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**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

**Form 10-K**

 

| **x**  | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934 (“Act”)** |
|--------|-----------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                  |
|   | **For the fiscal year ended December 31, 2009**                                                                  |
|   |                                                                                                                  |
| **o**  | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**               |

 

**Commission File No. 333-88242**

 

**JACOBSENTERTAINMENT, INC.**

(Exactname of Registrant as specified in its charter)

 

| **Delaware**                                                    | ** ** | **34-1959351**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State  or other jurisdiction of incorporation or organization) |       | (I.R.S.  Employer Identification No.) |

 

**17301 WestColfax, Suite 250, Golden, Colorado 80401**

(Addressof principal executive offices) (Zip code)

 

**(303)215-5200**

(Registrant’stelephone number, including area code)

 

Securitiesregistered pursuant to Section 12(b) of the Act:**None.**

 

Securitiesregistered pursuant to Section 12(g) of the Act:**None.**

 

Indicate by check mark if the registrant is awell-known seasoned issuer as defined in Rule 405 of the Securities Act.  Yes  o  No  x

 

Indicate by check mark if the issuer is not requiredto file reports pursuant to Section 13 or 15(d) of the Act.  Yes  x  No  o

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theAct during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes  x  No  o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Website, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  Yes  o  No  o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is notcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K. x

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer or asmaller reporting company. See the definitions of “large accelerated filer”, “acceleratedfiler” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

| Large  accelerated filer o                     |   | Accelerated  filer o         |
|------------------------------------------------|--------|------------------------------|
|                                           |   |                         |
| Non-accelerated  filer x                       |   | Smaller  reporting company o |
| (Do  not check if a smaller reporting company) |   |                         |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Act).  Yes  o  No  x

 

State the aggregate market value of the voting andnon-voting common equity held by non-affiliates computed by reference to theprice at which the common equity was last sold, or the average bid and askedprice of such common equity, as of the last business day of the registrant’smost recently completed second fiscal quarter: No market exists for the common stock of the registrant; as of March 30,2010 all of its outstanding shares of common stock are held by its parentcorporation.

 

Indicate the number of shares outstanding of each ofthe registrant’s classes of common stock, as of the latest practicable date:

 

| **Class**                                   | ** ** | **Outstanding at March 30, 2010** |
|---------------------------------------------|------------|-------------------------------------------------------|
| Class A  Common Stock, $0.01 par value |       | 1,320  shares                                         |
| Class B  Common Stock, $0.01 par value |       | 180  shares                                           |

 

**DOCUMENTS INCORPORATED BY REFERENCE: ****None**

See the exhibit index which appears on page E-1.

 

 

 

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**JACOBSENTERTAINMENT, INC.**

**2009 ANNUALREPORT ON FORM 10-K**

 

**Table ofContents**

 
| **Item**    | ** ** | **Description**                                                                                                      | ** ** | **Page** |
|-------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|----------|
|        |       |                                                                                                                 |       |     |
| Item 1.     |       | Business.                                                                                                            |       | 1        |
| Item  1A.   |       | Risk  Factors.                                                                                                       |       | 24       |
| Item 1B.    |       | Unresolved Staff  Comments.                                                                                          |       | 34       |
| Item  2.    |       | Properties.                                                                                                          |       | 34       |
| Item 3.     |       | Legal Proceedings.                                                                                                   |       | 34       |
| Item 4.     |       | Submission of  Matters to a Vote of Security Holders.                                                                |       | 34       |
| Item 5.     |       | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities. |       | 34       |
| Item 6.     |       | Selected Financial  Data.                                                                                            |       | 35       |
| Item 7.     |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations.                         |       | 36       |
| Item 7A.    |       | Quantitative  and Qualitative Disclosure about Market Risk.                                                          |       | 53       |
| Item 8.     |       | Financial  Statements and Supplementary Data.                                                                        |       | 54       |
| Item 9.     |       | Changes in and  Disagreements with Accountants on Accounting and Financial Disclosure.                               |       | 54       |
| Item 9A.    |       | Controls and  Procedures.                                                                                            |       | 54       |
| Item 9A(T). |       | Controls and  Procedures.                                                                                            |       | 55       |
| Item 9B.    |       | Other Information.                                                                                                   |       | 55       |
| Item 10.    |       | Directors, Executive  Officers and Corporate Governance.                                                             |       | 55       |
| Item 11.    |       | Executive  Compensation.                                                                                             |       | 57       |
| Item 12.    |       | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters.                    |       | 60       |
| Item 13.    |       | Certain  Relationships and Related Transactions, and Director Independence.                                          |       | 60       |
| Item 14.    |       | Principal  Accounting Fees and Services.                                                                             |       | 62       |
| Item 15.    |       | Exhibits,  Financial Statement Schedules.                                                                            |       | 62       |

 

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**SPECIALNOTE REGARDING FORWARD-LOOKING STATEMENTS**

 

We make statements in this report that relate to matters that are nothistorical facts that we refer to as “forward-looking statements” regarding,among other things, our business strategy, our prospects and our financialposition. These statements may be identified by the use of forward-lookingterminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “should”or “anticipates” or the negative or other variation of these or similar words,or by discussion of strategy or risks and uncertainties. Forward-lookingstatements in this report include, among other things, statements concerning:

 

·                  projections of futureresults of operations or financial condition;

 

·                  expectations for our casino,truck plaza and horse racing properties; and

 

·                  expectations of theavailability of capital resources.

 

Any forward-looking statement made by us necessarily is based upon anumber of estimates and assumptions that, while considered reasonable by us,are inherently subject to significant business, economic, regulatory andcompetitive uncertainties and contingencies, many of which are beyond ourcontrol, and are subject to change. Actual results of our operationsmay vary materially from any forward-looking statement made by us or onour behalf. Forward-looking statements should not be regarded asrepresentations by us or any other person that the forward-looking statementswill be achieved. Undue reliance should not be placed on any forward-lookingstatements. The contingencies and uncertainties to which any forward-lookingstatement contained herein is subject to include, but are not limited to, thefollowing:

 

·                  Our substantial indebtednesscould adversely affect our financial health and prevent us from fulfilling ourdebt obligations.

 

·                  We will require asignificant amount of cash to service our indebtedness. Our ability to generatecash depends on many factors beyond our control.

 

·                  Our indebtedness imposesrestrictive covenants on us and our ability to refinance our debt in theforeseeable future is problematic given the recent and continuing turmoil inthe credit markets.

 

·                  We may not be able tosuccessfully integrate the operations of recent and future acquisitions intoour business.

 

·                  We may experience aloss of market share due to intense competition and the possible introductionof slot machines at one or more Colorado racetracks.

 

·                  We face extensive regulationfrom gaming and other government authorities and the possibility thatlegislative changes may prohibit or limit our gaming activities.

 

·                  Changes to applicable taxlaws could have a material adverse effect on our operations and financialcondition.

 

·                  Our operations couldcontinue to be adversely affected due to the adoption of anti-smokingregulations in Colorado and their possible adoption in Nevada and Louisiana.

 

·                  We depend upon our keyemployees and certain members of our management.

 

·                  The single member of ourboard of directors and his family trusts indirectly own or control the issuedand outstanding shares of Jacobs Entertainment, Inc. and could haveinterests that conflict with yours.

 

·                  We rely on the maintenanceof agreements with horsemen at our horse racing facility.

 

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·                  Our business relies heavilyon certain markets and an economic downturn in these markets as has beenexperienced in 2008 and 2009 could have a material adverse effect on our futureresults of operations.

 

·                  Seasonality and weatherconditions can adversely affect our results of operations.

 

Allsubsequent written and oral forward-looking statements attributable to us orpersons acting on our behalf are expressly qualified in their entirety by thecautionary statements included in this report. We undertake no obligation topublicly update or revise any forward-looking statements, whether as a resultof new information, future events or otherwise. In light of these risks,uncertainties and assumptions, the forward-looking events discussed in thisreport might not occur.

 

**NON-GAAP FINANCIAL MEASURES**

 

Consolidated and property level EBITDA and the related ratios presentedin this report are supplemental measures of our performance that are notrequired by, or presented in accordance with, generally accepted accountingprinciples. EBITDA is not a measurement of our financial performance undergenerally accepted accounting principles and should not be considered as analternative to net income, operating income or any other performance measuresderived in accordance with generally accepted accounting principles, or as analternative to cash flow from operating activities as a measure of ourliquidity.

 

EBITDA consists of net income (loss) plus depreciation andamortization, interest, net of capitalized interest, and income taxes. EBITDAis presented because it is used by our management as a supplemental performancemeasure to analyze the performance of our business and because it is frequentlyused by securities analysts, investors and others in their evaluation ofcompanies in our industry, substantially all of which present EBITDA whenreporting their results.

 

Our bank credit agreement and our indenture use EBITDA, subject tocertain adjustments, to measure our compliance with debt covenants. We also useEBITDA to evaluate and price potential acquisition candidates. We believeEBITDA facilitates operating performance comparisons from period to period andcompany to company by removing potential differences caused by variations incapital structures (affecting relative interest expense), tax positions (suchas the impact on periods or type of companies of changes in effective tax ratesor net operating losses) and the age and book depreciation of facilities andequipment (affecting relative depreciation expense).

 

EBITDA has limitations as an analytical tool, and you should notconsider it in isolation, or as a substitute for analysis of our results asreported under generally accepted accounting principles. Some of theselimitations are:

 

·                  EBITDA does not reflect ourcash expenditures, or future requirements for capital expenditures orcontractual commitments;

 

·                  EBITDA does not reflectchanges in, or cash requirements for, our working capital needs;

 

·                  EBITDA does not reflect thecash requirements necessary to service interest or principal payments, on ourdebts;

 

·                  although depreciation andamortization are non-cash charges, the assets being depreciated and amortizedwill often have to be replaced in the future, and EBITDA does not reflect anycash requirements for such replacements; and

 

·                  other companies in ourindustry may calculate EBITDA differently than we do, limiting itsusefulness as a comparative measure.

 

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Because of these limitations, EBITDA should not be considered as ameasure of discretionary cash available to us to invest in the growth of ourbusiness. We compensate for these limitations by relying primarily on ourresults under generally accepted accounting principles and using EBITDA onlysupplementally. See our consolidated financial statements and the notes tothose statements included elsewhere in this report.

 

**INDUSTRY AND MARKET DATA**

 

Thisreport includes market and industry data that we obtained from our ownresearch, studies conducted by third party sources that we believe to bereliable and industry and general publications by third parties and, in somecases, management estimates based on industry and other knowledge. We have notindependently verified any of the data from third party sources, and we make norepresentation as to the accuracy of such information. While we believeinternal company estimates are reliable and market definitions are appropriate,they have not been verified by any independent sources.  Actual results could differ from those estimates.

 

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**PART I**

 

**Item 1.                    *Business.***

 

**Introduction**

 

Jacobs Entertainment, Inc. (“Jacobs Entertainment,” “JEI,” the “Company,”“us,” “our” or “we”) was formed as a Delaware corporation on April 17,2001. We are a developer, owner and operator of gaming and pari-mutuel wageringfacilities throughout the United States, with properties located in Colorado,Nevada, Louisiana and Virginia. We own and operate five land-based casinos, 18video gaming truck plazas (five of which are leased) and a horse racing trackwith eight satellite wagering facilities (four of which are leased). Inaddition, we are party to an agreement that entitles us to a portion of thegaming revenue from an additional truck plaza video gaming facility.

 

All of our gaming facilities target local customers and emphasizerevenues from slot machine play or video gaming, or both. For the year ended December 31,2009, our net revenues and EBITDA were approximately $313.4 million and $48.4million, respectively. See Note 15 to our consolidated financial statements forinformation concerning the operational performance of the segments of ourbusiness.

 

Thefollowing table sets forth certain information and property level EBITDA(excluding corporate overhead) of our properties:

 
| ** **                                                  | ** ** | ** **                        | ** ** | ** **                                | ** ** | **As of December 31, 2009** | ** ** | **Year Ended  December 31,  2009** | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------|------------|-------------------------------------------|------------|----------------------------------|------------|-----------------------------------------|------------|
| ** **                                                  | ** ** | ** **                        | ** ** | ** **                                | ** ** | **Approximate**                  | ** ** | ** **                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                  | ** ** | ** **                        | ** ** | ** **                                | ** ** | **Gaming**                       | ** ** | ** **                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                  | ** ** | ** **                        | ** ** | ** **                                | ** ** | **Square**                       | ** ** | **Gaming**                              | ** ** | **Table** | ** ** | **Hotel** | ** ** | **Property Level** | ** ** |
| **Property**                                                | ** ** | **Location**                      | ** ** | **Facility Type**                    | ** ** | **Footage**                      | ** ** | **Machines**                            | ** ** | **Games** | ** ** | **Rooms** | ** ** | **EBITDA (1)** | ** ** |
| ** **                                                  | ** ** | ** **                        | ** ** | ** **                                | ** ** | ** **                       | ** ** | ** **                              | ** ** | ** ** | ** ** | ** ** | ** ** | **(in thousands)** | ** ** |
| The Lodge Casino                                            |       | Black Hawk,  Colorado             |       | Land-based  casino                        |       | 28,000                           |       | 975                                     |       | 35 |   | 50 |   | $ | 27,212 |   |
| Gilpin Casino                                               |       | Black Hawk,  Colorado             |       | Land-based  casino                        |       | 11,000                           |       | 395                                     |       | 19 |   | 0 |   | 5,113 |   |
| Gold Dust  West-Reno                                        |       | Reno,  Nevada                     |       | Land-based  casino                        |       | 17,500                           |       | 479                                     |       | 0 |   | 27 |   | 5,711 |   |
| Gold Dust West -Carson  City                                |       | Carson City,  Nevada              |       | Land-based  casino                        |       | 12,000                           |       | 377                                     |       | 6 |   | 146 |   | 36 |   |
| Gold Dust  West-Elko                                        |       | Elko,  Nevada                     |       | Land-based  casino                        |       | 13,000                           |       | 340                                     |       | 6 |   | 0 |   | 1,829 |   |
| Louisiana Truck  Plazas                                     |       | Louisiana  (19 various locations) |       | Video  gaming                             |       | 12,000                           |       | 943                                     |       | 0 |   | 0 |   | 18,552 |   |
| Colonial Downs Racetrack  and satellite wagering facilities |       | Virginia   (9 various locations)  |       | Horse   racing and  pari-mutuel  wagering |       | N/A                              |       | N/A                                     |       | N/A |   | N/A |   | 1,547 |   |
|                                                        |       |                              |       |                                      |       |                             |       |                                    |       |   |   |   |   |   |   |
| **Total**                                                   |       |                              |       |                                      |       | 93,500                           |       | 3,509                                   |       | 66 |   | 223 |   | $ | 60,000 |   |

 

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(1)                    Property LevelEBITDA excludes corporate overhead expense of $11.6 million.

 

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**Thefollowing is a reconciliation of our property level EBITDA to our net income(in thousands):**

 
| ** **                     | ** ** | **Year Ended  December 31, 2009** | ** ** |
|--------------------------------|------------|--------------------------------------------------|------------|
| Total Property  Level EBITDA   |       | $                                                | 60,000     |   |
| Corporate  overhead            |       | (11,643                                          | )          |
|                           |       |                                             |       |
| Total EBITDA                   |       | 48,357                                           |       |
|                           |       |                                             |       |
| Depreciation and  amortization |       | (21,482                                          | )          |
| Interest  expense, net         |       | (25,170                                          | )          |
| ** **                     | ** ** | ** **                                       | ** ** |
| Net Income                     |       | $                                                | 1,705      |   |

 

**Business Strategy and Competitive Strengths**

 

Our business strategy is tocontinue to operate a broad, geographically diversified base of gaming andpari-mutuel wagering properties that seek to provide our customers with anenjoyable entertainment experience, and in turn, to generate significantcustomer loyalty and repeat business.  We believe that there are opportunities forgrowth and operational efficiencies in the markets in which we operate.

 

BlackHawk, Colorado was one of the fastest growing gaming markets in the country,having experienced a 26.3% compound annual growth in gaming revenue from 1998through 2000. Revenues in 2001 through 2003 stabilized at approximately $500million annually and rose to $524 million in 2004, $535 million in 2005, $554million in 2006, and $581 million in 2007. However, in 2008, revenues fell to $509 million due to a statewidesmoking ban and a nationwide economic recession, combined with a pronouncedslowdown in the gaming industry. In 2009, revenues rose to $530 millionprimarily due to thenew gaming regulations allowed under Colorado Amendment 50 which becameeffective on July 2, 2009.

 

Wemay acquire or develop additional gaming properties in different jurisdictionscatering to local gaming patrons in the future, further expanding ourgeographic diversity.

 

InNovember 2003 and 2004, referendums were passed in four localities inVirginia that allowed us to expand our off-track wagering facilities from fourto nine such facilities and we now operate eight. Our strategy for our horseracing operations is to be a competitive participant in the industry bycapitalizing on our unique dirt and turf track facilities for live racing,hosting marquee racing events, and expanding our off-track wagering facilitynetwork under appropriate circumstances. Advanced deposit account wagering, primarily over the internet, is thefastest growing segment of the pari-mutuel wagering industry.  Colonial operates its own account wageringplatform called EZ Horseplay.  Colonialis seeking to grow EZ Horseplay wagering handle with both traditional customersand customers in non-traditional venues using technology specifically developedfor EZ Horseplay.  On January 11,2008, we announced that we intend to sell our racetrack and offsite wageringfacilities in Virginia.  At this point asale is not probable and we are not actively seeking a buyer.

 

Ourcompetitive strategies and strengths include:

 

***GenerateRepeat Business by Catering to Local Gaming Patrons.*** We focus on attracting and fostering repeat business from local gamingpatrons at all of our properties. Our strategy for establishing a strongpresence with local residents or patrons is to provide a user-friendly gamingenvironment featuring convenient locations, high quality food at affordableprices and promotional incentives that reward frequent play. In order tomaximize exposure to the local and surrounding communities in the mostcost-effective manner, we utilize computerized slot data tracking systems thatallow us to track individual play and payouts and develop mailing lists forspecial events, contest play and promotions. We also participate in busingprograms with unaffiliated transportation companies to bring patrons from thegreater Denver metropolitan area and surrounding communities to our twoproperties located in Black Hawk, Colorado.

 

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***ExpandLouisiana Truck Plaza Business.***Our strategy of expanding our presence in the Louisiana truck plaza market isdriven by: (i) the consistent revenue each facility generates, (ii) thehigh return on investment associated with operating the truck plazas, and (iii) therelatively low capital expenditures necessary to maintain the facilities.

 

***EnterAdditional Locals-Oriented Markets.***Our management team has a proven track record of successfully operating casinosthat cater to local residents or day trip patrons who reside in close proximityto the properties. In an effort to leverage this operating experience and entertwo additional locals-oriented markets, we acquired Piñon Plaza (subsequentlyrenamed “Gold Dust West-Carson City”), located in Carson City, Nevada, in June 2006.This facility has 377 slot machines and six table games on its 12,000 squarefoot gaming floor. We opened a new casino in Elko, Nevada (“Gold Dust West-Elko”)on March 5, 2007 that features a 13,000 square-foot casino floor with 340slot machines and six table games.

 

***BroadGeographic and Asset Diversification*****.**We believe that because of our geographic and asset diversification, we areless dependent on results at a specific property or in a specific market togenerate our cash flow. This geographic diversity helps mitigate oursusceptibility to regional economic downturns or weather conditions.

 

***StrongEmphasis on Slot and Video Gaming Revenues*****.** All of our gaming facilities emphasize slot machine or video gamingplay, or both. We believe slot machine play to be the fastest growing, mostconsistently profitable and lowest risk segment of the gaming entertainmentbusiness. We offer a wide variety of games to attract customers and encouragethem to play for longer periods of time, thereby promoting the stability of ourgaming revenue. We intend to maximize slot and video gaming revenue bycontinuing to invest in state-of-the art equipment and systems and replacingolder models with the most current product offerings in appropriate markets. Inaddition, we believe that the introduction of new table games, higher betlimits and 24-hour gaming in our Colorado casinos will enable us to maintainour competitive edge in that market.

 

***Significant Barriers to Entry*****.** There are significant regulatory and other barriers to entry in each ofthe markets in which we operate. The gaming industry in each of our markets isgoverned by a state gaming commission. In order to enter the gaming industry inany of our markets, a potential new entrant must work through a costly andlengthy regulatory process, which could last anywhere from 12 to 18 monthsdepending on jurisdiction and type of gaming. Beyond the regulatory barriers,the need for significant investments of time and capital also restrictspotential new entrants. The discussion that follows provides a sample of thespecific barriers to entry in each of our markets.

 

In the Black Hawk, Colorado market, barriers toentry include: (i) the scarcity of land available for development withinthe approved gaming district, which is defined in the state constitution, theGaming Commission’s regulations and the City of Black Hawk’s ordinances, and (ii) thehigh cost of acquiring land and constructing new gaming facilities.

 

There are stringent licensing requirements andsubstantial licensing and compliance expenses attendant to commencing andconducting gaming operations in Nevada.

 

InLouisiana, the barriers to entry include restrictions that require truck plazavideo gaming facilities to meet specified minimum levels of diesel and totalfuel sales, have a specified minimum site acreage and conduct restaurantoperations not fewer than 12 hours per day and to keep a convenience store open24 hours per day. These restrictions also prohibit the operation of more than50 video gaming machines at any location and require truck plaza video gamingfacilities to be located only in those parishes that voted to continue videogaming during a one-time statewide referendum in 1996. Additional barriers toentry are disclosed below in “*GamingRegulation and Licensing—Louisiana*.”

 

In Virginia, in all but the county in which weoperate and one additional county, any potential operator of any competinghorse racing track would need to secure passage of a referendum in the localein which the track is to be operated. In addition, an unlimited racetrack owner’sand operator’s license is required in order to have off-track wageringfacilities. Off-track wagering facilities can be opened only in the currentjurisdictions in which we operate without passage of additional referendums.The number of off-track wagering facilities is limited by statute to astatewide total of 10 and we currently operate eight, leaving only twopotentially available. The high cost of building a new racetrack in Virginiapresents an additional barrier in that state.

 

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***Strong, Experienced Management Team.*****Our seniormanagement team is an experienced group of industry veterans. Jeffrey P.Jacobs, our Chairman and Chief Executive Officer, has been Black Hawk Gaming’sChief Executive Officer since November 1996 and the Chief ExecutiveOfficer of Colonial Holdings, Inc. (“Colonial”), our wholly ownedsubsidiary, since March 1997. Stephen R. Roark, our President, has beenBlack Hawk Gaming’s President since September 1995 and was its ChiefFinancial Officer from 1993 to 2006. Ian M. Stewart, our President ofPari-Mutuel Wagering Operations, has been President of Colonial since November 1998and its Chief Financial Officer since June 1997. Michael T. Shubic, ourChief Operating Officer, has over 35 years of experience in the gamingindustry. Brett A. Kramer, our Chief Financial Officer, has over 15 yearsexperience with us in various financial capacities. Stanley Politano, ourExecutive Vice President, has 16 years of experience in the gaming industry.The five general managers of our casinos have numerous years of casino managementexperience and report to Mr. Shubic. The Vice President of LouisianaOperations oversees our truck plaza video gaming operations, has over 15 yearsof experience in the truck plaza video gaming business and also reportsdirectly to Mr. Shubic. We believe the expertise and experience of ourmanagement team enables us to enhance the operation of our existing propertiesand any properties we may acquire in the future.

 

**Our Properties and Operations**

 

***The Lodge Casino—Black Hawk,Colorado***. The Lodge Casino in Black Hawk, Colorado, whichcommenced operations in June 1998, is one of 18 casinos located in thegaming district of Black Hawk. The Lodge serves the greater Denver metropolitanarea, which is located 40 miles east of Black Hawk and has a population ofapproximately 2.4 million, as well as customers from nearby communities such asBoulder and Fort Collins, Colorado and Cheyenne, Wyoming. We believe that mostof The Lodge’s customers are primarily day trip patrons who reside in thegreater Denver metropolitan area. As of December 31, 2009, the Black Hawkmarket had approximately 9,100 slot machines and approximately 200 table gamesgenerating $530 million in revenues for the year then ended. The Lodge is oneof the largest gaming facilities in the market.

 

The Lodge is located on a 2.5 acre site that abuts State Highway 119,with approximately 28,000 square feet of gaming space on three floorscontaining 975****slot machines and35 table games (including 19 poker tables, 12 black jack tables, 2 roulettetables and 2 craps tables), 50 hotel rooms, three restaurants, three bars andon-site parking for approximately 600 vehicles. Our property includes The WhiteBuffalo Grille, a buffet and a snack bar. Black Hawk now has significantlodging facilities. The Isle of Capri has a 402-room hotel at its BlackHawk casino, and Ameristar recently completed a 536-room hotel directlyacross from The Lodge Casino, which opened during the fourth quarter of 2009.

 

We utilize computerized slot data tracking systems that allow us totrack individual play and payouts and develop mailing lists for special events,contest play and promotions. The Lodge participates in busing programs withunaffiliated transportation companies who transport patrons to BlackHawk/Central City from the market areas described above. Black Hawk Gaming hasobtained an exemption as a common carrier from the Colorado Public UtilitiesCommission and may elect to operate its own busing program in the future.

 

During 2008, we providedfinancial support for a proposed constitutional amendment (“Colorado Amendment50”) that would increase the types of table games, wagering limits and hours ofoperation at Colorado casinos.  For theyear ended December 31, 2008, we funded a total of $1.4 million in supportof this amendment.  Colorado residentsapproved the proposed constitutional amendment on November 4, 2008.  The amendment was subsequently voted upon andapproved by the residents of each of the three gaming towns in Colorado (BlackHawk, Central City and Cripple Creek). The new gaming regulation, which became effective on July 2, 2009at Colorado casinos, allows for the introduction of craps and roulette,increases the maximum wager limit to one hundred dollars, allows 24-hour gamingoperations, and set a maximum gaming tax rate of 20%.  For further discussion, see Item 7 “Management’sDiscussion and Analysis of Financial Condition and Results of Operations.”

 

***The Gilpin Casino—Black Hawk,Colorado***. The Gilpin Casino, which commenced operations in October 1992,is located on a one-acre site in the central Black Hawk gaming district. Weexpanded our facility through the acquisition of an adjacent casino in early1994 and we further expanded the casino in 2005. We were one of the firstcasinos opened in Colorado following the legalization of casino gaming in 1991.We offer 395 slot machines and 19 table games, including 14 poker tables wherewe provide both tournament and cash poker play, 3 black jack tables, 1 roulettetable and 1 craps table. The Gilpin has a restaurant and two bars and a slotclub and utilizes busing and other promotional programs, similar to those ofThe Lodge. We have available to our customers approximately 200 surface parkingspaces in the heart of historic Black Hawk.

 

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***Gold Dust West-Reno—Reno, Nevada***. Gold DustWest-Reno, which we acquired in 2001, is located on 4.6 owned and leased acresin Reno’s central downtown gaming district and has been operating since 1978.Gold Dust West-Reno caters to residents of Reno and surrounding areas and hasapproximately 17,500 square feet of gaming space, which offers 479 slotmachines. Gold Dust West-Reno also features the Wildwood Restaurant and hasparking for 375 vehicles. The property currently offers 27 motel rooms.

 

***Gold Dust West-Carson City******—Carson City, Nevada.***On June 25, 2006, we closed an agreement with Capital City Entertainment, Inc.(“CCI”), an unaffiliated party, under which we acquired all of the assets ofPiñon Plaza, a division of CCI which we have now re-branded as Gold DustWest-Carson City. The assets included all of the personal property, buildingsand improvements used by Piñon Plaza in the operation of its casino, hotel,bowling alley and RV park in Carson City, Nevada. The purchase price for theassets was $14.5 million.  Additionally,during 2006 and 2007, we spent approximately $5.0 million in total for propertyand equipment improvements.

 

Contemporaneously, we entered into a triplenet ground lease covering land underlying the assets which began upon closingof the asset purchase agreement discussed above. The lessor is a family trustaffiliated with CCI. The lease has a ten year term with two ten year extensionsat our option. Rentals under the lease are $250,000 per year for years onethrough five, $300,000 per year for years six through ten, and a rate based onan MAI (Member of the Appraisal Institute) appraisal of the property during thefirst and second extension terms. We have the right to purchase the leased landat an MAI appraised value at the end of the first ten year term. We also have aright of first refusal should the lessor seek to sell the leased land to athird party.

 

Gold Dust West-Carson City, which commencedoperations in 1995, is a 140,000 square foot facility located on approximately18 acres covered by the land lease described above. Gold Dust West-Carson Cityoffers 377 slot machines and six table games, two restaurants and two bars. Ithas a slot club and offers various promotional packages, many associated withits 32 bowling lanes. Gold Dust West-Carson City has 146 hotel rooms. It alsoowns and operates a 48 space RV park as part of the resort. There are approximately 875 parking spaces for Gold Dust West-CarsonCity’s casino patrons and hotel guests.

 

***Gold Dust West-Elko—Elko, Nevada.*** On November 14,2005, we entered into a triple net lease with an unaffiliated party for thelease of a 37,000 square foot building and approximately six acres of land inElko, Nevada. The lease has a five-year term with three five-year renewals atour option. Rent under the lease was $225,000 for the first year, with $50,000of the first year rent abated as an allowance for tenant improvements. Thesecond year’s rent is $375,000 and for years three through five the annual rentis $450,000.

 

Wehave the right to buy the land and the building any time after the first12 months through the 60th month for $5 million andfrom the 61st month through the 120th month for $5.4 million.

 

Werenovated and upgraded the building and installed slot machines, table gamesand appropriate food and beverage offerings. Pre-opening and gaming devicecosts totaled approximately $21 million. We commenced renovation duringthe third quarter of 2006 and opened the casino on March 5, 2007. GoldDust West-Elko has approximately 13,000 square feet of gaming space, and offers340 slot machines and six table games. Gold Dust West-Elko also has tworestaurants, one bar and has parking for 400 vehicles.

 

***Louisiana Gaming Properties.*** Our truckplaza properties consist of 18 truck plaza video gaming facilities located inLouisiana (of which five are leased). We are also party to an agreement thatentitles us to a portion of the gaming revenues from a 19th truck plaza (Cash’s Truck Plaza and Casino inLobdell). Each truck plaza features a 24 hour per day convenience store,fueling operations, a restaurant operating not fewer than 12 hours per day,and up to 50 video gaming devices in the casino depending on the level of fuelsales and available space.  At December 31,2009, our truck plaza video gaming facilities had a combined total of 943 videogaming devices.

 

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TheLouisiana truck plazas’ revenues are comprised of: (i) revenue from videopoker gaming machines; (ii) sales of gasoline and diesel fuel; (iii) salesof groceries, trucker supplies and various items through their conveniencestores; (iv) sales of food and beverages in their restaurants and bars;and (v) miscellaneous commissions on ATMs, pay phones and lottery sales.

 

TheLouisiana video gaming industry consists of video gaming in 31 of Louisiana’s64 parishes. The industry is highly regulated and video gaming machines canonly be placed in qualifying bars, restaurants, hotels, satellite wageringfacilities and truck plazas. In order to qualify for video gaming, a truckplaza must offer diesel fuel, gasoline, a convenience store, a restaurant and aplace for truck drivers to shower and sleep. Our video gaming machines arelocated in a separate gaming room that is designed to provide a pleasantcasino-like atmosphere. As of December 31, 2009, Louisiana had 193licensed video gaming truck plazas.

 

The Louisiana truck plaza video gaming market caters primarily to localresidents, whom we believe contribute to the vast majority of truck plazagaming revenue. We believe that most of our video gaming customers live withina five-mile radius of our properties.

 

***Colonial Downs—New Kent, Virginia***. ColonialDowns, which opened in 1997, is a racetrack in New Kent, Virginia, whichprimarily conducts pari-mutuel wagering on thoroughbred and harness racing. Thetrack facility was designed to provide patrons with a pleasant atmosphere toenjoy quality horse racing. The outside grandstand area, located on the firstfloor of the track facility, has an occupancy capacity of approximately 4,000patrons. Also located on the first floor of the track facility are simulcasttelevision seating areas, two covered patio areas, two bars, a large concessionfood court, gift shop, game room and wagering locations with approximately 72tellers. The Jockey Club, which is in the main grandstand area located on thethird floor of the track facility, includes a full-service dining area with aseating capacity of 548 patrons, two separate lounge areas, and additionalwagering locations with 24 tellers. On the fourth floor is the Turf Club withseating for full service dining for 125 along with 10 luxury suites with skyboxseating and a wagering location with eight tellers. In addition, there is aballroom with seating for 250 patrons for special events. In 2005, we addedoutdoor seating for additional patrons along the track’s homestretch in an areacalled “the Green.”

 

Thedirt track at Colonial Downs is one and one-quarter miles in length and is oneof the largest tracks in the United States. Based on our knowledge of theindustry, we believe the 180-foot wide turf track is the widest turf track inthe country, thereby establishing the track as one of the major turf racingfacilities in the Mid-Atlantic region. In addition to our racetrack, we presently operate eight satellitewagering facilities in Virginia as described below.  We previously operated nine such facilitiesuntil we closed our Chesapeake Military Highway facility in November 2008in order to consolidate operations with our Chesapeake Indian River Roadfacility.

 

***Satellite Wagering Facilities,Virginia***. In addition to our racetrack facility, we operateeight satellite wagering facilities in Virginia (four are leased). Thesefacilities provide simulcast pari-mutuel wagering on thoroughbred and harnessracing from our racetrack and selected other racetracks throughout the UnitedStates. Our satellite wagering facilities are located in Alberta, Chesapeake,Hampton, Martinsville, Weber City, Vinton, and two in Richmond. Thesefacilities employ state-of-the-art audio/video technology for receiving qualityimport simulcast thoroughbred and harness racing from nationally knownracetracks. The Virginia Racing Commission can grant licenses for two moresatellite wagering facilities under existing legislation.

 

The facilities are structured to accommodate the needs of variouspatrons, from the seasoned handicapper to the novice wagerer, and providepatrons with a comfortable, upscale environment including a full bar and arange of restaurant services. In addition, self-serve automated wageringequipment is available to patrons in order to make wagering more user-friendlyto the novice and more efficient for the expert. This equipment, withtouch-screen interactive terminals and personalized portable wageringterminals, provides patrons with current odds information and enables them toplace wagers and credit winning tickets to their accounts without waiting inline.

 

In 2003, the legislature of the Commonwealth of Virginia passed astatute authorizing the Virginia Racing Commission to grant licenses andthereafter regulate account wagering in Virginia. Each year, the VirginiaRacing Commission licenses advance deposit account wagering providers,including Colonial Downs, to accept wagers over the telephone or through theinternet via the provider’s advanced deposit wagering system. For 2010, fiveproviders (including Colonial Downs) have been licensed. Colonial receives ashare of source market fees for wagers placed 

 

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byVirginians through these account wagering service providers. Effective January 1,2010, the Virginia General Assembly amended the statutory provisions relatingto account wagering to set the source market fee for wagers originating fromVirginia at 10% of such wagers. Colonial shares the source market fee equallywith the recognized majority horsemen’s groups.

 

***The Nautica Properties.*** We have acquiredfrom affiliated parties several options to lease and options to purchase sixparcels of land and certain improvements on the west bank of the Cuyahoga Riverin Cleveland, Ohio. We refer to these properties, covering an aggregate ofapproximately 624,000 square feet of land (14.4 acres) and a building comprisedof 47,380 square feet of net rentable space, as the Nautica Properties. TheNautica Properties currently require aggregate option payments totaling$200,000 per year.

 

DuringMarch 2008, weexercised our option to acquire one of these parcels referred to as “Lot D.”  On April 1, 2008, we purchased thisparcel for $800,000.  The company thatowned this parcel of land and parking lot business was wholly owned by ourChairman and Chief Executive Officer (“CEO”). Additionally, on January 15, 2009, we exercised our option toacquire one of these parcels referred to as “Sugar Warehouse,” and on January 21,2009, we purchased this parcel for $2,450,000 from the limited partnership thatowned this building.  An affiliate of ourCEO owned 82% of the general partner interests and 16.4% of the limited partnerinterests of the seller.  See Item 13 “Certain Relationships and RelatedTransactions, and Director Independence.”

 

The option agreements give us the right until July 2010to purchase one of the remaining parcels and the right to purchase or enterinto long-term leases on the remaining three parcels.  We expect to either exercise or extend theseoptions prior to their expiration.  OurCEO owns varying interests in three of the four remaining parcels.

 

Although we may elect notto exercise all the options unless casino gaming opportunities arise, wenonetheless have the right to acquire all or part of the Nautica Properties forother purposes. If casino gaming is not legalized on the Nautica Properties butwe decide to exercise our options, the aggregate purchase price would beapproximately $3.0 million for one of the parcels and the aggregate annuallease payments on the remaining three parcels would be approximately $355,000.If all four remaining parcels are purchased and none leased, the total purchaseprice would be approximately $6.55 million, less any aggregate option paymentspreviously made. The purchase price and rent payments would be increased basedon independent appraisals of the land and improvement values if, in the future,casino gaming were to become legalized in Ohio and a casino is licensed on theNautica Properties.

 

During 2009, weprovided financial support to oppose a proposed constitutional amendment inOhio (“Issue 3”) that would allow for one casino each at designated locationsin Cincinnati, Cleveland, Columbus and Toledo and distribute to all Ohiocounties a tax on the casinos.  None ofthe designated locations is owned by JEI or its affiliates.  For the year ended December 31, 2009, weprovided financial support totaling $2.3 million to oppose Issue 3.  On November 3, 2009, Issue 3 was passedin Ohio which permits casino gaming at the locations designated in theamendment.  We are currently evaluatingthe impact Issue 3 might have on our development efforts on the NauticaProperties in Ohio.

 

**Seasonality and Weather Conditions**

 

Seasonality and weather conditions can affect our results ofoperations. Winter travel conditions can adversely affect patronage andrevenues at our Colorado and Nevada casinos. Although casino business is notseasonal, levels of gaming activity increase significantly during weekends andholidays, especially holiday weekends. Hurricanes Katrina and Rita temporarilyaffected our truck plaza video gaming operations in late 2005, while HurricanesGustav and Ike temporarily affected our truck plaza video gaming operations inlate 2008. Similar hurricanes could have a material adverse effect on ourLouisiana operations in future years. Our pari-mutuel wagering revenues arehigher during scheduled live racing than at other times of the year. Adverseweather conditions can cause cancellation of or curtail attendance at outdoorraces, thereby reducing wagering and our revenues. Attendance and wagering atboth outdoor races and satellite wagering facilities can be harmed by holidaysand other competing seasonal activities.

 

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**Competition**

 

***General***. We faceintense competition in each of the markets in which we operate. Our existinggaming facilities compete directly with other gaming properties and activitiesin and near Colorado, Nevada, Louisiana and Virginia. We expect thiscompetition to increase as new gaming operators enter our markets, existingcompetitors expand their operations, gaming activities expand in existingjurisdictions and gaming is legalized in new jurisdictions. Several of ourcompetitors have significantly better name recognition and more marketing andfinancial resources than we do. We cannot predict with any certainty theeffects of existing and future competition on our operating results.

 

Wecompete with other forms of gaming and entertainment such as bingo, pull-tabgames, card parlors, sports books, pari-mutuel or telephonic betting on horseracing and dog racing, state-sponsored lotteries, video lottery terminals, andvideo poker terminals. We may compete with gaming from other venuesincluding internet gaming, although its legality is presently unclear.

 

Wealso compete with gaming operators in other gaming jurisdictions such as LasVegas, Nevada, and Atlantic City, New Jersey. Our competition includes casinoslocated on Native American reservations throughout the United States, whichhave the advantage of being exempt from certain state and federal taxes. SomeNative American tribes are either establishing or are considering theestablishment of gaming at additional locations. Expansion of existing gamingjurisdictions and the development of new gaming jurisdictions and casinos onNative American-owned lands would increase competition for our existing andfuture operations. In addition, increased competition could limit newopportunities for us or result in the saturation of certain gaming markets. SeeItem 1A “Risk Factors—Competition” below.

 

***CasinoProperties*****.**We believe the primary competitive factors in the Black Hawk, Colorado, marketare location, availability and convenience of parking; number and types of slotmachines and gaming tables; types and pricing of amenities, including food;name recognition; overall atmosphere; and customer service. We believe ourColorado casinos generally compete favorably based on these factors.

 

OurColorado casinos are on opposite sides of Main Street in Black Hawk. Because oftheir proximity, our Black Hawk casinos compete for some of the same customers.Further, there were 16 other casinos operating in Black Hawk on December 31,2009. There were approximately 9,300 total gaming devices (slot machines,poker, black jack, craps and roulette tables) in Black Hawk as of December 31,2009.

 

CentralCity is located adjacent to Black Hawk and provides the most direct competitionto the gaming establishments in Black Hawk. There were six casinos operating inCentral City with approximately 2,100 total gaming devices as of December 31,2009. Black Hawk has historically enjoyed a competitive advantage over CentralCity in large part because access by State Highway 119 (formerly the onlymajor access to Black Hawk from the Denver metropolitan area and Interstate 70)requires customers to drive by and, in part, through Black Hawk to reachCentral City. In late 2004, Central City constructed a road from I-70 directlyinto Central City, commonly referred to as the Central City Parkway. It is nowpossible for certain traffic that passed through Black Hawk to proceed directlyto Central City from Interstate 70. Nonetheless, motorists driving from theDenver metropolitan area still have the option of choosing to go either toBlack Hawk or Central City without having to drive through the other town.

 

Large,well-financed companies have entered the Black Hawk and other Colorado marketsand others may enter through the purchase or expansion of existingfacilities, which could have a material adverse effect on our results ofoperations and financial position. For example, on January 1, 2005,Ameristar Casinos, Inc. purchased a facility, formerly known as theMountain High Casino, which is directly across the street from The Lodge, andcompleted construction of a 536 hotel room tower in the fourth quarterof 2009, a convention center, and otheramenities. Under Ameristar’s ownership, this facility has been expanded toapproximately 1,550 slot machines and 37 table games, and a parking garageaccommodating 1,500 vehicles.  No othercasinos are currently under construction in Black Hawk.  In 2003, the Isle of Capri Casinos, Inc.purchased Colorado Central Station, located diagonally across the street fromits existing facility and subsequently completed a major renovation andexpansion project physically linking the two properties.  The combined casinos are the largest in BlackHawk with approximately 1,850 slot machines, approximately 40 table games, 402hotel rooms and 2,300 parking spaces. The Isle of Capri is noted for itsaggressive marketing programs. The Mardi Gras casino, which is next to TheLodge, was purchased in 2005 and the owners have developed and implemented newmarketing programs.

 

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OurGold Dust West Casino-Reno encounters strong competition from large hotel andcasino facilities and smaller casinos similar in size to our Gold DustWest-Reno in the Reno area, which includes Sparks, Nevada. There is alsocompetition from gaming establishments in other towns and cities in Nevada andfrom Native American gaming facilities located near Sacramento, California. OurGold Dust West-Carson City and Gold Dust West-Elko, Nevada casinos facecompetition from several casinos in those cities and many other venues inNevada.

 

***TruckPlaza Operations*****.**Our Louisiana truck plaza operations face competition from land-based andriverboat casinos throughout Louisiana and on the Mississippi Gulf Coast,casinos on Native American lands and other non-casino gaming opportunitieswithin Louisiana. The Louisiana Riverboat Economic Development and GamingControl Act limits the number of gaming casinos in Louisiana to 15 riverboatcasinos statewide and one land-based casino in New Orleans. All 15 availableriverboat licenses are issued, however, only 13 are currently operational.

 

Ourvideo gaming operations also face competition from other truck plaza videogaming facilities located in surrounding areas, as well as competition fromLouisiana horse racing facilities, some of which have been authorized tooperate video gaming machines, and restaurants and bars with video gamingmachines. As of December 31, 2009, there were 193 truck plazas inLouisiana licensed to operate video gaming devices.

 

***Horse Racingand Pari-Mutuel Wagering Operations*****.**We compete with racetracks located outside Virginia (including several inDelaware, Maryland, New Jersey, New York, Pennsylvania, and West Virginia, someof which augment their purses with slot machine revenues) and other forms ofgaming, such as land-based casinos, including those in Atlantic City, andstatewide lotteries in Virginia and neighboring states. The possiblelegalization of other forms of gaming in Virginia, such as Native American orriverboat casinos, could have an adverse effect on our performance. Althoughbills for the creation of riverboat casinos have failed in the Virginialegislature, proponents of riverboat gaming and other forms of gaming inVirginia may continue to seek legislative approval, in particular tooffset anticipated budget deficits. Additionally, certain Native Americantribes are seeking federal recognition (through legislation currently pendingin the U.S. Senate) which, if successful, could result in additional gamingvenues. Similarly, the expansion of other forms of gaming in neighboringstates, such as table games in West Virginia and slot machines in Maryland,could have an adverse effect on our performance.

 

Wehave competed and will compete for wagering dollars and simulcast fees withlive racing and races simulcast from racetracks in other states, particularlyracetracks in neighboring states such as Charles Town in West Virginia, PimlicoRace Course and Laurel Park in Maryland, and Delaware Park in Delaware. Webelieve that our existing agreements will continue to promote coordination ofthoroughbred events between Maryland and Virginia. However, if the Virginia orMaryland Racing Commissions do not approve either party’s proposed racing days,or if the Virginia-Maryland thoroughbred racing circuit is otherwiseunsuccessful, our track may have to compete directly with Pimlico Race Courseand Laurel Park in Maryland.

 

Wealso compete for wagering dollars with account wagering companies operatingboth legally and illegally in Virginia. These companies take wagers fromVirginians both over the phone and the internet. We believe legislation whichwent into effect January 1, 2010 will provide us with fair compensationfor their activities. Unlicensed account wagering companies have lower coststhan Colonial and thus are able to attract customers in Virginia with largewagering rebates.

 

**Employees and Labor Relations**

 

As of December 31, 2009, we had approximately 1,300 full-time andpart-time employees at our facilities in Black Hawk, Colorado, and Reno, CarsonCity, and Elko, Nevada, 300 year-round and 400 seasonal employees at ourfacilities in Virginia and 500 employees at our facilities in Louisiana.Employees include cashiers, dealers, food and beverage service personnel,facilities maintenance, security, valet, accounting, marketing, and personnelservices. We consider relations with our employees to be good.

 

None of our employees are presently represented by any union or otherlabor organization. See “Risk Factors” under Item 1A below.

 

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**Regulation**

 

***GamingRegulation and Licensing—Colorado***

 

TheState of Colorado created the Colorado Division of Gaming within the Departmentof Revenue to license, implement, regulate and supervise the conduct of limitedstakes gaming. The Division, under the supervision of the Gaming Commission,has been granted broad power to ensure compliance with Colorado law andregulations adopted thereunder (collectively, the “Colorado Regulations”). TheDivision may inspect, without notice, premises where gaming is beingconducted; may seize, impound or remove any gaming device;may examine and copy all of a licensee’s records; may investigate thebackground and conduct of licensees and their employees; and may bringdisciplinary actions against licensees and their employees. The Divisionmay also conduct detailed background checks of persons who lend money toor invest money in a licensee.

 

Itis illegal to operate a gaming facility without a license issued by the GamingCommission. The Gaming Commission is empowered to issue five types of gamingand gaming-related licenses. The licenses are revocable and nontransferable.Our failure or inability to obtain and maintain necessary gaming licenses wouldhave a material adverse effect on its gaming operations.

 

TheColorado casinos were granted retail/operator licenses concurrently with theiropenings. The licenses are subject to continued satisfaction of suitabilityrequirements and must be renewed biyearly. The current licenses for bothColorado casinos were renewed on April 16, 2009. There can be no assurancethat the Colorado casinos can successfully renew their licenses in a timelymanner every other year.

 

Allpersons employed by us in Colorado who are involved, directly or indirectly, ingaming operations in Colorado also are required to obtain various forms ofgaming licenses. Key licenses are issued to “key employees,” which include anyexecutive, employee or agent of a licensee having the power to exercise asignificant influence over decisions concerning any part of the operationsof a licensee. At least one key license holder must be on the premises of eachColorado casino at all times that a casino is open for business.

 

TheGaming Commission closely regulates the suitability of persons owning orseeking to renew an interest in a gaming license, and the suitability of alicensee can be adversely affected by persons associated with the licensee.Additionally, any person or entity having any direct interest in our subsidiaryBlack Hawk Gaming & Development Company, Inc. (“Black Hawk Gaming”)or any casino directly or indirectly owned by Black Hawk Gaming may besubject to administrative action, including personal history and backgroundinvestigations. The actions of persons associated with Jacobs Entertainment, Inc.,such as its shareholders, its officers, directors, management or employees,could jeopardize any licenses held by Black Hawk Gaming. All of Black HawkGaming’s directors are required to be found suitable as associated persons.

 

Asa general rule, under the Colorado Regulations, it is a criminal violation forany person to have a legal, beneficial, voting or equitable interest, or rightto receive profits in more than three retail/operator gaming licenses inColorado. Black Hawk Gaming has an interest in two such licenses. Any expansionopportunities that we may have in Colorado are limited to one morelicense.

 

TheColorado Division of Gaming may require any person having an interest in alicensee or an applicant for a license to provide background information,information on sources of funding, and a sworn statement that the interestedperson or applicant is not holding that interest for another party. The GamingCommission may, at its discretion, require any person having an interest in alicensee to undergo a full background investigation and to pay for thatinvestigation in the same manner as an applicant for a license. A backgroundinvestigation includes an examination of one’s personal history, financialassociations, character, record, and reputation, as well as the people withwhom a person has associated.

 

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TheGaming Commission has the right to request information from any person directlyor indirectly interested in, or employed by, a licensee, and to investigate themoral character, honesty, integrity, prior activities, criminal record, reputation,habits and associations of (i) all persons licensed pursuant to theColorado Limited Gaming Act, (ii) all officers, directors and stockholdersof a licensed privately held corporation, (iii) all officers, directorsand stockholders holding either a 5% or greater interest or a controllinginterest in a licensed publicly traded corporation, (iv) any person who asagent, consultant, advisor or otherwise, exercises a significant influence uponthe management or affairs of a publicly traded corporation, (v) allgeneral partners and all limited partners of a licensed partnership, (vi) allpersons that have a relationship similar to that of an officer, director orstockholder of a corporation (such as members and managers of a limitedliability company), (vii) all persons supplying financing or lending moneyto any licensee connected with the establishment or operation of limitedgaming, and (viii) all persons having a contract, lease or ongoingfinancial or business arrangement with any licensee, if such contract, lease orarrangement relates to limited gaming operations, equipment, devices orpremises.

 

Ifthe Gaming Commission determines that a person or entity is not suitable to owna direct or indirect voting interest in Black Hawk Gaming or Jacobs Entertainment,Black Hawk Gaming or Jacobs Entertainment may be sanctioned unless theperson or entity disposes of its voting interest. Sanctions may includethe loss of the casino licenses. In addition, the Colorado Regulations prohibita licensee or any affiliate of a licensee from paying dividends, interest orother remuneration to any person found to be unsuitable, or recognizing theexercise of any voting rights by any person found to be unsuitable. TheColorado Regulations require an operating casino licensee to include in itscorporate charter provisions that permit the repurchase of the voting interestsof any person found to be unsuitable. Black Hawk Gaming’s Articles ofIncorporation include the required provisions.

 

TheGaming Commission also has the power to require Black Hawk Gaming to suspend ordismiss its officers, directors and other key employees or sever relationshipswith other persons who refuse to file appropriate applications or who are foundto be unsuitable to act in such capacities. The Commission or the Director ofthe Division of Gaming may review a licensee’s gaming contracts, requirechanges in the contract before the licensee’s application is approved orparticipation in the contract is allowed, and require a licensee to terminateits participation in any gaming contract.

 

TheGaming Commission has enacted Rule 4.5, which imposes requirements onpublicly traded corporations holding gaming licenses in Colorado and on gaminglicenses owned directly or indirectly by a publicly traded corporation, whetherthrough a subsidiary or intermediary company. The term “publicly tradedcorporation” includes corporations, firms, limited liability companies, trusts,partnerships and other forms of business organizations. Such requirementsautomatically apply to any ownership interest held by a publicly tradedcorporation, holding company or intermediary company thereof, when theownership interest directly or indirectly is, or will be upon approval of theGaming Commission, 5% or more of the entire licensee. In any event, if theGaming Commission determines that a publicly traded corporation, or asubsidiary, intermediary company or holding company has the actual ability toexercise influence over a licensee, regardless of the percentage of ownership possessedby that entity, the Gaming Commission may require the entity to complywith the disclosure regulations contained in Rule 4.5.

 

UnderRule 4.5, gaming licensees, affiliated companies and controlling personscommencing a public offering of voting securities must notify the GamingCommission no later than ten business days after the initial filing of aregistration statement with the Securities and Exchange Commission. Licensedpublicly traded corporations are also required to send proxy statements to theDivision of Gaming within five days after their distribution. Licensees to whomRule 4.5 applies must include in their charter documents provisions that:restrict the rights of the licensees to issue voting interests or securitiesexcept in accordance with the Colorado Gaming Act and the Colorado Regulations;void the transfer of voting securities or other voting interests issued inviolation of the Colorado Gaming Act and the Colorado Regulations until theissuer ceases to be subject to the jurisdiction of the Gaming Commission oruntil the Gaming Commission, by affirmative act, validates the transfer; andprovide that holders of voting interests or securities of licensees foundunsuitable by the Gaming Commission may, within 60 days of such finding of unsuitability,be required to sell their interests or securities back to the issuer at thelesser of the cash equivalent of the holders’ investment or the market price asof the date of the finding of unsuitability. Alternatively, the holders may,within 60 days after the finding of unsuitability, transfer the votinginterests or securities to a person suitable to the Gaming Commission. Untilthe voting interests or securities are held by suitable persons, the issuermay not pay dividends or interest, the securities may not be voted,they may not be included in 

 

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thevoting or securities of the issuer, and the issuer may not pay anyremuneration in any form to the holders of the securities.

 

Notificationmust be given to the Division of Gaming of the acquisition of direct orindirect beneficial ownership of:

 

·                  5%or more of any class of voting securities of a publicly traded corporationthat is required to include in its articles of organization the Rule 4.5charter language provisions; or

 

·                  5%or more of the beneficial interest in a gaming licensee directly or indirectlythrough any class of voting securities of any holding company orintermediary company of a licensee, referred to as qualifying persons.

 

Ownersof any such interests, whether owned individually or in association withothers, are subject to a finding of suitability. Notification must be made bypersons acquiring these interests. Such persons must submit all requestedinformation to the Division of Gaming, are subject to a finding of suitabilityas required by the Division of Gaming or the Gaming Commission, and must beinformed of these requirements by the licensee. A person other than aninstitutional investor whose interest equals 10% or more of a publicly tradedcorporation or a 10% beneficial interest in a gaming licensee must apply to theGaming Commission for a finding of suitability within 45 days after acquiringsuch securities.

 

Aninstitutional investor who, individually or in association with others,acquires, directly or indirectly, the beneficial ownership of 15% or more ofany class of voting securities or 15% of the beneficial interest in agaming licensee must apply to the Gaming Commission for a finding ofsuitability within 45 days after acquiring such interests.

 

Licenseesmust also notify any qualifying persons of these requirements. Whether or notso notified, qualifying persons are responsible for complying with theserequirements.

 

The Colorado Regulations also provide forexemption from the requirements for a finding of suitability when the GamingCommission finds such action to be consistent with the purposes of the ColoradoGaming Control Act. The Gaming Commission may determine that anyone with amaterial relationship to, or material involvement with, a licensee or anaffiliated company must apply for a finding of suitability or must apply for akey employee license.

 

Pursuantto Rule 4.5, persons found unsuitable by the Gaming Commission must beremoved from any position as an officer, director, or employee of a licensee,or of a holding or intermediary company. Such unsuitable persons also areprohibited from any beneficial ownership of the voting securities of any suchentities. Licensees, or affiliated entities of licensees, are subject tosanctions for paying dividends or distributions to persons found unsuitable bythe Gaming Commission, or for recognizing voting rights of, or paying a salaryor any remuneration for services to, unsuitable persons. Licensees or theiraffiliated entities also may be sanctioned for failing to pursue effortsto require unsuitable persons to relinquish their interests. The GamingCommission must provide prior approval of any sale, lease, purchase,conveyance, or acquisition of an interest in a casino licensee, except asprovided in Rule 4.5 relating to publicly traded corporations.

 

Prior to July 2, 2009, Colorado casinoscould operate only between 8:00 a.m. and 2:00 a.m. Slotmachines, black jack, poker and other approved variations of those games andvideo poker were the only permitted games, with a maximum single wager of $5. On November 4, 2008, ColoradoAmendment 50 was approved by Colorado voters and was subsequently voted uponand approved by each of the three gaming towns in Colorado (Black Hawk, CentralCity and Cripple Creek).  The new gamingrules, which became effective on July 2, 2009 at Colorado casinos, allowedfor the introduction of craps and roulette, increased the maximum single wagerlimit to $100, allows 24-hour gaming operations, and prohibit changes inexisting tax levels (currently, a series of graduated tax rates, with a maximumgaming tax rate of 20% on adjusted gross proceeds over $13 million) unless suchchanges are approved by a statewide vote. For further discussion, see Item 7 “Management’s Discussion and Analysisof Financial Condition and Results of Operations.”

 

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The recent voter-approvedamendment did not affect constitutional restrictions on the percentage of space a casino may use for gaming — 50% of anyfloor and 35% of the overall square footage of the building in which the casinois located.  Also, it did not change theage-related restrictions for casinos, namely, that only individuals who are 21 years or older may gambleor consume alcohol on the casino premises. Finally, Colorado casinosmay not extend credit to any gaming patrons.

 

***GamingRegulation and Licensing—Nevada***

 

Theownership and operation of casino gaming facilities in Nevada, including theNevada casino operated by Jacobs Entertainment’s direct and indirectsubsidiaries Gold Dust West Casino, Inc. (“Gold Dust West”), Jacobs PiñonPlaza Entertainment, Inc. (“Piñon Plaza”) and Jacobs Elko Entertainment, Inc.(“Elko”) (collectively, the “Nevada Gaming Subsidiaries”), are subject to the Nevada Gaming ControlAct and the regulations promulgated thereunder (the “Nevada Act”) and to thelicensing and regulatory control of the Nevada Gaming Commission (the “NevadaCommission”), the Nevada State Gaming Control Board (the “Nevada Board”), andvarious local ordinances and regulations, including, without limitation, thoseof the cities of Reno, Carson City and Elko, Nevada (collectively, the “NevadaGaming Authorities”).

 

Thelaws, regulations and supervisory procedures of the Nevada Gaming Authoritiesare based upon declarations of public policy which are concerned with, amongother things: (i) the prevention of unsavory or unsuitable persons fromhaving a direct or indirect involvement with gaming at any time or in anycapacity; (ii) the establishment and maintenance of responsible accountingpractices and procedures; (iii) the maintenance of effective controls overthe financial practices of licensees, including the establishment of minimumprocedures for internal fiscal affairs and the safeguarding of assets andrevenues, providing reliable record keeping and filing periodic reports withthe Nevada Gaming Authorities; (iv) the prevention of cheating andfraudulent practices; and (v) providing a source of state and localrevenues through taxation and licensing fees. Change in such laws, regulationsand procedures could have an adverse effect on Jacobs Entertainment’s Nevadagaming operations.

 

TheNevada Gaming Subsidiaries have been licensed by the Nevada Gaming Authoritiesas corporate licensees. Gaming licenses require the periodic payment of feesand taxes and are not transferable. Jacobs Entertainment’s parent company,Jacobs Investments, Inc. (“Jacobs Investments” or “JII”), has beenregistered by the Nevada Commission as a holding company and has been foundsuitable to own Jacobs Entertainment’s stock. Black Hawk Gaming has beenregistered by the Nevada Commission as an intermediary company and has beenfound suitable to own the stock of Gold Dust West. Jacobs Entertainment hasbeen registered by the Nevada Commission as a publicly traded corporation (a “RegisteredCorporation”) and has been found suitable as the sole shareholder of Black HawkGaming, Piñon Plaza andElko.  Registered Corporations,registered intermediary companies, and corporate licensees are requiredperiodically to submit detailed financial and operating reports to the NevadaCommission and furnish any other information that the Nevada Commissionmay require. Substantially all material loans, leases, sales of securitiesand similar financing transactions by Jacobs Investments, Jacobs Entertainment,Black Hawk Gaming, and the Nevada Gaming Subsidiaries must be reported to orapproved by the Nevada Commission. No person may become a stockholder of,or holder of an interest in, or receive any percentage of profits from acorporate licensee without first obtaining licenses and approvals from theNevada Gaming Authorities. The controlling shareholders, directors and certainofficers of Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming, andthe Nevada Gaming Subsidiaries have obtained from the Nevada Gaming Authoritiesthe various registrations, findings of suitability, approvals, permits andlicenses that are required in order to engage in gaming activities in Reno,Carson City and Elko,****Nevada.

 

TheNevada Gaming Authorities may investigate any person who has a materialrelationship to, or material involvement with, Jacobs Investments, JacobsEntertainment, Black Hawk Gaming, or the Nevada Gaming Subsidiaries in order todetermine whether that individual is suitable or should be licensed as abusiness associate of a gaming licensee. The officers, directors andshareholders of Jacobs Investments and Jacobs Entertainment must fileapplications with and be licensed or found suitable by the Nevada GamingAuthorities. The officers, directors and certain key employees of the NevadaGaming Subsidiaries must file applications with and may be required to belicensed or found suitable by the Nevada Gaming Authorities. The officers,directors and key employees of Jacobs Investments, Jacobs Entertainment andBlack Hawk Gaming who are actively and directly involved in the gamingactivities of the Nevada Gaming Subsidiaries may be required to be licensedor found suitable by the Nevada Gaming Authorities. The Nevada GamingAuthorities may deny an application for licensing for any cause that they 

 

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deemreasonable. A finding of suitability is comparable to licensing, and bothrequire submission of detailed personal and financial information followed by athorough investigation. The applicant for licensing or a finding of suitabilitymust pay all the costs of the investigation. Changes in licensed positions mustbe reported to the Nevada Gaming Authorities and, in addition to theirauthority to deny an application for a finding of suitability or licensure, theNevada Gaming Authorities have jurisdiction to disapprove a change in acorporate position.

 

Ifthe Nevada Gaming Authorities were to find an officer, director or key employeeunsuitable for licensing or unsuitable to continue having a relationship withJacobs Investments, Jacobs Entertainment, Black Hawk Gaming or the NevadaGaming Subsidiaries, the companies involved would have to sever allrelationships with that person. In addition, the Nevada Commissionmay require Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming orthe Nevada Gaming Subsidiaries to terminate the employment of any person whorefuses to file appropriate applications. Determinations of suitability or ofquestions pertaining to licensing are not subject to judicial review in Nevada.

 

JacobsInvestments, Jacobs Entertainment, Black Hawk Gaming and the Nevada GamingSubsidiaries are required periodically to submit detailed financial andoperating reports to the Nevada Commission and furnish any other informationthat the Nevada Commission may require. Substantially material loans,leases, sales of securities and similar financing transactions of JacobsInvestments, Jacobs Entertainment, Black Hawk Gaming and the Nevada GamingSubsidiaries must be reported to or approved by the Nevada Commission.

 

Ifit were determined that the Nevada Act was violated by Jacobs Investments,Jacobs Entertainment, Black Hawk Gaming Jacobs Investments, JacobsEntertainment, Black Hawk Gaming or the Nevada Gaming Subsidiaries, theregistrations or gaming licenses that Jacobs Investments, Jacobs Entertainment,Black Hawk Gaming Jacobs Investments, Jacobs Entertainment, Black Hawk Gamingand the Nevada Gaming Subsidiaries hold could be limited, conditioned,suspended or revoked, subject to compliance with certain statutory andregulatory procedures. In addition, Jacobs Investments, Jacobs Entertainment,Black Hawk Gaming, or the Nevada Gaming Subsidiaries and the persons involvedcould be subject to substantial fines for each separate violation of the NevadaAct at the discretion of the Nevada Commission. Further, a supervisor could beappointed by the Nevada Commission to operate the casinos operated by theNevada Gaming Subsidiaries and, under certain circumstances, earnings generatedduring the supervisor’s appointment (except for reasonable rental value of thecasino) could be forfeited to the State of Nevada. Limitation, conditioning orsuspension of the gaming licenses of the Nevada Gaming Subsidiaries or theappointment of a supervisor could (and revocation of any gaming license would)have a material adverse effect on the gaming operations, financial conditionand results of operations of Jacobs Entertainment.

 

TheNevada Act requires any person who acquires beneficial ownership of more than5% of a Registered Corporation’s voting securities to report the acquisition tothe Nevada Commission. The Nevada Act requires that beneficial owners of morethan 10% of a Registered Corporation’s voting securities apply to the NevadaCommission for a finding of suitability within 30 days after the Chairman ofthe Nevada Board mails the written notice requiring such filing. However, an “institutionalinvestor,” as defined in the Nevada Act, that beneficially owns more than 10%but not more than 11% of a Registered Corporation’s voting securities as aresult of a stock repurchase by the Registered Corporation may not be requiredto file such an application.  Further, aninstitutional investor that acquires more than 10% but not more than 25% of aRegistered Corporation’s voting securities may apply to the NevadaCommission for a waiver of a finding of suitability if that institutionalinvestor holds the voting securities for investment purposes only. Aninstitutional investor that has obtained a waiver may hold more than 25%but not more than 29% of a Registered Corporation’s voting securities andmaintain the waiver where the additional ownership results from a stockrepurchase by the Registered Corporation. An institutional investor will not bedeemed to hold voting securities for investment purposes unless the votingsecurities were acquired and are held in the ordinary course of business as aninstitutional investor and not for the purpose of causing, directly orindirectly, the election of a majority of the members of the RegisteredCorporation’s board of directors, any change in the Registered Corporation’scorporate charter, bylaws, management, policies or operations, or of any of itsgaming affiliates, or any other action that the Nevada Commission finds to beinconsistent with holding the Registered Corporation’s voting securities forinvestment purposes only. Activities which are not deemed to be inconsistentwith holding voting securities for investment purposes only include: (i) votingon all matters voted on by stockholders; (ii) making financial and otherinquiries of management of the type normally made by securities analysts forinformational purposes and not to cause a change in management, policies oroperations; and (iii) such other activities as the Nevada Commission may determineto be consistent with such investment intent. If the 

 

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beneficialholder of voting securities who must be found suitable is a corporation,partnership or trust, it must submit detailed business and financialinformation, including a list of beneficial owners. The applicant is requiredto pay all costs of investigation.

 

Anyofficer, director or stockholder of a licensed or registered company who failsor refuses to apply for a finding of suitability or a license within 30 daysafter being directed to do so by the Nevada Commission or the Chairman of theNevada Board may be found unsuitable. The same restrictions apply to arecord owner of stock if the record owner, after request, fails to identify thebeneficial owner. Any stockholder found unsuitable who holds, directly orindirectly, any beneficial ownership of the stock of a licensed or registered companybeyond such period of time as may be prescribed by the Nevada Commissionmay be guilty of a criminal offense. A Registered Corporation is subjectto disciplinary action if, after it receives notice that a person is unsuitableto be a stockholder or to have any other relationship with the RegisteredCorporation, the Registered Corporation (i) pays that person any dividendor interest, (ii) allows that person to exercise, directly or indirectly,any voting right conferred through securities held by that person, (iii) paysremuneration in any form to that person for services rendered orotherwise, or (iv) fails to pursue all lawful efforts to require thatunsuitable person to relinquish its voting securities including, if necessary,the immediate purchase of the voting securities for cash at fair market value.Additionally, the Cities of Reno, Carson City and Elko, Nevada have theauthority to approve all persons owning or controlling the stock of anycorporation controlling a gaming licensee operating in those cities.

 

TheNevada Commission may, in its discretion, require the holder of any of the debtor similar securities of a Registered Corporation to file applications, beinvestigated and be found suitable to own such debt securities if the NevadaCommission has reason to believe that such ownership would otherwise beinconsistent with the declared policies of the State of Nevada. If the NevadaCommission determines that a person is unsuitable to own those securities, thenpursuant to the Nevada Act, a Registered Corporation can be sanctioned,including by revocation of its approvals and those of its affiliates, ifwithout the prior approval of the Nevada Commission, the Registered Corporation(i) pays to the unsuitable person any dividend, interest, or anydistribution whatsoever; (ii) recognizes any voting right by theunsuitable person in connection with the Registered Corporation’s securities; (iii) paysthe unsuitable person remuneration in any form; or (iv) makes any paymentto the unsuitable person by way of principal, redemption, conversion, exchange,liquidation, or similar transaction.

 

Jacobs Investments, Jacobs Entertainment, Black HawkGaming and the Nevada Gaming Subsidiaries are required to maintain currentstock ledgers in Nevada that may be examined by the Nevada GamingAuthorities at any time. If any securities are held in trust by an agent or bya nominee, the record holder may be required to disclose the identity ofthe beneficial owner to the Nevada Gaming Authorities. A failure to make therequired disclosure may be grounds for finding the record holderunsuitable. Licensed and registered companies are also required to rendermaximum assistance in determining the identity of beneficial owners of theirsecurities. The Nevada Commission has the power to require Jacobs Entertainment’sstock certificates to bear a legend indicating that the securities are subjectto the Nevada Act. To date, the Nevada Commission has not imposed such arequirement.

 

Jacobs Investments, JacobsEntertainment and Black Hawk Gaming may not make a public offering withoutthe prior approval of the Nevada Commission if the proceeds from the offeringare intended to be used to construct, acquire or finance gaming facilities inNevada, or to retire or extend obligations incurred for those purposes or forsimilar transactions. On September 17, 2009, the Nevada Commission grantedJacobs Entertainment prior approval to make public offerings for a period oftwo years, subject to certain conditions (the “Shelf Approval”). The ShelfApproval also applies to any affiliated company wholly owned by JacobsEntertainment which is a publicly traded corporation or would become a publiclytraded corporation pursuant to a public offering. The Shelf Approvalmay be rescinded for good cause without prior notice upon the issuance ofan interlocutory stop order by the Chairman of the Nevada Board. The ShelfApproval does not constitute a finding, recommendation or approval by any ofthe Nevada Gaming Authorities as to the accuracy or adequacy of the offeringmemorandum or the investment merits of the securities. Any representation tothe contrary is unlawful.

 

Changes in control of aRegistered Corporation through merger, consolidation, stock or assetacquisitions, management or consulting agreements, or any act or conduct by aperson by which it obtains control of a Registered Corporation, may notoccur without the prior approval of the Nevada Commission. Entities seeking toacquire control of a Registered Corporation must satisfy the Nevada Board andNevada Commission on a variety of

 

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stringent standards prior toassuming such control. The Nevada Commission may also require controllingstockholders, officers, directors and other persons having a materialrelationship or involvement with the entity proposing to acquire control, to beinvestigated and licensed as part of the approval process relating to thetransaction.

 

TheNevada legislature has declared that some corporate acquisitions opposed bymanagement, repurchases of voting securities, and corporate defense tacticsaffecting Nevada corporate gaming licensees may be injurious to stable andproductive corporate gaming. Regulations of the Nevada Gaming Commissionprovide that control of a Registered Corporation cannot be acquired through atender offer, merger, consolidation, acquisition of assets, management orconsulting agreements or any form of takeover whatsoever without the priorapproval of the Nevada Gaming Commission. The Nevada Commission has establisheda regulatory scheme to ameliorate the potentially adverse effects of thesebusiness practices on Nevada’s gaming industry and to further Nevada’s policyto: (i) assure the financial stability of corporate gaming licensees andtheir affiliates; (ii) preserve the beneficial aspects of conductingbusiness in the corporate form; and (iii) promote a neutral environmentfor the orderly governance of corporate affairs. Approvals are, in certaincircumstances, required from the Nevada Commission before a RegisteredCorporation can make exceptional repurchases of voting securities above thecurrent market price thereof and before a corporate acquisition opposed bymanagement can be consummated. The Nevada Act also requires prior approval of aplan of recapitalization proposed by a Registered Corporation in response to atender offer made directly to its stockholders for the purposes of acquiringcontrol of the Registered Corporation.

 

Licensefees and taxes, computed in various ways depending on the type of gaming oractivity involved, are payable to the State of Nevada and to the counties andcities in which the Nevada Gaming Subsidiaries’ operations are conducted.Depending on the particular fee or tax involved, these fees and taxes arepayable either monthly, quarterly or annually and are based on either (i) apercentage of the gross revenues received; (ii) the number of gamingdevices operated; or (iii) the number of table games operated. A liveentertainment tax is also paid by gaming establishments where liveentertainment is furnished in connection with an admission fee or the sellingor serving of food, refreshments or merchandise.

 

Anyperson who is licensed, required to be licensed, registered, or required to beregistered, or is under common control with any such person (collectively, “Licensees”),and who is or proposes to become involved in a gaming venture outside ofNevada, is required to deposit with the Nevada Board, and thereafter maintain,a revolving fund in the amount of $10,000 to pay the expenses of investigationby the Nevada Board for its participation in that foreign gaming. The revolvingfund is subject to increase or decrease in the discretion of the NevadaCommission. Thereafter, foreign Licensees are required to comply with certainreporting requirements imposed by the Nevada Act. The Licensees are alsosubject to disciplinary action by the Nevada Commission if they knowinglyviolate any laws of the foreign jurisdiction pertaining to the foreign gamingoperation, fail to conduct the foreign gaming operation in accordance with thestandards of honesty and integrity required of Nevada gaming operations, engagein activities or enter into associations that are harmful to the State ofNevada or its ability to collect gaming taxes and fees, or employ, contractwith or associate with a person in the foreign operation who has been denied alicense or finding of suitability in Nevada on the grounds of personalunsuitability.

 

***GamingRegulation and Licensing—Louisiana***

 

Videogaming in Louisiana is regulated by the Louisiana Gaming Control Board, whichis part of the Department of Public Safety and Corrections. Theenforcement arm thereof in charge of licensing and criminal investigations isthe Video Gaming Division of the Louisiana State Police, likewise apart of the Department of Public Safety and Corrections. The Gaming Section ofthe Attorney General’s Office provides all legal counsel and representationwith respect to all matters involving licensing actions and any other litigationissue relative to gaming and involving either the Louisiana Gaming ControlBoard (hereinafter the “Board”) or the Video Gaming Division of the LouisianaState Police (hereinafter the “Division”).

 

TheVideo Draw Poker Devices Control Law, which governs our operations inLouisiana, is contained within the Louisiana Revised Statutes at Title 27:301et seq. (the “act”) with accompanying regulations being promulgated by theBoard pursuant to the statutory authority contained within the act. The videodraw poker regulations are in Title 42 of the Louisiana Administrative Code atSections 2401 et seq.

 

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Theact gives the Board broad authority and discretion in the licensing of personsfor video draw poker operations within the State of Louisiana. Generally, aperson may not be licensed for video draw poker if he has been convictedin any jurisdiction of any of the following offenses within ten years prior tothe date of the application for a video draw poker license or less than tenyears has elapsed between the date of application for a video draw pokerlicense and the successful completion or service of any sentence, deferredadjudication, or period of probation or parole for any such offense: (i) anyoffense punishable by imprisonment for more than one year; (ii) theft orany crime involving false statements or declarations; or (iii) gambling,as defined by the laws or ordinances of any municipality, any parish, anystate, or the United States. The act and its corresponding regulations furtherprovide that an application for a video draw poker license may be deniedif it contains any material omission of information. An applicant must also notbe delinquent in state or federal income taxes, penalties or interest ordelinquent in the payment of any sales taxes, penalties, or interest to eitherthe state or any local governing authority of the parish or municipality inwhich the establishment is located.

 

Thereare several general suitability requirements for licensure. Specifically, thelaw requires that an applicant for a video draw poker license be: (i) aperson of good character, honesty, and integrity; (ii) a person whoseprior activities, arrest or criminal record if any, reputation, habits, andassociations do not pose a threat to the public interest of Louisiana or to theeffective regulation of video draw poker, and do not create or enhance thedangers of unsuitable, unfair, or illegal practices, methods, and operations inthe activities authorized by the act and financial arrangements incidentalthereto; and (iii) a person who is likely to conduct business asauthorized by the act in complete compliance with the act.

 

Thesuitability standards must be met by every person who has or controls directlyor indirectly more than a 5% ownership, income, or profit interest in an entitythat has or applies for a license in accordance with the act, or who receivesmore than a 5% revenue interest in the form of a commission, finder’s fee,loan repayment, or any other business expense related to the gaming operation,or who has the ability, in the opinion of the Division, to exercise asignificant influence over the activities of a licensee authorized or to beauthorized by the act. For the purposes of the act, all gaming-relatedassociations, outstanding loans, promissory notes, leases, or other financialindebtedness of an applicant or licensee must be revealed to the Division forthe purposes of determining significant influence and suitability. Whilesignificant influence is determined on a case-by-case basis, it has generallybeen interpreted to include any person who is an officer or director of anyjuridical entity that is an applicant for a video draw poker license as well asthe spouse of any person having more than a 5% ownership, income, or profitinterest in an applicant as well as the spouse of any officer or director ofany juridical entity applicant. As of the middle of 2007, the Louisiana StatePolice made a policy decision that generally removed spouses from the list ofparties required to file suitability documentation related to video draw pokerestablishment licenses. However, the companion legislation was not approved norsent to the governor for signature during the corresponding legislativesession.

 

Thesuitability criteria law makes an exception for institutional investors. Aninstitutional investor of any applicant otherwise required to be found suitableor qualified pursuant to the act is presumed suitable or qualified uponsubmitting documentation to the Board and the Division sufficient to establishqualifications as an institutional investor as described below, and uponcertifying that: (i) it owns, holds, or controls publicly tradedsecurities issued by a licensee or permittee or a holding, intermediate, orparent company of a licensee or permittee in the ordinary course of businessfor investment purposes only; (ii) it does not exercise influence over theaffairs of the issuer of the securities or over any licensed or permittedsubsidiary of the issuer of the securities; and (iii) it does not intendto exercise influence over the affairs of the issuer of the securities, or overany licensed or permitted subsidiary of the issuer of the securities, in thefuture, and that it agrees to notify the Board in writing within 30 days ifthat intent should change.

 

Theexercise of voting privileges with regard to publicly traded securities is notdeemed to constitute the exercise of influence over the affairs of a licensee.The act also provides that this exception is not to be construed to precludethe Board or the Division from investigating the suitability or qualificationsof an institutional investor should the Board or Division become aware of factsor information which may result in such institutional investor being foundunsuitable or disqualified.

 

Aninstitutional investor is defined in the act as: (i) a plan or trustestablished and maintained by the United States Government, a state, or apolitical subdivision of a state for the benefit of their respective employees;(ii) an 

 

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investmentcompany that is registered under the Investment Company Act of 1940; (iii) acollective investment trust organized by a bank under Part Nine of the Rules ofthe Comptroller of the Currency; (iv) a closed end investment trust thatis registered with the United States Securities and Exchange Commission; (v) amutual fund; (vi) a life insurance company or property and casualtycompany; (vii) a federal or state bank; or (viii) an investmentadvisor registered under the Investment Advisers Act of 1940.

 

Ifany person required to be found qualified or suitable fails to provide all orpart of the documents or information required by the Board or theDivision, and if, as a result, any person holding a license issued pursuant tothe act is not or may no longer be qualified or suitable, the Board willissue, under penalty of revocation of the license, a condition naming theperson who failed to provide all or part of the documents or informationrequired by the Board or the Division, and declaring that such personmay not: (i) receive dividends or interest on securities of acorporation holding a license, if the person has or controls directly orindirectly more than a 5% ownership, income, or profit interest in suchcorporation; (ii) exercise directly, or through a trustee or nominee, aright conferred by securities of a corporation holding a license, if the personhas or controls directly or indirectly more than a five percent ownership,income, or profit interest in such corporation; (iii) receive remunerationor other economic benefit from any person holding a license issued pursuant tothe provisions of the act; (iv) exercise significant influence over theactivities of a person holding a license issued pursuant to the provisions ofthe act; or (v) continue owning or holding a security of a corporationholding a license if the person has or controls directly or indirectly morethan a 5% ownership, income, or profit interest in such corporation.

 

Operatingvideo draw poker devices at truck plazas in Louisiana requires both anestablishment license and a device owner license. The establishment licensepermits the placement by a licensed device owner of video draw poker devices onthe licensed premises. A device owner license permits the licensed entity toplace and operate video draw poker devices at licensed establishments. In manycases, an establishment licensed for the placement of video draw poker deviceswill contract with a licensed device owner for video draw poker deviceplacement services for a percentage of the video draw poker revenues. Alicensed establishment may also, however, be a licensed device owner. Alicensed device owner entity must be majority-owned by a person or persons whohave resided within the State of Louisiana for a period of two years.

 

Licensedestablishments in Louisiana may be a restaurant, bar, motel or hotel, aLouisiana State Racing Commission licensed pari-mutuel wagering facility, aLouisiana State Racing Commission licensed satellite wagering facility, or aqualified truck stop facility. Generally, a licensed establishment pays to adevice owner a percentage of the net device revenues generated by video drawpoker devices placed at its business premises. There is no law that governs theminimum amount that a device owner must be compensated for its services.

 

Restaurantsand bars may contain up to three video draw poker devices and a hotel ormotel may have three video draw poker devices in each of its lounges andrestaurants licensed to sell alcoholic beverages, up to a total of twelve foreach hotel or motel. A pari-mutuel wagering facility and a licensed satellitewagering facility may have an unlimited number of video draw pokerdevices. A truck stop facility may have up to fifty video draw pokerdevices, with the number being determined by the amount of fuel sales of thetruck stop facility.

 

Arestaurant, bar, motel or hotel, pari-mutuel wagering facility, and satellitewagering facility pays an initial non-refundable licensing and processing feeof $1,100. A truck stop facility pays an initial licensing and processing feeof $10,100. A license must be renewed every five years but a renewal fee isrequired each year. The non-refundable annual renewal and processing fee for arestaurant, bar, motel or hotel, pari-mutuel wagering facility, and satellitewagering facility is $200. The non-refundable annual renewal and processing feefor a truck stop facility is $1,100.

 

Inaddition to the licensing fee, the device owner collects all funds deposited ineach video draw poker device and is required to remit to the State of Louisianaon a bi-weekly basis a franchise payment in an amount equal to a percentage ofthe net device revenue derived from the operation of each video draw pokerdevice owned by him. The amount of the percentage is based on the type oflicensed establishment authorized by the Board for the placement of video drawpoker devices, as follows: (i) a restaurant, bar, tavern, cocktail lounge,club, motel, or hotel—26%; (ii) a qualified truck stop facility—32.5%; and(iii) a pari-mutuel wagering facility or satellite wageringfacility—22.5%.

 

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Thenumber of video draw poker devices permissible in a qualified truck stopfacility is based on average monthly fuel sales, as follows: (i) 100,000gallons of fuel, of which at least 40,000 gallons are diesel—not more than 50devices; (ii) 75,000 gallons of fuel, of which at least 30,000 gallons arediesel—not more than 40 devices; and (iii) 50,000 gallons of fuel, ofwhich at least 10,000 are diesel—not more than 35 devices. Compliance with theforegoing thresholds is measured quarterly for the first year of operation and,thereafter, is measured annually. Once licensed, if a truck stop facility sellsless than an average of 50,000 gallons per month but more than 25,000 gallonsper month in any calendar year, the truck stop facility will not be permittedto operate any video draw poker devices in the following calendar year. Aqualified truck stop facility that sells less than an average of 25,000 gallonsper month in any calendar year will be subject to revocation of its video drawpoker license. Bulk sales or transfers may not be used to calculatemonthly averages. Fuel facilities may, however, offer fuel for sale at a lowerprice (a) when motor fuel is sold upon the final liquidation of abusiness; (b) when motor fuel is advertised, offered for sale, or sold byany fiduciary or other officer under the order or direction of any court; (c) whenmotor fuel is sold for promotional purposes limited to a grand opening, anannual anniversary, or an annual customer appreciation day sale, each of whichdoes not exceed three consecutive days; and (d) when motor fuel is sold ina good faith effort to meet the legal price of a competitor. Louisiana lawcreates a presumption that a fuel facility will not violate the pricerequirement when it sells fuel below the required price to meet the price of acompetitor if it makes a bona fide effort to determine the legality of theprice of such competitor and determines in good faith that the competitor’sprice is a legal price.

 

Inaddition, under the act, a qualified truck stop facility is required to have atleast five developed contiguous acres and sell fuel, lubricating oil, and othervehicular merchandise, such as batteries, tires, or vehicle parts foreighteen-wheel tractor-trailers, and also meet all of the following criteria: (i) itmust be located adjacent to a major state or interstate highway, as defined bythe Board (within 2,000 feet of a major state highway or U.S. interstatehighway); (ii) it must have an on-site restaurant with all of thefollowing features: (a) provides seating for at least 50 patrons; (b) providesfull table service for sit-down meals; (c) is open 12 hours a day; (d) offersa varied menu; and (e) operates a fully equipped kitchen which includes,but is not limited to, a range oven and refrigerated storage appliances usedfor the preparation of foods for on-premises or immediate consumption; (iii) itmust have parking areas with each of the following: (a) a stable parkingarea for at least 50 18-wheel tractor-trailer motor vehicles, either paved orconcrete (or otherwise certified and approved), to support 18-wheel tractor-trailer motor vehicles and their loads, constructed according to industryspecifications, subject to approval by the Board and the Division; (b) parkingof sufficient size is allowed for safe ingress and egress; and (c) parkingareas for other vehicles around business entrance ways and exits shall notconstitute parking areas for 18-wheel tractor-trailer motor vehicles; (iv) itmust have diesel and gasoline fuel; (v) it must have on-site repair servicefacilities for 18-wheel tractor-trailer motor vehicles which facilitymay be in the form of a contract services business which regularlyperforms this type of service; (vi) it must have at least four of thefollowing amenities: (a) a separate truckers’ television lounge; (b) afull service laundry facility located in a convenient area for truckers’ use; (c) privateshowers for men and women, not located in an area open to general publicrestroom facilities; (d) a travel store with items commonly referredto as truckers’ supplies (items commonly used only by commercial motorvehicles); (e) truck scales; (f) separate truckers’ telephones; and (g) permanentstorage facilities for fuel; (vii) it must have an area separated foradult patronage only; and (viii) it must have, if available, a Class A—Generalretail permit or a Class A—Restaurant permit, as defined in Part IIof Chapter 1 or Part II of Chapter 2 of Title 26 of the Louisiana RevisedStatutes of 1950, to serve or sell alcoholic beverages for on-premisesconsumption and be owned and leased by a person who meets all personalqualifications for such permit. In light of Hurricane Katrina and other recentevents, the Louisiana legislature has recently put in place exceptions to theamenities requirements and fuel requirements that allow qualified truck stopfacility licensees to operate casinos with a previously approved number ofgaming devices, notwithstanding certain non-compliance with the amenities orfuel requirements. The exceptions may apply, depending on the circumstances andas determined by the Division, if the non-compliance is caused by forcemajeure, expropriation by political subdivision, road construction or othernon-commercial circumstances that directly affect compliance. An owner or lessorof a qualified truck stop facility may lease or sublease any restaurant,convenience store, fuel facility, or any other business operation located onthe premises of the qualified truck stop facility to another person, providedthat such person executes a written lease which contains a requirement that thelessee or sublessee comply with the laws and regulations which govern theoperation of video draw poker devices. If such lease or sublease is granted,the owner or lessor of such qualified truck stop facility shall maintainultimate supervision and control of that entire truck stop premises.

 

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Additionally,no license can be granted to any truck stop facility located, at the timeapplication is made for a license to operate video draw poker devices, withinfive hundred feet of any property that is on the National Historic Registry,any public playground, or a building used exclusively as a church, synagogue,public library, or school. In addition, no license shall be issued for anytruck stop facility unless previously applied for or licensed as of January 1,2008, located, at the time application is made for a license to operate videodraw poker devices, within two thousand five hundred feet of any property thatis on the National Historic Registry, any public playground, or a building usedexclusively as a church, synagogue, public library, or school unless theapplicant for the license has applied prior to January 1, 2008, with thelocal governing authority of the parish where the truck stop is located for acertificate of compliance with applicable zoning ordinances and building codesand a statement of approval for the operation of video draw poker devices at atruck stop facility or has applied with the appropriate authority for abuilding permit prior to January 1, 2008. Moreover, after June 1, 2010, no new truck plaza video gaminglicenses will be issued for facilities located within 2,500 feet (almostone-half mile) from the nearest qualifying personal residence or residentialdistrict that has been in its present location for at least 60 days.

 

Allsuitability information and applications required to be submitted with respectto the 18 Louisiana truck plazas currently owned by us, as well as the truckstop in which we share in the revenue, have been submitted to the Board and theDivision. All applications submitted have been approved and none are currentlypending.  However, because the Board andthe Division conduct a new suitability investigation in connection with eachacquisition of a facility at which video gaming devices are to be operated,regardless of prior approvals, there can be no guarantee that a suitabilityapproval will ultimately result with respect to the plazas that we propose toacquire.

 

***GamingRegulation and Licensing—Virginia***

 

Colonial’ssuccess is dependent upon continued government and public acceptance of horseracing as a form of legalized gaming. Although Colonial believes thatpari-mutuel wagering on horse racing will continue to be legal in Virginia,gaming has come under increasing scrutiny nationally and locally.

 

Oppositionto the Virginia Racing Act has been unsuccessfully introduced in the Virginialegislature in the past, but additional legislative opposition may arisein the future. Any repeal or material amendment of the Virginia Racing Actcould have a material adverse effect on Colonial’s business of pari-mutuelwagering.

 

Underthe Virginia Racing Act, the Virginia Racing Commission is vested with controlover all aspects of horse racing with pari-mutuel wagering and the power toprescribe regulations and conditions under which such racing and wagering areconducted. The Virginia Racing Commission is responsible for, among otherthings, (i) conducting a review annually of Colonial’s track and satellitewagering facility licenses, (ii) annually approving Colonial’s proposedschedule of racing days, (iii) approving new or modified types ofpari-mutuel wagering pools requested by Colonial, (iv) issuing permits toall officers, directors, racing officials, and other employees of Colonial, and(v) approving simulcast schedules at the track and at the satellitewagering facilities. The Virginia Racing Commission also has the authority topromulgate regulations pertaining to Colonial’s track facilities, equipment,safety and security measures, and controls the issuing of licenses and permitsfor participants in pari-mutuel racing, including Colonial employees at thetrack and at the satellite wagering facilities. In addition, the VirginiaRacing Commission must approve any acquisition or continuing ownership of a 5%or greater interest in Colonial. Action by the Virginia Racing Commission thatis inconsistent with the Colonial’s business plan could have a material adverseeffect on Colonial.

 

Duringthe 2000 session of the Virginia General Assembly, an amendment to the RacingAct was passed that requires Colonial to enter into contracts with eachrepresentative horsemen’s group and provides for it to contribute to the purseaccount of the respective breed a minimum of 5% of the first $75 million ofsimulcast amounts wagered (“handle”), 6% of the next $75 million and 7% of allhandle over $150 million. The amendment also provides for the breakagegenerated by pari-mutuel wagering to be allocated 70% to capital expendituresand 30% to backstretch benevolent activities. Prior to this amendment, Colonialreceived all breakage. The Virginia Racing Act requires that, after July 1,2000, we enter into contracts with each representative horsemen’s group thatprovide for us to contribute, by breed of horse, a minimum of 5% of the first$75 million of handle, 6% of the next $75 million of handle and 7% of allhandle over $150 million to the purse account of the respective breed. Finally,the amendment empowers the Commission to summarily suspend Colonial’s licensesif it believes the Racing Act or the regulations have been violated. Inaddition, the Interstate Horse Racing Act also requires that we secure the 

 

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consentof the Virginia Horsemen’s Benevolence and Protective Association (the “VaHBPA”)and the Virginia Harness Horse Association (“VHHA”) to the export simulcastingof races. These consents are usually contained in the agreement between eachgroup and Colonial.

 

Thelicenses issued by the Virginia Racing Commission to Colonial for the racetrackand its satellite wagering facilities are for a period of not less than 20years, but are subject to annual review by the Virginia Racing Commission. Itis possible that such licenses will not be renewed or that such licenses couldbe suspended or revoked by the Virginia Racing Commission for violations of theVirginia Racing Act or Virginia Racing Commission rules. We also hold anadvance deposit account wagering license that is renewable annually. Our currentadvance deposit account wagering license expires December 31, 2010.

 

Wehave an agreement with the VHHA that expires December 31, 2011.  Our agreement with the VaHBPA expired December 31,2009.  We have entered into a newthree-year agreement with the VaHBPA that expires December 31, 2012, whichwas approved by the Virginia Racing Commission on March 17, 2010.

 

Colonial, the track and thesatellite wagering facilities are also subject to a variety of other laws andregulations, including zoning, construction, and land-use laws and theregulations of the Virginia Alcoholic Beverage Control Board. Such laws andregulations may affect the selection of satellite wagering facility sitesbecause of parking, traffic flow, and other similar considerations. Any interruptionor termination of Colonial’s ability, or that of its concessionaires, to servealcoholic beverages could have a material adverse effect on Colonial.

 

***GamingRegulation—Federal***

 

Colonial’sinterstate simulcast operations are subject to the Federal Interstate HorseRacing Act, which regulates interstate satellite wagering. In order to conductwagering on import simulcasting at the track or any racing center, theInterstate Horse Racing Act requires Colonial to obtain the consent of theVirginia Racing Commission, the consent of the racing commission of the statewhere the horse racing meet originates, and the consent of the representativehorsemen groups in the origination state. To conduct export simulcasting,Colonial must obtain the consent of the Virginia Horseman’s Benevolent andProtective Association or the Virginia Harness Horse Association, and theVirginia Racing Commission. Also, in the case of satellite wagering to beconducted at any of Colonial’s satellite wagering facilities, the InterstateHorse Racing Act requires Colonial to obtain the approval of all currentlyoperating horse racetracks within 60 miles of the satellite wagering facilitiesor if there are no currently operating tracks within 60 miles, the approval ofthe closest operating horse racetrack, if any, in an adjoining state.Significant delay in obtaining or failure to obtain these consents or approvalscould have a material adverse effect on Colonial.

 

***LiquorRegulation***

 

Thesale of alcoholic beverages in Colorado is subject to licensing, control andregulation by certain Colorado state and local agencies (the “Liquor Agencies”).Subject to certain exceptions, all persons who directly or indirectly own 5% ormore of a company or its casino must file applications with and are subject toinvestigation by the Liquor Agencies. The Liquor Agencies alsomay investigate persons who, directly or indirectly, lend money to liquorlicensees. All liquor licenses are renewable, are revocable and are nottransferable. The Liquor Agencies have broad powers to limit, condition,suspend or revoke any liquor license. Any disciplinary action by the LiquorAgencies or any failure to renew or other revocation of any of our liquorlicenses would have a material adverse effect on our operations and Black HawkGaming’s Colorado casinos.

 

UnderColorado law, it is a criminal violation for any person or entity to own adirect or indirect interest in more than one type of alcoholic beverage licenseor more than three gaming tavern liquor licenses. Black Hawk Gaming’s Coloradocasinos have gaming tavern liquor licenses. Accordingly, our expansion anddiversification opportunities in Colorado are limited by these licensingrestrictions.

 

Whilegaming operations may now be conducted twenty-four hours a day, Colorado’sliquor laws still limit service of patrons to the hours of 7:00 a.m. to2:00 a.m. This limitation is contained in Colorado statute and could bechanged only by the state legislature with the approval of the governor.

 

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Thesale of alcoholic beverages in the cities of Reno, Carson City and Elko,Nevada, is subject to licensing, control and regulation by those cities. Alllicenses are revocable and are not transferable. The agencies involved havefull power to limit, condition, suspend or revoke any such license, and anysuch disciplinary action could (and revocation would) have a material adverseeffect on the operations of one or more of our Gold Dust West casinos inNevada.

 

Alcoholregulation within the State of Louisiana is performed primarily by the Officeof Alcohol and Tobacco Control (the “Board”). The Commissioner of the Board isgiven broad discretion in the granting and denial of state alcohol permits.While permits are issued on a state level, the local municipality is alsopermitted to provide for concurrent local licensing. The state alcoholregulatory scheme is contained at Title 26:1 of the Louisiana Revised Statutes(hereinafter referred to as the “act”). Generally, no permit may be issuedif the applicable premises is located three hundred feet or less, as fixed anddetermined by the local municipal ordinance, of a public playground or of abuilding used exclusively as a church or synagogue, public library, school,full-time daycare center or corrections facility housing inmates, including butnot limited to, a halfway house. Louisiana parishes may enact ordinancesextending the distance between the applicable premises and the property line ofsuch locations to 500 feet. Local municipalities are also permitted to regulatethe opening and closing hours of permitted businesses as well as to prohibitthe sale of alcoholic beverages altogether by referendum vote of the peoplewithin the municipality. A local municipality may also regulate via zoningdesignations the permissibility or prohibition of the permitting of businessesthat sell alcoholic beverages within that municipality. All of our video gamingtruck plaza facilities are currently licensed by the applicable state and localalcohol licensing authorities.

 

Thesale of alcoholic beverages in Virginia is subject to licensing, control andregulation by the Virginia Department of Alcoholic Beverage Control (the “VirginiaABC Board”), a Virginia state agency. The Virginia ABC Board issues licensesbased upon the type of beverage, type of establishment or place of consumption.Virginia ABC laws include the responsibility of the licensee to maintaincomplete and accurate records, certain restrictions on advertising and certainfood sale requirements.

 

Before receiving a Virginia ABC license, anapplicant must satisfy several requirements. The Virginia ABC Board conducts anextensive background investigation (to include a criminal history review aswell as contacts with the local governing body of each license application) andcontacts local officials, residents and business people in the vicinity of theestablishment to ascertain if any objections exist. The backgroundinvestigation is completed for all principal owners of the proposed licensee.Administrative hearings are available to afford all interested parties theopportunity to present any concerns with respect to an application.

 

Alicensee is required to maintain financial responsibility for its business,including timely payment of all taxes, creditor obligations and other bills,and must keep accurate records of all such transactions. Mixed beveragelicensees must record sales and purchases of all mixed beverages, food andnon-alcoholic beverages. Mixed beverage licensees must submit annual reviewreports to the Virginia ABC Board showing all purchases and sales of alcoholicbeverages during the year as well as an accurate inventory. Finally, theVirginia ABC Board imposes certain restrictions and limitations on advertising,the use of advertising materials and promotions.

 

IfVirginia ABC agents discover license violations, a disciplinary hearing willtypically be conducted with a Virginia ABC hearing officer. Any aggrievedlocalities and members of the community may attend the hearing and presentany additional or relevant objections or complaints concerning the license. TheVirginia ABC Board has broad power to limit, condition, suspend or revoke anylicense granted on discovery of any violation. Any disciplinary action by theVirginia ABC Board or any failure to renew or any revocation of a liquorlicense would likely have a material adverse effect on the operation ofColonial’s track and satellite wagering facilities.

 

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**Taxation**

 

Gamingoperators in Colorado are subject to state and local taxes and fees in additionto ordinary federal and state income taxes. The City of Black Hawk has imposedan annual license fee, currently $750, for each gaming device installed in acasino. In addition, Colorado has a tax on gross gaming revenue (also called “adjustedgross proceeds”) being generally defined as the total amount wagered less thetotal amount paid out in prizes as follows:

 

 
| **Tax as Percentage of** | ** ** | **Annual Amount of Adjusted** | ** ** |
|-----------------------------------------|------------|----------------------------------------------|------------|
| **Adjusted Gross Proceeds**   | ** ** | **Gross Proceeds**                      | ** ** |
|                                    |       |                                         |       |   |   |   |   |
| 0.25%                                   |       | $                                            | 0          |   | — |   | 2,000,000 |   |
| 2.00%                                   |       | 2,000,001                                    |       | — |   | 5,000,000 |   |
| 9.00%                                   |       | 5,000,001                                    |       | — |   | 8,000,000 |   |
| 11.00%                                  |       | 8,000,001                                    |       | — |   | 10,000,000 |   |
| 16.00%                                  |       | 10,000,001                                   |       | — |   | 13,000,000 |   |
| 20.00%                                  |       | 13,000,001                                   |       |   |   | and above |   |
|                                         |            |                                              |            |  |  |  |  |  |

 

Both of JEI’s Colorado casinos are subject tothe maximum rate. Neither the Colorado Constitution nor the gaming statutesrequire that gaming tax rates be graduated, as they currently are. However,with the passage of Colorado Amendment 50, the gaming tax rates were set inaccordance with the table above and can only be increased with an amendment tothe Colorado Constitution.

 

InNevada, license fees and taxes, computed in various ways depending on the typeof gaming or activity involved, are payable to the State of Nevada, Washoe,Carson City, and Elko Counties and the Cities of Reno, Carson City, and Elko.Depending upon the particular fee or tax involved, these fees and taxes arepayable either monthly, quarterly or annually and are based upon either: (i) apercentage of the gross revenues received; (ii) the number of gamingdevices operated; or (iii) the number of table games operated. A liveentertainment tax is also paid by casino operations where entertainment isfurnished in connection with an admissions charge or the selling or serving offood or refreshments or the selling of merchandise. Presently the state tax inNevada on adjusted gross revenue from gaming is 6.75%.

 

Videogaming operators in truck plazas in Louisiana are subject to state and localtaxes and fees in addition to ordinary federal and state income taxes. Thestate of Louisiana has imposed a “gaming franchise fee” of 32.5% of the netdevice revenue from each video gaming device located at a truck plaza. The netdevice revenue is the amount remaining after all winnings have been paid. Thisfranchise fee is collected twice per month by the Louisiana state police basedon the data that is provided directly to them from the devices. There is alsoan annual state establishment license fee of $1,000. In addition, the stateimposes a device operation fee of $1,000 per year per device, which is paidquarterly, and each parish imposes an annual occupational license tax ofapproximately $50 per device.

 

Colonial is subject to a number of federal,state and local taxes and fees. These include fees to support the VirginiaBreeders Fund, taxes payable to the Commonwealth of Virginia, taxes andadmission charges payable to New Kent County, where the track is located, andtaxes payable to localities in which satellite wagering facilities are locatedbased upon attendance and the amount of monies wagered both at the track and atthe satellite wagering facilities. Colonial believes that the public acceptanceof pari-mutuel wagering on horse races, as well as other forms of gaming, isbased, in part, on the governmental revenues it generates from taxes and feeson such activities. It is possible that gaming activities, including horseracing, may become a target for additional federal, state, or local taxes andfees. A significant increase in such taxes or fees or the creation of significantadditional taxes or fees could have a material adverse effect on us.

 

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**Item 1A.              *Risk Factors.***

 

To inform readers of our future plans and business strategies, thisreport contains statements concerning our future performance, intentions,objectives, plans and expectations that are or may be deemed to be “forward-lookingstatements.” Our ability to do this has been fostered by the Private SecuritiesLitigation Reform Act of 1995, which provides a “safe harbor” for forward-lookingstatements to encourage companies to provide prospective information so long asthose statements are accompanied by meaningful cautionary statementsidentifying important factors that could cause actual results to differmaterially from those discussed in the statements. All known material riskfactors are disclosed. Such factors affecting us include, but are not limitedto, the following:

 

**RisksRelated to Our Indebtedness**

 

***Our substantial indebtedness couldadversely affect our financial health and prevent us from fulfilling ourobligations under our debt agreements.***

 

We have a significant amount of indebtedness. As of December 31,2009, we had total indebtedness of $291.9 million, excluding accounts payable,accrued expenses and other noncurrent liabilities, and total stockholder’sequity of $24.7 million. Our substantial indebtedness could have considerableconsequences. For example, it could:

 

·                                          increase ourvulnerability to general adverse economic and industry conditions;

·                                          require us todedicate a substantial portion of our cash flow from operations to debtservice, thereby reducing the availability of our cash flow to fund workingcapital, capital expenditures, and other general corporate purposes;

·                                          limit ourflexibility in planning for, or reacting to, changes in our business and theindustry in which we operate;

·                                          limit ourability to fund a required regulatory redemption or a change of control offer;

·                                          place us at acompetitive disadvantage to our competitors that have less debt; and

·                                          limit, alongwith the financial and other restrictive covenants in our debt agreements,among other things, our ability to borrow additional funds. A failure to complywith those covenants could result in an event of default which, if not cured orwaived, could have a significant adverse effect on us.

 

The occurrence of any one of these events could have a material adverseeffect on our business, financial condition, results of operations, prospectsand ability to satisfy our obligations under our debt agreements.

 

***Our debt agreements impose many restrictivecovenants on us.***

 

Our debt agreements contain covenants that, among other things,restrict our ability to:

 

·                                          incur moredebt;

·                                          issue stock ofsubsidiaries;

·                                          makeinvestments;

·                                          repurchasestock;

·                                          create liens;

·                                          enter intotransactions with affiliates;

·                                          enter intosale-leaseback transactions;

·                                          merge orconsolidate; and

·                                          transfer andsell assets.

 

In addition, our seniorcredit facility contains many restrictive covenants similar to the covenants ofour indenture but the covenants in our senior credit facility are generallymore restrictive than those contained in our indenture. Our senior credit facilityalso requires us to maintain specified consolidated financial ratios andsatisfy certain consolidated financial tests. Our ability to meet thosefinancial ratios and financial tests may be affected by 

 

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events beyond our control,and we may not be able to continue to meet those tests. If we fail to meetthose tests or breach any of the covenants, the lenders under our senior creditfacility could declare all amounts outstanding thereunder, together with theaccrued interest, to be immediately due and payable. Our assets may not besufficient to repay in full such indebtedness or any other indebtedness, including$210 million of our senior unsecured notes issued under our indenture. Further,any other agreements we may enter into in the future governing our indebtednessmay impose additional restrictions on us, any of which may adversely affect ourability to finance our future operations or capital needs or to pursueavailable business opportunities.  Ourfailure to pay interest, repay our indebtedness when due, or maintaincompliance with our debt covenants would result in an event of default underboth our senior credit facility and our note indenture.

 

Complying with these covenants could materially limit our financial andoperating flexibility and could cause us to take actions that we otherwisewould not take or cause us not to take actions that we otherwise would take.

 

***Despite current indebtedness levels,we may still be able to incur substantially more debt, which could exacerbatethe risks described above.***

 

Subject to debt covenant restrictions, we and our subsidiaries may beable to incur substantial additional indebtedness in the future. The indenturegoverning our senior unsecured notes and our senior credit facility do notfully prohibit us or our subsidiaries from doing so. If new debt is added toour and our subsidiaries’ current debt levels, the related risks that we andthey now face could intensify.

 

***To service our indebtedness, we willrequire a significant amount of cash, the availability of which depends on manyfactors beyond our control.***

 

Our ability to make payments on and to refinance our indebtedness andto fund our operations will depend on our ability to generate cash. This, to anextent, is subject to general economic, financial, competitive, legislative,regulatory and other factors that are beyond our control. Our business may notgenerate sufficient cash flow from operations and future borrowings may not beavailable to us in amounts sufficient to enable us to pay our indebtedness, orto fund our other liquidity needs. In addition, if we consummate significantacquisitions in the future, our cash requirements may increase significantly.If we are unable to generate sufficient cash flow and are unable to refinanceor extend outstanding borrowings, we may have to:

 

·                                          reduce or delayplanned expansion and capital expenditures;

·                                          sell assets;

·                                          restructuredebt; or

·                                          raiseadditional capital.

 

Furthermore, we intend to refinance all of our debt on or beforematurity. We cannot assure you that we will be able to refinance any of ourdebt on commercially reasonable terms or at all.

 

***Our senior notes are not secured by any of our assets and seniornoteholders’ rights to enforce remedies will be limited to the rights ofholders of unsecured debt.***

 

Our senior notes are not secured by any ofour assets. Our obligations under our senior credit facility are secured byliens on substantially all of our assets. If we become insolvent or areliquidated, or if payments under our senior credit facility are accelerated,the lenders under our senior credit facility will be entitled to exercise theremedies available to a secured lender under applicable law and our seniorcredit facility. Accordingly, such lenders will have a prior claim with respectto our assets and there may not be sufficient assets remaining to pay amountsdue on our senior unsecured notes then outstanding.

 

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***We are a holding company and will depend onthe business of our subsidiaries to satisfy our obligations under ourindebtedness.***

 

Weare a holding company. Substantially all of the operations necessary to fundpayment on our indebtedness are conducted by our subsidiaries. Our ability tomake payments on our indebtedness will depend on our subsidiaries’ cash flowand their payment of funds to us. Our subsidiaries’ ability to make payments tous will depend on their earnings, the terms of their indebtedness, business andtax considerations, legal and regulatory restrictions and economic conditions.

 

***We may not have the ability to raise the funds necessary to finance thechange of control offer required by our indebtedness.***

 

Uponthe occurrence of certain change of control events, we will be required tooffer to repurchase all outstanding senior unsecured notes at a purchase priceequal to 101% of their principal amount. Moreover, a change of controlconstitutes a default under our senior credit facility. However, it is likelythat we will not have sufficient funds at the time of such a change of controlto make the required repurchase of our notes or repay the indebtedness underour senior credit facility. The change of control provisions may not protectyou in a transaction in which we incur a large amount of debt, including areorganization, restructuring, merger or other similar transaction, becausethat kind of transaction may not involve any shift in voting power orbeneficial ownership, or may not involve a shift large enough to trigger achange of control as defined in our debt agreements.

 

***Federal and state statutes allow courts, under specific circumstances,to void guarantees, subordinate claims in respect of indebtedness and requiredebt holders to return payments received from guarantors.***

 

Under the federal bankruptcylaw and comparable provisions of state fraudulent transfer laws, a court couldvoid a guarantee of one or more of our subsidiaries or claims related to oursenior unsecured notes or subordinate a subsidiary’s guarantee to all of ourother debts or all other debts of the guarantor if, among other things, we orthe guarantor, at the time we or it incurred the indebtedness evidenced by itsguarantee:

 

·                                          received lessthan reasonably equivalent value or fair consideration for the incurrence ofthat indebtedness; and

·                                          we were or the guarantorwas insolvent or rendered insolvent by reason of that incurrence;

·                                          we were or theguarantor was engaged in a business or transaction for which our or theguarantor’s remaining assets constituted unreasonably small capital; or

·                                          we or theguarantor intended to incur, or believed that we or it would incur, debtsbeyond our or its ability to pay those debts as they mature.

 

Inaddition, a court could void any payment by us or the guarantor pursuant to oursenior unsecured notes or a guarantee and require that payment to be returnedto us or the guarantor, or to a fund for the benefit of our creditors or thecreditors of the guarantor.

 

Themeasures of insolvency for purposes of these fraudulent transfer laws will varydepending upon the law applied in any proceeding to determine whether afraudulent transfer has occurred. Generally, however, a guarantor would beconsidered insolvent if:

 

·                                          the sum of itsdebts, including contingent liabilities, were greater than the fair saleablevalue of all of its assets,

·                                          the presentfair saleable value of its assets were less than the amount that would berequired to pay its probable liability on its existing debts, includingcontingent liabilities, as they become absolute and mature, or

·                                          it could notpay its debts as they become due.

 

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We believe that we and the guarantors havereceived reasonably equivalent value and fair consideration for the incurrenceof the indebtedness and obligations represented by our senior unsecured notesand the guarantees. On the basis of historical financial information, recentoperating history and other factors, we believe that we and each subsidiaryguarantor, after giving effect to its guarantee of our senior unsecured notes,are not insolvent, do not have unreasonably small capital for the business inwhich we are or it is engaged and have not incurred debts beyond our or itsability to pay such debts as they mature. However, a court might disagree withany or all of our conclusions in this regard and it could apply different legalstandards.

 

***Holders of our senior unsecured notes may be required to comply withregistration, licensing, qualification or other requirements under gaming lawsor dispose of their securities.***

 

Thegaming authorities of any jurisdiction in which we currently or in the futureconduct or propose to conduct gaming, either through our subsidiaries or ajoint venture, may require that a holder or beneficial owner of our seniorunsecured notes be registered, licensed, qualified or found suitable, or complywith any other requirement under applicable gaming laws. If you have aninterest in our senior unsecured notes, by the terms of the indenture, you willbe deemed to agree to comply with all of these requirements, including youragreement to register or apply for and maintain in full force and effect alicense, qualification or a finding or suitability, or comply with any otherrequirement, within the required time period, as provided by the relevantgaming authority. If you fail to apply to be, or fail to become, registered,licensed or qualified or such registration, license or qualification issuspended or revoked or not maintained, or you are found unsuitable or fail tocomply with any other requirement of a gaming authority, then we will have theright, at our option, to:

 

·                                          require you tosell your senior unsecured notes or beneficial interest in the senior unsecurednotes in accordance with applicable gaming requirements within 30 daysafter you receive notice of our election, or by any earlier date that therelevant gaming authority may request or prescribe; or

·                                          redeem yoursenior unsecured notes (possibly within less than 30 days following thenotice of redemption if requested or prescribed by the gaming authority) at aredemption price equal to the lesser of:

·                                          your cost;

·                                          100% of theprincipal amount of the senior unsecured notes, plus accrued and unpaidinterest, if any, to the redemption date or the date of the first to occur ofany (i) failure to become or continue to be registered, licensed orqualified, (ii) failure to be found or continue to be suitable, (iii) failureto comply with relevant gaming authority requirements or (iv) receipt ofnotice from the relevant gaming authority that you will not be registered,licensed or qualified; and

·                                          any otheramount required by applicable law or by order of any gaming authority.

 

Ifwe elect, in our sole discretion, to redeem your senior unsecured notes, wewill notify the indenture trustee in writing of any redemption as soon aspracticable. We will not be responsible for any costs or expenses you may incurin connection with your registration, application for a license, qualificationor a finding of suitability, or your renewal or continuation of the foregoingor compliance with any other requirement of a gaming authority. The indenturealso provides that as soon as you are required to sell your senior unsecurednotes as a result of a gaming authority action, you will, to the extentrequired by the applicable gaming authority, have no further right:

 

·                                          to exercise,directly or indirectly, any right conferred by the senior unsecured notes; or

·                                          to receive fromus any interest or any other distributions or payments, or any remuneration inany form, relating to the senior unsecured notes, except the redemption pricewe refer to above.

 

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**Risks Related to Our Business**

 

***We facesignificant competition.***

 

The gaming industry is characterized by ahigh degree of competition among a large number of participants, many of whichhave financial and other resources that are greater than our resources.Competitive gaming activities include casinos, pari-mutuel wagering, video lotteryterminals and other gaming devices, and other forms of legalized gaming. New orexpanded operations by other persons can be expected to increase competitionfor our gaming operations and could have a material adverse impact on us.

 

*Casino Operations*. Our casino operations are conducted in Black Hawk, Colorado, and Reno,Carson City, and Elko, Nevada. Competition in the Black Hawk gaming market,which is the primary gaming market in Colorado, is intense. In addition, large,well-financed companies have entered the Black Hawk and other Colorado marketsthrough the purchase or expansion of existing facilities and others maycontinue to do so, all of which could materially harm our business, financialcondition and results of operations. For example:

 

·                                          AmeristarCasinos, Inc. (“Ameristar”) purchased Mountain High Casino (formerly theBlack Hawk Casino by Hyatt) in a bankruptcy sale. That casino is directlyacross highway 119 from The Lodge and Ameristar has expanded the casino area toaccommodate approximately 1,600 total gaming devices with new slot product,expanded the parking garage and refurbished and rebranded its dining venues.Ameristar completed construction of a 33 story, 536-room hotel, a conventioncenter and other amenities and facilities in the fourth quarter of 2009. In allrespects, Ameristar is known to be a fierce competitor in gaming markets inwhich it operates;

 

·                                          Isle of CapriCasinos, Inc. owns Lady Luck Casino Black Hawk (previously operated asColorado Central Station), across the street from its existing facility and in2005 completed a major renovation and expansion project physically linking thetwo properties. The combined casinos are the largest in Black Hawk withapproximately 1,900 total gaming devices, 402 hotel rooms and 2,300 parkingspaces;

 

·                                          the Mardi Grascasino, next to our casino, The Lodge, was purchased in 2005 and the ownershave continued to develop and implement new marketing programs and new slotproduct;

 

·                                          late in 2004,Central City, a gaming area about one mile from Black Hawk, completed the “SouthernAccess,” a road which directly connects Central City to Interstate 70. The newaccess road to Central City enables existing casinos and possible new casinosto pose a significant competitive threat to gaming activities in Black Hawk;

 

·                                          the continuingmarket deterioration at Colorado’s horse track and three dog tracks mayreinvigorate efforts to authorize video lottery terminals, slot machines,so-called “instant racing machines” or other types of gaming at these venuesand at the state’s off-track betting facilities.  A possible statewide initiative orlegislation to expand slot machine gaming to the two Denver area racingfacilities and potentially to one or both of its other tracks in the southernpart of the state have been publicly discussed. In 2009, legislation toauthorize instant racing machines (a form of slot machine) was defeated in theColorado General Assembly. If this authorization is granted by the ColoradoLottery Division, the Colorado state legislature, or the voters, it would havea material adverse effect on gaming revenues in Black Hawk and at The Lodge andGilpin casinos; and

 

·                                          in the recentpast, the Cheyenne and Arapahoe Indian tribes have claimed significant treatyrights to land in Colorado have pursued a plan to exchange those rights forland east of the Denver metropolitan area on which to build and operate a largecasino gaming facility. This project appears to be dormant at present. If it isrenewed, or if another tribe seeks approval from the United States Departmentof Interior to secure other land in the state on which it does not now resideand to which it does not now have legal title, and if any such effort obtainsall necessary federal, state, and local governmental approvals, it could have amaterial adverse effect on gaming revenues in Black Hawk and at The Lodge andGilpin casinos.

 

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Inaddition to competing with other gaming facilities in Colorado as describedabove, we compete to a lesser degree, for both customers and potential futuregaming sites, with gaming companies nationwide, including casinos in Nevada andseveral other states, and casinos on Native American lands in several states,many of which have substantially greater financial resources and experience inthe gaming business. The expansion of legalized casino gaming to newjurisdictions throughout the United States may also affect competitive conditions.

 

TheGold Dust West casino in Reno, Nevada, encounters strong competition from largehotel and casino facilities and smaller casinos similar in size to the GoldDust West casino in the Reno area, which includes Sparks, Nevada. There is alsocompetition from gaming establishments in other towns and cities in Nevada andfrom Native American gaming facilities located near Sacramento, California. OurCarson City and Elko, Nevada Gold Dust West casinos face competition fromseveral casinos in those cities and other venues in Nevada. Gold Dust West-Elkofaces additional competitive and other risks associated with being anewly-opened casino.

 

Inaddition, we believe that the introduction of casino gaming, or the expansionof presently conducted gaming activities (particularly at Native Americanestablishments) in areas in or close to Nevada, such as California, Oregon,Washington, Arizona and western Canada, could materially harm our operations atour Reno property.

 

*Louisiana Truck Plaza Operations*. Our Louisiana truck plaza operations compete with other truck plazaslocated in Louisiana and other forms of gaming, such as land-based, riverboatand Native American casinos, as well as slot machines located at horseracingtracks and video poker machines located in bars, restaurants, hotels, off-trackwagering facilities and bingo parlors. There were 193 licensed video pokertruck plazas in Louisiana at December 31, 2009, which is a 7% increaseover December 31, 2008.

 

*Pari-Mutuel Wagering Operations*. We operate a racetrack in New Kent, Virginia, and off-track wageringfacilities in Alberta, Chesapeake, Hampton, Martinsville, Weber City, Vinton,and Richmond (two), Virginia. Similarly, the expansion of other forms of gamingin neighboring states, such as table games in West Virginia and slot machinesin Maryland, could have an adverse effect on our performance.

 

Wecompete with racetracks located outside Virginia (including several inDelaware, Maryland, New Jersey, New York, Pennsylvania, and West Virginia, someof which augment their purses with slot machine revenues) and other forms ofgaming, such as land-based casinos, including those in Atlantic City, NewJersey, and statewide lotteries in Virginia and neighboring states. We alsoface competition from a wide range of entertainment options, including live andtelevised sporting events and other recreational activities such as theme parks(Kings Dominion to the northwest and Busch Gardens to the southeast).

 

We compete for wagering dollars and simulcastfees with live racing and races simulcast from racetracks in other states,particularly racetracks in neighboring states such as Charles Town in WestVirginia, Pimlico Race Course and Laurel Park in Maryland, and Delaware Park inDelaware. We also compete for wagering dollars with account wagering companiesoperating both legally and illegally in Virginia. These companies take wagersfrom Virginians both over the phone and the internet. We believe legislationwhich went into effect January 1, 2010 will provide us with faircompensation for their activities. Unlicensed account wagering companies havelower costs than Colonial Downs and thus are able to attract customers inVirginia with large wagering rebates.

 

***We face extensive regulation from gaming authorities.***

 

*Licensing Requirements.*As owners and operators of gaming and pari-mutuel wagering facilities, weare subject to extensive state and local and some federal regulation. State andlocal authorities require us and our subsidiaries to demonstrate suitability toobtain and retain various licenses and require that we have registrations,permits and approvals to conduct gaming and wagering operations. Variousregulatory authorities, including the Colorado Limited Gaming ControlCommission, the Nevada Gaming Commission, the Nevada State Gaming ControlBoard, the Louisiana Gaming Control Board and the Virginia Racing Commissionmay, for any reason set forth in the applicable legislation, limit, condition,suspend or revoke a license or registration to conduct gaming or 

 

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wagering operations or prevent us from owning thesecurities of any of our gaming or wagering subsidiaries. Like all gaming andwagering operators in the jurisdictions in which we operate, we will need toapply periodically to renew our licenses or registrations. We cannot assure youthat we will be able to obtain such renewals. Regulatory authorities may also levysubstantial fines against us or seize our assets or those of our subsidiariesor of the people involved in violating gaming laws or regulations. Any of theseevents could materially harm our business, financial condition and results ofoperations. Gaming authorities in the United Sates can generally require thatany beneficial owner of our securities, including holders of our debt, file anapplication for a finding of suitability.

 

*Potential Changes in Regulatory Environment.*From time to time, legislators and special interest groups have proposedlegislation that would expand, restrict or prevent gaming or wageringoperations in the jurisdictions in which we operate. Any expansion of gaming orwagering or restriction on or prohibition of our gaming or wagering operationscould materially harm our business, financial condition and results ofoperations. In particular in Colorado, there have been repeated attempts toexpand gambling beyond Black Hawk, Central City and Cripple Creek to othertowns, racetracks, bingo halls, and tribal gaming through legislation, ballotinitiatives, and administrative action by state or local agencies and this is acontinued competitive threat to us. Periodic changes to the membership of the Colorado Limited GamingControl Commission and turnover in the office of the governor of Colorado (theappointing authority for both the members of the Gaming Commission and theexecutive director of the Department of Revenue which oversees the GamingCommission) in January 2011 could also affect our operations.

 

*Taxation.*Webelieve that the prospect of significant additional revenue is one of theprimary reasons that jurisdictions permit legalized gaming and wagering. As aresult, gaming and wagering companies are typically subject to significanttaxes and fees in addition to normal federal, state, local and provincialincome taxes, and such taxes and fees are subject to increase at any time. Wepay substantial taxes and fees with respect to all of our operations. From timeto time, federal, state and local legislators and officials have proposedchanges in tax laws, or in the administration of such laws, affecting thegaming and wagering industry. It is not possible to predict the likelihood ofchanges in tax laws or in the administration of such laws. Similarly, specialimprovement districts, now in existence or those that may be formed in thefuture, may impose assessments in the form of additional taxes or fees thatwill finance infrastructure improvements that enhance the attractiveness oraccessibility of casinos with which we compete and/or add to our costs of doingbusiness, either of which can negatively affect the competitive position of ourLodge and Gilpin casinos. Such changes, if adopted, could materially harm ourbusiness, financial condition and results of operations.

 

*Compliance with Other Laws.*Weare also subject to a variety of other rules and regulations, includingzoning, environmental, construction and land-use laws and regulations governingthe serving of alcoholic beverages.

 

***We depend on our key personnel, particularly Jeffrey P. Jacobs***.

 

We are highly dependent onthe services of Jeffrey P. Jacobs (one of our indirect owners and our ChiefExecutive Officer) and other officers and key employees. The loss of the servicesof any of these individuals could materially harm our business, financialcondition and results of operations. The loss of their experience andfamiliarity with our operations could have negative effects on management’sefficiency and could cause us to incur costs to find qualified replacements.

 

***Our Chief Executive Officer and hisfamily trusts own a controlling beneficial interest in our capital stock andmay significantly influence our affairs or may pursue other activities thatcompete with us.***

 

All of our equity securitiesare presently owned by Jacobs Investments, Inc. (“JII”). Jeffrey P.Jacobs, our Chairman and Chief Executive Officer, and his family trusts own allof JII’s equity securities. JII has the ability to significantly influence ouraffairs, including the election of our directors and transactions includingmergers, consolidations or sales of assets. Although Mr. Jacobs has agreednot to pursue any U.S. casino or gaming activities except through us (exceptinginvestments in publicly traded companies and his involvement therein), he isallowed to purchase and own additional truck plazas in Louisiana which we havethe right to buy. Any such activities by him could be competitive with ouroperations in that state.

 

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***We need toinvest in capital expenditures to compete effectively.***

 

Capitalexpenditures, amenity upgrades and new gaming equipment are necessary from timeto time to preserve the competitiveness of our properties. The gaming industryis very competitive and is expected to become more competitive in the future.If cash from our operations is insufficient to provide for needed levels ofcapital expenditures, our competitive position could deteriorate if we areunable to borrow funds for such purposes.

 

***Economicconditions, seasonality and weather conditions could affect our operations***.

 

Our business, financial condition and results of operations may beharmed by general and local economic conditions. If the U.S. economy or thelocal economy in a market in which we operate suffers a downturn, ourproperties could be harmed as the disposable income of consumers or theirwillingness to patronize our operations declines, resulting in a decrease inthe number of patrons at our properties or a decrease in the amount thatpatrons are willing to wager.

 

In addition, seasonality andweather conditions can affect our results of operations. Winter travel conditionscan adversely affect patronage and revenues at our Colorado and Nevada casinos.Although casino business is not seasonal, levels of gaming activity increasesignificantly during weekends and holidays, especially holiday weekends.Hurricanes Katrina and Rita temporarily affected our truck plaza video gamingoperations in late 2005, while Hurricanes Gustav and Ike temporarily affectedour truck plaza video gaming operations in late 2008.  Similar hurricanes could have a materialadverse effect on our Louisiana operations in future years. Our pari-mutuelwagering revenues are higher during scheduled live racing than at other timesof the year. Adverse weather conditions can cause cancellation of or curtailattendance at outdoor races, thereby reducing wagering and our revenues.Attendance and wagering at both outdoor races and satellite wagering facilitiescan be harmed by holidays and other competing seasonal activities.

 

***We depend onagreements with Colonial’s horsemen to operate our racing and wageringbusiness.***

 

TheFederal Interstate Horseracing Act and the Virginia Racing Act require Colonialto have written agreements with representative Virginia horsemen’s groups inorder to simulcast races.

 

Wehave an agreement with the VHHA that expires December 31, 2011. Ouragreement with the VaHBPA expired December 31, 2009.  We have entered into a new three-yearagreement with the VaHBPA that expires December 31, 2012, which wasapproved by the Virginia Racing Commission on March 17, 2010.

 

***Energy price increases may adversely affect our costs and our revenues.***

 

Ourcasino and horse racing and pari-mutuel wagering operations use significantamounts of electricity and other forms of energy. Any substantial increase inthe cost of the forms of energy we use may negatively affect our results ofoperations. In addition, consumer energy or gasoline price increases may reducethe disposable income of our potential customers or their willingness topatronize our operations and correspondingly reduce our patronage and revenues.Furthermore, a fuel price increase may impact fuel sales in Louisiana, makingit more difficult to meet minimum fuel sale requirements which in turn couldlimit (or eliminate entirely) the number of video gaming devices we can operateat any given truck plaza.

 

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***Our business, financial condition, and results of operations may beharmed by union efforts to organize our employees.***

 

Our employees are notcovered by collective bargaining agreements. However, in January and February 2007,the United Food and Commercial Workers local union #7 conducted some initialorganizing activities in Black Hawk by direct mail to casino employees,handouts at bus stops and personal solicitations. These efforts were directedto employees of all major casinos in Black Hawk. A small number of ouremployees, which we estimate to be about 22, signed up with the local as internalorganizers in January and February 2007.  Since that time we have not been notified ofany other employees being involved with organizing.  All union organization activity seems to haveceased in April 2007.  If this or any other union seeks to organizeany of our employees, we could experience disruption in our business and incursignificant costs, both of which could have a material adverse effect on ourresults of operation and financial condition. If a union were successful inorganizing any of our employees, we could experience significant increases inour labor costs which could also have a material adverse effect on ourbusiness, financial condition, and results of operations.

 

***Weare subject to potential exposure to environmental liabilities.***

 

Generally, we are subject to various federal, stateand local governmental laws and regulations relating to the use, storage,discharge, emission and disposal of hazardous materials. Failure to complycould result in the imposition of severe penalties or restrictions on ouroperations by governmental agencies or courts. We are not aware of any suchexposure at our properties. Black Hawk, Colorado is located within a 400-squaremile area that in 1983 was designated as the Clear Creek Central/City NationalPriorities List Site Study Area under the Comprehensive Environmental Response,Compensation and Liability Act of 1980, as amended. Although our Coloradocasinos are not within any of the specific areas currently identified forinvestigation or remediation under that statute, environmental problems maysubsequently be discovered, including in connection with any futureconstruction on our property. Furthermore, governmental authorities couldbroaden their investigations and identify areas of concern within the site, wecould be identified as a “potentially responsible party” and any relatedliability could have a material adverse effect on us. We do not have insuranceto cover environmental liabilities, if we incur any.

 

***Failure to complete any future construction or development projects onbudget and on time could adversely affect our financial condition.***

 

Anyfuture construction or expansion projects will be subject to significant risks,any of which could cause unanticipated cost increases and delays. These include,among others, the following:

 

·                                          shortages ofmaterial and skilled laborers;

·                                          labor disputesand work stoppages;

·                                          weatherinterference or delays;

·                                          engineeringproblems;

·                                          environmentalproblems;

·                                          regulatoryproblems;

·                                          changes toplans or specifications;

·                                          fire,earthquake, flood and other natural disasters; and

·                                          geological,construction, excavation and equipment problems.

 

Ourexpansion projects may not be completed within our budget, our constructionactivities may disrupt our operations and our new operations may not open onschedule. We have limited experience in developing properties and cannotpredict all of the risks that any particular construction or remodeling projectmight face. In addition, we have experienced delays that adversely affected ourbusiness during similar remodeling and expansion projects. Failure to completea construction or expansion project on time or within our budget may cause usto devote additional resources to the project, which could divert our time andattention away from the operation of our other businesses and could cause ourbusiness to suffer.

 

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***If we are unable to finance our expansion and renovation projects aswell as capital expenditures through cash flow, borrowings under our seniorcredit facility and additional financings, our expansion and renovation effortswill be jeopardized.***

 

Weintend to finance our current and future expansion and renovation projectsprimarily with cash flow from operations and borrowings under our senior creditfacility. If we are unable to finance our current or future expansion projects,we will have to adopt one or more alternatives, such as reducing or delayingplanned expansion, development and renovation projects as well as capitalexpenditures, selling assets, restructuring debt, or obtaining additionalequity financing or joint venture partners, or modifying our senior creditfacility. These sources of funds may not be sufficient to finance ourexpansion, and other financing may not be available on acceptable terms in atimely manner or at all. In addition, our existing indebtedness containscertain restrictions on our ability to incur additional indebtedness. If we areunable to secure additional financing, we could be forced to limit or suspendexpansion, development and renovation projects, which may adversely affect ourbusiness, financial condition and results of operations.

 

***The concentration and evolution of the slot machine manufacturingindustry could impose additional costs on us.***

 

Amajority of our revenues are attributable to slot machines operated by us atour gaming facilities. It is important, for competitive reasons, that we offerthe most popular and up to date slot machine games with the latest technologyto our customers.

 

Webelieve that a substantial majority of the slot machines sold in the U.S. in2009 were manufactured by a few select companies. In addition, we believe thatone company in particular provided a majority of all slot machines sold in theU.S. in 2009.

 

Inrecent years, the prices of new slot machines have escalated faster than therate of inflation. Furthermore, in recent years, slot machine manufacturershave frequently refused to sell slot machines featuring the most popular games,instead requiring participation lease arrangements in order to acquire themachines. Participation slot machine leasing arrangements typically require thepayment of a fixed daily rental. Such agreements may also include a percentagepayment of coin-in or net win. Generally, a participation lease issubstantially more expensive over the long term than the cost to purchase a newmachine.

 

Forcompetitive reasons, we may be forced to purchase new slot machines or enterinto participation lease arrangements that are more expensive than our currentcosts associated with the continued operation of our existing slot machines. Ifthe new slot machines do not result in sufficient incremental revenues tooffset the increased investment and participation lease costs, it could hurtour profitability.

 

***Our operations could be adversely affected due to the adoption ofcertain anti-smoking regulations.***

 

In November 2006, a ballot initiativelisted as Question 5 and entitled the “Nevada Clean Indoor Air Act” (the “Question5”) was approved by a majority of Nevada voters. Question 5 restricts smokingin all indoor public places of employment with certain exceptions. Among theexceptions are the gaming areas of casinos and “stand alone” bars, taverns andsaloons that do not serve meals. If future ballot initiatives or anti-smokinglegislation are passed in Nevada removing or restricting these exceptions toQuestion 5, there could be a resulting material adverse effect on our business.

 

The“Colorado Clean Indoor Act” (the “Indoor Act”) was adopted in the Coloradolegislature in March 2006. It bans smoking in virtually all public placesalthough certain portions of gaming casinos, including gaming areas, wereexempt from the Indoor Act until January 1, 2008. Compliance with theIndoor Act, which now bans smoking in casinos, has, we believe, had an adverseeffect on our business.

 

In2009, a bill was introduced in the Louisiana state legislature that would ban smoking inbars, restaurants and casinos in Louisiana.  The bill failed by a largemargin, however, it is expected that the same bill will be introduced in 2010with a more organized effort.  If anti-smoking legislation is passed inLouisiana, there could be a resulting material adverse effect on our business.

 

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Virginiabanned smoking in restaurants that do not have separate smoking and non-smokingfacilities as of December 1, 2009. Colonial has installed appropriate separate facilities in two of itssatellite wagering facilities and is in the process of doing so for athird.  Colonial has no plans to installseparate facilities in its other locations. Colonial does not believe the restrictions placed on smoking inrestaurants will have an adverse effect on our business.

 

**Item 1B.                 *Unresolved Staff Comments.***

 

None.

 

**Item 2.                    *Properties.***

 

See “Our Properties and Operations” in Item 1 above for a descriptionof the location and general character of our principal properties. Each of ourproperties is subject to liens and encumbrances securing our senior creditfacility. See Note 5 to our consolidated financial statements includedelsewhere herein.

 

**Item 3.                    *Legal Proceedings.***

 

We are involved in routine litigation arising in the ordinary course ofour business pertaining to workers’ compensation claims, equal opportunityemployment issues, or guest injury claims. All such claims are routinely turnedover to our insurance providers. We believe these matters are covered byappropriate insurance policies, less applicable deductibles which are accruedin our financial statements.  None of theclaims or payment of deductibles is expected to have a material impact on ourfinancial position, results of operations or cash flows.

 

**Item 4.                    *Submission of Matters to a Vote of Security Holders.***

 

There were no matters submitted to a vote of our security holders duringthe fourth quarter of the fiscal year covered by this report.

 

**Item 5*.******                                                              ******Market for Registrant’s Common Equity, RelatedStockholder Matters and Issuer Purchases of Equity Securities.***

 

Effective January 31, 2007, all of our outstanding common stockbecame held by Jacobs Investments, Inc., a private holding company and,accordingly, there is no established trading market for our common stock. Weare a Qualified Subchapter S-Corporation Subsidiary under the Internal RevenueCode of 1986. Under those provisions, the owner of our common stock pays taxeson our taxable income. Our ability to make distributions to our stockholder islimited by the terms of the credit agreement and indenture related to ourindebtedness.

 

We have no equity compensation, stock option or similar plans relatingto our equity securities.

 

We made no repurchases of our equity securities during the fourthquarter of the fiscal year covered by this report.

 

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**Item 6.**                                                         ***Selected Financial Data.***

 

The following selected consolidated financial datashould be read in conjunction with our management’s discussion and analysis offinancial condition and results of operations and our consolidated financialstatements and related notes thereto appearing elsewhere in this report. Theconsolidated statements of operations data and the consolidated balance sheetdata are derived from our consolidated financial statements. The selectedfinancial data provided below is not necessarily indicative of our futureresults of operations or financial performance. The consolidated financialstatements and the accompanying management’s discussion and analysis offinancial condition and results of operations presented in this Form 10-Khave been retroactively adjusted to include the operations of Sugar Warehousefrom January 1, 2005.  See Note 4 ofthe consolidated financial statements.

 
| ** **                                                            | ** ** | **As of and for the Year Ended December 31,**                | ** ** |
|-----------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **2009**                                                                                             | ** ** | **2008  (As  adjusted,  see Note 4  of Financial  Statements)** | ** ** | **2007  (As  adjusted,  see Note 4  of Financial  Statements)** | ** ** | **2006  (As  adjusted,  see Note 4  of Financial  Statements)** | ** ** | **2005  (As  adjusted,  see Note 4  of Financial  Statements)** | ** ** |
| ** **                                                            | ** ** | **(Dollars In Thousands, except Distributions per Common Share)** | ** ** |
| ** **                                                            | ** ** | ** **                                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Statements of Operations Data:**(1)                                 |       |                                                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   |   |   |
| Net  revenues                                                         |       | $                                                                                                    | 313,362    |   | $ | 363,186 |   | $ | 350,324 |   | $ | 322,989 |   | $ | 252,247 |   |
| Total  costs and expenses                                             |       | 286,487                                                                                              |       | 339,965 |   | 317,307 |   | 291,419 |   | 233,062 |   |
| Operating  income                                                     |       | 26,875                                                                                               |       | 23,221 |   | 33,017 |   | 31,570 |   | 19,185 |   |
| Interest  expense, net                                                |       | (25,170                                                                                              | )          | (27,258 | ) | (28,108 | ) | (32,312 | ) | (22,660 | ) |
| Pre-payment  penalties, tender and consent costs                      |       | —                                                                                               |       | — |   | — |   | (9,321 | ) | — |   |
| Income  tax (expense) benefit                                         |       | —                                                                                               |       | — |   | — |   | 103 |   | (423 | ) |
| Net  income (loss)                                                    |       | $                                                                                                    | 1,705      |   | $ | (4,037 | ) | $ | 4,909 |   | $ | (9,960 | ) | $ | (3,898 | ) |
| **Balance Sheet Data (end of period):**(1)                            |       |                                                                                                 |       |   |   |   |   |   |   |   |   |
| Current  assets                                                       |       | $                                                                                                    | 35,200     |   | $ | 32,831 |   | $ | 35,772 |   | $ | 37,212 |   | $ | 32,705 |   |
| Total  assets                                                         |       | 340,649                                                                                              |       | 344,477 |   | 357,995 |   | 352,911 |   | 298,250 |   |
| Current  liabilities                                                  |       | 25,138                                                                                               |       | 28,030 |   | 29,633 |   | 31,650 |   | 32,260 |   |
| Long-term  debt, capital lease obligations and other liabilities |       | 290,778                                                                                              |       | 290,911 |   | 299,408 |   | 285,265 |   | 194,969 |   |
| Stockholder’s  equity                                            |       | 24,733                                                                                               |       | 25,536 |   | 28,954 |   | 35,996 |   | 71,021 |   |
| **Financial Data**                                                    |       |                                                                                                 |       |   |   |   |   |   |   |   |   |
| Ratio  of earnings to fixed charges(2)                                |       | 1.07                                                                                                 | x          | 0.87 | x | 1.16 | x | 0.71 | x | 0.85 | x |
| **Distributions per Common Share**                                    |       | $                                                                                                    | 2,159      |   | $ | 1,200 |   | $ | 10,962 |   | $ | 22,803 |   | $ | 15,000 |   |

 

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(1)                                 See a discussion of our recentacquisition activities in Note 4 and our debt issuances in Note 5 tothe consolidated financial statements.

 

(2)                                 The ratio of earnings to fixed charges iscomputed by dividing earnings by fixed charges. Earnings consist of income(loss) before income taxes and noncontrolling interest, plus fixed charges andamortization of capitalized interest, less interest capitalized during theperiod. Fixed charges consist of interest on indebtedness (whether expensed orcapitalized), amortization of deferred financing costs, discounts and premiumsand that portion of rental expense that we believe is representative ofinterest. For the years ended December 31, 2008, 2006 and 2005, we had adeficiency of $3,962, $10,146 and $3,514, respectively, in earnings to fixedcharges.

 

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**Item 7.****                                                     *****Management’s Discussion and Analysis of FinancialCondition and Results of Operations.***

 

*Thissection discusses the results of our operations on a historical basis for theyears indicated. You should read the following discussion and analysis inconjunction with the audited consolidated financial statements that areincluded elsewhere in this Form 10-K. Certain statements contained in thisManagement’s Discussion and Analysis of Financial Condition and Results ofOperations constitute “forward-looking statements,” which statements involverisks and uncertainties described elsewhere in this report.*

 

*Our historical information may notnecessarily be meaningful when making year-to-year comparisons, as our coststructure, debt structure, capitalization, and the overall composition of ourcompany following the transactions discussed herein have significantly changed.Further, the historical information should not necessarily be taken as areliable indication of our future performance.*

 

**TABLE OF CONTENTS TOMANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)**

 
| **Description of item** | ** **                                                                                                        |
|-----------------------------------|-------------------------------------------------------------------------------------------------------------------|
|                              |                                                                                                              |   |
| A.                                | Company background                                                                                                | 36 |
| B.                                | Significant transactions  occurring during the year ended December 31, 2009                                  | 36 |
| C.                                | Overview and discussion of  our operations                                                                        | 37 |
| D.                                | Comparison of our operations  for the year ended December 31, 2009 to the year ended December 31,  2008 | 41 |
| E.                                | Comparison of our operations  for the year ended December 31, 2008 to the year ended December 31,  2007 | 43 |
| F.                                | Segment  information for the three years ended December 31, 2009                                             | 45 |
| G.                                | Liquidity and  capital resources—December 31, 2009                                                      | 49 |
| H.                                | Critical  accounting policies and estimates                                                                       | 52 |

 

**A.****                                   ****Company background**

 

We are a developer, ownerand operator of gaming and pari-mutuel wagering facilities throughout theUnited States, with properties located in Colorado, Nevada, Louisiana andVirginia. As of December 31, 2009, we owned and operated two casinos inColorado and three casinos in Nevada, 18 video gaming truck plazas in Louisianaand a horse racing track with eight satellite wagering facilities in Virginia.In addition, we are party to an agreement that entitles us to a portion of thegaming revenues from an additional truck plaza video gaming facility.

 

We are a wholly-owned subsidiary of Jacobs Investments, Inc.(“JII”) and a Qualified Subchapter S-Corporation Subsidiary under the InternalRevenue Code of 1986, as amended. Under those provisions, the owner of ourcompany pays income taxes on our taxable income. Jeffrey P. Jacobs, our ChiefExecutive Officer (“CEO”),  and hisfamily trusts own 100% of JII’s outstanding Class A and Class Bshares.

 

**B.****                                   ****Significanttransactions occurring during the year ended December 31, 2009**

 

***NauticaProperty Acquisition***

 

DuringJuly 2006, we acquired from affiliated parties several options to leaseand options to purchase six parcels of land and certain improvements on thewest bank of the Cuyahoga River in Cleveland, Ohio.  We refer to these properties as the NauticaProperties.  On January 15, 2009, weexercised our option to acquire one parcel referred to as “Sugar Warehouse,”and on January 21, 2009, we purchased this parcel for $2.45 million fromthe limited partnership that owned this building.  An affiliate of our CEO owned 82% of thegeneral partner interests and 16.4% of the limited partner interests of theseller. The acquisition of Sugar Warehouse and its related business wasaccounted for as a combination of entities under common control.  Therefore, the portion acquired from ouraffiliate has been recorded at the historical cost bases in the assets andliabilities transferred and the portion acquired from third parties has beenrecorded at fair value at the acquisition date using the acquisition method ofaccounting in accordance with FASB ASC Topic 805, *BusinessCombinations* (“ASC Topic 805”). Accordingly, the consolidated financial statements and the accompanyingmanagement’s discussion and analysis of financial condition and results 

 

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of operations presentedin this Form 10-K have been retroactively adjusted to include theoperations of Sugar Warehouse from January 1, 2007.  See Note 4 of the consolidated financialstatements.

 

***Acquisitionof Land and Land Options along the Gulf Coast of Mississippi***

 

During2008, we completed several land purchase transactions with owners of realestate along the Gulf Coast of Mississippi. During January 2009, we completed one additional land purchasetransaction at a total purchase price of $0.3 million.

 

DuringSeptember 2008, we entered into two land purchase options totaling $0.2million.  During the second quarter of2009, these two land purchase options were extended to July 1, 2010 for$0.2 million. Each option agreement contains three additional one-yearextensions at the option of JEI.  Thetotal purchase price of all parcels under these two option agreements is $13million.  During November 2008, weentered into a third land purchase option totaling $0.1 million, which expiredin May 2009.

 

Wecontinue to conduct due diligence regarding the feasibility of developing andconstructing a mixed use project which may include a licensed gamingestablishment, a hotel, restaurant, condominiums, retail development andparking facilities.  Our applicationfiled with Hancock County, Mississippi, to rezone the property to waterfrontdistrict, as part of our plan to build a casino resort and hotel, was approvedby the Planning Commission but denied by the Hancock County Board ofSupervisors by a vote of 3 to 2 in April 2009.  However, we continue to evaluate rezoning ofthe property, including the potential to file an amended application withHancock County.  The project is subjectto all necessary approvals from the Mississippi Gaming Commission and thenecessary financing.

 

***Amendmentto Credit Agreement***

 

At March 31,2009, certain debt covenants under our senior secured creditfacility were to becomemore restrictive.  We entered into anamendment to our credit agreement which became effective February 5,2009.  The amendment increased themaximum permitted senior secured leverage ratio for the remaining test periods.

 

***OhioConstitutional Amendment***

 

During 2009, we providedfinancial support to oppose a proposed constitutional amendment in Ohio (“Issue3”) that would allow for one casino each at designated locations in Cincinnati,Cleveland, Columbus and Toledo and distribute to all Ohio counties a tax on thecasinos.  None of the designatedlocations is owned by JEI or its affiliates. For the year ended December 31, 2009, we provided financial supporttotaling $2.3 million to oppose Issue 3. On November 3, 2009, Issue 3 was passed in Ohio which permitscasino gaming at the locations designated in the amendment.  We are currently evaluating the impact Issue3 might have on our development efforts on the Nautica Properties in Ohio.

 

**C.****                                   ****Overview and discussion of our operations**

 

We have four segments representing the geographicregions of our operations: Colorado, Nevada, Louisiana and Virginia. Eachsegment is managed separately because of the unique characteristics of itsrevenue stream, regulatory environment and customer base.

 

Our CEO is the chief operating decision maker. Ourcasino properties in Colorado (The Lodge and Gilpin casinos) and Nevada (theGold Dust West-Reno, Gold Dust West-Carson City and Gold Dust West-Elkocasinos) are managed by our Chief Operating Officer (“COO”) who is located inour Golden, Colorado corporate offices. Our 18 video poker truck plazaoperations are also managed by our COO. Our COO reports to our President, whois also located in Golden, Colorado.  OurPresident reports directly to our CEO. Our Virginia racetrack and satellitewagering facilities are managed by our on-site President of Pari-MutuelOperations, and he also reports directly to our CEO.

 

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When we analyze and manage our segments, we focus onseveral measurements that we believe provide us with the necessary ratios andkey performance indicators for us to determine how we are performing versus ourcompetition and against our own internal goals and budgets. We confer monthlyand discuss and analyze significant variances in an effort to identify trendsand changes in our business. We focus on EBITDA (earnings before interest,income taxes, depreciation and amortization) as one of the primary measurementsof reviewing and analyzing the operating results of each segment. While werecognize that EBITDA is not a generally accepted accounting principle (i.e. itis a non-GAAP financial measure), we nonetheless believe it is useful becauseit allows holders of our debt and management to evaluate and compare operatingresults from continuing operations from period to period in a meaningful andconsistent manner in addition to standard GAAP financial measures.Additionally, most financial analysts following the gaming industry utilizeEBITDA as a financial measurement, and when our debt holders (both secured andunsecured) inquire and discuss our operational performance with us, theyconsistently inquire about our EBITDA performance levels versus the prior yearas well as our EBITDA margins versus our competitors. Finally, EBITDA is a keycomponent of certain financial covenants contained in our debt agreements,among other things, and as such it is a critical ingredient that we must watchin order to ensure compliance with our bank credit agreement and our noteindenture covenants, measure our historical operating performance, anddetermine our ability to achieve future growth.

 

In addition to the above performance measurements,we pay particular attention to our monthly and annual cash flow. Our businessis sensitive to shifts in volumes and levels of activity and we find itnecessary to watch our cash closely. Every six months (June 15 and December 15)we have a cash interest payment due on our $210 million senior unsecured notesamounting to $10.2 million. Additionally, we currently have $58 millionoutstanding on our senior secured credit facility with interest due at varyingintervals.  As of December 31, 2009,$19 million is outstanding on the $40 million senior secured revolving creditfacility we have with a bank group on which we can draw as needed in order toaugment the cash flow we generate from operations. This is generally a functionof the timing of generating cash from operations coupled with the amount ofcash we need to run the business—i.e., our cash inventory. Presently, weestimate that we require approximately $15 million of cash inventory to operateour properties. We also have $1.9 million of outstanding letters of credit asof December 31, 2009. See also Section G, “Liquidity and CapitalResources.”

 

***Colorado***

 

OurColorado operations consist of The Lodge Casino at Black Hawk (“The Lodge”) andthe Gilpin Casino (“Gilpin”), both of which are located in Black Hawk,Colorado. The competitive aspects of the market in Black Hawk continue to be asignificant factor in our operations. At December 31, 2009, there were approximately 9,100 slotmachines in the city of Black Hawk.  Wehad 1,370 slot machines in this market (975 at The Lodge and 395 at theGilpin), which represented approximately 15% of the total slot machines inBlack Hawk. Additionally, there were 207 table games in the city of BlackHawk.  We had 54 table games in thismarket (35 at The Lodge and 19 at the Gilpin), which represented approximately26% of the total table games in Black Hawk.

 

OurColorado properties were affected by a number of events related to preparingour properties to take advantage of the higher limits, new games and extendedhours that went into effect on July 2, 2009.  We reduced the slot machine count toaccommodate the addition of table games. Our casino floors at both The Lodge and Gilpin were disrupted during thesecond quarter to install new carpet, additional surveillance and new tablegames.  On September 9, 2009, we reduced theslot count at The Lodge as we made room to accommodate the construction projectto expand our casino floor space at The Lodge. The project was completed on November 16, 2009.

 

For the year ended December 31, 2009, our grossgaming revenues at The Lodge and the Gilpin totaled $102.0 million, whichrepresented 19% of the total gaming revenues in Black Hawk.  The overall Black Hawk market gross gamingrevenues increased by 4.2% in 2009 over 2008. Total slot devices in Black Hawk decreased by 6% while table gamesincreased by 43%.  We managed to generate126% efficiencies (our percentage of the gross gaming revenues divided by ourpercentage of the gaming devices) within the market for 2009.  We follow our efficiency level very closelyas we believe this is a useful measure of how well we are performing within themarket.

 

We expect some of our previous and existing marketshare to be lost due to increased competition. As more properties continue tocompete for their share of the market, our personnel costs, marketing costs,and other costs will likely increase as we attempt to keep our market share.

 

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***Nevada***

 

OurNevada operations consist of Gold Dust West-Reno, located in Reno, Nevada,which was acquired on January 5, 2001; Gold Dust West-Carson City, locatedin Carson City, Nevada, which was acquired on June 25, 2006; and Gold DustWest-Elko, located in Elko, Nevada, which we developed and opened on March 5,2007.  As in Colorado, our Nevada casinosoperate in highly competitive markets, with many casinos marketing themselvesas “locals’ casinos,” partially due to added competition from Indian Gaming inCalifornia.

 

AtDecember 31, 2009, Reno had approximately 12,200 gaming devices, of whichGold Dust West-Reno had 479 devices, or 3.9% of the market. For the year ended December 31,2009, our gross gaming revenues were 4.2% of the Reno market, with anefficiency rate of 96%.

 

Sinceits acquisition in June 2006, Gold Dust West-Carson City (formerly PiñonPlaza Resort), has undergone major renovations and changes to the operationsemerging January 24, 2007 as the “new” Gold Dust West-Carson City by wayof an extensive rebranding program. The Carson City area (state capital) is 30miles south of Reno and services the areas of Dayton, Gardnerville and Mindensurrounding it with a total population base of 60,000 plus. The area hadapproximately 4,200 gaming devices of which Gold Dust West-Carson City had 383(9% of total devices).  For the yearended December 31, 2009, our efficiency rate was 99%. This property isexpected to substantially improve its efficiency through enhanced utilizationof its many unique amenities.

 

AtDecember 31, 2009, Gold Dust West-Elko had 346 gaming devices,representing approximately 11% of the total devices in the market.  For the year ended December 31, 2009,our gross gaming revenues were 12% of the Elko market, with an efficiency rateof 138%.

 

***Louisiana***

 

The Louisiana truck plaza video gaming facilitiesconsist of 18 truck plazas located in Louisiana and a share in the gamingrevenues of an additional truck plaza. Each truck plaza features a conveniencestore, fueling operations, a restaurant and up to 50 video gaming devices inthe casino depending on the level of fuel sales and available space.  At December 31, 2009, our truck plazavideo gaming facilities had a combined total of 943 video gaming devices.

 

The Louisiana truck plazas’ revenues are comprisedof: (i) revenue from video poker gaming machines; (ii) sales ofgasoline and diesel fuel; (iii) sales of groceries, trucker supplies andsundry items through their convenience stores; (iv) sales of food andbeverages in their restaurants and bars; and (v) miscellaneous commissionson ATMs, pay phones and lottery sales.

 

Allvideo poker activity is reported via a computer phone line directly to theLouisiana State Police. The Louisiana truck plazas’ revenues are dependent onmeeting the minimum gallons of fuel sales requirements necessary to operatevideo poker gaming machines in Louisiana. The fuel sales requirements must becomplied with on an annual basis (except for the first year of operationsduring which it must be complied with on a quarterly basis) and in the event ofnoncompliance, the Louisiana State Police will turn off a portion of the videopoker machines until the minimum fuel sales requirements are met. Management ofthe Louisiana truck plazas believes that they will continue to meet the fuelsales requirements necessary to operate video poker gaming machines inLouisiana at current levels, however, we can give no assurance in this regard.

 

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***Virginia***

 

Colonial’srevenues are comprised of: (i) pari-mutuel commissions from wagering onraces broadcast from out-of-state racetracks to Colonial’s satellite wageringfacilities and the track using import simulcasting; (ii) wagering at thetrack and Colonial’s satellite wagering facilities on its live races; (iii) commissionsfrom advance deposit account wagering by telephone and over the internet; (iv) admissionfees, program and racing form sales, and certain other ancillary depositaccount activities; and (v) net income from food and beverage sales andconcessions.

 

Colonial’srevenues are heavily dependent on the operations of its satellite wageringfacilities.  Revenues from the satellitewagering facilities help support live racing at the track. The amount ofrevenue Colonial earns from each wager depends on where the race is run.  Revenues from import simulcasting ofout-of-state races and from wagering at the track and at the satellite wageringfacilities on races run at the track consist of the total amount wagered atColonial’s facilities, less the amount paid as winning wagers. The percentageof each dollar wagered on horse races that must be returned to the public aswinning wagers (typically about 79%) is legislated by the state in which a racetakes place. Revenues from export simulcasting consist of amounts payable toColonial by the out-of-state racetracks and their simulcast facilities withrespect to wagering on races run at the track.

 

On November 10,2008, we closed one of our two satellite wagering facilities in Chesapeake,Virginia. We now operate eight satellite wagering facilities in Virginia.

 

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***Summary of Consolidated Operating Results***

 

Ourresults of operations reflect the consolidated operations of all oursubsidiaries. A summary of our consolidated operating results for the yearsended December 31, 2009, 2008 and 2007 is as follows:

 
| ** **                                                                  | ** ** | **Year Ended December 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                  | ** ** | **2009**                                   | ** ** | **2008  (As adjusted,  see Note 4 of  Financial  Statements)** | ** ** | **2007  (As adjusted,  see Note 4 of  Financial  Statements)** | ** ** |
| ** **                                                                  | ** ** | **(Dollars in Thousands)**       | ** ** |
| **REVENUES**                                                                |       |                                       |       |   |   |   |   |
| Gaming:                                                                     |       |                                       |       |   |   |   |   |
| Casino                                                                      |       | $                                          | 139,766    |   | $ | 139,492 |   | $ | 144,656 |   |
| Truck  stop                                                                 |       | 62,983                                     |       | 67,590 |   | 64,322 |   |
| Pari-mutuel                                                                 |       | 32,276                                     |       | 38,657 |   | 41,309 |   |
| Food  and beverage                                                          |       | 29,781                                     |       | 30,736 |   | 29,260 |   |
| Convenience  store—fuel                                                |       | 60,659                                     |       | 97,021 |   | 81,329 |   |
| Other                                                                       |       | 22,198                                     |       | 23,408 |   | 21,401 |   |
| Less:  promotional allowances                                               |       | (34,301                                    | )          | (33,718 | ) | (31,953 | ) |
|                                                                        |       |                                       |       |   |   |   |   |
| Total  net revenues                                                         |       | 313,362                                    |       | 363,186 |   | 350,324 |   |
|                                                                        |       |                                       |       |   |   |   |   |
| **COSTS AND EXPENSES**                                                      |       |                                       |       |   |   |   |   |
| Gaming:                                                                     |       |                                       |       |   |   |   |   |
| Casino                                                                      |       | 47,348                                     |       | 46,809 |   | 48,427 |   |
| Truck  stop                                                                 |       | 38,784                                     |       | 40,990 |   | 37,954 |   |
| Pari-mutuel                                                                 |       | 26,077                                     |       | 31,172 |   | 32,977 |   |
| Food  and beverage                                                          |       | 13,521                                     |       | 15,417 |   | 16,416 |   |
| Convenience  store—fuel                                                |       | 57,139                                     |       | 90,714 |   | 77,269 |   |
| Other                                                                       |       | 16,044                                     |       | 18,260 |   | 16,290 |   |
| Marketing,  general and administrative                                      |       | 65,783                                     |       | 68,889 |   | 69,704 |   |
| Unrealized  loss on change in fair value of investment in equity securities |       | 309                                        |       | 6,577 |   | — |   |
| Goodwill  impairment                                                        |       | —                                     |       | 199 |   | — |   |
| Abandonment  costs                                                          |       | —                                     |       | 829 |   | — |   |
| Depreciation  and amortization                                              |       | 21,482                                     |       | 20,109 |   | 18,270 |   |
|                                                                        |       |                                       |       |   |   |   |   |
| Total  costs and expenses                                                   |       | 286,487                                    |       | 339,965 |   | 317,307 |   |
|                                                                        |       |                                       |       |   |   |   |   |
| **OPERATING INCOME**                                                        |       | 26,875                                     |       | 23,221 |   | 33,017 |   |
|                                                                        |       |                                       |       |   |   |   |   |
| Interest  expense, net                                                      |       | (25,170                                    | )          | (27,258 | ) | (28,108 | ) |
| Noncontrolling  interest                                                    |       | —                                     |       | (71 | ) | 73 |   |
|                                                                        |       |                                       |       |   |   |   |   |
| **NET INCOME (LOSS) ATTRIBUTABLE TO JEI**                                   |       | $                                          | 1,705      |   | $ | (4,108 | ) | $ | 4,982 |   |

 

**D.****                                  ****Comparison of our operations for the year ended December 31,2009 to the year ended December 31, 2008**

 

*All comparisons below begin withthe 2009 results followed by the 2008 results**.*

 

Casinorevenues increased $0.3 million or less than 1% to $139.8 million from $139.5million.  Increases in casino revenues atThe Lodge of $2.3 million or 3%, Gold Dust West-Carson City of $0.1 million or1% and Gold Dust West-Elko of $1.0 million or 10% were offset by decreases atthe Gilpin of $1.1 million or 5% and Gold Dust 

 

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West-Reno of $2.0 millionor 10% .  Overall, the City of Black Hawkcasino win increased 4% during 2009 compared to 2008, due to the improved July throughDecember 2009 performance resulting from the new games, increased bettinglimits and expanded hours that began on July 2, 2009.  However, throughout 2009, revenues have beennegatively impacted by general economic conditions, including higherunemployment and decreased disposable income.

 

Truckstop gaming revenues decreased $4.6 million or 7% to $63.0 million from $67.6million primarily due to new competition at certain locations combined withgeneral economic conditions, including higher unemployment and decreaseddisposable income.

 

Pari-mutuelrevenues decreased $6.4 million or 17% to $32.3 million from $38.7million.  The decrease in revenues isattributable to a $1.9 million decrease in the Chesapeake market partiallyresulting from the closure of our Chesapeake, Military Highway off trackwagering facility in November 2008, combined with a $2.1 million decreasein the Richmond market resulting from fewer operating days in 2009 at our BroadStreet and Hull Street off track wagering facilities. Revenues at the racetrackand other off track wagering facilities decreased $2.1 million and accountwagering revenues decreased $0.3 million.

 

Foodand beverage revenues decreased $0.9 million or 3% to $29.8 million from $30.7million.  This decrease is primarilyattributable to decreases of $1.2 million at the truck stops and $0.5 millionat Colonial due to the lower level of gaming activity, somewhat offset byincreases of $0.5 million at The Lodge, $0.1 million at the Gilpin, $0.1million at Gold Dust West-Carson City and $0.1 million at Gold Dust West-Elko.

 

Convenience store-fuelrevenues decreased $36.3 million or 37% to $60.7 million from $97.0million.  The average selling price offuel decreased to $2.26 per gallon in 2009 from $3.58 per gallon in 2008, whilefuel volume was down 1% to 26.9 million gallons.

 

Otherrevenues decreased $1.2 million or 5% to $22.2 million from $23.4 million and wereprimarily attributable to a $0.3 million decrease in hotel and other revenuesat Gold Dust West-Carson City, a $0.1 million decrease in hotel revenues at TheLodge, a $0.1 million decrease at the Gilpin, a $0.2 million decrease atColonial, a $0.2 million decrease in Sugar Warehouse revenues and a $0.6million decrease in convenience store and other revenues at the truck stops,somewhat offset by receipt of $0.3 million of insurance proceeds in excess ofhurricane losses incurred during late 2008 at our truck stops.

 

Promotional allowancesincreased $0.6 million or 2% to $34.3 million from $33.7 million.  Increases in promotional allowances of $0.3million at The Lodge, $0.3 million at the Gilpin, $0.3 million at Gold DustWest-Carson City and $0.5 million at Gold Dust West-Elko were somewhat offsetby decreases of $0.5 million at Gold Dust West-Reno and $0.3 million at thetruck stops.

 

Casinoexpenses increased $0.5 million or 1% to $47.3 million from $46.8 million, dueto increases of $1.1 million at The Lodge and $0.1 million at Gold DustWest-Elko, offset by decreases of $0.2 million at the Gilpin, $0.4 million atGold Dust West-Reno and $0.1 million at Gold Dust West-Carson City, whichcorrespond to the changes in casino revenues at each location.

 

Truck stop gamingexpenses decreased $2.2 million or 5% to $38.8 million from $41.0 million andis attributable to direct costs associated to the decrease in truck stop gamingrevenues.

 

Pari-mutuelcosts and expenses decreased $5.1 million or 16% to $26.1 million from $31.2million.  The decrease is attributable todecreased direct costs resulting from decreased pari-mutuel revenues combinedwith decreased operating costs resulting from the closure of one of our off trackwagering facilities in November 2008.

 

Foodand beverage costs and expenses decreased $1.9 million or 12% to $13.5 millionfrom $15.4 million, and is due to decreases of $1.0 million at the truck stops,$0.6 million at Colonial, $0.1 million at The Lodge and $0.2 million at GoldDust West-Carson City.

 

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Convenience store-fuelexpenses decreased $33.6 million or 37% to $57.1 million from $90.7 million.The average cost of fuel decreased to $2.13 per gallon in 2009 from $3.35 pergallon in 2008, while volume was down 1%.

 

Othercosts and expenses decreased $2.2 million or 12% to $16.0 million from $18.2million, and were primarily attributable to a $2.0 million decrease inconvenience store expenses at the truck stops and a $0.2 million decrease inhotel expenses at Gold Dust West-Carson City.

 

Marketing,general and administrative expenses decreased $3.1 million or 5% to $65.8million from $68.9 million.  Thisdecrease is primarily the result of a $1.5 million decrease at Colonial due todecreases in marketing costs, Instant Racing lobbying costs, insurance costs,travel expenses and administrative salaries, combined with decreases of $0.2million at The Lodge, $0.8 million at the Gilpin, $0.5 million at Gold DustWest-Reno, $1.2 million at Gold Dust West-Carson City and $0.3 million at thetruck stops, somewhat offset by an increase of $1.1 million at corporate and$0.2 million at Sugar Warehouse.  The decreasesat our operating units are the result of cost management efforts at alllocations.  The increase in corporateoverhead is primarily attributable to $2.3 million of Ohio campaign costsincurred during 2009 and an increase in professional accounting fees totaling$0.4 million, somewhat offset by a decrease in labor totaling $0.2 million and$1.4 million of Colorado Amendment 50 campaign costs incurred during 2008.  These 2009 and 2008 campaign costs are furtherdiscussed in Note 12 to the consolidated financial statements.

 

BeginningNovember 1, 2008, we began accounting for our investment in MTR GamingGroup, Inc. (“MTR”) as an equity security, in accordance with FASB ASCTopic 825, *Financial Instruments* (“ASC Topic 825”).  Decreases in the stock price resulted in anunrealized loss on the change in fair value of investment in equity securitiestotaling $0.3 million during the year ended December 31, 2009. During2008, we recorded impairments totaling $6.6 million on the fair value of ourinvestment in MTR.

 

Agoodwill impairment totaling $0.2 million was recorded at Gold Dust West-CarsonCity during the year ended December 31, 2008.  No goodwill remained on this property afterthe impairment was recorded.

 

Abandonmentcosts totaling $0.8 million were recorded at Colonial during 2008 due to theclosure of one of our two satellite wagering facilities in Chesapeake,Virginia.  No comparable transactionoccurred during 2009.

 

Depreciation andamortization expense increased $1.4 million or 7% to $21.5 million from $20.1million and was primarily attributable to increases of $1.1 million at thetruck stop locations, $0.3 million at The Lodge and $0.1 million at Gold DustWest-Elko, somewhat offset by a $0.1 million decrease at Gold Dust West-CarsonCity.

 

Netinterest expense decreased $2.1 million or 8% to $25.2 million from $27.3million.  The decrease is attributable tolower effective interest rates on our variable rate bank debt, combined with adecrease in debt outstanding during the year ended December 31, 2009compared to the year ended December 31, 2008.

 

**E.****                                  ****Comparison****of our operations for the yearended December 31, 2008 to the year ended December 31, 2007**

 

*All comparisons below begin withthe 2008 results followed by the 2007 results**.*

 

Casinorevenues decreased $5.2 million or 4% to $139.5 million from $144.7million.  The decrease in casino revenuesis a result of decreased casino revenues at The Lodge of $2.2 million or 3%,the Gilpin of $3.4 million or 13%, Gold Dust West-Reno of $1.3 million or 6%and Gold Dust West-Carson City of $0.3 million or 3%.  These decreases were partially offset by anincrease of $2.0 million at Gold Dust West-Elko, which opened on March 5,2007.  Casino revenues at our twoColorado properties have been negatively affected due to the smoking ban whichbecame effective on January 1, 2008. Overall, the City of Black Hawk casino win declined 12.5% during 2008compared to 2007.  The decreased revenuesat our casinos in Black Hawk and Reno are also attributable to general economicconditions, higher gas prices during the summer months and decreased customerspend per visit.

 

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Truckstop gaming revenues increased $3.3 million or 5% to $67.6 million from $64.3million.  Of this increase, $1.8 millionis due to video gaming activity at the Silver Dollar location that began in September 2007,combined with a net increase totaling $1.5 million at all other truck stoplocations.  The increase in gamingrevenue is primarily attributable to the increased bet and jackpot limits thatbecame effective in late 2007.

 

Pari-mutuelrevenues decreased $2.7 million or 6% to $38.7 million from $41.3 million.  The decrease in revenues is primarilyattributable to a $3.6 million decrease at the off track wagering facilitiescombined with a $0.2 million decrease at the racetrack, somewhat offset by a$1.1 million increase in account wagering revenues.

 

Food andbeverage revenues increased $1.5 million or 5% to $30.7 million from $29.3million.  This increase is attributableto increases of $1.0 million at The Lodge, $0.1 million at Gold Dust West-Reno,$0.4 million at Gold Dust West-Elko and $0.3 million at the truck stopfacilities, primarily due to increased promotional activity, offset bydecreases of $0.1 million at the Gilpin, $0.1 million at Gold Dust West-CarsonCity and $0.1 million at Colonial.

 

Convenience store-fuelrevenues increased $15.7 million or 19% to $97.0 million from $81.3million.  The average selling price offuel increased to $3.58 per gallon in 2008 from $2.74 per gallon in 2007.  These increases in fuel revenues weresomewhat offset by a decrease in volume to 27.1 million gallons from 29.7million gallons.

 

Otherrevenues increased $2.0 million or 9% to $23.4 million from $21.4 million andwere primarily attributable to an increase of $2.0 million in convenience storeand other revenues at the truck stops, $0.1 million at Colonial due to anincrease in Virginia Derby sponsorship revenue combined with a one-time lawsuitsettlement with Youbet, an increase of $0.1 million at The Lodge, and anincrease of $0.2 million at Sugar Warehouse, somewhat offset by a decrease of$0.4 million in hotel and other revenues at Gold Dust West-Carson City.

 

Promotional allowancesincreased $1.8 million or 6% to $33.7 million from $32.0 million.  The increase is attributable to an increasein promotional allowances of $1.1 million at The Lodge, $0.3 million at GoldDust West-Reno, $0.6 million at Gold Dust West-Elko and $0.2 million at thetruck stops, somewhat offset by a decrease of $0.4 million at the Gilpin.

 

Casinoexpenses decreased $1.6 million or 3% to $46.8 million from $48.4 million.  This decrease is primarily due to decreasesof $0.4 million at The Lodge, $1.1 million at the Gilpin, $0.2 million at GoldDust West-Reno and $0.3 million at Gold Dust West-Carson City, offset by anincrease of $0.4 million at Gold Dust West-Elko. These variances are consistentwith the changes in casino revenues by property as discussed above.

 

Truck stop gamingexpenses increased $3.0 million or 8% to $41.0 million from $38.0 million.  Of this increase, $1.2 million is due tovideo gaming activity at the Silver Dollar location that began in September 2007,combined with a net increase totaling $1.8 million at all other truck stoplocations.

 

Pari-mutuelcosts and expenses decreased $1.8 million or 5% to $31.2 million from $33.0million.  The decrease is primarilyattributable to a $2.4 million decrease in pari-mutuel taxes, purses and otherdirect expenses associated with decreased pari-mutuel revenues at the racetrackand off track wagering facilities, partially offset by a $0.6 million increasein account wagering direct costs and expenses.

 

Foodand beverage costs and expenses decreased $1.0 million or 6% to $15.4 millionfrom $16.4 million due to decreases of $0.4 million at The Lodge, $0.1 millionat the Gilpin, $0.5 million at Gold Dust West-Carson City and $0.2 million atColonial, offset by an increase of $0.2 million at the truck stops.

 

Convenience store-fuelexpenses increased $13.4 million or 17% to $90.7 million from $77.3million.  The average cost of fuelincreased to $3.35 per gallon in 2008 from $2.60 per gallon in 2007.  These increases in fuel expenses weresomewhat offset by a decrease in volume.

 

Othercosts and expenses increased $2.0 million or 12% to $18.3 million from $16.3million, and were primarily attributable to an increase in convenience storeexpenses at the truck stops.

 

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Marketing, generaland administrative expenses decreased $0.8 million or 1% to $68.9 million from$69.7 million.  This decrease isprimarily the result of  decreases of$0.8 million at Colonial due to decreased lobbying costs associated withInstant Racing, and decreases of $0.4 million at The Lodge, $0.6 million at theGilpin, $0.3 million at Gold Dust West-Reno, $0.1 million at Gold DustWest-Carson City and $0.1 million at Gold Dust West-Elko. These decreases werepartially offset by an increase of $1.5 million at corporate, primarily due topolitical contributions totaling $1.4 million made for a Colorado campaign,which is further discussed in Note 12 to the financial statements.

 

During 2008, werecorded an impairment totaling $6.6 million on the change in fair value of ourinvestment in equity securities of MTR Gaming Group, Inc., which isfurther discussed in Note 6 to the financial statements.  No comparable transaction occurred during2007.

 

A goodwillimpairment totaling $0.2 million was recorded at Gold Dust West-Carson Cityduring 2008, which is further discussed in Note 3 to the financialstatements.  No comparable transactionoccurred during 2007.

 

Abandonment coststotaling $0.8 million were recorded during 2008 due to the closure one of ourtwo satellite wagering facilities in Chesapeake, Virginia, which is furtherdiscussed in Note 13 to the financial statements.  No comparable transaction occurred during2007.

 

Depreciation andamortization expense increased $1.8 million or 10% to $20.1 million from $18.3million.  Of this increase, $0.4 millionis attributable to Gold Dust West-Elko and $0.2 million is attributable to the SilverDollar truck stop location. Additionally, The Lodge increased by $0.5 million,the Gilpin increased by $0.1 million, Gold Dust West-Reno increased by $0.1million, Gold Dust West-Carson City increased by $0.3 million and the remainingtruck stops combined increased by $0.2 million due to capital asset purchases.

 

Net interest expense decreased $0.8 million or 3% to$27.2 million from $28.1 million.  Thedecrease is attributable to lower effective interest rates on our variable ratebank debt, partially offset by an increase in debt outstanding during the yearended December 31, 2008 compared to the year ended December 31, 2007.

 

**F.****                                     ****Segment information for the three years ended December 31, 2009**

 

As discussed above, we havefour segments representing the geographic regions of our operations: Colorado,Nevada, Louisiana and Virginia. Each segment is managed separately because ofthe unique characteristics of its revenue stream, regulatory environment andcustomer base.

 

Theinformation presented is by each segment in which we have operations and alsopresents our EBITDA (earnings before interest, income taxes, depreciation andamortization) for each segment. We believe that the presentation of a non-GAAPfinancial measure such as EBITDA is useful because it allows holders of our debtand management to evaluate and compare our operating results from continuingoperations from period to period in a meaningful and consistent manner inaddition to standard GAAP financial measures. Management internally evaluatesthe performance of our segments using EBITDA measures as do most analystsfollowing the gaming industry. EBITDA is an element of certain key financialcovenants in our debt agreements and, as such, is a critical component that weclosely watch in order to determine our ability to achieve future growth and toensure we are in compliance with our debt agreements. We present EBITDA in thetables below to provide further discussion and analysis of our operatingresults. EBITDA can be reconciled directly to our consolidated net income (loss)by adding the amounts shown for depreciation and amortization, interest andincome taxes to net income (loss). This information should not be considered asan alternative to any measure of performance as promulgated under accountingprinciples generally accepted in the United States of America, such as netincome (loss), nor should it be considered as an indicator of our overallfinancial performance. Our calculation of EBITDA may be different from thecalculation used by other companies and comparability may be limited.

 

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The following is a summaryof the net revenues, costs and expenses and EBITDA, for the three years ended December 31,2009, 2008 and 2007 (dollars in thousands):

 
| ** **                                                                                                | ** ** | **For the Years Ended December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                                | ** ** | **2009**                                                      | ** ** | **2008  (As adjusted,  see Note 4 of  Financial  Statements)** | ** ** | **2007  (As adjusted,  see Note 4 of  Financial  Statements)** | ** ** |
| **NET  REVENUES**                                                                                         |       |                                                          |       |   |   |   |   |
| Colorado:                                                                                                 |       |                                                          |       |   |   |   |   |
| The Lodge                                                                                                 |       | $                                                             | 76,129     |   | $ | 73,853 |   | $ | 76,051 |   |
| Gilpin                                                                                                    |       | 18,917                                                        |       | 20,200 |   | 23,323 |   |
| Total Colorado                                                                                            |       | 95,046                                                        |       | 94,053 |   | 99,374 |   |
| Nevada:                                                                                                   |       |                                                          |       |   |   |   |   |
| Gold Dust  West-Reno                                                                                      |       | 17,968                                                        |       | 19,457 |   | 20,986 |   |
| Gold Dust  West-Carson City                                                                               |       | 12,627                                                        |       | 13,085 |   | 13,833 |   |
| Gold Dust  West-Elko                                                                                      |       | 10,824                                                        |       | 10,189 |   | 8,243 |   |
| Total Nevada                                                                                              |       | 41,419                                                        |       | 42,731 |   | 43,062 |   |
| Louisiana                                                                                                 |       | 139,832                                                       |       | 182,101 |   | 161,070 |   |
| Virginia                                                                                                  |       | 36,512                                                        |       | 43,592 |   | 46,322 |   |
| Corporate and  other                                                                                      |       | 553                                                           |       | 709 |   | 496 |   |
| **Total  Net Revenues**                                                                                   |       | 313,362                                                       |       | 363,186 |   | 350,324 |   |
|                                                                                                      |       |                                                          |       |   |   |   |   |
| **COSTS  AND EXPENSES (excluding depreciation and amortization, net interest expense  and income taxes)** |       |                                                          |       |   |   |   |   |
| Colorado:                                                                                                 |       |                                                          |       |   |   |   |   |
| The Lodge                                                                                                 |       | 48,917                                                        |       | 48,094 |   | 49,359 |   |
| Gilpin                                                                                                    |       | 13,804                                                        |       | 14,793 |   | 16,594 |   |
| Total Colorado                                                                                            |       | 62,721                                                        |       | 62,887 |   | 65,953 |   |
| Nevada:                                                                                                   |       |                                                          |       |   |   |   |   |
| Gold Dust West-Reno                                                                                       |       | 12,257                                                        |       | 13,218 |   | 13,794 |   |
| Gold Dust  West-Carson City (2)                                                                           |       | 12,591                                                        |       | 14,364 |   | 15,064 |   |
| Gold Dust  West-Elko                                                                                      |       | 8,995                                                         |       | 8,901 |   | 8,567 |   |
| Total Nevada                                                                                              |       | 33,843                                                        |       | 36,483 |   | 37,425 |   |
| Louisiana                                                                                                 |       | 121,280                                                       |       | 160,413 |   | 141,771 |   |
| Virginia (3)                                                                                              |       | 34,965                                                        |       | 42,993 |   | 44,921 |   |
| Corporate  overhead and other (1)(4)                                                                      |       | 12,196                                                        |       | 17,080 |   | 8,967 |   |
| **Total  Costs and Expenses**                                                                             |       | 265,005                                                       |       | 319,856 |   | 299,037 |   |
|                                                                                                      |       |                                                          |       |   |   |   |   |
| **EBITDA**                                                                                                |       |                                                          |       |   |   |   |   |
| Colorado:                                                                                                 |       |                                                          |       |   |   |   |   |
| The Lodge                                                                                                 |       | 27,212                                                        |       | 25,759 |   | 26,692 |   |
| Gilpin                                                                                                    |       | 5,113                                                         |       | 5,407 |   | 6,729 |   |
| Total Colorado                                                                                            |       | 32,325                                                        |       | 31,166 |   | 33,421 |   |
| Nevada:                                                                                                   |       |                                                          |       |   |   |   |   |
| Gold Dust  West-Reno                                                                                      |       | 5,711                                                         |       | 6,239 |   | 7,192 |   |
| Gold Dust  West-Carson City (2)                                                                           |       | 36                                                            |       | (1,279 | ) | (1,231 | ) |
| Gold Dust  West-Elko                                                                                      |       | 1,829                                                         |       | 1,288 |   | (324 | ) |
| Total Nevada                                                                                              |       | 7,576                                                         |       | 6,248 |   | 5,637 |   |
| Louisiana                                                                                                 |       | 18,552                                                        |       | 21,688 |   | 19,299 |   |
| Virginia (3)                                                                                              |       | 1,547                                                         |       | 599 |   | 1,401 |   |
| Corporate  overhead and other (1)(4)                                                                      |       | (11,643                                                       | )          | (16,371 | ) | (8,471 | ) |
|                                                                                                      |       |                                                          |       |   |   |   |   |
| **Total  EBITDA**                                                                                         |       | $                                                             | 48,357     |   | $ | 43,330 |   | $ | 51,287 |   |

 

SeeNotes on page 49.

 

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***General***

 

See sections D and E above which provide explanationsregarding the fluctuations in our revenues and costs and expenses by propertyand segment.

 

Throughout most of 2009and 2008, net revenues at all of our properties have been negatively impactedby local and general economic conditions, including higher unemployment anddecreased disposable income, combined with a decrease in fuel prices.  However, during the last six months of 2009,both of our Colorado properties benefited from the new games, higher limits andextended hours that began on July 2, 2009. Costs and expenses are generally lower due to cost management efforts atall of our properties, combined with a decrease in direct costs associated tothe decrease in net revenues. Year-over-year, costs and expenses increased at The Lodge as a result ofadditional training, personnel and other expenses resulting from ourpreparations to take advantage of the new gaming legislation.

 

***TheLodge***

 

EBITDA at The Lodgeincreased 6% for the year ended December 31, 2009 compared to the sameperiod of 2008 primarily due to the new gaming legislation that began on July 2,2009, somewhat offset by the general economic conditions discussed in the “General”section above.  Additionally, we incurredcosts and disruption during the second quarter of 2009 as a result of thepreparation for the new gaming legislation, and during the fourth quarter of2009, we experienced construction disruption during the expansion of our casinofloor.  For the year ended December 31,2008 compared to the year ended December 31, 2007, EBITDA fell 3%,primarily due to the smoking ban which became effective in Colorado on January 1,2008.

 

***Gilpin***

 

EBITDA at the Gilpindecreased 5% for the year ended December 31, 2009 compared to the sameperiod of 2008 primarily due to the general economic conditions discussed inthe “General” section above, costs and disruption during the second quarter of2009 as a result of the preparation for the new gaming legislation, somewhatoffset by the new gaming legislation during the last half of 2009.  The Colorado smoking ban and economicconditions resulted in significantly lower revenues and a 20% decrease inEBITDA at the Gilpin for the year ended 2008 compared to 2007.

 

***GoldDust West-Reno***

 

The Reno market hasexperienced significant slot revenue declines during 2009 and 2008 compared to2007 revenue levels.  EBITDA at Gold DustWest-Reno decreased 8% for the year ended December 31, 2009 compared tothe same period of 2008 and 13% for the year ended December 31, 2008compared to 2007 primarily due to a decrease in slot revenues resulting fromthe local and general economic conditions discussed in the “General” sectionabove.

 

***GoldDust West-Carson City***

 

EBITDA at Gold DustWest-Carson City increased $1.3 million for the year ended December 31,2009 compared to the same period of 2008 primarily due to reductions in labor,advertising and other operating costs and expenses.  EBITDA was flat for the year ended 2008 comparedto 2007.  A goodwill impairment totaling$0.2 million was recorded at Gold Dust West-Carson City during the year ended December 31,2008.  No goodwill impairment wasrecorded during 2009 or 2007.

 

***GoldDust West-Elko***

 

EBITDA at Gold DustWest-Elko increased $0.5 million for the year ended December 31, 2009compared to the same period of 2008 and increased $1.6 million for the yearended December 31, 2008 compared to the same period of 2007, primarily dueto increases in slot revenues resulting from increases in promotionalallowances.  Gold Dust West-Elko openedon March 5, 2007.

 

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***Louisiana***

 

EBITDA at the Louisianatruck stops decreased 14% for the year ended December 31, 2009 compared tothe same period of 2008 primarily due to decreases during the third and fourthquarters of 2009 in gaming and non-gaming revenues resulting from the generaleconomic conditions discussed in the “General” section above, combined with adecrease in fuel gross profit per gallon. EBITDA increased 12% in 2008 compared to 2007, as a result of theincrease in fuel gross profit per gallon and increased gaming revenue. Duringthe third quarter of 2008, hurricanes Gustav and Ike struck certain of ourLouisiana operations causing minimal damage to our properties but significantdamage in the region.  All of ourproperties were operating within approximately two days, resulting in an increasein gaming and non-gaming revenues during the third and fourth quarters of 2008.

 

***Virginia***

 

EBITDA at our pari-mutueloperations in Virginia increased $0.9 million for the year ended December 31,2009 compared to the same period of 2008 but decreased $0.8 million for theyear ended December 31, 2008 compared to the same period of 2007. During2008, Virginia recorded abandonment costs totaling $0.8 million for the closureof a satellite wagering facility. No similar charges were recorded during 2009or 2007.

 

***CorporateOverhead and Other***

 

EBITDA at corporatedecreased $4.7 million for the year ended December 31, 2009 compared tothe same period of 2008 but increased $7.9 million for the year ended December 31,2008 compared to the same period of 2007. These fluctuations are primarily dueto decreases in the stock price of our investment in MTR totaling $0.3 millionin 2009, $6.6 million in 2008 and $0 in 2007. Additionally, we expended $2.3 million during 2009 for campaign costs inOhio and $1.4 million during 2008 for campaign costs in Colorado.  After adjusting for these unusual items,EBITDA increased 7% in 2009 compared to 2008, primarily due to professionalaccounting fees, but was flat for 2008 compared to 2007.

 

***Reconciliation of EBITDA to Net Income (Loss)***

 

The following table sets forth a reconciliation of our EBITDA, anon-GAAP financial measure, to our net income (loss), a GAAP financial measure(dollars in thousands):

 
| **Year Ended  December 31, 2009** | ** ** | **EBITDA** | ** ** | **Depreciation and  Amortization** | ** ** | **Interest  Expense, net** | ** ** | **Net  Income (Loss)** | ** ** |
|---------------------------------------------|------------|------------|------------|-----------------------------------------|------------|---------------------------------|------------|-----------------------------|------------|
| Colorado:                                   |       |       |       |                                    |       |                            |       |                        |       |
| The Lodge                                   |       | $          | 27,212     |                                    | $          | 5,148                           |       | $                           | 6,782      |   | $ | 15,282 |   |
| Gilpin                                      |       | 5,113      |       | 1,939                                   |       | 1,904                           |       | 1,270                       |       |
| Total Colorado                              |       | 32,325     |       | 7,087                                   |       | 8,686                           |       | 16,552                      |       |
| Nevada:                                     |       |       |       |                                    |       |                            |       |                        |       |
| Gold  Dust West-Reno                        |       | 5,711      |       | 1,598                                   |       | 2,618                           |       | 1,495                       |       |
| Gold  Dust West-Carson City                 |       | 36         |       | 1,948                                   |       | 1,534                           |       | (3,446                      | )          |
| Gold  Dust West-Elko                        |       | 1,829      |       | 2,438                                   |       | 932                             |       | (1,541                      | )          |
| Total  Nevada                               |       | 7,576      |       | 5,984                                   |       | 5,084                           |       | (3,492                      | )          |
| Louisiana                                   |       | 18,552     |       | 5,307                                   |       | 4,041                           |       | 9,204                       |       |
| Virginia                                    |       | 1,547      |       | 2,124                                   |       | 577                             |       | (1,154                      | )          |
| Corporate  overhead and other (1)           |       | (11,643    | )          | 980                                     |       | 6,782                           |       | (19,405                     | )          |
| TOTAL                                       |       | $          | 48,357     |                                    | $          | 21,482                          |       | $                           | 25,170     |   | $ | 1,705 |   |

 

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| **Year  Ended December 31, 2008  (As adjusted, see Note 4 of Financial Statements)** | ** ** | **EBITDA** | ** ** | **Depreciation and  Amortization** | ** ** | **Interest  Expense, net** | ** ** | **Noncontrolling  Interest** | ** ** | **Net  Income (Loss)** | ** ** |
|------------------------------------------------------------------------------------------------|------------|------------|------------|-----------------------------------------|------------|---------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Colorado:                                                                                      |       |       |       |                                    |       |                            |       |                         |       |                        |       |
| The Lodge                                                                                      |       | $          | 25,759     |                                    | $          | 4,825                           |       | $                            | 6,715      |                        |       |   | $ | 14,219 |   |
| Gilpin                                                                                         |       | 5,407      |       | 1,998                                   |       | 1,903                           |       |                         |       | 1,506                       |       |
| Total Colorado                                                                                 |       | 31,166     |       | 6,823                                   |       | 8,618                           |       |                         |       | 15,725                      |       |
| Nevada:                                                                                        |       |       |       |                                    |       |                            |       |                         |       |                        |       |
| Gold  Dust West-Reno                                                                           |       | 6,239      |       | 1,589                                   |       | 2,617                           |       |                         |       | 2,033                       |       |
| Gold  Dust West-Carson City (2)                                                                |       | (1,279     | )          | 2,079                                   |       | 1,533                           |       |                         |       | (4,891                      | )          |
| Gold  Dust West-Elko                                                                           |       | 1,288      |       | 2,364                                   |       | 1,423                           |       |                         |       | (2,499                      | )          |
| Total  Nevada                                                                                  |       | 6,248      |       | 6,032                                   |       | 5,573                           |       |                         |       | (5,357                      | )          |
| Louisiana                                                                                      |       | 21,688     |       | 4,219                                   |       | 4,875                           |       |                         |       | 12,594                      |       |
| Virginia (3)                                                                                   |       | 599        |       | 2,114                                   |       | 520                             |       |                         |       | (2,035                      | )          |
| Corporate  overhead and other (4)                                                              |       | (16,371    | )          | 921                                     |       | 7,672                           |       | $                            | (71        | )                           | (25,035    | ) |
| TOTAL                                                                                          |       | $          | 43,330     |                                    | $          | 20,109                          |       | $                            | 27,258     |                        | $          | (71 | ) | $ | (4,108 | ) |

 
| **Year  Ended December 31, 2007  (As adjusted, see Note 4 of Financial Statements)** | ** ** | **EBITDA** | ** ** | **Depreciation and  Amortization** | ** ** | **Interest  Expense, net** | ** ** | **Noncontrolling Interest** | ** ** | **Net  Income (Loss)** | ** ** |
|------------------------------------------------------------------------------------------------|------------|------------|------------|-----------------------------------------|------------|---------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Colorado:                                                                                      |       |       |       |                                    |       |                            |       |                        |       |                        |       |
| The Lodge                                                                                      |       | $          | 26,692     |                                    | $          | 4,318                           |       | $                           | 6,884      |                        |       |   | $ | 15,490 |   |
| Gilpin                                                                                         |       | 6,729      |       | 1,854                                   |       | 1,891                           |       |                        |       | 2,984                       |       |
| Total Colorado                                                                                 |       | 33,421     |       | 6,172                                   |       | 8,775                           |       |                        |       | 18,474                      |       |
| Nevada:                                                                                        |       |       |       |                                    |       |                            |       |                        |       |                        |       |
| Gold  Dust West-Reno                                                                           |       | 7,192      |       | 1,520                                   |       | 2,605                           |       |                        |       | 3,067                       |       |
| Gold  Dust West-Carson City                                                                    |       | (1,231     | )          | 1,819                                   |       | 1,521                           |       |                        |       | (4,571                      | )          |
| Gold  Dust West-Elko                                                                           |       | (324       | )          | 1,974                                   |       | 1,790                           |       |                        |       | (4,088                      | )          |
| Total  Nevada                                                                                  |       | 5,637      |       | 5,313                                   |       | 5,916                           |       |                        |       | (5,592                      | )          |
| Louisiana                                                                                      |       | 19,299     |       | 3,848                                   |       | 4,774                           |       |                        |       | 10,677                      |       |
| Virginia                                                                                       |       | 1,401      |       | 2,065                                   |       | 486                             |       |                        |       | (1,150                      | )          |
| Corporate  overhead and other                                                                  |       | (8,471     | )          | 872                                     |       | 8,157                           |       | $                           | 73         |                        | (17,427    | ) |
| TOTAL                                                                                          |       | $          | 51,287     |                                    | $          | 18,270                          |       | $                           | 28,108     |                        | $          | 73 |   | $ | 4,982 |   |

 

----

(1)                                 Included in corporate overhead and otherfor 2009 is a $0.3 million loss on the change in fair value of investment inequity securities and $2.3 million we expended in opposition of aconstitutional amendment in Ohio.

 

(2)                                 Included in Gold Dust West-Carson City for2008 is a $0.2 million impairment of goodwill.

 

(3)                                 Included in Virginia for 2008 is a $0.8million charge for the closure of a satellite wagering facility.

 

(4)                                 Included in corporate overhead and otherfor 2008 is a $6.6 million impairment of the fair value of an investment inequity securities and $1.4 million we expended in support of a constitutionalamendment in Colorado to expand games, limits and hours.

 

**G.****                                   ****Liquidityand capital resources—December 31, 2009**

 

As of December 31, 2009, we had cash and cash equivalents of $24.2million compared to $21.9 million in cash and cash equivalents as of December 31,2008. The increase of $2.3 million is the result of $21.9 million cash providedby operating activities, $16.9 million cash used in investing activities, and$2.7 million used in financing activities, which is further discussedbelow.  Our primary sources of liquidityare cash provided by operating activities and external borrowings.  Our primary uses of cash are for debtservice, capital improvements, development and acquisitions.  Cash flows provided by operating activitiesdecreased $3.7 million for the year ended December 31, 2009 compared tothe same period of 2008 and decreased $3.5 million for the year ended 

 

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December 31,2008 compared to 2007.  Theseyear-over-year reductions in operating cash flows are consistent with ourdecreases in operating income after adjusting for non-cash transactions.

 

Thecash used in investing activities during 2009 was the result of property andequipment and device rights additions totaling $14.1 million for ongoingcapital investments at our existing properties, $2.7 for the atrium expansionproject at The Lodge, $0.3 million for Mississippi land purchase transactions,and $0.2 million to acquire the noncontrolling interest of Sugar Warehouse,offset by $0.4 million of proceeds from the sale of equipment. Net cash used ininvesting activities was consistent for the year ended December 31, 2009compared to the same period of 2008. For the year ended December 31, 2007,net cash used in investing activities was approximately $16 million higher than2008 due to the following development capital spending: $12.2 million todevelop our casino in Elko, $2.8 million to remodel Gold Dust West-Carson Cityand $1.0 million to complete the south entrance at The Lodge.

 

Thecash provided by or used in our financing activities varies significantly fromyear to year depending upon the cash provided by operations and investingactivities, both of which are discussed above, as well as our cash position.  The cash used in financing activities during2009 was the result of payments on long-term debt totaling $1.4 million,payments to obtain financing totaling $0.6 million and distributions tostockholder totaling $3.2 million, including $2.2 million for the purchase ofSugar Warehouse, somewhat offset by net borrowings on the revolving seniorcredit facility totaling $2.5 million.

 

As of December 31,2009, we had $19.1 million available on our $40 million revolving senior creditfacility for acquisitions, capital expenditure programs and working capital.The revolving senior credit facility carries an interest rate of 3.00% aboveLIBOR and expires in June 2011. However, on March 23, 2010, weobtained consents from our senior secured lenders to enter into an Amendmentand Restatement Agreement, including as an exhibit the form of an Amended andRestated Credit Agreement that will be executed once certain customaryconditions are satisfied (the “New Agreement”). Generally, the New Agreement,among other things, adjusts our bank financial covenants, allows for theexclusion of certain items from EBITDA for purposes of calculating our revisedfinancial covenants, allows for the acquisition of a truck stop in Louisiana,and other minor amendments. Additionally, all but $3.0 million of our revolvingsenior credit facility aggregating $40 million due June 2011 (“Class BRevolving Loans”) was extended to June 2012 (“Class A RevolvingLoans”). We have the ability to raise an additional $3.0 million to fullyreplace the revolver capacity should we so choose.

 

As a result of theNew Agreement, our interest rate will increase by 0.25% on the drawn Class BRevolving Loans balance and by 0.50% on the drawn Class A Revolving Loansbalance, and our interest rate on the Tranche B Term Loan and Delayed Draw TrancheB Term Loan (aggregating $58.0 million at December 31, 2009) will increasefrom 2.75% above LIBOR to 3.00% above LIBOR. We expect the total cost of theNew Agreement, including the bank consent fees, the fees to Credit SuisseSecurities (USA) LLC (the Joint Lead Arrangers) and legal, accounting and othercosts to approximate $1.6 million. These costs will be amortized to interestexpense over the remaining life of the credit facility which is approximately 2years. As of December 31, 2009, our total debt approximates $291.9million. Our future liquidity, which includes our ability to make semi-annualinterest payments on June 15 and December 15 of each year, dependsupon our future operational success. Our failure to pay interest, repay ourindebtedness when due, or maintain compliance with our debt covenants wouldresult in an event of default under both our senior credit facility and ournote indenture.  At December 31,2009, we were in compliance with our financial covenants.

 

While our owner has made capital contributions in the past tofacilitate our various acquisitions from time to time, we can give no assurancethat it will continue to do so in the future. Additionally, as we are aQualified Subchapter S-Corporation Subsidiary, we may from time to time makedistributions to our owner for any taxes due as a result of taxable incomegenerated by us. Furthermore, annual distributions may be made to our owner inan aggregate amount not to exceed the greater of $1 million and 50% ofconsolidated net income as defined in our credit agreement and indenture.

 

We believe that our cash flow from operations, cash and cashequivalents and available borrowings on our $40 million senior revolving creditfacility discussed above will be adequate to meet our debt service obligationsand operational expenditures, as well as our capital expenditure requirementsfor the next twelve months.  During 2010,we currently anticipate spending approximately $15 million for discretionarycapital expenditures. While we believe our operations and credit facility willprovide us sufficient liquidity over the next twelve months, we can give noassurance that these sources of cash will be sufficient to enable us to do so.Further, in addition to our normal capital expenditure requirements, weanticipate that we will pursue the acquisition of other properties and continueto engage in the pursuit of new development opportunities. It is possible thatwe may need to enter into new financing arrangements and raise additionalcapital in the future if we are unable to generate sufficient cash to sustainexpansion.  However, due to existinguncertainties in the capital and credit markets, our access to funding may belimited or available only on terms unacceptable to us.  Also, our ability to incur additional debt isfurther restricted by the terms and covenants of our senior secured bank creditfacility and senior unsecured notes. We can give no assurance that we will beable to raise any capital or obtain the necessary sources of liquidity andfinancing on favorable terms, if at all. Additionally, any debt financing thatwe may incur in the future will increase the amount of our total outstandingindebtedness and our debt service requirements, and therefore heighten therelated risks we currently face.

 

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We also face the risk that there could be further declines in thedemand for our products and services, which would reduce our ability togenerate funds from operations. Adverse national and local economic conditionscould persist or worsen. While we believe our cash flows are geographicallydiverse, at present we do have a significant concentration of cash flowsgenerated in the Black Hawk, Colorado and Louisiana markets.  Should the Black Hawk or Louisiana marketsdecline or become saturated or should competition erode our market share, wewould suffer a decline in available funds generated from operations.  If this were to occur, there exists thepossibility that our credit rating could be downgraded, which would furtherreduce our ability to access the capital markets and obtain additional oralternative financing.  See the section “RiskFactors” in Item 1A above.

 

The following table provides disclosure concerningour obligations and commitments to make future payments under contracts, suchas debt and lease agreements, and purchase and other long-term obligations asof December 31, 2009.

 
| ** **                          | ** ** | ** ** | ** ** | **Next**      | ** ** | **1-3**   | ** ** | **4-5**   | ** ** | **After 5** | ** ** |
|-------------------------------------|------------|------------|------------|---------------|------------|-----------|------------|-----------|------------|------------------|------------|
| **(In Thousands)**                  | ** ** | **Total**  | ** ** | **12 Months** | ** ** | **Years** | ** ** | **Years** | ** ** | **Years**        | ** ** |
|                                |       |       |       |          |       |      |       |      |       |             |       |
| Long-term debt  (1)                 |       | $          | 385,162    |          | $          | 24,169    |       | $         | 120,275    |             | $          | 240,718 |   | $ | — |   |
| Capital lease  obligations          |       | 8,515      |       | 1,299         |       | 994       |       | 1,715     |       | 4,507            |       |
| Operating leases  (2)               |       | 34,829     |       | 2,809         |       | 4,070     |       | 3,538     |       | 24,412           |       |
| Purchase  obligations (3)           |       | 286,890    |       | 56,089        |       | 117,845   |       | 112,956   |       | —           |       |
| Other long-term  obligations (4)    |       | 23,206     |       | 2,086         |       | 3,677     |       | 3,068     |       | 14,375           |       |
| Total  contractual cash obligations |       | $          | 738,602    |          | $          | 86,452    |       | $         | 246,861    |             | $          | 361,995 |   | $ | 43,294 |   |

 

----

(1)                                 Long-term debtincludes principal and interest owing under the terms of our senior unsecurednotes, our senior secured credit facility and the Black Hawk special assessmentbonds.  Interest on variable rate debt iscomputed based on rates outstanding at December 31, 2009.

 

(2)                                 Operating leases include various land andbuilding leases for certain properties in Nevada, Louisiana and Virginia,office space in Colorado, Louisiana, Virginia and Florida and other equipmentleases at all locations.

 

(3)                                 Purchase obligations include five-yearfuel supply agreements for gasoline and diesel fuel.  Fuel volumes are specified in thecontracts.  The purchase price is avariable market-based price.  Thelong-term obligations in this table were derived using the applicable contractprices for gasoline and diesel fuel at December 31, 2009 multiplied by theactual fuel volumes per the contracts.

 

(4)                                 Other long-termobligations include a 20-year, $1.25 million per year management agreement withJacobs Investments Management Co. Inc., an affiliated company, and ourobligation to pay $0.90 per operating video poker machine per day to JalouDevice Owner, L.P., the related party owner of the video poker machines inorder to maintain the machines used in our truck plaza operations. In addition, Colonial has entered into an agreement with a totalisatorcompany, which provides wagering services and designs, programs, andmanufactures totalisator systems for use in wagering applications. Theamendment provides for a minimum charge per calendar year of $210,000.  Other long-term obligations also includevarious surveillance and service agreements in Louisiana and at the corporateoffice.

 

Finally,our outstanding senior unsecured notes aggregating $210 million cannot beredeemed until June 15, 2010. We can, however, with proceeds from anequity offering on more than one occasion redeem up to 35% of the aggregateprincipal amount of the notes at a redemption price of 109.75% of the principalamount thereof, plus accrued and unpaid interest.

 

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**H.****                                   ****Criticalaccounting policies and estimates**

 

Thepreparation of financial statements in accordance with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amount of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting periods. We periodically evaluate our policies and theestimates and assumptions related to these policies. All of our subsidiarycompanies operate in a highly regulated industry. Our Colorado, Nevada,Louisiana and Virginia operations are subject to regulations that describe andregulate operating and internal control procedures. The majority of our casinorevenue is in the form of cash, personal checks, credit cards or gaming chipsand tokens, which by their nature do not require complex estimations. Weestimate certain liabilities with payment periods that extend for longer thanseveral months. Such estimates include our slot club liabilities, outstandinggaming chip, token and pari-mutuel ticket liability, self-insured medical andworkers compensation liabilities, and litigation costs. We believe that theseestimates are reasonable based on our past experience with the business andbased upon our assumptions related to possible outcomes in the future. Futureactual results will likely differ from these estimates.

 

***Propertyand equipment***

 

Wehave a significant investment in long-lived property and equipment,representing approximately 71% of our total assets. We estimate that theundiscounted future cash flows expected to result from the use of these assetsexceed the current carrying value of these assets. Any adverse change to theestimate of these undiscounted cash flows could necessitate an impairmentcharge that would adversely affect operating results. We review the carryingvalue of our property and equipment for potential impairment when events andcircumstances indicate that the carrying value of an asset may not berecoverable from the estimated future cash flows expected to result from itsuse. Further, we assign lives to our assets based on our standard policy, whichis established by management as representative of the useful life of each classof assets. Should the actual useful life of a class of assets differ from theestimated useful life, we would record an impairment charge. We review usefullives and obsolescence and assess the commercial viability of our assetsperiodically. During 2009, based on operating results, we performed animpairment analysis of property and equipment at our Gold Dust West-Carson Cityand Virginia reporting units, and we determined that property and equipment isnot impaired at either reporting unit.

 

***Goodwill andother intangible assets***

 

Wehave $46.5 million in goodwill recorded on our consolidated balance sheetresulting from the acquisition of businesses. We do not have any othernonamortizing intangible assets on our consolidated balance sheet. We annuallyreview our goodwill for impairment. The annual evaluation of goodwill requiresthe use of estimates about future operating results of each reporting unit todetermine its estimated fair value. Changes in forecasted operations canmaterially affect these estimates. Once an impairment of goodwill has beenrecorded, it cannot be reversed.

 

Ourreporting units with goodwill balances at December 31, 2009 are The Lodge($4.2 million), Gilpin ($2.5 million), Gold Dust West-Reno($8.8 million) and Louisiana ($31.0 million). There is no goodwillrecorded in our Gold Dust West-Carson City, Gold Dust West-Elko or Virginiareporting units. We performed our most recent annual impairment test for thesereporting units as of September 30, 2009. Our annual impairment testincluded an analysis of the gaming industry overall as well as an analysis ofthe specific locations in which we operate. We determined the fair values foreach of these reporting units using both the market approach (recent comparabletransactions from which we derived an applicable valuation multiple) and theincome approach (net present value of our anticipated future cash flows). Thesefair values were then compared to the carrying values for the respectivereporting unit. We determined that goodwill was not impaired at any of ourreporting units as of September 30, 2009. Furthermore, if the fair value of any of our reporting units declined by10%, no goodwill impairment would be required. During 2008, we recorded a goodwill impairment totaling $0.2 million atour Gold Dust West-Carson City reporting unit, which is further discussed inNote 3 to the financial statements.

 

Wehave also reassessed the useful lives of our identifiable intangible assetswithout any change to the previously established amortization periods of suchassets.

 

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**Item 7A.****                                              *****Quantitative and Qualitative Disclosure about MarketRisk.***

 

**Market Risk**

 

Market risk is the risk of loss arising from adverse changes in marketrates and prices, such as commodity prices and interest rates.  We purchase and sell fuel at market prices,subject to daily price changes.

 

We have issued $210 million of 93⁄4% fixed rate senior unsecured notesdue in 2014 and a $100 million variable rate senior secured credit facilityconsisting of: (i) a $40 million revolving credit facility due in 2011, (ii) a$40 million term loan facility due in 2012, and (iii) a $20 milliondelayed draw term loan due in 2012.  Asof December 31, 2009, $19.0 million is outstanding on the senior securedrevolving credit facility and $58.0 million is outstanding on our seniorsecured term loan debt, bearing interest at a blended variable rateapproximating 3.04% at December 31, 2009. Additionally, we have $1.9million of outstanding letters of credit as of December 31, 2009 resulting in $19.1 millionavailable on the revolving credit facility.

 

If market interest rates increase, our cash requirements for intereston the senior secured credit facility balance would also increase. Conversely,if market interest rates decrease, our cash requirements for interest on thesenior secured credit facility balance would also decrease. There would be anapproximate change in our cash requirements of $0.2 million annually forinterest should market rates increase or decrease by 10% compared to interestrate levels at December 31, 2009.

 

We currently do not use interest rate swaps or other similarinvestments to alter interest rate exposure.

 

JEI owns an investment in the publicly traded equity of MTR GamingGroup, Inc. (“MTR”). Market prices for equity securities are subject to fluctuation. Fluctuation in the market price of such a security may result from perceivedchanges in the underlying economic characteristics of the investee, therelative price of alternative investments, and general market conditions. Consequently, the amount realized on any ultimate sale of this investmentmay significantly differ from the reported market value as of December 31,2009.

 

The recent severeeconomic downturn and adverse conditions in the local, regional, national andglobal markets has negatively affected our operations, and may continue tonegatively affect our operations in the future. During periods of economiccontraction such as the current period, our revenues may decrease while some ofour costs remain fixed or even increase, resulting in decreased earnings.Gaming and other leisure activities we offer represent discretionaryexpenditures and participation in such activities may decline during economicdownturns, during which consumers generally earn less disposable income. Evenan uncertain economic outlook may adversely affect consumer spending in ourgaming operations and related facilities, as consumers spend less inanticipation of a potential economic downturn. Furthermore, other uncertainties,including national and global economic conditions, terrorist attacks or otherglobal events, could adversely affect consumer spending, increase gasolineprices and adversely affect our operations.

 

We use significantamounts of electricity, natural gas and other forms of energy. While we havegenerally not experienced any major shortages of energy, any substantialincreases in the cost of electricity and natural gas in the United States couldnegatively impact our operating results. The extent of any impact is subject tothe magnitude and duration of the energy price increases and could be material.

 

Also, if gas prices rise, this may result in areduction of automobile travel and a decrease in the number of patrons at ourproperties.  Our business, assets,financial condition and results of operations could be adversely affected by aweakening of national economic conditions, high gasoline prices and/or adversewinter weather conditions.

 

We are a highly leveredcompany. While we intend to finance expansion and capital expenditures withexisting cash, cash flow from operations and/or borrowings under our existingsenior secured credit facilities, we may require additional financing tosupport our continued growth. However, due to the existing uncertainty in thecapital and credit markets, our access to capital may not be available on termsacceptable to us or at all. Further, if adverse regional and national economicconditions persist or worsen, we could experience decreased revenues from

 

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our operationsattributable to decreases in consumer spending levels and could fail to satisfythe financial and other restrictive covenants to which we are subject under ourexisting indebtedness.

 

**Item 8.****                                                       *****Financial Statements and Supplementary Data.***

 

Reference is made to the financial statements, the notes, and thereport of our independent registered public accounting firm commencing on page F-1of this report.

 

**Item 9.**                                                        ***Changes in and Disagreements with Accountants onAccounting and Financial Disclosure.***

 

None.

 

**Item 9A.****                                              *****Controls and Procedures.***

 

*Evaluationof Disclosure Controls and Procedures*

 

Our management,under the supervision and with the participation of our Chief Executive Officerand Chief Financial Officer, have evaluated the effectiveness of our disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31,2009. Based on that evaluation, our Chief Executive Officer and Chief FinancialOfficer have concluded that, as of such date, our disclosure controls andprocedures were effective to ensure that information required to be disclosedby us in our Exchange Act reports is recorded, processed, summarized, evaluatedand reported, as applicable, within the time periods specified in the rules andforms of the U.S. Securities and Exchange Commission, and that such informationis accumulated and communicated to our management, including our ChiefExecutive Officer and Chief Financial Officer, as appropriate, to allow timelydiscussions regarding required disclosure.

 

*Management’sReport on Internal Control Over Financial Reporting*

 

Our management isresponsible for establishing and maintaining adequate internal control overfinancial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgatedunder the Exchange Act. Those rules define internal control over financialreporting as a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accountingprinciples and includes those policies and procedures that:

 
| · | Pertain to the  maintenance of records that, in reasonable detail, accurately and fairly  reflect the transactions and dispositions of our assets;                                                                                                                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                      |
| · | Provide reasonable  assurance that transactions are recorded as necessary to permit preparation  of financial statements in accordance with generally accepted accounting  principles, and that our receipts and expenditures are being made only in  accordance with authorizations of our management and directors; and |
|   |                                                                                                                                                                                                                                                                                                                      |
| · | Provide reasonable  assurance regarding prevention or timely detection of unauthorized  acquisitions, use or disposition of our assets that could have a material  effect on our financial statements.                                                                                                                    |

 

Because of its inherentlimitations, internal controls over financial reporting may not prevent or detectmisstatements. Projections of any evaluation of effectiveness to future periodsare subject to the risk that controls may become inadequate because of changesin conditions, or that the degree of compliance with the policies or proceduresmay deteriorate.

 

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Management assessed the effectiveness of our internal control overfinancial reporting as of December 31, 2009. In making this assessment,our management used the criteria established in *InternalControl-Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). Based on our assessment, webelieve that, as of December 31, 2009, our internal control over financialreporting is effective based on those criteria.

 

*Changesin Internal Control Over Financial Reporting*

 

There were no changes that occurred during our most recent fiscalquarter that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 

**Item 9A(T).****                                 *****Controls and Procedures.***

 

Pursuant to Item 308T ofRegulation S-K adopted under the Exchange Act, this annual report does notinclude an attestation report of our registered public accounting firmregarding internal control over financial reporting.  Management’s report was not subject toattestation by our registered public accounting firm pursuant to temporary rules ofthe Securities and Exchange Commission that permit us to provide onlymanagement’s report in this annual report.

 

**Item 9B.****                                              *****Other Information.***

 

There is no information we were required to report on Form 8-Kduring our fourth fiscal quarter of the year ended December 31, 2009 thatwas not so reported.

 

**Item 10.****                                                *****Directors, Executive Officers and Corporate Governance.***

 

The following table provides information regarding our directors andexecutive officers and key employees as of March 1, 2010

 
| **Name**              | ** ** | **Age** | ** ** | **Position**                                                             |
|-----------------------|------------|---------|------------|--------------------------------------------------------------------------|
| Jeffrey P. Jacobs     |       | 56      |       | Chief Executive Officer, Secretary, Treasurer and  Chairman of the Board |
| Stephen R. Roark      |       | 62      |       | President                                                                |
| Ian M. Stewart        |       | 55      |       | President of Pari-Mutuel Wagering Operations                             |
| Michael T. Shubic     |       | 56      |       | Chief Operating Officer                                                  |
| Brett A. Kramer       |       | 41      |       | Chief Financial Officer                                                  |
| Stanley Politano      |       | 60      |       | Executive Vice President                                                 |
| Emanuel J. Cotronakis |       | 39      |       | Executive Vice President, General Counsel and  Assistant Secretary       |

 

Jeffrey P. Jacobs is ourChairman, Chief Executive Officer, Secretary and Treasurer and sole director.He is also Chairman and Chief Executive Officer of Colonial, and Chairman andChief Executive Officer of Black Hawk Gaming, two of our subsidiaries. From1996 to 2007, he served as Chairman and Chief Executive Officer of DiversifiedOpportunities Group Ltd. (“Diversified”), a company co-founded by Mr. Jacobsand his father, Richard E. Jacobs, and based in Cleveland, Ohio, that hasinvestments in gaming companies and other ventures. Jacobs Entertainment, Inc.acquired Diversified on February 22, 2002 and it was dissolved in 2007. Mr. Jacobsserves as the Chairman and Chief Executive Officer of Jacobs Investments, Inc.,a company which owns all of our equity securities and which engages in avariety of private equity transactions and other investments. From 1975 topresent, Mr. Jacobs has also served as the Chairman and Chief ExecutiveOfficer of Jacobs Investments Management Co., Inc., a company engaged inthe development, construction and operations of various residential andcommercial real estate projects in Ohio. Mr. Jacobs became a director ofMTR Gaming Group, Inc. (“MTR”) on May 6, 2008 and became its Chairmanon October 31, 2008. MTR has a class of equity securities registered underthe Securities Exchange Act of 1934.  Effective March 12, 2010, Mr. Jacobs resigned from MTR’sBoard of Directors.

 

Stephen R. Roark was appointed as our President on December 5,2006. During the five years prior to that, he was our Chief Financial Officerand President of Casino Operations. He was employed as Chief Financial Officerof Black Hawk Gaming since August 1993. Mr. Roark became a directorof Black Hawk Gaming in 1994. He was elected President of Black Hawk Gaming in September 1995.Prior to that time he was an independent consultant in

 

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theDenver area rendering financial and accounting assistance to companies in thepublic marketplace. Mr. Roark has 17 years of public accountingexperience, having served as a partner with a local accounting firm based inDenver and as a partner with a national accounting firm. Mr. Roark waswith Hanifen, Imhoff and Prudential Securities, Inc. for three years andis a member of the American Institute of Certified Public Accountants and theColorado Society of Certified Public Accountants. Mr. Roark obtained hisB.S.B.A. in Accounting from the University of Denver in 1973.

 

Ian M. Stewart is currently our President of Pari-Mutuel Wagering Operations.He has served as President of Colonial since November 1998 and its ChiefFinancial Officer since June 1997. From January 1998 through November 1998,Mr. Stewart served as Chief Operating Officer of Colonial. From October 1994to June 1997, Mr. Stewart served as a consultant and a temporaryChief Financial Officer for several Virginia-based businesses. From December 1989to September 1994, Mr. Stewart was Vice President and CFO of HatBrands, Inc. Mr. Stewart is a Certified Public Accountant and holdsan M.B.A. degree from the University of Michigan.

 

Michael T. Shubic has been our Chief Operating Officer since July 1,2006. From December 1, 2002 when he joined us until his appointment as ourChief Operating Officer, he served as our Vice President of Operations. From2000 to 2002, Mr. Shubic was Vice President and General Manager of theIsle of Capri Black Hawk Casino in Black Hawk, Colorado. From 1997 to 2000, asa private individual, he explored and participated in various aspects of thegolf industry, including education, sales and management. From 1984 to 1997, Mr. Shubicwas employed by several gaming companies in Las Vegas and Reno, Nevada, Joliet,Illinois, and Nassau, Bahamas. His positions included general manager, casinoadministrator, customer analysis manager, casino credit manager and food andbeverage manager. Mr. Shubic holds a B.S. degree in Hotel Administrationfrom the University of Nevada.

 

Brett A. Kramer has been our Chief Financial Officer since December 5,2006. He has been employed by us and certain of our predecessor subsidiariesfor 15 years. He was responsible for overseeing accounting managers andcontrollers of our multi-state operating subsidiaries, over 30 in all. He hasalso been involved in developing our system of internal controls in order tocomply with various gaming regulations and provisions of the Sarbanes-Oxley Actof 2002. Mr. Kramer was a staff and senior accountant for five years withDeloitte & Touche, LLP. He graduated with a degree in accounting fromthe University of Colorado in 1990.

 

StanleyPolitano is our Executive Vice President and has been with the Company and itspredecessor, Black Hawk Gaming & Development Company, Inc. since1994. He is a former officer and director of Black Hawk Gaming.  He currently serves on our Company’s NevadaCompliance Committee and our Audit and Disclosure Committee.  Mr. Politano received his B.S. degree inBusiness, majoring in finance, from the University of Colorado in 1972.  He has 22 years of experience in the securitiesindustry, in both retail and wholesale organizations.  He has worked for Rauscher Pierce SecuritiesCorporation and Prudential-Bache Securities, Inc. and was a vice presidentwith E.F. Hutton & Company, Inc. and Hanifen Imhoff SecuritiesCorporation.

 

EmanuelJ. Cotronakis is our Executive Vice President, General Counsel and AssistantSecretary having joined us on July 31, 2009.  Prior to his employment with us, Mr. Cotronakiswas a partner at the national law firm of Baker & Hostetler, LLP,where he practicedlaw in their Business Group beginning in 2000.  While at Baker &Hostetler, Mr. Cotronakis’s practice focused on mergers and acquisitions,corporate finance and corporate governance, counseling a variety of clientsincluding us beginning with our incorporation in 2001.  Mr. Cotronakis graduated with a B.A. ineconomics from Case Western Reserve University in 1992 and earned his JurisDoctorate from the Georgetown University Law Center in 1998.

 

We are a company wholly owned by Jacobs Investments, Inc. (“JII”),which in turn is owned by Jeffrey P. Jacobs and his family trusts which collectively own 100% of JII’soutstanding Class A and Class B shares.

 

Our board of directors, currently consisting only of Jeffrey P. Jacobs,has no nominating, audit, compensation or other committees. Jeffrey P. Jacobsand Richard E. Jacobs had served as our directors since our formation in 2001.The board of directors is elected each year. The board has adopted a code ofethics policy which is applicable to our CEO, CFO and our employees. We rely onour employment procedures and system of internal controls and procedures, todeter wrongdoing and to promote honest and ethical conduct, full, fair andaccurate disclosure in our reports, our compliance with governmental laws, rules andregulations, and internal reporting of violations of our policies.

 

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**Item 11.****                                                   *****Executive Compensation.***

 

**Compensation Discussion and Analysis**

 

The following discussion of our executive compensation policies andpractices include:

 

·                                          an overview ofour board of directors’ philosophy as to executive compensation;

 

·                                          a discussion ofthe overall objectives of our compensation program for executive officers; and

 

·                                          a discussion ofall material components of compensation, particularly for the seven namedexecutive officers listed in the Summary Compensation table.

 

***Overview and Objectives***

 

As described in Item 12 immediately below, we are a wholly ownedsubsidiary of a privately-held company, hence we have no publicly tradedsecurities, nor any option or other equity based incentive programs for ourexecutives or employees. Our Chairman and Chief Executive Officer, Jeffrey P.Jacobs, and trusts that he has established, own the equity securities of JacobsInvestments, Inc., the company that owns all of our equity securities.

 

During 2009, the total cash compensation to Jeffrey P. Jacobs islimited to an aggregate of $1 million per year under our credit agreements. Asa result, most elements of our compensation plans discussed below do not includeour CEO, Jeffrey P. Jacobs. However, as also discussed below, our soleshareholder nonetheless is entitled under our credit agreements to certain taxdistributions since, as a Qualified Subchapter S-Corporation Subsidiary, ourtaxable income flows through and is taxed to it. Finally and also as discussedin detail in Item 13 below, Mr. Jeffrey P. Jacobs has received certaindirect dividends from us and constructive dividends resulting from theaccounting treatment required of certain related party transactions.

 

Our Executive Compensation Program (Program) is designed to attract,motivate and retain high performing executives who are critical to ourlong-term success. The Program is structured to link executive compensation tohow successfully we execute our business plans and meet a number of corporate,financial and operational goals. This design is intended to provide executivesincreased compensation when we do well and to provide less compensation when wedo not.

 

Thedesign and effectiveness of compensation policies and programs are reviewed byour CEO periodically in light of general industry and peer trends, andrecommendations for changes are made to the board of directors as deemedadvisable by the CEO. The CEO reviews such compensation matters with ourinternal personnel. The role played by the CEO in this process is reasonableand appropriate because he is best suited to evaluate the performance of ourexecutive personnel.

 

OurCEO reviews the philosophy, goals and objectives of the Program at leastannually. In assessing their continued appropriateness, our CEO examines oursuccess and the contributions of the individual executives in achieving ourbusiness plans. Our CEO considers the motivational impact of the Program as anincentive in attaining desired business results and in the continued ability toattract and retain high-quality executives. Key factors in judging whether theProgram has met its goals are the Program’s relationship to our financialresults, our future outlook and our ability to attract and retain key executivetalent.

 

As a result of our corporate structure, the base compensation structureand amounts paid to all of our executive officers, except Jeffrey P. Jacobs,are determined after individual negotiations with each executive and approvedby him. We formulate an annual cash incentive compensation plan for our namedexecutive officers and selected middle management personnel based on ourachievement of multi-year financial and growth objectives. Our discretionaryannual bonus is paid in cash in an amount reviewed and approved by our CEO andtraditionally has been paid in a single installment in the first quarterfollowing the completion of a given fiscal year. The actual amount ofdiscretionary bonus, which varies by individual, is determined by our CEOfollowing a review of each executive’s individual performance and contributionto our strategic and financial goals. In support of his

 

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recommendations,Mr. Jacobs considers the desirability of maintaining a cohesive, longstanding management and operating group and keeps himself informed of thesalaries and benefits offered by competitors although he does not adhere tospecific benchmarks, median placements, percentages or ranges of compensationpaid by competitors or others.

 

The following table sets forth information regarding the compensationpaid by us to each of the following individuals for services rendered in allcapacities for the years indicated:

 
| **Name and Principal  Position(1)** | ** ** | **Year**   | ** ** | **Salary** | ** ** | **Bonus** | ** ** | **Stock  Awards** | ** ** | **Option  Awards** | ** ** | **Non-Equity  Incentive Plan  Compensation** | ** ** | **Change in  Pension Value  and Non-  Qualified  Deferred  Compensation  Earnings** | ** ** | **All Other  Compensation  (2)(3)** | ** ** | **Total** | ** ** |
|-----------------------------------------------|------------|------------|------------|------------|------------|-----------|------------|-------------------|------------|--------------------|------------|---------------------------------------------------|------------|----------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|-----------|------------|
| ** **                                    | ** ** | ** ** | ** ** | **($)**    | ** ** | **($)**   | ** ** | **($)**           | ** ** | **($)**            | ** ** | **($)**                                           | ** ** | **($)**                                                                                            | ** ** | **($)**                                  | ** ** | **($)**   | ** ** |
|                                          |       |       |       |       |       |      |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       |      |       |
| Jeffrey P. Jacobs                             |       | 2009       |       | 758,942    |       | —    |       |              |       |               |       |                                              |       |                                                                                               |       | 1,325,000                                |       | 2,083,942 |       |
|                                          |       | 2008       |       | 562,500    |       | 250,000   |       |              |       |               |       |                                              |       |                                                                                               |       | 1,340,000                                |       | 2,152,500 |       |
|                                          |       | 2007       |       | 500,000    |       | 167,000   |       |              |       |               |       |                                              |       |                                                                                               |       | 1,609,000                                |       | 2,276,000 |       |
|                                          |       |       |       |       |       |      |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       |      |       |
| Stephen R. Roark                              |       | 2009       |       | 485,571    |       | —    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 485,571   |       |
|                                          |       | 2008       |       | 457,816    |       | 133,000   |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 590,816   |       |
|                                          |       | 2007       |       | 406,134    |       | 129,188   |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 535,322   |       |
|                                          |       |       |       |       |       |      |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       |      |       |
| Ian M. Stewart                                |       | 2009       |       | 298,852    |       | —    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 298,852   |       |
|                                          |       | 2008       |       | 300,661    |       | 65,000    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 365,661   |       |
|                                          |       | 2007       |       | 282,392    |       | 75,000    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 357,392   |       |
|                                          |       |       |       |       |       |      |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       |      |       |
| Michael T. Shubic                             |       | 2009       |       | 361,175    |       | —    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 361,175   |       |
|                                          |       | 2008       |       | 339,094    |       | 98,000    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 437,094   |       |
|                                          |       | 2007       |       | 314,192    |       | 93,303    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 407,495   |       |
|                                          |       |       |       |       |       |      |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       |      |       |
| Brett A. Kramer                               |       | 2009       |       | 256,302    |       | —    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 256,302   |       |
|                                          |       | 2008       |       | 231,821    |       | 70,000    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 301,821   |       |
|                                          |       | 2007       |       | 205,320    |       | 64,594    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 269,914   |       |
|                                          |       |       |       |       |       |      |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       |      |       |
| Stanley Politano                              |       | 2009       |       | 181,226    |       | —    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 181,226   |       |
|                                          |       | 2008       |       | 171,440    |       | 49,000    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 220,440   |       |
|                                          |       | 2007       |       | 159,239    |       | 47,369    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 206,608   |       |
|                                          |       |       |       |       |       |      |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       |      |       |
| Emanuel J.  Cotronakis(4)                     |       | 2009       |       | 188,077    |       | —    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | 188,077   |       |
|                                          |       | 2008       |       | —     |       | —    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | —    |       |
|                                          |       | 2007       |       | —     |       | —    |       |              |       |               |       |                                              |       |                                                                                               |       |                                     |       | —    |       |

 

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(1)                                  See Item 10above which describes the principal positions of the named executives.

 

(2)                                  See Item 13below which describes consulting fees paid to Jacobs Investments Management Co., Inc.,an affiliate of Mr. Jacobs.

 

(3)                                  Also seeDirector Compensation and Item 13 below that describe distributions to ourowners during 2009, which directly and indirectly benefited our Chief ExecutiveOfficer.

 

(4)                                  Mr. Cotronakisassumed his positions effective July 31, 2009.

 

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***Employment Agreements***

 

As of December 31, 2009, three of our executive officers are aparty to an Executive Employment Agreement as follows:

 
| ** **             | ** ** | ** **                                                         | ** ** | ** **              | ** ** | **Base Salary** | ** ** |
|------------------------|------------|--------------------------------------------------------------------|------------|-------------------------|------------|----------------------|------------|
| **Name**               | ** ** | **Title**                                                          | ** ** | **Effective Date** | ** ** | **Year One**    | ** ** | **Year Two** | ** ** | **Year Three** | ** ** |
|                   |       |                                                               |       |                    |       |                 |       |   |   |   |   |
| Michael T.  Shubic     |       | Chief Operating Officer                                            |       | July 1, 2009       |       | $                    | 350,000    |   | $ | 360,500 |   | $ | 371,315 |   |
|                   |       |                                                               |       |                    |       |                 |       |   |   |   |   |
| Ian M. Stewart         |       | President of Pari-Mutuel Wagering Operations                       |       | August 1, 2009     |       | 300,000              |       | 309,000 |   | 318,270 |   |
|                   |       |                                                               |       |                    |       |                 |       |   |   |   |   |
| Emanuel J.  Cotronakis |       | Executive Vice President, General Counsel and  Assistant Secretary |       | July 31, 2009      |       | 400,000              |       | 425,000 |   | 450,000 |   |
|                        |            |                                                                    |            |                         |            |                      |            |  |  |  |  |  |  |  |

 

All employment agreements are substantially identical except withrespect to the amount of the executives’ respective salaries. Among the moreimportant provisions of the agreements are the following:

 

(a)                                  the term ofeach agreement is approximately three years from its effective date;

 

(b)                                 the basesalaries are set forth above; in addition, each executive is entitled toreceive an annual bonus of up to 35% of his base salary if certain performancecriteria (established each year) are met, and Mr. Cotronakis has a minimumannual bonus in an amount equal to 10% of his base salary;

 

(c)                                  the agreementsprovide that if the executive is terminated without cause, he is entitled to alump sum payment equal to six month’s salary and a prorated portion of hisbonus.  If the executive dies, his estateis entitled to a lump sum payment equal to one year’s salary and a proratedportion of his bonus. If there is a change in our control and the executive isnot offered employment satisfactory to him, he is entitled to a lump sumpayment equal to one and one-half year’s salary except in the case of Mr. Cotronakiswho is entitled to a lump sum payment equal to three year’s salary; and

 

(d)                                 each agreementcontains customary provisions regarding vacations, benefits, insurance,indemnification and expense reimbursements.

 

***Director Compensation***

 

We had two directors, Jeffrey P. Jacobs, who is also our CEO, andRichard E. Jacobs, his father. In 2008, Richard E. Jacobs was paid $187,500 forhis service as a director. Effective October 15, 2008, Richard E. Jacobs resigned his positionas a member of the Board of Directors of JEI. Our directors received noother compensation for their services as directors.  During 2009, no directors fees were paid.

 

Asexplained in Item 13 below, our stockholder received compensation from us in2009 as a result of amounts accounted for as a distribution resulting from thesale of a certain Nautica Property. Additionally, annual distributions may bemade to our owners in an aggregate amount not to exceed the greater of $1million and 50% of consolidated net income as defined in our credit agreementand indenture. Distributions to our stockholder totaled $3,238,000 in 2009,including $2,238,000 for the purchase of Sugar Warehouse.

 

Finally, under the terms of our bank credit agreementand note indenture, we are allowed to make a tax distribution to ourstockholder to cover the tax on our income which is taxable to our stockholderbecause of our Qualified Subchapter S-Corporation Subsidiary status.

 

Our director has reviewed and discussed the foregoing CompensationDiscussion and Analysis with management and based thereon, has recommended thatit be included in this Annual Report on Form 10-K.

 

During 2009, there were no interlocking relationships between anymember of our board of directors and any of our executive officers that wouldbe required to be disclosed under Item 407(e)(4) of Regulation S-K.

 

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**Item 12.**                                                    ***Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters.***

 

As of March 1, 2010, there were 1,500 shares of our common stockoutstanding divided into 1,320 Class A shares and 180 Class B shares.The shares are equal in all respects except that each Class B shareentitles the holder to 50,000 votes on each matter required to be voted upon byour shareholders. We have no equity compensation, stock option or similar plansrelating to our equity securities. All 1,500 shares (100%) of our issued andoutstanding common stock are owned by Jacobs Investments, Inc., a Delawarecorporation (“JII”).

 

The following table sets forth certain information regarding thebeneficial ownership of JII’s common stock as of March 1, 2010, for eachstockholder who is known by us to own beneficially more than 5% of JII’s commonstock.

 
| ** **                                                                                                                                | ** ** | **Number of Shares** | ** ** | **Percentage**   | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------|------------|
| **Stockholders of JII**                                                                                                                   | ** ** | **Class A**               | ** ** | **Class B** | ** ** | **Class A** | ** ** | **Class B** | ** ** |
| Jeffrey P. Jacobs(1)  Golden Bear Plaza  East Tower  1170 U.S. Highway One, Suite 600  North Palm Beach, Florida 33408               |       | 528                            |       | —           |       | 40 | % | — |   |
|                                                                                                                                      |       |                           |       |             |       |   |   |   |   |
| Jacobs Family Economic and Control Trusts(2)  Hahn Loeser & Parks LLP  200 Public Square, Suite 2800  Cleveland, Ohio 44114 |       | 792                            |       | 180              |       | 60 | % | 100 | % |
|                                                                                                                                      |       |                           |       |             |       |   |   |   |   |
| All executive officers and directors as a group                                                                                           |       | 528                            |       | —           |       | 40 | % | — |   |

 

----

(1)                                  Jeffrey P.Jacobs is our Chief Executive Officer, Secretary, Treasurer and Chairman of theBoard.

 

(2)                                  The JacobsFamily Economic Trust owns 792 Class A shares and the Jacobs FamilyControl Trust owns 180 Class B shares. Both trusts are dynasty trustsestablished by Jeffrey P. Jacobs for the benefit of his current and futureheirs and place certain restrictions on the transfer of the shares by thetrustee. The current trustee of both trusts is Stanley R. Gorom III, a partnerin the Cleveland, Ohio law firm of Hahn Loeser & Parks LLP.The trusts referred toherein are collectively referred to as the “Trusts.”

 

**Item 13.****                                                   *****Certain Relationships and Related Transactions, andDirector Independence.***

 

In order to assist us in our efforts to research, develop, perform duediligence on and possibly acquire new gaming opportunities, we have aconsulting agreement with Jacobs Investments Management Co. Inc. (“JIMCO”), 82%of which is owned by Jeffrey P. Jacobs and the remaining 18% of which is ownedin equal portions by two other persons. Under this agreement, we make paymentsof $1.25 million per year payable in installments of $625,000 each on January 1st and July 1st plus 2.5% ofbudgeted development costs for projects undertaken by us, if certain debt covenantratios are met. Totals expenses incurred under this agreement with JIMCO were$1,325,000, $1,340,000 and $1,609,000 for the years ended December 31,2009, 2008 and 2007, respectively. As of December 31, 2009, thesetransactions resulted in net payables to affiliates totaling $625,000.

 

We also havepayables to affiliates totaling $113,000 at December 31,2009 to the R.E.Jacobs Group, an affiliate, for JEI-related airplane usage during 2009. Total expenses incurred to the R.E. Jacobs Group were $113,000, $0 and$0 for the years ended December 31, 2009, 2008 and 2007, respectively.

 

We allocate management, accounting and overhead costs incurred by JEIto various truck stops owned by Gameco Holdings, Inc. (“Gameco”), anotherwholly owned subsidiary of JII. These costs totaled $1,101,000, 

 

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$1,157,000, and $1,035,000 for the yearsended December 31, 2009, 2008 and 2007, respectively. Additionally, weprovide shared services such as gasoline and diesel fuel and repair partspurchased by Gameco. These transactions result in receivables from and payablesto our affiliates. As of December 31, 2009, these transactions resulted innet receivables from affiliates totaling $390,000, and as of December 31,2008, these transactions resulted in net payables to affiliates totaling$210,000. We expect to continue to render management and accounting services toGameco in the future. We believe the fees paid to us are no less favorable tous than those that would be paid to unaffiliated vendors.

 

Beginning in November 2009, the ownership of the video pokermachines and the related repair parts inventory used by the Jalou truck plazaswas transferred to a related party, Jalou Device Owner, L.P. (“Device Owner”),of which Gameco owns 49% and is its general partner and two Louisiana residentsown 51% and are the limited partners.  As of December 31, 2009, thetransfer of the repair parts inventory from us to Device Owner resulted in netreceivables from affiliates totaling $588,000.

 

We also have receivablesfrom other affiliates totaling $34,000 at December 31,2009.

 

We may invest up to$3 million per year in private or publicly traded securities ofunaffiliated companies. These investments may be selected and managed by JII,provided that under our senior credit agreement our pro forma consolidatedleverage ratio (ratio of our total pro forma debt to our pro forma EBITDA) mustbe 5.0 to 1.0 or less after giving effect to any such investment and providedthat under our note indenture our fixed charge coverage ratio (ratio of ourConsolidated EBITDA to our fixed charges, primarily interest) was at least 2.0to 1.0 for the preceding four quarter period; and provided further that to theextent that less than $3.0 million in the aggregate of such investmentsare made in any fiscal year, the unused amount may be used in the succeedingfiscal year, subject to the pro forma leverage condition just discussed.Furthermore, we may invest an aggregate amount not to exceed $5.0 million atany time outstanding.  At December 31,2009, we had invested $7,943,000 (cost) in the securities of an unaffiliatedpublic company; the market value of such securities at December 31, 2009was $1,058,000.

 

Gamecoowns and has the right to acquire additional video gaming truck plazas inLouisiana. We have the right to purchase any existing or future video gamingfacilities acquired by Gameco at a price equal to (i) the lesser of (a) seventimes trailing 12 months EBITDA, and (b) the sum of the considerationpaid by the affiliated company plus or minus an adjustment for working capitaland plus an amount equal to the trailing 12 months EBITDA, or (ii) anamount supported by a fairness opinion by a nationally recognized accounting,investment banking or appraisal firm; provided that after giving effect to eachsuch acquisition and pro forma for contemplated expenditures, (x) theremust be at least $10,000,000 of undrawn availability under our revolving creditline, (y) we must be in pro forma compliance with all financial covenantsunder our credit agreements, and (z) we must maintain specified levelswith respect to our consolidated total leverage ratio. Any such acquisitions byus could result in significant profits to Gameco.

 

DuringJuly 2006, we acquired from affiliated parties several options to leaseand options to purchase six parcels of land and certain improvements on thewest bank of the Cuyahoga River in Cleveland, Ohio. We refer to theseproperties, covering an aggregate of approximately 624,000 square feet of land(14.4 acres) and a building comprised of 47,380 square feet of net rentablespace, as the Nautica Properties. The Nautica Properties currently requireaggregate option payments totaling $200,000 per year.

 

During March 2008,we exercised our option to acquire one of these parcels referred to as “Lot D.” On April 1, 2008, we purchased this parcel for $800,000, which wasaccounted for as a distribution to our stockholder.  The company thatowned this parcel of land and parking lot business was wholly owned by ourChairman and Chief Executive Officer (“CEO”). The net assets acquired were$131,000, resulting in an effective net distribution of $669,000. Additionally, on January 15, 2009,we exercised our option to acquire another of these parcels referred to as “SugarWarehouse,” and on January 21, 2009, we purchased this parcel for$2,450,000 from the limited partnership that owned this building.  An affiliate (“Affiliate”) of our CEO owned82% of the general partner interests and 16.4% of the limited partner interestsof the seller.  A distributionof $2,238,000 was recorded on the acquisition date for the portion of thepurchase price attributable to our CEO, and the net assets acquired were$1,721,000.

 

Theoption agreements give us the right until July 2010 to purchase one of theremaining parcels and the right to purchase or enter into long-term leases onthe remaining three parcels. We expect to either exercise or extend theseoptions prior to their expiration.  OurCEO owns varying interests in three of the four remaining parcels.

 

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Althoughwe may elect not to exercise all the options unless casino gaming opportunitiesarise, we nonetheless have the right to acquire all or part of the NauticaProperties for other purposes. If casino gaming is not legalized on the NauticaProperties but we decide to exercise our options, the aggregate purchase pricewould be approximately $3.0 million for one of the parcels and theaggregate annual lease payments on the remaining three parcels would beapproximately $355,000. If all four remaining parcels are purchased and noneleased, the total purchase price would be approximately $6.55 million, less anyaggregate option payments previously made. The purchase price and rent paymentswould be increased based on independent appraisals of the land and improvementvalues if, in the future, casino gaming were to become legalized in Ohio and acasino is licensed on the Nautica Properties.

 

**Director Independence**

 

We are a privately heldcompany wholly owned by Jacobs Investments, Inc. which in turn is ownedbeneficially by our director, Jeffrey P. Jacobs, who is also our ChiefExecutive Officer and two trusts created by him. Therefore, our board ofdirectors is not independent, nor are any independence standards applicable tous as a result of stock exchange or any other self regulatory organization’srequirements. Mr. Jacobsapproves all transactions required to be reported under this Item giving dueregard to the covenants in our bank credit agreement and in our note indenture.

 

**Item 14.****                                                   *****Principal Accountant Fees and Services.***

 

Fees paid to our registered public accounting firm for the last twoyears were as follows:

 
| ** **           | ** ** | **Year Ended**   | ** ** |
|----------------------|------------|-----------------------|------------|
| ** **           | ** ** | **December 31,** | ** ** |
| ** **           | ** ** | **2009**              | ** ** | **2008** | ** ** |
| Audit fees           |       | $                     | 1,428,000  |   | $ | 1,100,000 |   |
| Audit related  fees* |       | 30,000                |       | 29,000 |   |
| Tax fees**           |       | 388,000               |       | 334,000 |   |
| All other fees       |       | 21,000                |       | 122,000 |   |
|                      |            |                       |            |  |  |  |  |

 

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*                                         Audit-relatedfees are comprised of our 401(k) audits and fees.

 

**                                  Tax fees areprincipally comprised of preparation of federal and state corporate income taxreturns, various state tax returns, and research and related tax consultationservices.

 

We have no audit committee. Our board of directors considered anddetermined that provision of the services described above and amounts paid forthose services are compatible with maintaining our principal accountant’sindependence.

 

**Item 15.****                                                   *****Exhibits and FinancialStatement Schedules.***

 

(a)                                  *FinancialStatements and Financial Statement Schedules*

 

(1)                                  FinancialStatements filed herewith are listed in the Index to Consolidated FinancialStatements on page F-1 of this report.

 

(2)                                  No FinancialStatement Schedules are included herein because such schedules are notapplicable, are not required, or because the required financial information isincluded in the Consolidated Financial Statements or notes thereto.

 

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(b)                                 *Exhibits*

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                 | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**   | ** ** | **Filed   Herewith** |
|------------------|------------|-----------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|-------------------|------------|----------------------|
| 3.1              |       | Certificate of Incorporation of Gameco, Inc.                                                               |       | S-4      |       | 333-88242    |       | 3.1                                      |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.2              |       | By-Laws of Gameco, Inc.                                                                                    |       | S-4      |       | 333-88242    |       | 3.2                                      |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.3              |       | Articles of Incorporation of Black Hawk  Gaming & Development Company, Inc.                       |       | S-4      |       | 333-88242    |       | 3.3                                      |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.4              |       | Bylaws of Black Hawk Gaming & Development  Company, Inc.                                          |       | S-4      |       | 333-88242    |       | 3.4                                      |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.5              |       | Articles of Incorporation of Gold Dust West  Casino, Inc.                                                  |       | S-4      |       | 333-88242    |       | 3.5                                      |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.6              |       | Code of By-laws of Gold Dust West Casino, Inc.                                                             |       | S-4      |       | 333-88242    |       | 3.6                                      |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.7              |       | Articles of Organization of Black Hawk/Jacobs  Entertainment, LLC.                                              |       | S-4      |       | 333-88242    |       | 3.7                                      |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.8              |       | Operating Agreement of Black Hawk/Jacobs  Entertainment, LLC.                                                   |       | S-4      |       | 333-88242    |       | 3.8                                      |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.9              |       | Joint Venture Agreement of Gilpin Hotel Venture.                                                                |       | S-4      |       | 333-88242    |       | 3.9                                      |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.10             |       | Articles of Incorporation of Gilpin  Ventures, Inc.                                                        |       | S-4      |       | 333-88242    |       | 3.10                                     |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.11             |       | By-Laws of Gilpin Ventures, Inc.                                                                           |       | S-4      |       | 333-88242    |       | 3.11                                     |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.12             |       | Articles of Incorporation of Winner’s Choice  Casino, Inc., now Cash Magic Winner’s Choice, LLC. |       | S-4      |       | 333-88242    |       | 3.14                                     |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.13             |       | By-Laws of Winner’s Choice Casino, Inc., now  Cash Magic Winner’s Choice, LLC.                   |       | S-4      |       | 333-88242    |       | 3.15                                     |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.14             |       | Articles of Organization of Houma Truck  Plaza & Casino, L.L.C.                                        |       | S-4      |       | 333-88242    |       | 3.18                                     |       | May 14, 2002 |       |                 |
|             |       |                                                                                                            |       |     |       |         |       |                                     |       |              |       |                 |
| 3.15             |       | Articles of Organization of Jalou-Cash’s L.L.C.                                                            |       | S-4      |       | 333-88242    |       | 3.19                                     |       | May 14, 2002 |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                       | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**     | ** ** | **Filed   Herewith** |
|------------------|------------|---------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|---------------------|------------|----------------------|
| 3.16             |       | Articles of Organization of Lucky Magnolia Truck  Stop and Casino, L.L.C.             |       | S-4      |       | 333-88242    |       | 3.21                                     |       | May 14, 2002   |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.17             |       | Articles of Organization of Bayou Vista Truck Plaza  and Casino, L.L.C.               |       | S-4      |       | 333-88242    |       | 3.22                                     |       | May 14, 2002   |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.18             |       | Articles of Organization of Raceland Truck Plaza and  Casino, L.L.C.                  |       | S-4      |       | 333-88242    |       | 3.23                                     |       | May 14, 2002   |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.19             |       | Articles of Organization of JACE, LLC.                                                |       | S-4      |       | 333-88242    |       | 3.24                                     |       | May 14, 2002   |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.20             |       | Certificate of Amendment of Certificate of  Incorporation of Gameco, Inc.        |       | S-4A     |       | 333-88242    |       | 3.25                                     |       | August 8, 2002 |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.21             |       | Amended and Restated Certificate of Limited  Partnership of Colonial Downs, L.P.      |       | S-4A     |       | 333-88242    |       | 3.26                                     |       | August 8, 2002 |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.22             |       | Limited Partnership Agreement of Colonial Downs,  L.P.                                |       | S-4A     |       | 333-88242    |       | 3.27                                     |       | August 8, 2002 |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.23             |       | Amended and Restated Articles of Incorporation of  Colonial Downs Holdings, Inc. |       | S-4A     |       | 333-88242    |       | 3.28                                     |       | August 8, 2002 |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.24             |       | Amendment to Articles of Incorporation of Colonial  Downs Holdings, Inc.         |       | S-4A     |       | 333-88242    |       | 3.29                                     |       | August 8, 2002 |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.25             |       | Bylaws of Colonial Downs Holdings, Inc.                                          |       | S-4A     |       | 333-88242    |       | 3.30                                     |       | May 14, 2002   |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.26             |       | Articles of Incorporation of Stansley Racing Corp.                                    |       | S-4A     |       | 333-88242    |       | 3.31                                     |       | August 8, 2002 |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.27             |       | Articles of Amendment to the Articles of Incorporation  of Stansley Racing Corp.      |       | S-4A     |       | 333-88242    |       | 3.32                                     |       | August 8, 2002 |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.28             |       | Bylaws of Stansley Racing Corp.                                                       |       | S-4A     |       | 333-88242    |       | 3.33                                     |       | August 8, 2002 |       |                 |
|             |       |                                                                                  |       |     |       |         |       |                                     |       |                |       |                 |
| 3.29             |       | Amendment to the Operating Agreement of Black  Hawk/Jacobs Entertainment, LLC.        |       | S-4A     |       | 333-88242    |       | 3.35                                     |       | August 8, 2002 |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                                              | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**        | ** ** | **Filed   Herewith** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|------------------------|------------|----------------------|
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.30             |       | Amendment to the Certificate of Incorporation of  Gameco, Inc.                                                          |       | S-4A     |       | 333-88242    |       | 3.36                                     |       | August 8, 2002    |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.31             |       | Articles of Organization of Jalou Breaux Bridge, LLC  dated January 29, 2003.                                           |       | 10-K     |       | 333-88242    |       | 3.37                                     |       | March 28, 2005    |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.32             |       | Articles of Organization of Jalou Eunice, LLC dated  March 27, 2003.                                                    |       | 10-K     |       | 333-88242    |       | 3.38                                     |       | March 28, 2005    |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.33             |       | Articles of Organization of Jalou of Jefferson, LLC  dated September 23, 2003.                                          |       | 10-K     |       | 333-88242    |       | 3.39                                     |       | March 28, 2005    |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.34             |       | Certificate of Amendment of Certificate of  Incorporation of Jacobs Entertainment, Inc. dated September 27,  2005. |       | 10-Q     |       | 333-88242    |       | 3.40                                     |       | November 14, 2005 |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.35             |       | Articles of Incorporation of Jacobs Piñon Plaza  Entertainment, Inc. dated November 2, 2005.                  |       | 10-Q     |       | 333-88242    |       | 3.41                                     |       | November 14, 2005 |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.36             |       | Bylaws of Jacobs Piñon Plaza  Entertainment, Inc. dated November 8, 2005.                                     |       | S-4      |       | 333-136066   |       | 3.41(A)                                  |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.37             |       | Articles of Organization of Fuel Stop 36, LLC dated  August 24, 1989.                                                   |       | S-4      |       | 333-136066   |       | 3.42                                     |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.38             |       | Articles of Organization of Jalou of Larose, LLC  dated November 3, 2005, now Cash Magic Larose, LLC.                   |       | S-4      |       | 333-136066   |       | 3.43                                     |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.39             |       | Articles of Incorporation of Jacobs Elko  Entertainment, Inc.                                                           |       | S-4      |       | 333-136066   |       | 3.44                                     |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.40             |       | Bylaws of Jacobs Elko Entertainment, Inc.                                                                               |       | S-4      |       | 333-136066   |       | 3.45                                     |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.41             |       | Articles of Organization of Jalou Diamond L.L.C.                                                                             |       | S-4      |       | 333-136066   |       | 3.48                                     |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.42             |       | Limited Liability Company Agreement of Jalou Diamond  L.L.C.                                                                 |       | S-4      |       | 333-136066   |       | 3.49                                     |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                         |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.43             |       | Articles of Organization of Jalou Magic L.L.C. (nka  Cash Magic                                                              |       | S-4      |       | 333-136066   |       | 3.50                                     |       | July 27, 2006     |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                     | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**    | ** ** | **Filed   Herewith** |
|------------------|------------|-----------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|--------------------|------------|----------------------|
|             |       | Vinton, LLC).                                                                                       |       |     |       |         |       |                                     |       |               |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.44             |       | Limited Liability Company Agreement of Jalou Magic  L.L.C. (nka Cash Magic Vinton, LLC).            |       | S-4      |       | 333-136066   |       | 3.51                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.45             |       | Articles of Organization of Jalou of Vinton-Bingo,  LLC.                                            |       | S-4      |       | 333-136066   |       | 3.52                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.46             |       | Limited Liability Company Agreement of Jalou of  Vinton-Bingo, LLC.                                 |       | S-4      |       | 333-136066   |       | 3.53                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.47             |       | Articles of Organization of Jalou of Vinton, LLC.                                                   |       | S-4      |       | 333-136066   |       | 3.54                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.48             |       | Limited Liability Company Agreement of Jalou of  Vinton, LLC.                                       |       | S-4      |       | 333-136066   |       | 3.55                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.49             |       | Articles of Organization of Jalou of St. Helena, LLC  (nka Cash Magic St. Helena, LLC).             |       | S-4      |       | 333-136066   |       | 3.56                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.50             |       | Limited Liability Company Agreement of Jalou of St.  Helena, LLC (nka Cash Magic St. Helena, LLC).  |       | S-4      |       | 333-136066   |       | 3.57                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.51             |       | Amended and Restated Articles of Incorporation of  Jacobs Piñon Plaza Entertainment, Inc. |       | S-4      |       | 333-136066   |       | 3.58                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.52             |       | Articles of Organization of Jalou of St. Martin,  L.L.C.                                            |       | S-4      |       | 333-136066   |       | 3.59                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.53             |       | Limited Liability Company Agreement of Jalou of St.  Martin, L.L.C.                                 |       | S-4      |       | 333-136066   |       | 3.60                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.54             |       | Operating Agreement of Houma Truck Plaza Stop and  Casino, L.L.C.                                   |       | S-4      |       | 333-136066   |       | 3.62                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.55             |       | Limited Liability Company Agreement of Jalou-Cash’s  L.L.C.                                    |       | S-4      |       | 333-136066   |       | 3.63                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                |       |     |       |         |       |                                     |       |               |       |                 |
| 3.56             |       | Limited Liability Company Agreement of Lucky  Magnolia Truck Stop and Casino, L.L.C.                |       | S-4      |       | 333-136066   |       | 3.64                                     |       | July 27, 2006 |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                       | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**    | ** ** | **Filed   Herewith** |
|------------------|------------|-------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|--------------------|------------|----------------------|
| 3.57             |       | Limited Liability Company Agreement of Bayou Vista  Truck Plaza and Casino, L.L.C.                    |       | S-4      |       | 333-136066   |       | 3.65                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.58             |       | Limited Liability Company Agreement of Raceland  Truck Plaza and Casino, L.L.C.                       |       | S-4      |       | 333-136066   |       | 3.66                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.59             |       | Limited Liability Company Agreement of Jalou Breaux  Bridge, LLC.                                     |       | S-4      |       | 333-136066   |       | 3.67                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.60             |       | Limited Liability Company Agreement of Jalou of  Eunice, LLC.                                         |       | S-4      |       | 333-136066   |       | 3.68                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.61             |       | Limited Liability Company Agreement of Jalou of  Jefferson, LLC.                                      |       | S-4      |       | 333-136066   |       | 3.69                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.62             |       | Limited Liability Company Agreement of Jalou of  Larose, LLC (nka Cash Magic Larose, LLC).            |       | S-4      |       | 333-136066   |       | 3.70                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.63             |       | Articles of Organization of Colonial Downs, LLC.                                                      |       | S-4      |       | 333-136066   |       | 3.71                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.64             |       | Operating Agreement of Colonial Downs, LLC.                                                           |       | S-4      |       | 333-136066   |       | 3.72                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.65             |       | Articles of Organization of JRJ Properties, LLC.                                                      |       | S-4      |       | 333-136066   |       | 3.73                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.66             |       | Limited Liability Company Agreement of JRJ  Properties, LLC.                                          |       | S-4      |       | 333-136066   |       | 3.74                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.67             |       | Articles of Organization of Virginia Concessions,  LLC.                                               |       | S-4      |       | 333-136066   |       | 3.75                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.68             |       | Amended and Restated Operating Agreement of Virginia  Concessions, LLC.                               |       | S-4      |       | 333-136066   |       | 3.76                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.69             |       | Articles of Amendment to the Articles of  Incorporation of Old Dominion Racing Association, Inc. |       | S-4      |       | 333-136066   |       | 3.77A                                    |       | July 27, 2006 |       |                 |
|             |       |                                                                                                  |       |     |       |         |       |                                     |       |               |       |                 |
| 3.70             |       | Articles of Amendment to the Articles of Incorporation  of Old Dominion Racing Association,      |       | S-4      |       | 333-136066   |       | 3.77B                                    |       | July 27, 2006 |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                        | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**        | ** ** | **Filed   Herewith** |
|------------------|------------|--------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|------------------------|------------|----------------------|
|             |       | Inc.                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.71             |       | Articles of Amendment to the Articles of  Incorporation of Old Dominion Jockey Club, Inc.         |       | S-4      |       | 333-136066   |       | 3.77C                                    |       | July 27, 2006     |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.72             |       | Articles of Amendment to the Articles of  Incorporation of Maryland-Virginia Racing Circuit, Inc. |       | S-4      |       | 333-136066   |       | 3.77D                                    |       | July 27, 2006     |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.73             |       | Articles of Organization of Jalou Fox, LLC dated  November 14, 2005.                              |       | 8-K      |       | 333-88242    |       | 3.78                                     |       | September 6, 2007 |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.74             |       | Limited Liability Company Agreement of Jalou Fox,  LLC dated September 1, 2005.                   |       | 8-K      |       | 333-88242    |       | 3.79                                     |       | September 6, 2007 |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.75             |       | Articles of Organization of Jalou Silver Dollar,  LLC.                                                 |       | 10-K     |       | 333-88242    |       | 3.80                                     |       | March 26, 2008    |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.76             |       | Limited Liability Company Agreement of Jalou Silver  Dollar, LLC.                                      |       | 10-K     |       | 333-88242    |       | 3.81                                     |       | March 26, 2008    |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.77             |       | Certificate of Incorporation of Jacobs Nautica  Development, Inc.                                 |       | 10-Q     |       | 333-88242    |       | 3.82                                     |       | May 13, 2008      |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.78             |       | Bylaws of Jacobs Nautica Development, Inc.                                                        |       | 10-Q     |       | 333-88242    |       | 3.83                                     |       | May 13, 2008      |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.79             |       | Certificate of Formation of Diamondhead Real Estate,  LLC.                                             |       | 10-K     |       | 333-88242    |       | 3.84                                     |       | March 18, 2009    |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.80             |       | Limited Liability Company Agreement of Diamondhead  Real Estate, LLC.                                  |       | 10-K     |       | 333-88242    |       | 3.85                                     |       | March 18, 2009    |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.81             |       | Articles of Organization of JEI Distributing, LLC.                                                     |       | 10-K     |       | 333-88242    |       | 3.86                                     |       | March 18, 2009    |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.82             |       | Limited Liability Company Agreement of JEI  Distributing, LLC.                                         |       | 10-K     |       | 333-88242    |       | 3.87                                     |       | March 18, 2009    |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.83             |       | Certificate of Incorporation of Jacobs Sugar  Warehouse, Inc.                                     |       | 10-K     |       | 333-88242    |       | 3.88                                     |       | March 18, 2009    |       |                 |
|             |       |                                                                                                   |       |     |       |         |       |                                     |       |                   |       |                 |
| 3.84             |       | Bylaws of Jacobs Sugar Warehouse, Inc.                                                            |       | 10-K     |       | 333-88242    |       | 3.89                                     |       | March 18, 2009    |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**     | ** ** | **Filed   Herewith** |
|------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|---------------------|------------|----------------------|
| 4.1              |       | Trust Indenture Agreement by and between Jacobs  Entertainment, Inc. and Wells Fargo Bank, as Trustee, dated  June 16, 2006.                                                                                                                                                                                                                                                                             |       | 8-K      |       | 333-88242    |       | 4.1                                      |       | March 23, 2006 |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                     |       |                |       |                 |
| 4.2              |       | Registration Rights Agreement by and between Jacobs  Entertainment, Inc. and Credit Suisse Securities (USA) LLC, CIBC World  Markets Corp., Libra Securities, LLC, Wells Fargo Securities, LLC and KeyBanc  Capital Markets, a Division of McDonald Investments Inc., as the initial  purchasers, dated June 16, 2006.                                                                                   |       | 8-K      |       | 333-88242    |       | 4.2                                      |       | March 23, 2006 |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                     |       |                |       |                 |
| 4.3              |       | Pledge Agreement dated as of June 16, 2006 by  and among Jacobs Entertainment, Inc., Black Hawk Gaming &  Development Company, Inc. and Credit Suisse, Cayman Islands Branch.                                                                                                                                                                                                              |       | S-4      |       | 333-136066   |       | 4.3                                      |       | July 27, 2006  |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                     |       |                |       |                 |
| 4.4              |       | Guarantee Agreement dated as of June 16, 2006,  by and among Jacobs Entertainment, Inc., certain of the subsidiaries of  Jacobs Entertainment, Inc. and Credit Suisse, Cayman Islands Branch.                                                                                                                                                                                                       |       | S-4      |       | 333-136066   |       | 4.4                                      |       | July 27, 2006  |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                     |       |                |       |                 |
| 4.5              |       | Security Agreement dated as of June 16, 2006,  made by Jacobs Entertainment, Inc. and each of the guarantors listed on  the signature pages or from time to time a party by execution of a joinder  agreement, as pledgors, assignors and debtors in favor of Credit Suisse,  Cayman Islands Branch, in its capacity as collateral agent for the Secured  Parties pursuant to the Credit Agreement. |       | S-4      |       | 333-136066   |       | 4.5                                      |       | July 27, 2006  |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                     |       |                |       |                 |
| 4.6              |       | Contribution Agreement dated June 16, 2006, by  and among Jacobs Entertainment, Inc. and affiliates of Jacobs                                                                                                                                                                                                                                                                                            |       | S-4      |       | 333-136066   |       | 4.6                                      |       | July 27, 2006  |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                 | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**    | ** ** | **Filed   Herewith** |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|--------------------|------------|----------------------|
|             |       | Entertainment, Inc.                                                                                                                                                                                                                                                                                                                                                                        |       |     |       |         |       |                                     |       |               |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                     |       |               |       |                 |
| 4.7              |       | Custodian Agreement dated as of June 16, 2006,  by and between Dunham Trust Company, 1 East Liberty Street, Sixth Floor,  Reno, NV 89504, as custodian, Credit Suisse, Cayman Islands Branch as  Collateral Agent under the Credit Agreement, Jacobs Entertainment, Inc.,  as the Borrower under the Credit Agreement and Blackhawk Gaming &  Development Company, Inc. |       | S-4      |       | 333-136066   |       | 4.7                                      |       | July 27, 2006 |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                     |       |               |       |                 |
| 4.8              |       | Form of Jacobs Entertainment, Inc. 9.75%  Rule 144A Global Note due 2014.                                                                                                                                                                                                                                                                                                        |       | S-4      |       | 333-136066   |       | 4.8                                      |       | July 27, 2006 |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                     |       |               |       |                 |
| 4.9              |       | Form of Jacobs Entertainment, Inc. 9.75%  Regulation S Global Note due 2014.                                                                                                                                                                                                                                                                                                          |       | S-4      |       | 333-136066   |       | 4.9                                      |       | July 27, 2006 |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                     |       |               |       |                 |
| 4.10             |       | Form of Jacobs Entertainment, Inc. 9.75%  IAI Global Note due 2014.                                                                                                                                                                                                                                                                                                                   |       | S-4      |       | 333-136066   |       | 4.10                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                     |       |               |       |                 |
| 4.11             |       | Intercompany Note dated as of June 16, 2006 by  and among Jacobs Entertainment, Inc., and Credit Suisse, Cayman Islands  Branch.                                                                                                                                                                                                                                                      |       | S-4      |       | 333-136066   |       | 4.11                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                     |       |               |       |                 |
| 4.12             |       | Purchase Agreement dated June 9, 2006 by and  among Jacobs Entertainment, Inc. and Credit Suisse Securities (USA) LLC,  on behalf of the purchasers of the $210,000,000 9.75% Senior Notes.                                                                                                                                                                                           |       | S-4      |       | 333-136066   |       | 4.12                                     |       | July 27, 2006 |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                     |       |               |       |                 |
| 4.13             |       | Pledge Agreement dated June 16, 2006 by and  among Jacobs Entertainment, Inc., Black Hawk Gaming &  Development Company, Inc. and Canadian Imperial Bank of Commerce, acting  through its New York Agency.                                                                                                                                                              |       | S-4      |       | 333-136066   |       | 4.13                                     |       | July 27, 2006 |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                                                                                      | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**        | ** ** | **Filed   Herewith** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|------------------------|------------|----------------------|
| 10.1             |       | Deed of Lease  dated May 8, 2003 between Haynes Chippenham Plaza, LLC and Colonial  Downs, L.P.                                                                                                                                                 |       | 10-K     |       | 333-88242    |       | 10.1                                     |       | March 29, 2004    |       |                 |
|             |       |                                                                                                                                                                                                                                                 |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.2             |       | Asset Purchase  Agreement dated November 2, 2005 among Capital City  Entertainment, Inc. and Jacobs Piñon Plaza Entertainment, Inc.                                                                                              |       | 10-Q     |       | 333-88242    |       | 10.2                                     |       | November 14, 2005 |       |                 |
|             |       |                                                                                                                                                                                                                                                 |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.3             |       | Piñon Plaza  Ground Lease dated June 26, 2006 by and between Clark G. Russell and  Jean M. Russell, Trustees of The Clark and Jean Russell Family Trust and  Jacobs Entertainment, Inc.                                               |       | S-4      |       | 333-136066   |       | 10.3                                     |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                                                                                                                                                 |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.4             |       | Triple Net Lease  dated November 14, 2005 among Route 225 Investments, LLC and Jacobs  Entertainment, Inc.                                                                                                                                 |       | 8-K      |       | 333-88242    |       | 10.4                                     |       | November 15, 2005 |       |                 |
|             |       |                                                                                                                                                                                                                                                 |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.5             |       | Shopping Center Lease  dated February 28, 2005 between Jay F. Wilks, Trustee under Indenture  dated December 20, 1976 by and between Herbert Cashvan and Marvin Simon,  as Settlors, and Jay F. Wilks as Trustee, and Colonial Downs, L.P. |       | 8-K      |       | 333-88242    |       | 10.7                                     |       | March 23, 2006    |       |                 |
|             |       |                                                                                                                                                                                                                                                 |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.6             |       | Membership Interests Purchase Agreement dated May 16, 2006 by and between Gameco  Holdings, Inc. and Jacobs Entertainment, Inc.                                                                                                       |       | S-4      |       | 333-136066   |       | 10.9                                     |       | July 27, 2006     |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**    | ** ** | **Filed   Herewith** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|--------------------|------------|----------------------|
| 10.7             |       | Asset  Purchase Agreement dated May 17, 2006 between Feliciana  Ventures, Inc., Forest Gold Truck Plaza and Casino, L.L.C., St. Helena  Express & Casino, L.L.C., Seabuckle Gaming, Inc., Janice M.  Penn and Minnie L. Hughes, as Sellers, Claude M. Penn, Jr., and Gameco  Holdings, Inc. as Purchaser. (Assigned as to St. Helena to Jacobs  Entertainment, Inc.).                                                                                                                       |       | S-4      |       | 333-136066   |       | 10.10A                                   |       | July 27, 2006 |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                     |       |               |       |                 |
| 10.8             |       | First Amendment to Asset Purchase Agreement dated July 12, 2006  between Feliciana Ventures, Inc., Forest Gold Truck Plaza and Casino,  L.L.C., St. Helena Express & Casino, L.L.C., Seabuckle  Gaming, Inc., Janice M. Penn and Minnie L. Hughes, as Sellers, Claude M.  Penn, Jr., and Gameco Holdings, Inc. as Purchaser. (Assigned as to  St. Helena to Jacobs Entertainment, Inc.).                                                                                                    |       | S-4      |       | 333-136066   |       | 10.10B                                   |       | July 27, 2006 |       |                 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                     |       |               |       |                 |
| 10.9             |       | Credit Agreement by and  between Jacobs Entertainment, Inc., Credit Suisse Securities (USA) LLC  and CIBC World Markets Corp., as Joint Lead Arrangers and Joint Bookrunners,  and CIBC World Markets Corp., as Syndication Agent, and Wells Fargo Bank,  National Association, as Documentation Agent and Swingline Lender, and CIT  Lending Services Corporation, as Documentation Agent, and Credit Suisse,  Cayman Islands Branch, as Issuing Bank, Administrative Agent and Collateral  Agent, dated June 16, 2006. |       | 8-K      |       | 333-88242    |       | 10.11                                    |       | June 22, 2006 |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                  | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**        | ** ** | **Filed   Herewith** |
|------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|------------------------|------------|----------------------|
| 10.10            |       | Consulting  Agreement dated January 1, 2006 and amended June 16, 2006, by and  among Jacobs Entertainment, Inc. and Jacobs Investments Management  Co., Inc. |       | S-4      |       | 333-136066   |       | 10.12                                    |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.11            |       | Option Agreement dated July 11, 2006 between Jacobs  Entertainment, Inc. and Nautica Phase 2 Limited Partnership.                                                      |       | S-4      |       | 333-136066   |       | 10.14                                    |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.12            |       | Option Agreement  dated April 18, 2006 between Jacobs Entertainment, Inc. and Flats  Development, Inc.                                                            |       | S-4      |       | 333-136066   |       | 10.16                                    |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.13            |       | Option Agreement  dated July 11, 2006 between Jacobs Entertainment, Inc. and  Sycamore & Main, Inc.                                                      |       | S-4      |       | 333-136066   |       | 10.17                                    |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.14            |       | Option Agreement dated July 11, 2006 between Jacobs  Entertainment, Inc. and Nautica Peninsula Land Limited Partnership.                                               |       | S-4      |       | 333-136066   |       | 10.18                                    |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.15            |       | Lease and Option  to Purchase Agreement dated June 21, 2006 by and between Curray  Corporation, Texas Pelican, LLC and Jalou of Vinton, LLC.                                |       | S-4      |       | 333-136066   |       | 10.20                                    |       | July 27, 2006     |       |                 |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.16            |       | Membership Interests Purchase Agreement dated August 20, 2007 by  and between Gameco Holdings, Inc. and Jacobs Entertainment, Inc.                                |       | 8-K      |       | 333-88242    |       | 10.28                                    |       | September 6, 2007 |       |                 |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.17            |       | Amendment  No. 1 dated May 4, 2007 to Credit Agreement among Jacobs  Entertainment, Inc. and various lenders.                                                     |       | 8-K      |       | 333-88242    |       | 10.28A                                   |       | May 10, 2007      |       |                 |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                     |       |                   |       |                 |
| 10.18            |       | Asset Purchase  Agreement dated October 4, 2006 regarding the Silver Dollar Truck Plaza.                                                                                    |       | 10-K     |       | 333-88242    |       | 10.29                                    |       | March 26, 2008    |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                                                    | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**         | ** ** | **Filed   Herewith** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|-------------------------|------------|----------------------|
| 10.19            |       | Purchase  Agreement dated March 14, 2008 regarding Jacobs Lot D, Inc.                                                    |       | 10-Q     |       | 333-88242    |       | 10.30                                    |       | May 13, 2008       |       |                 |
|             |       |                                                                                                                               |       |     |       |         |       |                                     |       |                    |       |                 |
| 10.20            |       | Amendment  No. 2 dated February 5, 2009 to Credit Agreement among Jacobs  Entertainment, Inc. and various lenders.  |       | 8-K      |       | 333-88242    |       | 10.31                                    |       | February 6, 2009   |       |                 |
|             |       |                                                                                                                               |       |     |       |         |       |                                     |       |                    |       |                 |
| 10.21            |       | Executive Employment  Agreement between Jacobs Entertainment, Inc. and Emanuel J. Cotronakis  signed August 21, 2009.    |       | 8-K      |       | 333-88242    |       | 10.32                                    |       | August 24, 2009    |       |                 |
|             |       |                                                                                                                               |       |     |       |         |       |                                     |       |                    |       |                 |
| 10.22            |       | Executive Employment  Agreement between Jacobs Entertainment, Inc. and Michael T. Shubic  signed September 23, 2009.     |       | 8-K      |       | 333-88242    |       | 10.33                                    |       | September 29, 2009 |       |                 |
|             |       |                                                                                                                               |       |     |       |         |       |                                     |       |                    |       |                 |
| 10.23            |       | Executive Employment  Agreement between Jacobs Entertainment, Inc. and Ian M. Stewart signed  September 23, 2009.        |       | 8-K      |       | 333-88242    |       | 10.34                                    |       | September 29, 2009 |       |                 |
|             |       |                                                                                                                               |       |     |       |         |       |                                     |       |                    |       |                 |
| 10.24            |       | Marketer Franchise  Agreement between JEI Distributing, LLC and CITGO Petroleum Corporation dated  as of December 21, 2009.   |       | 8-K      |       | 333-88242    |       | 10.35                                    |       | January 13, 2010   |       |                 |
|             |       |                                                                                                                               |       |     |       |         |       |                                     |       |                    |       |                 |
| 10.25            |       | Unbranded Rack Sales  Agreement between JEI Distributing, LLC and CITGO Petroleum Corporation dated  as of December 21, 2009. |       | 8-K      |       | 333-88242    |       | 10.36                                    |       | January 13, 2010   |       |                 |

 

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| **Exhibit  No.** | ** ** | **Description**                                                                                                                                | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where   located   (Exhibit No.)** | ** ** | **Filing Date**       | ** ** | **Filed   Herewith** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|------------------------------------------|------------|-----------------------|------------|----------------------|
| 10.26            |       | Addendum to  Unbranded Rack Sales Agreement between JEI Distributing, LLC and CITGO  Petroleum Corporation dated as of December 21, 2009. |       | 8-K      |       | 333-88242    |       | 10.37                                    |       | January 13, 2010 |       |                 |
|             |       |                                                                                                                                           |       |     |       |         |       |                                     |       |                  |       |                 |
| 12               |       | Computation of  Ratio of Earnings to Fixed Charges.                                                                                            |       |     |       |         |       |                                     |       |                  |       | X                    |
|             |       |                                                                                                                                           |       |     |       |         |       |                                     |       |                  |       |                 |
| 14               |       | Code of Ethics  (as revised).                                                                                                                  |       | 10-K     |       | 333-88242    |       | 14.1                                     |       | March 26, 2008   |       |                 |
|             |       |                                                                                                                                           |       |     |       |         |       |                                     |       |                  |       |                 |
| 21.2             |       | Subsidiaries of  Jacobs Entertainment, Inc.                                                                                               |       |     |       |         |       |                                     |       |                  |       | X                    |
|             |       |                                                                                                                                           |       |     |       |         |       |                                     |       |                  |       |                 |
| 25.1             |       | Statement of  Eligibility of Trustee on Form T-1.                                                                                         |       | S-4      |       | 333-136066   |       | 25.1                                     |       | July 27, 2006    |       |                 |
|             |       |                                                                                                                                           |       |     |       |         |       |                                     |       |                  |       |                 |
| 31.1             |       | Chief Executive  Officer Certification under Section 302 of the Sarbanes-Oxley Act of  2002.                                              |       |     |       |         |       |                                     |       |                  |       | X                    |
|             |       |                                                                                                                                           |       |     |       |         |       |                                     |       |                  |       |                 |
| 31.2             |       | Chief Financial  Officer Certification under Section 302 of the Sarbanes-Oxley Act of  2002.                                              |       |     |       |         |       |                                     |       |                  |       | X                    |
|             |       |                                                                                                                                           |       |     |       |         |       |                                     |       |                  |       |                 |
| 32.1             |       | Chief Executive  Officer Certification under Section 906 of the Sarbanes-Oxley Act of  2002.                                              |       |     |       |         |       |                                     |       |                  |       | X                    |
|             |       |                                                                                                                                           |       |     |       |         |       |                                     |       |                  |       |                 |
| 32.2             |       | Chief Financial  Officer Certification under Section 906 of the Sarbanes-Oxley Act of  2002.                                              |       |     |       |         |       |                                     |       |                  |       | X                    |

 

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.

 
|       | JACOBS ENTERTAINMENT, INC. |
|------------|----------------------------|
|       |                       |   |   |
|       | By:                        | /s/ JEFFREY P. JACOBS |
| ** ** | ** **                 | **Jeffrey  P. Jacobs** |
| ** ** | ** **                 | **Chief  Executive Officer** |
| ** ** | ** **                 | ** ** |
|       | By:                        | /s/ BRETT A. KRAMER |
| ** ** | ** **                 | **Brett  A. Kramer** |
| ** ** | ** **                 | **Chief  Financial Officer** |

 

Date:March 30, 2010

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.

 

 
| **Signature**          | ** ** | **Title**                                       | ** ** | **Date**            |
|------------------------|------------|-------------------------------------------------|------------|---------------------|
|                   |       |                                            |       |                |
| /s/ JEFFREY P. JACOBS  |       | Chairman of the Board of Directors and Chief    |       | March 30, 2010 |
| **Jeffrey  P. Jacobs** |       | Executive Officer (Principal Executive Officer) |       |                |
| ** **             |       |                                            |       |                |
| /s/ BRETT A. KRAMER    |       | Chief Financial Officer                         |       | March 30, 2010 |
| **Brett  A. Kramer**   |       | (Principal Financial and Accounting Officer)    |       |                |

 

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***JacobsEntertainment, Inc.***

 

*Consolidated Financial Statementsas of December 31, 2009 and 2008, and for the Years Ended December 31,2009, 2008 and 2007, and Report of Independent Registered Public AccountingFirm*

 

----

 

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**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Board ofDirectors and Stockholder ofJacobs Entertainment, Inc.Golden, Colorado

 

We have auditedthe accompanying consolidated balance sheets of Jacobs Entertainment, Inc.and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and therelated consolidated statements of operations, stockholder’s equity, and cashflows for each of the three years in the period ended December 31, 2009.These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements basedon our audits.

 

We conducted ouraudits in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. The Company is not required tohave, nor were we engaged to perform, an audit of its internal control overfinancial reporting. Our audits included consideration of internal control overfinancial reporting as a basis for designing audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

 

In our opinion,such consolidated financial statements present fairly, in all materialrespects, the financial position of Jacobs Entertainment, Inc. andsubsidiaries as of December 31, 2009 and 2008, and the results of theiroperations and their cash flows for each of the three years in the period endedDecember 31, 2009, in conformity with accounting principles generallyaccepted in the United States of America.

 
| /s/ Deloitte & Touche LLP |   |
|------------------------------------|--------|
|                               |   |
| Denver, Colorado                   |   |
| March 30, 2010                |   |

 

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**JACOBSENTERTAINMENT, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**AS OF DECEMBER 31, 2009 and 2008**

**(Dollars in thousands)**

 
| ** **                                                                                                                                      | ** ** | **2009**   | ** ** | **2008  (As adjusted,  see Note 4)** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|--------------------------------------|------------|
| **ASSETS**                                                                                                                                      | ** ** | ** ** | ** ** | ** **                           | ** ** |
| CURRENT ASSETS:                                                                                                                                 |       |       |       |                                 |       |
| Cash and cash equivalents                                                                                                                       |       | $          | 24,201     |                                 | $          | 21,879 |   |
| Restricted cash                                                                                                                                 |       | 1,121      |       | 1,423                                |       |
| Accounts receivable, net of allowance for doubtful  accounts of $910 and $740, respectively                                                     |       | 2,952      |       | 3,157                                |       |
| Due from affiliates                                                                                                                             |       | 1,012      |       | —                               |       |
| Inventory                                                                                                                                       |       | 3,039      |       | 3,421                                |       |
| Prepaid expenses and other current assets                                                                                                       |       | 2,875      |       | 2,951                                |       |
| Total current assets                                                                                                                            |       | 35,200     |       | 32,831                               |       |
| PROPERTY, PLANT AND EQUIPMENT:                                                                                                                  |       |       |       |                                 |       |
| Land and improvements                                                                                                                           |       | 59,768     |       | 59,451                               |       |
| Buildings and improvements                                                                                                                      |       | 190,236    |       | 185,453                              |       |
| Equipment, furniture and fixtures                                                                                                               |       | 95,125     |       | 87,432                               |       |
| Leasehold improvements                                                                                                                          |       | 3,201      |       | 3,087                                |       |
| Construction in progress                                                                                                                        |       | 594        |       | 945                                  |       |
|                                                                                                                                            |       | 348,924    |       | 336,368                              |       |
| Less accumulated depreciation                                                                                                                   |       | (106,278   | )          | (89,986                              | )          |
| Property, plant and equipment, net                                                                                                              |       | 242,646    |       | 246,382                              |       |
| OTHER NONCURRENT ASSETS:                                                                                                                        |       |       |       |                                 |       |
| Goodwill                                                                                                                                        |       | 46,471     |       | 46,471                               |       |
| Identifiable intangible assets, net                                                                                                             |       | 8,173      |       | 9,192                                |       |
| Debt issue costs, net                                                                                                                           |       | 5,695      |       | 6,795                                |       |
| Investment in equity securities                                                                                                                 |       | 1,058      |       | 1,367                                |       |
| Other assets                                                                                                                                    |       | 1,406      |       | 1,439                                |       |
| Total other noncurrent assets                                                                                                                   |       | 62,803     |       | 65,264                               |       |
| TOTAL                                                                                                                                           |       | $          | 340,649    |                                 | $          | 344,477 |   |
|                                                                                                                                            |       |       |       |                                 |       |
| **LIABILITIES AND STOCKHOLDER’S  EQUITY**                                                                                                  | ** ** | ** ** | ** ** | ** **                           | ** ** |
| CURRENT LIABILITIES:                                                                                                                            |       |       |       |                                 |       |
| Accounts payable                                                                                                                                |       | $          | 6,347      |                                 | $          | 8,003 |   |
| Accrued expenses                                                                                                                                |       | 15,936     |       | 18,457                               |       |
| Due to affiliates                                                                                                                               |       | 738        |       | 210                                  |       |
| Current portion of long-term debt and capital lease  obligations                                                                                |       | 2,117      |       | 1,360                                |       |
| Total current liabilities                                                                                                                       |       | 25,138     |       | 28,030                               |       |
|                                                                                                                                            |       |       |       |                                 |       |
| Long-term debt and capital lease obligations                                                                                                    |       | 289,767    |       | 290,020                              |       |
| Other noncurrent liabilities                                                                                                                    |       | 1,011      |       | 891                                  |       |
| Total liabilities                                                                                                                               |       | 315,916    |       | 318,941                              |       |
| COMMITMENTS AND CONTINGENCIES (Note 8)                                                                                                          |       |       |       |                                 |       |
| STOCKHOLDER’S EQUITY:                                                                                                                      |       |       |       |                                 |       |
| Class A Common stock, $.01 par value; 1,800  shares authorized, 1,320 shares issued and outstanding as of  December 31, 2009 and 2008 |       | —     |       | —                               |       |
| Class B Common stock, $.01 par value; 200  shares authorized, 180 shares issued and outstanding as of December 31,  2009 and 2008     |       | —     |       | —                               |       |
| Additional paid-in capital                                                                                                                      |       | 28,843     |       | 31,139                               |       |
| Accumulated deficit                                                                                                                             |       | (4,110     | )          | (5,815                               | )          |
| Total stockholder’s equity of Jacobs  Entertainment, Inc.                                                                             |       | 24,733     |       | 25,324                               |       |
| Noncontrolling interest                                                                                                                         |       | —     |       | 212                                  |       |
| Total stockholder’s equity                                                                                                                 |       | 24,733     |       | 25,536                               |       |
| TOTAL                                                                                                                                           |       | $          | 340,649    |                                 | $          | 344,477 |   |

 

Seenotes to consolidated financial statements.

 

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**JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 and 2007**

**(Dollars in thousands)**

 
| ** **                                                                  | ** ** | **2009** | ** ** | **2008  (As adjusted,  see Note 4)** | ** ** | **2007  (As adjusted,  see Note 4)** | ** ** |
|-----------------------------------------------------------------------------|------------|----------|------------|--------------------------------------|------------|--------------------------------------|------------|
| **REVENUES**                                                                |       |     |       |                                 |       |                                 |       |
| Gaming:                                                                     |       |     |       |                                 |       |                                 |       |
| Casino                                                                      |       | $        | 139,766    |                                 | $          | 139,492                              |       | $ | 144,656 |   |
| Truck  stop                                                                 |       | 62,983   |       | 67,590                               |       | 64,322                               |       |
| Pari-mutuel                                                                 |       | 32,276   |       | 38,657                               |       | 41,309                               |       |
| Food  and beverage                                                          |       | 29,781   |       | 30,736                               |       | 29,260                               |       |
| Convenience  store—fuel                                                |       | 60,659   |       | 97,021                               |       | 81,329                               |       |
| Convenience  store—other                                               |       | 12,460   |       | 12,908                               |       | 11,133                               |       |
| Hotel                                                                       |       | 3,607    |       | 4,101                                |       | 4,415                                |       |
| Other                                                                       |       | 6,131    |       | 6,399                                |       | 5,853                                |       |
| Total  revenues                                                             |       | 347,663  |       | 396,904                              |       | 382,277                              |       |
| Less:  Promotional allowances                                               |       | (34,301  | )          | (33,718                              | )          | (31,953                              | )          |
| Net  revenues                                                               |       | 313,362  |       | 363,186                              |       | 350,324                              |       |
|                                                                        |       |     |       |                                 |       |                                 |       |
| **COSTS AND EXPENSES**                                                      |       |     |       |                                 |       |                                 |       |
| Gaming:                                                                     |       |     |       |                                 |       |                                 |       |
| Casino                                                                      |       | 47,348   |       | 46,809                               |       | 48,427                               |       |
| Truck  stop                                                                 |       | 38,784   |       | 40,990                               |       | 37,954                               |       |
| Pari-mutuel                                                                 |       | 26,077   |       | 31,172                               |       | 32,977                               |       |
| Food  and beverage                                                          |       | 13,521   |       | 15,417                               |       | 16,416                               |       |
| Convenience  store—fuel                                                |       | 57,139   |       | 90,714                               |       | 77,269                               |       |
| Convenience  store—other                                               |       | 15,179   |       | 17,222                               |       | 15,175                               |       |
| Hotel                                                                       |       | 865      |       | 1,038                                |       | 1,115                                |       |
| Marketing,  general and administrative                                      |       | 65,783   |       | 68,889                               |       | 69,704                               |       |
| Unrealized  loss on change in fair value of investment in equity securities |       | 309      |       | 6,577                                |       | —                               |       |
| Goodwill  impairment                                                        |       | —   |       | 199                                  |       | —                               |       |
| Abandonment  costs                                                          |       | —   |       | 829                                  |       | —                               |       |
| Depreciation  and amortization                                              |       | 21,482   |       | 20,109                               |       | 18,270                               |       |
|                                                                        |       |     |       |                                 |       |                                 |       |
| Total  costs and expenses                                                   |       | 286,487  |       | 339,965                              |       | 317,307                              |       |
|                                                                        |       |     |       |                                 |       |                                 |       |
| OPERATING  INCOME                                                           |       | 26,875   |       | 23,221                               |       | 33,017                               |       |
|                                                                        |       |     |       |                                 |       |                                 |       |
| Interest  income                                                            |       | 26       |       | 194                                  |       | 345                                  |       |
| Interest  expense, net of amounts capitalized                               |       | (25,196  | )          | (27,452                              | )          | (28,453                              | )          |
|                                                                        |       |     |       |                                 |       |                                 |       |
| NET  INCOME (LOSS)                                                          |       | 1,705    |       | (4,037                               | )          | 4,909                                |       |
|                                                                        |       |     |       |                                 |       |                                 |       |
| Net  (income) loss attributable to the noncontrolling interest              |       | —   |       | (71                                  | )          | 73                                   |       |
|                                                                        |       |     |       |                                 |       |                                 |       |
| NET INCOME  (LOSS) ATTRIBUTABLE TO JACOBS ENTERTAINMENT, INC.               |       | $        | 1,705      |                                 | $          | (4,108                               | )          | $ | 4,982 |   |

 

Seenotes to consolidated financial statements.

 

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**JACOBSENTERTAINMENT, INC.****AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY**

**FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 and 2007**

**(Dollars inthousands)**

 
| ** **                                                    | ** ** | **Jacobs Entertainment, Inc. Stockholder** | ** ** | ** **                       | ** ** | ** **                                     | ** ** | ** **                                           | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------------------|------------|----------------------------------|------------|------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                    | ** ** | **Common  Stock***                                        | ** ** | **Additional  Paid-in  Capital** | ** ** | **(Accumulated  Deficit)  Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income (Loss)** | ** ** | **Noncontrolling  Interest** | ** ** | **Comprehensive  Income (Loss)** | ** ** | **Total** | ** ** |
| BALANCES,

JANUARY 1, 2007 (As  adjusted, see Note 4)    |       | $                                                         | —     |                             | $          | 36,499                                         |       | $                                                    | (2,716     | ) | $ | 1,999 |   | $ | 214 |   | $ | — |   | $ | 35,996 |   |
| Capital  contribution                                         |       |                                                      |       | 8,910                            |       |                                           |       |                                                 |       |   |   |   |   | 8,910 |   |
| Distributions                                                 |       |                                                      |       | (12,470                          | )          | (3,973                                         | )          |                                                 |       |   |   |   |   | (16,443 | ) |
| Comprehensive  income (loss):                                 |       |                                                      |       |                             |       |                                           |       |                                                 |       |   |   |   |   |   |   |
| Change in fair  value of equity securities available-for-sale |       |                                                      |       |                             |       |                                           |       | (4,418                                               | )          |   |   | (4,418 | ) | (4,418 | ) |
| Net income (loss)  (As adjusted, see Note 4)                  |       |                                                      |       |                             |       | 4,982                                          |       |                                                 |       | (73 | ) | 4,909 |   | 4,909 |   |
| Total  comprehensive income (As adjusted, see Note 4)         |       |                                                      |       |                             |       |                                           |       |                                                 |       |   |   | 491 |   | 491 |   |
| BALANCES,

DECEMBER 31, 2007  (As adjusted, see Note 4)  |       | $                                                         | —     |                             | $          | 32,939                                         |       | $                                                    | (1,707     | ) | $ | (2,419 | ) | $ | 141 |   | $ | — |   | $ | 28,954 |   |
| Distributions                                                 |       |                                                      |       | (1,800                           | )          |                                           |       |                                                 |       |   |   |   |   | (1,800 | ) |
| Comprehensive  income (loss):                                 |       |                                                      |       |                             |       |                                           |       |                                                 |       |   |   |   |   |   |   |
| Change in fair  value of equity securities                    |       |                                                      |       |                             |       |                                           |       | 2,419                                                |       |   |   | 2,419 |   | 2,419 |   |
| Net (loss) income  (As adjusted, see Note 4)                  |       |                                                      |       |                             |       | (4,108                                         | )          |                                                 |       | 71 |   | (4,037 | ) | (4,037 | ) |
| Total  comprehensive loss (As adjusted, see Note 4)           |       |                                                      |       |                             |       |                                           |       |                                                 |       |   |   | (1,618 | ) | (1,618 | ) |
| BALANCES,

DECEMBER 31, 2008 (As  adjusted, see Note 4)       |       | $                                                         | —     |                             | $          | 31,139                                         |       | $                                                    | (5,815     | ) | $ | — |   | $ | 212 |   | $ | — |   | $ | 25,536 |   |
| Capital  contribution                                         |       |                                                      |       | 942                              |       |                                           |       |                                                 |       |   |   |   |   | 942 |   |
| Distributions                                                 |       |                                                      |       | (3,238                           | )          |                                           |       |                                                 |       |   |   |   |   | (3,238 | ) |
| Acquisition of  noncontrolling interest                       |       |                                                      |       |                             |       |                                           |       |                                                 |       | (212 | ) |   |   | (212 | ) |
| Net income **                                                 |       |                                                      |       |                             |       | 1,705                                          |       |                                                 |       |   |   | 1,705 |   | 1,705 |   |
| BALANCES,

DECEMBER 31, 2009                                  |       | $                                                         | —     |                             | $          | 28,843                                         |       | $                                                    | (4,110     | ) | $ | — |   | $ | — |   | $ | 1,705 |   | $ | 24,733 |   |

 

----

*                 The par value amount of the JacobsEntertainment, Inc. 1,320 shares of Class A common stock and 180shares of Class B common stock outstanding for the periods presented isless than $500 and is therefore presented as $0 due to rounding.

 

**          For the year ended December 31,2009, comprehensive income is equal to net income and is entirely attributableto the Jacobs Entertainment, Inc. stockholder.

 

See notes to unaudited condensed consolidatedfinancial statements.

 

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**JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 and 2007**

**(Dollars in thousands)**

 
| ** **                                                                                | ** ** | **2009**   | ** ** | **2008  (As  adjusted,  see Note 4)** | ** ** | **2007  (As  adjusted,  see Note 4)** | ** ** |
|-------------------------------------------------------------------------------------------|------------|------------|------------|---------------------------------------|------------|---------------------------------------|------------|
| **OPERATING ACTIVITIES:**                                                                 | ** ** | ** ** | ** ** | ** **                            | ** ** | ** **                            | ** ** |
| Net income (loss)                                                                         |       | $          | 1,705      |                                  | $          | (4,037                                | )          | $ | 4,909 |   |
| Adjustments to reconcile net income (loss) to net  cash provided by operating activities: |       |       |       |                                  |       |                                  |       |
| Depreciation and amortization                                                             |       | 21,482     |       | 20,109                                |       | 18,270                                |       |
| Goodwill impairment                                                                       |       | —     |       | 199                                   |       | —                                |       |
| Unrealized loss on change in fair value of  investment in equity securities               |       | 309        |       | 6,577                                 |       | —                                |       |
| Loss (gain) on sale of equipment                                                          |       | 203        |       | 240                                   |       | (115                                  | )          |
| Deferred financing cost amortization                                                      |       | 1,655      |       | 1,481                                 |       | 1,510                                 |       |
| Noncash abandonment costs                                                                 |       | —     |       | 782                                   |       | —                                |       |
| Other                                                                                     |       | 9          |       | (75                                   | )          | 55                                    |       |
| Changes in operating assets and liabilities, net of  acquisitions:                        |       |       |       |                                  |       |                                  |       |
| Restricted cash                                                                           |       | 302        |       | (25                                   | )          | (447                                  | )          |
| Accounts receivable, net                                                                  |       | 15         |       | 607                                   |       | 1,088                                 |       |
| Inventory                                                                                 |       | (125       | )          | (93                                   | )          | (608                                  | )          |
| Prepaid expenses and other assets                                                         |       | 77         |       | 23                                    |       | 133                                   |       |
| Accounts payable                                                                          |       | (1,861     | )          | 2,692                                 |       | 1,494                                 |       |
| Accrued expenses and other noncurrent liabilities                                         |       | (1,855     | )          | (2,511                                | )          | 858                                   |       |
| Due from/to affiliates                                                                    |       | (7         | )          | (385                                  | )          | 1,926                                 |       |
| Net cash provided by operating activities                                                 |       | 21,909     |       | 25,584                                |       | 29,073                                |       |
| **INVESTING ACTIVITIES:**                                                                 | ** ** | ** ** | ** ** | ** **                            | ** ** | ** **                            | ** ** |
| Additions to property, plant and equipment                                                |       | (16,104    | )          | (17,208                               | )          | (28,339                               | )          |
| Proceeds from sale of equipment                                                           |       | 389        |       | 370                                   |       | 280                                   |       |
| Purchase of device rights                                                                 |       | (967       | )          | (900                                  | )          | (1,002                                | )          |
| Acquisition of truck stop, net of cash acquired                                           |       | —     |       | —                                |       | (4,234                                | )          |
| Acquisition of noncontrolling interest                                                    |       | (212       | )          | —                                |       | —                                |       |
| Net cash used in investing activities                                                     |       | (16,894    | )          | (17,738                               | )          | (33,295                               | )          |
| **FINANCING ACTIVITIES:**                                                                 | ** ** | ** ** | ** ** | ** **                            | ** ** | ** **                            | ** ** |
| Payments to obtain financing                                                              |       | (555       | )          | —                                |       | (342                                  | )          |
| Proceeds from long-term debt                                                              |       | —     |       | —                                |       | 585                                   |       |
| Proceeds from revolving line of credit                                                    |       | 29,463     |       | 20,038                                |       | 38,500                                |       |
| Payments on long-term debt                                                                |       | (1,363     | )          | (1,702                                | )          | (1,942                                | )          |
| Payments on revolving line of credit                                                      |       | (27,000    | )          | (27,000                               | )          | (15,000                               | )          |
| Distributions to stockholder                                                              |       | (3,238     | )          | (1,800                                | )          | (17,443                               | )          |
| Net cash (used in) provided by financing activities                                       |       | (2,693     | )          | (10,464                               | )          | 4,358                                 |       |
| NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                                     |       | 2,322      |       | (2,618                                | )          | 136                                   |       |
| CASH AND CASH EQUIVALENTS—Beginning of year                                          |       | 21,879     |       | 24,497                                |       | 24,361                                |       |
| CASH AND CASH EQUIVALENTS—End of year                                                |       | $          | 24,201     |                                  | $          | 21,879                                |       | $ | 24,497 |   |
| SUPPLEMENTAL CASH FLOW INFORMATION:                                                       |       |       |       |                                  |       |                                  |       |
| Cash paid for interest, net of amounts capitalized                                        |       | $          | 23,622     |                                  | $          | 26,173                                |       | $ | 27,666 |   |
| Non-cash investing and financing activities:                                              |       |       |       |                                  |       |                                  |       |
| Capital contribution exchanged for retirement of  liabilities paid by affiliate           |       | $          | 942        |                                  | $          | —                                |       | $ | 8,910 |   |
| Non-cash additions to property                                                            |       | $          | 1,193      |                                  | $          | 988                                   |       | $ | 2,386 |   |
| Acquisition of property under capital lease  agreements                                   |       | $          | —     |                                  | $          | —                                |       | $ | 40 |   |

 

See notes to consolidatedfinancial statements.

 

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**JACOBS ENTERTAINMENT, INC. ANDSUBSIDIARIES**

** **

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTSAS OF DECEMBER 31, 2009 and 2008, AND FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 and 2007(Dollars in thousands)**

** **

**1.**                   BUSINESSAND ORGANIZATION

 

Jacobs Entertainment, Inc. (“JEI,” the “Company,”“us,” “our,” or “we”) was formed on April 17, 2001 to become ageographically diversified gaming and pari-mutuel wagering company withproperties in Colorado, Nevada, Louisiana, and Virginia.  We are a wholly-owned subsidiary of JacobsInvestments, Inc. (“JII”) and a Qualified Subchapter S-CorporationSubsidiary under the Internal Revenue Code of 1986, as amended.  Jeffrey P. Jacobs, our Chief ExecutiveOfficer (“CEO”),  and his family trustsown 100% of JII’s outstanding Class A and Class B shares.  These persons and their affiliates arereferred to herein as “Jacobs.” We have four reportable segments (Colorado,Nevada, Virginia and Louisiana), as defined by Financial Accounting StandardsBoard (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, *Segment Reporting.*  SeeNote 15.

 

As of December 31, 2009, we owned and operatedfive casinos through wholly-owned subsidiaries. Our casinos include The Lodge Casino at Black Hawk (“The Lodge”) and theGilpin Hotel Casino (“Gilpin”), both in Black Hawk, Colorado, the Gold DustWest Casino (“Gold Dust West-Reno”) in Reno, Nevada, the Gold Dust West-CarsonCity (“Gold Dust West-Carson City”) in Carson City, Nevada and the Gold DustWest-Elko (“Gold Dust West-Elko”) in Elko, Nevada, which opened on March 5,2007.  JEI also owns and operates 18truck plaza video gaming facilities in Louisiana, which are collectivelyreferred to as “Jalou,” “truck stops” or “truck plazas.”  We also receive a percentage of gamingrevenue from an additional truck plaza video gaming facility.  Finally, JEI owns and operates a horse racingtrack with eight satellite wagering facilities in Virginia through a wholly-ownedsubsidiary, Colonial Holdings, Inc. (“Colonial”).

 

On September 4, 2007, we acquired one truck plazavideo gaming facility in Louisiana, which was previously owned by another JIIsubsidiary.  Additionally, on April 1,2008, we acquired a parcel of land referred to as “Lot D” in what we call theNautica Properties area in Cleveland, Ohio. The company that owned this parcel of land and parking lot business waswholly owned by our CEO. Furthermore, on January 21, 2009, we acquired asecond Nautica Properties parcel referred to as “Sugar Warehouse” from alimited partnership controlled by our CEO. The purchases of these three businesses were accounted for ascombinations of entities under common control. Our 2008 and 2007 financial statements were previously adjusted toinclude the operations of the truck plaza and Lot D acquisitions from January 1,2007 to their respective acquisition dates. The accompanying consolidated financial statements have beenretroactively adjusted to include the operations of Sugar Warehouse from January 1,2007.  See Notes 4 and 7 below.

** **

**2.**                   SIGNIFICANTACCOUNTING POLICIES

*** ***

***Consolidation***—The accompanying consolidated financialstatements include the accounts of JEI and its subsidiaries.  All intercompany transactions and balanceshave been eliminated in consolidation.

*** ***

***Cash and Cash Equivalents***—We consider all demand deposits and timedeposits with original maturities of three months or less to be cashequivalents.

*** ***

***Restricted Cash***—Amounts due under agreements with theVirginia Horsemen’s Benevolent and Protective Association, Inc. and theVirginia Harness Horse Association are accrued based on the terms of theagreements.  Funds for purses for futurelive race meets are held in restricted cash accounts.

 

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***Accounts Receivable***—Our accounts receivable balances primarily consist ofreceivables from convenience store fuel sales on account.  Generally, our receivables are collectedwithin two months, and we have had minimal bad debt losses.  We routinely assess the recoverability of allmaterial receivables to determine their collectibility.

*** ***

***Inventory***—Inventory consists of food and beveragesand uniforms at the casinos and of fuel, convenience store, and restaurantitems at Jalou’s truck stop operations, and is recorded at the lower of cost(first-in, first-out method) or market.

*** ***

***Property,Plant, and Equipment***—Property, plant, and equipment are stated at historical cost.  Depreciation is computed using thestraight-line method over the estimated useful lives of the relatedassets.  Leasehold improvements are depreciated,using the straight-line method, over the shorter of the lease term or theuseful life of the asset.  Estimateduseful lives used are as follows:

 
| Land  improvements                 |   | 20-40 years |   |
|------------------------------------|--------|-------------|--------|
| Buildings and  improvements        |   | 5-40 years  |   |
| Equipment,  furniture and fixtures |   | 2-20 years  |   |
| Leasehold  improvements            |   | 5-25 years  |   |

 

Costs of major improvementsare capitalized, while costs of normal repairs and maintenance are charged toexpense as incurred.  Gains or losses ondisposal of assets are recognized as incurred.

*** ***

***Goodwill***—Goodwill represents the excess purchaseprice over the fair value of the net identifiable assets acquired related tothird party acquisitions.  See Notes 3and 4.

*** ***

***IdentifiableIntangible Assets***—Identifiable intangible assets are comprised of revenue rights, deviceuse rights associated with video poker machines used at each truck stop, andrestriction agreements associated with certain Jalou truck stopacquisitions.  Revenue rights areamortized on a straight line basis over 50 years, representing the term of therelated agreement.  Device use rights areamortized on a straight line basis over five years, representing the terms ofthe related agreements.  Restrictionagreements are amortized on a straight line basis over five or ten years,representing the terms of the related agreements.

*** ***

***CapitalizedInterest***—Interestcosts associated with major construction projects are capitalized.  When no debt is incurred specifically for aproject, interest is capitalized on amounts expended for the project using ourweighted average cost of borrowing. Capitalization of interest ceases when the project or discernibleportions of the project are substantially complete.  We amortize capitalized interest over theestimated useful life of the related asset. Capitalized interest for the years ended December 31, 2009, 2008and 2007 was $10, $0 and $159, respectively.

*** ***

***DebtIssue Costs***—Coststhat are incurred by us in connection with the issuance of debt are capitalizedand amortized to interest expense, using the effective interest method, overthe expected terms of the related debt agreements.

*** ***

***Investmentsin Equity Securities***—Investments in equity securities are recorded at fair value andincluded in other noncurrent assets.  SeeNote 6.

*** ***

***SlotClub Liability***—Ourcasinos offer customers the ability to become members in their respective slotclubs.  Once a member, the customer caninsert a special card into slot and video poker machines while playing in ourcasinos to earn “points.”  Based on theirpoint totals, members receive various cash rewards and gift prizes.  We accrue a liability based on the pointsearned by the members of the slot clubs with the associated reduction inrevenues recorded to Promotional Allowances (see below).  Redemptions are deducted from the accruedliability.  The slot club liability is acomponent of accrued expenses in the accompanying consolidated balance sheets.

 

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***Outstanding Gaming Chip and Token Liability***—When customers exchange cash for gamingchips and tokens, we have a liability as long as those chips and tokens are notredeemed or won by the house.  Thatliability is established by determining the difference between the total chipsand tokens placed in service and the actual inventory of chips and tokens incustody or under the control of the casinos. The chip and token liability is adjusted periodically to reflect anestimate of chips and tokens that will never be redeemed, such as chips andtokens that have been lost or taken as souvenirs and is reflected as acomponent of accounts payable and accrued expenses in the accompanyingconsolidated balance sheets.

*** ***

***Revenue***—***Casino***—Casinorevenues are the net winnings from gaming activities, which is the differencebetween gaming wins and losses. Jackpots, other than the incremental amount of progressive jackpots, arerecognized at the time they are won by customers.  We accrue the incremental amount ofprogressive jackpots as the progressive machine is played and the progressivejackpot amount increases, with a corresponding reduction of casino gamingrevenues.

*** ***

***R******evenue***—***Truck Stop***—Videopoker revenue is the net winnings from gaming activities of our truck stops,which is the difference between gaming wins and losses.

*** ***

***Revenue***—***Pari-Mutuel***—Pari-mutuelrevenue includes our share of pari-mutuel wagering on live races after paymentsof amounts returned on winning wagers, and our share of wagering from importand export simulcasting at our racing centers.

*** ***

***Revenue***—***Food and Beverage***—Werecognize food and beverage revenue at the time that goods or services arerendered.

*** ***

***Revenue***—***Convenience Store***—***Fuel and Other***—We recognize revenueat the time of sale for fuel and convenience-store items.

*** ***

***Revenue***—***Hotel***—Werecognize hotel revenue at the time rooms are provided to customers.

*** ***

***Revenue***—***Other***—Otherrevenue consists of ATM commissions, cash advance commissions, miscellaneousvending commissions, rental income, admission charges, and program andconcession sales at Colonial’s live racing events.  Other revenues are recognized at the timeservices are provided to patrons.

*** ***

***Promotional Allowances***—Gross revenues include the retail amountof rooms, food and beverages, and other goods and services providedgratuitously to customers.  Whencomputing net revenues, the retail amount of rooms, food and beverages andcoupons, as well as slot club player points earned, is deducted from grossrevenues as promotional allowances.  Theestimated cost of such complimentary services in our casino operations forrooms, food, and beverages is charged to casino operations.  The estimated cost of such complimentaryservices in our truck stops related to video poker operations for food andbeverages is charged to truck stop operations. The estimated cost of such complimentary services in our truck stopsrelated to fuel operations for food and beverages is charged to conveniencestore operations.  The estimated costs ofcomplimentary services charged to casino operations, truck stop operations andconvenience store operations, respectively, are as follows:

 
| ** **                    | ** ** | **Years Ended December 31** | ** ** |
|-------------------------------|------------|--------------------------------------------|------------|
| ** **                    | ** ** | **2009**                                   | ** ** | **2008** | ** ** | **2007** | ** ** |
|                          |       |                                       |       |   |   |   |   |
| Casino  operations            |       | $                                          | 14,100     |   | $ | 13,686 |   | $ | 11,012 |   |
| Truck stop  operations        |       | 2,265                                      |       | 2,243 |   | 2,005 |   |
| Convenience  store operations |       | 267                                        |       | 463 |   | 599 |   |
|                               |            |                                            |            |  |  |  |  |  |  |  |

 

***Income Taxes***—We have elected for income tax purposesto be treated as a Qualified Subchapter S-Corporation Subsidiary under theInternal Revenue Code of 1986, as amended, and, consequently, no current ordeferred income taxes have been reflected in the accompanying consolidatedfinancial statements as these taxes are the responsibility of the stockholder.

 

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***Long-Lived Assets***—We periodically evaluate the value oflong-lived assets, including property, plant and equipment and identifiableintangibles, for potential impairment. If an impairment is indicated, such impaired assets are written down totheir estimated fair value.  As of December 31,2009 and 2008, we determined that there was no impairment of our long-livedassets other than those discussed in Notes 3 and 13.

*** ***

***Use of Estimates***—The preparation of financial statementsin accordance with accounting principles generally accepted in the UnitedStates of America requires management to make estimates and assumptions thataffect the reported amount of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting periods.

 

We periodically evaluate our policies, and theestimates and assumptions related to such accounting principles.  All of our subsidiary companies operate in ahighly regulated industry.  Our operationsare subject to regulations that describe and regulate operating and internalcontrol procedures.  The majority ofgaming revenue is in the form of cash which by nature does not require complexestimations.  We estimate certainliabilities with payment periods that extend for longer than severalmonths.  Such estimates include theself-insured medical and workers compensation liabilities and litigationcosts.  We believe that these estimatesare reasonable based on past experience with the business and based uponassumptions related to possible outcomes in the future.  Actual results, however, could differ fromthose estimates.

 

Furthermore, we have determined that the policiesassociated with our long-lived assets, goodwill and identifiable intangibleassets, and related estimates are critical to the preparation of ourconsolidated financial statements.  Wehave a significant investment in long-lived property and equipment.  We estimate that the undiscounted future cashflows expected to result from the use of these assets exceeds the currentcarrying value of these assets.  Anyadverse change to the estimate of these undiscounted cash flows couldnecessitate an impairment charge that would adversely affect operatingresults.  We estimate the useful livesfor our assets based on historical experience, estimates of assets’ commerciallives, and the likelihood of obsolescence. Should the actual useful life of a class of assets differ from theestimated useful life, we would record an impairment charge.

*** ***

***New Accounting Guidance***—New authoritative accounting guidance under FASB ASC Topic105,*Generally Accepted Accounting Principles*(“ASC Topic 105”), established the FASB Accounting Standards Codification asthe source of authoritative U.S. generally accepted accounting principles (“GAAP”)recognized by the FASB to be applied to rules and interpretive releases ofthe U.S. Securities and Exchange Commission (“SEC”) under federal securitieslaws as authoritative GAAP for SEC registrants.  ASC Topic 105 supersedesexisting FASB, American Institute of Certified Public Accountants, EmergingIssues Task Force and related literature. All other accounting literature is considered non-authoritative. ASCTopic 105 changes the way we cite authoritative guidance within our financialstatements and accounting policies.  Thenew authoritative guidance under ASC Topic 105 became effective for periodsending on or after September 15, 2009 and did not have a material impacton our consolidated financial statements.

 

New accounting guidanceunder FASB ASC Topic 805, *Business Combinations*(“ASC Topic 805”), established principles and requirements for how an acquirerin a business combination: (a) recognizes and measures in its financialstatements the identifiable assets acquired, the liabilities assumed, and anynoncontrolling interest in the acquiree; (b) recognizes and measures thegoodwill acquired in the business combination or a gain from a bargain purchaseoption; (c) determines what information to disclose to enable users of thefinancial statements to evaluate the nature and financial effects of thebusiness combination; and (d) determines the initial recognition andmeasurement, subsequent measurement and accounting, and disclosures of assetsand liabilities arising from contingencies in a business combination.  ASCTopic 805 was effective for us on January 1, 2009.  ASC Topic 805will have an impact on our consolidated results of operations, cash flows andfinancial position, but the nature and magnitude of the specific effects willdepend upon the nature, terms and size of the acquisitions we consummate in thefuture.  No material businesscombinations have been consummated since adoption.

 

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New accounting guidance under FASB ASC Topic 810, *Consolidation*(“ASC Topic 810”), established accounting and reporting standards pertaining toownership interests in subsidiaries held by parties other than the parent, theamount of net income attributable to the parent and to the noncontrollinginterest, changes in a parent’s ownership interest, and the valuation of anyretained noncontrolling equity investment when a subsidiary is deconsolidated.ASC Topic 810 also establishes disclosure requirements that clearlyidentify and distinguish between the interests of the parent and the interestsof the noncontrolling owners. We adopted ASC Topic 810 effective January 1,2009 in conjunction with the acquisition of Sugar Warehouse.  See Note 4. Such adoption did not have a material impact on our consolidatedfinancial statements.

 

Additional new guidanceunder ASC Topic 810 amends existing accounting literature to require anenterprise to perform an analysis to determine whether any variable interestheld gives it a controlling financial interest in a variable interest entityand requires an ongoing reassessment of this nature.  The standard also requires enhanceddisclosures that will provide more transparent information about an entity’sinvolvement in a variable interest entity. The standard is effective for us on January 1, 2010.  We are currently evaluating the impactadoption of this standard will have on our financial statements.

 

New accountingguidance under FASB ASC Topic 855, *Subsequent Events* (“ASC Topic 855”), established generalstandards of accounting for and disclosures of events that occur after thebalance sheet date but before financial statements are issued or are availableto be issued.  ASC Topic 855, as amended, requires SEC filers to evaluatesubsequent events through the date on which the financial statements areissued.  The adoption of this pronouncement did not have a material impacton our consolidated financial statements.

** **

**3.**                   GOODWILLAND IDENTIFIABLE INTANGIBLE ASSETS

 

Wetest goodwill for impairment as of September 30 each year or whencircumstances indicate it is necessary. Testing compares the estimated fair values of our reporting units to thereporting units’ carrying value.  Weconsider a variety of factors when estimating the fair value of our reportingunits, including estimates about the future operating results of each reportingunit, multiples of EBITDA (earnings before interest, income taxes, depreciationand amortization), investment banker market analyses, and recent sales ofcomparable business units if such information is available to us.  A variety of estimates and judgments aboutthe relevance and comparability of these factors to the reporting units aremade.  As of September 30, 2009, wedetermined that goodwill was not impaired at any of our reporting units.However, as of September 30, 2008, we determined the carrying value of thegoodwill in our Gold Dust West-Carson City reporting unit was impaired. Marketconditions in 2008 resulted in Gold Dust West-Carson City not meeting thefinancial performance expectations originally forecast at the time ofacquisition.  Consequently, Gold DustWest-Carson City recorded a goodwill impairment charge of $199 during the yearended December 31, 2008.  As aresult of the impairment charge, the carrying amount of the Gold DustWest-Carson City goodwill was reduced to zero.

 

The changes in thecarrying amount of goodwill for the years ended December 31, 2009 and 2008are as follows:

 
| ** **                           | ** ** | **2009** | ** ** | **2008** | ** ** |
|--------------------------------------|------------|----------|------------|----------|------------|
|                                 |       |     |       |     |       |
| Balance  as of beginning of year     |       | $        | 46,471     |     | $          | 46,670 |   |
| Goodwill  impairment during the year |       | —   |       | (199     | )          |
|                                 |       |     |       |     |       |
| Balance as of  end of year           |       | $        | 46,471     |     | $          | 46,471 |   |

 

In addition, we haveassessed the useful lives of our identifiable intangible assets without anychange to the previously established amortization periods of such assets.

 

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Identifiable intangibleassets as of December 31, 2009 and 2008 consist of the following:

 
| ** **                      | ** ** | **Weighted**  | ** ** | **2009**     | ** ** | **2008**         | ** ** |
|---------------------------------|------------|---------------|------------|--------------|------------|------------------|------------|
| ** **                      | ** ** | **Average**   | ** ** | **Gross**    | ** ** | ** **       | ** ** | **Net** | ** ** | **Gross** | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **                      | ** ** | **Remaining** | ** ** | **Carrying** | ** ** | **Accumulated**  | ** ** | **Carrying** | ** ** | **Carrying** | ** ** | **Accumulated** | ** ** | **Carrying** | ** ** |
| ** **                      | ** ** | **Life**      | ** ** | **Amount**   | ** ** | **Amortization** | ** ** | **Amount** | ** ** | **Amount** | ** ** | **Amortization** | ** ** | **Amount** | ** ** |
|                            |       |          |       |         |       |             |       |   |   |   |   |   |   |   |   |
| Amortizable  intangible assets: |       |          |       |         |       |             |       |   |   |   |   |   |   |   |   |
| Revenue rights                  |       | 42.00         |       | $            | 6,000      |             | $          | 960 |   | $ | 5,040 |   | $ | 6,000 |   | $ | 840 |   | $ | 5,160 |   |
| Device use  rights              |       | 2.09          |       | 9,064        |       | 6,275            |       | 2,789 |   | 8,820 |   | 5,393 |   | 3,427 |   |
| Restriction  agreements         |       | 2.45          |       | 1,369        |       | 1,025            |       | 344 |   | 1,779 |   | 1,174 |   | 605 |   |
|                            |       |          |       |         |       |             |       |   |   |   |   |   |   |   |   |
| Total                           |       |          |       | $            | 16,433     |             | $          | 8,260 |   | $ | 8,173 |   | $ | 16,599 |   | $ | 7,407 |   | $ | 9,192 |   |

 

Aggregate amortization expense of identifiableintangible assets was $1,995, $1,398, and $1,281 for the years ended December 31,2009, 2008 and 2007, respectively.

 

Estimated amortizationexpense for the years ending December 31 (in thousands):

 
| 2010       |   | $      | 1,493  |   |
|------------|--------|--------|--------|--------|
| 2011       |   | 894    |   |
| 2012       |   | 708    |   |
| 2013       |   | 408    |   |
| 2014       |   | 208    |   |
| Thereafter |   | 4,462  |   |
|       |   |   |   |
| Total      |   | $      | 8,173  |   |

 

**4.**                   RECENTACQUISITION ACTIVITY

* *

*Acquisitionof Silver Dollar*

 

On October 4, 2006,we entered into an asset purchase agreement with an unaffiliated party toacquire the Silver Dollar truck plaza in Shreveport, Louisiana (“Silver Dollar”),which was under construction.  On January 15,2007, we agreed with the seller to operate the business and simultaneouslyassume the terms of its land lease.  Theland lease has an initial term of ten years, which began July 1, 2005,with seven five-year extensions at the option of JEI.  Rentals under the lease increase throughoutthe initial term from $72 per year to $196 per year.  Rentals under the extension periods increasefrom $196 per year to $262 per year.  JEIhas the right of first refusal to purchase the leased land should the lessorreceive a bona-fide, arm’s length, good faith offer to purchase any or all ofthe real property and improvements from a third party.

 

On February 9,2007, we began operating the convenience store and fuel operations and on March 29,2007, we acquired Silver Dollar for $4,000 plus acquisition costs of $197.  The purchase agreement included an “earn-outpayment” (additional purchase price) to be paid 19 calendar months after thevideo poker devices were legally operating at Silver Dollar.  The earn-out payment was based on 5.0 timesannualized EBITDA of the truck stop, less the initial $4,000 purchase pricepaid, up to a maximum of $1,500 additional purchase price.  We have determined that no additionalpurchase price is due to the seller.

 

On September 18,2007, Silver Dollar received approval from Louisiana gaming regulators to offerup to 50 video poker devices, and on September 28, 2007, we beganoperating 40 video poker devices. During the first quarter of 2008, we beganoperating 10 additional video poker devices for a total of 50 video pokerdevices.

 

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Under the purchase method of accounting, the totalpurchase price is allocated to Silver Dollar’s tangible and intangible assetsand liabilities based on their estimated fair value as of the acquisitiondate.  A valuation was completed todetermine the fair values for property and equipment acquired.  Goodwill resulting from the Silver Dollartransaction is attributable to anticipated future cash flows associated withthe acquired entity.  The following tablesummarizes the allocation of the purchase price to net assets acquired as of March 29,2007, for the purchase of Silver Dollar:

 
| ** **                      | ** ** | **Silver Dollar** | ** ** |
|---------------------------------|------------|-------------------|------------|
|                            |       |              |       |
| Property and  equipment         |       | $                 | 1,459      |   |
| Goodwill                        |       | 2,638             |       |
| Identifiable  intangible assets |       | 100               |       |
|                            |       |              |       |
| Total assets  acquired          |       | $                 | 4,197      |   |

 

*Acquisitionof Silver Fox*

 

On September 4,2007, with funds available on our revolving credit facility, we acquired from Gameco Holdings, Inc.(“Gameco”), a wholly-owned subsidiary of JII, the Silver Fox truck plaza video gaming facility for$13,794.  Silver Fox is located in DenhamSprings, Louisiana.  The acquisition ofthe truck plaza facility was accounted for as a combination of entities undercommon control.  Therefore, theacquisition has been recorded at Jacobs’ historical cost basis in the netassets transferred.

 

At January 1, 2007,Silver Fox’s debt outstanding totaled $9,021. On September 4, 2007, with proceeds from the sale of Silver Fox,Jacobs repaid the outstanding principal and interest of $8,910.  The debt was not assumed by JEI and isreflected as a capital contribution in the statement of stockholder’s equity.

 

A distribution of $13,794was recorded on the acquisition date. The net assets of the entity acquiredhave been retroactively accounted for in JEI’s financial statements.  Therefore, an effective net distribution of$2,339 (the $13,794 distribution reduced by the $11,455 of net assets acquired)results from the transaction.

 

The following table summarizes the net assets acquired and liabilitiesassumed as of September 4, 2007, for the Silver Fox acquisition:

 
| ** **                      | ** ** | **Silver Fox** | ** ** |
|---------------------------------|------------|----------------|------------|
|                            |       |           |       |
| Current assets                  |       | $              | 609        |   |
| Property and  equipment, net    |       | 2,743          |       |
| Goodwill                        |       | 7,342          |       |
| Other assets                    |       | 4              |       |
| Identifiable  intangible assets |       | 1,004          |       |
|                            |       |           |       |
| Total assets  acquired          |       | 11,702         |       |
|                            |       |           |       |
| Current  liabilities assumed    |       | 247            |       |
|                            |       |           |       |
| Net assets  acquired            |       | $              | 11,455     |   |

 

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*Acquisition of Nautica Lot D*

 

As discussed in Notes 1 and 7, on April 1, 2008, we acquired Lot Dfor $800. The acquisition of Lot D and its parking lot business was accountedfor as a combination of entities under common control.  Therefore, the acquisition has been recordedat our CEO’s historical cost bases in the assets and liabilities transferred. Adistribution of $800 was recorded on the acquisition date, and the net assetsof the entity acquired have been retroactively accounted for in our financialstatements.  Therefore, an effective netdistribution of $669 (the $800 distribution reduced by the $131 of net assetsacquired) results from the transaction.

 

Thefollowing table summarizes the net assets acquired and liabilities assumed asof April 1, 2008, for the Lot D acquisition:

 
| ** **                   | ** ** | **Lot D** | ** ** |
|------------------------------|------------|-----------|------------|
|                         |       |      |       |
| Current assets               |       | $         | 1          |   |
| Property and  equipment, net |       | 143       |       |
|                         |       |      |       |
| Total assets  acquired       |       | 144       |       |
|                         |       |      |       |
| Current  liabilities assumed |       | 13        |       |
|                         |       |      |       |
| Net assets  acquired         |       | $         | 131        |   |

*** ***

*Acquisition of Nautica Sugar Warehouse*

 

As discussed in Notes 1and 7, on January 21, 2009, we acquired Sugar Warehouse for $2,450. SugarWarehouse is a building comprised of 47,380 square feet of net rentable spacewith commercial tenants.  The acquisitionof Sugar Warehouse and its related business was accounted for as a combinationof entities under common control. Therefore, the portion acquired from our CEO has been recorded at thehistorical cost bases in the assets and liabilities transferred and the portionacquired from third parties has been recorded at fair value at the acquisitiondate using the acquisition method of accounting in accordance with ASC Topic805.  Accordingly, the accompanying consolidatedfinancial statements have been retroactively adjusted from January 1, 2007to include the operations of the business as though the transaction hadoccurred at January 1, 2007. A distribution of $2,238 was recorded on theacquisition date for the portion of the purchase price attributable to ourCEO.  Additionally, the net assetsattributable to the noncontrolling interest holders have been reflected as aseparate component of equity in connection with the retroactive adjustmentdiscussed above.

 

If casino gaming were tobecome legalized in Ohio within seven years from the purchase date and afor-profit casino is licensed on the Nautica Properties, the purchase price ofSugar Warehouse could increase based on independent appraisals of the land and improvementvalues.  Any additional purchase priceshall be equal to the fair market value of the property at the time that alicense is issued to JEI in the State of Ohio for a for-profit casino less thepurchase price previously paid.  The fairmarket value shall be determined based upon the average of three independentappraisals prepared at that time.  Thereis no maximum additional purchase price. We will continue to evaluate the fair value of this additionalcontingent purchase price at each balance sheet date throughout the term of theagreement.  If applicable, any additionalpurchase price would be accounted for consistently with the originalacquisition accounting, whereby the portion attributable to the related partywould be accounted for as a combination of entities under common control and asa distribution, and the portion attributable to third parties would beaccounted for using the acquisition method of accounting.  At December 31, 2009, the fair value ofthe Sugar Warehouse contingent purchase price was immaterial to the financialposition of JEI but could have a material impact in the future if and whengaming becomes legalized in Ohio and a casino license is granted for thissite.  Casino gaming at four sites, not including our Nautica Properties,was approved on November 3, 2009 by Ohio voters.  See Note 12.

 

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The following tablesummarizes the net assets acquired and liabilities assumed as of January 21,2009, for the Sugar Warehouse acquisition considering both the portion acquiredfrom our affiliate and the noncontrolling interest holders:

 
| ** **                   | ** ** | **Sugar  Warehouse** | ** ** |
|------------------------------|------------|----------------------|------------|
|                         |       |                 |       |
| Current assets               |       | $                    | 47         |   |
| Property and  equipment, net |       | 1,775                |       |
|                         |       |                 |       |
| Total assets  acquired       |       | 1,822                |       |
|                         |       |                 |       |
| Current  liabilities assumed |       | 38                   |       |
| Other long-term liabilities  |       | 63                   |       |
|                         |       |                 |       |
| Total  liabilities assumed   |       | 101                  |       |
|                         |       |                 |       |
| Net assets  acquired         |       | $                    | 1,721      |   |

 

The following schedulediscloses the effects on JEI’s equity due to the change in ownership interestin Sugar Warehouse discussed above:

 
| ** **                                                                              | ** ** | **Year Ended December 31,** | ** ** |
|-----------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                              | ** ** | **2009**                                   | ** ** | **2008  (As adjusted,  see Note 4)** | ** ** |
|                                                                                    |       |                                       |       |   |   |
| Net  income (loss) attributable to JEI                                                  |       | $                                          | 1,705      |   | $ | (4,108 | ) |
| Decrease  in JEI’s equity for purchase of Sugar Warehouse noncontrolling interest  |       | (212                                       | )          | — |   |
| Change from net  income attributable to JEI and purchase of the noncontrolling interest |       | $                                          | 1,493      |   | $ | (4,108 | ) |

 

*Acquisitionof Land and Land Options along the Gulf Coast of Mississippi*

 

During 2008, we completedseveral land purchase transactions with owners of real estate along the GulfCoast of Mississippi, resulting in total purchases of $3,047, includingacquisition costs of $246.  During January 2009,we completed one additional land purchase transaction at a total purchase priceof $307.

 

During September 2008,we entered into two land purchase options totaling $160.  During the second quarter of 2009, these twoland purchase options were extended to July 1, 2010 for $200.  Each option agreement contains threeadditional one-year extensions at the option of JEI.  The total purchase price of all parcels underthese two option agreements is $13,000. During November 2008, we entered into a third land purchase optiontotaling $100, which expired in May 2009.

 

We continue to conductdue diligence regarding the feasibility of developing and constructing a mixeduse project which may include a licensed gaming establishment, a hotel,restaurant, condominiums, retail development and parking facilities.  Our application filed with Hancock County,Mississippi, to rezone the property to waterfront district, as part of our planto build a casino resort and hotel, was approved by the Planning Commission butdenied by the Hancock County Board of Supervisors by a vote of 3 to 2 in April 2009.  However, we continue to evaluate rezoning ofthe property, including the potential to file an amended application withHancock County.  The project is subjectto all necessary approvals from the Mississippi Gaming Commission and thenecessary financing.

 

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**5.**                   LONG-TERMDEBT

** **

Long-term debt and capital lease obligations as of December 31,2009 and 2008 consist of the following:

 
| ** **                                               | ** ** | **2009** | ** ** | **2008  (As adjusted,  see Note 4)** | ** ** |
|----------------------------------------------------------|------------|----------|------------|--------------------------------------|------------|
|                                                     |       |     |       |                                 |       |
| 93/4% Senior  Unsecured Notes due 2014                   |       | $        | 210,000    |                                 | $          | 210,000 |   |
| Senior  Secured Term Loan Facility due 2012              |       | 38,600   |       | 39,000                               |       |
| Senior  Secured Delayed Draw Term Loan Facility due 2012 |       | 19,350   |       | 19,550                               |       |
| Senior  Secured Revolving Credit Facility expiring 2011  |       | 19,000   |       | 16,537                               |       |
| Black  Hawk Bonds Payable due 2011                       |       | 885      |       | 1,525                                |       |
| Capital  Leases and other                                |       | 4,049    |       | 4,768                                |       |
|                                                     |       |     |       |                                 |       |
| Total  indebtedness                                      |       | 291,884  |       | 291,380                              |       |
|                                                     |       |     |       |                                 |       |
| Less  current indebtedness                               |       | (2,117   | )          | (1,360                               | )          |
|                                                     |       |     |       |                                 |       |
| Total long-term  indebtedness                            |       | $        | 289,767    |                                 | $          | 290,020 |   |

 

***9******3******/******4******% Senior Unsecured Notes due 2014and Senior Secured Credit Facility***

 

We have issued seniorunsecured notes in the amount of $210,000 bearing interest at 93⁄4% due June 15,2014 with interest only payments due each June 15 and December 15.  We also have a $100,000 senior secured creditfacility consisting of: (i) a $40,000 five-year revolving credit facility;(ii) a $40,000 six-year term loan facility; and (iii) a $20,000six-year delayed draw term loan. Borrowings under our senior secured credit facility bear interest at arate equal to an applicable margin plus, at our option, either (a) a baserate determined by reference to the higher of (1) the prime rate, asdefined, and (2) the federal funds rate plus 1⁄2 of 1% or (b) a LIBORrate for the interest period relevant to such borrowing adjusted for certaincosts.  At December 31, 2009,the blended interest rate on our senior secured credit facility wasapproximately 3.04%. We have $1,900 of outstanding letters of credit as of December 31, 2009 resulting in$19,100 available on the revolving credit facility.

 

Our $210,000 of 93⁄4%senior unsecured notes rank equally in right of payment with all of ourexisting and future unsecured senior indebtedness and senior to any existingand future subordinated indebtedness. The notes are effectively subordinated to any secured indebtedness(including indebtedness under our senior credit facility) up to the value ofthe collateral securing such indebtedness. The notes are guaranteed by our current and future restrictedsubsidiaries that also guarantee our senior secured credit facility.  Our $210,000 of outstanding senior unsecurednotes cannot be redeemed until June 15, 2010. We can, however, withproceeds from an equity offering on more than one occasion redeem up to 35% ofthe aggregate principal amount of the notes at a redemption price of 109.75% ofthe principal amount thereof, plus accrued and unpaid interest.

 

There are many restrictions and covenants placed upon us under both oursecured and unsecured indebtedness. We are required to maintain certainoperating performance ratios, our covenants impose various restrictions on usas to the timing of redemptions of our notes, there are various change ofcontrol covenants, and there are many other restrictive and operationallimitations on us that would be difficult or impossible for us to change. Theoccurrence of any one of these events and/or covenant violations to our debtagreements could have a material adverse effect on our business, financialcondition, results of operations, prospects and ability to satisfy ourobligations under our debt agreements.  The failure torepay or maintain compliance with our covenants on any of our indebtednesswould result in an event of default under both our senior credit facility andour note indenture.

 

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We entered into the first amendment to our credit agreement whichbecame effective May 4, 2007.  Theamendment increased the maximum permitted total leverage ratio, increased themaximum permitted senior secured leverage ratio, decreased the minimum interestcoverage ratio and adjusted the test periods.

 

At March 31, 2009, certain debt covenants under our senior securedcredit facility were to becomemore restrictive.   We entered into asecond amendment to our credit agreement which became effective February 5,2009.  The second amendment increased themaximum permitted senior secured leverage ratio for the remaining testperiods.  At December 31, 2009, wewere in compliance with the revised financial covenants.

 

On March 23, 2010, we obtained consents from oursenior secured lenders to enter into an Amendment and Restatement Agreement,including as an exhibit the form of an Amended and Restated Credit Agreementthat will be executed once certain customary conditions are satisfied (the “NewAgreement”). Generally, the New Agreement, among other things, adjusts our bankfinancial covenants, allows for the exclusion of certain items from EBITDA forpurposes of calculating our revised financial covenants, allows for theacquisition of a truck stop in Louisiana, and other minor amendments.Additionally, all but $3,000 of our revolving senior credit facilityaggregating $40,000 due June 2011 (“Class B Revolving Loans”) wasextended to June 2012 (“Class A Revolving Loans”). We have the abilityto raise an additional $3,000 to fully replace the revolver capacity should weso choose.

 

***Black Hawk Bonds Payable due 2011***

 

The Black Hawk bondspayable were issued in two series with interest payments varying between 6.25%and 6.50%.  Principal and interestpayments totaling $368 are due semi-annually beginning in June 2000 andcontinuing until December 2011. These bonds are secured by infrastructure improvements made by TheLodge.

 

***Other Notes Payable***

 

A mortgage note payableto Bank of America, with a maturity date of May 2010, bearing interest ata floating rate equal to 3 month LIBOR plus 2.25% with interest only paymentspayable monthly and a balloon payment due at maturity. This note was secured bycertain real property of Sugar Warehouse Limited Partnership.  This note was paid in full in 2009 by thelimited partnership upon acquisition of Sugar Warehouse by JEI.  See Note 4 above.

 

***Capital Leases***

 

Gold Dust West-Elko has a capital lease on itsbuilding with interest and principal payments of $21 per month, maturing October 2010,with the right to extend the lease three times for five year intervals, or topurchase the land and building for $5,000 any time commencing with the dayafter the last day of the first year of the initial term through the end of theinitial term, or for $5,398 at any time during the first renewal period.  The purchase option is no longer availableafter the first renewal period.  Theeffective interest rate is 16.9%.  Eachlease renewal if elected will result in an increase in monthly payments basedon a base index rate established with the August 2005 Consumer Price Indexas published.

 

Colonial has a capitallease on the land for its satellite wagering facility in Vinton, Virginia, withinterest and principal payments of $10 per month, maturing September 11,2009.  We have the right to extend theterm of the lease five times for five year intervals, or to purchase the landfor $800 at any time after the term and first renewal period of the lease(after September 11, 2014).  Weextended the term of the lease for five years to September 11, 2014, withinterest and principal payments of $11 per month.  The effective interest rate is 11.8%.  Each lease renewal if elected will result inan increase in monthly payments by 10% over the previous lease term.

 

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Colonial has a capital lease on the land and building for its satellitewagering facility in Martinsville, Virginia, with interest and principalpayments of $8 per month, maturing June 1, 2010, with the right to extendthe term of the lease four times for five year intervals, or to purchase theland and building for $700 at any time after the initial term of the lease(after June 1, 2010), with the purchase price increasing 8% with anysuccessive renewal term. The effective interest rate is 10.3%.  Each lease renewal if elected will result inan increase in annual payments by $8 over the lease term.

 

Colonial has a capital lease on the land and building for its satellitewagering facility in Chesapeake, Virginia, with interest and principal paymentsof $6 per month until October 2010, then interest and principal paymentsof $7 per month until October 2015, with three renewal periods of fiveyears each with monthly payments starting at $8 per month increasing to $11 permonth.  The effective interest rate is10.5% per annum.

 

Jalou has a capital leaseon equipment at its truck plaza in Vinton, Louisiana, with interest andprincipal payments of $5 per month until May 2011, with two renewalperiods of five years each with monthly payments starting at $6 per monthincreasing to $7 per month.  Theeffective interest rate is 9.75% per annum.

 

Finally, the Company hastwo capital leases for autos with combined interest and principal payments of$1 per month until May 2011.  Theeffective interest rates are approximately 6% per annum on each lease.

 

Scheduled maturities oflong-term debt and capital lease obligations as of December 31, 2009, areas follows:

 
| 2010       |   | $       | 2,117   |   |
|------------|--------|---------|---------|--------|
| 2011       |   | 19,924  |    |
| 2012       |   | 56,829  |    |
| 2013       |   | 73      |    |
| 2014       |   | 210,867 |    |
| Thereafter |   | 2,074   |    |
|       |   |    |    |
| Total      |   | $       | 291,884 |   |

 

**6**.                   **FAIR VALUE OF FINANCIALINSTRUMENTS**

 

Effective January 1, 2008, we adopted the provisions of FASB ASCTopic 820, *Fair Value Measurements and Disclosures*(“ASC Topic 820”) for all financial and nonfinancial assets and liabilitiesmeasured at fair value on a recurring basis.  Effective January 1,2009, we adopted the provisions of ASC Topic 820 pertaining to nonrecurringfair value measurements of nonfinancial assets and nonfinancial liabilities,which primarily relates to impairment of long-lived assets or goodwill.  The statement establishes a framework formeasuring fair value and requires enhanced disclosures about fair valuemeasurements.  ASC Topic 820 defines fair value as the price thatwould be received to sell an asset or paid to transfer a liability (an exitprice) in an orderly transaction between market participants at the measurementdate.  The statement establishes market or observable inputs as thepreferred sources of values, followed by assumptions based on hypotheticaltransactions in the absence of market inputs.  The statement establishesa hierarchy for grouping these assets and liabilities, based on thesignificance level of the following inputs:

 

·                  Level 1 —inputs are unadjusted quoted prices for *identical*assets or liabilities in active markets.

 

·                  Level 2 — inputsinclude quoted prices for *similar* assetsand liabilities in active markets, and inputs that are observable for the assetor liability, either directly or indirectly, for substantially the full term ofthe financial instrument.

 

·                  Level 3 —inputs are unobservable and considered significant to the fair valuemeasurement.

 

A financial instrument’scategorization within the hierarchy is based upon the lowest level of inputthat is significant to the fair value measurement.

 

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***Investment in Equity Securities***

 

During 2006, we acquired approximately three percent of the outstandingshares of MTR Gaming Group, Inc. (“MTR”), a publicly-traded gamingcompany. Our CEO, Jeffrey P. Jacobs, his father, as well as other entitiesaffiliated with them, also invested in MTR, increasing their combined ownershipto approximately 18.5% of the outstanding common shares of MTR, making thegroup MTR’s largest shareholder. Effective May 6, 2008, our CEO wasappointed to the Board of Directors of MTR, and effective October 31,2008, he was appointed Chairman and three of his nominees were added as Boardmembers.  On June 5, 2009, our CEO’sfather died and on July 31, 2009, a trust established by our CEO wasbequeathed the shares formerly held by his father.  As a result, our CEO and his family trustsnow control the 18.5% interest in MTR. Effective March 12, 2010, our CEO resigned from MTR’s Board ofDirectors.

 

Through October 31, 2008, our investment in MTR was accounted foras an available-for-sale investment and was recorded at fair value and includedin other noncurrent assets, with unrealized gains and losses recognized asaccumulated other comprehensive income (loss). During the fourth quarter of 2008, we determined that we and ouraffiliates had reached a level of significant influence on the operations ofMTR because of the foregoing factors, and were therefore required to accountfor our investment in MTR using the equity method of accounting.  Alternatively, we have elected the fair valueoption permitted by FASB ASC Topic 825, *Financial Instruments*(“ASC Topic 825”), and beginning November 1, 2008, we have recognizedchanges in the fair value of our investment in MTR as unrealized gains/lossesin earnings based on its quoted market price.

 

The following table presents information about our assets measured atfair value on a recurring basis as of December 31, 2009, aggregated by thelevel in the fair value hierarchy within which those assets fall:

 

**Assets Measured at FairValue on a Recurring Basis at December 31, 2009**

 
| ** **                       | ** ** | **Total Fair  Value** | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
|----------------------------------|------------|-----------------------|------------|-------------|------------|-------------|------------|-------------|------------|
|                             |       |                  |       |        |       |        |       |        |       |
| Investment  in equity securities |       | $                     | 1,058      |        | $          | 1,058       |       | —      |       | — |   |
|                                  |            |                       |            |             |            |             |            |             |            |  |  |

 

The following table presents information about our assets measured atfair value on a recurring basis as of December 31, 2008, aggregated by thelevel in the fair value hierarchy within which those assets fall:

 

**Assets Measured at FairValue on a Recurring Basis at December 31, 2008**

 
| ** **                       | ** ** | **Total Fair  Value** | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
|----------------------------------|------------|-----------------------|------------|-------------|------------|-------------|------------|-------------|------------|
|                             |       |                  |       |        |       |        |       |        |       |
| Investment  in equity securities |       | $                     | 1,367      |        | $          | 1,367       |       | —      |       | — |   |
|                                  |            |                       |            |             |            |             |            |             |            |  |  |

 

For the year ended December 31,2009, we recorded an unrealized loss on the change in the fair value of theinvestment totaling $309. At June 30, 2008, prior to electing the fairvalue option, our MTR investment was deemed to have an “other-than-temporary”decline in value. As a result, during the second quarter of 2008, we recordedan impairment of our investment in MTR totaling $4,063.  In addition, on October 31, 2008, priorto electing the fair value option, we recorded an additional “other-than-temporary”impairment charge of $1,700, due to the continuing decline in the stock priceof MTR.  Subsequent to electing the fairvalue option for our investment in MTR, we recorded an additional unrealizedloss on the change in the fair value of the investment totaling $814 during2008.

 

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Consistentwith the requirements of ASC Topic 825 and Rule 4-08(g) of RegulationS-X of the Securities Exchange Act of 1934, the following is summary levelfinancial information of MTR for each of the three years in the period ended December 31,2009 and as of December 31, 2009 and 2008 as derived from its reportsfiled with the SEC:

 
| ** **                       | ** ** | **Years Ended December 31** | ** ** |
|----------------------------------|------------|--------------------------------------------|------------|
| ** **                       | ** ** | **2009**                                   | ** ** | **2008** | ** ** | **2007** | ** ** |
|                             |       |                                       |       |   |   |   |   |
| Net  revenues                    |       | $                                          | 444,155    |   | $ | 470,851 |   | $ | 415,818 |   |
| Total  operating expenses        |       | 421,308                                    |       | 432,617 |   | 388,884 |   |
| Loss from  continuing operations |       | (23,698                                    | )          | (4,386 | ) | (5,490 | ) |
| Net loss                         |       | (22,538                                    | )          | (17,711 | ) | (11,359 | ) |
|                                  |            |                                            |            |  |  |  |  |  |  |  |

 
| ** **              | ** ** | **As of December 31,** | ** ** |
|-------------------------|------------|----------------------------------|------------|
| ** **              | ** ** | **2009**                         | ** ** | **2008** | ** ** |
|                    |       |                             |       |   |   |
| Current  assets         |       | $                                | 72,160     |   | $ | 71,095 |   |
| Noncurrent  assets      |       | $                                | 430,853    |   | $ | 456,615 |   |
| Current liabilities     |       | $                                | 45,879     |   | $ | 70,688 |   |
| Noncurrent  liabilities |       | $                                | 383,861    |   | $ | 361,419 |   |

 

***OtherFinancial Instruments***

 

The following disclosure of estimated fair value ofour financial instruments has been determined using available marketinformation and generally accepted valuation methodologies.  However, considerable judgment is required tointerpret market data in order to develop the estimates of fair value.  Accordingly, the estimates herein are notnecessarily indicative of the amounts we could realize in a current marketexchange.  The use of different marketassumptions and/or estimation methodologies may have a material effect on theestimated fair value amounts.

 

The estimated fair valueof our financial instruments is as follows:

 
| ** **                                           | ** ** | **2009**     | ** ** | **2008**      | ** ** |
|------------------------------------------------------|------------|--------------|------------|---------------|------------|
| ** **                                           | ** ** | ** **   | ** ** | **Estimated** | ** ** | ** ** | ** ** | **Estimated** | ** ** |
| ** **                                           | ** ** | **Carrying** | ** ** | **Fair**      | ** ** | **Carrying** | ** ** | **Fair** | ** ** |
| ** **                                           | ** ** | **Amount**   | ** ** | **Value**     | ** ** | **Amount** | ** ** | **Value** | ** ** |
|                                                 |       |         |       |          |       |   |   |   |   |
| Liabilities—Debt  and capital lease obligations |       | $            | 291,884    |          | $          | 283,961 |   | $ | 291,380 |   | $ | 188,186 |   |
|                                                      |            |              |            |               |            |  |  |  |  |  |  |  |  |

 

The estimationmethodologies utilized are summarized as follows:

 

***Debt***—The fair value of our variable rate debtis estimated to be equal to its carrying amount.  The fair value of our senior unsecured notesis based upon quoted market rates.  The fairvalue of other fixed rate debt is estimated based on a discounted cash flowanalysis, using the prevailing market interest rates for debt of similar dollaramount, maturity and risk.

 

The estimated fair value of our other financialinstruments, such as cash and cash equivalents, accounts receivable andaccounts payable, have been determined to approximate carrying value based onthe short-term nature of those financial instruments.

 

***Nonrecurring Fair Value Measurements***

 

For the year ended December 31, 2009, there were no assetsmeasured at fair value on a nonrecurring basis.

 

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**7.**                   RELATEDPARTY TRANSACTIONS

** **

In order to assist us in our efforts to research,develop, perform due diligence on and possibly acquire new gamingopportunities, we have an agreement with Jacobs Investments Management Co. Inc.(“JIMCO”), 82% of which is owned by Jeffrey P. Jacobs and the remaining 18% ofwhich is owned in equal portions by two other persons.  Under this agreement, we make payments of$1,250 per year payable in installments of $625 each on January 1st and July 1st plus 2.5% ofbudgeted development costs for projects undertaken by us, if certain debtcovenant ratios are met.  Total expensesincurred under this agreement with JIMCO were $1,325, $1,340 and $1,609 for theyears ended December 31, 2009, 2008 and 2007, respectively.  As of December 31, 2009, thesetransactions resulted in net payables to affiliates totaling $625.

 

We also have payables to affiliates totaling $113 at December 31,2009 to the R.E.Jacobs Group, an affiliate, for JEI-related airplane usage during 2009. Total expenses incurred to the R.E. Jacobs Group were $113, $0 and $0for the years ended December 31, 2009, 2008 and 2007, respectively.

 

We allocate management, accounting and overhead costsincurred by JEI to various truck stops owned by Gameco.  These costs totaled $1,101, $1,157 and $1,035for the years ended December 31, 2009, 2008 and 2007, respectively.  Additionally, we provide shared services suchas gasoline and diesel fuel and repair parts purchased by Gameco.  These transactions result in receivables fromand payables to our affiliates.  As of December 31,2009, these transactions resulted in net receivables from affiliates totaling$390, and as of December 31, 2008, these transactions resulted in netpayables to affiliates totaling $210.

 

Beginning in November 2009,the ownership of the video poker machines and the related repair partsinventory used by the Jalou truck plazas was transferred to a related party,Jalou Device Owner, L.P. (“Device Owner”), of which Gameco owns 49% and is itsgeneral partner and two Louisiana residents own 51% and are the limitedpartners.  As of December 31, 2009, the transfer of therepair parts inventory from us to Device Owner resulted in net receivables fromaffiliates totaling $588.

 

We also have receivables from other affiliatestotaling $34 at December 31, 2009.

 

DuringJuly 2006, we acquired from affiliated parties several options to leaseand options to purchase six parcels of land and certain improvements on thewest bank of the Cuyahoga River in Cleveland, Ohio. We refer to theseproperties, covering an aggregate of approximately 624,000 square feet of land(14.4 acres) and a building comprised of 47,380 square feet of net rentablespace, as the Nautica Properties. The Nautica Properties currently requireaggregate option payments totaling $200 per year.

 

DuringMarch 2008, we exercised our option to acquire one of these parcelsreferred to as “Lot D.”  On April 1,2008, we purchased this parcel for $800. The company that owned this parcel of land and parking lot business waswholly owned by our CEO.  Additionally,on January 15, 2009, we exercised our option to acquire one of theseparcels referred to as “Sugar Warehouse,” and on January 21, 2009, wepurchased this parcel for $2,450 from the limited partnership that owned thisbuilding.  An affiliate of our CEO owned82% of the general partner interests and 16.4% of the limited partner interestsof the seller.  See Note 4 above.

 

Theoption agreements give us the right until July 2010 to purchase one of theremaining parcels and the right to purchase or enter into long term leases onthe remaining three parcels.  We expectto either exercise or extend these options prior to their expiration.  Our CEO owns varying interests in three ofthe four remaining parcels.

 

Althoughwe may elect not to exercise all the options unless casino gaming opportunitiesarise, we nonetheless have the right to acquire all or part of the NauticaProperties for other purposes.  See Note12 below.  If casino gaming is notlegalized on the Nautica Properties but we decide to exercise our options, theaggregate purchase price would be approximately $3,000 for one of the parcelsand the aggregate annual lease payments on the remaining three parcels would beapproximately $355. If all four remaining parcels are purchased and noneleased, the total purchase price would be $6,550, less any aggregate optionpayments previously made.  The purchaseprice and rent payments would be increased based on independent appraisals ofthe land and improvement values if, in the future, casino gaming were to becomelegalized in Ohio and a casino is licensed on the Nautica Properties.

 

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**8.**                   COMMITMENTSAND CONTINGENCIES

** **

***Commitments***

 

Colonial has entered into an agreement with atotalisator company which provides wagering services and designs, programs, andmanufactures totalisator systems for our pari-mutuel wageringapplications.  The basic terms of theagreement state that the totalisator company shall provide totalisator servicesto Colonial for all wagering held at Colonial’s facilities to 2012, and toprovide replacement equipment for existing equipment, at a rate of .385% ofhandle up to $270,000 in handle.  Handleabove $270,000 will be charged a rate of .345%. The agreement also provides for a minimum charge per calendar year of$210.  In addition, effective May 1,2009, Colonial has entered into an agreement with a company which providesbroadcasting and simulcasting equipment and services.  The agreements for live racing broadcastingand simulcasting services at the horse racing track expires December 31,2011.  Total expense incurred fortotalisator and broadcasting and simulcasting services was $850, $930, and$1,145 for the years ended December 31, 2009, 2008 and 2007, respectively.

 

TheInterstate Horse Racing Act requires that we secure the consent of the VirginiaHorsemen’s Benevolence and Protective Association (the “VaHBPA”) and the Virginia Harness HorseAssociation (“VHHA”) to the export simulcasting of races. These consents areusually contained in the agreement between each group and Colonial.  We have an agreement with the VHHA that expires December 31, 2011.Our agreement with the VaHBPA expired December 31, 2009.  We have entered into a new three-yearagreement with the VaHBPA that expires December 31, 2012, which wasapproved by the Virginia Racing Commission on March 17, 2010.

 

Additionally, under Louisianalaw, video poker machines must be owned by Louisiana residents. Through October 2009,the Jalou truck plazavideo gaming facilities paid a fee to the third party owner of the machines inorder to maintain the machines used in our truck plaza operations, plusreimbursement for the owner’s licensing costs and various other expenses.  Beginningin November 2009, the ownership of the video poker machines used by the Jaloutruck plazas was transferred from the third party owner to a related party,Device Owner.  The Jalou truck plazas pay90 cents per operating video poker machine per day to Device Owner, plusreimbursement for the owner’s licensing costs. Total expense under these obligations was $1,126, $1,273 and $1,268 for the years ended December 31, 2009,2008 and 2007, respectively.

 

JEIDistributing, LLC (“JEID”), a wholly-owned subsidiary of JEI, entered into fuelsupply agreements with CITGO Petroleum Corporation (“CITGO”).  Theagreements provide for the purchase and sale of CITGO branded and unbrandedgasoline and diesel fuel.

 

JEIDand CITGO entered into a five-year Marketer Franchise Agreement on December 21,2009 (the “MFA”).  The MFA created a franchise relationship between JEIDand CITGO and requires JEID to purchase at least 90% of certain listed monthlyquantities of gasoline from CITGO in order to maintain the franchise and not bein violation of the MFA.  Under the MFA, CITGO grants JEID for the term ofthe MFA, the right to use CITGO’s applicable brand names, trademarks and otherforms of CITGO’s identification, in the manner established by CITGO, inconnection with the resale by JEID of products acquired under CITGO’s brandnames.  The MFA also requires JEID to indemnify CITGO against liabilitiesarising in connection with performance under the MFA and contains, among otherthings, customary provisions in respect of insurance, fuel pricing, payment anddelivery.

 

JEIDand CITGO also entered into an Unbranded Rack Sales Agreement dated December 21,2009 (the “RSA”).  Although the initial term of the RSA is five yearsfollowed by annual renewals, the RSA provides that either party may terminatethe RSA, without cause, upon providing thirty days written notice.  TheRSA requires JEID to purchase at least 90% of certain listed monthly quantitiesof fuel from CITGO in order to qualify for CITGO’s rack posting pricing ineffect and not be in violation of the RSA. The RSA also requires JEID toindemnify CITGO against liabilities arising in connection with performanceunder the RSA and contains, among other things, customary provisions in respectof insurance, fuel pricing, payment and 

 

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delivery. The Addendum to Unbranded Rack Sales Agreement between JEID and CITGO, alsodated December 21, 2009, amends the pricing for unbranded fuel under theRSA.  The amended pricing equals the sum of the base price and an adderfee that is dependent on the location of the terminal where the product isdelivered.

 

***Operating Leases***

 

Our operating leases include various land and buildingleases for certain properties in Nevada, Louisiana and Virginia, leases foroffice space in Colorado, Louisiana, Virginia and Florida, as well as leasesfor automobiles and other property and equipment at all locations, expiring atvarious dates.  Total expense under thesenon-cancelable operating leases was $2,978,$2,968 and $2,948 for the years ended December 31, 2009, 2008 and2007, respectively.

 

The future minimum commitments relating to JEI’snon-cancelable operating agreements and leases are as follows:

 
| **Years Ending December 31** |   |   |   |
|---------------------------------------------|--------|--------|--------|
|                                        |   |   |   |
| 2010                                        |   | $      | 2,809  |   |
| 2011                                        |   | 2,184  |   |
| 2012                                        |   | 1,886  |   |
| 2013                                        |   | 1,775  |   |
| 2014                                        |   | 1,763  |   |
| Thereafter                                  |   | 24,412 |   |
|                                        |   |   |   |
| Total                                       |   | $      | 34,829 |   |

 

***Capital Leases***

 

The following is an analysis of the leased propertyunder capital leases:

 
| **Class of Property**             | ** ** | **2009**   | ** ** | **2008**   | ** ** |
|---------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Land                                        |       | $          | 1,523      |       | $          | 1,523 |   |
| Buildings                                   |       | 2,095      |       | 2,095      |       |
| Equipment  and furniture and fixtures       |       | 255        |       | 255        |       |
| Other                                       |       | 72         |       | 72         |       |
| Less:  accumulated depreciation             |       | (555       | )          | (398       | )          |
|                                        |       |       |       |       |       |
| Total  leased property under capital leases |       | $          | 3,390      |       | $          | 3,547 |   |

 

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As of December 31, 2009, the following is aschedule by years of future minimum lease payments under capital leasestogether with the net present value of the minimum lease payments:

 
| **Years Ending December 31**                             |   |   |   |
|-------------------------------------------------------------------------|--------|--------|--------|
|                                                                    |   |   |   |
| 2010                                                                    |   | $      | 1,323  |   |
| 2011                                                                    |   | 544    |   |
| 2012                                                                    |   | 498    |   |
| 2013                                                                    |   | 478    |   |
| 2014                                                                    |   | 1,241  |   |
| Thereafter                                                              |   | 4,507  |   |
|                                                                    |   |   |   |
| Total  future minimum lease payments                                    |   | 8,591  |   |
|                                                                    |   |   |   |
| Less  amount representing interest ranging from 6.3% to 16.9% per annum |   | 4,542  |   |
|                                                                    |   |   |   |
| Net  present value of minimum lease payments                            |   | $      | 4,049  |   |

 

***Contingencies***

 

We are involved inroutine litigation arising in the ordinary course of our business pertaining toworkers compensation claims, equal opportunity employment issues, or guestinjury claims.  All such claims areroutinely turned over to our insurance providers.  None of the claims is expected to have amaterial impact on our financial position, results of operations or cashflows.  We believe these matters arecovered by appropriate insurance policies less applicable deductibles which areaccrued in our financial statements.

 

**9.      ACCRUED EXPENSES**

** **

Accrued expenses as of December 31,2009 and 2008, include the following:

 
| ** **                     | ** ** | **December 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|--------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
|                           |       |                        |       |                        |       |
| Payroll  and related           |       | $                           | 3,886      |                        | $          | 5,966 |   |
| Gaming  taxes payable          |       | 3,213                       |       | 3,195                       |       |
| Interest  payable              |       | 941                         |       | 994                         |       |
| Property  taxes payable        |       | 1,060                       |       | 847                         |       |
| Slot  club liability           |       | 1,169                       |       | 1,294                       |       |
| Progressive  jackpot liability |       | 1,381                       |       | 1,393                       |       |
| Purses  due horsemen           |       | 598                         |       | 790                         |       |
| Other                          |       | 3,688                       |       | 3,978                       |       |
|                           |       | $                           | 15,936     |                        | $          | 18,457 |   |

 

**10.**            COMMONSTOCK

** **

Effective January 31, 2007, we became awholly-owned subsidiary of JII, which in turn was 50% owned by Jeffrey P.Jacobs, our CEO, and two of his family trusts, and 50% owned by a revocabletrust and an irrevocable trust established by his father, Richard E. Jacobs. OnOctober 1, 2008, JII redeemed the shares owned by the Richard E. JacobsRevocable Trust in exchange for a $5,200 promissory note from JII.  As a result, effective October 1, 2008,80% of the outstanding Class A shares of JII were owned by our CEO and twoof his family trusts, and 20% of the outstanding Class A shares were ownedby an irrevocable trust established by Richard E. Jacobs, of which Jeffrey P.Jacobs was the sole trustee. Additionally, Jeffrey P. Jacobs’ family trusts ownall 180 outstanding shares of JII’s Class B common stock.  On June 2, 2009, JII redeemed theremaining 326 Class A shares owned by The Richard E. Jacobs IrrevocableTrust.  Effective June 2, 2009,Jeffrey P. Jacobs and his family trusts own 100% of JII’s outstanding Class Aand Class B shares.

 

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**11.**            EMPLOYEEBENEFIT PLANS

** **

The Company is the sponsor of Jacobs Entertainment, Inc.’s401(k) Plan (the “Plan”). The Plan is a defined contribution plancovering eligible employees of JEI, The Lodge, the Gilpin, Gold Dust West-Reno,Gold Dust West-Carson City, Gold Dust West-Elko, Jalou and Colonial.  The Plan allows eligible employees to maketax-deferred contributions that are matched by us up to a specified level.  We contributed approximately $93, $540, and$412 to the Plan for the years ended December 31, 2009, 2008 and 2007,respectively.

 

**12.**            CONSTITUTIONALAMENDMENTS

** **

During 2009, we provided financial support to oppose aproposed constitutional amendment in Ohio (“Issue 3”) that would allow for onecasino each at designated locations in Cincinnati, Cleveland, Columbus andToledo and distribute to all Ohio counties a tax on the casinos.  None of the designated locations is owned byJEI or its affiliates.  For the year endedDecember 31, 2009, we provided financial support totaling $2,285 to opposeIssue 3.  On November 3, 2009, Issue3 was passed in Ohio which permits casino gaming at the locations designated inthe amendment.  We are currentlyevaluating the impact Issue 3 might have on our development efforts on theNautica Properties in Ohio.

 

During2008, we provided financial support for a proposed constitutional amendmentthat would increase the types of games, wagering limits and hours of operationat Colorado casinos.  For the year ended December 31,2008, we funded a total of $1,371 in support of this amendment.  Colorado residents approved the proposedconstitutional amendment on November 4, 2008.  The amendment was subsequently voted upon andapproved by the residents of each of the three gaming towns in Colorado (BlackHawk, Central City and Cripple Creek). The new gaming regulation, which became effective on July 2, 2009at Colorado casinos, allows for the introduction of craps and roulette,increases the maximum wager limit to one hundred dollars, allows 24-hour gamingoperations, and prohibits changes in existing tax levels (currently, a seriesof graduated tax rates, with a maximum gaming tax rate of 20% on adjusted grossproceeds over $13,000) unless such changes are approved by a statewide vote.

 

**13.**            ABANDONMENTCOSTS

** **

**On November 10,2008, we closed one of our two satellite wagering facilities in Chesapeake,Virginia. We recorded an impairment of leasehold improvements at this locationtotaling $783 in the fourth quarter of 2008. Additionally, we incurred costs for the termination of the operatinglease and severance totaling $46 in the fourth quarter of 2008.**

** **

**14.**            HURRICANE

** **

During the third quarter of 2008, hurricanes Gustavand Ike struck certain of our Louisiana operations causing minimal damage.  Our damages totaled approximately $213.  We received insurance proceeds related to thedamages totaling $462 during January and February 2009.

 

**15.**            SEGMENTINFORMATION

** **

Our CEO is our chief operating decision maker.  At December 31, 2009, 2008 and 2007, wehave four segments representing the geographic regions of our operations. Eachsegment is managed separately because of the unique characteristics of itsrevenue stream and customer base.  Wehave aggregated our operations into these four segments based on similaritiesin the nature of the properties’ businesses, customers and regulatoryenvironment in which each property operates. The Colorado segment consists ofThe Lodge and Gilpin casinos.  Our Nevadasegment includes the Gold Dust West-Reno, Gold Dust West-Carson City and GoldDust West-Elko casinos.  The Louisianaoperations consist of our truck plaza/video poker facilities, and the Virginiasegment consists of Colonial’s pari-mutuel operations and its satellitewagering facilities.

 

The accounting policies of the segments are the sameas those described in Note 2.  Thecorporate adjustments, eliminations and other represent all other income andexpenses, and are also presented.

 

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**As of and for the****Year Ended December 31,2009**

 
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **Corporate**    | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|--------------|------------|------------|------------|---------------|------------|--------------|------------|------------------|------------|------------|------------|
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **Adjustments,** | ** ** | ** ** | ** ** |
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **Eliminations** | ** ** | ** ** | ** ** |
| ** **                                    | ** ** | **Colorado** | ** ** | **Nevada** | ** ** | **Louisiana** | ** ** | **Virginia** | ** ** | **and Other**    | ** ** | **Total**  | ** ** |
| Revenues                                      | ** ** |         | ** ** |       | ** ** |          | ** ** |         | ** ** |             | ** ** |       | ** ** |
| Gaming                                        | ** ** |         | ** ** |       | ** ** |          | ** ** |         | ** ** |             | ** ** |       | ** ** |
| Casino                                        |       | $            | 102,032    |       | $          | 37,734        |       |         |       |             |       |       |       | $ | 139,766 |   |
| Truck  stop                                   |       |         |       |       |       | $             | 62,983     |         |       |             |       |       | 62,983     |   |
| Pari-mutuel                                   |       |         |       |       |       |          |       | $            | 32,276     |             |       |       | 32,276     |   |
| Food  and beverage                            |       | 11,388       |       | 8,961      |       | 7,008         |       | 2,424        |       |             |       | 29,781     |       |
| Convenience  store — fuel                |       |         |       |       |       | 60,659        |       |         |       |             |       | 60,659     |       |
| Convenience  store — other               |       |         |       |       |       | 12,460        |       |         |       |             |       | 12,460     |       |
| Hotel                                         |       | 1,738        |       | 1,869      |       |          |       |         |       |             |       | 3,607      |       |
| Other                                         |       | 947          |       | 1,362      |       | 1,457         |       | 1,812        |       | $                | 553        |       | 6,131      |   |
| Total  revenues                               |       | 116,105      |       | 49,926     |       | 144,567       |       | 36,512       |       | 553              |       | 347,663    |       |
| Less:  Promotional allowances                 |       | (21,059      | )          | (8,507     | )          | (4,735        | )          |         |       |             |       | (34,301    | )          |
| Net  revenues                                 |       | $            | 95,046     |       | $          | 41,419        |       | $            | 139,832    |             | $          | 36,512     |       | $ | 553 |   | $ | 313,362 |   |
|                                          |       |         |       |       |       |          |       |         |       |             |       |       |       |
| Depreciation  and amortization                |       | $            | 7,087      |       | $          | 5,984         |       | $            | 5,307      |             | $          | 2,124      |       | $ | 980 |   | $ | 21,482 |   |
| Interest  income                              |       | $            | —     |       | $          | —        |       | $            | 6          |             | $          | 17         |       | $ | 3 |   | $ | 26 |   |
| Interest  expense, net of amounts capitalized |       | $            | 8,686      |       | $          | 5,084         |       | $            | 4,047      |             | $          | 594        |       | $ | 6,785 |   | $ | 25,196 |   |
| Net  income (loss)                            |       | $            | 16,552     |       | $          | (3,492        | )          | $            | 9,204      |             | $          | (1,154     | )          | $ | (19,405 | ) | $ | 1,705 |   |
| EBITDA(1)                                     |       | $            | 32,325     |       | $          | 7,576         |       | $            | 18,552     |             | $          | 1,547      |       | $ | (11,643 | ) | $ | 48,357 |   |
|                                          |       |         |       |       |       |          |       |         |       |             |       |       |       |
| Goodwill                                      |       | $            | 6,711      |       | $          | 8,836         |       | $            | 30,924     |             |       |       |       |   | $ | 46,471 |   |
| Identifiable  intangible assets, net          |       |         |       |       |       | $             | 8,173      |         |       |             |       |       | $          | 8,173 |   |
| Property,  plant and equipment, net           |       | $            | 91,585     |       | $          | 40,907        |       | $            | 40,294     |             | $          | 62,964     |       | $ | 6,896 |   | $ | 242,646 |   |
| Total  assets                                 |       | $            | 113,679    |       | $          | 57,580        |       | $            | 90,201     |             | $          | 67,847     |       | $ | 11,342 |   | $ | 340,649 |   |
| Long-term  debt                               |       | $            | 84,981     |       | $          | 61,337        |       | $            | 51,115     |             | $          | 4,902      |       | $ | 87,432 |   | $ | 289,767 |   |
| Capital  expenditures                         |       | $            | 7,722      |       | $          | 2,887         |       | $            | 3,543      |             | $          | 1,052      |       | $ | 900 |   | $ | 16,104 |   |

 

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**As of and for the****Year Ended December 31,2008**

 
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **Corporate**             | ** ** | ** **                | ** ** |
|-----------------------------------------------|------------|--------------|------------|------------|------------|---------------|------------|--------------|------------|---------------------------|------------|---------------------------|------------|
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **Adjustments,**          | ** ** | ** **                | ** ** |
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **Eliminations**          | ** ** | ** **                | ** ** |
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **And Other**        | ** ** | **Total**                 | ** ** |
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **(As adjusted,**    | ** ** | **(As adjusted,**    | ** ** |
| ** **                                    | ** ** | **Colorado** | ** ** | **Nevada** | ** ** | **Louisiana** | ** ** | **Virginia** | ** ** | **see Note 4)** | ** ** | **see Note 4)** | ** ** |
| Revenues:                                     |       |         |       |       |       |          |       |         |       |                      |       |                      |       |
| Gaming                                        |       |         |       |       |       |          |       |         |       |                      |       |                      |       |
| Casino                                        |       | $            | 100,807    |       | $          | 38,685        |       |         |       |                      |       |                      |       | $ | 139,492 |   |
| Truck  stop                                   |       |         |       |       |       | $             | 67,590     |         |       |                      |       |                      | 67,590     |   |
| Pari-mutuel                                   |       |         |       |       |       |          |       | $            | 38,657     |                      |       |                      | 38,657     |   |
| Food  and beverage                            |       | 10,812       |       | 8,757      |       | 8,264         |       | 2,903        |       |                      |       | 30,736                    |       |
| Convenience  store — fuel                |       |         |       |       |       | 97,021        |       |         |       |                      |       | 97,021                    |       |
| Convenience  store — other               |       |         |       |       |       | 12,908        |       |         |       |                      |       | 12,908                    |       |
| Hotel                                         |       | 1,946        |       | 2,155      |       |          |       |         |       |                      |       | 4,101                     |       |
| Other                                         |       | 927          |       | 1,420      |       | 1,311         |       | 2,032        |       | $                         | 709        |                      | 6,399      |   |
| Total  revenues                               |       | 114,492      |       | 51,017     |       | 187,094       |       | 43,592       |       | 709                       |       | 396,904                   |       |
| Less:  Promotional allowances                 |       | (20,439      | )          | (8,286     | )          | (4,993        | )          |         |       |                      |       | (33,718                   | )          |
| Net  revenues                                 |       | $            | 94,053     |       | $          | 42,731        |       | $            | 182,101    |                      | $          | 43,592                    |       | $ | 709 |   | $ | 363,186 |   |
|                                          |       |         |       |       |       |          |       |         |       |                      |       |                      |       |
| Depreciation  and amortization                |       | $            | 6,823      |       | $          | 6,032         |       | $            | 4,219      |                      | $          | 2,114                     |       | $ | 921 |   | $ | 20,109 |   |
| Interest  income                              |       | $            | 3          |       | $          | 4             |       | $            | 19         |                      | $          | 83                        |       | $ | 85 |   | $ | 194 |   |
| Interest  expense, net of amounts capitalized |       | $            | 8,621      |       | $          | 5,577         |       | $            | 4,894      |                      | $          | 603                       |       | $ | 7,757 |   | $ | 27,452 |   |
| Net  income (loss)                            |       | $            | 15,725     |       | $          | (5,357        | )          | $            | 12,594     |                      | $          | (2,035                    | )          | $ | (24,964 | ) | $ | (4,037 | ) |
| EBITDA(1)                                     |       | $            | 31,166     |       | $          | 6,248         |       | $            | 21,688     |                      | $          | 599                       |       | $ | (16,371 | ) | $ | 43,330 |   |
|                                          |       |         |       |       |       |          |       |         |       |                      |       |                      |       |
| Goodwill                                      |       | $            | 6,711      |       | $          | 8,836         |       | $            | 30,924     |                      |       |                      |       |   | $ | 46,471 |   |
| Identifiable  intangible assets, net          |       |         |       |       |       | $             | 9,192      |         |       |                      |       |                      | $          | 9,192 |   |
| Property,  plant and equipment, net           |       | $            | 90,574     |       | $          | 44,241        |       | $            | 40,517     |                      | $          | 64,106                    |       | $ | 6,944 |   | $ | 246,382 |   |
| Total  assets                                 |       | $            | 110,441    |       | $          | 61,552        |       | $            | 90,396     |                      | $          | 69,453                    |       | $ | 12,635 |   | $ | 344,477 |   |
| Long-term  debt                               |       | $            | 85,655     |       | $          | 61,556        |       | $            | 51,174     |                      | $          | 5,644                     |       | $ | 85,991 |   | $ | 290,020 |   |
| Capital  expenditures                         |       | $            | 5,348      |       | $          | 5,138         |       | $            | 2,561      |                      | $          | 781                       |       | $ | 3,380 |   | $ | 17,208 |   |

 

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Table ofContents

 

**As of and for the****Year Ended December 31,2007**

 
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **Corporate**             | ** ** | ** **                | ** ** |
|-----------------------------------------------|------------|--------------|------------|------------|------------|---------------|------------|--------------|------------|---------------------------|------------|---------------------------|------------|
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **Adjustments,**          | ** ** | ** **                | ** ** |
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **Eliminations**          | ** ** | ** **                | ** ** |
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **And Other**        | ** ** | **Total**                 | ** ** |
| ** **                                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | **(As adjusted,**    | ** ** | **(As adjusted,**    | ** ** |
| ** **                                    | ** ** | **Colorado** | ** ** | **Nevada** | ** ** | **Louisiana** | ** ** | **Virginia** | ** ** | **see Note 4)** | ** ** | **see Note 4)** | ** ** |
| Revenues                                      |       |         |       |       |       |          |       |         |       |                      |       |                      |       |
| Gaming                                        |       |         |       |       |       |          |       |         |       |                      |       |                      |       |
| Casino                                        |       | $            | 106,409    |       | $          | 38,247        |       |         |       |                      |       |                      |       | $ | 144,656 |   |
| Truck  stop                                   |       |         |       |       |       | $             | 64,322     |         |       |                      |       |                      | 64,322     |   |
| Pari-mutuel                                   |       |         |       |       |       |          |       | $            | 41,309     |                      |       |                      | 41,309     |   |
| Food  and beverage                            |       | 9,944        |       | 8,315      |       | 7,974         |       | 3,027        |       |                      |       | 29,260                    |       |
| Convenience  store — fuel                |       |         |       |       |       | 81,329        |       |         |       |                      |       | 81,329                    |       |
| Convenience  store — other               |       |         |       |       |       | 11,133        |       |         |       |                      |       | 11,133                    |       |
| Hotel                                         |       | 1,939        |       | 2,476      |       |          |       |         |       |                      |       | 4,415                     |       |
| Other                                         |       | 848          |       | 1,434      |       | 1,089         |       | 1,986        |       | $                         | 496        |                      | 5,853      |   |
| Total  revenues                               |       | 119,140      |       | 50,472     |       | 165,847       |       | 46,322       |       | 496                       |       | 382,277                   |       |
| Less:  Promotional allowances                 |       | (19,766      | )          | (7,410     | )          | (4,777        | )          |         |       |                      |       | (31,953                   | )          |
| Net  revenues                                 |       | $            | 99,374     |       | $          | 43,062        |       | $            | 161,070    |                      | $          | 46,322                    |       | $ | 496 |   | $ | 350,324 |   |
|                                          |       |         |       |       |       |          |       |         |       |                      |       |                      |       |
| Depreciation  and amortization                |       | $            | 6,172      |       | $          | 5,313         |       | $            | 3,848      |                      | $          | 2,065                     |       | $ | 872 |   | $ | 18,270 |   |
| Interest  income                              |       | $            | 46         |       | $          | 40            |       | $            | 87         |                      | $          | 113                       |       | $ | 59 |   | $ | 345 |   |
| Interest  expense, net of amounts capitalized |       | $            | 8,821      |       | $          | 5,956         |       | $            | 4,861      |                      | $          | 599                       |       | $ | 8,216 |   | $ | 28,453 |   |
| Net  income (loss)                            |       | $            | 18,474     |       | $          | (5,592        | )          | $            | 10,677     |                      | $          | (1,150                    | )          | $ | (17,500 | ) | $ | 4,909 |   |
| EBITDA(1)                                     |       | $            | 33,421     |       | $          | 5,637         |       | $            | 19,299     |                      | $          | 1,401                     |       | $ | (8,471 | ) | $ | 51,287 |   |
|                                          |       |         |       |       |       |          |       |         |       |                      |       |                      |       |
| Goodwill                                      |       | $            | 6,711      |       | $          | 9,035         |       | $            | 30,924     |                      |       |                      |       |   | $ | 46,670 |   |
| Identifiable  intangible assets, net          |       |         |       |       |       | $             | 9,491      |         |       |                      |       |                      | $          | 9,491 |   |
| Property,  plant and equipment, net           |       | $            | 93,593     |       | $          | 45,458        |       | $            | 40,727     |                      | $          | 66,381                    |       | $ | 4,461 |   | $ | 250,620 |   |
| Total  assets                                 |       | $            | 114,615    |       | $          | 64,430        |       | $            | 92,650     |                      | $          | 71,991                    |       | $ | 14,309 |   | $ | 357,995 |   |
| Long-term  debt                               |       | $            | 86,680     |       | $          | 61,773        |       | $            | 51,227     |                      | $          | 5,669                     |       | $ | 93,369 |   | $ | 298,718 |   |
| Capital  expenditures                         |       | $            | 7,925      |       | $          | 17,075        |       | $            | 2,016      |                      | $          | 939                       |       | $ | 384 |   | $ | 28,339 |   |

 

----

(1)  EBITDA(earnings before interest, income taxes, depreciation and amortization) ispresented as supplemental information in the tables above as it is a keymeasure of operating performance used by our chief operating decisionmaker.  EBITDA can be reconciled directlyto our consolidated net income (loss) by adding the amounts shown fordepreciation, amortization, income taxes and interest to net income(loss).  This information should not beconsidered as an alternative to any measure of performance as promulgated underaccounting principles generally accepted in the United States of America, suchas net income (loss), nor should it be considered as an indicator of ouroverall financial performance.  Ourcalculation of EBITDA may be different from the calculation used by othercompanies and comparability may be limited. Management believes that presentation of a non-GAAP financial measuresuch as EBITDA is useful because it allows holders of our debt and managementto evaluate and compare our operating results from continuing operations fromperiod to period in a meaningful and consistent manner in addition to standardGAAP financial measures.  Managementinternally evaluates the performance of our segments using EBITDA measures asdo most analysts following the gaming industry. EBITDA is also a key component of certain financial covenants in ourdebt agreements.

 

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**Table of Contents**

 

**16.**            CONDENSEDCONSOLIDATING FINANCIAL INFORMATION

 

On June 16, 2006, wecompleted a debt refinancing in the form of secured and unsecuredindebtedness.  The secured portion of ourindebtedness, which was with a bank syndicate group, consists of a $100,000senior secured credit facility comprising: (1) a $40,000 six-year termloan facility; (2) a $40,000 five-year revolving credit facility; and (3) a$20,000 six-year delayed draw term loan facility.  The unsecured portion of our debt is in theform of $210,000 of 93⁄4% unsecured senior notes. The senior secured credit facility and the unsecured senior notes areboth guaranteed by our current and future restricted subsidiaries.  Each subsidiary guarantor is 100% owned bythe parent company, all guarantees are full and unconditional and joint and several,and all subsidiaries of JEI guarantee the securities.

 

Thefollowing information sets forth our Condensed Consolidating Balance Sheets asof December 31, 2009 and 2008, and the Condensed Consolidating Statementsof Operations and the Condensed Consolidating Statements of Cash Flows for thethree years ended December 31, 2009 as required by Rule 3-10 ofRegulation S-X of the Securities Exchange Act of 1934, as amended.  Investments in our subsidiaries are accountedfor on the equity method.  Accordingly,entries necessary to consolidate the Parent Company Issuer and our SubsidiaryGuarantors are reflected in the eliminations column.

 

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Table of Contents

 

**JACOBSENTERTAINMENT, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATING BALANCE SHEETS**

** **

**AS OF DECEMBER 31, 2009**

 
| ** **                                             | ** ** | **Parent**  | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|--------------------------------------------------------|------------|-------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                             | ** ** | **Company** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                             | ** ** | **Issuer**  | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| **ASSETS**                                             |       |        |       |           |       |             |       |             |       |
| Current  assets                                        |       | $           | 644        |           | $          | 34,556           |       |             |       | $ | 35,200 |   |
| Property,  plant and equipment, net                    |       | 1,404       |       | 241,242        |       |             |       | 242,646          |       |
| Net  investment in and advances to subsidiaries        |       | 109,449     |       |           |       | $                | (109,449   | )                | —     |   |
| Other  long-term assets                                |       | 3,655       |       | 59,148         |       |             |       | 62,803           |       |
| **Total assets**                                       |       | $           | 115,152    |           | $          | 334,946          |       | $                | (109,449   | ) | $ | 340,649 |   |
|                                                   |       |        |       |           |       |             |       |             |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**          |       |        |       |           |       |             |       |             |       |
| Current  liabilities                                   |       | $           | 3,023      |           | $          | 22,115           |       |             |       | $ | 25,138 |   |
| Long-term  debt                                        |       | 286,569     |       | 3,198          |       |             |       | 289,767          |       |
| Long-term  debt (receivable from) payable to affiliate |       | (199,182    | )          | 199,182        |       |             |       | —           |       |
| Other  long-term liabilities                           |       | 9           |       | 1,002          |       |             |       | 1,011            |       |
| Stockholder’s  equity                             |       | 24,733      |       | 109,449        |       | $                | (109,449   | )                | 24,733     |   |
| **Total liabilities and stockholder’s equity**    |       | $           | 115,152    |           | $          | 334,946          |       | $                | (109,449   | ) | $ | 340,649 |   |

 

**AS OF DECEMBER 31, 2008**

**(As adjusted, see Note 4)**

 
| ** **                                             | ** ** | **Parent**  | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|--------------------------------------------------------|------------|-------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                             | ** ** | **Company** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                             | ** ** | **Issuer**  | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| **ASSETS**                                             |       |        |       |           |       |             |       |             |       |
| Current  assets                                        |       | $           | 1,026      |           | $          | 31,805           |       |             |       | $ | 32,831 |   |
| Property,  plant and equipment, net                    |       | 1,984       |       | 244,398        |       |             |       | 246,382          |       |
| Net  investment in and advances to subsidiaries        |       | 107,417     |       |           |       | $                | (107,417   | )                | —     |   |
| Other  long-term assets                                |       | 4,255       |       | 61,009         |       |             |       | 65,264           |       |
| **Total assets**                                       |       | $           | 114,682    |           | $          | 337,212          |       | $                | (107,417   | ) | $ | 344,477 |   |
|                                                   |       |        |       |           |       |             |       |             |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**          |       |        |       |           |       |             |       |             |       |
| Current  liabilities                                   |       | $           | 3,797      |           | $          | 24,233           |       |             |       | $ | 28,030 |   |
| Long-term  debt                                        |       | 284,511     |       | 5,509          |       |             |       | 290,020          |       |
| Long-term  debt (receivable from) payable to affiliate |       | (199,182    | )          | 199,182        |       |             |       | —           |       |
| Other  long-term liabilities                           |       | 20          |       | 871            |       |             |       | 891              |       |
| Stockholder’s  equity                             |       | 25,536      |       | 107,417        |       | $                | (107,417   | )                | 25,536     |   |
| **Total liabilities and stockholder’s equity**    |       | $           | 114,682    |           | $          | 337,212          |       | $                | (107,417   | ) | $ | 344,477 |   |

 

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Table of Contents

 

**JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS**

 

**FOR THE YEAR ENDED DECEMBER 31, 2009**

 
| ** **                          | ** ** | **Parent**  | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|-------------------------------------|------------|-------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                          | ** ** | **Company** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                          | ** ** | **Issuer**  | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net  revenues                       |       |        |       | $              | 313,487    |             | $          | (125             | )          | $ | 313,362 |   |
| Costs  and expenses                 |       | $           | (12,359    | )              | (274,253   | )                | 125        |             | (286,487   | ) |
| Interest  expense, net              |       | (5,184      | )          | (19,986        | )          |             |       | (25,170          | )          |
| Equity  in earnings of subsidiaries |       | 19,248      |       |           |       | (19,248          | )          | —           |       |
| Net  income (loss)                  |       | $           | 1,705      |           | $          | 19,248           |       | $                | (19,248    | ) | $ | 1,705 |   |

 

**FOR THE YEAR ENDED DECEMBER 31, 2008**

**(As adjusted, see Note 4)**

 
| ** **                             | ** ** | **Parent**  | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------|------------|-------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                             | ** ** | **Company** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                             | ** ** | **Issuer**  | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net  revenues                          |       |        |       | $              | 363,461    |             | $          | (275             | )          | $ | 363,186 |   |
| Costs  and expenses                    |       | $           | (17,450    | )              | (322,790   | )                | 275        |             | (339,965   | ) |
| Interest  expense, net                 |       | (6,048      | )          | (21,210        | )          |             |       | (27,258          | )          |
| Equity  in earnings of subsidiaries    |       | 19,390      |       |           |       | (19,390          | )          | —           |       |
| Noncontrolling  interest               |       |        |       | (71            | )          |             |       | (71              | )          |
| Net  (loss) income attributable to JEI |       | $           | (4,108     | )              | $          | 19,390           |       | $                | (19,390    | ) | $ | (4,108 | ) |

 

**FOR THE YEAR ENDED DECEMBER 31, 2007**

**(As adjusted, see Note 4)**

 
| ** **                             | ** ** | **Parent**  | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------|------------|-------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                             | ** ** | **Company** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                             | ** ** | **Issuer**  | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net  revenues                          |       |        |       | $              | 350,624    |             | $          | (300             | )          | $ | 350,324 |   |
| Costs  and expenses                    |       | $           | (9,328     | )              | (308,279   | )                | 300        |             | (317,307   | ) |
| Interest  expense, net                 |       | (6,527      | )          | (21,581        | )          |             |       | (28,108          | )          |
| Equity  in earnings of subsidiaries    |       | 20,837      |       |           |       | (20,837          | )          | —           |       |
| Noncontrolling  interest               |       |        |       | 73             |       |             |       | 73               |       |
| Net  income (loss) attributable to JEI |       | $           | 4,982      |           | $          | 20,837           |       | $                | (20,837    | ) | $ | 4,982 |   |

 

F-30

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Table of Contents

 

**JACOBSENTERTAINMENT, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATING****STATEMENTSOF CASH FLOWS**

**FOR THE YEAR ENDED DECEMBER 31, 2009**

 
| ** **                                               | ** ** | **Parent**  | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------------|------------|-------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                               | ** ** | **Company** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                               | ** ** | **Issuer**  | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                               |       |        |       |           |       |             |       |             |       |
| **Net cash provided by operating activities**            |       | $           | 8,963      |           | $          | 12,946           |       | $                |       |   | $ | 21,909 |   |
| ** **                                               |       |        |       |           |       |             |       |             |       |
| **INVESTING ACTIVITIES:**                                |       |        |       |           |       |             |       |             |       |
| Additions  to property, plant and equipment              |       | (192        | )          | (15,912        | )          |             |       | (16,104          | )          |
| Proceeds  from sale of equipment                         |       | 4           |       | 385            |       |             |       | 389              |       |
| Purchase  of device rights                               |       |        |       | (967           | )          |             |       | (967             | )          |
| Acquisition  of noncontrolling interest                  |       | (212        | )          |           |       |             |       | (212             | )          |
| **Net cash used in investing activities**                |       | (400        | )          | (16,494        | )          |             |       | (16,894          | )          |
| ** **                                               |       |        |       |           |       |             |       |             |       |
| **FINANCING ACTIVITIES:**                                |       |        |       |           |       |             |       |             |       |
| Payments  to obtain financing                            |       | (555        | )          |           |       |             |       | (555             | )          |
| Proceeds  from revolving line of credit                  |       | 29,463      |       |           |       |             |       | 29,463           |       |
| Payments  on long-term debt                              |       | (404        | )          | (959           | )          |             |       | (1,363           | )          |
| Payments  on revolving line of credit                    |       | (27,000     | )          |           |       |             |       | (27,000          | )          |
| Net  advances to/from subsidiaries                       |       | (7,125      | )          | 7,125          |       |             |       | —           |       |
| Distributions  to stockholder                            |       | (3,238      | )          |           |       |             |       | (3,238           | )          |
| **Net cash (used in) provided by financing  activities** |       | (8,859      | )          | 6,166          |       |             |       | (2,693           | )          |
|                                                     |       |        |       |           |       |             |       |             |       |
| Net  (Decrease) Increase in Cash and Cash Equivalents    |       | (296        | )          | 2,618          |       |             |       | 2,322            |       |
| Cash  and Cash Equivalents — Beginning of Year      |       | 487         |       | 21,392         |       |             |       | 21,879           |       |
| Cash  and Cash Equivalents — End of Year            |       | $           | 191        |           | $          | 24,010           |       | $                |       |   | $ | 24,201 |   |

 

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**JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATING****STATEMENTSOF CASH FLOWS**

**FOR THE YEAR ENDED DECEMBER 31, 2008**

**(As adjusted, see Note 4)**

 
| ** **                                               | ** ** | **Parent**  | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------------|------------|-------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                               | ** ** | **Company** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                               | ** ** | **Issuer**  | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                               |       |        |       |           |       |             |       |             |       |
| **Net cash provided by operating activities**            |       | $           | 20,504     |           | $          | 5,080            |       | $                |       |   | $ | 25,584 |   |
| ** **                                               |       |        |       |           |       |             |       |             |       |
| **INVESTING ACTIVITIES:**                                |       |        |       |           |       |             |       |             |       |
| Additions  to property, plant and equipment              |       | (301        | )          | (16,907        | )          |             |       | (17,208          | )          |
| Proceeds  from sale of equipment                         |       |        |       | 370            |       |             |       | 370              |       |
| Purchase  of device rights                               |       |        |       | (900           | )          |             |       | (900             | )          |
| **Net cash used in investing activities**                |       | (301        | )          | (17,437        | )          |             |       | (17,738          | )          |
| ** **                                               |       |        |       |           |       |             |       |             |       |
| **FINANCING ACTIVITIES:**                                |       |        |       |           |       |             |       |             |       |
| Proceeds  from revolving line of credit                  |       | 20,038      |       |           |       |             |       | 20,038           |       |
| Payments  on long-term debt                              |       | (405        | )          | (1,297         | )          |             |       | (1,702           | )          |
| Payments  on revolving line of credit                    |       | (27,000     | )          |           |       |             |       | (27,000          | )          |
| Net  advances to/from subsidiaries                       |       | (10,784     | )          | 10,784         |       |             |       | —           |       |
| Distributions  to stockholder                            |       | (1,800      | )          |           |       |             |       | (1,800           | )          |
| **Net cash (used in) provided by financing  activities** |       | (19,951     | )          | 9,487          |       |             |       | (10,464          | )          |
|                                                     |       |        |       |           |       |             |       |             |       |
| Net  Increase (Decrease) in Cash and Cash Equivalents    |       | 252         |       | (2,870         | )          |             |       | (2,618           | )          |
| Cash  and Cash Equivalents — Beginning of Year      |       | 235         |       | 24,262         |       |             |       | 24,497           |       |
| Cash  and Cash Equivalents — End of Year            |       | $           | 487        |           | $          | 21,392           |       | $                |       |   | $ | 21,879 |   |

 

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**JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATING****STATEMENTSOF CASH FLOWS**

**FOR THE YEAR ENDED DECEMBER 31, 2007**

**(As adjusted, see Note 4)**

 
| ** **                                               | ** ** | **Parent**  | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------------|------------|-------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                               | ** ** | **Company** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                               | ** ** | **Issuer**  | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                               |       |        |       |           |       |             |       |             |       |
| **Net cash provided by operating activities**            |       | $           | 19,265     |           | $          | 9,808            |       | $                |       |   | $ | 29,073 |   |
| ** **                                               |       |        |       |           |       |             |       |             |       |
| **INVESTING ACTIVITIES:**                                |       |        |       |           |       |             |       |             |       |
| Additions  to property, plant and equipment              |       | (322        | )          | (28,017        | )          |             |       | (28,339          | )          |
| Proceeds  from sale of equipment                         |       | 115         |       | 165            |       |             |       | 280              |       |
| Purchase  of device rights                               |       |        |       | (1,002         | )          |             |       | (1,002           | )          |
| Acquisition  of truck stop, net of cash acquired         |       |        |       | (4,234         | )          |             |       | (4,234           | )          |
| **Net cash used in investing activities**                |       | (207        | )          | (33,088        | )          |             |       | (33,295          | )          |
| ** **                                               |       |        |       |           |       |             |       |             |       |
| **FINANCING ACTIVITIES:**                                |       |        |       |           |       |             |       |             |       |
| Payments  to obtain financing                            |       | (342        | )          |           |       |             |       | (342             | )          |
| Proceeds  from long-term debt                            |       |        |       | 585            |       |             |       | 585              |       |
| Proceeds  from revolving line of credit                  |       | 38,500      |       |           |       |             |       | 38,500           |       |
| Payments  on long-term debt                              |       | (608        | )          | (1,334         | )          |             |       | (1,942           | )          |
| Payments  on revolving line of credit                    |       | (15,000     | )          |           |       |             |       | (15,000          | )          |
| Net  advances to/from subsidiaries                       |       | (25,782     | )          | 25,782         |       |             |       | —           |       |
| Distributions  to stockholder                            |       | (17,443     | )          |           |       |             |       | (17,443          | )          |
| **Net cash (used in) provided by financing  activities** |       | (20,675     | )          | 25,033         |       |             |       | 4,358            |       |
|                                                     |       |        |       |           |       |             |       |             |       |
| Net  (Decrease) Increase in Cash and Cash Equivalents    |       | (1,617      | )          | 1,753          |       |             |       | 136              |       |
| Cash  and Cash Equivalents — Beginning of Year      |       | 1,852       |       | 22,509         |       |             |       | 24,361           |       |
| Cash  and Cash Equivalents — End of Year            |       | $           | 235        |           | $          | 24,262           |       | $                |       |   | $ | 24,497 |   |

 

******

 

F-33

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Table of Contents

 

**EXHIBITINDEX**

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                 | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**   | ** ** | **Filed  Herewith** |
|------------------|------------|-----------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|-------------------|------------|---------------------|
| 3.1              |       | Certificate of Incorporation of Gameco, Inc.                                                               |       | S-4      |       | 333-88242    |       | 3.1                                    |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.2              |       | By-Laws of Gameco, Inc.                                                                                    |       | S-4      |       | 333-88242    |       | 3.2                                    |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.3              |       | Articles of Incorporation of Black Hawk  Gaming & Development Company, Inc.                       |       | S-4      |       | 333-88242    |       | 3.3                                    |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.4              |       | Bylaws of Black Hawk Gaming & Development  Company, Inc.                                          |       | S-4      |       | 333-88242    |       | 3.4                                    |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.5              |       | Articles of Incorporation of Gold Dust West  Casino, Inc.                                                  |       | S-4      |       | 333-88242    |       | 3.5                                    |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.6              |       | Code of By-laws of Gold Dust West Casino, Inc.                                                             |       | S-4      |       | 333-88242    |       | 3.6                                    |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.7              |       | Articles of Organization of Black Hawk/Jacobs  Entertainment, LLC.                                              |       | S-4      |       | 333-88242    |       | 3.7                                    |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.8              |       | Operating Agreement of Black Hawk/Jacobs Entertainment,  LLC.                                                   |       | S-4      |       | 333-88242    |       | 3.8                                    |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.9              |       | Joint Venture Agreement of Gilpin Hotel Venture.                                                                |       | S-4      |       | 333-88242    |       | 3.9                                    |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.10             |       | Articles of Incorporation of Gilpin  Ventures, Inc.                                                        |       | S-4      |       | 333-88242    |       | 3.10                                   |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.11             |       | By-Laws of Gilpin Ventures, Inc.                                                                           |       | S-4      |       | 333-88242    |       | 3.11                                   |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.12             |       | Articles of Incorporation of Winner’s Choice  Casino, Inc., now Cash Magic Winner’s Choice, LLC. |       | S-4      |       | 333-88242    |       | 3.14                                   |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.13             |       | By-Laws of Winner’s Choice Casino, Inc., now  Cash Magic Winner’s Choice, LLC.                   |       | S-4      |       | 333-88242    |       | 3.15                                   |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.14             |       | Articles of Organization of Houma Truck  Plaza & Casino, L.L.C.                                        |       | S-4      |       | 333-88242    |       | 3.18                                   |       | May 14, 2002 |       |                |
|             |       |                                                                                                            |       |     |       |         |       |                                   |       |              |       |                |
| 3.15             |       | Articles of Organization of Jalou-Cash’s L.L.C.                                                            |       | S-4      |       | 333-88242    |       | 3.19                                   |       | May 14, 2002 |       |                |

 

E-1

----

Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                       | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing  Date**    | ** ** | **Filed  Herewith** |
|------------------|------------|---------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|---------------------|------------|---------------------|
| 3.16             |       | Articles of Organization of Lucky Magnolia Truck  Stop and Casino, L.L.C.             |       | S-4      |       | 333-88242    |       | 3.21                                   |       | May 14, 2002   |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.17             |       | Articles of Organization of Bayou Vista Truck Plaza  and Casino, L.L.C.               |       | S-4      |       | 333-88242    |       | 3.22                                   |       | May 14, 2002   |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.18             |       | Articles of Organization of Raceland Truck Plaza and  Casino, L.L.C.                  |       | S-4      |       | 333-88242    |       | 3.23                                   |       | May 14, 2002   |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.19             |       | Articles of Organization of JACE, LLC.                                                |       | S-4      |       | 333-88242    |       | 3.24                                   |       | May 14, 2002   |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.20             |       | Certificate of Amendment of Certificate of  Incorporation of Gameco, Inc.        |       | S-4A     |       | 333-88242    |       | 3.25                                   |       | August 8, 2002 |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.21             |       | Amended and Restated Certificate of Limited  Partnership of Colonial Downs, L.P.      |       | S-4A     |       | 333-88242    |       | 3.26                                   |       | August 8, 2002 |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.22             |       | Limited Partnership Agreement of Colonial Downs,  L.P.                                |       | S-4A     |       | 333-88242    |       | 3.27                                   |       | August 8, 2002 |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.23             |       | Amended and Restated Articles of Incorporation of  Colonial Downs Holdings, Inc. |       | S-4A     |       | 333-88242    |       | 3.28                                   |       | August 8, 2002 |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.24             |       | Amendment to Articles of Incorporation of Colonial  Downs Holdings, Inc.         |       | S-4A     |       | 333-88242    |       | 3.29                                   |       | August 8, 2002 |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.25             |       | Bylaws of Colonial Downs Holdings, Inc.                                          |       | S-4A     |       | 333-88242    |       | 3.30                                   |       | May 14, 2002   |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.26             |       | Articles of Incorporation of Stansley Racing Corp.                                    |       | S-4A     |       | 333-88242    |       | 3.31                                   |       | August 8, 2002 |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.27             |       | Articles of Amendment to the Articles of Incorporation  of Stansley Racing Corp.      |       | S-4A     |       | 333-88242    |       | 3.32                                   |       | August 8, 2002 |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.28             |       | Bylaws of Stansley Racing Corp.                                                       |       | S-4A     |       | 333-88242    |       | 3.33                                   |       | August 8, 2002 |       |                |
|             |       |                                                                                  |       |     |       |         |       |                                   |       |                |       |                |
| 3.29             |       | Amendment to the Operating Agreement of Black  Hawk/Jacobs Entertainment, LLC.        |       | S-4A     |       | 333-88242    |       | 3.35                                   |       | August 8, 2002 |       |                |

 

E-2

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Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                              | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**        | ** ** | **Filed  Herewith** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|------------------------|------------|---------------------|
| 3.30             |       | Amendment to the Certificate of Incorporation of  Gameco, Inc.                                                          |       | S-4A     |       | 333-88242    |       | 3.36                                   |       | August 8, 2002    |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.31             |       | Articles of Organization of Jalou Breaux Bridge, LLC  dated January 29, 2003.                                           |       | 10-K     |       | 333-88242    |       | 3.37                                   |       | March 28, 2005    |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.32             |       | Articles of Organization of Jalou Eunice, LLC dated  March 27, 2003.                                                    |       | 10-K     |       | 333-88242    |       | 3.38                                   |       | March 28, 2005    |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.33             |       | Articles of Organization of Jalou of Jefferson, LLC  dated September 23, 2003.                                          |       | 10-K     |       | 333-88242    |       | 3.39                                   |       | March 28, 2005    |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.34             |       | Certificate of Amendment of Certificate of  Incorporation of Jacobs Entertainment, Inc. dated September 27,  2005. |       | 10-Q     |       | 333-88242    |       | 3.40                                   |       | November 14, 2005 |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.35             |       | Articles of Incorporation of Jacobs Piñon Plaza  Entertainment, Inc. dated November 2, 2005.                  |       | 10-Q     |       | 333-88242    |       | 3.41                                   |       | November 14, 2005 |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.36             |       | Bylaws of Jacobs Piñon Plaza  Entertainment, Inc. dated November 8, 2005.                                     |       | S-4      |       | 333-136066   |       | 3.41(A)                                |       | July 27, 2006     |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.37             |       | Articles of Organization of Fuel Stop 36, LLC dated  August 24, 1989.                                                   |       | S-4      |       | 333-136066   |       | 3.42                                   |       | July 27, 2006     |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.38             |       | Articles of Organization of Jalou of Larose, LLC  dated November 3, 2005, now Cash Magic Larose, LLC.                   |       | S-4      |       | 333-136066   |       | 3.43                                   |       | July 27, 2006     |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.39             |       | Articles of Incorporation of Jacobs Elko  Entertainment, Inc.                                                           |       | S-4      |       | 333-136066   |       | 3.44                                   |       | July 27, 2006     |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.40             |       | Bylaws of Jacobs Elko Entertainment, Inc.                                                                               |       | S-4      |       | 333-136066   |       | 3.45                                   |       | July 27, 2006     |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.41             |       | Articles of Organization of Jalou Diamond L.L.C.                                                                             |       | S-4      |       | 333-136066   |       | 3.48                                   |       | July 27, 2006     |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.42             |       | Limited Liability Company Agreement of Jalou Diamond  L.L.C.                                                                 |       | S-4      |       | 333-136066   |       | 3.49                                   |       | July 27, 2006     |       |                |
|             |       |                                                                                                                         |       |     |       |         |       |                                   |       |                   |       |                |
| 3.43             |       | Articles of Organization of Jalou Magic L.L.C. (nka  Cash Magic                                                              |       | S-4      |       | 333-136066   |       | 3.50                                   |       | July 27, 2006     |       |                |

 

E-3

----

Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                     | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**    | ** ** | **Filed  Herewith** |
|------------------|------------|-----------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|--------------------|------------|---------------------|
|             |       | Vinton, LLC).                                                                                       |       |     |       |         |       |                                   |       |               |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.44             |       | Limited Liability Company Agreement of Jalou Magic  L.L.C. (nka Cash Magic Vinton, LLC).            |       | S-4      |       | 333-136066   |       | 3.51                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.45             |       | Articles of Organization of Jalou of Vinton-Bingo,  LLC.                                            |       | S-4      |       | 333-136066   |       | 3.52                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.46             |       | Limited Liability Company Agreement of Jalou of  Vinton-Bingo, LLC.                                 |       | S-4      |       | 333-136066   |       | 3.53                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.47             |       | Articles of Organization of Jalou of Vinton, LLC.                                                   |       | S-4      |       | 333-136066   |       | 3.54                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.48             |       | Limited Liability Company Agreement of Jalou of  Vinton, LLC.                                       |       | S-4      |       | 333-136066   |       | 3.55                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.49             |       | Articles of Organization of Jalou of St. Helena, LLC  (nka Cash Magic St. Helena, LLC).             |       | S-4      |       | 333-136066   |       | 3.56                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.50             |       | Limited Liability Company Agreement of Jalou of St.  Helena, LLC (nka Cash Magic St. Helena, LLC).  |       | S-4      |       | 333-136066   |       | 3.57                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.51             |       | Amended and Restated Articles of Incorporation of  Jacobs Piñon Plaza Entertainment, Inc. |       | S-4      |       | 333-136066   |       | 3.58                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.52             |       | Articles of Organization of Jalou of St. Martin,  L.L.C.                                            |       | S-4      |       | 333-136066   |       | 3.59                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.53             |       | Limited Liability Company Agreement of Jalou of St.  Martin, L.L.C.                                 |       | S-4      |       | 333-136066   |       | 3.60                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.54             |       | Operating Agreement of Houma Truck Plaza Stop and  Casino, L.L.C.                                   |       | S-4      |       | 333-136066   |       | 3.62                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.55             |       | Limited Liability Company Agreement of Jalou-Cash’s  L.L.C.                                    |       | S-4      |       | 333-136066   |       | 3.63                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                |       |     |       |         |       |                                   |       |               |       |                |
| 3.56             |       | Limited Liability Company Agreement of Lucky  Magnolia Truck Stop and Casino, L.L.C.                |       | S-4      |       | 333-136066   |       | 3.64                                   |       | July 27, 2006 |       |                |

 

E-4

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Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                       | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**    | ** ** | **Filed  Herewith** |
|------------------|------------|-------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|--------------------|------------|---------------------|
| 3.57             |       | Limited Liability Company Agreement of Bayou Vista  Truck Plaza and Casino, L.L.C.                    |       | S-4      |       | 333-136066   |       | 3.65                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.58             |       | Limited Liability Company Agreement of Raceland  Truck Plaza and Casino, L.L.C.                       |       | S-4      |       | 333-136066   |       | 3.66                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.59             |       | Limited Liability Company Agreement of Jalou Breaux  Bridge, LLC.                                     |       | S-4      |       | 333-136066   |       | 3.67                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.60             |       | Limited Liability Company Agreement of Jalou of  Eunice, LLC.                                         |       | S-4      |       | 333-136066   |       | 3.68                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.61             |       | Limited Liability Company Agreement of Jalou of  Jefferson, LLC.                                      |       | S-4      |       | 333-136066   |       | 3.69                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.62             |       | Limited Liability Company Agreement of Jalou of  Larose, LLC (nka Cash Magic Larose, LLC).            |       | S-4      |       | 333-136066   |       | 3.70                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.63             |       | Articles of Organization of Colonial Downs, LLC.                                                      |       | S-4      |       | 333-136066   |       | 3.71                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.64             |       | Operating Agreement of Colonial Downs, LLC.                                                           |       | S-4      |       | 333-136066   |       | 3.72                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.65             |       | Articles of Organization of JRJ Properties, LLC.                                                      |       | S-4      |       | 333-136066   |       | 3.73                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.66             |       | Limited Liability Company Agreement of JRJ  Properties, LLC.                                          |       | S-4      |       | 333-136066   |       | 3.74                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.67             |       | Articles of Organization of Virginia Concessions,  LLC.                                               |       | S-4      |       | 333-136066   |       | 3.75                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.68             |       | Amended and Restated Operating Agreement of Virginia  Concessions, LLC.                               |       | S-4      |       | 333-136066   |       | 3.76                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.69             |       | Articles of Amendment to the Articles of  Incorporation of Old Dominion Racing Association, Inc. |       | S-4      |       | 333-136066   |       | 3.77A                                  |       | July 27, 2006 |       |                |
|             |       |                                                                                                  |       |     |       |         |       |                                   |       |               |       |                |
| 3.70             |       | Articles of Amendment to the Articles of  Incorporation of Old Dominion Racing Association,      |       | S-4      |       | 333-136066   |       | 3.77B                                  |       | July 27, 2006 |       |                |

 

E-5

----

Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                        | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**        | ** ** | **Filed  Herewith** |
|------------------|------------|--------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|------------------------|------------|---------------------|
|             |       | Inc.                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.71             |       | Articles of Amendment to the Articles of  Incorporation of Old Dominion Jockey Club, Inc.         |       | S-4      |       | 333-136066   |       | 3.77C                                  |       | July 27, 2006     |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.72             |       | Articles of Amendment to the Articles of  Incorporation of Maryland-Virginia Racing Circuit, Inc. |       | S-4      |       | 333-136066   |       | 3.77D                                  |       | July 27, 2006     |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.73             |       | Articles of Organization of Jalou Fox, LLC dated  November 14, 2005.                              |       | 8-K      |       | 333-88242    |       | 3.78                                   |       | September 6, 2007 |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.74             |       | Limited Liability Company Agreement of Jalou Fox,  LLC dated September 1, 2005.                   |       | 8-K      |       | 333-88242    |       | 3.79                                   |       | September 6, 2007 |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.75             |       | Articles of Organization of Jalou Silver Dollar,  LLC.                                                 |       | 10-K     |       | 333-88242    |       | 3.80                                   |       | March 26, 2008    |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.76             |       | Limited Liability Company Agreement of Jalou Silver  Dollar, LLC.                                      |       | 10-K     |       | 333-88242    |       | 3.81                                   |       | March 26, 2008    |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.77             |       | Certificate of Incorporation of Jacobs Nautica  Development, Inc.                                 |       | 10-Q     |       | 333-88242    |       | 3.82                                   |       | May 13, 2008      |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.78             |       | Bylaws of Jacobs Nautica Development, Inc.                                                        |       | 10-Q     |       | 333-88242    |       | 3.83                                   |       | May 13, 2008      |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.79             |       | Certificate of Formation of Diamondhead Real Estate,  LLC.                                             |       | 10-K     |       | 333-88242    |       | 3.84                                   |       | March 18, 2009    |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.80             |       | Limited Liability Company Agreement of Diamondhead  Real Estate, LLC.                                  |       | 10-K     |       | 333-88242    |       | 3.85                                   |       | March 18, 2009    |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.81             |       | Articles of Organization of JEI Distributing, LLC.                                                     |       | 10-K     |       | 333-88242    |       | 3.86                                   |       | March 18, 2009    |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.82             |       | Limited Liability Company Agreement of JEI  Distributing, LLC.                                         |       | 10-K     |       | 333-88242    |       | 3.87                                   |       | March 18, 2009    |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.83             |       | Certificate of Incorporation of Jacobs Sugar  Warehouse, Inc.                                     |       | 10-K     |       | 333-88242    |       | 3.88                                   |       | March 18, 2009    |       |                |
|             |       |                                                                                                   |       |     |       |         |       |                                   |       |                   |       |                |
| 3.84             |       | Bylaws of Jacobs Sugar Warehouse, Inc.                                                            |       | 10-K     |       | 333-88242    |       | 3.89                                   |       | March 18, 2009    |       |                |

 

E-6

----

Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**     | ** ** | **Filed  Herewith** |
|------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|---------------------|------------|---------------------|
| 4.1              |       | Trust Indenture Agreement by and between Jacobs  Entertainment, Inc. and Wells Fargo Bank, as Trustee, dated  June 16, 2006.                                                                                                                                                                                                                                                                             |       | 8-K      |       | 333-88242    |       | 4.1                                    |       | March 23, 2006 |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                   |       |                |       |                |
| 4.2              |       | Registration Rights Agreement by and between Jacobs  Entertainment, Inc. and Credit Suisse Securities (USA) LLC, CIBC World  Markets Corp., Libra Securities, LLC, Wells Fargo Securities, LLC and KeyBanc  Capital Markets, a Division of McDonald Investments Inc., as the initial  purchasers, dated June 16, 2006.                                                                                   |       | 8-K      |       | 333-88242    |       | 4.2                                    |       | March 23, 2006 |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                   |       |                |       |                |
| 4.3              |       | Pledge Agreement dated as of June 16, 2006 by  and among Jacobs Entertainment, Inc., Black Hawk Gaming &  Development Company, Inc. and Credit Suisse, Cayman Islands Branch.                                                                                                                                                                                                              |       | S-4      |       | 333-136066   |       | 4.3                                    |       | July 27, 2006  |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                   |       |                |       |                |
| 4.4              |       | Guarantee Agreement dated as of June 16, 2006,  by and among Jacobs Entertainment, Inc., certain of the subsidiaries of  Jacobs Entertainment, Inc. and Credit Suisse, Cayman Islands Branch.                                                                                                                                                                                                       |       | S-4      |       | 333-136066   |       | 4.4                                    |       | July 27, 2006  |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                   |       |                |       |                |
| 4.5              |       | Security Agreement dated as of June 16, 2006,  made by Jacobs Entertainment, Inc. and each of the guarantors listed on  the signature pages or from time to time a party by execution of a  joinder agreement, as pledgors, assignors and debtors in favor of Credit  Suisse, Cayman Islands Branch, in its capacity as collateral agent for the  Secured Parties pursuant to the Credit Agreement. |       | S-4      |       | 333-136066   |       | 4.5                                    |       | July 27, 2006  |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                   |       |                |       |                |
| 4.6              |       | Contribution Agreement dated June 16, 2006, by  and among Jacobs Entertainment, Inc. and affiliates of Jacobs                                                                                                                                                                                                                                                                                            |       | S-4      |       | 333-136066   |       | 4.6                                    |       | July 27, 2006  |       |                |

 

E-7

----

Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                 | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**    | ** ** | **Filed  Herewith** |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|--------------------|------------|---------------------|
|             |       | Entertainment, Inc.                                                                                                                                                                                                                                                                                                                                                                        |       |     |       |         |       |                                   |       |               |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                   |       |               |       |                |
| 4.7              |       | Custodian Agreement dated as of June 16, 2006,  by and between Dunham Trust Company, 1 East Liberty Street, Sixth Floor,  Reno, NV 89504, as custodian, Credit Suisse, Cayman Islands Branch as  Collateral Agent under the Credit Agreement, Jacobs Entertainment, Inc.,  as the Borrower under the Credit Agreement and Blackhawk Gaming & Development  Company, Inc. |       | S-4      |       | 333-136066   |       | 4.7                                    |       | July 27, 2006 |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                   |       |               |       |                |
| 4.8              |       | Form of Jacobs Entertainment, Inc. 9.75%  Rule 144A Global Note due 2014.                                                                                                                                                                                                                                                                                                        |       | S-4      |       | 333-136066   |       | 4.8                                    |       | July 27, 2006 |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                   |       |               |       |                |
| 4.9              |       | Form of Jacobs Entertainment, Inc. 9.75%  Regulation S Global Note due 2014.                                                                                                                                                                                                                                                                                                          |       | S-4      |       | 333-136066   |       | 4.9                                    |       | July 27, 2006 |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                   |       |               |       |                |
| 4.10             |       | Form of Jacobs Entertainment, Inc. 9.75%  IAI Global Note due 2014.                                                                                                                                                                                                                                                                                                                   |       | S-4      |       | 333-136066   |       | 4.10                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                   |       |               |       |                |
| 4.11             |       | Intercompany Note dated as of June 16, 2006 by  and among Jacobs Entertainment, Inc., and Credit Suisse, Cayman Islands  Branch.                                                                                                                                                                                                                                                      |       | S-4      |       | 333-136066   |       | 4.11                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                   |       |               |       |                |
| 4.12             |       | Purchase Agreement dated June 9, 2006 by and  among Jacobs Entertainment, Inc. and Credit Suisse Securities (USA) LLC,  on behalf of the purchasers of the $210,000,000 9.75% Senior Notes.                                                                                                                                                                                           |       | S-4      |       | 333-136066   |       | 4.12                                   |       | July 27, 2006 |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |     |       |         |       |                                   |       |               |       |                |
| 4.13             |       | Pledge Agreement dated June 16, 2006 by and  among Jacobs Entertainment, Inc., Black Hawk Gaming &  Development Company, Inc. and Canadian Imperial Bank of Commerce, acting  through its New York Agency.                                                                                                                                                              |       | S-4      |       | 333-136066   |       | 4.13                                   |       | July 27, 2006 |       |                |

 

E-8

----

Table of Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                                                                                      | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**        | ** ** | **Filed  Herewith** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|------------------------|------------|---------------------|
| 10.1             |       | Deed of Lease  dated May 8, 2003 between Haynes Chippenham Plaza, LLC and Colonial  Downs, L.P.                                                                                                                                                 |       | 10-K     |       | 333-88242    |       | 10.1                                   |       | March 29, 2004    |       |                |
|             |       |                                                                                                                                                                                                                                                 |       |     |       |         |       |                                   |       |                   |       |                |
| 10.2             |       | Asset Purchase  Agreement dated November 2, 2005 among Capital City  Entertainment, Inc. and Jacobs Piñon Plaza Entertainment, Inc.                                                                                              |       | 10-Q     |       | 333-88242    |       | 10.2                                   |       | November 14, 2005 |       |                |
|             |       |                                                                                                                                                                                                                                                 |       |     |       |         |       |                                   |       |                   |       |                |
| 10.3             |       | Piñon Plaza  Ground Lease dated June 26, 2006 by and between Clark G. Russell and  Jean M. Russell, Trustees of The Clark and Jean Russell Family Trust and  Jacobs Entertainment, Inc.                                               |       | S-4      |       | 333-136066   |       | 10.3                                   |       | July 27, 2006     |       |                |
|             |       |                                                                                                                                                                                                                                                 |       |     |       |         |       |                                   |       |                   |       |                |
| 10.4             |       | Triple Net Lease  dated November 14, 2005 among Route 225 Investments, LLC and Jacobs  Entertainment, Inc.                                                                                                                                 |       | 8-K      |       | 333-88242    |       | 10.4                                   |       | November 15, 2005 |       |                |
|             |       |                                                                                                                                                                                                                                                 |       |     |       |         |       |                                   |       |                   |       |                |
| 10.5             |       | Shopping Center Lease  dated February 28, 2005 between Jay F. Wilks, Trustee under Indenture  dated December 20, 1976 by and between Herbert Cashvan and Marvin Simon,  as Settlors, and Jay F. Wilks as Trustee, and Colonial Downs, L.P. |       | 8-K      |       | 333-88242    |       | 10.7                                   |       | March 23, 2006    |       |                |
|             |       |                                                                                                                                                                                                                                                 |       |     |       |         |       |                                   |       |                   |       |                |
| 10.6             |       | Membership Interests Purchase Agreement dated May 16, 2006 by and between Gameco  Holdings, Inc. and Jacobs Entertainment, Inc.                                                                                                       |       | S-4      |       | 333-136066   |       | 10.9                                   |       | July 27, 2006     |       |                |

 

E-9

----

Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**    | ** ** | **Filed  Herewith** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|--------------------|------------|---------------------|
| 10.7             |       | Asset  Purchase Agreement dated May 17, 2006 between Feliciana  Ventures, Inc., Forest Gold Truck Plaza and Casino, L.L.C., St. Helena  Express & Casino, L.L.C., Seabuckle Gaming, Inc., Janice M.  Penn and Minnie L. Hughes, as Sellers, Claude M. Penn, Jr., and Gameco  Holdings, Inc. as Purchaser. (Assigned as to St. Helena to Jacobs  Entertainment, Inc.).                                                                                                                       |       | S-4      |       | 333-136066   |       | 10.10A                                 |       | July 27, 2006 |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                   |       |               |       |                |
| 10.8             |       | First Amendment to Asset Purchase Agreement dated July 12, 2006  between Feliciana Ventures, Inc., Forest Gold Truck Plaza and Casino,  L.L.C., St. Helena Express & Casino, L.L.C., Seabuckle  Gaming, Inc., Janice M. Penn and Minnie L. Hughes, as Sellers, Claude M.  Penn, Jr., and Gameco Holdings, Inc. as Purchaser. (Assigned as to  St. Helena to Jacobs Entertainment, Inc.).                                                                                                    |       | S-4      |       | 333-136066   |       | 10.10B                                 |       | July 27, 2006 |       |                |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       |     |       |         |       |                                   |       |               |       |                |
| 10.9             |       | Credit Agreement by and  between Jacobs Entertainment, Inc., Credit Suisse Securities (USA) LLC  and CIBC World Markets Corp., as Joint Lead Arrangers and Joint Bookrunners,  and CIBC World Markets Corp., as Syndication Agent, and Wells Fargo Bank,  National Association, as Documentation Agent and Swingline Lender, and CIT  Lending Services Corporation, as Documentation Agent, and Credit Suisse,  Cayman Islands Branch, as Issuing Bank, Administrative Agent and Collateral  Agent, dated June 16, 2006. |       | 8-K      |       | 333-88242    |       | 10.11                                  |       | June 22, 2006 |       |                |

 

E-10

----

Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                  | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**        | ** ** | **Filed  Herewith** |
|------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|------------------------|------------|---------------------|
| 10.10            |       | Consulting  Agreement dated January 1, 2006 and amended June 16, 2006, by and  among Jacobs Entertainment, Inc. and Jacobs Investments Management  Co., Inc. |       | S-4      |       | 333-136066   |       | 10.12                                  |       | July 27, 2006     |       |                |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                   |       |                   |       |                |
| 10.11            |       | Option Agreement dated July 11, 2006 between Jacobs  Entertainment, Inc. and Nautica Phase 2 Limited Partnership.                                                      |       | S-4      |       | 333-136066   |       | 10.14                                  |       | July 27, 2006     |       |                |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                   |       |                   |       |                |
| 10.12            |       | Option Agreement  dated April 18, 2006 between Jacobs Entertainment, Inc. and Flats  Development, Inc.                                                            |       | S-4      |       | 333-136066   |       | 10.16                                  |       | July 27, 2006     |       |                |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                   |       |                   |       |                |
| 10.13            |       | Option Agreement  dated July 11, 2006 between Jacobs Entertainment, Inc. and  Sycamore & Main, Inc.                                                      |       | S-4      |       | 333-136066   |       | 10.17                                  |       | July 27, 2006     |       |                |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                   |       |                   |       |                |
| 10.14            |       | Option Agreement dated July 11, 2006 between Jacobs Entertainment, Inc.  and Nautica Peninsula Land Limited Partnership.                                               |       | S-4      |       | 333-136066   |       | 10.18                                  |       | July 27, 2006     |       |                |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                   |       |                   |       |                |
| 10.15            |       | Lease and Option  to Purchase Agreement dated June 21, 2006 by and between Curray  Corporation, Texas Pelican, LLC and Jalou of Vinton, LLC.                                |       | S-4      |       | 333-136066   |       | 10.20                                  |       | July 27, 2006     |       |                |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                   |       |                   |       |                |
| 10.16            |       | Membership Interests Purchase Agreement dated August 20, 2007 by  and between Gameco Holdings, Inc. and Jacobs Entertainment, Inc.                                |       | 8-K      |       | 333-88242    |       | 10.28                                  |       | September 6, 2007 |       |                |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                   |       |                   |       |                |
| 10.17            |       | Amendment  No. 1 dated May 4, 2007 to Credit Agreement among Jacobs  Entertainment, Inc. and various lenders.                                                     |       | 8-K      |       | 333-88242    |       | 10.28A                                 |       | May 10, 2007      |       |                |
|             |       |                                                                                                                                                                             |       |     |       |         |       |                                   |       |                   |       |                |
| 10.18            |       | Asset Purchase  Agreement dated October 4, 2006 regarding the Silver Dollar Truck Plaza.                                                                                    |       | 10-K     |       | 333-88242    |       | 10.29                                  |       | March 26, 2008    |       |                |

 

E-11

----

Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                    | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**         | ** ** | **Filed  Herewith** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|-------------------------|------------|---------------------|
| 10.19            |       | Purchase  Agreement dated March 14, 2008 regarding Jacobs Lot D, Inc.                                                    |       | 10-Q     |       | 333-88242    |       | 10.30                                  |       | May 13, 2008       |       |                |
|             |       |                                                                                                                               |       |     |       |         |       |                                   |       |                    |       |                |
| 10.20            |       | Amendment  No. 2 dated February 5, 2009 to Credit Agreement among Jacobs  Entertainment, Inc. and various lenders.  |       | 8-K      |       | 333-88242    |       | 10.31                                  |       | February 6, 2009   |       |                |
|             |       |                                                                                                                               |       |     |       |         |       |                                   |       |                    |       |                |
| 10.21            |       | Executive Employment  Agreement between Jacobs Entertainment, Inc. and Emanuel J. Cotronakis  signed August 21, 2009.    |       | 8-K      |       | 333-88242    |       | 10.32                                  |       | August 24, 2009    |       |                |
|             |       |                                                                                                                               |       |     |       |         |       |                                   |       |                    |       |                |
| 10.22            |       | Executive Employment  Agreement between Jacobs Entertainment, Inc. and Michael T. Shubic  signed September 23, 2009.     |       | 8-K      |       | 333-88242    |       | 10.33                                  |       | September 29, 2009 |       |                |
|             |       |                                                                                                                               |       |     |       |         |       |                                   |       |                    |       |                |
| 10.23            |       | Executive Employment  Agreement between Jacobs Entertainment, Inc. and Ian M. Stewart signed  September 23, 2009.        |       | 8-K      |       | 333-88242    |       | 10.34                                  |       | September 29, 2009 |       |                |
|             |       |                                                                                                                               |       |     |       |         |       |                                   |       |                    |       |                |
| 10.24            |       | Marketer Franchise  Agreement between JEI Distributing, LLC and CITGO Petroleum Corporation dated  as of December 21, 2009.   |       | 8-K      |       | 333-88242    |       | 10.35                                  |       | January 13, 2010   |       |                |
|             |       |                                                                                                                               |       |     |       |         |       |                                   |       |                    |       |                |
| 10.25            |       | Unbranded Rack Sales  Agreement between JEI Distributing, LLC and CITGO Petroleum Corporation dated  as of December 21, 2009. |       | 8-K      |       | 333-88242    |       | 10.36                                  |       | January 13, 2010   |       |                |

 

E-12

----

Tableof Contents

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                                | ** ** | **Form** | ** ** | **File No.** | ** ** | **Where  located  (Exhibit No.)** | ** ** | **Filing Date**       | ** ** | **Filed  Herewith** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|--------------|------------|----------------------------------------|------------|-----------------------|------------|---------------------|
| 10.26            |       | Addendum to  Unbranded Rack Sales Agreement between JEI Distributing, LLC and CITGO  Petroleum Corporation dated as of December 21, 2009. |       | 8-K      |       | 333-88242    |       | 10.37                                  |       | January 13, 2010 |       |                |
|             |       |                                                                                                                                           |       |     |       |         |       |                                   |       |                  |       |                |
| 12               |       | Computation of  Ratio of Earnings to Fixed Charges.                                                                                            |       |     |       |         |       |                                   |       |                  |       | X                   |
|             |       |                                                                                                                                           |       |     |       |         |       |                                   |       |                  |       |                |
| 14               |       | Code of Ethics  (as revised).                                                                                                                  |       | 10-K     |       | 333-88242    |       | 14.1                                   |       | March 26, 2008   |       |                |
|             |       |                                                                                                                                           |       |     |       |         |       |                                   |       |                  |       |                |
| 21.2             |       | Subsidiaries of  Jacobs Entertainment, Inc.                                                                                               |       |     |       |         |       |                                   |       |                  |       | X                   |
|             |       |                                                                                                                                           |       |     |       |         |       |                                   |       |                  |       |                |
| 25.1             |       | Statement of  Eligibility of Trustee on Form T-1.                                                                                         |       | S-4      |       | 333-136066   |       | 25.1                                   |       | July 27, 2006    |       |                |
|             |       |                                                                                                                                           |       |     |       |         |       |                                   |       |                  |       |                |
| 31.1             |       | Chief Executive  Officer Certification under Section 302 of the Sarbanes-Oxley Act of  2002.                                              |       |     |       |         |       |                                   |       |                  |       | X                   |
|             |       |                                                                                                                                           |       |     |       |         |       |                                   |       |                  |       |                |
| 31.2             |       | Chief Financial  Officer Certification under Section 302 of the Sarbanes-Oxley Act of  2002.                                              |       |     |       |         |       |                                   |       |                  |       | X                   |
|             |       |                                                                                                                                           |       |     |       |         |       |                                   |       |                  |       |                |
| 32.1             |       | Chief Executive  Officer Certification under Section 906 of the Sarbanes-Oxley Act of  2002.                                              |       |     |       |         |       |                                   |       |                  |       | X                   |
|             |       |                                                                                                                                           |       |     |       |         |       |                                   |       |                  |       |                |
| 32.2             |       | Chief Financial  Officer Certification under Section 906 of the Sarbanes-Oxley Act of  2002.                                              |       |     |       |         |       |                                   |       |                  |       | X                   |

 

E-13

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