**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D. C. 20549**
 
 **FORM
        10-Q**
 (Mark
                  One)x
              **QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE **SECURITIES
                  EXCHANGE ACT OF 1934****
 
 **FOR
        THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006**
 
 or
  ̈
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE **SECURITIES
                  EXCHANGE ACT OF 1934******For
                  the transition period from ______________ to
                  ______________**
 
 Commission
        file number: **333-06489**
 
 **Indiana**
              
              **THE
                  MAJESTIC STAR CASINO, LLC**
              
              **43-1664986****Indiana**
              
              **THE
                  MAJESTIC STAR CASINO CAPITAL CORP.**
              
              **35-2100872****Indiana**
              
              **MAJESTIC
                  STAR CASINO CAPITAL CORP. II**
              
              **20-3879309**(State
                  or other jurisdiction of incorporation or organization)
              
              (Exact
                  name of registrant as specified in its charter)
              
              (I.R.S.
                  Employer Identification No.)
 
 **301
        FREMONT STREET**
 **LAS
        VEGAS, NEVADA 89101**
 **(702)
        388 - 2224**
 (Address
        of principal executive offices, including zip code, and telephone number,
        including area code)
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to filing requirements for
        the
        past 90 days.
 
 Yes
              x
              No
               ̈
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
        one):
 
 Large
                  accelerated filer
               ̈
              Accelerated
                  filer
               ̈
              Non-accelerated
                  filer
              x
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 
 Yes
               ̈
              No
              x
 
 As
        of
        September 30, 2006, shares outstanding of each of the registrant’s classes
        of common stock:
 
 Class
              Number
                  of sharesNot
                  applicable
              Not
                  applicable





**THE
        MAJESTIC STAR CASINO, LLC AND
        SUBSIDIARIES**
 **(A
        Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 
 **Table
        of Contents**
 
 PART
                  I
              FINANCIAL
                  INFORMATION
              Page
                  No.Item
                  1.
              Financial
                  Statements.Condensed
                  Consolidated Balance Sheets as of September 30, 2006 (unaudited)and
                  December 31, 2005
              1Condensed
                  Consolidated Statements of
                  Operations for the three and nine months ended September 30, 2006 and
                  2005 (unaudited)
              2Condensed
                  Consolidated Statements of Cash
                  Flows for the nine months ended September 30, 2006 and 2005
                  (unaudited)
              3Notes
                  to the Condensed Consolidated Financial Statements
                  (unaudited)
              5Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition
                  and Results of Operations.
              26Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market
                  Risk.
              36Item
                  4.
              Controls
                  and Procedures.
              36PART
                  II
              OTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings.
              38Item
                  1A.
              Risk
                  Factors.
              38Item
                  6.
              Exhibits.
              40SIGNATURES
              S-1
 
 
 
 
 
 
 i
 Table
            of Contents
  **PART
                  I**
              **FINANCIAL
                  INFORMATION** **Item
                  1.**
              **Financial
                  Statements.**
 
 **THE
        MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
        Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 September
                  30,
              
              December
                  31,2006
              
              2005(unaudited)ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              26,800,070
              
              $
              32,368,249Restricted
                  cash
              
              
              3,326,881
              
              
              3,190,000Accounts
                  receivable, less allowance for doubtful accounts of $ 759,183
                  and$668,575
                  as of September 30, 2006 and December 31, 2005,
                  respectively
              
              
              4,691,976
              
              
              4,599,414Inventories
              
              
              979,798
              
              
              787,881Prepaid
                  expenses and deposits
              
              
              4,320,482
              
              
              2,433,601Receivable
                  from affiliate
              
              
              295,493
              
              
              169,011Other
                  current assets
              
              
              90,615
              
              
              137,914Total
                  current assets
              
              
              40,505,315
              
              
              43,686,070Property,
                  equipment and improvements, net
              
              
              272,773,650
              
              
              278,132,483Intangible
                  assets, net
              
              
              126,260,294
              
              
              128,854,668Goodwill
              
              
              48,341,340
              
              
              47,250,794Other
                  assets:Deferred
                  financing costs, net of accumulated amortizationof
                  $4,925,495 and $2,529,369 as of September 30, 2006 andDecember
                  31, 2005, respectively
              
              
              13,897,855
              
              
              15,263,897Deferred
                  financing costs, pushed down from Majestic Holdco, net ofaccumulated
                  amortization of $396,043 and $19,519 as ofSeptember
                  30, 2006 and December 31, 2005, respectively
              
              
              2,562,696
              
              
              2,804,227Other
                  assets
              
              
              2,023,514
              
              
              1,966,693Total
                  other assets
              
              
              18,484,065
              
              
              20,034,817Total
                  assets
              
              $
              506,364,664
              
              $
              517,958,832LIABILITIES
                  AND MEMBER'S DEFICITCurrent
                  liabilities:Accounts
                  payable
              
              $
              5,507,220
              
              $
              3,559,207Short-term
                  note payable
              
              
              -
              
              
              984,590Current
                  portion of long-term debt
              
              
              172,448
              
              
              174,447Accrued
                  liabilities:Payroll
                  and related
              
              
              9,781,895
              
              
              9,266,247Interest
              
              
              22,319,196
              
              
              7,216,379Property
                  and franchise taxes
              
              
              9,435,219
              
              
              8,415,639Other
                  accrued liabilities
              
              
              13,288,737
              
              
              16,456,976Total
                  current liabilities
              
              
              60,504,715
              
              
              46,073,485Long-term
                  debt, net of current maturities
              
              
              526,320,221
              
              
              547,403,183Long-term
                  debt pushed down from Majestic Holdco, net of discount of
                  $13,918,300and
                  $18,203,665 as of September 30, 2006 and December 31, 2005,
                  respectively
              
              
              49,581,700
              
              
              45,296,335Total
                  liabilities
              
              
              636,406,636
              
              
              638,773,003Commitments
                  and contingencies (Note 7)Member's
                  deficit
              
              
              (130,041,972
              )
              
              (120,814,171
              )Total
                  liabilities and member's deficit
              
              $
              506,364,664
              
              $
              517,958,832
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
  1
 Table
            of Contents
 **THE
        MAJESTIC STAR CASINO, LLC AND
        SUBSIDIARIES**
 **(A
        Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(unaudited)**
 
 
 For
                  The Three Months Ended
              
              For
                  The Nine Months EndedSeptember
                  30,
              
              September
                  30,2006
              
              2005
              
              2006
              
              2005OPERATING
                  REVENUES:Casino
              
              $
              94,839,802
              
              $
              69,486,837
              
              $
              288,667,449
              
              $
              208,845,447Rooms
              
              
              2,943,349
              
              
              2,004,744
              
              
              8,556,120
              
              
              5,716,417Food
                  and beverage
              
              
              4,170,994
              
              
              3,561,963
              
              
              12,489,828
              
              
              10,532,339Other
              
              
              1,709,908
              
              
              1,366,804
              
              
              5,117,603
              
              
              3,817,281Gross
                  revenues
              
              
              103,664,053
              
              
              76,420,348
              
              
              314,831,000
              
              
              228,911,484Less:
                  promotional allowances
              
              
              17,274,270
              
              
              11,683,525
              
              
              42,965,928
              
              
              34,259,570Net
                  operating revenues
              
              
              86,389,783
              
              
              64,736,823
              
              
              271,865,072
              
              
              194,651,914OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              21,820,463
              
              
              16,882,422
              
              
              65,293,510
              
              
              50,388,047Rooms
              
              
              862,425
              
              
              448,211
              
              
              2,468,620
              
              
              1,273,264Food
                  and beverage
              
              
              2,111,213
              
              
              1,468,569
              
              
              6,388,406
              
              
              4,434,412Other
              
              
              278,216
              
              
              259,099
              
              
              767,696
              
              
              760,976Gaming
                  taxes
              
              
              22,282,835
              
              
              15,025,064
              
              
              66,738,090
              
              
              45,075,257Advertising
                  and promotion
              
              
              5,651,828
              
              
              3,951,372
              
              
              14,190,448
              
              
              11,346,300General
                  and administrative
              
              
              13,272,892
              
              
              10,815,662
              
              
              42,538,453
              
              
              31,388,398Corporate
                  expense
              
              
              1,242,897
              
              
              1,367,628
              
              
              4,962,562
              
              
              6,525,812Economic
                  incentive tax - City of Gary
              
              
              1,734,721
              
              
              1,131,164
              
              
              5,086,735
              
              
              3,419,136Depreciation
                  and amortization
              
              
              7,976,694
              
              
              5,420,949
              
              
              23,596,542
              
              
              16,808,617Loss
                  on investment in Buffington HarborRiverboats,
                  LLC
              
              
              -
              
              
              611,448
              
              
              -
              
              
              1,820,646Loss
                  (gain) on disposal of assets
              
              
              2,158
              
              
              23,378
              
              
              (2,146
              )
              
              61,353Total
                  operating costs and expenses
              
              
              77,236,342
              
              
              57,404,966
              
              
              232,028,916
              
              
              173,302,218Operating
                  income
              
              
              9,153,441
              
              
              7,331,857
              
              
              39,836,156
              
              
              21,349,696OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              127,512
              
              
              82,747
              
              
              349,889
              
              
              181,363Interest
                  expense
              
              
              (13,450,864
              )
              
              (7,474,473
              )
              
              (40,199,565
              )
              
              (22,154,497
              )Interest
                  expense - debt pushed downfrom
                  Majestic Holdco
              
              
              (1,591,635
              )
              
              -
              
              
              (4,661,889
              )
              
              -Other
                  non-operating expense
              
              
              (31,530
              )
              
              (37,191
              )
              
              (82,733
              )
              
              (115,860
              )Total
                  other expense
              
              
              (14,946,517
              )
              
              (7,428,917
              )
              
              (44,594,298
              )
              
              (22,088,994
              )Net
                  loss
              
              $
              (5,793,076
              )
              $
              (97,060
              )
              $
              (4,758,142
              )
              $
              (739,298
              )
 
 
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
  2
 Table
            of Contents
 **THE
        MAJESTIC STAR CASINO, LLC AND
        SUBSIDIARIES**
 **(A
        Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(unaudited)**
 
 For
                  The Nine Months EndedSeptember
                  30,2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (4,758,142
              )
              $
              (739,298
              )Adjustments
                  to reconcile net loss to net cashprovided
                  by operating activities:Depreciation
              
              
              21,002,168
              
              
              14,537,875Amortization
              
              
              2,594,374
              
              
              2,270,742Amortization
                  of deferred financing costs
              
              
              2,415,645
              
              
              -Amortization
                  of bond discount on 12 1/2% senior discount notes anddeferred
                  financing costs pushed down from Majestic Holdco
              
              
              4,661,889
              
              
              -Loss
                  on investment in Buffington Harbor Riverboats, LLC
              
              
              -
              
              
              1,820,646(Gain)
                  loss on disposal of assets
              
              
              (2,146
              )
              
              61,353Changes
                  in operating assets and liabilities, net of effects of
                  acquisition:Accounts
                  receivable, net
              
              
              (92,562
              )
              
              93,411Related
                  party payables
              
              
              (126,482
              )
              
              541,017Inventories
              
              
              (191,917
              )
              
              37,155Prepaid
                  expenses and deposits
              
              
              (1,886,880
              )
              
              (50,971
              )Other
                  assets
              
              
              (9,522
              )
              
              (602,907
              )Accounts
                  payable
              
              
              832,404
              
              
              101,738Accrued
                  payroll and other expenses
              
              
              515,648
              
              
              (54,433
              )Accrued
                  interest
              
              
              15,103,402
              
              
              6,754,803Other
                  accrued liabilities
              
              
              (2,389,928
              )
              
              (1,539,873
              )Net
                  cash provided by operating activities
              
              
              37,667,951
              
              
              23,231,258CASH
                  FLOWS FROM INVESTING ACTIVITIES:Change
                  in restricted cash
              
              
              (136,881
              )
              
              390,008Acquisition
                  of property and equipment
              
              
              (14,627,486
              )
              
              (10,072,329
              )Additional
                  acquisition costs related to Trump Indiana acquisition
              
              
              (1,090,546
              )
              
              -Increase
                  in prepaid leases and deposits
              
              
              -
              
              
              (71,400
              )Investment
                  in Buffington Harbor Riverboats, LLC
              
              
              -
              
              
              (76,371
              )Proceeds
                  from disposal of equipment
              
              
              718,695
              
              
              23,900Net
                  cash used in investing activities
              
              $
              (15,136,218
              )
              $
              (9,806,192
              )
 
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
  3
 Table
            of Contents
 **THE
        MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
        Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)**
 **(unaudited)**
 
 For
                  The Nine Months EndedSeptember
                  30,2006
              
              2005CASH
                  FLOWS FROM FINANCING ACTIVITIES:Issuance
                  costs for the 9 1/2% senior secured notes
              
              $
              (207,331
              )
              $
              -Issuance
                  costs for the 9 3/4% senior notes
              
              
              (1,036,655
              )
              
              -Issuance
                  costs for the 12 1/2% senior discount notespushed
                  down from Majestic Holdco
              
              
              (206,290
              )
              
              -Proceeds
                  from line of credit
              
              
              26,739,773
              
              
              23,389,581Repayment
                  of line of credit
              
              
              (47,758,609
              )
              
              (25,349,296
              )Advances
                  on revolving credit facility with affiliate
              
              
              -
              
              
              (4,453,331
              )Repayment
                  of debt
              
              
              (1,161,085
              )
              
              -Distributions
                  to Barden Development, Inc.
              
              
              (4,469,715
              )
              
              (6,196,242
              )Net
                  cash used in financing activities
              
              
              (28,099,912
              )
              
              (12,609,288
              )Net
                  decrease in cash and cash equivalents
              
              
              (5,568,179
              )
              
              815,778Cash
                  and cash equivalents, beginning of period
              
              
              32,368,249
              
              
              16,721,729Cash
                  and cash equivalents, end of period
              
              $
              26,800,070
              
              $
              17,537,507For
                  The Nine Months EndedSeptember
                  30,2006
              
              
              2005Supplemental
                  disclosure of cash flow information and non-cash investingand
                  financing activities:INTEREST
                  PAID
              
              $
              23,018,800
              
              $
              15,399,650NON-CASH
                  INVESTING AND FINANCING ACTIVITIES:Capital
                  assets acquired from incurring accounts payable and accrued
                  liabilities
              
              $
              2,258,169
              
              $
              359,201Capital
                  assets acquired from incurring debt
              
              $
              110,730
              
              $
              -Deferred
                  financing and transaction costs related to the Trump
                  acquisitionincluded
                  in accrued liabilities
              
              $
              175,080
              
              $
              851,179
 
 
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
 
  4
 Table
            of Contents
   
 **NOTE
        1.****ORGANIZATION**
 
 The
        Majestic Star Casino, LLC (the “Company”) is a wholly owned subsidiary of
        Majestic Holdco, LLC (“Majestic Holdco”) which is a wholly owned subsidiary of
        Barden Development, Inc. (“BDI”). The Company was formed on December 8,
        1993 as an Indiana limited liability company to provide gaming and related
        entertainment to the public. The Company commenced gaming operations in the
        City
        of Gary (the “City”) at Buffington Harbor, located in Lake County, Indiana on
        June 7, 1996.
 
 The
        Company is a multi-jurisdictional gaming company with operations in three
        states
        - Indiana, Mississippi and Colorado. The Company owns and operates two riverboat
        gaming facilities located in Gary, Indiana (“Majestic Star” and “Majestic Star
        II”). As of December 21, 2005, the Company also owns 100% of Buffington
        Harbor Riverboats, L.L.C. (“BHR”). BHR was previously operated through a joint
        venture with Trump Indiana, Inc. (“Trump Indiana”). See Note 4 - Trump Indiana
        Acquisition. Also, as part of the Trump Indiana acquisition, the Company
        acquired 50% of Buffington Harbor Parking Associates, LLC (“BHPA”) and through
        an affiliate of the Company, the other 50% interest in BHPA was contributed
        to
        the Company. Majestic Star, Majestic Star II, and BHR are referred to
        collectively as the “Majestic Properties.” Effective August 4, 2006, BHPA was
        merged into Majestic Star.
 
 The
        Company also owns other subsidiaries that operate the following
“Fitzgeralds-brand” casino properties during the periods presented in the
        accompanying consolidated financial statements:
 
 ·
            A
                casino-hotel located in Tunica County, Mississippi (“Barden Mississippi
                Gaming, LLC” or “Fitzgeralds Tunica”). 
 ·
            A
                casino located in Black Hawk, Colorado (“Barden Colorado Gaming, LLC” or
                “Fitzgeralds Black Hawk”). 
 The
        Company also has the following subsidiaries, which were formed for the purpose
        of facilitating financing transactions:
 
 ·
            The
                Majestic Star Casino Capital Corp. (“MSCC”) is a co-obligor with the
                Company for the $300.0 million 9 1⁄2% senior secured notes (the “Senior
                Secured Notes”) due 2010. MSCC has no assets or operations. See Note 6 -
                Long Term Debt. 
 ·
            Majestic
                Star Casino Capital Corp. II (“MSCC II”) is a co-obligor with the
                Company for the $200.0 million 9 3⁄4% senior notes (the “Senior Notes”)
                due 2011. MSCC II has no assets or operations. See Note 6 - Long
                Term
                Debt. 
 Following
        the completion of the defeasance of the remaining Majestic Investor Holdings,
        LLC (“Investor Holdings”) 11.653% notes (“Investor Notes”), we terminated the
        existence of Majestic Investor Capital Corp (an entity created to facilitate
        the
        issuance of the Investor Notes) effective March 6, 2006. We also merged Majestic
        Investor, LLC and Investor Holdings into The Majestic Star Casino, LLC on
        March 21, 2006 and March 22, 2006, respectively, thus making Barden
        Mississippi Gaming, LLC and Barden Colorado Gaming, LLC direct subsidiaries
        of
        The Majestic Star Casino, LLC.
 
 Except
        where otherwise noted, the words “we,” “us,” “our,” and similar terms, as well
        as the “Company,” refer to The Majestic Star Casino, LLC and all of its direct
        and indirect subsidiaries.
 
 
 
 
  5
 Table
            of Contents
 **THE
              MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
              Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
              TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              (CONTINUED)**
 **(unaudited)**
   **NOTE
        2. BASIS OF PRESENTATION**
 
 The
        accompanying consolidated financial statements are unaudited. All intercompany
        transactions and balances have been eliminated. Investments in affiliates
        in
        which the Company has the ability to exercise significant influence, but
        not
        control, are accounted for by the equity method. These financial statements
        have
        been prepared in accordance with accounting principles generally accepted
        in the
        United States of America, or “GAAP” for interim financial information and with
        the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
        certain information and footnote disclosures normally included in financial
        statements have been condensed or omitted. The preparation of financial
        statements in conformity with GAAP requires management to make estimates
        and
        assumptions that affect the reported amounts of assets and liabilities and
        disclosure of contingent assets and liabilities at the date of the financial
        statements and the reported amounts of revenues and expenses during the
        reporting period. Actual results could differ from those estimates.
 
 In
        the
        opinion of management, all adjustments (which include normal recurring
        adjustments) considered necessary for a fair statement of the results for
        the
        interim periods have been made. The results for the nine months ended
        September 30, 2006 are not necessarily indicative of results to be expected
        for the full fiscal year. The financial statements should be read in conjunction
        with the financial statements and notes thereto included in The Majestic
        Star
        Casino, LLC’s Annual Report on Form 10-K for the year ended December 31,
        2005.
 
 PUSH
        DOWN
        OF DISCOUNT NOTES FROM MAJESTIC HOLDCO - The Company’s consolidated balance
        sheet as of September 30, 2006 and December 31, 2005 includes $49.6
        million and $45.3 million, respectively, of senior discount notes (“Discount
        Notes”), net of original issue discount, issued by Majestic Holdco in connection
        with the Trump Indiana acquisition in December 2005 (see Note 4). The Discount
        Notes are solely the obligation of Majestic Holdco and Majestic Holdco, Inc.
        (the co-issuer with Majestic Holdco) and are unsecured. Neither the Company
        nor
        any of its direct or indirect subsidiaries guarantees the Discount Notes
        nor are
        the equity or assets of the Company or its direct or indirect subsidiaries
        security for the Discount Notes. Further, the indentures governing the Senior
        Notes and the Senior Secured Notes and the loan and security agreement which
        governs our Senior Secured Credit Facility preclude distributions by the
        Company
        to Majestic Holdco unless certain financial tests are met. In addition to
        the
        push down of the Discount Notes, the Company is also reflecting $2.6 million
        and
        $2.8 million of Discount Notes issuance costs, net of amortization,
        respectively, on its consolidated balance sheets as of September 30, 2006
        and December 31, 2005, and amortization of issuance costs of $126,000 and
        $377,000, respectively, and bond discount of $1.5 million and $4.3 million,
        respectively, on its consolidated statement of operations for the three and
        nine
        months ended September 30, 2006. A likely scenario for the repayment of the
        Discount Notes is from cash flows of the Company or a refinancing of the
        Company’s indebtedness, together with the indebtedness of Majestic Holdco. The
        Discount Notes have been “pushed-down” to the Company pursuant to the guidelines
        of SEC Staff Accounting Bulletin Topic 5(J).
 
 TERMINATED
        SALE OF FITZGERALDS BLACK HAWK - On July 12, 2004, the Company entered into
        an agreement to sell substantially all of the assets, subject to certain
        liabilities, of Fitzgeralds Black Hawk. On April 14, 2005, the Company and
        Legends Gaming, LLC (“Legends”) mutually agreed to terminate the Asset Purchase
        Agreement dated July 12, 2004, as amended (the “Purchase Agreement”). The
        Company took an approximately $2.3 million charge related to terminating
        this
        agreement. Because the Purchase Agreement was mutually terminated in April
        2005,
        the financial information of Fitzgeralds Black Hawk has been reclassified
        to be
        presented as continuing operations. During the period the property was
        considered as held for sale, no depreciation or amortization expense was
        recognized on Fitzgeralds Black Hawk’s assets. When the sale was terminated, in
        April 2005, depreciation and amortization of $1.5 million was caught up for
        the
        period in which no depreciation or amortization was recognized.
 
 PURCHASE
        OF TRUMP INDIANA, INC. - On December 21, 2005, the Company completed the
        stock purchase of Trump Indiana, which included Trump Indiana’s 50% interests in
        BHR and BHPA. See Note 4 - Trump Indiana Acquisition.
  6
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 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
  PROMOTIONAL
        ALLOWANCES - Cash incentives related to gaming play are recorded as a reduction
        of gross revenues. Such amounts totaled $12.2 million and $7.5 million for
        the
        quarters ended September 30, 2006 and 2005, respectively, and $28.2 million
        and $22.0 million for the nine months ended September 30, 2006 and 2005,
        respectively. In addition, the retail value of accommodations, food and
        beverage, and other services furnished to hotel/casino guests without charge
        is
        included in gross revenue and then deducted as promotional allowances. The
        estimated departmental cost of providing such promotional allowances is included
        in casino expenses as follows:
 
 For
                  The Three Months Ended September 30,
              
              For
                  The Nine Months Ended September 30,2006
              
              2005
              
              2006
              
              2005Rooms
              
              $
              855,858
              
              $
              570,475
              
              $
              2,497,631
              
              $
              1,779,035Food
                  and Beverage
              
              
              2,879,133
              
              
              2,218,392
              
              
              8,138,860
              
              
              6,654,510Other
              
              
              156,926
              
              
              121,246
              
              
              395,233
              
              
              347,987Total
              
              $
              3,891,917
              
              $
              2,910,113
              
              $
              11,031,724
              
              $
              8,781,532
 
 The
        following schedule lists total cash incentives and the retail cost of hotel,
        food, beverage, and other, which comprise the total promotional
        allowances.
 
 For
                  The Three Months Ended September 30,
              
              For
                  The Nine Months Ended September 30,2006
              
              2005
              
              2006
              
              2005Cash
                  based promotional activities
              
              $
              10,063,680
              
              $
              5,707,760
              
              $
              22,367,731
              
              $
              16,984,330Slot
                  club and other
              
              
              2,136,990
              
              
              1,826,565
              
              
              5,866,257
              
              
              5,060,178Retail
                  cost of rooms, food,beverage
                  and other
              
              
              5,073,600
              
              
              4,149,200
              
              
              14,731,940
              
              
              12,215,062Total
              
              $
              17,274,270
              
              $
              11,683,525
              
              $
              42,965,928
              
              $
              34,259,570
 
 At
        Fitzgeralds Tunica, we have implemented promotions that allow customers to
        download promotional credits directly to the slot machine. While the Company
        does not recognize the playing of these credits as revenue and the customer
        cannot redeem the credits for cash, any jackpots won by the customer are
        a
        direct reduction of slot revenue.
 
 
 **NOTE
        3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**
 
 In
        September 2006, the FASB issued FASB No. 157 “Fair Value Measurements,” (“FASB
        157”) to establish a framework for measuring fair value and expanding
        disclosures related to fair value measurements. SFAS 157 is effective for
        financial statements for fiscal years beginning after November 15, 2007.
        The
        Company is evaluating, what impact, if any, FASB 157 will have on future
        reporting.
 
 **NOTE
        4. TRUMP INDIANA ACQUISITION**
 
 On
        December 21, 2005, the Company acquired Trump Indiana (subsequently renamed
        Majestic Star II) pursuant to a Stock Purchase Agreement (“SPA”) dated
        November 3, 2005 with Trump Entertainment Resorts Holdings, L.P. (“TERH”)
        for a purchase price of $253.0 million, subject to certain specified
        adjustments. Trump Indiana owned and operated a riverboat casino and land-based
        hotel adjacent to Majestic Star. As a result of the stock purchase, we acquired
        Trump Indiana’s 50% interest in our joint venture, BHR, which owns and operates
        the land-based pavilion and docking facility. The Company also acquired Trump
        Indiana’s 50% interest in BHPA, a joint venture with an affiliate of ours (which
        contributed its interest in BHPA at closing of the Trump Indiana acquisition),
        which owns and operates the parking garage.
 
 7
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            of Contents
  The
        Company’s consolidated statement of operations for the three and nine months
        ended September 30, 2006 includes results for Majestic Star II, BHR
        and BHPA. Prior to the purchase, the operations for BHR were accounted for
        under
        the equity method of accounting as an investment in a joint venture. Also,
        prior
        to December 21, 2005, the Company was a lessee of the parking garage owned
        and operated by BHPA. With the acquisition of Trump Indiana and contribution
        of
        our affiliate’s equity interest in BHPA, the lease was terminated and we
        recognized all of the operating expenses of BHPA during the three and nine
        months ended September 30, 2006.
 
 The
        acquisition of Trump Indiana is being accounted for under the purchase method
        of
        accounting. In order to assist the Company in assigning values to the assets
        acquired and liabilities assumed, the Company engaged a third party to assist
        with the valuation of the significant identifiable intangible assets acquired,
        as well as the other tangible assets acquired and certain liabilities assumed.
        The third party valuation report is still in draft form. Since the purchase
        price allocation is still in process, the valuation of intangible and tangible
        assets, and liabilities assumed is subject to refinement. Changes to the
        allocation of the purchase price may also affect goodwill. The Company has
        up to
        one year from the acquisition date to finalize the valuation of intangible
        and
        tangible assets, and assumed liabilities.
 
 
 Since
        December 31, 2005, goodwill had been adjusted as follows:
 
 
 Goodwill
                  as of December 31, 2005
              
              $
              41,328,396Severance
                  payments
              
              
              1,141,518Other
              
              
              (50,973
              )Goodwill
                  as of September 30, 2006
              
              $
              42,418,941
 
 As
        part
        of the Trump Indiana Acquisition, the Company identified certain positions
        at
        Majestic Star, Majestic Star II and BHR that could be eliminated. In the
        first
        quarter of 2006, the Company began laying off employees to implement this
        plan.
        In conjunction with the layoffs, the Company incurred severance and other
        compensation that was outside the normal compensation and bonuses payable
        to its
        laid off employees. The Company has capitalized severance and other compensation
        accrued or paid as goodwill pursuant to the guidance in EITF 95-3.
 
 
 **NOTE
        5. INVESTMENT IN BUFFINGTON HARBOR RIVERBOATS, L.L.C.**
 
 On
        October 31, 1995, the Company and Trump Indiana entered into the First
        Amended and Restated Operating Agreement of BHR for the purpose of acquiring
        and
        developing certain facilities for the gaming operations in the City of Gary
        (“BHR Property”). The Company and Trump Indiana each had a 50% non-controlling
        interest in BHR. Prior to December 21, 2005, the Company accounted for its
        interest in the joint venture under the equity method of accounting.
 
 BHR was
        responsible for the management, development and operation of the BHR Property.
        The Company and Trump Indiana had each entered into an agreement with BHR
        (the
“Berthing Agreement”) to use the BHR Property for their respective gaming
        operations and had committed to pay the cash operating losses of BHR as
        additional berthing fees. All expenditures requiring a cash outlay by BHR
        were
        billed to Trump Indiana and the Company at cost. Accordingly, BHR recorded
        as
        expenses the cost of providing such services and recorded as other revenues
        the
        amounts billed to Trump Indiana and the Company.
 
 8
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            of Contents
  The
        Company paid BHR approximately $1.3 million and $3.8 million, respectively,
        of berthing fees for the three- and nine-month periods ended September 30,
        2005. Such amounts were recorded in general and administrative expense in
        the
        consolidated statements of operations. On December 21, 2005, BHR became a
        wholly owned subsidiary and the Berthing Agreements between BHR and the Company
        and between BHR and Trump Indiana were terminated.
 
 Majestic
        Star uses the food and beverage operations at BHR to provide its casino
        customers with complimentary meals, beverages and services. The Company sends
        guests to these restaurants, and the other food and beverage operators at
        BHR
        and the proprietors of these businesses charge the Company for the meals
        served
        and the services provided. These proprietors are third-party vendors. The
        Company paid approximately $0.9 million and $2.6 million, respectively, to
        these
        restaurants, other food and beverage operators and for valet services for
        the
        three- and nine-month periods ended September 30, 2005. Food, beverage and
        valet costs are recorded in casino expense in the Company’s consolidated
        statements of operations. After the Company and Trump Indiana reimbursed
        BHR for
        all cash operational losses, the remaining net loss of BHR resulted from
        depreciation expense associated with the BHR property and was recorded as
        equity
        in loss of joint venture in the Company’s consolidated statements of operations.
        Such loss was approximately $0.6 million and $1.8 million, respectively,
        for the
        three- and nine- month periods ended September 30, 2005.
 
 The
        following represents selected financial information for BHR for the three-
        and
        nine-month periods ended September 30, 2005 when the Company accounted for
        its 50% interest in BHR under the equity method:
  STATEMENTS
                  OF OPERATIONS
              
              For
                  the
              
              For
                  theThree
                  Months Ended
              
              Nine
                  Months EndedSeptember 30,
                  2005
              
              September 30,
                  2005Gross
                  revenues
              
              $
              2,898,642
              
              $
              8,846,167Operating
                  loss
              
              $
              (1,062,791
              )
              $
              (3,480,099
              )Net
                  loss
              
              $
              (1,222,896
              )
              $
              (3,641,292
              )
 
 
 **NOTE
        6. LONG-TERM DEBT**
 
 September 30,
                2006
              
              December 31,
                2005Long-term
                  debt outstanding is as follows:$300,000,000
                  of 9 1⁄2% senior secured notes
              
              $
              300,000,000
              
              $
              300,000,000$200,000,000
                  of 9 3⁄4% senior notes
              
              
              200,000,000
              
              
              200,000,000$80,000,000 senior
                  secured credit facility
              
              
              26,208,357
              
              
              47,212,346Capitalized
                  leases and other debt
              
              
              284,312
              
              
              365,284Total
                  long-term debt
              
              
              526,492,669
              
              
              547,577,630Less:
                  current maturities
              
              
              172,448
              
              
              174,447Total
                  long-term debt, net of current maturities
              
              $
              526,320,221
              
              $
              547,403,183
 
 9
 Table
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  **AMENDMENTS
        TO THE SENIOR SECURED CREDIT FACILITY**
 
 The
        Company has entered into various amendments to the loan and security agreement
        governing the senior secured credit facility (the “Senior Secured Credit
        Facility”) as listed in the Company’s prior reports on Form 10-K and Form 10-Q.
        In addition to those amendments, on April 13, 2006, the Company entered
        into Amendment Number Five (“Amendment Five”). Amendment Five modified the
        interest coverage ratio covenant for the twelve-month period ended
        March 31, 2006. Pursuant to Amendment Four, the Company was required to
        obtain an interest coverage ratio of 1.85:1.0. The interest coverage ratio
        was
        amended to 1.80:1.0 in Amendment Five. In addition, the definition of
        consolidated interest expense was amended to exclude interest expense related
        to
        the pushdown of Majestic Holdco’s Discount Notes.
 
 On
        July
        31, 2006, the Company entered into Amendment Number Six (“Amendment Six”) to the
        Senior Secured Credit Facility. Amendment Six modifies the last 12 month
        minimum
        EBITDA covenant and the last 12 month interest coverage ratio covenant for
        the
        applicable calendar quarterly periods. As amended, the Company is now required
        to have a minimum EBITDA of $65.0 million for the 12 months ended June 30,
        2006, which periodically increases in $5.0 million increments to a maximum
        of
        $90.0 million for the 12 months ending March 31, 2010 and periods
        thereafter. The interest coverage ratio is reduced to 1.50:1.0 for the 12
        months
        ended June 30, 2006, continuing through December 31, 2007. The ratio
        increases to 1.60:1.0 in 2008, 1.70:1.0 in 2009 and to 1.80:1.0 in 2010 and
        each
        period thereafter. In addition, the capital expenditures limitations have
        been
        increased to $25.0 million for each of the fiscal years 2006 and 2007 and
        to
        $30.0 million for each of the fiscal years 2008, 2009 and 2010. The Company
        was
        in compliance with the financial covenants under the Senior Secured Credit
        Facility as of September 30, 2006.
 
 
 **NOTE
        7. COMMITMENTS AND CONTINGENCIES**
 
 CONTINGENCIES
 
 In
        February 2006, the Company’s previous stop loss health insurance provider
        (“Insurance Provider”), through their third party auditor, contacted the Company
        and requested that the Company provide information to facilitate an audit
        of
        employee health insurance stop loss coverage for the years of 2004 and 2005.
        Though the Company has provided and continues to provide the requested
        information, as a result of this audit process the Insurance Provider has
        withheld payment of nine individual claims that are payable under our stop
        loss
        insurance policy with an aggregate outstanding value of approximately $0.6
        million. The Company believes that it has fulfilled the obligations of the
        insurance policy. At this time, the Insurance Provider has not provided any
        information with regard to the results of the audit and thus the Company
        is
        unable to determine what claims, if any, could potentially be denied payment
        by
        our Insurance Provider.
 
 In
        conjunction with the Company’s acquisition of Trump Indiana, the Company entered
        into Amendment 1 to the Company’s development agreement (the “Amended Majestic
        Development Agreement”) with the City. The City has called into the question the
        validity of the Amended Majestic Development Agreement. The
        Company's postion is that the Amended Majestic Development Agreement
        is valid and binding. The City has discussed with the Company its need to
        receive more economic incentive payments from the Majestic Properties.
        The Company is continuing its discussions with the City. The Company has
        made no
        commitment to assist the City at this time.
  LEGAL
        PROCEEDINGS
 
 Various
        legal proceedings are pending against the Company. Management considers all
        such
        pending proceedings, comprised primarily of personal injury and equal employment
        opportunity (EEO) claims, to be routine litigation incidental to the Company’s
        business. Except as described in our Report on Form 10-K for the year ended
        December 31, 2005, management believes that the resolution of these
        proceedings will not individually, or in the aggregate, have a material effect
        on the Company’s financial condition, results of operations or cash flows. See
        our Report on Form 10-K for the year ended December 31, 2005 for a full
        description of our legal proceedings.
 
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  In
        June
        2003, a complaint was filed in the U.S. District Court for the Northern District
        of Mississippi against Tunica County casino owners and operators, including
        Barden Mississippi, the Tunica Casino Operators Association and the Tunica
        County Tourism Commission alleging violation of federal and state anti-trust
        claims, as well as various other tort and contract claims. In December 2005,
        the
        District Court granted summary judgment in favor of the casinos, dismissing
        all
        claims against the Company and other casino defendants. The plaintiffs have
        filed an appeal. The briefing has just recently been completed and it will
        likely be several months before the 5th Circuit Court of Appeals issues a
        ruling
        on the appeal. The trial date for the casino defendants’ counterclaims has been
        continued until such time as the appellate court issues a ruling on the appeal.
        The Company intends to vigorously defend against the appeal. At this time,
        it is
        too early to determine the outcome of this litigation and the effect, if
        any, on
        the Company's financial position and results of operations.
 
 TAX
        MATTERS
 
 Majestic
        Star Income Tax Protest. The
        Company has been assessed $2.6 million, plus interest, for the fiscal year
        1996
        and the period January 1, 1998 through June 18, 2001, by the Indiana Department
        of Revenue (the “Department”). On September 7, 2004, the Department assessed
        BDI, the Company’s ultimate parent and member, $1.3 million, plus penalties and
        interest for the remainder of 2001 and all of fiscal year 2002. The Department
        held a hearing on the 1996 through 2002 tax years on April 7, 2006, and is
        expected to issue its ruling later this year. BDI's non-resident shareholder
        has
        been assessed $0.2 million, plus penalty and interest, for 2003. A hearing
        on
        the 2003 tax year has been scheduled by the Department for December 5, 2006.
        The
        assessments relate to deductions for payments of taxes on adjusted gross
        gaming
        revenues the Company’s member took in computing adjusted gross income for
        Indiana state income tax purposes. The Department has taken the position
        that
        the Company had an obligation to withhold and remit tax for the non-resident
        shareholder of its member. The Company, BDI and BDI's non-resident shareholder
        have timely filed protests for all tax years at issue and those protests
        are
        currently pending before the Legal Division of the Department. On April 19,
        2004, the Indiana Tax Court ruled in a similar case involving another Indiana
        casino, Aztar Indiana Gaming Corporation (“Aztar”), that the gross wagering tax
        is a tax based on or measured by income and that it must be added back to
        the
        taxable income base for the purpose of determining adjusted gross income
        for
        Indiana tax purposes. On September 28, 2004, the Indiana Supreme Court denied
        Aztar’s request to review the Indiana Tax Court’s decision, and thus, the
        Indiana Tax Court’s opinion in the Aztar case is controlling precedent on the
        wagering tax add-back issue. No liability has been accrued by the Company
        relating to this matter.
 
 The
        Company’s indentures governing the Senior Secured Notes (the “Senior Secured
        Notes Indenture”) and the Senior Notes (the “Senior Notes Indenture”) and the
        loan agreement related to the Senior Secured Credit Facility allow the Company
        to make distributions to BDI for tax purposes. Accordingly, should BDI
        ultimately be found liable for additional state income taxes to the State
        of
        Indiana, the Company would make distributions sufficient to pay the additional
        tax. Any payments would be recorded as distributions in Member’s Deficit. The
        Company does not intend to make any distributions for the years in which
        an
        assessment was received until it has fully evaluated its options with BDI.
        In
        April 2005, and again in April 2006, BDI’s non-resident shareholder paid Indiana
        state income tax for fiscal years 2004 and 2005 pursuant to the Indiana Tax
        Court’s decision in Aztar. BDI’s non-resident shareholder determined that the
        arguments to be made by the Company and BDI related to the assessed years
        were
        not applicable to fiscal years 2004 and 2005.
 
 Majestic
        Star Sales and Use Tax Assessments. In
        October 2005, the Department assessed Majestic Star for unpaid sales and
        use
        taxes, with penalties and interest, for the period 2001 through 2004. The
        sales
        and use tax assessments, with penalties and interest, total $0.3 million.
        The
        use tax portions of the assessments relate to capital and operating supply
        purchases, and food, merchandise and other products provided to the guests
        of
        Majestic Star at no charge. On November 15, 2005, Majestic Star paid $0.2
        million under the State of Indiana amnesty program to eliminate all use tax
        and
        a portion of the sales tax assessment for the 2001 through 2004 tax years.
        All
        penalties and interest associated with such payments were waived in their
        entirety pursuant to Indiana law. The remaining $0.1 million of the assessment
        relates to:
 
 1.
              The
                  difference between sales tax on the full retail price of merchandise
                  and
                  other products provided to Majestic Star’s customers at no charge less
                  sales tax on the cost of this merchandise and other products,
                  and  2.
              Sales tax on the retail value
                of
                complimentary food provided to Majestic Star’s
                customers.
 
 11
 Table
            of Contents
  Both
        1
        and 2 above relate to the period August 2003 through 2004. On November 15,
        2005, Majestic Star filed a protest of the proposed assessments protesting
        the
        sales tax assessments related to this period. The Department held a hearing
        on
        the 2003 and 2004 tax years on April 7, 2006, and is expected to issue its
        ruling later this year.
 In
          addition, Majestic Star has a receivable on its balance sheet in the amount
          of
          $0.1 million related to the two items noted immediately above for the period
          2001 through July 2003. During this period of time, Majestic Star was remitting
          full sales tax on the retail value of complimentary food, merchandise and
          other
          products to the Department. In or around July 2003, the Department notified
          Majestic Star’s management that no sales tax should be paid on items provided on
          a complimentary basis to its customers. At that time Majestic Star established
          the receivable for sales taxes paid during the period 2001 through July
          2003. In
          or around July 2003, Majestic Star also filed claims for refund with the
          Department in the total amount of $0.1 million for tax years 2001 and 2002
          and
          for the period January through July 2003 for sales tax paid on food and
          other
          items provided to its customers on a complimentary basis. In December 2005,
          those refund claims were denied by the Department, and Majestic Star appealed
          those denials to the Indiana Tax Court on March 27, 2006. The Tax Court has
          ordered the parties to file status reports in that case by December 31,
          2006. Majestic Star believes that it has no sales or use tax liability
          for food
          for human consumption purchased by it and prepared for serving to its customers
          on a complimentary basis based on the Hyatt decision (see discussion below
          about
          Hyatt).
 
 BHR
          Sales and Use Tax Assessment 1998-2001 Tax Years. In
          October 2002, the Department assessed BHR for unpaid use tax for 1998 and
          unpaid
          sales and use taxes for 1999 through 2001 in the total amount of $0.4 million,
          excluding interest. The assessments related to purchases of capital assets
          and
          supplies, vehicle leases and rental of other items of personal property,
          for
          which no sales tax was paid and no use tax was self-assessed. In addition,
          for
          the years 1999 through 2001, the Department assessed tax on BHR’s provision of
          food, provided on a complimentary basis, to the patrons and employees of
          BHR’s
          members, Majestic Star and Trump Indiana. Sales tax was assessed on BHR’s cost
          of the food, as measured by the members’ periodic reimbursements to BHR. BHR
          paid the use tax portion of the assessment and filed a protest of the proposed
          assessments of sales tax in December 2002.
 
 BHR
          is
          disputing the assessment of sales tax on food provided at no charge, to
          the
          employees and patrons of Majestic Star and Trump Indiana, pursuant to the
          decision in Hyatt Corp v. Indiana Department of State Revenue. In Hyatt,
          the
          petitioner, a hotel operator, sought a refund for use tax paid on food
          purchased
          for complimentary meals that were provided to both guests and employees.
          Hyatt
          prevailed. BHR is arguing that since its inception, it has acted as the
          agent of
          Majestic Star and Trump Indiana with authority to purchase, prepare and
          provide
          food to their employees and patrons. This arrangement was memorialized
          in a
          written Limited Agency Agreement dated effective January 1, 2001. BHR’s position
          has been that all acts performed by it in its agency capacity (including
          the
          purchase, preparation and delivery of food) should be treated as though
          the acts
          had been performed by BHR’s joint venture partners, Majestic Star and Trump
          Indiana. The Department conducted a hearing on the protest in August 2005
          and in
          October 2005, issued a ruling waiving penalties but upholding the proposed
          $0.4
          million assessment. BHR filed a petition with the Indiana Tax Court in
          March
          2006, protesting the Department’s ruling with regard to the 1999-2001 tax years. The
          Tax
          Court has ordered the parties to file status reports in the case by December
          31,
          2006.
 
 BHR
        Sales and Use Tax Assessment 2002-2004 Tax Years. In
        October 2005, the Department assessed BHR $0.3 million in unpaid sales and
        use
        taxes for the 2002 tax year, inclusive of interest and penalties. A substantial
        portion of the assessed sales tax is on complimentary food provided to the
        employees and patrons of Majestic Star and Trump Indiana based on the *retail* value
        of
        the items provided. In prior years, the Department had made similar assessments,
        but on the *cost* of
        those
        items to BHR. BHR has not reserved for the assessment related to the prepared
        meals provided to the employees and patrons of Majestic Star and Trump Indiana.
        On November 15, 2005, BHR paid the use tax portion of the assessment for
        the 2002 tax year under Indiana’s tax amnesty program, thereby eliminating
        interest and penalties on the amount paid. The remaining amount outstanding
        is
        $0.2 million. BHR has protested the remainder of the assessments for 2002.
        The
        Department held a hearing on the 2002 tax year on April 7, 2006, and is
        expected to issue its ruling later this year. On June 19, 2006, the Department
        assessed BHR $0.3 million in sales and use tax for 2003 and 2004, exclusive
        of
        interest and penalties, relating primarily to the same sales and use tax
        issues
        as were assessed in earlier years, concerning the provision of complimentary
        food to the employees and patrons of Majestic Star and Trump Indiana. BHR
        filed
        protests with the Department on August 16, 2006 and BHR is now awaiting a
        hearing on those protests. Should the Department maintain its position that
        sales taxes are due on the retail value of complimentary meals BHR provided
        to
        employees of Majestic Star and Trump Indiana, BHR’s estimated 2005 sales tax
        exposure for the complimentary meals will be $0.1 million. Pursuant to the
        terms
        of the SPA, TERH is obligated to indemnify the Company for 50% of BHR’s
        pre-closing tax liabilities. Estimated exposure for the first nine months
        of
        2006, which would be the Company’s obligation only, would be approximately $0.1
        million.
 
 12
 Table
            of Contents
  **NOTE
        8. RELATED PARTY TRANSACTIONS**
 
 TRANSACTIONS
        BY OR WITH AFFILIATES
 
 *Manager
        Agreement.* Distributions to BDI under the Manager Agreement dated October 7, 2003 are
        governed and limited by the terms of the indentures governing the Senior
        Secured
        Notes, the Senior Notes and the Discount Notes and by the terms of the Senior
        Secured Credit Facility. The distributions for each fiscal quarter may not
        exceed 1% of the Company’s consolidated net operating revenue and 5% of the
        Company’s consolidated cash flow (as defined in the indenture governing the
        Senior Secured Notes and the Senior Secured Credit Facility) for the immediately
        preceding fiscal quarter.
 
 During
        the nine months ended September 30, 2006 and 2005, Majestic Star made
        distributions totaling $3.6 million and $3.9 million, respectively, to BDI
        pursuant to the Manager Agreement. The $3.6 million of distributions paid
        to BDI
        in 2006 pertain to the net revenues and consolidated cash flows of the Company
        during the three-month periods ended December 31, 2005 and March 31,2006. Though allowable, BDI chose to defer its distribution for the
        three
        months ended June 30, 2006 and has not taken a distribution for the three
        months
        ended September 30, 2006. If BDI were to decide to take these unpaid
        distributions, then the Company would be required to pay $3.6 million.
 
 *Tax
        Distributions* .
        Pursuant to the terms of each of the Senior Secured Notes and Senior Notes
        Indentures and the Senior Secured Credit Facility, the Company is permitted
        to
        make distributions for its member’s state and federal income tax liabilities. In
        the second quarter of 2006, the Company made a tax distribution of $0.9 million
        to BDI for 2005 state tax liabilities and estimated 2006 taxes. In the second
        quarter of 2005, the Company made a tax distribution of $2.3 million to BDI
        for
        2004 state tax liabilities and estimated 2005 taxes of which $0.7 million
        was
        reimbursed to the Company upon final determination of BDI’s tax
        liabilities.
 
 *BHPA
        Rent Expense.* During
        the three and nine months ended September 30, 2005, the Company incurred
        rent expense payable to BHPA totaling $0.5 million and $1.6 million,
        respectively. As a result of our acquisition of Trump Indiana and the
        contribution of our affiliates’s equity interest in BHPA to the Company, on
        December 21, 2005, BHPA became an indirect wholly owned subsidiary of the
        Company. The parking leases between BHPA and the Company and BHPA and Trump
        Indiana were terminated.
 
 *Barden
        Nevada Expense Sharing Agreement* .
        The
        Company has entered into an expense sharing agreement dated October 7, 2003
        with Barden Nevada. The expense sharing agreement provides for a fee from
        Barden
        Nevada to the Company in the amount of the greater of (i) $0.5 million per
        year,
        or (ii) the actual amount of certain specified expenses incurred by the Company
        in connection with providing services to Barden Nevada. These transactions
        are
        included in general and administrative expenses in the consolidated statements
        of operations. For the three and nine months ended September 30, 2006, the
        Company charged Barden Nevada $0.4 million and $1.1 million, respectively,
        pursuant to the expense sharing agreement. For the three and nine months
        ended
        September 30, 2005, the Company charged Barden Nevada $0.3 million and $1.0
        million, respectively, pursuant to the expense sharing agreement.
 
 
 **NOTE
        9. SEGMENT INFORMATION**
 
 The
        Majestic Star Casino, LLC, either directly or indirectly through wholly owned
        subsidiaries, owns and operates four casino properties as follows: two riverboat
        casinos and a hotel located in Gary, Indiana; a casino and hotel located
        in
        Tunica, Mississippi; and a casino located in Black Hawk, Colorado (collectively,
        the “Properties”).
 
 13
 Table
            of Contents
  The
        Company identifies its business in three segments based on geographic location.
        The Properties, in each of their segments, market primarily to middle-income
        guests. The major products offered in each segment are as follows: casino,
        hotel
        rooms (at the Majestic Properties and Fitzgeralds Tunica), and food and
        beverage.
 
 The
        accounting policies of each business segment are the same as those described
        in
        the summary of significant accounting policies in our Report on Form 10-K
        for
        the year ended December 31, 2005. There are minimal inter-segment
        sales.
 
 A
        summary
        of the Properties’ operations and expenditures for long-lived assets by business
        segment for the three and nine months ended September 30, 2006 and 2005 and
        a summary of the Properties’ goodwill as of September 30, 2006 and
        December 31, 2005 are presented below:
 
 For
                  The Three Months Ended
              
              For
                  The Nine Months EndedSeptember
                  30,
              
              September
                  30,2006
              
              2005
              
              2006
              
              2005(in
                  thousands)Net
                  revenues:Majestic
                  Properties (1)
              
              $
              55,041
              
              $
              34,707
              
              $
              180,616
              
              $
              105,012Fitzgeralds
                  Tunica
              
              
              22,426
              
              
              20,781
              
              
              65,395
              
              
              62,817Fitzgeralds
                  Black Hawk
              
              
              8,923
              
              
              9,249
              
              
              25,854
              
              
              26,823Total
              
              $
              86,390
              
              $
              64,737
              
              $
              271,865
              
              $
              194,652Operating
                  income (loss):Majestic
                  Properties (1)
              
              $
              4,420
              
              $
              3,972
              
              $
              29,559
              
              $
              13,581Fitzgeralds
                  Tunica
              
              
              3,289
              
              
              2,403
              
              
              8,875
              
              
              8,495Fitzgeralds
                  Black Hawk (2)
              
              
              2,717
              
              
              2,411
              
              
              6,447
              
              
              6,084Corporate
                  (3)
              
              
              (1,273
              )
              
              (1,390
              )
              
              (5,045
              )
              
              (6,591
              )Majestic
                  Investor Holdings (4)
              
              
              -
              
              
              (64
              )
              
              -
              
              
              (219
              )Total
              
              $
              9,153
              
              $
              7,332
              
              $
              39,836
              
              $
              21,350Segment
                  depreciation and amortization:Majestic
                  Properties (1)
              
              $
              5,111
              
              $
              2,187
              
              $
              15,216
              
              $
              6,423Fitzgeralds
                  Tunica
              
              
              2,320
              
              
              2,578
              
              
              6,651
              
              
              7,587Fitzgeralds
                  Black Hawk (2)
              
              
              516
              
              
              565
              
              
              1,648
              
              
              2,525Corporate
                  (3)
              
              
              30
              
              
              22
              
              
              82
              
              
              66Majestic
                  Investor Holdings (4)
              
              
              -
              
              
              69
              
              
              -
              
              
              208Total
              
              $
              7,977
              
              $
              5,421
              
              $
              23,597
              
              $
              16,809Expenditure
                  for additions to long-lived assets:Majestic
                  Properties (1)
              
              $
              1,984
              
              $
              1,723
              
              $
              4,911
              
              $
              4,061Fitzgeralds
                  Tunica
              
              
              4,651
              
              
              1,349
              
              
              5,988
              
              
              3,996Fitzgeralds
                  Black Hawk
              
              
              2,412
              
              
              206
              
              
              3,602
              
              
              2,015Corporate
              
              
              3
              
              
              -
              
              
              126
              
              
              -Total
              
              $
              9,050
              
              $
              3,278
              
              $
              14,627
              
              $
              10,072
  14
 Table
            of Contents
 As
                  of
              
              
              As
                  ofSeptember
                  30,
              
              
              December
                  31,2006
              
              
              2005(in
                  thousands)GoodwillMajestic
                  Properties (1)
              
              $
              42,418
              
              $
              41,328Fitzgeralds
                  Tunica
              
              
              3,998
              
              
              3,998Fitzgeralds
                  Black Hawk
              
              
              1,925
              
              
              1,925Total
              
              $
              48,341
              
              $
              47,251
 
 (1)
            The
                Majestic Properties for 2006 include Majestic Star, Majestic Star
                II and
                BHR. BHPA was merged into Majestic Star as of August 4, 2006 and
                is shown
                as if the merger had been completed as of January 1, 2006. All 2005
                information is for Majestic Star only but includes its 50% interest
                in BHR
                and lease payments to BHPA as an expense
                . (2)
            Fitzgeralds
                Black Hawk’s 2005 depreciation includes the $1.5 million of catch up
                depreciation and amortization expense for the period of time from
                July
                2004 to April 2005 when the assets of Fitzgeralds Black Hawk were
                held for
                sale and no depreciation or amortization expense was recorded during
                that
                period. (3)
            Corporate
                expenses reflect professional fees, payroll, benefits, travel and
                other
                costs associated with our corporate staff and are not allocated to
                the
                properties. In the nine-month period ended September 30, 2005,
                corporate expenses include the $2.3 million charge related to the
                termination of the Fitzgeralds Black Hawk
                sale. (4)
            Majestic
                Investor Holdings was merged into the Company on March 22,
                2006. 
 
 **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION**
 
 The
        Company is the co-issuer of $300.0 million of Senior Secured Notes and $200.0
        million of Senior Notes. Under the Senior Secured Notes Indenture, the Senior
        Notes Indenture and the loan and security agreement for the Senior Secured
        Credit Facility, Majestic Star II, Fitzgeralds Tunica, Fitzgeralds Black
        Hawk, BHR and BHPA are guarantor subsidiaries of the $300.0 million of Senior
        Secured Notes. On August 4, 2006, BHPA was merged into Majestic Star. As
        such,
        BHPA is reflected in the column titled “The Majestic Star Casino, LLC” in the
        following condensed consolidating balance sheet as of September 30, 2006,
        condensed consolidating statements of operations for the three and nine months
        ended September 30, 2006 and the condensed consolidating statement of cash
        flows
        for the nine months ended September 30, 2006.
 
 Our
        supplemental guarantor financial information contains financial information
        for
        The Majestic Star Casino, LLC, The Majestic Star Casino Capital Corp (co-issuer
        of the Senior Secured Notes but an entity with no operations), the guarantor
        subsidiaries and the eliminating entries necessary to consolidate such
        entities.
 
 
  15
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
  **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)**
 
 CONDENSED
        CONSOLIDATING BALANCE SHEET
 As
        of
        September 30, 2006
 
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              
              
              TotalLLC
                  (3)
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              
              
              ConsolidatedASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              8,677,970
              
              $
              -
              
              $
              18,122,100
              
              $
              -
              
              
              
              
              $
              26,800,070Restricted
                  cash
              
              
              2,166,881
              
              
              -
              
              
              1,160,000
              
              
              -
              
              
              
              
              
              3,326,881Accounts
                  receivable, net
              
              
              805,801
              
              
              -
              
              
              3,886,175
              
              
              -
              
              
              
              
              
              4,691,976Inventories
              
              
              59,499
              
              
              -
              
              
              920,299
              
              
              -
              
              
              
              
              
              979,798Prepaid
                  expenses and deposits
              
              
              1,585,301
              
              
              -
              
              
              2,735,181
              
              
              -
              
              
              
              
              
              4,320,482Receivable
                  from affiliate
              
              
              2,021,295
              
              
              -
              
              
              500,088
              
              
              (2,225,890
              )
              
              (a
              )
              
              295,493Investment
                  in subsidiaries
              
              
              104,686,500
              
              
              -
              
              
              -
              
              
              (104,686,500
              )
              
              (b
              )
              
              -Other
                  current assets
              
              
              -
              
              
              -
              
              
              90,615
              
              
              -
              
              
              
              
              
              90,615Total
                  current assets
              
              
              120,003,247
              
              
              -
              
              
              27,414,458
              
              
              (106,912,390
              )
              
              
              
              
              40,505,315Property,
                  equipment and improvements, net
              
              
              94,177,564
              
              
              -
              
              
              178,596,086
              
              
              -
              
              
              
              
              
              272,773,650Intangible
                  assets, net
              
              
              -
              
              
              -
              
              
              126,260,294
              
              
              -
              
              
              
              
              
              126,260,294Goodwill
              
              
              -
              
              
              -
              
              
              48,341,340
              
              
              -
              
              
              
              
              
              48,341,340Other
                  assets:Deferred
                  financing costs, net
              
              
              13,897,855
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              13,897,855Deferred
                  financing costs pushed downfrom
                  Majestic Holdco (1)
              
              
              2,562,696
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              2,562,696Long
                  term receivable - related party
              
              
              259,198,787
              
              
              -
              
              
              8,257,546
              
              
              (267,456,333
              )
              
              (a
              )
              
              -Other
                  assets
              
              
              229,294
              
              
              -
              
              
              1,794,220
              
              
              -
              
              
              
              
              
              2,023,514Total
                  other assets
              
              
              275,888,632
              
              
              -
              
              
              10,051,766
              
              
              (267,456,333
              )
              
              
              
              
              18,484,065Total
                  assets
              
              $
              490,069,443
              
              $
              -
              
              $
              390,663,944
              
              $
              (374,368,723
              )
              
              
              
              $
              506,364,664LIABILITIES
                  AND MEMBER'S DEFICITCurrent
                  liabilities:Accounts
                  payable
              
              $
              1,046,596
              
              $
              -
              
              $
              4,460,624
              
              $
              -
              
              
              
              
              $
              5,507,220Current
                  portion of long-term debt
              
              
              59,032
              
              
              -
              
              
              113,416
              
              
              -
              
              
              
              
              
              172,448Payable
                  to related party
              
              
              498,460
              
              
              -
              
              
              1,727,430
              
              
              (2,225,890
              )
              
              (a
              )
              
              -Accrued
                  liabilities:Payroll
                  and related
              
              
              2,937,902
              
              
              -
              
              
              6,843,993
              
              
              -
              
              
              
              
              
              9,781,895Interest
              
              
              22,319,196
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              22,319,196Property
                  and franchise taxes
              
              
              4,591,723
              
              
              -
              
              
              4,843,496
              
              
              -
              
              
              
              
              
              9,435,219Other
                  accrued liabilities
              
              
              4,574,413
              
              
              -
              
              
              8,714,324
              
              
              -
              
              
              
              
              
              13,288,737Total
                  current liabilities
              
              
              36,027,322
              
              
              -
              
              
              26,703,283
              
              
              (2,225,890
              )
              
              
              
              
              60,504,715Due
                  to related parties
              
              
              8,257,546
              
              
              -
              
              
              259,198,787
              
              
              (267,456,333
              )
              
              (a
              )
              
              -Long-term
                  debt, net of current maturities
              
              
              526,244,847
              
              
              300,000,000
              
              
              75,374
              
              
              (300,000,000
              )
              
              (c
              )
              
              526,320,221Long-term
                  debt pushed down from Majestic Holdco (2)
              
              
              49,581,700
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              49,581,700Total
                  liabilities
              
              
              620,111,415
              
              
              300,000,000
              
              
              285,977,444
              
              
              (569,682,223
              )
              
              
              
              
              636,406,636Member's
                  (deficit) equity
              
              
              (130,041,972
              )
              
              (300,000,000
              )
              
              104,686,500
              
              
              195,313,500
              
              
              (b)
                  (c
              )
              
              (130,041,972
              )Total
                  liabilities and member's (deficit) equity
              
              $
              490,069,443
              
              $
              -
              
              $
              390,663,944
              
              $
              (374,368,723
              )
              
              
              
              $
              506,364,664
 
  16
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
  **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)**
 
 CONDENSED
        CONSOLIDATING BALANCE SHEET (CONTINUED)
 As
        of
        September 30, 2006
 
 (a)
            To
                eliminate intercompany receivable and
                payables. 
 (b)
            To
                eliminate intercompany accounts and investment in
                subsidiaries. 
 (c)
            The
                Majestic Star Casino Capital Corp. is a co-obligor of the Senior
                Secured
                Notes issued by the Company. Accordingly, such indebtedness has been
                presented as an obligation of both the issuer and the co-obligor
                in the
                above balance sheets. 
 (1)
            Reflects
                the pushdown of deferred financing costs related to the issuance
                of the
                Discount Notes of Majestic Holdco, net of amortization, pursuant
                to SEC
                Staff Accounting Bulletin Topic 5(J). 
 (2)
            Reflects
                the pushdown of Majestic Holdco’s Discount Notes pursuant to SEC Staff
                Accounting Bulletin Topic 5(J). 
 (3)
            Includes
                BHPA which was merged into Majestic Star on August 4,
                2006. 
 
  17
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
  **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)**
 
 CONDENSED
        CONSOLIDATING BALANCE SHEET
 As
        of
        December 31, 2005
 
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              
              
              ConsolidatedASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              7,085,458
              
              $
              -
              
              $
              25,282,791
              
              $
              -
              
              
              
              
              $
              32,368,249Restricted
                  cash
              
              
              900,000
              
              
              -
              
              
              2,290,000
              
              
              -
              
              
              
              
              
              3,190,000Accounts
                  receivable, net
              
              
              1,528,727
              
              
              -
              
              
              3,070,687
              
              
              -
              
              
              
              
              
              4,599,414Inventories
              
              
              60,476
              
              
              -
              
              
              727,405
              
              
              -
              
              
              
              
              
              787,881Prepaid
                  expenses and deposits
              
              
              918,195
              
              
              -
              
              
              1,515,406
              
              
              -
              
              
              
              
              
              2,433,601Receivable
                  from affiliate
              
              
              9,851,352
              
              
              -
              
              
              -
              
              
              (9,682,341
              )
              
              (a
              )
              
              169,011Other
                  current assets
              
              
              -
              
              
              -
              
              
              137,914
              
              
              -
              
              
              
              
              
              137,914Total
                  current assets
              
              
              20,344,208
              
              
              -
              
              
              33,024,203
              
              
              (9,682,341
              )
              
              
              
              
              43,686,070Property,
                  equipment and improvements, net
              
              
              75,421,809
              
              
              -
              
              
              202,710,674
              
              
              -
              
              
              
              
              
              278,132,483Intangible
                  assets, net
              
              
              -
              
              
              -
              
              
              128,854,668
              
              
              -
              
              
              
              
              
              128,854,668Goodwill
              
              
              -
              
              
              -
              
              
              47,250,794
              
              
              -
              
              
              
              
              
              47,250,794Other
                  assets:Deferred
                    financing costs, net
              
              
              15,263,897
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              15,263,897Deferred
                  financing costs pushed downfrom
                  Majestic Holdco (1)
              
              
              2,804,227
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              2,804,227Long
                  term receivable - related party
              
              
              418,765,178
              
              
              -
              
              
              -
              
              
              (418,765,178
              )
              
              (a
              )
              
              -Other
                  assets
              
              
              228,363
              
              
              -
              
              
              1,738,330
              
              
              -
              
              
              
              
              
              1,966,693Total
                  other assets
              
              
              437,061,665
              
              
              -
              
              
              1,738,330
              
              
              (418,765,178
              )
              
              
              
              
              20,034,817Total
                  assets
              
              $
              532,827,682
              
              $
              -
              
              $
              413,578,669
              
              $
              (428,447,519
              )
              
              
              
              $
              517,958,832LIABILITIES
                  AND MEMBER'S DEFICITCurrent
                  liabilities:Accounts
                  payable
              
              $
              1,775,675
              
              $
              -
              
              $
              1,783,532
              
              $
              -
              
              
              
              
              $
              3,559,207Note
                  payable
              
              
              -
              
              
              -
              
              
              984,590
              
              
              -
              
              
              
              
              
              984,590Current
                  portion of long-term debt
              
              
              -
              
              
              -
              
              
              174,447
              
              
              -
              
              
              
              
              
              174,447Payable
                  to related party
              
              
              714,240
              
              
              -
              
              
              8,968,101
              
              
              (9,682,341
              )
              
              (a
              )
              
              -Accrued
                  liabilities:Payroll
                  and related
              
              
              3,095,817
              
              
              -
              
              
              6,170,430
              
              
              -
              
              
              
              
              
              9,266,247Interest
              
              
              7,215,793
              
              
              -
              
              
              586
              
              
              -
              
              
              
              
              
              7,216,379Property
                  and franchise taxes
              
              
              3,763,331
              
              
              -
              
              
              4,652,308
              
              
              -
              
              
              
              
              
              8,415,639Other
                  accrued liabilities
              
              
              5,465,515
              
              
              -
              
              
              10,991,461
              
              
              -
              
              
              
              
              
              16,456,976Total
                  current liabilities
              
              
              22,030,371
              
              
              -
              
              
              33,725,455
              
              
              (9,682,341
              )
              
              
              
              
              46,073,485Investment
                  in subsidiaries
              
              
              23,381,935
              
              
              -
              
              
              -
              
              
              (23,381,935
              )
              
              (b
              )
              
              -Due
                  to related parties
              
              
              15,720,866
              
              
              -
              
              
              403,044,312
              
              
              (418,765,178
              )
              
              (a
              )
              
              -Long-term
                  debt, net of current maturities
              
              
              547,212,346
              
              
              300,000,000
              
              
              190,837
              
              
              (300,000,000
              )
              
              (c
              )
              
              547,403,183Long-term
                  debt pushed down from Majestic Holdco (2)
              
              
              45,296,335
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              45,296,335Total
                  liabilities
              
              
              653,641,853
              
              
              300,000,000
              
              
              436,960,604
              
              
              (751,829,454
              )
              
              
              
              
              638,773,003Member's
                  deficit
              
              
              (120,814,171
              )
              
              (300,000,000
              )
              
              (23,381,935
              )
              
              323,381,935
              
              
              (b)
                  (c
              )
              
              (120,814,171
              )Total
                  liabilities and member's deficit
              
              $
              532,827,682
              
              $
              -
              
              $
              413,578,669
              
              $
              (428,447,519
              )
              
              
              
              $
              517,958,832
 
  18
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
  
 **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)**
 
 CONDENSED
        CONSOLIDATING BALANCE SHEET (CONTINUED)
 As
        of
        December 31, 2005
 
 
 (a)
            To
                eliminate intercompany receivable and
                payables. 
 (b)
            To
                eliminate intercompany accounts and investment in
                subsidiaries. 
 (c)
            The
                Majestic Star Casino Capital Corp. is a co-obligor of the Senior
                Secured
                Notes issued by the Company. Accordingly, such indebtedness has been
                presented as an obligation of both the issuer and the co-obligor
                in the
                above balance sheets. 
 (1)
            Reflects
                the pushdown of deferred financing costs related to the issuance
                of the
                Discount Notes of Majestic Holdco, net of amortization, pursuant
                to SEC
                Staff Accounting Bulletin Topic 5(J). 
 (2)
            Reflects
                the pushdown of Majestic Holdco’s Discount Notes pursuant to SEC Staff
                Accounting Bulletin Topic 5(J). 
  19
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
  **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)**
 
 CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS
 For
        the
        Three Months Ended September 30, 2006
 
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
                  (3)
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
                  (a)
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              33,088,799
              
              $
              -
              
              $
              61,751,003
              
              $
              -
              
              $
              94,839,802Rooms
              
              
              -
              
              
              -
              
              
              2,943,349
              
              
              -
              
              
              2,943,349Food
                  and beverage
              
              
              442,778
              
              
              -
              
              
              3,728,216
              
              
              -
              
              
              4,170,994Other
              
              
              809,303
              
              
              -
              
              
              900,605
              
              
              -
              
              
              1,709,908Gross
                  revenues
              
              
              34,340,880
              
              
              -
              
              
              69,323,173
              
              
              -
              
              
              103,664,053Less
                  promotional allowances
              
              
              4,877,139
              
              
              -
              
              
              12,397,131
              
              
              -
              
              
              17,274,270Net
                  operating revenues
              
              
              29,463,741
              
              
              -
              
              
              56,926,042
              
              
              -
              
              
              86,389,783OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              6,545,407
              
              
              -
              
              
              15,275,056
              
              
              -
              
              
              21,820,463Rooms
              
              
              -
              
              
              -
              
              
              862,425
              
              
              -
              
              
              862,425Food
                  and beverage
              
              
              500,463
              
              
              -
              
              
              1,610,750
              
              
              -
              
              
              2,111,213Other
              
              
              -
              
              
              -
              
              
              278,216
              
              
              -
              
              
              278,216Gaming
                  taxes
              
              
              9,434,766
              
              
              -
              
              
              12,848,069
              
              
              -
              
              
              22,282,835Advertising
                  and promotion
              
              
              1,684,212
              
              
              -
              
              
              3,967,616
              
              
              -
              
              
              5,651,828General
                  and administrative
              
              
              3,125,750
              
              
              -
              
              
              10,147,142
              
              
              -
              
              
              13,272,892Corporate
                  expense
              
              
              1,242,897
              
              
              -
              
              
              -
              
              
              -
              
              
              1,242,897Economic
                  incentive tax - City of Gary
              
              
              933,091
              
              
              -
              
              
              801,630
              
              
              -
              
              
              1,734,721Depreciation
                  and amortization
              
              
              2,083,319
              
              
              -
              
              
              5,893,375
              
              
              -
              
              
              7,976,694Loss
                  on disposal of assets
              
              
              367
              
              
              -
              
              
              1,791
              
              
              -
              
              
              2,158Total
                  operating costs and expenses
              
              
              25,550,272
              
              
              -
              
              
              51,686,070
              
              
              -
              
              
              77,236,342Operating
                  income
              
              
              3,913,469
              
              
              -
              
              
              5,239,972
              
              
              -
              
              
              9,153,441OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              50,866
              
              
              -
              
              
              76,646
              
              
              -
              
              
              127,512Interest
                  expense
              
              
              (13,447,675
              )
              
              -
              
              
              (3,189
              )
              
              -
              
              
              (13,450,864
              )Interest
                  expense - debt pushed downfrom
                  Majestic Holdco (1) (2)
              
              
              (1,591,635
              )
              
              -
              
              
              -
              
              
              -
              
              
              (1,591,635
              )Other
                  non-operating expense
              
              
              (31,530
              )
              
              -
              
              
              -
              
              
              -
              
              
              (31,530
              )Equity
                  in net income of subsidiaries
              
              
              5,313,429
              
              
              -
              
              
              -
              
              
              (5,313,429
              )
              
              -Total
                  other (expense) income
              
              
              (9,706,545
              )
              
              -
              
              
              73,457
              
              
              (5,313,429
              )
              
              (14,946,517
              )Net
                  (loss) income
              
              $
              (5,793,076
              )
              $
              -
              
              $
              5,313,429
              
              $
              (5,313,429
              )
              $
              (5,793,076
              )
 
 
 (a)
            To
                eliminate equity in net income of
                subsidiaries. 
 (1)
            Includes
                amortization of deferred financing costs related to the issuance
                of
                Majestic Holdco’s Discount Notes. 
 (2)
            Includes
                amortization of the discount on Majestic Holdco’s Discount
                Notes. 
 (3)
            Includes
                BHPA which was merged into Majestic Star on August 4,
                2006.  20
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
  **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)**
 
 CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS
 For
        the
        Three Months Ended September 30, 2005
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
                  (a)
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              37,704,116
              
              $
              -
              
              $
              31,782,721
              
              $
              -
              
              $
              69,486,837Rooms
              
              
              -
              
              
              -
              
              
              2,004,744
              
              
              -
              
              
              2,004,744Food
                  and beverage
              
              
              438,194
              
              
              -
              
              
              3,123,769
              
              
              -
              
              
              3,561,963Other
              
              
              933,613
              
              
              -
              
              
              433,191
              
              
              -
              
              
              1,366,804Gross
                  revenues
              
              
              39,075,923
              
              
              -
              
              
              37,344,425
              
              
              -
              
              
              76,420,348Less
                  promotional allowances
              
              
              4,369,136
              
              
              -
              
              
              7,314,389
              
              
              -
              
              
              11,683,525Net
                  operating revenues
              
              
              34,706,787
              
              
              -
              
              
              30,030,036
              
              
              -
              
              
              64,736,823OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              7,241,329
              
              
              -
              
              
              9,641,093
              
              
              -
              
              
              16,882,422Rooms
              
              
              -
              
              
              -
              
              
              448,211
              
              
              -
              
              
              448,211Food
                  and beverage
              
              
              508,159
              
              
              -
              
              
              960,410
              
              
              -
              
              
              1,468,569Other
              
              
              -
              
              
              -
              
              
              259,099
              
              
              -
              
              
              259,099Gaming
                  taxes
              
              
              10,835,296
              
              
              -
              
              
              4,189,768
              
              
              -
              
              
              15,025,064Advertising
                  and promotion
              
              
              1,964,929
              
              
              -
              
              
              1,986,443
              
              
              -
              
              
              3,951,372General
                  and administrative
              
              
              6,255,406
              
              
              -
              
              
              4,560,256
              
              
              -
              
              
              10,815,662Corporate
                  expense
              
              
              1,367,628
              
              
              -
              
              
              -
              
              
              -
              
              
              1,367,628Economic
                  incentive tax - City of Gary
              
              
              1,131,164
              
              
              -
              
              
              -
              
              
              -
              
              
              1,131,164Depreciation
                  and amortization
              
              
              2,208,724
              
              
              -
              
              
              3,212,225
              
              
              -
              
              
              5,420,949Loss
                  on investment in BuffingtonHarbor
                  Riverboats, LLC
              
              
              611,448
              
              
              -
              
              
              -
              
              
              -
              
              
              611,448Loss
                  on disposal of assets
              
              
              -
              
              
              -
              
              
              23,378
              
              
              -
              
              
              23,378Total
                  operating costs and expenses
              
              
              32,124,083
              
              
              -
              
              
              25,280,883
              
              
              -
              
              
              57,404,966Operating
                  income
              
              
              2,582,704
              
              
              -
              
              
              4,749,153
              
              
              -
              
              
              7,331,857OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              67,295
              
              
              -
              
              
              15,452
              
              
              -
              
              
              82,747Interest
                  expense
              
              
              (6,999,859
              )
              
              -
              
              
              (474,614
              )
              
              -
              
              
              (7,474,473
              )Other
                  non-operating expense
              
              
              (37,191
              )
              
              -
              
              
              -
              
              
              -
              
              
              (37,191
              )Equity
                  in net income of subsidiaries
              
              
              4,289,991
              
              
              -
              
              
              -
              
              
              (4,289,991
              )
              
              -Total
                  other expense
              
              
              (2,679,764
              )
              
              -
              
              
              (459,162
              )
              
              (4,289,991
              )
              
              (7,428,917
              )Net
                  (loss) income
              
              $
              (97,060
              )
              $
              -
              
              $
              4,289,991
              
              $
              (4,289,991
              )
              $
              (97,060
              )
 
 (a)
            To
                eliminate equity in net income of
                subsidiaries. 
  21
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
  **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)**
 
 CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS
 For
        the
        Nine Months Ended September 30, 2006
 
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
                  (3)
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
                  (a)
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              102,110,108
              
              $
              -
              
              $
              186,557,341
              
              $
              -
              
              $
              288,667,449Rooms
              
              
              -
              
              
              -
              
              
              8,556,120
              
              
              -
              
              
              8,556,120Food
                  and beverage
              
              
              1,367,955
              
              
              -
              
              
              11,121,873
              
              
              -
              
              
              12,489,828Other
              
              
              2,210,940
              
              
              -
              
              
              2,906,663
              
              
              -
              
              
              5,117,603Gross
                  revenues
              
              
              105,689,003
              
              
              -
              
              
              209,141,997
              
              
              -
              
              
              314,831,000Less
                  promotional allowances
              
              
              10,024,943
              
              
              -
              
              
              32,940,985
              
              
              -
              
              
              42,965,928Net
                  operating revenues
              
              
              95,664,060
              
              
              -
              
              
              176,201,012
              
              
              -
              
              
              271,865,072OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              18,880,217
              
              
              -
              
              
              46,413,293
              
              
              -
              
              
              65,293,510Rooms
              
              
              -
              
              
              -
              
              
              2,468,620
              
              
              -
              
              
              2,468,620Food
                  and beverage
              
              
              1,469,446
              
              
              -
              
              
              4,918,960
              
              
              -
              
              
              6,388,406Other
              
              
              173
              
              
              -
              
              
              767,523
              
              
              -
              
              
              767,696Gaming
                  taxes
              
              
              29,043,471
              
              
              -
              
              
              37,694,619
              
              
              -
              
              
              66,738,090Advertising
                  and promotion
              
              
              4,308,499
              
              
              -
              
              
              9,881,949
              
              
              -
              
              
              14,190,448General
                  and administrative
              
              
              11,802,936
              
              
              -
              
              
              30,735,517
              
              
              -
              
              
              42,538,453Corporate
                  expense
              
              
              4,962,562
              
              
              -
              
              
              -
              
              
              -
              
              
              4,962,562Economic
                  incentive tax - City of Gary
              
              
              2,720,837
              
              
              -
              
              
              2,365,898
              
              
              -
              
              
              5,086,735Depreciation
                  and amortization
              
              
              6,197,773
              
              
              -
              
              
              17,398,769
              
              
              -
              
              
              23,596,542(Gain)
                  loss on disposal of assets
              
              
              (2,360
              )
              
              -
              
              
              214
              
              
              -
              
              
              (2,146
              )Total
                  operating costs and expenses
              
              
              79,383,554
              
              
              -
              
              
              152,645,362
              
              
              -
              
              
              232,028,916Operating
                  income
              
              
              16,280,506
              
              
              -
              
              
              23,555,650
              
              
              -
              
              
              39,836,156OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              173,452
              
              
              -
              
              
              176,437
              
              
              -
              
              
              349,889Interest
                  expense
              
              
              (40,327,792
              )
              
              -
              
              
              128,227
              
              
              -
              
              
              (40,199,565
              )Interest
                  expense - debt pushed downfrom
                  Majestic Holdco (1) (2)
              
              
              (4,661,889
              )
              
              -
              
              
              -
              
              
              -
              
              
              (4,661,889
              )Other
                  non-operating expense
              
              
              (82,733
              )
              
              -
              
              
              -
              
              
              -
              
              
              (82,733
              )Equity
                  in net income of subsidiaries
              
              
              23,860,314
              
              
              -
              
              
              -
              
              
              (23,860,314
              )
              
              -Total
                  other expense
              
              
              (21,038,648
              )
              
              -
              
              
              304,664
              
              
              (23,860,314
              )
              
              (44,594,298
              )Net
                  (loss) income
              
              $
              (4,758,142
              )
              $
              -
              
              $
              23,860,314
              
              $
              (23,860,314
              )
              $
              (4,758,142
              )
 
 
 (a)
            To
                eliminate equity in net income of
                subsidiaries. 
 (1)
            Includes
                amortization of deferred financing costs related to the issuance
                of
                Majestic Holdco’s Discount Notes. 
 (2)
            Includes
                amortization of the discount on Majestic Holdco’s Discount Notes. 
 (3)
            Includes
                BHPA which was merged into Majestic Star on August 4,
                2006.  22
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
  **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)**
 
 CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS
 For
        the
        Nine Months Ended September 30, 2005
 
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
                  (a)
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              113,843,473
              
              $
              -
              
              $
              95,001,974
              
              $
              -
              
              $
              208,845,447Rooms
              
              
              -
              
              
              -
              
              
              5,716,417
              
              
              -
              
              
              5,716,417Food
                  and beverage
              
              
              1,298,191
              
              
              -
              
              
              9,234,148
              
              
              -
              
              
              10,532,339Other
              
              
              2,552,643
              
              
              -
              
              
              1,264,638
              
              
              -
              
              
              3,817,281Gross
                  revenues
              
              
              117,694,307
              
              
              -
              
              
              111,217,177
              
              
              -
              
              
              228,911,484Less
                  promotional allowances
              
              
              12,682,535
              
              
              -
              
              
              21,577,035
              
              
              -
              
              
              34,259,570Net
                  operating revenues
              
              
              105,011,772
              
              
              -
              
              
              89,640,142
              
              
              -
              
              
              194,651,914OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              21,142,605
              
              
              -
              
              
              29,245,442
              
              
              -
              
              
              50,388,047Rooms
              
              
              -
              
              
              -
              
              
              1,273,264
              
              
              -
              
              
              1,273,264Food
                  and beverage
              
              
              1,484,998
              
              
              -
              
              
              2,949,414
              
              
              -
              
              
              4,434,412Other
              
              
              -
              
              
              -
              
              
              760,976
              
              
              -
              
              
              760,976Gaming
                  taxes
              
              
              32,679,749
              
              
              -
              
              
              12,395,508
              
              
              -
              
              
              45,075,257Advertising
                  and promotion
              
              
              5,672,518
              
              
              -
              
              
              5,673,782
              
              
              -
              
              
              11,346,300General
                  and administrative
              
              
              18,783,859
              
              
              -
              
              
              12,604,539
              
              
              -
              
              
              31,388,398Corporate
                  expense
              
              
              6,525,812
              
              
              -
              
              
              -
              
              
              -
              
              
              6,525,812Economic
                  incentive tax - City of Gary
              
              
              3,419,136
              
              
              -
              
              
              -
              
              
              -
              
              
              3,419,136Depreciation
                  and amortization
              
              
              6,488,653
              
              
              -
              
              
              10,319,964
              
              
              -
              
              
              16,808,617Loss
                  on investment in BuffingtonHarbor
                  Riverboats, LLC
              
              
              1,820,646
              
              
              -
              
              
              -
              
              
              -
              
              
              1,820,646Loss
                  on disposal of assets
              
              
              3,644
              
              
              -
              
              
              57,709
              
              
              -
              
              
              61,353Total
                  operating costs and expenses
              
              
              98,021,620
              
              
              -
              
              
              75,280,598
              
              
              -
              
              
              173,302,218Operating
                  income
              
              
              6,990,152
              
              
              -
              
              
              14,359,544
              
              
              -
              
              
              21,349,696OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              137,025
              
              
              -
              
              
              44,338
              
              
              -
              
              
              181,363Interest
                  expense
              
              
              (20,730,746
              )
              
              -
              
              
              (1,423,751
              )
              
              -
              
              
              (22,154,497
              )Other
                  non-operating expense
              
              
              (115,860
              )
              
              -
              
              
              -
              
              
              -
              
              
              (115,860
              )Equity
                  in net income of subsidiaries
              
              
              12,980,131
              
              
              -
              
              
              -
              
              
              (12,980,131
              )
              
              -Total
                  other expense
              
              
              (7,729,450
              )
              
              -
              
              
              (1,379,413
              )
              
              (12,980,131
              )
              
              (22,088,994
              )Net
                  (loss) income
              
              $
              (739,298
              )
              $
              -
              
              $
              12,980,131
              
              $
              (12,980,131
              )
              $
              (739,298
              )
 
 (a)
            To
                eliminate equity in net income of
                subsidiaries. 
  23
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
  
 **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)**
 
 CONDENSED
        CONSOLIDATING STATEMENT OF CASH FLOWS
 For
        the
        Nine Months Ended September 30, 2006
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
                  (3)
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              ConsolidatedNET
                  CASH PROVIDED BYOPERATING
                  ACTIVITIES: (1)
              
              $
              102,957
              
              $
              -
              
              $
              37,564,994
              
              $
              -
              
              $
              37,667,951CASH
                  FLOWS FROM INVESTING ACTIVITIES:Change
                  in restricted cash
              
              
              (16,881
              )
              
              -
              
              
              (120,000
              )
              
              -
              
              
              (136,881
              )Additional
                  acquisition costs related toTrump
                  Indiana acquisition
              
              
              -
              
              
              -
              
              
              (1,090,546
              )
              
              -
              
              
              (1,090,546
              )Acquisition
                  of property and equipment
              
              
              (3,793,467
              )
              
              -
              
              
              (10,834,019
              )
              
              -
              
              
              (14,627,486
              )Merger
                  of Majestic Investor Holdings into Majestic Star
              
              
              600,328
              
              
              -
              
              
              (600,328
              )
              
              -
              
              
              -Merger
                  of BHPA into Majestic Star
              
              
              3,134
              
              
              -
              
              
              (3,134
              )
              
              -
              
              
              -Proceeds
                  from disposal of assets
              
              
              135,268
              
              
              -
              
              
              583,427
              
              
              -
              
              
              718,695Net
                  cash used in investing activities
              
              
              (3,071,618
              )
              
              -
              
              
              (12,064,600
              )
              
              -
              
              
              (15,136,218
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Issuance
                  costs for the 9 1/2% senior secured notes
              
              
              (207,331
              )
              
              -
              
              
              -
              
              
              -
              
              
              (207,331
              )Issuance
                  costs for the 9 3/4% senior notes
              
              
              (1,036,655
              )
              
              -
              
              
              -
              
              
              -
              
              
              (1,036,655
              )Issuance
                  costs for the 12 1/2% senior discount notespushed
                  down from Majestic Holdco (2)
              
              
              (206,290
              )
              
              -
              
              
              -
              
              
              -
              
              
              (206,290
              )Proceeds
                  from line of credit
              
              
              26,739,773
              
              
              -
              
              
              -
              
              
              -
              
              
              26,739,773Repayment
                  of line of credit
              
              
              (47,758,609
              )
              
              -
              
              
              -
              
              
              -
              
              
              (47,758,609
              )Repayment
                  of debt
              
              
              -
              
              
              -
              
              
              (1,161,085
              )
              
              -
              
              
              (1,161,085
              )Cash
                  advances from (to) affiliates
              
              
              31,500,000
              
              
              -
              
              
              (31,500,000
              )
              
              -
              
              
              -Distribution
                  to Barden Development, Inc.
              
              
              (4,469,715
              )
              
              -
              
              
              -
              
              
              -
              
              
              (4,469,715
              )Net
                  cash provided by (used in) financing activities
              
              
              4,561,173
              
              
              -
              
              
              (32,661,085
              )
              
              -
              
              
              (28,099,912
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              1,592,512
              
              
              -
              
              
              (7,160,691
              )
              
              -
              
              
              (5,568,179
              )Cash
                  and cash equivalents, beginning of period
              
              
              7,085,458
              
              
              -
              
              
              25,282,791
              
              
              -
              
              
              32,368,249Cash
                  and cash equivalents, end of period
              
              $
              8,677,970
              
              $
              -
              
              $
              18,122,100
              
              $
              -
              
              $
              26,800,070
 
 
 (1)
            Includes
                amortization of bond discount and deferred financing costs of $4.7
                million
                related to the pushdown of Majestic Holdco’s Discount Notes pursuant to
                SEC Staff Accounting Bulletin Topic 5(J). 
 (2)
            Reflects
                the pushdown of issuance costs of Majestic Holdco’s Discount Notes
                pursuant to SEC Staff Accounting Bulletin Topic
                5(J). 
 (3)
            Includes
                BHPA which was merged into Majestic Star on August 4,
                2006. 
 
  24
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            (CONTINUED)**
 **(unaudited)**
 **NOTE
        10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)**
  CONDENSED
        CONSOLIDATING STATEMENT OF CASH FLOWS
 For
        the
        Nine Months Ended September 30, 2005
 
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              ConsolidatedNET
                  CASH (USED IN) PROVIDED BYOPERATING
                  ACTIVITIES:
              
              $
              (851,319
              )
              $
              -
              
              $
              24,082,577
              
              $
              -
              
              $
              23,231,258CASH
                  FLOWS FROM INVESTING ACTIVITIES:Change in
                  restricted cash
              
              
              -
              
              
              -
              
              
              390,008
              
              
              -
              
              
              390,008Acquisition
                  of property and equipment
              
              
              (4,061,012
              )
              
              -
              
              
              (6,011,317
              )
              
              -
              
              
              (10,072,329
              )Increase
                  in prepaid leases and deposits
              
              
              (71,400
              )
              
              -
              
              
              -
              
              
              -
              
              
              (71,400
              )Investment
                  in Buffington Harbor Riverboats, L.L.C.
              
              
              (76,371
              )
              
              -
              
              
              -
              
              
              -
              
              
              (76,371
              )Proceeds
                  from disposal of assets
              
              
              -
              
              
              -
              
              
              23,900
              
              
              -
              
              
              23,900Net
                  cash used in investing activities
              
              
              (4,208,783
              )
              
              -
              
              
              (5,597,409
              )
              
              -
              
              
              (9,806,192
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from line of credit
              
              
              23,389,581
              
              
              -
              
              
              -
              
              
              -
              
              
              23,389,581Repayment
                  of line of credit
              
              
              (25,349,296
              )
              
              -
              
              
              -
              
              
              -
              
              
              (25,349,296
              )Advances
                  on revolving credit facility with affiliate
              
              
              (4,453,331
              )
              
              -
              
              
              -
              
              
              -
              
              
              (4,453,331
              )Cash
                  advances from (to) affiliates
              
              
              16,275,000
              
              
              -
              
              
              (16,275,000
              )
              
              -
              
              
              -Distribution
                  to Barden Development, Inc.
              
              
              (6,196,242
              )
              
              -
              
              
              -
              
              
              -
              
              
              (6,196,242
              )Net
                  cash provided by (used in) financing activities
              
              
              3,665,712
              
              
              -
              
              
              (16,275,000
              )
              
              -
              
              
              (12,609,288
              )Net
                  (decrease) increase in cash and cash equivalents
              
              
              (1,394,390
              )
              
              -
              
              
              2,210,168
              
              
              -
              
              
              815,778Cash
                  and cash equivalents, beginning of period
              
              
              8,433,545
              
              
              -
              
              
              8,288,184
              
              
              -
              
              
              16,721,729-
              
              
              -
              
              
              -
              
              
              -
              
              
              -Cash
                  and cash equivalents, end of period
              
              $
              7,039,155
              
              $
              -
              
              $
              10,498,352
              
              $
              -
              
              $
              17,537,507
 
 
 
 
  25
 Table
            of Contents
 **ITEM
                  2.**
              **Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations.**
  STATEMENT
          ON FORWARD-LOOKING INFORMATION
 
 Throughout
          this report we make forward-looking statements. Forward-looking statements
          include the words “may,” “will,” “would,” “could,” “likely,” “estimate,”
“intend,” “plan,” “continue,” “believe,” “expect” or “anticipate” and other
          similar words and include all discussions about our acquisition and development
          plans. We do not guarantee that the transactions and events described in
          this
          report will happen as described or that any positive trends noted in this
          report
          will continue. The forward-looking statements contained in this report
          are
          generally located in the material set forth under the headings “Business,” and
“Management’s Discussion and Analysis of Financial Condition and Results of
          Operations,” but may be found in other locations as well. These forward-looking
          statements generally relate to our plans, objectives and expectations for
          future
          operations and are based upon management’s reasonable estimates of future
          results or trends. Although we believe that our plans and objectives reflected
          in or suggested by such forward-looking statements are reasonable, we may
          not
          achieve such plans or objectives. You should read this report completely
          and
          with the understanding that actual future results may be materially different
          from what we expect. We will not update forward-looking statements even
          though
          our situation may change in the future.
 
 For
          a
          more complete description of the risk factors that may affect our business,
          see
          the risk factors set forth in Item 1A., Risk Factors, in the Company’s Annual
          Report on Form 10-K for the year ended December 31, 2005, and as updated in
          Part II of this report, and elsewhere in this report.
 
 All
          future written and verbal forward-looking statements attributable to us
          or any
          person acting on our behalf are expressly qualified in their entirety by
          the
          cautionary statements contained or referred to in this report. In light
          of these
          risks, uncertainties and assumptions, the forward-looking events discussed
          in
          this report might not occur.
 
 
 **OVERVIEW**
 
 ***The
          Company***
 
 The
          Majestic Star Casino, LLC and its subsidiaries (collectively, the “Company”),
          operate two riverboat gaming facilities and a dockside pavilion known as
          the
          Buffington Harbor Gaming Complex located in Gary, Indiana (separately “Majestic
          Star,” “Majestic Star II,” and “BHR” and collectively as the “Majestic
          Properties”) and two Fitzgeralds brand casino-hotels located in Tunica County,
          Mississippi (“Barden Mississippi” or “Fitzgeralds Tunica”) and Black Hawk,
          Colorado (casino only) (“Barden Colorado” or “Fitzgeralds Black Hawk”). The
          Company has entered into an expense-sharing arrangement with Barden Nevada
          Gaming, LLC (“Barden Nevada” or “Fitzgeralds Las Vegas”) for support services.
          See Note 8 to the Condensed Consolidated Financial Statements.
 
 26
 Table
              of Contents
  ***Discount
          Notes***
 
 The
          Company’s parent, Majestic Holdco, LLC (“Majestic Holdco”) issued, in
          conjunction with its co-issuer, Majestic Holdco, Inc., $63.5 million aggregate
          principal at maturity of 12 1⁄2% Senior Discount Notes due 2011 (the
“Discount Notes”). The Company’s consolidated balance sheets as of
          September 30, 2006 and December 31, 2005, include the pushdown of
          Discount Notes of $45.3 million at December 31, 2005 and $49.6 million at
          September 30, 2006, net of original issue discount, that were issued by
          Majestic Holdco in connection with the financing for the acquisition of
          Trump
          Indiana, Inc. and its related interest in BHR and in a parking garage located
          adjacent to BHR. Also being pushed down are financing costs of $2.6 million,
          net
          of amortization of $0.4 million as of September 30, 2006, and $2.8 million,
          net of amortization of $20,000 as of December 31, 2005, and amortization
          of
          deferred financing costs and bond discount (reflected in interest expense
          in the
          Company’s consolidated statement of operations) of $1.6 million and $4.7
          million, respectively for the three and nine months ended September 30,
          2006. A likely scenario for the repayment of the Discount Notes is from
          cash
          flows of the Company or a refinancing of the Company’s indebtedness, together
          with the indebtedness of Majestic Holdco. The Discount Notes have been
          “pushed-down” to the Company pursuant to the guidelines of SEC Staff Accounting
          Bulletin Topic 5(J). The Discount Notes are solely the obligation of Majestic
          Holdco and its co-issuer, Majestic Holdco, Inc. and are unsecured. Neither
          the
          Company nor any of its direct or indirect subsidiaries guarantees the Discount
          Notes nor are the equity or assets of the Company or any of its subsidiaries
          security for the Discount Notes. Further, each of the 9 3⁄4% senior notes
          (the “Senior Notes”) and the 9 1⁄2% senior secured notes (the “Senior Secured
          Notes”) indentures and the loan and security agreement which governs our $80.0
          million senior secured credit facility (“Senior Secured Credit Facility”)
          preclude distributions by the Company to Majestic Holdco unless certain
          financial tests are met.
 
 **RESULTS
          OF OPERATIONS**
 
 ***Trump
          Indiana Acquisition***
 
 On
          December 21, 2005, the Company purchased the Majestic Star II (formerly
          known as Trump Indiana) from Trump Entertainment Resorts Holdings L.P.
          (“TERH”)
          for a purchase price of $253.0 million, subject to adjustments for certain
          obligations, cash on hand and working capital. As part of that purchase,
          the
          Company also acquired Trump Indiana’s 50% joint venture interest in BHR and in
          Buffington Harbor Parking Associates, L.L.C. (“BHPA”)(together, the “Trump
          Indiana Acquisition”). An affiliate of the Company contributed its 50% interest
          in BHPA to the Company at the time of the closing on the Trump Indiana
          Acquisition. As a result of these transactions, Majestic Star II, BHR and
          BHPA
          became wholly owned subsidiaries of the Company. On August 4, 2006, BHPA
          was
          merged into Majestic Star.
 
 Since
          the
          acquisition, we have spent a significant amount of time and effort to
          incorporate Majestic Star II into our other Gary, Indiana operations.
          However, reductions in marketing and promotions, increased competition,
          disruption to our gaming operations during the transition, the loss of
          a
          separate, identifiable casino in Trump Indiana, road construction, and
          lack of
          acceptance of the changes we made to our properties by some of our customers,
          have impacted casino revenues. Margins for the Majestic Properties may
          decrease
          as our costs increase in connection with an effort to generate greater
          casino volumes. The Majestic Properties have become more aggressive in
          their
          marketing and promotions in order to remain competitive with the marketing
          and
          promotions of competitors. Management is adding staff in order to provide
          better
          service on the casino floor. Also, management is maintaining and adding
          leased
          and participation slot machines in order to increase slot revenues. A reduction
          in leased and participation slot machines was anticipated from the Company’s
          cost savings plan in conjunction with the Trump Indiana
          Acquisition.
 
 As
          reported by the Indiana Gaming Commission, the casino revenues at our Majestic
          Properties declined by 17.5% and 13.2%, respectively, for the three and
          nine
          months ended September 30, 2006 compared to the same periods in
          2005, prior to the acquisition of Trump Indiana. For all of the
          northwest Indiana gaming market, casino revenues have increased 3.6% in
          the
          third quarter of 2006 compared to the third quarter of 2005 and 4.3% in
          the
          first nine months of 2006 compared to the same period in 2005.
 
 We
          are
          actively addressing those issues identified above that are within our control.
          However, many of the programs take time to implement and to gain customer
          acceptance. Additionally, the Majestic Properties will continue to be subject
          to
          the enhanced marketing, promotions and amenities offered by our competitors.
          There is no guarantee that our immediate plans will improve our casino
          revenues
          and our cash flows in the near term or on a permanent basis. We increased
          promotional and complimentaries activities at the Majestic Properties by
          $5.9
          million, or 82.1%, in the third quarter of 2006 compared to the second
          quarter
          of 2006. However, market share has not improved.
 
 27
 Table
              of Contents
  In
          addition to those plans identified within Management’s Discussion and Analysis
          of Financial Condition and Results of Operations contained within the Company’s
          Report on Form 10-Q for the quarterly periods ended March 31, 2006 and
          June 30, 2006, we plan to:
 
 ·
              Continue
                  refining our direct mail program to achieve a better return from
                  the
                  customers we are targeting in our mailing campaigns; 
 ·
              Take
                  over the operation of the food and beverage outlets in the BHR
                  pavilion in
                  order to improve the food offerings to our customers as well as
                  improve
                  the physical appearance of the outlets; 
 ·
              Enhance
                  the slot product on our casino floor by adding new and entertaining
                  machines, through a combination of slot machine purchases and lease
                  agreements, that are not currently offered in the
                  market; 
 ·
              Add
                  staff to the casino floor to increase guest service and enhance
                  the
                  management team at the property in key areas;
                  and 
 ·
              Develop
                  an entertainment center that could be used for concerts and
                  events. 
 
 ***Overall
          Operating Results***
 
 The
          discussion of our consolidated financial results for the three and nine
          months
          ended September 30, 2006 is inclusive of the operating results of Majestic
          Star II, along with the additional 50% interest of BHR and BHPA, from the
          date of acquisition. In addition, our financial results are inclusive of
          interest expense and amortization of financing costs related to the pushdown
          of
          the Discount Notes, as discussed previously.
 
 Consolidated
          gross operating revenues increased $27.2 million, or 35.6%, from $76.4
          million
          in the three-month period ended September 30, 2005 to $103.7 million in the
          three-month period ended September 30, 2006. The increase is primarily due
          to the acquisition of Majestic Star II, which contributed $30.3 million to
          consolidated gross revenues for the quarter. Fitzgeralds Tunica and BHR
          also
          added $1.9 million and $0.1 million, respectively, to consolidated gross
          revenues, offset by a decrease of $4.7 million at Majestic Star and a decrease
          of $0.3 million at Fitzgeralds Black Hawk.
 
 Consolidated
          casino revenues, which comprise 91.5% of consolidated gross revenues, increased
          $25.4 million, or 36.5%, to $94.8 million, in the three-month period ended
          September 30, 2006, compared to the similar period last year, again due to
          Majestic Star II’s contribution, which was $28.5 million. Adding to the
          increase in consolidated casino revenue was a $1.8 million increase at
          Fitzgeralds Tunica, offset by declines in casino revenue at Majestic Star
          of
          $4.6 million and $0.3 million at Fitzgeralds Black Hawk.
 
 During
          the third quarter of 2006, promotional allowances, which are deducted from
          gross
          operating revenues to arrive at net revenues, increased to $17.3 million
          from
          $11.7 million in the same quarter last year. The increase is due to the
          acquisition of Majestic Star II and greater levels of promotional and
          complimentary activities at Majestic Star and Fitzgeralds Tunica. At the
          Majestic Properties, promotional and complimentary expenses increased as
          management attempted to improve the level of gaming play of existing customers
          and to reintroduce our gaming facilities to customers that patronized the
          Majestic Properties prior to the acquisition and integration of Trump Indiana.
          At Fitzgeralds Tunica, promotional and complimentary expenses increased
          as part
          of the repositioning of the property to attract a higher worth gaming customer
          and to remain competitive with the marketing and promotions of other gaming
          properties in the Tunica market.
 
 In
          the
          three-month period ended September 30, 2006, as compared to the same
          three-month period last year, operating expenses increased $19.8 million,
          with
          $23.2 million of this increase attributable to Majestic Star II along with
          $3.2
          million for BHR. In 2005, 50% of BHR’s expenses would have been included in
          operating expenses due to the joint venture with Trump Indiana. Majestic
          Star's
          operating expenses decreased $6.4 million to $24.3 million for the third
          quarter
          of 2006 compared to $30.7 million in the third quarter of 2005. Fitzgeralds
          Tunica had an increase in operating expenses of $0.7 million which was
          offset by
          a reduction of $0.6 million at Fitzgeralds Black Hawk.
 
 28
 Table
              of Contents
  As
          a
          result of these changes in revenues and expenses, operating income was
          $9.2
          million for the three months ended September 30, 2006 compared to $7.3
          million
          for the same period in 2005. As a result of greater interest expense, which
          increased $7.6 million as a result of the additional debt issued in conjunction
          with the Trump Indiana Acquisition, we had a consolidated net loss of $5.8
          million during the three-month period ended September 30, 2006 compared to
          a net loss of $0.1 million for the three-month period ended September 30,
          2005.
 
 For
          the
          nine months ended September 30, 2006, consolidated gross operating revenues
          were $314.8 million compared to $228.9 million for the first nine months
          of
          2005, an increase of $85.9 million or 37.5%. The acquisition of Majestic
          Star II contributed $94.1 million of gross revenue, while Fitzgeralds
          Tunica and BHR added $4.5 million and $0.3 million, respectively, which
          was
          offset by a decrease of $12.0 million at Majestic Star and a decrease of
          $1.0
          million at Fitzgeralds Black Hawk.
 
 In
          the
          nine-month period ended September 30, 2006, as compared to the same prior
          year period, consolidated casino revenues, which comprised 91.7% of consolidated
          gross revenues during the period, increased $79.8 million, or 38.2%, to
          $288.7
          million, due to Majestic Star II’s contribution, which was $88.7 million.
          Adding to the increase in consolidated casino revenue was a $3.8 million
          increase at Fitzgeralds Tunica, offset by declines in casino revenue at
          Majestic
          Star of $11.7 million and $0.9 million at Fitzgeralds Black Hawk.
 
 Promotional
          allowances for the nine months ended September 30, 2006 were $43.0 million
          compared to $34.3 million for the nine months ended September 30, 2005.
          As
          stated above, promotions have increased as a result of the acquisition
          of
          Majestic Star II and efforts to reposition the Fitzgeralds Tunica property,
          but
          overall were at a lower level earlier in the year than in the third
          quarter.
 
 In
          the
          nine-month period ended September 30, 2006, as compared to the same
          nine-month period last year, operating expenses increased $58.7 million,
          with
          $66.7 million of this increase attributable to Majestic Star II and $10.0
          million related to BHR. Majestic Star's operating expenses for the nine
          months
          ended September 30, 2006 decreased $17.1 million from $91.4 million during
          the first nine months of 2005 compared to $74.3 million for the same period
          in
          2006. Depreciation expense and corporate expense were higher in 2005 due
          to the
          mutual termination of the Fitzgeralds Black Hawk sale which resulted in
          catch up
          depreciation in the second quarter of 2005 of $1.5 million and a $2.3 million
          termination fee.
 
 Operating
          income for the nine months ended September 30, 2006 was $39.8 million,
          an
          increase of $18.5 million or 86.6% compared to operating income of $21.3
          million
          for the nine months ended September 30, 2005. Consolidated net loss was
          $4.8
          million in the nine-month period ended September 30, 2006, an increase of
          $4.0 million when compared to a net loss of $0.7 million for the same period
          in
          2005. Interest expense increased $22.7 million due to the Trump Indiana
          Acquisition.
 
 Developments
          that affected our results during the three- and nine-month periods ended
          September 30, 2006, or that may affect future results are listed
          below:
 
 ·
              Competition
                  in our markets remains intense and continued aggressive marketing
                  by our
                  competitors in all our markets will require us to maintain a high
                  level of
                  marketing and promotional expenses. The new casino and amenities
                  at Boyd
                  Gaming’s Blue Chip Casino that opened in January 2006, together
                  with Blue Chip’s related promotions, have impacted our operations at
                  the Majestic Properties. Boyd has also announced a $130.0 million
                  expansion to their Blue Chip Casino facility with a hotel and other
                  additional amenities, scheduled to open in late 2008. Harrah’s
                  Entertainment announced plans for a $485.0 million expansion project
                  at
                  its Horseshoe Casino in Hammond, Indiana which is expected to open
                  in mid
                  2008. The Pokagon Indians have broken ground on a facility near
                  the
                  Indiana and Michigan state line that is scheduled to open in the
                  summer of
                  2007 and will include 3,000 slot machines, 90 table games and 20
                  poker
                  games. Various remodel and expansion projects have been recently
                  completed
                  by our competitors in the Black Hawk market, and these competitors
                  have
                  increased their marketing activities. In the Tunica market, a new
                  casino
                  project has been announced that is expected to begin construction
                  in the
                  summer of 2007 and open 24 to 48 months later. If the level of
                  competition
                  in any of our markets increases, our financial performance and
                  cash flows
                  may be negatively impacted. 
 ·
              The
                  $25.0 million expansion plans for Fitzgeralds Black Hawk are progressing
                  with the necessary governmental approvals being obtained in the
                  third
                  quarter of 2006. This expansion will not only add more amenities
                  for our
                  guests, but will also increase the number of slot machines from
                  approximately 600 to approximately 1,000, which will all be ticket-in
                  ticket out (“TITO”). Previously the Company disclosed this project would
                  be completed by the end of 2007. Our board of directors is currently
                  evaluating the timing of this project as part of a process to determine
                  the most effective use of the Company’s cash flows and available
                  credit. 
 ·
              Fitzgeralds
                  Tunica is seeking to improve market share and attract a higher-valued
                  gaming customer by enhancing the property with a $3.5 million hotel
                  renovation project which commenced in the third quarter of 2006,
                  and will
                  include 108 hotel rooms as well as remodeling the hotel lobby and
                  room
                  corridors, and upgrading the elevator access areas. The remaining
                  hotel
                  rooms are anticipated to be renovated in 2007. In conjunction with
                  attracting a higher-valued gaming customer, the property is
                  looking to open a high-limit pit in
                  2007. 
 29
 Table
                of Contents
 ·
              The
                  management team at Fitzgeralds Tunica has implemented and is refining
                  its
                  changes to the property to make it more competitive in the Tunica
                  market.
                  Along with a new advertising program, management has also enhanced
                  the property’s direct mail, guest development and hosting programs.
                  Management has also focused on upgrading the property’s food and beverage
                  operations. 
 ·
              During
                  the third quarter of 2006, the Majestic Properties remodeled the
                  porte
                  cochere and front entrance to the BHR pavilion and re-opened the
                  Lakeshore
                  Lounge. These projects have improved the exterior of the facility
                  and
                  “sense of arrival” and have also increased foot traffic past the bars and
                  restaurants in BHR with the goal of driving greater revenues from
                  these
                  facilities.  ·
              In
                  the first nine months of 2006, we spent approximately $14.6 million
                  for
                  the purchase of slot machines and TITO implementation, re-branding
                  Trump
                  Indiana to Majestic Star II, integration of our computer system with
                  Trump Indiana, making purchases related to upgrading the Fitzgeralds
                  Tunica hotel and preparing for the Fitzgeralds Black Hawk expansion.
                  As of
                  September 30, 2006, we had 1,124, or 86.6%, of our slot machines at
                  Fitzgeralds Tunica equipped with TITO and 563, or 94.9%, of our
                  slot
                  machines at Fitzgeralds Black Hawk equipped with TITO. At Majestic
                  Star
                  and Majestic Star II, all of our slot machines are TITO equipped. By
                  year end, substantially all of our slot machines at all of our
                  properties
                  will be equipped with TITO. 
 The
          following tables set forth information derived from the Company's statements
          of
          operations, balance sheets and statements of cash flows.
 
 **Operating
        Results by Entity**
 For
                  The Three Months Ended
              
              For
                  The Nine Months EndedSeptember
                  30,
              
              September
                  30,2006
              
              2005
              
              2006
              
              2005(in
                  thousands)Gross
                  revenues:Majestic
                  Properties (1)
              
              $
              64,763
              
              $
              39,076
              
              $
              200,107
              
              $
              117,694Fitzgeralds
                  Tunica
              
              
              28,693
              
              
              26,771
              
              
              84,857
              
              
              80,377Fitzgeralds
                  Black Hawk
              
              
              10,208
              
              
              10,573
              
              
              29,867
              
              
              30,840Total
              
              $
              103,664
              
              $
              76,420
              
              $
              314,831
              
              $
              228,911Net
                  revenues:Majestic
                  Properties (1)
              
              $
              55,041
              
              $
              34,707
              
              $
              180,616
              
              $
              105,012Fitzgeralds
                  Tunica
              
              
              22,426
              
              
              20,781
              
              
              65,395
              
              
              62,817Fitzgeralds
                  Black Hawk
              
              
              8,923
              
              
              9,249
              
              
              25,854
              
              
              26,823Total
              
              $
              86,390
              
              $
              64,737
              
              $
              271,865
              
              $
              194,652Casino
                  revenues:Majestic
                  Properties (1)
              
              $
              61,587
              
              $
              37,704
              
              $
              190,791
              
              $
              113,843Fitzgeralds
                  Tunica
              
              
              23,692
              
              
              21,892
              
              
              69,955
              
              
              66,166Fitzgeralds
                  Black Hawk
              
              
              9,561
              
              
              9,891
              
              
              27,921
              
              
              28,836Total
              
              $
              94,840
              
              $
              69,487
              
              $
              288,667
              
              $
              208,845Operating
                  income (loss):Majestic
                  Properties (1)
              
              $
              4,420
              
              $
              3,972
              
              $
              29,559
              
              $
              13,581Fitzgeralds
                  Tunica
              
              
              3,289
              
              
              2,403
              
              
              8,875
              
              
              8,495Fitzgeralds
                  Black Hawk (2)
              
              
              2,717
              
              
              2,411
              
              
              6,447
              
              
              6,084Corporate
                  (3)
              
              
              (1,273
              )
              
              (1,390
              )
              
              (5,045
              )
              
              (6,591
              )Majestic
                  Investor Holdings (4)
              
              
              -
              
              
              (64
              )
              
              -
              
              
              (219
              )Total
              
              $
              9,153
              
              $
              7,332
              
              $
              39,836
              
              $
              21,350
  30
 Table
            of Contents
 **Operating
                  Results by Entity (continued)**For
                  The Three Months Ended
              For
                  The Nine Months EndedSeptember
                  30,
              September
                  30,2006
              
              
              2005
              
              
              2006
              
              
              2005(in
                  thousands)Operating
                  margin (5)Majestic
                  Properties (1)
              
              
              8.0
              %
              
              11.4
              %
              
              16.4
              %
              
              12.9
              %Fitzgeralds
                  Tunica
              
              
              14.7
              %
              
              11.6
              %
              
              13.6
              %
              
              13.5
              %Fitzgeralds
                  Black Hawk (2)
              
              
              30.4
              %
              
              26.1
              %
              
              24.9
              %
              
              22.7
              %Total
              
              
              10.6
              %
              
              11.3
              %
              
              14.7
              %
              
              11.0
              %Segment
                  depreciation and amortization:Majestic
                  Properties (1)
              
              $
              5,111
              
              $
              2,187
              
              $
              15,216
              
              $
              6,423Fitzgeralds
                  Tunica
              
              
              2,320
              
              
              2,578
              
              
              6,651
              
              
              7,587Fitzgeralds
                  Black Hawk (2)
              
              
              516
              
              
              565
              
              
              1,648
              
              
              2,525Corporate
              
              
              30
              
              
              22
              
              
              82
              
              
              66Majestic
                  Investor Holdings (4)
              
              
              -
              
              
              69
              
              
              -
              
              
              208Total
              
              $
              7,977
              
              $
              5,421
              
              $
              23,597
              
              $
              16,809Expenditure
                  for additions to long-lived assets:Majestic
                  Properties (1)
              
              $
              1,984
              
              $
              1,723
              
              $
              4,911
              
              $
              4,061Fitzgeralds
                  Tunica
              
              
              4,651
              
              
              1,349
              
              
              5,988
              
              
              3,996Fitzgeralds
                  Black Hawk
              
              
              2,412
              
              
              206
              
              
              3,602
              
              
              2,015Corporate
              
              
              3
              
              
              -
              
              
              126
              
              
              -Total
              
              $
              9,050
              
              $
              3,278
              
              $
              14,627
              
              $
              10,072As
                  of
              
              
              As
                  ofSeptember
                  30,
              
              
              December
                  31,2006
              
              
              2005(in
                  thousands)GoodwillMajestic
                  Properties (1)
              
              $
              42,418
              
              $
              41,328Fitzgeralds
                  Tunica
              
              
              3,998
              
              
              3,998Fitzgeralds
                  Black Hawk
              
              
              1,925
              
              
              1,925Total
              
              $
              48,341
              
              $
              47,251
 
 Notes:
 (1)
            The
                Majestic Properties for 2006 include Majestic Star, Majestic Star
                II and
                BHR. BHPA was merged into Majestic Star as of August 4, 2006 and
                is shown
                as if the merger had been completed as of January 1, 2006. All 2005
                information is for Majestic Star only but includes its 50% interest
                in BHR
                and lease payments to BHPA as an expense
                . (2)
            Fitzgeralds
                Black Hawk’s 2005 depreciation includes the $1.5 million catch up
                depreciation and amortization expense for the period of time from
                July
                2004 to April 2005 when the property’s assets were held for sale and no
                depreciation or amortization expense was
                recorded. (3)
            Corporate
                expenses reflect professional fees, payroll, benefits, travel and
                other
                costs associated with our corporate staff and are not allocated to
                the
                properties. Included in the nine-month period of 2005 is the $2.3
                million
                charge related to the termination of the Fitzgeralds Black Hawk
                sale. (4)
            Majestic
                Investor Holdings was merged into the Company on March 22,
                2006. (5)
            Operating
                margin is calculated by dividing operating income (loss) by net
                revenues. 
  31
 Table
            of Contents
 ******Majestic
        Properties******
 Gross
            revenues for the three months ended September 30, 2006 was $64.8 million
            compared to $39.1 million in the same period in 2005, an increase of
            $25.7
            million or 65.7%. Majestic Star II contributed $30.3 million of the increase,
            offset by a $4.7 million decline at Majestic Star. Casino revenues, which
            make
            up 95.1% of the gross revenue, were $61.6 million, an increase of $23.9
            million
            compared to $37.7 million of the third quarter of 2005. Majestic Star
            II’s
            casino revenues of $28.5 million generated the increase. The decline
            at Majestic
            Star of $4.6 million was due to a $0.5 million decrease in table games
            revenue,
            resulting from a 15.0% increase in drop but offset by a 21.0% decrease
            in the
            hold percentage, and a $4.1 million decrease in slot win due to a reduction
            of
            12.2% in coin-in compared to the prior year third quarter and a decrease
            in the
            win percentage of 0.7%.
 
 For
            the
            three months ended September 30, 2006, operating income for the Majestic
            Properties was $4.4 million compared to $4.0 million for only Majestic
            Star
            (which included 50% of BHR’s loss in investment of $0.6 million) for the same
            three months in 2005. Excluding Majestic Star II and BHR, casino expenses
            were
            down $0.7 million, gaming taxes were down $1.4 million, advertising and
            promotions were down $0.3 million, general and administrative expenses
            decreased
            $3.1 million, and taxes to the City of Gary decreased $0.2 million. These
            decreases are a result of both lower revenues at Majestic Star and savings
            achieved through the cost savings strategies undertaken with the integration
            of
            Trump Indiana into Majestic Star. There was also a reduction in property
            taxes for Majestic Star of $1.0 million as the 2005 tax bills, received
            in
            August 2006, were less than anticipated as Lake County applied a one-time
            credit
            resulting from a settlement with a large Lake County taxpayer.
 
 For
            the
            nine-month period ended September 30, 2006, gross revenues were $200.1
            million,
            an increase of $82.4 million, or 70.0%, compared to 2005. Gross revenues
            of
            $94.1 million generated by Majestic Star II were the reason for this
            increase while Majestic Star experienced a decline of $12.0 million when
            comparing 2006 to 2005. Casino revenues were $102.1 million and $88.7
            million,
            respectively, for Majestic Star and Majestic Star II in the first nine
            months of
            2006 compared to casino revenue of $113.8 million for Majestic Star only
            in the
            first nine months of 2005. Casino revenues declined at Majestic Star
            due to a
            $1.8 million decrease in table games revenue caused by a 5.5% decline
            in drop
            and a 4.3% decrease in win percentage, and a $10.0 million decline in
            slot
            revenue resulting from a decrease in slot coin-in of 12.2%, offset by
            a 2.0%
            improvement in win percentage.
 
 For
            the
            nine months ended September 30, 2006, operating income for the Majestic
            Properties was $29.6 million compared to $13.6 million for the same three
            months
            in 2005. Operating income from Majestic Star and Majestic Star II in
            2006 was
            $21.3 million and $17.9 million, respectively, while BHR had an operating
            loss
            of $9.7 million. Comparing only the results of Majestic Star for the
            nine months
            ended September 30, 2006 to 2005, expenses decreased as follows: casino
            expense
            by $2.3 million, gaming taxes by $3.6 million, advertising and promotions
            by
            $1.4 million, general and administrative by $7.0 million, and taxes to
            the City
            of Gary by $0.7 million. In addition, in the nine months ended September
            30,
            2005, Majestic Star recognized a loss on its investment in BHR of $1.8
            million.
            The prior year loss in investment in BHR is primarily depreciation expense.
            As a
            result of the Company’s acquisition of Trump Indiana, and its 50% ownership of
            BHR, all of BHR’s income and expenses are reflected in the $9.7 million
            operating loss reported above for the nine months ended September 30,
            2006.
            Decreases in Majestic Star’s expenses are a result of lower volume and
            implementation of cost saving strategies related to the integration of
            Trump Indiana and Majestic Star. Property tax expense also decreased by
            $1.0 million based on the one-time tax credits received from Lake County
            in
            August 2006.
 
 
 **Fitzgeralds
            Tunica**
 
 Fitzgeralds
            Tunica generated gross revenues of $28.7 million in the third quarter
            of 2006
            compared to $26.8 million in the third quarter of 2005, an increase of
            $1.9
            million or 7.2%. The majority of this increase came from a $1.8 million
            or 8.2%
            increase in casino revenue from $21.9 million in the third quarter of
            2005 to
            $23.7 million in the third quarter of 2006. This increase resulted from
            higher
            slot revenues of $0.6 million due to increases in slot coin-in of 3.4%
            offset by
            a slight decrease of 0.4% in the slot win percentage, and a $1.2 million
            increase in table games revenue resulting from a 68.9% increase in drop
            offset
            by a 3.1% reduction in the hold percentage. Casino revenue made up 82.6%
            of
            gross revenues in the third quarter of 2006 compared to 81.8% in the
            third
            quarter of 2005. Fitzgeralds Tunica will also have lower slot revenue
            in the
            future as it has implemented technology to allow customers to play downloadable
            promotional credits directly at the slot machines. The playing of these
            credits
            will not be recorded as revenue, but any jackpots won by our customers
            will be
            recognized as a direct reduction of slot revenue. As a result of the
            downloadable promotional credits to the slot machine, Fitzgeralds Tunica
            will be
            able to significantly reduce the amount of promotional cash coupons mailed
            and
            redeemed by its customers. We anticipate the reduction in slot revenues
            will be offset by reduced cash coupons mailed and redeemed.
 
 32
 Table
                of Contents
  For
            the
            three months ended September 30, 2006, operating income for Fitzgeralds
            Tunica
            was $3.3 million compared to $2.4 million in 2005, an increase of $0.9
            million
            or 36.9%. Operating expenses increased $0.8 million primarily from increased
            casino expense, gaming tax expense and advertising and promotion expense
            related
            to the higher gaming volume and the repositioning of the property to
            attract a
            higher-value gaming customer, partially offset by a decrease in general
            and
            administrative expense and reduced depreciation expense as assets have
            become
            fully depreciated.
 
 Gross
            revenues for the nine month period ended September 30, 2006 were $84.9
            million
            at Fitzgeralds Tunica compared to $80.4 million in the same period in
            2005, an
            increase of $4.5 million or 5.6%. Casino revenues increased 5.7% or $3.8
            million
            to $70.0 million in 2006 compared to $66.2 million in 2005. The increase
            is
            comprised of a $2.0 million increase in slot revenue resulting from increases
            in
            slot coin-in and slot win percentages of 1.8% and 1.6%, respectively,
            and a $1.8
            million increase in table games revenue from a 35.2% increase in drop
            offset by
            a 4.2% reduction in the hold percentage. Year-to-date 2006 casino revenues
            were
            82.4.% of gross revenues compared to 82.3% in 2005.
 
 Operating
            income increased to $8.9 million for the first nine months of 2006 compared
            to
            $8.5 million in 2005, an increase of $0.4 million or 4.5%. Operating
            expenses
            increased $2.2 million, mostly in casino expense, gaming taxes and advertising
            and promotions in relation to the higher casino revenues and the repositioning
            of the property to attract a high-value gaming customer. General and
            administrative expenses were also higher on a year-to-date basis, primarily
            due
            to greater labor and energy costs, that was partially offset by a decrease
            in
            depreciation expense as assets are becoming fully depreciated.
 
 
 **Fitzgeralds
            Black Hawk**
 
 Fitzgeralds
            Black Hawk’s gross revenues for the third quarter of 2006 were $10.2 million
            compared to $10.6 million in the third quarter of 2005, a decrease of
            $0.4
            million or 3.5%. Casino revenues were $9.6 million which is a $0.3 million
            decrease or 3.3% when compared to the third quarter of 2005. This decline
            was
            mostly due to lower slot coin-in of 9.5%. During the third quarter of
            2005,
            results were impacted by one of the two routes into Black Hawk being
            closed for
            most of the quarter, but we benefited from new customers visiting our
            facility
            while construction was ongoing at competitors. In 2006, we are feeling
            the
            effects of increased competition and marketing from remodeled
            properties.
 
 For
            the
            three months ended September 30, 2006, operating income at Fitzgeralds
            Black
            Hawk was $2.7 million, an increase of $0.3 million when compared to operating
            income of $2.4 million in the third quarter of 2005. The majority of
            the
            increase came from savings in casino payroll expense resulting from the
            conversion of the floor to TITO machines and reduced gaming taxes as
            a result of
            the lower revenue in the quarter.
 
 Gross
            revenues for the nine months ended September 30, 2006 were $29.9 million
            compared to $30.9 million in the first nine months of 2005, a decrease
            of $1.0
            million or 3.2%. A decrease in casino revenue of $0.9 million is primarily
            responsible for this decrease as casino revenue decreased to $27.9 million
            for
            the first nine months of 2006 compared to $28.8 million in the same period
            in
            2005. This decline is a result of lower slot coin-in of 6.2% which is
            due to new
            amenities and greater levels of marketing from our competitors.
 
 For
            the
            nine-month period ended September 30, 2006, Fitzgeralds Black Hawk had
            operating
            income of $6.4 million compared to $6.1 million in 2005, an increase
            of $0.3
            million or 6.0%. Comparing expenses in 2006 to 2005 shows an increase
            in casino
            expense of $0.2 million offset by a significant decrease in depreciation
            expense
            of $0.9 million and a reduction of $0.2 million in gaming taxes and $0.3
            million
            in general and administrative costs. The decline in depreciation expense
            from
            2005 is related to the catch up of depreciation expense in the second
            quarter of
            2005 for the period from July 2004 to April 2005 when the property was
            being
            held for sale prior to the mutual termination of the purchase agreement.
 
 33
 Table
                of Contents
 
 **Corporate**
 
 Corporate
            operating expense for the three and nine months ended September 30, 2006
            was
            $1.3 million and $5.0 million, respectively, compared to $1.4 million
            and $6.6
            million in 2005. The largest component of corporate expense is payroll,
            which
            has increased for both periods in 2006 compared to 2005 and will continue
            to
            increase as we build our corporate management team. The year-to-date
            expenses in
            2005 also include the $2.3 million termination fee related to the cancelled
            sale
            of Fitzgeralds Black Hawk in April 2005.
 
 **Other
            income (expense)**
 
 Other
            income (expense) has increased to $14.9 million in net expenses for the
            three
            months ended September 30, 2006 compared to $7.4 million of expense in
            the third
            quarter of 2005. For the nine months ended September 2006, this net expense
            was
            $44.6 million compared to $22.1 million. For both periods, the majority
            of this
            increase is interest expense associated with $200.0 million of Senior
            Notes,
            $40.0 million of additional Senior Secured Notes and $63.5 million aggregate
            principal amount at maturity of Discount Notes that were all issued in
            December
            2005 in conjunction with the Trump Indiana Acquisition.
 
 **LIQUIDITY
            AND CAPITAL RESOURCES**
 
 We
            generate our cash flows from operating activities. For the nine-month
            periods
            ended September 30, 2006 and 2005, we reported cash flows from operating
            activities of $37.7 million and $23.2 million, respectively. We use our
            cash
            flows to meet our financial obligations, which consist principally of
            financing
            the daily operations of our casinos, servicing our debt, funding capital
            improvements and projects, and making distributions to BDI under the
            manager
            agreement and for tax distributions.
 
 Through
            September 30, 2006, investing activities used $15.1 million of cash, which
            was mostly for the acquisition of assets. In the first nine months of
            2006, we
            purchased slot machines and continued to implement TITO technology, re-branded
            Trump Indiana to Majestic Star II, integrated Trump Indiana’s computer
            systems with those of Majestic Star, enhanced the BHR pavilion, made
            purchases
            related to upgrading the Fitzgeralds Tunica hotel and prepared for the
            Fitzgeralds Black Hawk expansion. For the same period in 2005, we spent
            $9.8
            million primarily for slot machines at Majestic Star, Fitzgeralds Tunica
            and
            Fitzgeralds Black Hawk and for a new slot player tracking and marketing
            system
            at Fitzgeralds Black Hawk. We anticipate spending $8.0 million to $10.0
            million
            on capital expenditures in the fourth quarter for remodeling the Fitzgeralds
            Tunica hotel, upgrading our restaurant operations and creating an entertainment
            venue at the Majestic Properties, and acquiring slot machines at all
            our
            properties.  The size and scope of future projects will be subject to the
            Company's cash flow and availability on its Senior Secured Credit
            Facility.
 
 Financing
            activities caused a decrease in cash of $28.1 million through September 30,
            2006 as a result of net paydowns of $21.0 million on our Senior Secured
            Credit
            Facility, $1.2 million of other debt payments and $1.4 million of deferred
            financing costs. The Company also made $4.5 million of distributions
            to BDI, the
            ultimate parent and manager of the Company, for taxes, and the fourth
            quarter
            2005 and first quarter 2006 manager payment. Though allowable, BDI chose to
            defer its distribution for the three months ended June 30, 2006 and has
            not
            taken a distribution for the three months ended September 30, 2006. If
            BDI were
            to decide to take these distributions, then the Company would be required
            to pay
            $3.6 million. In 2005, financing activities resulted in a decrease in
            cash of
            $12.6 million from a net of $2.0 million to pay down debt, $4.4 million
            advanced
            to an affiliate and distributions to BDI of $6.2 million.
 
 To
            date,
            we have financed our operations with internal cash flows and borrowings
            under
            our $80.0 million Senior Secured Credit Facility. At September 30, 2006,
            $26.2 million was outstanding and $53.8 million was available under the
            Senior
            Secured Credit Facility. The Company had unrestricted cash and cash equivalents
            of $26.8 million at September 30, 2006.
 
 In
            conjunction with the Company’s acquisition of Trump Indiana, the Company entered
            into Amendment 1 to the Company’s development agreement (the “Amended Majestic
            Development Agreement”) with the City of Gary (“City”). The City has called into
            question the validity of the Amended Majestic Development Agreement.
            The
            Company’s position is that the Amended Majestic Development Agreement is valid
            and binding. The City has discussed with the Company its need to receive
            more
            economic incentive payments from the Majestic Properties. The Company
            is
            continuing its discussions with the City. The Company has made no commitment
            to
            assist the City at this time.
 
 The
            Fitzgeralds Black Hawk property intends to expand its facility by rebuilding
            the
            Masonic Building (a partially demolished building on our property) as
            a part of
            a major casino expansion. Management expects the casino expansion to
            cost
            approximately $25.0 million, including the re-construction of the Masonic
            Building and the purchase of associated gaming equipment and other furniture
            and
            fixtures. The building will have two levels of gaming and a third level
            with a
            food outlet. At this time, the Company’s Board of Directors is evaluating the
            timing of this expansion project. Fitzgeralds Black Hawk also intends
            to rebuild
            the Rohling Inn, another historical building on Fitzgeralds Black Hawk’s
            property. The re-building is necessary due to its partial collapse when
            a
            contractor for the City of Black Hawk was burying a storm sewer pipe
            on the
            property of Fitzgeralds Black Hawk, causing damage to the building. We
            are
            currently in discussion with the insurance company to determine the amount
            of
            the proceeds from the policy, but there is a risk of a short-fall of
            insurance
            proceeds of up to $2.0 million. The Company anticipates subrogating the
            claim
            back to the City of Black Hawk’s contractor and other parties involved in
            burying the storm sewer pipe. However, there is no assurance that the
            Company
            will be successful with its claim. In the interim, the Company will need
            to
            advance the funds to cover any shortfall from insurance proceeds.
 
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  As
            we
            have discussed previously, the Company's Gary, Indiana properties will
            experience great levels of competition in the future as a result of the
            development and expansion projects announced by various northern Indiana
            casino
            operators.  Company management believes that in order to remain competitive
            in the northern Indiana market, new development and improvement projects
            will
            need to be undertaken. New development and improvement projects could
            include
            a vessel with all gaming operations on a single floor and land based
            amenities to support our gaming operations, such as new restaurants,
            a hotel,
            retail outlets and an entertainment venue. However, the Company is precluded,
            by
            the Senior Secured Credit Facility, from making capital expenditures
            in excess
            of $25.0 million per year (except for $7.5 million for TITO slot machines
            at
            Fitzgeralds Tunica and Fitzgeralds Black Hawk and the $25.0 million Fitzgeralds
            Black Hawk expansion) in 2006 and 2007. In 2008 through 2010, the limit
            on
            capital expenditures increases to $30.0 million. In addition, the Company
            is
            precluded from incurring additional debt unless certain financial tests
            are met.
            As a result of the Company's capital expenditure and debt incurrence
            limitations, the Company may need to seek partners to provide financing
            for
            these development and improvement projects, receive a contribution from
            its
            member, sell assets and amend the capital expenditure covenant contained
            within the Senior Secured Credit Facility. In addition, the Company acquired,
            on
            December 31, 2005, 2.45 acres of land at its Fitzgeralds Black Hawk
            property. This land is available for development; however, obtaining
            capital to
            commence development is limited, as previously explained.
 
 Management
            believes that the Company's cash flow from operations and its current
            line of
            credit will be adequate to meet the Company's anticipated normal operating
            requirements for working capital. Given the recent lower than anticipated
            levels
            of cash flow, the Company may re-evaluate its planned capital expenditures
            in
            order to meet its significant contractual obligations with respect to
            amounts
            outstanding under the Senior Secured Credit Facility, the Senior Secured
            Notes
            and the Senior Notes, and tax distributions and distributions under the
            manager
            agreement with BDI. The Company will be required to pay any amounts outstanding
            on the Senior Secured Credit Facility, plus accrued interest thereon,
            in 2010.
            In addition, beginning April 15, 2009, our parent will likely look to
            us to
            distribute cash to pay interest on the Discount Notes. Our ability to
            distribute
            cash to Majestic Holdco is limited unless certain financial tests are
            met. The
            Senior Secured Notes mature in October 2010 and the Senior Notes mature
            in
            January 2011. No assurance can be given that our operating cash flows
            or
            proceeds from additional financings, if available, will be sufficient
            to pay
            those obligations at maturity.
 
 Each
            of
            the Senior Secured Notes and the Senior Notes Indentures and the loan
            and
            security agreement for the Senior Secured Credit Facility allow for
            distributions to BDI to pay income taxes. The ultimate resolution of
            the
            assessments by the Indiana Department of Revenue against the Company
            and BDI, in
            the amount of $4.1 million, plus penalties and interest (as more fully
            described
            in Note 7 to the Financial Statements - Commitments and Contingencies)
            could
            have a material impact on the Company's liquidity in the period that
            the taxes
            are paid, if any, to the extent that the Company uses such liquidity
            to make
            distributions to BDI for tax purposes. As part of the $4.5 million in
            distributions to date in 2006 to BDI, $0.9 million was paid for current
            tax
            obligations separate from the assessments still outstanding with the
            Indiana
            Department of Revenue.
 
 On
            April 13, 2006, the Company entered into Amendment Number Five to the Loan
            and Security Agreement, as amended (“Amendment Five”). Amendment Five modified
            the interest coverage ratio covenant, as defined in the Loan and Security
            Agreement, for the twelve-month period ended March 31, 2006. As a result of
            Amendment Four, the Company was required to obtain an interest coverage
            ratio of
            1.85:1.0. The interest coverage ratio was amended to 1.80:1.0. In addition,
            the
            definition of Consolidated Interest Expense was amended to exclude interest
            expense related to the pushdown of Majestic Holdco's Discount Notes.
 
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  On
            July
            31, 2006, the Company entered into Amendment Number Six (“Amendment Six”) to the
            Senior Secured Credit Facility. Amendment Six further modifies the last
            12 month
            minimum EBITDA covenant and the last 12 month interest coverage
            ratio covenant for the applicable calendar quarterly periods. As amended,
            the Company is now required to have a minimum EBITDA of $65.0 million
            for the 12
            months ended June 30, 2006, which periodically increases in $5.0 million
            increments to a maximum of $90.0 million for the 12 months ending March 31,
            2010 and periods thereafter. The interest coverage ratio is reduced to
            1.50:1.0
            for the 12 months ended June 30, 2006, continuing through December 31,
            2007. The ratio increases to 1.60:1.0 in 2008, 1.70:1.0 in 2009 and to
            1.80:1.0
            in 2010 and each period thereafter. In addition, the capital expenditures
            limitations have been increased to $25.0 million for each of the fiscal
            years
            2006 and 2007 and to $30.0 million for each of the fiscal years 2008,
            2009 and
            2010. The Company was in compliance with the financial covenants under
            the
            Senior Secured Credit Facility as of September 30, 2006.
 
 
 **CRITICAL
            ACCOUNTING POLICIES**
 
 Our
            consolidated financial statements are prepared in accordance with accounting
            principles generally accepted in the United States of America, which
            require our
            management to make estimates and assumptions about the effects of matters
            that
            are inherently uncertain. We have summarized our significant accounting
            policies
            in Note 2 to our consolidated financial statements contained in our Annual
            Report on Form 10-K for the year ended December 31, 2005 and in Note 2 to
            the interim financial statements as of September 30, 2006 as contained
            herein.
 
 At
            Fitzgeralds Tunica, we have implemented promotions that allow customers
            to
            download promotional credits directly to the slot machine. While the
            Company
            does not recognize the playing of these credits as revenue and the customer
            cannot redeem the credits for cash, any jackpots won by the customer
            are a
            direct reduction of slot revenue.
 
 
 **RECENTLY
            ISSUED ACCOUNTING PRONOUNCEMENTS**
 
 In
            September 2006, the FASB issued FASB No. 157 “Fair Value Measurements,” (“FASB
            157”) to establish a framework for measuring fair value and expanding
            disclosures related to fair value measurements. SFAS 157 is effective
            for
            financial statements for fiscal years beginning after November 15, 2007.
            The
            Company is evaluating, what impact, if any, FASB 157 will have on future
            reporting.
 
 **Item
                  3.**
              **Quantitative
                  and Qualitative Disclosures About Market
                  Risk.**
 
 There
        have been no material changes from the information reported in the Company's
        Annual Report on Form 10-K for the fiscal year ended December 31,
        2005.
 
 
 **Item
                  4.**
              **Controls
                  and Procedures.**
 
 Disclosure
        Controls and Procedures
 
 As
        of the
        end of the period covered by this report, the Company carried out an evaluation,
        under the supervision and with the participation of the Company's management,
        including its Chief Executive Officer and Chief Financial Officer, of the
        effectiveness of the design and operation of the Company's disclosure controls
        and procedures pursuant to Rule 15d-15 of the Securities Exchange Act of
        1934.
        Based upon that evaluation, the Company's Chief Executive Officer and Chief
        Financial Officer concluded that the Company's disclosure controls and
        procedures are effective to cause the material information required to be
        disclosed by the Company in the reports that it files or submits under the
        Securities Exchange Act of 1934 to be recorded, processed, summarized and
        reported within the time periods specified in the SEC's rules and
        forms.
 
 36
 Table
            of Contents
  We
        maintain disclosure controls and procedures that are designed to ensure that
        information required to be disclosed in our Exchange Act reports is recorded,
        processed, summarized and reported within the time periods specified in the
        SEC's rules and forms, and that such information is accumulated and communicated
        to our management, including our Chief Executive Officer and Chief Financial
        Officer, as appropriate, to allow timely decisions regarding required
        disclosure. In designing and evaluating the disclosure controls and procedures,
        management recognized that any controls and procedures, no matter how well
        designed and operated, can provide only reasonable assurance of achieving
        the
        desired control objectives.
 
 Changes
        in Internal Control Over Financial Reporting
 
 There
        have been no changes in the Company's internal controls during the quarter
        ended
        September 30, 2006 that have materially affected, or are reasonably likely
        to materially affect the Company's financial reporting.
 
  37
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 **PART
                  II**
              **OTHER
                  INFORMATION**
  **Item
                  1.**
              **Legal
                  Proceedings.**
 
 Information
        regarding Legal Proceedings appears in Part I - Item 3 of our Report on Form
        10-K for the fiscal year ended December 31, 2005. The following information
        is an update to those matters previously disclosed in our Report on Form
        10-K:
 
 Anti-trust
        litigation. In June
        2003, a complaint was filed in the U.S. District Court for the Northern District
        of Mississippi against Tunica County casino owners and operators, including
        Barden Mississippi, the Tunica Casino Operators Association and the Tunica
        County Tourism Commission alleging violation of federal and state anti-trust
        claims, as well as various other tort and contract claims. In
        December 2005, the District Court granted Summary Judgment in favor of the
        casinos, dismissing all claims against the Company and other casino defendants.
        The plaintiffs have filed an appeal. The briefing has just recently been
        completed and it will likely be several months before the 5th Circuit Court
        of
        Appeals issues a ruling on the appeal. The trial date for the casino defendants’
counterclaims has been continued until such time as the appellate court issues
        a
        ruling on the appeal. The
        Company intends to vigorously defend against the appeal. At this time, it
        is too
        early to determine the outcome of this litigation and the effect, if any,
        on the
        Company’s financial position and results of operations.
 
 Majestic
        Star Income Tax Protest. The
        Indiana Department of Revenue (“Department”) held a hearing on the 1996 through
        2002 tax years on April 7, 2006, and is expected to issue its ruling later
        this
        year. BDI's non-resident shareholder has been assessed $0.2 million, plus
        penalty and interest, for 2003. A hearing on the 2003 tax year has been
        scheduled by the Department for December 5, 2006.
 
 Majestic
        Star Sales and Use Tax Assessments. The
        Department held a hearing on the 2003 and 2004 tax years on April 7, 2006,
        and
        is expected to issue its ruling later this year. In regard to the matters
        for
        the period 2001 through July 2003, the Tax Court has ordered the parties
        to file
        status reports in the case by December 31, 2006.
 
 BHR
        Sales and Use Tax Assessments - 1998-2001 Tax Years. The
        Tax
        Court has ordered the parties to file status reports in the case by December
        31,
        2006.
 
 BHR
        Sales and Use Tax Assessments - 2002-2004 Tax Years. On June
        19, 2006, the Department assessed BHR $0.3 million in sales and use tax for
        2003
        and 2004, exclusive of interest and penalties, relating primarily to the
        same
        sales and use tax issues as were assessed in earlier years, concerning the
        provision of complimentary food to the employees and patrons of Majestic
        Star
        and Trump Indiana. BHR filed protests with the Department on August 16,
        2006 and BHR is now awaiting a hearing on those protests.
 
 
 **Item
                  1A.**
              **Risk
                  Factors.**
 
 Information
        regarding risk factors appears in Part I - Item 1A of our Report on Form
        10-K
        for the fiscal year ended December 31, 2005. The following risk factors
        reflect certain material changes from the risks previously disclosed in our
        Report on Form 10-K:
 
 **Increased
        competition in the Chicagoland market will have a significant impact on how
        we
        operate our business to remain competitive.**
 
 On
        April 27, 2006, Harrah’s Entertainment announced plans for a $485 million
        renovation and expansion of its Horseshoe Casino in Hammond, Indiana that
        is
        tentatively scheduled to open in mid-2008. The facility is expected to more
        than
        double the size of their existing facility. While we cannot determine what
        effect this will have on the future operations of our Majestic Properties,
        a
        renovated and expanded Horseshoe Casino in Hammond will have a significant
        impact on how we operate our business to remain competitive.
 
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  In
        addition, the Pokagon Indians have broken ground on a facility near the Indiana
        and Michigan state line that is scheduled to open in the summer of 2007 with
        anticipated 3,000 slot machines, 90 table games and 20 poker tables. This
        casino
        will have the advantage of being a land-based facility.
 
 Boyd
        Gaming has also announced a $130.0 million expansion to their Blue Chip Casino
        facility with a 22-story hotel tower adding 300 guest rooms, a spa and fitness
        center, additional meeting and event space and new dining and other additional
        amenities. They expect to begin construction in the first quarter of
        2007.
 
 New
        casino facilities and the expansion of existing facilities will impact our
        ability to be competitive in the market in the event we are unable to improve
        our facilities.
 
 **Increased
        competition in Tunica market may negatively affect our
        operations.**
  Myriad
        Entertainment & Resorts, Inc. is moving forward with plans for its $1.9
        billion resort in Tunica. They have stated that construction on the project
        is
        expected to begin in the summer of 2007 and take 24 to 48 months to complete.
        If
        the project is completed, the addition of 80,000 square feet of casino space
        may
        have a negative impact on our operations in this market.
 
 **Higher
        energy costs may negatively affect our customers discretionary income and
        may
        reduce the number of trips to our casinos.**
 
 Due
        to
        the recent increase in energy prices, there is a greater risk that our patrons
        will have less discretionary income. Customers may also be less likely to
        travel
        or to reduce the number of trips to our casinos due to higher fuel costs.
 
 **A
        shortfall in the amount of insurance proceeds related to our Black Hawk
        construction projects could limit our ability to implement our other planned
        expenditures at our properties.**
 
 If
        there
        is a shortfall in the insurance proceeds we expect to receive for the rebuilding
        of the Rohling Inn in Black Hawk, we will need to reallocate our capital
        expenditure budget to cover these costs in order to stay within our capital
        expenditures limitation in our loan covenants. This will limit our ability
        to
        implement our other planned expenditures at our properties.
 
 **Roadwork
        by the Colorado Department on Transportation may impact travel into Black
        Hawk
        during the fourth quarter of 2006.**
 
 The
        Colorado Department of Transportation is working along U.S. Route 6, which
        is
        one of the two transportation routes into Black Hawk, during the fourth quarter
        of 2006, including closure of the road, while installing fencing and mesh
        along
        the canyon walls as well as other rock scaling operations to improve safety
        on
        this highway. We cannot predict what impact this will have on our operations
        in
        Black Hawk at this time.
 
 **Failure
        to achieve the financial covenants as contained in the Company’s Senior Secured
        Credit Facility could cause an event of default.**
 
 In
        the
        past, the Company has had to seek amendments to the financial covenants
        contained in the Senior Secured Credit Facility in order to maintain compliance
        with those covenants. Failure to achieve compliance with future financial
        covenants could constitute an event of default under the Senior Secured Credit
        Facility and a cross default under the Senior Secured Notes and Senior Notes.
        A
        default, if not cured, could cause an acceleration of payment of the Company’s
        debt obligations, including the amount outstanding under the Senior Secured
        Credit Facility, Senior Secured Notes and Senior Notes.
 
  39
 Table
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 **Item
                  6.**
              **Exhibits.**
  (a)
            The
                  following exhibits are filed as part of this
                  report:




Exhibit
                  No.
              Description
                  of Document10.1*
              Employment
                  Agreement between The Majestic Star Casino, LLC and Jon Scott
                  Bennett31.1**
              Certification
                  of Chief Executive Officer pursuant to Rule 15d-14 of the Securities
                  Exchange Act of 1934, as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.31.2**
              Certificate
                  of Chief Financial Officer pursuant to Rule 15d-14 of the Securities
                  Exchange Act of 1934, as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.32**
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.*    
                  Incorporated by reference to the Company’s Current Report on Form 8-K
                  dated August 14, 2006.**  
                  Filed herewith.





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**SIGNATURES**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        has
        duly caused this report to be signed on its behalf by the undersigned, thereunto
        duly authorized.
 
 Dated:
                  November 14, 2006THE
                  MAJESTIC STAR CASINO, LLC*/s/
                  Don H. Barden*Don
                  H. BardenChairman,
                  President and Chief Executive Officer(Principal
                  Executive Officer)*/s/
                  Jon S. Bennett*Jon
                  S. BennettVice
                  President and Chief Financial Officer(Principal
                  Financial and Accounting Officer)THE
                  MAJESTIC STAR CASINO CAPITAL CORP.*/s/
                  Don H. Barden*Don
                  H. BardenPresident
                  and Chief Executive Officer(Principal
                  Executive Officer)*/s/
                  Jon S. Bennett*Jon
                  S. BennettVice
                  President and Chief Financial Officer(Principal
                  Financial and Accounting Officer)MAJESTIC
                  STAR CASINO CAPITAL CORP. II*/s/
                  Don H. Barden*Don
                  H. BardenPresident
                  and Chief Executive Officer(Principal
                  Executive Officer)*/s/
                  Jon S. Bennett*Jon
                  S. BennettVice
                  President and Chief Financial Officer(Principal
                  Financial and Accounting
                  Officer)




S-1