Table
      of Contents  
 **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, 2007**
 
 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
 
 Indicate
        the number of shares outstanding of each of the issuer’s classes of common
        shares, as of the latest practicable
        date.
  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, 2007
                  (unaudited) and December 31, 2006
              1Condensed
                  Consolidated Statements of Operations for the three
                  and nine months ended September 30, 2007 and 2006
                  (unaudited)
              2Condensed
                  Consolidated Statements of Cash Flows for the nine
                  months ended September 30, 2007 and 2006
                  (unaudited)
              3Notes
                  to the Condensed Consolidated Financial Statements
                  (unaudited)
              5Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition
                  and Results of Operations.
              24Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market
                  Risk.
              34Item
                  4T.
              Controls
                  and Procedures.
              34PART
                  II
              OTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings.
              36Item
                  1A.
              Risk
                  Factors.
              36Item
                  6.
              Exhibits.
              38SIGNATURES
              S-1
 
 
 **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
                  31,2007
              
              2006ASSETS
              
              (unaudited)Current
                  assets:Cash
                  and cash equivalents
              
              $
              31,094,657
              
              $
              25,531,924Restricted
                  cash
              
              
              3,628,241
              
              
              3,326,881Accounts
                  receivable, less allowance for doubtful accounts of $1,340,380
                  and$871,448
                  as of September 30, 2007 and December 31, 2006,
                  respectively
              
              
              4,336,472
              
              
              7,582,476Inventories
              
              
              1,033,636
              
              
              888,292Prepaid
                  expenses and deposits
              
              
              3,677,523
              
              
              2,306,311Receivable
                  from affiliate
              
              
              1,033,289
              
              
              455,270Total
                  current assets
              
              
              44,803,818
              
              
              40,091,154Property,
                  equipment and improvements, net
              
              
              278,986,684
              
              
              275,735,582Intangible
                  assets, net
              
              
              122,801,127
              
              
              125,395,502Goodwill
              
              
              47,431,442
              
              
              47,431,442Other
                  assets:Deferred
                  financing costs, net of accumulated amortizationof
                  $8,270,798 and $5,761,820 as of September 30, 2007 andDecember
                  31, 2006, respectively
              
              
              10,574,122
              
              
              13,083,100Deferred
                  financing costs, pushed down from Majestic Holdco, net ofaccumulated
                  amortization of $904,346 and $523,119 as ofSeptember
                  30, 2007 and December 31, 2006, respectively
              
              
              2,054,393
              
              
              2,435,620Other
                  assets
              
              
              2,671,781
              
              
              2,187,020Total
                  other assets
              
              
              15,300,296
              
              
              17,705,740Total
                  assets
              
              $
              509,323,367
              
              $
              506,359,420LIABILITIES
                  AND MEMBER'S DEFICITCurrent
                  liabilities:Accounts
                  payable
              
              $
              3,418,546
              
              $
              4,491,600Current
                  portion of long-term debt
              
              
              153,577
              
              
              165,421Accrued
                  liabilities:Payroll
                  and related
              
              
              10,667,759
              
              
              9,116,726Interest
              
              
              22,762,988
              
              
              10,750,630Property
                  and franchise taxes
              
              
              15,475,613
              
              
              8,942,975Other
                  accrued liabilities
              
              
              16,736,731
              
              
              15,554,947Total
                  current liabilities
              
              
              69,215,214
              
              
              49,022,299Long-term
                  debt, net of current maturities
              
              
              541,544,239
              
              
              545,803,990Long-term
                  debt pushed down from Majestic Holdco, net of discount of
                  $7,532,582and
                  $12,376,308 as of September 30, 2007 and December 31, 2006,
                  respectively
              
              
              55,967,418
              
              
              51,123,692Total
                  liabilities
              
              
              666,726,871
              
              
              645,949,981Member's
                  deficit
              
              
              (157,403,504
              )
              
              (139,590,561
              )Total
                  liabilities and member's deficit
              
              $
              509,323,367
              
              $
              506,359,420
 
 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
                  30,2007
              
              2006
              
              2007
              
              2006OPERATING
                  REVENUES:Casino
              
              $
              90,063,183
              
              $
              94,839,802
              
              $
              281,331,556
              
              $
              288,667,449Rooms
              
              
              3,376,417
              
              
              2,943,349
              
              
              8,970,884
              
              
              8,556,120Food
                  and beverage
              
              
              6,864,437
              
              
              4,170,994
              
              
              19,650,769
              
              
              12,489,828Other
              
              
              1,913,297
              
              
              1,709,908
              
              
              5,814,657
              
              
              5,117,603Gross
                  revenues
              
              
              102,217,334
              
              
              103,664,053
              
              
              315,767,866
              
              
              314,831,000Less:
                  promotional allowances
              
              
              12,362,162
              
              
              17,274,270
              
              
              41,314,121
              
              
              42,965,928Net
                  operating revenues
              
              
              89,855,172
              
              
              86,389,783
              
              
              274,453,745
              
              
              271,865,072OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              24,222,459
              
              
              21,820,463
              
              
              71,037,278
              
              
              65,293,510Rooms
              
              
              857,380
              
              
              862,425
              
              
              2,415,216
              
              
              2,468,620Food
                  and beverage
              
              
              3,159,278
              
              
              2,111,213
              
              
              8,658,198
              
              
              6,388,406Other
              
              
              507,519
              
              
              278,216
              
              
              1,490,716
              
              
              767,696Gaming
                  taxes
              
              
              21,174,864
              
              
              22,282,835
              
              
              65,641,255
              
              
              66,738,090Advertising
                  and promotion
              
              
              6,188,313
              
              
              5,651,828
              
              
              17,544,346
              
              
              14,190,448General
                  and administrative
              
              
              14,003,947
              
              
              13,272,892
              
              
              42,153,132
              
              
              42,538,453Corporate
                  expense
              
              
              1,708,250
              
              
              1,242,897
              
              
              5,180,044
              
              
              4,962,562Economic
                  incentive tax - City of Gary
              
              
              1,716,920
              
              
              1,734,721
              
              
              5,182,685
              
              
              5,086,735Depreciation
                  and amortization
              
              
              8,154,118
              
              
              7,976,694
              
              
              24,355,497
              
              
              23,596,542(Gain)
                  loss on disposal of assets
              
              
              (2,925
              )
              
              2,158
              
              
              805,638
              
              
              (2,146
              )Total
                  operating costs and expenses
              
              
              81,690,123
              
              
              77,236,342
              
              
              244,464,005
              
              
              232,028,916Operating
                  income
              
              
              8,165,049
              
              
              9,153,441
              
              
              29,989,740
              
              
              39,836,156OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              92,937
              
              
              127,512
              
              
              466,983
              
              
              349,889Interest
                  expense
              
              
              (13,527,473
              )
              
              (13,450,864
              )
              
              (40,824,410
              )
              
              (40,199,565
              )Interest
                  expense - debt pushed downfrom
                  Majestic Holdco
              
              
              (1,778,076
              )
              
              (1,591,635
              )
              
              (5,224,955
              )
              
              (4,661,889
              )Other
                  non-operating expense
              
              
              (19,690
              )
              
              (31,530
              )
              
              (70,056
              )
              
              (82,733
              )Total
                  other expense
              
              
              (15,232,302
              )
              
              (14,946,517
              )
              
              (45,652,438
              )
              
              (44,594,298
              )Net
                  loss
              
              $
              (7,067,253
              )
              $
              (5,793,076
              )
              $
              (15,662,698
              )
              $
              (4,758,142
              )
 
 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
                  30,2007
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (15,662,698
              )
              $
              (4,758,142
              )Adjustments
                  to reconcile net loss to net cashprovided
                  by operating activities:Depreciation
              
              
              21,761,122
              
              
              21,002,168Amortization
              
              
              2,594,375
              
              
              2,594,374Amortization
                  of deferred financing costs
              
              
              2,508,977
              
              
              2,415,645Amortization
                  of bond discount on 12 1⁄2% senior discount notes anddeferred
                  financing costs pushed down from Majestic Holdco
              
              
              5,224,955
              
              
              4,661,889Loss
                  (gain) on disposal of assets
              
              
              805,638
              
              
              (2,146
              )Changes
                  in operating assets and liabilities, net of effects of
                  acquisition:Accounts
                  receivable, net
              
              
              3,246,004
              
              
              (92,562
              )Receivable
                  from affilates
              
              
              (578,019
              )
              
              (126,482
              )Inventories
              
              
              (145,344
              )
              
              (191,917
              )Prepaid
                  expenses and deposits
              
              
              (1,371,212
              )
              
              (1,886,880
              )Other
                  assets
              
              
              135,034
              
              
              (9,522
              )Accounts
                  payable
              
              
              459,333
              
              
              832,404Accrued
                  payroll and other expenses
              
              
              1,551,033
              
              
              515,648Accrued
                  interest
              
              
              12,012,358
              
              
              15,103,402Other
                  accrued liabilities
              
              
              3,972,925
              
              
              (2,389,928
              )Net
                  cash provided by operating activities
              
              
              36,514,481
              
              
              37,667,951CASH
                  FLOWS FROM INVESTING ACTIVITIES:Increase
                  in restricted cash
              
              
              (301,360
              )
              
              (136,881
              )Adjustment
                  to costs related to Trump Indiana acquisition
              
              
              -
              
              
              (1,090,546
              )Additions
                  to property and equipment
              
              
              (23,626,411
              )
              
              (14,627,486
              )Increase
                  in Lakefront Capital Improvement Fund
              
              
              (619,795
              )
              
              -Proceeds
                  from disposal of equipment
              
              
              168,899
              
              
              718,695Net
                  cash used in investing activities
              
              
              (24,378,667
              )
              
              (15,136,218
              )
 
 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
                  30,2007
              
              2006CASH
                  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
              
              
              28,665,026
              
              
              26,739,773Repayment
                  of line of credit
              
              
              (32,950,000
              )
              
              (47,758,609
              )Repayment
                  of debt
              
              
              (137,862
              )
              
              (1,161,085
              )Distributions
                  to Barden Development, Inc.
              
              
              (2,150,245
              )
              
              (4,469,715
              )Net
                  cash used in financing activities
              
              
              (6,573,081
              )
              
              (28,099,912
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              5,562,733
              
              
              (5,568,179
              )Cash
                  and cash equivalents, beginning of period
              
              
              25,531,924
              
              
              32,368,249Cash
                  and cash equivalents, end of period
              
              $
              31,094,657
              
              $
              26,800,070Supplemental
                  disclosure of cash flow information and non-cash investingand
                  financing activities:INTEREST
                  PAID:
              
              $
              26,475,868
              
              $
              23,018,800NON-CASH
                  INVESTING ACTIVITIES:Capital
                  assets acquired from incurring accounts payable and accrued
                  liabilities
              
              $
              4,078,232
              
              $
              2,258,169Capital
                  assets acquired from incurring debt
              
              $
              151,240
              
              $
              110,730Deferred
                  financing and transaction costs related to the Trump
                  acquisitionincluded
                  in accrued liabilities
              
              $
              -
              
              $
              175,080
 
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
 
  4
 **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**
 **(unaudited)**
   **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 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”, together the “Majestic Properties”).
 
 The
        Company also owns other subsidiaries that operate the following
“Fitzgeralds-brand” casino properties:
 
 ·
            A
                casino-hotel located in Tunica County, Mississippi (“Fitzgeralds
                Tunica”). 
 ·
            A
                casino located in Black Hawk, Colorado (“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. 
 ·
            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. 
 Following
        the completion of the defeasance of the remaining Majestic Investor Holdings,
        LLC (“Investor Holdings”) 11.653% notes (“Investor Notes”) on March 6, 2006, 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
        Fitzgeralds Tunica and Fitzgeralds Black Hawk direct subsidiaries of The
        Majestic Star Casino, LLC.
 
 Buffington
        Harbor Parking Associates, LLC (“BHPA”), which owned the parking garage at
        Buffington Harbor, was merged into Majestic Star in August 2006. In addition,
        Buffington Harbor Riverboats, LLC (“BHR”), the owner of the pavilion and joint
        docking facility for Majestic Star and Majestic Star II, was dissolved on
        December 31, 2006.
 
 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 and include
        the
        accounts of The Majestic Star Casino, LLC and its wholly owned direct and
        indirect subsidiaries. All inter-company transactions and balances have been
        eliminated. These financial statements have been prepared in accordance with
        U.S. Generally Accepted Accounting Principles (“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. Significant estimates incorporated into our
        consolidated financial statements include the estimated useful lives of
        depreciable and amortizable assets, the estimated allowance for doubtful
        accounts receivable, estimated cash flow in assessing the recoverability
        of
        long-lived assets and estimated liabilities for our self-insured medical
        and
        workers’ compensation plans, property taxes, slot club point programs, and
        litigation, claims and assessments. 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, 2007
        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, 2006.
 
 PUSH
        DOWN
        OF DISCOUNT NOTES FROM MAJESTIC HOLDCO - The Company’s consolidated balance
        sheets as of September 30, 2007 and December 31, 2006 include the 121⁄2%
        Senior Discount Notes due 2011 (the “Discount Notes”), total amount $63.5
        million net of discount of $7.5 million and $12.4 million, respectively,
        issued
        by Majestic Holdco. 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 $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. In addition
        to the push down of the Discount Notes, the Company is also reflecting $2.1
        million and $2.4 million of Discount Notes’ issuance costs, net of amortization,
        respectively, on the Company’s consolidated balance sheets as of September 30,
        2007 and December 31, 2006.
 
 Amortization
        of issuance costs were $0.1 million and $0.4 million, respectively, for each
        of
        the three- and nine-month periods ended September 30, 2007 and 2006.
        Amortization of bond discount was $1.7 million and $1.5 million, respectively,
        for the three months ended September 30, 2007 and 2006, and $4.8 million
        and
        $4.3 million, respectively, for the nine months ended September 30, 2007
        and
        2006, as reflected in interest expense on the Company’s consolidated statements
        of operations. A likely scenario for the repayment of these 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 Securities and
        Exchange Commission (“SEC”) Staff Accounting Bulletin 73 Topic
        5(J).
 
 
  6
 **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)**
  PROMOTIONAL
        ALLOWANCES - Cash incentives related to gaming play are recorded as a reduction
        of gross revenues. Such amounts totaled $4.2 million and $12.2 million for
        the
        quarters ended September 30, 2007 and 2006, respectively, and $18.8 million
        and
        $28.2 million for the nine months ended September 30, 2007 and 2006,
        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
        primarily in casino expenses as follows:
 
 For
                  The Three Months Ended
                September
                  30,
              
              For
                  The Nine Months Ended
                September
                  30,2007
              
              2006
              
              2007
              
              2006Rooms
              
              $
              1,060,866
              
              $
              855,858
              
              $
              3,000,368
              
              $
              2,497,631Food
                  and Beverage
              
              
              4,752,908
              
              
              2,879,133
              
              
              13,621,965
              
              
              8,138,860Other
              
              
              419,338
              
              
              156,926
              
              
              727,002
              
              
              395,233Total
              
              $
              6,233,112
              
              $
              3,891,917
              
              $
              17,349,335
              
              $
              11,031,724
 
 
 The
        following schedule lists total cash incentives and the retail cost of hotel,
        food, beverage, and other, which comprise total promotional
        allowances.
 
 For
                  The Three Months Ended
                September
                  30,
              
              For
                  The Nine Months Ended
                September
                  30,2007
              
              2006
              
              2007
              
              2006Cash
                  based promotional activities
              
              $
              2,216,393
              
              $
              10,063,680
              
              $
              12,892,792
              
              $
              22,367,731Slot
                  club and other
              
              
              2,002,178
              
              
              2,136,990
              
              
              5,860,219
              
              
              5,866,257Retail
                  cost of rooms, food, beverage and other
              
              
              8,143,591
              
              
              5,073,600
              
              
              22,561,110
              
              
              14,731,940Total
              
              $
              12,362,162
              
              $
              17,274,270
              
              $
              41,314,121
              
              $
              42,965,928
 
 
 DOWNLOADABLE
        PROMOTIONAL CREDITS - At Fitzgeralds Tunica and the Majestic Properties,
        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 credits for cash,
        any
        jackpots won by the customer are a direct reduction in slot revenue. At
        Fitzgeralds Tunica, during the three- and nine-month periods ended September
        30,
        2007, promotional credits of $3.0 million and $7.8 million, respectively,
        and
        during the three- and nine-month periods ended September 30, 2006,
        promotional credits of $0.8 million and $1.1 million, respectively, were
        utilized. At the Majestic Properties, promotional credits of $2.4 million
        were
        utilized for both the three- and nine-month periods ended September 30, 2007.
 
 **NOTE
        3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**
 
 The
        Company has adopted or will be required to adopt the following accounting
        policy
        resulting from the following newly issued standards.
 
 ·
            In
                September 2006, the Financial Accounting Standards Board (“FASB”) issued
                FASB Statement No. 157, “Fair Value Measurements” (“FASB 157”), to
                establish a framework for measuring fair value and expanding disclosures
                related to fair value measurements. FASB 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. .
 ·
            In
                February 2007, the FASB issued FASB Statement No. 159, "The Fair
                Value
                Option for Financial Assets and Financial Liabilities" (“FASB 159”). FASB
                159 permits companies to choose to measure many financial instruments
                and
                certain other items at fair value. The objective is to improve financial
                reporting by providing companies with the opportunity to mitigate
                volatility in reported earnings caused by measuring related assets
                and
                liabilities differently without having to apply complex hedge accounting
                provisions. The fair value option established by FASB 159 permits
                all
                companies to choose to measure eligible items at fair value at specified
                election dates. At each subsequent reporting date, companies shall
                report
                in earnings any unrealized gains and losses on items for which the
                fair
                value option has been elected. FASB 159 is effective as of the beginning
                of a company's first fiscal year that begins after November 15, 2007.
                We
                are currently evaluating whether to adopt the fair value option under
                FASB
                159 and evaluating what impact such adoption would have on our condensed
                consolidated financial statements.  7
 **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
        4. LONG-TERM DEBT**
 September
                  30,
              
              December
                  31,2007
              
              2006Long-term
                  debt outstanding is as follows:9
                  1⁄2% senior secured notes due 2010
              
              $
              300,000,000
              
              $
              300,000,0009
                  3⁄4% senior notes due 2011
              
              
              200,000,000
              
              
              200,000,000Senior
                  secured credit facility
              
              
              41,451,951
              
              
              45,736,924Capitalized
                  leases and other debt
              
              
              245,865
              
              
              232,487Long-term
                  debt
              
              
              541,697,816
              
              
              545,969,411Less
                  current maturities
              
              
              153,577
              
              
              165,421Total
                  long-term debt
              
              $
              541,544,239
              
              $
              545,803,990
 
 
 **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 most current of which is
        described below.
 
 On
        March
        15, 2007, the Company entered into Amendment Number Seven (“Amendment Seven”) to
        the Senior Secured Credit Facility. Amendment Seven modified the Company’s
        minimum EBITDA requirement for each of the 12-month periods ended March 31,
        2007, June 30, 2007 and September 30, 2007 to $65.0 million, modified the
        minimum EBITDA requirement for each of the 12-month periods ended December
        31,
        2007, March 31, 2008 and June 30, 2008 to $70.0 million, and modified the
        minimum EBITDA requirement to $72.0 million and $74.0 million, for each of
        the
        12-month periods ended September 30, 2008 and December 31, 2008. Amendment
        Seven
        also modified the Company’s interest coverage ratio requirement for each of the
        12-month periods ended March 31, 2007, June 30, 2007, September 30, 2007,
        December 31, 2007, March 31, 2008 and June 30, 2008, to 1.20:1.0, and modified
        the interest coverage ratio requirement to 1.25:1.0 for each of the 12-month
        periods ended September 30, 2008 and December 31, 2008.
 
 The
        Company was in compliance with the financial covenants contained in the Senior
        Secured Credit Facility at September 30 ,
        2007.
 
 
 **NOTE
        5. COMMITMENTS AND CONTINGENCIES**
 
 **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 claims, to be routine litigation incidental to the Company’s
        business. Except as described in our Annual Report on Form 10-K for the year
        ended December 31, 2006 and as updated in our Form 10-Q’s for the
        three-month period ended March 31, 2007 and the three- and six-month periods
        ended June 30, 2007, or as described below, 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 Annual Report on Form 10-K for the year ended
        December 31, 2006 for a full description of our legal
        proceedings.
  8
 **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)**
  Anti-trust
        litigation. As we
        have previously disclosed in our Annual Report on Form 10-K for the year
        ended
        December 31, 2006, in June 2003, a complaint was filed in the U.S. District
        Court for the Northern District of Mississippi (“District Court”) 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. On August 13, 2007 the Court of Appeals reversed the
        District Court’s Order granting summary judgment in favor of the defendants, and
        remanded the case to the District Court. As the Court of Appeals ruling left
        open the option for defendants to renew their motion for summary judgment
        with
        the District Court, on October 25, 2007 the defendants again filed for summary
        judgment. While the Company intends to continue to vigorously defend the
        matter,
        the plaintiff and defendants are in the process of scheduling mediation.
        In the
        event that the defendants do not prevail in their renewed motion for summary
        judgment, or the matter is not otherwise resolved through mediation, the
        District Court will set the matter for trial in 2008. At this time, it is
        too early to determine the outcome of this mediation or litigation and the
        effect, if any, on the Company's financial position and results of
        operations.
   **TAX
        MATTERS**
  Majestic
        Star Real Property Assessment Appeals. The
        Company received notices of assessment dated July 20, 2007 from the Calumet
        Township (City of Gary, Indiana) Assessor updating the assessed valuation
        of the
        Company's real property, retroactive to March 1, 2006. These included notices
        that the property tax assessments of the Majestic Star and Majestic Star
        II
        vessels were to be increased by 166.2% and 184.1%, respectively.  Under
        Indiana law, licensed gaming vessels are assessed as real property. 
Without a commensurate reduction in the historical tax rate on real property,
        the combined increase in real property tax expense for the Majestic Star
        and
        Majestic Star II vessels alone would be $4.0 million for the period March
        1,
        2006 through December 31, 2006, and $3.6 million for the period January 1,
        2007
        through September 30, 2007.  The actual tax rate for 2007 has not yet been
        determined, and no property tax bills have yet been received. The Company
        believes that the new assessed valuations for the Majestic Star and Majestic
        Star II vessels are excessive and unsupportable and as a result, the Company
        has
        not established any reserves.  On September 4, 2007, the Company initiated
        administrative appeals of the vessels' assessments.  While the appeals are
        pending, the Company will pay tax based on the prior year's assessed values,
        as
        permitted by Indiana law.
 
 
 **GAMING
        AND OTHER REGULATIONS**
 
 The
        Company’s directors, officers, managers and key employees are required to hold
        individual licenses. These requirements vary from jurisdiction to jurisdiction.
        Licenses and permits for gaming operations and for individual licensees are
        subject to revocation or non-renewal for cause. Under certain circumstances,
        holders of our securities are required to secure independent licenses and
        permits.
 
 
 **NOTE
        6. RELATED PARTY TRANSACTIONS**
 
 **TRANSACTIONS
        BY OR WITH AFFILIATES**
 
 *Pushdown
        of Majestic Holdco Discount Notes.* The
        Company’s financial statements for 2007 and 2006 include $63.5 million total
        amount of Discount Notes, net of discount of $7.5 million and $12.4 million
        as
        of September 30, 2007 and December 31, 2006, respectively, issued by Majestic
        Holdco. The Discount Notes are solely the obligation of Majestic Holdco and
        are
        unsecured. Neither the Company nor any of its direct or indirect subsidiaries
        guarantees the Discount Notes nor is 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. A likely scenario for the repayment of these Discount Notes is from
        cash flows of the Company or a refinancing of the Company’s indebtedness,
        including Majestic Holdco. The Discount Notes have been “pushed-down” to the
        Company pursuant to the guidelines of SEC Staff Accounting Bulletin 73 Topic
        5(J).
  9
 **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)**
  
 *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 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, the Company made distributions
        totaling $3.6 million to BDI pursuant to the Manager Agreement. No distributions
        were made during the nine months ended September 30, 2007.
 
 *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 2007, the Company made a tax distribution of $2.2 million
        to BDI for resolution of an IRS audit of BHR, and 2006 and 2007 Indiana taxes.
        In the second quarter of 2006, the Company made a tax distribution of $0.9
        million to BDI for 2005 Indiana tax liabilities and estimated 2006
        taxes.
 
 *Barden
        Nevada Expense Sharing Agreement* .
        The
        Company has entered into an expense sharing agreement dated October 7, 2003
        with Barden Nevada Gaming, LLC (“Barden Nevada”), a wholly owned subsidiary of
        BDI that operates the Fitzgeralds hotel and casino in Las Vegas, 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, 2007, the Company charged Barden
        Nevada $0.3 million and $1.2 million, respectively, pursuant to the expense
        sharing agreement. For the three and nine months ended September 30, 2006,
        the
        Company charged Barden Nevada $0.4 million and $1.1 million pursuant to the
        expense sharing agreement.
 
 *Barden
        Nevada Revolving Promissory Note.* On
        March 9, 2005, Barden Nevada entered into a revolving promissory note with
        the Company, whereby Barden Nevada may request advances from time to time
        from
        the Company up to $5.0 million. Interest is calculated based on the prime
        rate
        (as published in the Money Rates Section of the Wall Street Journal), plus
        the
        margin spread paid by the Company under prime rate borrowings with Wells
        Fargo
        Foothill, the agent bank under the Company’s Senior Secured Credit Facility.
        Interest is paid quarterly, in arrears. Any costs that are funded by the
        Company
        and not repaid by Barden Nevada within 30 days will be added to the principal
        amount outstanding. All amounts outstanding under the promissory note were
        due
        and payable on October 7, 2007 along with the accrued and unpaid interest.
        On October 7, 2007 a new revolving promissory note, with a maturity date
        of
        April 15, 2010, was executed with substantially the same terms. As of September
        30, 2007, there was no principal balance outstanding on this promissory
        note.
 
 *PITG
        Gaming, LLC Expense Sharing Agreement* .
        The
        Company has entered into an expense sharing agreement with PITG Gaming, LLC
        (“PITG”), an indirectly owned subsidiary of BDI. The expense sharing agreement
        provides for reimbursement from PITG to the Company for expenses paid by
        the
        Company on behalf of PITG. These expenses are primarily for payroll and travel
        costs related to the development of a casino in Pittsburgh, Pennsylvania.
        The
        Company charged PITG $0.3 million and $0.6 million during the three- and
        nine-month periods ended September 30, 2007, respectively, pursuant to the
        expense sharing agreement. There were no charges in the three- and nine-months
        periods ended September 30, 2006.
 
 *PITG
        Revolving Promissory Note.* PITG
        entered into a revolving promissory note with the Company, whereby PITG may
        request advances from time to time from the Company up to $5.0 million. Interest
        is calculated based on the prime rate (as published in the Money Rates Section
        of the Wall Street Journal), plus one-half of one percent. Interest is payable
        quarterly, in arrears. All amounts outstanding under the promissory note
        are due
        and payable upon the issuance or incurrence by PITG of any indebtedness or
        capital stock which, in the aggregate, is equal to or exceeds $450.0 million
        along with any accrued and unpaid interest. The Company anticipates repayment
        of
        the note with proceeds from a PITG bridge financing that is expected to close
        in
        mid- November 2007. As of September 30, 2007, approximately $0.7 million
        was
        owed to the Company under this promissory note.
  10
 **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
        7. 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”). The Majestic Properties for 2006 and through the nine months
        ended September 30, 2007 include Majestic Star and Majestic Star II. BHPA
        was
        merged into Majestic Star on August 4, 2006, and BHR was dissolved into Majestic
        Star on December 31, 2006. Both are shown as if the transactions had been
        completed as of January 1, 2006.
 
 The
        Company identifies its business in three segments based on geographic location.
        The Properties, in each of their segments, market primarily to mid-level
        gaming
        customers. 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 Annual Report on Form
        10-K
        for the year ended December 31, 2006. There are minimal inter-segment
        sales.
 
 A
        summary
        of the Properties’ operations by business segment and expenditures for additions
        to long-lived assets for the three months and nine months ended September
        30,
        2007 and 2006, respectively, is presented below:
 
  11
 **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)**
  
 For
                  The Three Months Ended
              
              For
                  The Nine Months EndedSeptember
                  30,
              
              September
                  30,2007
              
              2006
              
              2007
              
              2006(amounts
                  in thousands)Net
                  revenues:Majestic
                  Properties
              
              $
              59,054
              
              $
              55,041
              
              $
              185,142
              
              $
              180,616Fitzgeralds
                  Tunica
              
              
              22,718
              
              
              22,426
              
              
              65,645
              
              
              65,395Fitzgeralds
                  Black Hawk
              
              
              8,083
              
              
              8,923
              
              
              23,667
              
              
              25,854Total
              
              $
              89,855
              
              $
              86,390
              
              $
              274,454
              
              $
              271,865Operating
                  income (loss):Majestic
                  Properties
              
              $
              6,667
              
              $
              4,420
              
              $
              26,033
              
              $
              29,559Fitzgeralds
                  Tunica
              
              
              1,427
              
              
              3,289
              
              
              4,303
              
              
              8,875Fitzgeralds
                  Black Hawk
              
              
              1,824
              
              
              2,717
              
              
              4,939
              
              
              6,447Corporate
                  (1)
              
              
              (1,753
              )
              
              (1,273
              )
              
              (5,285
              )
              
              (5,045
              )Total
              
              $
              8,165
              
              $
              9,153
              
              $
              29,990
              
              $
              39,836Segment
                  depreciation and amortization:Majestic
                  Properties
              
              $
              4,676
              
              $
              5,111
              
              $
              14,209
              
              $
              15,216Fitzgeralds
                  Tunica
              
              
              2,800
              
              
              2,320
              
              
              8,158
              
              
              6,651Fitzgeralds
                  Black Hawk
              
              
              636
              
              
              516
              
              
              1,885
              
              
              1,648Corporate
                  (1)
              
              
              42
              
              
              30
              
              
              103
              
              
              82Total
              
              $
              8,154
              
              $
              7,977
              
              $
              24,355
              
              $
              23,597Expenditure
                  for additions to long-lived assets:Majestic
                  Properties
              
              $
              1,251
              
              $
              1,984
              
              $
              5,779
              
              $
              4,911Fitzgeralds
                  Tunica
              
              
              1,088
              
              
              4,651
              
              
              6,699
              
              
              5,988Fitzgeralds
                  Black Hawk
              
              
              6,062
              
              
              2,412
              
              
              10,728
              
              
              3,602Corporate
              
              
              372
              
              
              3
              
              
              420
              
              
              126Total
              
              $
              8,773
              
              $
              9,050
              
              $
              23,626
              
              $
              14,627
 
  (1)
              Corporate
                  expenses reflect payroll, benefits, travel and other costs associated
                  with
                  our corporate staff and are not allocated to the
                  properties.
 
  12
 **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
        8. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION**
 
 The
        Majestic Star Casino, LLC is the co-issuer of $300.0 million of Senior Secured
        Notes and $200.0 million of Senior Notes. Under the indentures governing
        the
        Senior Secured Notes and the Senior Notes and the loan and security agreement
        for the Senior Secured Credit Facility, Majestic Star II, Fitzgeralds
        Tunica and Fitzgeralds Black Hawk are guarantor subsidiaries of the $300.0
        million of Senior Secured Notes.
 
 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.
 
 
  13
 **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
        8.
        SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
 
 CONDENSED
        CONSOLIDATING BALANCE SHEET
 As
        of
        September 30, 2007
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              
              
              ConsolidatedASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              9,406,972
              
              $
              -
              
              $
              21,687,685
              
              $
              -
              
              
              
              
              $
              31,094,657Restricted
                  cash
              
              
              2,588,241
              
              
              -
              
              
              1,040,000
              
              
              -
              
              
              
              
              
              3,628,241Accounts
                  receivable, net
              
              
              1,531,026
              
              
              -
              
              
              2,805,446
              
              
              -
              
              
              
              
              
              4,336,472Inventories
              
              
              390,142
              
              
              -
              
              
              643,494
              
              
              -
              
              
              
              
              
              1,033,636Prepaid
                  expenses and deposits
              
              
              1,888,585
              
              
              -
              
              
              1,788,938
              
              
              -
              
              
              
              
              
              3,677,523Receivable
                  from affiliate
              
              
              4,408,122
              
              
              -
              
              
              1,399
              
              
              (3,376,232
              )
              
              (a
              )
              
              1,033,289Investment
                  in subsidiaries
              
              
              148,073,808
              
              
              -
              
              
              -
              
              
              (148,073,808
              )
              
              (b
              )
              
              -Total
                  current assets
              
              
              168,286,896
              
              
              -
              
              
              27,966,962
              
              
              (151,450,040
              )
              
              
              
              
              44,803,818Property,
                  equipment and improvements, net
              
              
              143,074,239
              
              
              -
              
              
              135,912,445
              
              
              -
              
              
              
              
              
              278,986,684Intangible
                  assets, net
              
              
              -
              
              
              -
              
              
              122,801,127
              
              
              -
              
              
              
              
              
              122,801,127Goodwill
              
              
              -
              
              
              -
              
              
              47,431,442
              
              
              -
              
              
              
              
              
              47,431,442Other
                  assets:Deferred
                  financing costs, net
              
              
              10,574,122
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              10,574,122Deferred
                  financing and transaction costspushed
                  down from Majestic Holdco (c)
              
              
              2,054,393
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              2,054,393Long-term
                  receivable - related party
              
              
              186,499,438
              
              
              -
              
              
              29,517,690
              
              
              (216,017,128
              )
              
              (a
              )
              
              -Other
                  assets
              
              
              1,043,494
              
              
              -
              
              
              1,628,287
              
              
              -
              
              
              
              
              
              2,671,781Total
                  other assets
              
              
              200,171,447
              
              
              -
              
              
              31,145,977
              
              
              (216,017,128
              )
              
              
              
              
              15,300,296Total
                  assets
              
              $
              511,532,582
              
              $
              -
              
              $
              365,257,953
              
              $
              (367,467,168
              )
              
              
              
              $
              509,323,367LIABILITIES
                  AND MEMBER'S DEFICITCurrent
                  liabilities:Accounts
                  payable
              
              $
              1,014,253
              
              $
              -
              
              $
              2,404,293
              
              $
              -
              
              
              
              
              $
              3,418,546Current
                  portion of long-term debt
              
              
              90,880
              
              
              -
              
              
              62,697
              
              
              -
              
              
              
              
              
              153,577Payable
                  to related party
              
              
              -
              
              
              -
              
              
              3,376,232
              
              
              (3,376,232
              )
              
              (a
              )
              
              -Accrued
                  liabilities:Payroll
                  and related
              
              
              4,243,320
              
              
              -
              
              
              6,424,439
              
              
              -
              
              
              
              
              
              10,667,759Interest
              
              
              22,762,988
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              22,762,988Property
                  and franchise taxes
              
              
              9,451,456
              
              
              -
              
              
              6,024,157
              
              
              -
              
              
              
              
              
              15,475,613Other
                  accrued liabilities
              
              
              4,356,518
              
              
              -
              
              
              12,380,213
              
              
              -
              
              
              
              
              
              16,736,731Total
                  current liabilities
              
              
              41,919,415
              
              
              -
              
              
              30,672,031
              
              
              (3,376,232
              )
              
              
              
              
              69,215,214Due
                  to related parties
              
              
              29,517,691
              
              
              -
              
              
              186,499,437
              
              
              (216,017,128
              )
              
              (a
              )
              
              -Long-term
                  debt, net of current maturities
              
              
              541,531,562
              
              
              300,000,000
              
              
              12,677
              
              
              (300,000,000
              )
              
              (d
              )
              
              541,544,239Long-term
                  debt pushed down from Majestic Holdco (e)
              
              
              55,967,418
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              55,967,418Total
                  liabilities
              
              
              668,936,086
              
              
              300,000,000
              
              
              217,184,145
              
              
              (519,393,360
              )
              
              
              
              
              666,726,871Member's
                  (deficit) equity
              
              
              (157,403,504
              )
              
              (300,000,000
              )
              
              148,073,808
              
              
              151,926,192
              
              
              (b)(d
              )
              
              (157,403,504
              )Total
                  liabilities and member's (deficit) equity
              
              $
              511,532,582
              
              $
              -
              
              $
              365,257,953
              
              $
              (367,467,168
              )
              
              
              
              $
              509,323,367
 
  14
 **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
        8.
        SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
 
 CONDENSED
        CONSOLIDATING BALANCE SHEET (CONTINUED)
 As
        of
        September 30, 2007
 
 
 (a)
              To
                  eliminate intercompany receivables and payables.(b)
              To
                  eliminate intercompany accounts and investment in
                  subsidiaries.(c)
              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 73 Topic 5(J).(d)
              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 sheet.(e)
              Reflects
                  the pushdown of Majestic Holdco’s Discount Notes pursuant to SEC Staff
                  Accounting Bulletin 73
                  Topic 5(J).
  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
        8.
        SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
 
 CONDENSED
        CONSOLIDATING BALANCE SHEET
 As
        of
        December 31, 2006
 
 The
                    Majestic
                
                The
                    MajesticStar
                    Casino,
                
                Star
                    Casino
                
                Guarantor
                
                Eliminating
                
                
                
                TotalLLC
                
                Capital
                    Corp.
                
                Subsidiaries
                
                Entries
                
                
                
                ConsolidatedASSETSCurrent
                    assets:Cash
                    and cash equivalents
                
                $
                9,101,841
                
                $
                -
                
                $
                16,430,083
                
                $
                -
                
                
                
                
                $
                25,531,924Restricted
                    cash
                
                
                2,286,881
                
                
                -
                
                
                1,040,000
                
                
                -
                
                
                
                
                
                3,326,881Accounts
                    receivable, net
                
                
                2,014,267
                
                
                -
                
                
                5,568,209
                
                
                -
                
                
                
                
                
                7,582,476Inventories
                
                
                196,681
                
                
                -
                
                
                691,611
                
                
                -
                
                
                
                
                
                888,292Prepaid
                    expenses and deposits
                
                
                824,865
                
                
                -
                
                
                1,481,446
                
                
                -
                
                
                
                
                
                2,306,311Receivable
                    from affiliate
                
                
                6,186,636
                
                
                -
                
                
                -
                
                
                (5,731,366
                )
                
                (a
                )
                
                455,270Investment
                    in subsidiaries
                
                
                119,861,069
                
                
                -
                
                
                -
                
                
                (119,861,069
                )
                
                (b
                )
                
                -Total
                    current assets
                
                
                140,472,240
                
                
                -
                
                
                25,211,349
                
                
                (125,592,435
                )
                
                
                
                
                40,091,154Property,
                    equipment and improvements, net
                
                
                146,207,554
                
                
                -
                
                
                129,528,028
                
                
                -
                
                
                
                
                
                275,735,582Intangible
                    assets, net
                
                
                -
                
                
                -
                
                
                125,395,502
                
                
                -
                
                
                
                
                
                125,395,502Goodwill
                
                
                -
                
                
                -
                
                
                47,431,442
                
                
                -
                
                
                
                
                
                47,431,442Other
                    assets:Deferred
                    financing costs, net
                
                
                13,083,100
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                13,083,100Deferred
                    financing and transaction costspushed
                    down from Majestic Holdco (c)
                
                
                2,435,620
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                2,435,620Long-term
                    receivable - related party
                
                
                223,649,437
                
                
                -
                
                
                7,757,546
                
                
                (231,406,983
                )
                
                (a
                )
                
                -Other
                    assets
                
                
                503,637
                
                
                -
                
                
                1,683,383
                
                
                -
                
                
                
                
                
                2,187,020Total
                    other assets
                
                
                239,671,794
                
                
                -
                
                
                9,440,929
                
                
                (231,406,983
                )
                
                
                
                
                17,705,740Total
                    assets
                
                $
                526,351,588
                
                $
                -
                
                $
                337,007,250
                
                $
                (356,999,418
                )
                
                
                
                $
                506,359,420LIABILITIES
                    AND MEMBER'S DEFICITCurrent
                    liabilities:Accounts
                    payable
                
                $
                2,166,672
                
                $
                -
                
                $
                2,324,928
                
                $
                -
                
                
                
                
                $
                4,491,600Current
                    portion of long-term debt
                
                
                60,091
                
                
                -
                
                
                105,330
                
                
                -
                
                
                
                
                
                165,421Payable
                    to related party
                
                
                2,095
                
                
                -
                
                
                5,729,271
                
                
                (5,731,366
                )
                
                (a
                )
                
                -Accrued
                    liabilities:Payroll
                    and related
                
                
                3,131,620
                
                
                -
                
                
                5,985,106
                
                
                -
                
                
                
                
                
                9,116,726Interest
                
                
                10,750,630
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                10,750,630Property
                    and franchise taxes
                
                
                5,178,856
                
                
                -
                
                
                3,764,119
                
                
                -
                
                
                
                
                
                8,942,975Other
                    accrued liabilities
                
                
                5,476,552
                
                
                -
                
                
                10,078,395
                
                
                -
                
                
                
                
                
                15,554,947Total
                    current liabilities
                
                
                26,766,516
                
                
                -
                
                
                27,987,149
                
                
                (5,731,366
                )
                
                
                
                
                49,022,299Due
                    to related parties
                
                
                42,298,987
                
                
                -
                
                
                189,107,996
                
                
                (231,406,983
                )
                
                (a
                )
                
                -Long-term
                    debt, net of current maturities
                
                
                545,752,954
                
                
                300,000,000
                
                
                51,036
                
                
                (300,000,000
                )
                
                (d
                )
                
                545,803,990Long-term
                    debt pushed down from Majestic Holdco (e)
                
                
                51,123,692
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                51,123,692Total
                    liabilities
                
                
                665,942,149
                
                
                300,000,000
                
                
                217,146,181
                
                
                (537,138,349
                )
                
                
                
                
                645,949,981Member's
                    (deficit) equity
                
                
                (139,590,561
                )
                
                (300,000,000
                )
                
                119,861,069
                
                
                180,138,931
                
                
                (b)(d
                )
                
                (139,590,561
                )Total
                    liabilities and member's (deficit) equity
                
                $
                526,351,588
                
                $
                -
                
                $
                337,007,250
                
                $
                (356,999,418
                )
                
                
                
                $
                506,359,420
 
  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
        8.
        SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
 
 CONDENSED
        CONSOLIDATING BALANCE SHEET (CONTINUED)
 As
        of
        December 31, 2006
 
 
 (a)
              To
                  eliminate intercompany receivables and payables.(b)
              To
                  eliminate intercompany accounts and investment in
                  subsidiaries.(c)
              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 73 Topic 5(J).(d)
              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 sheet.(e)
              Reflects
                  the pushdown of Majestic Holdco’s Discount Notes pursuant to SEC Staff
                  Accounting Bulletin 73
                  Topic 5(J).
 
  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
        8.
        SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
 
 CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS
 For
        the
        Three Months Ended September 30, 2007
  The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              30,062,298
              
              $
              -
              
              $
              60,000,885
              
              $
              -
              
              
              
              
              $
              90,063,183Rooms
              
              
              -
              
              
              -
              
              
              3,376,417
              
              
              -
              
              
              
              
              
              3,376,417Food
                  and beverage
              
              
              2,465,600
              
              
              -
              
              
              4,398,837
              
              
              -
              
              
              
              
              
              6,864,437Other
              
              
              814,828
              
              
              -
              
              
              1,098,469
              
              
              -
              
              
              
              
              
              1,913,297Gross
                  revenues
              
              
              33,342,726
              
              
              -
              
              
              68,874,608
              
              
              -
              
              
              
              
              
              102,217,334Less
                  promotional allowances
              
              
              3,438,229
              
              
              -
              
              
              8,923,933
              
              
              -
              
              
              
              
              
              12,362,162Net
                  operating revenues
              
              
              29,904,497
              
              
              -
              
              
              59,950,675
              
              
              -
              
              
              
              
              
              89,855,172OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              7,746,081
              
              
              -
              
              
              16,476,378
              
              
              -
              
              
              
              
              
              24,222,459Rooms
              
              
              -
              
              
              -
              
              
              857,380
              
              
              -
              
              
              
              
              
              857,380Food
                  and beverage
              
              
              1,677,753
              
              
              -
              
              
              1,481,525
              
              
              -
              
              
              
              
              
              3,159,278Other
              
              
              266,976
              
              
              -
              
              
              240,543
              
              
              -
              
              
              
              
              
              507,519Gaming
                  taxes
              
              
              8,942,008
              
              
              -
              
              
              12,232,856
              
              
              -
              
              
              
              
              
              21,174,864Advertising
                  and promotion
              
              
              1,540,262
              
              
              -
              
              
              4,648,051
              
              
              -
              
              
              
              
              
              6,188,313General
                  and administrative
              
              
              6,134,090
              
              
              -
              
              
              7,869,857
              
              
              -
              
              
              
              
              
              14,003,947Corporate
                  expense
              
              
              1,708,250
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              1,708,250Economic
                  incentive tax - City of Gary
              
              
              879,421
              
              
              -
              
              
              837,499
              
              
              -
              
              
              
              
              
              1,716,920Depreciation
                  and amortization
              
              
              2,967,700
              
              
              -
              
              
              5,186,418
              
              
              -
              
              
              
              
              
              8,154,118Gain
                  on disposal of assets
              
              
              (2,831
              )
              
              -
              
              
              (94
              )
              
              -
              
              
              
              
              
              (2,925
              )Total
                  operating costs and expenses
              
              
              31,859,710
              
              
              -
              
              
              49,830,413
              
              
              -
              
              
              
              
              
              81,690,123Operating
                  (loss) income
              
              
              (1,955,213
              )
              
              -
              
              
              10,120,262
              
              
              -
              
              
              
              
              
              8,165,049OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              16,519
              
              
              -
              
              
              76,418
              
              
              -
              
              
              
              
              
              92,937Interest
                  expense
              
              
              (13,526,481
              )
              
              -
              
              
              (992
              )
              
              -
              
              
              
              
              
              (13,527,473
              )Interest
                  expense - debt pushed downfrom
                  Majestic Holdco (a) (b)
              
              
              (1,778,076
              )
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (1,778,076
              )Other
                  non-operating expense
              
              
              (19,690
              )
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (19,690
              )Equity
                  in net income of subsidiaries
              
              
              10,195,688
              
              
              -
              
              
              -
              
              
              (10,195,688
              )
              
              (c
              )
              
              -Total
                  other expense
              
              
              (5,112,040
              )
              
              -
              
              
              75,426
              
              
              (10,195,688
              )
              
              
              
              
              (15,232,302
              )Net
                  (loss) income
              
              $
              (7,067,253
              )
              $
              -
              
              $
              10,195,688
              
              $
              (10,195,688
              )
              
              
              
              $
              (7,067,253
              ) 
 (a)
                Includes
                    amortization of deferred financing costs related to the issuance
                    of
                    Majestic Holdco’s Discount Notes pushed down pursuant to SEC Staff
                    Accounting Bulletin 73 Topic 5(J).(b)
                Includes
                    interest expense on Majestic Holdco’s Discount Notes pushed down pursuant
                    to SEC Staff Accounting Bulletin 73
                    Topic 5(J).(c)
                To
                    eliminate equity in net income of
                    subsidiaries.
 
 
  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
        8.
        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
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              33,088,799
              
              $
              -
              
              $
              61,751,003
              
              $
              -
              
              
              
              
              $
              94,839,802Rooms
              
              
              -
              
              
              -
              
              
              2,943,349
              
              
              -
              
              
              
              
              
              2,943,349Food
                  and beverage
              
              
              450,138
              
              
              -
              
              
              3,720,856
              
              
              -
              
              
              
              
              
              4,170,994Other
              
              
              889,300
              
              
              -
              
              
              820,608
              
              
              -
              
              
              
              
              
              1,709,908Gross
                  revenues
              
              
              34,428,237
              
              
              -
              
              
              69,235,816
              
              
              -
              
              
              
              
              
              103,664,053Less
                  promotional allowances
              
              
              4,877,139
              
              
              -
              
              
              12,397,131
              
              
              -
              
              
              
              
              
              17,274,270Net
                  operating revenues
              
              
              29,551,098
              
              
              -
              
              
              56,838,685
              
              
              -
              
              
              
              
              
              86,389,783OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              6,545,407
              
              
              -
              
              
              15,275,056
              
              
              -
              
              
              
              
              
              21,820,463Rooms
              
              
              -
              
              
              -
              
              
              862,425
              
              
              -
              
              
              
              
              
              862,425Food
                  and beverage
              
              
              524,897
              
              
              -
              
              
              1,586,316
              
              
              -
              
              
              
              
              
              2,111,213Other
              
              
              57,516
              
              
              -
              
              
              220,700
              
              
              -
              
              
              
              
              
              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
              
              
              5,268,389
              
              
              -
              
              
              8,004,503
              
              
              -
              
              
              
              
              
              13,272,892Corporate
                  expense
              
              
              1,242,897
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              1,242,897Economic
                  incentive tax - City of Gary
              
              
              933,091
              
              
              -
              
              
              801,630
              
              
              -
              
              
              
              
              
              1,734,721Depreciation
                  and amortization
              
              
              3,048,438
              
              
              -
              
              
              4,928,256
              
              
              -
              
              
              
              
              
              7,976,694Loss
                  on disposal of assets
              
              
              367
              
              
              -
              
              
              1,791
              
              
              -
              
              
              
              
              
              2,158Total
                  operating costs and expenses
              
              
              28,739,980
              
              
              -
              
              
              48,496,362
              
              
              -
              
              
              
              
              
              77,236,342Operating
                  income
              
              
              811,118
              
              
              -
              
              
              8,342,323
              
              
              -
              
              
              
              
              
              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 (a) (b)
              
              
              (1,591,635
              )
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (1,591,635
              )Other
                  non-operating expense
              
              
              (31,530
              )
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (31,530
              )Equity
                  in net income of subsidiaries
              
              
              8,415,780
              
              
              -
              
              
              -
              
              
              (8,415,780
              )
              
              (c
              )
              
              -Total
                  other expense
              
              
              (6,604,194
              )
              
              -
              
              
              73,457
              
              
              (8,415,780
              )
              
              
              
              
              (14,946,517
              )Net
                  (loss) income
              
              $
              (5,793,076
              )
              $
              -
              
              $
              8,415,780
              
              $
              (8,415,780
              )
              
              
              
              $
              (5,793,076
              ) 
 (a)
                  Includes
                      amortization of deferred financing costs related to the issuance
                      of
                      Majestic Holdco’s Discount Notes pushed down pursuant to SEC Staff
                      Accounting Bulletin 73 Topic 5(J).(b)
                  Includes
                      interest expense on Majestic Holdco’s Discount Notes pushed down pursuant
                      to SEC Staff Accounting Bulletin 73
                      Topic 5(J).(c)
                  To
                      eliminate equity in net income of
                      subsidiaries.
   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
        8.
        SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
 
 CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS
 For
        the
        Nine Months Ended September 30, 2007
  The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              102,469,748
              
              $
              -
              
              $
              178,861,808
              
              $
              -
              
              
              
              
              $
              281,331,556Rooms
              
              
              -
              
              
              -
              
              
              8,970,884
              
              
              -
              
              
              
              
              
              8,970,884Food
                  and beverage
              
              
              7,054,775
              
              
              -
              
              
              12,595,994
              
              
              -
              
              
              
              
              
              19,650,769Other
              
              
              2,648,198
              
              
              -
              
              
              3,166,459
              
              
              -
              
              
              
              
              
              5,814,657Gross
                  revenues
              
              
              112,172,721
              
              
              -
              
              
              203,595,145
              
              
              -
              
              
              
              
              
              315,767,866Less
                  promotional allowances
              
              
              13,571,166
              
              
              -
              
              
              27,742,955
              
              
              -
              
              
              
              
              
              41,314,121Net
                  operating revenues
              
              
              98,601,555
              
              
              -
              
              
              175,852,190
              
              
              -
              
              
              
              
              
              274,453,745OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              22,772,668
              
              
              -
              
              
              48,264,610
              
              
              -
              
              
              
              
              
              71,037,278Rooms
              
              
              -
              
              
              -
              
              
              2,415,216
              
              
              -
              
              
              
              
              
              2,415,216Food
                  and beverage
              
              
              4,328,723
              
              
              -
              
              
              4,329,475
              
              
              -
              
              
              
              
              
              8,658,198Other
              
              
              776,947
              
              
              -
              
              
              713,769
              
              
              -
              
              
              
              
              
              1,490,716Gaming
                  taxes
              
              
              29,286,462
              
              
              -
              
              
              36,354,793
              
              
              -
              
              
              
              
              
              65,641,255Advertising
                  and promotion
              
              
              4,266,230
              
              
              -
              
              
              13,278,116
              
              
              -
              
              
              
              
              
              17,544,346General
                  and administrative
              
              
              18,085,873
              
              
              -
              
              
              24,067,259
              
              
              -
              
              
              
              
              
              42,153,132Corporate
                  expense
              
              
              5,180,044
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              5,180,044Economic
                  incentive tax - City of Gary
              
              
              2,769,089
              
              
              -
              
              
              2,413,596
              
              
              -
              
              
              
              
              
              5,182,685Depreciation
                  and amortization
              
              
              8,961,049
              
              
              -
              
              
              15,394,448
              
              
              -
              
              
              
              
              
              24,355,497Loss
                  on disposal of assets
              
              
              84,769
              
              
              -
              
              
              720,869
              
              
              -
              
              
              
              
              
              805,638Total
                  operating costs and expenses
              
              
              96,511,854
              
              
              -
              
              
              147,952,151
              
              
              -
              
              
              
              
              
              244,464,005Operating
                  income
              
              
              2,089,701
              
              
              -
              
              
              27,900,039
              
              
              -
              
              
              
              
              
              29,989,740OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              149,799
              
              
              -
              
              
              317,184
              
              
              -
              
              
              
              
              
              466,983Interest
                  expense
              
              
              (40,819,926
              )
              
              -
              
              
              (4,484
              )
              
              -
              
              
              
              
              
              (40,824,410
              )Interest
                  expense - debt pushed downfrom
                  Majestic Holdco (a) (b)
              
              
              (5,224,955
              )
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (5,224,955
              )Other
                  non-operating expense
              
              
              (70,056
              )
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (70,056
              )Equity
                  in net income of subsidiaries
              
              
              28,212,739
              
              
              -
              
              
              -
              
              
              (28,212,739
              )
              
              (c
              )
              
              -Total
                  other expense
              
              
              (17,752,399
              )
              
              -
              
              
              312,700
              
              
              (28,212,739
              )
              
              
              
              
              (45,652,438
              )Net
                  (loss) income
              
              $
              (15,662,698
              )
              $
              -
              
              $
              28,212,739
              
              $
              (28,212,739
              )
              
              
              
              $
              (15,662,698
              ) 
 (a)
                Includes
                    amortization of deferred financing costs related to the issuance
                    of
                    Majestic Holdco’s Discount Notes pushed down pursuant to SEC Staff
                    Accounting Bulletin 73 Topic 5(J).(b)
                Includes
                    interest expense on Majestic Holdco’s Discount Notes pushed down pursuant
                    to SEC Staff Accounting Bulletin 73
                    Topic 5(J).(c)
                To
                    eliminate equity in net income of
                    subsidiaries.
 
  
  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
        8.
        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
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              102,110,108
              
              $
              -
              
              $
              186,557,341
              
              $
              -
              
              
              
              
              $
              288,667,449Rooms
              
              
              -
              
              
              -
              
              
              8,556,120
              
              
              -
              
              
              
              
              
              8,556,120Food
                  and beverage
              
              
              1,375,315
              
              
              -
              
              
              11,114,513
              
              
              -
              
              
              
              
              
              12,489,828Other
              
              
              2,511,955
              
              
              -
              
              
              2,605,648
              
              
              -
              
              
              
              
              
              5,117,603Gross
                  revenues
              
              
              105,997,378
              
              
              -
              
              
              208,833,622
              
              
              -
              
              
              
              
              
              314,831,000Less
                  promotional allowances
              
              
              10,024,943
              
              
              -
              
              
              32,940,985
              
              
              -
              
              
              
              
              
              42,965,928Net
                  operating revenues
              
              
              95,972,435
              
              
              -
              
              
              175,892,637
              
              
              -
              
              
              
              
              
              271,865,072OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              18,880,217
              
              
              -
              
              
              46,413,293
              
              
              -
              
              
              
              
              
              65,293,510Rooms
              
              
              -
              
              
              -
              
              
              2,468,620
              
              
              -
              
              
              
              
              
              2,468,620Food
                  and beverage
              
              
              1,493,880
              
              
              -
              
              
              4,894,526
              
              
              -
              
              
              
              
              
              6,388,406Other
              
              
              72,916
              
              
              -
              
              
              694,780
              
              
              -
              
              
              
              
              
              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
              
              
              18,876,222
              
              
              -
              
              
              23,662,231
              
              
              -
              
              
              
              
              
              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
              
              
              9,035,168
              
              
              -
              
              
              14,561,374
              
              
              -
              
              
              
              
              
              23,596,542(Gain)
                  loss on disposal of assets
              
              
              (2,360
              )
              
              -
              
              
              214
              
              
              -
              
              
              
              
              
              (2,146
              )Total
                  operating costs and expenses
              
              
              89,391,412
              
              
              -
              
              
              142,637,504
              
              
              -
              
              
              
              
              
              232,028,916Operating
                  income
              
              
              6,581,023
              
              
              -
              
              
              33,255,133
              
              
              -
              
              
              
              
              
              39,836,156OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              173,452
              
              
              -
              
              
              176,437
              
              
              -
              
              
              
              
              
              349,889Interest
                  expense
              
              
              (40,168,940
              )
              
              -
              
              
              (30,625
              )
              
              -
              
              
              
              
              
              (40,199,565
              )Interest
                  expense - debt pushed downfrom
                  Majestic Holdco (a) (b)
              
              
              (4,661,889
              )
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (4,661,889
              )Other
                  non-operating expense
              
              
              (82,733
              )
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (82,733
              )Equity
                  in net income of subsidiaries
              
              
              33,400,945
              
              
              -
              
              
              -
              
              
              (33,400,945
              )
              
              (c
              )
              
              -Total
                  other expense
              
              
              (11,339,165
              )
              
              -
              
              
              145,812
              
              
              (33,400,945
              )
              
              
              
              
              (44,594,298
              )Net
                  (loss) income
              
              $
              (4,758,142
              )
              $
              -
              
              $
              33,400,945
              
              $
              (33,400,945
              )
              
              
              
              $
              (4,758,142
              ) 
 (a)
                Includes
                    amortization of deferred financing costs related to the issuance
                    of
                    Majestic Holdco’s Discount Notes pushed down pursuant to SEC Staff
                    Accounting Bulletin 73 Topic 5(J).(b)
                Includes
                    interest expense on Majestic Holdco’s Discount Notes pushed down pursuant
                    to SEC Staff Accounting Bulletin 73
                    Topic 5(J).(c)
                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
        8.
        SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
 
 CONDENSED
        CONSOLIDATING STATEMENT OF CASH FLOWS
 For
        the
        Nine Months Ended September 30, 2007
  The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              ConsolidatedNET
                  CASH (USED IN) PROVIDED BYOPERATING
                  ACTIVITIES:
              
              $
              (19,229,918
              )
              $
              -
              
              $
              55,744,399
              
              $
              -
              
              $
              36,514,481CASH
                  FLOWS FROM INVESTING ACTIVITIES:Increase
                  in restricted cash
              
              
              (301,360
              )
              
              -
              
              
              -
              
              
              -
              
              
              (301,360
              )Additions
                  to property and equipment
              
              
              (6,025,107
              )
              
              -
              
              
              (17,601,304
              )
              
              -
              
              
              (23,626,411
              )Increase
                  in Lakefront Capital Improvement Fund
              
              
              (619,795
              )
              
              -
              
              
              -
              
              
              -
              
              
              (619,795
              )Proceeds
                  from disposal of equipment
              
              
              73,400
              
              
              -
              
              
              95,499
              
              
              -
              
              
              168,899Net
                  cash used in investing activities
              
              
              (6,872,862
              )
              
              -
              
              
              (17,505,805
              )
              
              -
              
              
              (24,378,667
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from line of credit
              
              
              28,665,026
              
              
              -
              
              
              -
              
              
              -
              
              
              28,665,026Repayment
                  of line of credit
              
              
              (32,950,000
              )
              
              -
              
              
              -
              
              
              -
              
              
              (32,950,000
              )Advances
                  from (to) affiliates
              
              
              32,900,000
              
              
              -
              
              
              (32,900,000
              )
              
              -
              
              
              -Repayment
                  of debt
              
              
              (56,870
              )
              
              -
              
              
              (80,992
              )
              
              -
              
              
              (137,862
              )Distribution
                  to Barden Development, Inc.
              
              
              (2,150,245
              )
              
              -
              
              
              -
              
              
              -
              
              
              (2,150,245
              )Net
                  cash provided by (used in) financing activities
              
              
              26,407,911
              
              
              -
              
              
              (32,980,992
              )
              
              -
              
              
              (6,573,081
              )Net
                  increase in cash and cash equivalents
              
              
              305,131
              
              
              -
              
              
              5,257,602
              
              
              -
              
              
              5,562,733Cash
                  and cash equivalents, beginning of period
              
              
              9,101,841
              
              
              -
              
              
              16,430,083
              
              
              -
              
              
              25,531,924Cash
                  and cash equivalents, end of period
              
              $
              9,406,972
              
              $
              -
              
              $
              21,687,685
              
              $
              -
              
              $
              31,094,657
 
 
 
  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
        8.
        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
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              ConsolidatedNET
                  CASH PROVIDED BYOPERATING
                  ACTIVITIES:
              
              $
              1,215,932
              
              $
              -
              
              $
              36,452,019
              
              $
              -
              
              $
              37,667,951CASH
                  FLOWS FROM INVESTING ACTIVITIES:Increase
                  in restricted cash
              
              
              (136,881
              )
              
              -
              
              
              -
              
              
              -
              
              
              (136,881
              )Adjustments
                  of costs related to Trump Indiana acquisition
              
              
              -
              
              
              -
              
              
              (1,090,546
              )
              
              -
              
              
              (1,090,546
              )Additions
                  to property and equipment
              
              
              (4,597,305
              )
              
              -
              
              
              (10,030,181
              )
              
              -
              
              
              (14,627,486
              )Proceeds
                  from disposal of equipment
              
              
              135,268
              
              
              -
              
              
              583,427
              
              
              -
              
              
              718,695Net
                  cash used in investing activities
              
              
              (4,598,918
              )
              
              -
              
              
              (10,537,300
              )
              
              -
              
              
              (15,136,218
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Payment
                  of debt issuance costs (a)
              
              
              (1,450,276
              )
              
              -
              
              
              -
              
              
              -
              
              
              (1,450,276
              )Repayment
                  of line of credit
              
              
              (47,758,609
              )
              
              -
              
              
              -
              
              
              -
              
              
              (47,758,609
              )Proceeds
                  from line of credit
              
              
              26,739,773
              
              
              -
              
              
              -
              
              
              -
              
              
              26,739,773Advances
                  from (to) affiliates
              
              
              31,500,000
              
              
              -
              
              
              (31,500,000
              )
              
              -
              
              
              -Repayment
                  of debt
              
              
              -
              
              
              -
              
              
              (1,161,085
              )
              
              -
              
              
              (1,161,085
              )Distributions
                  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
              
              
              1,178,187
              
              
              -
              
              
              (6,746,366
              )
              
              -
              
              
              (5,568,179
              )Cash
                  and cash equivalents, beginning of period
              
              
              8,084,908
              
              
              -
              
              
              24,283,341
              
              
              -
              
              
              32,368,249Cash
                  and cash equivalents, end of period
              
              $
              9,263,095
              
              $
              -
              
              $
              17,536,975
              
              $
              -
              
              $
              26,800,070
 
 (a)
              Includes
                  the pushdown of $0.2 million of issuance costs of Majestic Holdco’s
                  Discount Notes pursuant to SEC Staff Accounting Bulletin 73
                  Topic 5(J).
 
  23
 **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 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 heading “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, 2006, 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 operate two riverboat gaming
        facilities, Majestic Star and Majestic Star II (together, the “Majestic
        Properties”), located in Gary, Indiana and two Fitzgeralds brand casino-hotels
        located in Tunica County, Mississippi, Fitzgeralds Tunica, and Black Hawk,
        Colorado (casino only), Fitzgeralds Black Hawk. The Company has entered into
        an
        expense-sharing arrangement with Barden Nevada Gaming, LLC for support services
        and with PITG Gaming, LLC for services related to the development of a casino
        in
        Pittsburgh, Pennsylvania. See Note 6 to the Condensed Consolidated Financial
        Statements.
 
 
 **COMPANY
        DEVELOPMENTS**
 
 ***The
        Majestic Properties***
 
 In
        early
        August 2007, the Four Winds Casino Resort (“Four Winds”) opened in New Buffalo,
        Michigan, approximately forty miles east from the Majestic Properties. Our
        operations have been affected, at least initially, as customers have gone
        to
        visit the new property. In August 2007 we experienced a 3.9% decline in
        admissions and a 2.2% decline in casino revenues from August 2006. However,
        in
        September 2007, we grew admissions and casino revenues by 2.1% and 3.1%,
        respectively, from September last year. October 2007 was another solid month,
        with admissions and casino revenues increasing 7.2% and 3.4%, respectively,
        from
        October 2006. We will continue to experience the competitive effects of Four
        Winds, and the results from September and October should not be considered
        indicative of longer term trends. In addition, added competition could also
        result in increased promotional spending by us and other casinos in the
        market.
  24
 **Table
            of Contents**
  
 During
        the third quarter, we also continued to upgrade our facilities, including
        a
        remodel of the high limit game room and the buffet, and the addition of new
        slot
        machines. These, along with other projects and changes in promotions,
        contributed to increased revenues over the prior year’s quarter in table games,
        poker, and food and beverage.
  In
        the
        third quarter of 2007, compared to the third quarter of 2006, our table games
        and poker revenues increased $2.6 million, or 33.1%. Our northwest Indiana
        market share for table games and poker revenues increased to 17.2% from 14.1%.
        Our definition of the northwest Indiana market excludes Four Winds.
 
 Our
        food
        and beverage revenues increased by $2.1 million in the third quarter of 2007
        compared to the third quarter of 2006 due to our taking control of, and
        improving, the food and beverage outlets in the Buffington Harbor pavilion,
        along with the opening of a new restaurant outlet earlier in 2007.
 
 
 ***Fitzgeralds
        Tunica***
 
 The
        Mississippi River casino market, which includes Tunica, continues to be impacted
        by increased competition from other regional gaming markets. Total casino
        revenues for the Mississippi River casinos for the three and nine months
        ended
        September 30, 2007, as compared to the same periods in 2006, declined 3.3%
        and
        4.2%, respectively.
 
 The
        property management team continues its focus on attracting a higher net worth
        casino customer. Management’s efforts are seen in the 4.4% increase in slot
        handle and 3.3% increase in table games drop over the third quarter of 2006.
        However, volatility in our table games win percentage exists. The win
        percentages in the third quarter and nine-month period were 3.2 percentage
        points lower than in the same periods last year. The lower year-to-date win
        percentage in table games has impacted our table games revenues by $1.6 million
        (measured by taking this year’s table games drop times last year’s table games
        win percentage and subtracting from this year’s table games revenues).
 
 Our
        newly
        upgraded and remodeled hotel rooms were available for occupancy for the first
        full quarter of operations during the third quarter of 2007. These new rooms
        work hand in hand with our strategy to improve the quality of the casino’s
        customers. The remodeled rooms give our customers a feeling of luxury and
        elegance. As a consequence of these hotel improvements, we were able to increase
        both the occupancy percentage of the hotel and the average daily rate of
        its
        rooms in the third quarter of 2007.
   ***Fitzgeralds
        Black Hawk***
 
 Results
        at our Fitzgeralds Black Hawk property declined during the three- and nine-month
        periods ended September 30, 2007 as compared to the year earlier periods.
        Certain of our competitors have made significant improvements to their
        facilities in the last couple of years. The intensity of our competitors’
marketing efforts has also increased. As a consequence, our market share
        of slot
        coin-in for the three- and nine-month periods ended September 30, 2007 has
        declined from 7.5% and 7.8%, respectively, to 6.9% and 7.1%, respectively,
        from
        the year earlier periods.
 
 The
        completion of Fitzgeralds Black Hawk’s expanded casino project is still
        scheduled for the summer of 2008. Our customers have experienced some
        inconvenience due to the construction, and we anticipate this will continue
        as
        the project moves forward. Recently we changed vehicle egress from the property
        and the location where guests retrieve their cars. We are taking necessary
        steps
        to reduce customer inconvenience and have implemented promotions to reward
        customers for their patience during the expansion project.
 
 
 **CONSOLIDATED
        FINANCIAL RESULTS** ******
 
 The
        discussion of our consolidated financial results for the three and nine months
        ended September 30, 2007 is inclusive of the Majestic Properties, Fitzgeralds
        Tunica, Fitzgeralds Black Hawk, the Company’s corporate overhead and interest
        expense, and the pushdown of the Discount Notes, related financing costs
        and
        amortization of financing costs of Majestic Holdco.
  25
 **Table
            of Contents**
  
 ***Discount
        Notes***
 
 Majestic
        Holdco, the Company’s parent, issued, in conjunction with its co-issuer,
        Majestic Holdco, Inc., $63.5 million of 12 1⁄2% Senior Discount Notes due
        2011. The Company’s consolidated balance sheets as of September 30, 2007 and
        December 31, 2006 include the pushdown of Discount Notes of $56.0 million
        and $51.1 million, respectively, which amounts are net of unamortized original
        issue discount. Also pushed down are financing costs of $2.1 million and
        $2.4
        million, both net of amortization, as of September 30, 2007 and December
        31,
        2006. The Company is also reflecting $1.8 million and $1.6 million for the
        three-month periods ended September 30, 2007 and 2006, respectively, and
        $5.2
        million and $4.7 million for the nine-month periods ended September 30, 2007
        and
        2006, respectively, of amortization of original issue discount and financing
        costs within its consolidated statements of operations and cash flows.
 
 A
        likely
        scenario for the repayment of these 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 73
        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
        is the
        equity or assets of the Company or its 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.
   ***Downloadable
        Promotional Credits***
 
 Both
        the
        Majestic Properties and Fitzgeralds Tunica have implemented promotional programs
        that allow customers to download credits directly to the slot machine being
        played (“downloadable promotional credits”). The implementation of our
        downloadable promotional credit programs has coincided with a significant
        reduction in our direct mail cash coupon programs. With our direct mail cash
        coupon programs, customers would receive cash coupons from us which could
        be
        redeemed for cash with the hope that the cash would be wagered at the casinos'
        slot machines and table games.
 
 Neither
        the Majestic Properties nor Fitzgeralds Tunica record as slot revenues the
        wagering of downloadable promotional credits; however, any jackpots won as
        a
        result of the wagering of these promotional credits are deducted from slot
        revenues. As a result, the net impact due to the implementation of downloadable
        promotional credits is lower slot revenues and corresponding casino revenues.
        However, as mentioned above, the implementation of our downloadable promotional
        credit programs has allowed us to greatly scale back our cash coupon direct
        mail
        programs, generally on a dollar for dollar basis. Cash coupons, when redeemed,
        are recorded in promotional allowances, which is netted from gross revenues
        when
        computing net revenues. As a result, the lower slot revenues (casino revenues)
        under the downloadable promotional credits programs are offset by similar
        reductions in promotional allowances under the direct mail cash coupon programs,
        with, at worst, no net affect under either program to net revenues. In fact,
        there is a benefit to net revenues as a result of implementing downloadable
        promotional credits. With downloadable promotional credits the customer must
        play the credits off at the slot machine. The credits are not redeemable
        for
        cash. With our direct mail cash coupon programs we took the risk that a customer
        would redeem his or her coupon without wagering the cash received. Thus we
        were
        recognizing a promotional expense with no corresponding casino
        revenue.
 
 Our
        discussion below will reference casino revenues and promotional allowances.
        At
        the Majestic Properties, downloadable promotional credits of $2.4 million
        were
        utilized in the three- and nine-month periods ended September 30, 2007. There
        was no impact to the three- and nine-month periods ended September 30, 2006.
        At
        Fitzgeralds Tunica, downloadable promotional credits of $3.0 million and
        $7.8
        million were utilized in the three- and nine-month periods ended September
        30,
        2007 and $0.8 million and $1.1 million in the three- and nine-month periods
        ended September 30, 2006.
  26
 **Table
            of Contents**
  
 Indiana,
        the home of our Majestic Properties, and Mississippi, the home of our
        Fitzgeralds Tunica property, have taken different approaches regarding the
        taxability of downloadable promotional credits. In Indiana, the wagering
        of
        downloadable promotional credits is fully taxable for gaming tax purposes.
        In
        Mississippi, the wagering of downloadable promotional credits is not taxable
        for
        gaming tax purposes. Under our direct mail cash coupon programs, coupons
        redeemed and wagered by customers of the Majestic Properties and Fitzgeralds
        Tunica were fully taxable for gaming tax purposes by the Indiana and Mississippi
        tax authorities.
 
 
 ***Consolidated
        Operating Results: Third Quarter 2007 Compared to the Third Quarter
        2006***
 
 Consolidated
        gross operating revenues decreased $1.4 million, or 1.4%, to $102.2 million
        in
        the three-month period ended September 30, 2007 from $103.7 million in the
        three-month period ended September 30, 2006. The decrease is due to lower
        gross
        revenues at the Majestic Properties of $0.3 million, at Fitzgeralds Tunica
        of
        $0.4 million and at Fitzgeralds Black Hawk of $0.7 million.
 
 Consolidated
        casino revenues, which comprised 88.1% of consolidated gross revenues, decreased
        $4.8 million, or 5.0%, to $90.1 million, in the three-month period ended
        September 30, 2007, from $94.8 million in the similar period last year. The
        decrease is due to downloadable promotional credits and lower slot coin-in
        volumes at the Majestic Properties and Fitzgeralds Black Hawk, and lower
        table
        games and slot win percentages at Fitzgeralds Tunica.
 
 Consolidated
        food and beverage revenues increased $2.7 million to $6.9 million in the
        current
        quarter, primarily due to increases of $2.1 million at the Majestic Properties
        and $0.6 million at Fitzgeralds Tunica. The increase at the Majestic Properties
        results from taking over and improving the food and beverage operations in
        the
        Buffington Harbor pavilion. The increase at Fitzgeralds Tunica is a result
        of
        increased direct mail food coupons redeemed by our customers.
 
 During
        the third quarter of 2007, promotional allowances, which are deducted from
        gross
        operating revenues to arrive at net revenues, decreased $4.9 million to $12.4
        million from $17.3 million in the same quarter last year. The decrease is
        primarily due to a significant reduction in the amount of cash coupons mailed
        to
        and redeemed by our customers at the Majestic Properties and Fitzgeralds
        Tunica,
        which resulted in a decrease of $4.3 million and $0.7 million, respectively.
        The
        Majestic Properties realigned their direct mail efforts and cutback on a
        majority of the less profitable promotional efforts that were utilized in
        the
        prior year.
 
 In
        the
        three-month period ended September 30, 2007, as compared to the same three-month
        period last year, operating costs and expenses increased by $4.5 million.
        Operating expenses were up $1.8 million at the Majestic Properties, primarily
        as
        a result of greater casino and food and beverage expenses, partially offset
        by
        lower gaming tax expenses, and $2.2 million at Fitzgeralds Tunica, primarily as
        a result of greater casino, and advertising and promotional expenses. Operating
        costs and expenses increased $0.5 million at corporate primarily due to the
        reduction of professional fee accruals in the prior year.
  As
        a
        result of a $3.5 million increase in net revenues, due to the $1.4 million
        decrease in gross revenues and $4.9 million decrease in promotional allowances,
        and the $4.5 million increase in operating expenses, operating income declined
        by $1.0 million. Additionally, interest expense increased $0.3 million,
        resulting in an increase of consolidated net loss by $1.3 million.
   ***Consolidated
        Operating Results: Nine Months Ended September 30, 2007 Compared to the Nine
        Months Ended September 30, 2006***
 
 Consolidated
        gross operating revenues increased $0.9 million, or 0.3%, to $315.8 million
        in
        the nine-month period ended September 30, 2007 from $314.8 million in the
        nine-month period ended September 30, 2006. The increase is due to higher
        gross
        revenues at the Majestic Properties of $7.6 million, partially offset by
        lower
        gross revenues at Fitzgeralds Tunica and Fitzgeralds Black Hawk of $4.5 million
        and $2.2 million, respectively.
  27
 **Table
            of Contents**
  
 Consolidated
        casino revenues, which comprised 89.1% of consolidated gross revenues, decreased
        $7.3 million, or 2.5%, to $281.3 million, in the nine-month period ended
        September 30, 2007, from $288.7 million in the similar period last year.
        The
        decline is due to lower slot coin-in volumes at the Majestic Properties and
        Fitzgeralds Black Hawk, lower table games and slot win percentages at
        Fitzgeralds Tunica and the utilization of downloadable promotional credits.
 
 Consolidated
        food and beverage revenues increased $7.2 million to $19.7 million, primarily
        due to a $6.3 million increase at the Majestic Properties. Again, the improved
        food and beverage revenues at the Majestic Properties resulted from our taking
        over and improving the restaurant operations in the Buffington Harbor
        pavilion.
 
 During
        the nine-month period ended September 30, 2007, promotional allowances, which
        are deducted from gross operating revenues to arrive at net revenues, decreased
        $1.7 million to $41.3 million from $43.0 million in the same period last
        year.
        The decrease is due to a significant reduction in cash coupons mailed to
        and
        redeemed by customers of our Fitzgeralds Tunica properties. The net reduction
        in
        promotional allowances at Fitzgeralds Tunica was $4.7 million. This was offset
        by a $3.1 million increase in promotional allowances at the Majestic Properties.
        During the third quarter ended September 30, 2007, the Majestic Properties
        realigned their direct mail efforts and cutback on the majority of less than
        profitable promotional efforts utilized during the first half of the year.
        This
        helped reduce the effect of the first six-month increase in promotional expenses
        as the third quarter reflected a decline from the prior period of $4.3 million,
        as discussed above.
 
 In
        the
        nine-month period ended September 30, 2007, as compared to the same nine-month
        period last year, operating costs and expenses increased by $12.4 million.
        Operating expenses were up $8.1 million at the Majestic Properties, primarily
        as
        a result of greater casino and food and beverage expenses, partly offset
        by a
        decrease in general and administrative and depreciation and amortization
        expenses. Operating expenses increased $4.8 million at Fitzgeralds Tunica,
        primarily as a result of greater casino, advertising and promotional and
        depreciation expenses. Operating costs and expenses declined $0.7 million
        at
        Fitzgeralds Black Hawk and increased $0.2 million at corporate.
  As
        a
        result of a $2.6 million increase in net revenues, due to the $0.9 million
        increase in gross revenues and $1.7 million decrease in promotional allowances,
        and the $12.4 million increase in operating expenses, operating income decreased
        by $9.8 million. The decline in operating income combined with a $1.2 million
        increase in interest expense results in a $10.9 million increase in consolidated
        net loss.
 
 
 **OTHER
        DEVELOPMENTS THAT MAY IMPACT OUR OPERATIONS AND CASH FLOWS**
 
 ·
            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, which can negatively impact cash
                flows
                and operating margins.  ·
            Enhancements
                to existing casino facilities of our competitors and new casino facilities
                that have recently opened or are scheduled to open in 2008 will increase
                the level of competition our Majestic Properties experience in northwest
                Indiana. See “Increased Competition in Chicagoland Market” under Part II,
                Item 1A below. 
 ·
            Customers
                of our Fitzgeralds Black Hawk casino may be inconvenienced due to
                the
                construction and expansion activities at this property, despite
                management’s attempt to minimize any impact felt by
                customers. 
 ·
            Our
                Fitzgeralds Tunica property continues to experience significant
                fluctuations in both slot and table games win percentages. We anticipate
                that the fluctuations will continue until we reach a point where
                we have a
                large enough database of higher stake gamblers to smooth out significant
                wins and losses.  28
 **Table
            of Contents**
  ·
            The
                Company’s ability to undertake significant property remodel and expansion
                projects in order to remain competitive in its markets is contingent
                upon
                its ability to successfully acquire the necessary financing to undertake
                these projects. The Company, under the terms of the indentures governing
                its outstanding notes and the loan and security agreement governing
                its
                Senior Secured Credit Facility, must meet certain financial ratios
                before
                incurring any additional debt. Given the Company’s current and past
                financial performance, the ability of the Company to incur additional
                debt, under its existing indentures and loan and security agreement
                is
                limited. 
 ·
            An
                unfavorable resolution to the substantially increased real property
                assessments for the Majestic Properties, retroactive to March 1,
                2006
                could result in $4.0 million and $3.6 million of additional property
                tax
                expense, for the periods March 1, 2006 to December 31, 2006 and January
                1,
                2007 to September 30, 2007, respectively, assuming no change to the
                historical property tax rate. The Company has not accrued for and
                has
                challenged the assessments as unsupportable. See our discussion in
                Part
                II, Item 1, Legal Proceedings, Majestic Star Real Property Assessment
                Appeals.  **Operating
        Results by Entity**
 
 For
                  The Three Months Ended
              
              For
                  The Nine Months EndedSeptember
                  30,
              
              September
                  30,2007
              
              2006
              
              2007
              
              2006(in
                  thousands)Gross
                  revenues:Majestic
                  Properties
              
              
              
              
              $
              64,433
              
              $
              64,763
              
              $
              207,693
              
              $
              200,107Fitzgeralds
                  Tunica
              
              
              
              
              
              28,273
              
              
              28,693
              
              
              80,360
              
              
              84,857Fitzgeralds
                  Black Hawk
              
              
              
              
              
              9,511
              
              
              10,208
              
              
              27,715
              
              
              29,867Total
              
              
              
              
              $
              102,217
              
              $
              103,664
              
              $
              315,768
              
              $
              314,831Net
                  revenues:Majestic
                  Properties
              
              
              
              
              $
              59,054
              
              $
              55,041
              
              $
              185,142
              
              $
              180,616Fitzgeralds
                  Tunica
              
              
              
              
              
              22,718
              
              
              22,426
              
              
              65,645
              
              
              65,395Fitzgeralds
                  Black Hawk
              
              
              
              
              
              8,083
              
              
              8,923
              
              
              23,667
              
              
              25,854Total
              
              
              
              
              $
              89,855
              
              $
              86,390
              
              $
              274,454
              
              $
              271,865Casino
                  revenues:Majestic
                  Properties
              
              
              
              
              $
              58,888
              
              $
              61,587
              
              $
              191,159
              
              $
              190,791Fitzgeralds
                  Tunica
              
              
              
              
              
              22,340
              
              
              23,692
              
              
              64,358
              
              
              69,955Fitzgeralds
                  Black Hawk
              
              
              
              
              
              8,835
              
              
              9,561
              
              
              25,815
              
              
              27,921Total
              
              
              
              
              $
              90,063
              
              $
              94,840
              
              $
              281,332
              
              $
              288,667Operating
                  income (loss):Majestic
                  Properties
              
              
              
              
              $
              6,667
              
              $
              4,420
              
              $
              26,033
              
              $
              29,559Fitzgeralds
                  Tunica
              
              
              
              
              
              1,427
              
              
              3,289
              
              
              4,303
              
              
              8,875Fitzgeralds
                  Black Hawk
              
              
              
              
              
              1,824
              
              
              2,717
              
              
              4,939
              
              
              6,447Corporate
                  (1)
              
              
              
              
              
              (1,753
              )
              
              (1,273
              )
              
              (5,285
              )
              
              (5,045
              )Total
              
              
              
              
              $
              8,165
              
              $
              9,153
              
              $
              29,990
              
              $
              39,836Operating
                  margin (2):Majestic
                  Properties
              
              
              
              
              
              11.3
              %
              
              8.0
              %
              
              14.1
              %
              
              16.4
              %Fitzgeralds
                  Tunica
              
              
              
              
              
              6.3
              %
              
              14.7
              %
              
              6.6
              %
              
              13.6
              %Fitzgeralds
                  Black Hawk
              
              
              
              
              
              22.6
              %
              
              30.4
              %
              
              20.9
              %
              
              24.9
              %Total
              
              
              
              
              
              9.1
              %
              
              10.6
              %
              
              10.9
              %
              
              14.7
              %Expenditure
                  for additions to long-lived assets:Majestic
                  Properties
              
              
              
              
              $
              1,251
              
              $
              1,984
              
              $
              5,779
              
              $
              4,911Fitzgeralds
                  Tunica
              
              
              
              
              
              1,088
              
              
              4,651
              
              
              6,699
              
              
              5,988Fitzgeralds
                  Black Hawk
              
              
              
              
              
              6,062
              
              
              2,412
              
              
              10,728
              
              
              3,602Corporate
              
              
              
              
              
              372
              
              
              3
              
              
              420
              
              
              126Total
              
              
              
              
              $
              8,773
              
              $
              9,050
              
              $
              23,626
              
              $
              14,627
 
 Notes:
 (1)
              Corporate
                  expenses reflect payroll, benefits, travel and other costs associated
                  with
                  our corporate staff and are not allocated to the
                  properties.(2)
              Operating
                  margin is calculated by dividing operating income by net
                  revenues.
 29
 **Table
            of Contents**
  ***Property
        Operating Results: September 30, 2007 Compared To September 30,
        2006***
 
 
 **Majestic
        Properties**
 
 Net
        revenues for the quarter ended September 30, 2007 were $59.1 million compared
        to
        $55.0 million in the same period in 2006, an increase of $4.0 million, or
        7.3%.
        Casino revenues, which made up 91.4% of the gross revenues, were $58.9 million,
        a decrease of $2.7 million, or 4.4%, compared to $61.6 million in the prior
        year. The decrease in casino revenues resulted from utilization of downloadable
        promotional credits and lower slot coin-in, partially offset by an increase
        in
        table games and poker revenues of 33.1%. Table games handle increased 22.3%
        and the win percentage increased 1.4%. Food and beverage revenues were $3.1
        million in the third quarter of 2007 compared to $1.0 million in the same
        quarter last year, an increase of $2.1 million as a result of the Majestic
        Properties taking over and improving the food and beverage operations in
        the
        Buffington Harbor pavilion during the first quarter of 2007. Promotional
        allowances, which are deducted from gross revenues when computing net revenues,
        declined by $4.3 million due to a significant reduction of the amount of
        cash
        coupons mailed and redeemed by our customers, as previously
        discussed.
 
 For
        the
        quarter ended September 30, 2007, operating income was $6.7 million compared
        to
        $4.4 million in the prior year quarter, an increase of $2.3 million. The
        increase was the result of our higher net revenues offset by an increase
        of $1.8
        million in operating costs and expenses. Casino expense increased $1.4 million,
        primarily due to an increase in the cost of complimentary meals provided
        to
        casino customers, payroll and slot equipment lease expense. Food and beverage
        expenses increased $1.2 million due to the above mentioned take over and
        improvement of the Buffington Harbor food and beverage operations. Gaming
        taxes
        decreased $0.8 million due to lower casino revenues.
 
 Net
        revenues for the nine-month period ended September 30, 2007 were $185.1 million
        compared to $180.6 million in the same period in 2006, an increase of $4.5
        million, or 2.5%. Casino revenues, which made up 92.0% of the gross revenues,
        were $191.2 million, an increase of $0.4 million, or 0.2%, compared to $190.8
        million in the prior year. The increase in casino revenues at the Majestic
        Properties resulted from an increase in table game and poker revenues of
        19.0%,
        partially offset by the utilization of downloadable promotional credits and
        lower slot coin-in. Food and beverage revenues were $9.4 million in the current
        nine-month period compared to $3.1 million in the same nine-month period
        last
        year, an increase of $6.3 million as a result of the Majestic Properties
        taking
        over and improving the food and beverage operations in the Buffington Harbor
        pavilion. Promotional allowances increased $3.1 million due to greater emphasis
        earlier in the year toward providing cash promotions, complimentary food
        and
        beverages to attract and build customer loyalty.
 
 For
        the
        nine-month period ended September 30, 2007, operating income was $26.0 million
        compared to $29.6 million in the prior year, a decrease of $3.6 million.
        The
        decrease was due to our higher net revenues offset by an $8.1 million increase
        in operating costs and expenses. Casino expense increased $4.9 million,
        primarily due to an increase in the cost of complimentary meals provided
        to
        casino customers, payroll and slot equipment lease expense. Food and beverage
        expenses increased $2.9 million due to our taking over and improving the
        Buffington Harbor food and beverage operations. The Majestic Properties is
        also
        reflecting a loss on sale and write down of slot machines of $0.8 million,
        which
        occurred in the second quarter.
 
 
 **Fitzgeralds
        Tunica**
 
 Net
        revenues for the quarter ended September 30, 2007 were $22.7 million compared
        to
        $22.4 million in the same period in 2006, an increase of $0.3 million, or
        1.3%.
        Casino revenues, which made up 79.0% of the gross revenues, were $22.3 million,
        a decrease of $1.4 million, or 5.7%, compared to $23.7 million in the prior
        year. Table game revenues decreased $0.5 million as a result of a 3.2% decrease
        in table game hold percentage. Slot revenues were reduced due to the utilization
        of downloadable promotional credits, which was partially offset by a 4.4%
        increase in slot coin-in. The decline in casino revenues was partially offset
        by
        an increase in food and beverage revenues of $0.6 million, due to increased
        redemption of direct mail buffet coupons by our customers. Promotional allowances declined by $0.7 million, primarily due to a significant
        reduction in our direct mail cash coupon program, which was partially offset
        by
        greater levels of providing complimentary food and hotel rooms provided to
        our
        casino customers.
  30
 **Table
            of Contents**
  
 For
        the
        quarter ended September 30, 2007, operating income was $1.4 million compared
        to
        $3.3 million in the prior year quarter, a decrease of $1.9 million. A $2.2
        million increase in operating costs and expenses offset the increase in net
        revenues contributing to the decrease in operating income. Casino expenses
        increased $1.1 million due to an increase in the cost of food and room
        complimentaries and bad debt expense. Advertising and promotional expenses
        increased $0.8 million due to increased junket, guest transportation and
        player
        development costs. In addition, depreciation expense increased $0.5 million
        as a
        result of the purchase of slot machines and equipment, and completion of
        the
        phased hotel remodeling project.
 
 Net
        revenues for the nine-month period ended September 30, 2007 were $65.6 million
        compared to $65.4 million in the same period in 2006, an increase of $0.2
        million, or 0.4%. Casino revenues, which made up 80.1% of gross revenues,
        were
        $64.4 million, a decrease of $5.6 million, or 8.0%, compared to $70.0 million
        in
        the prior year. Slot revenues decreased $5.3 million due to utilization of
        downloadable promotional credits. Also impacting casino revenues is a much
        lower
        win percentage in table games. While table games handle is up 17.5% for the
        year, a 3.2% reduction in the win percentage is resulting in a $0.3 million
        decline in table games revenues. The decrease in casino revenues was partially
        offset by an increase in food and beverage revenues of $0.9 million, due
        to
        increased redemption of direct mail buffet coupons to our casino customers.
        Promotional allowances declined by $4.7 million, which results from the
        significant reduction in our direct mail cash coupon program, offset by greater
        levels of complimentary food and hotel rooms provided to our casino
        customers.
 
 For
        the
        nine-month period ended September 30, 2007, operating income was $4.3 million
        compared to $8.9 million in the prior year period, a decrease of $4.6 million.
        An increase of $4.8 million in operating costs and expenses contributed to
        the
        decline in operating income. Casino expenses increased $1.6 million due to
        an
        increase in the cost of food and room complimentaries and bad debt expense.
        Advertising and promotional expenses increased $2.7 million due to increased
        junket, guest transportation and player development costs. In addition,
        depreciation expense increased $1.5 million as a result of the purchase of
        slot
        machines and equipment, and completion of the phased hotel remodeling project.
        Gaming taxes decreased $0.6 million due to the decrease in casino revenues.
   **Fitzgeralds
        Black Hawk**
 
 Net
        revenues for the quarter ended September 30, 2007 were $8.1 million at
        Fitzgeralds Black Hawk compared to $8.9 million in 2006, a decrease of $0.8
        million, or 9.4%. Casino revenues, which made up 92.9% of gross revenues,
        were
        $8.8 million, a decrease of $0.8 million, or 7.6%, compared to $9.6 million
        in
        the prior year. The decrease in casino revenues resulted from a decrease
        in slot
        coin-in of 8.9%. Revenues were negatively impacted by improved facilities
        and
        greater levels of marketing from our competitors and guest inconveniences
        resulting from our casino expansion project.
 
 For
        the
        quarter ended September 30, 2007, operating income was $1.8 million compared
        to
        $2.7 million in the prior year quarter, a decrease of $0.9 million, or 32.9%.
        The decline in operating income is the result of our lower casino revenues
        as
        expenses have remained consistent with the prior year period.
 
 Net
        revenues for the nine-month period ended September 30, 2007 were $23.7 million
        compared to $25.9 million in the prior year period, a decrease of $2.2 million,
        or 8.5%. Casino revenues, which made up 93.1% of the gross revenues, were
        $25.8
        million, a decrease of $2.1 million, or 7.5%, compared to $27.9 million in
        the
        prior year. The decrease in casino revenues resulted from a 12.7% decrease
        in
        slot coin-in, which was partially offset by an increase in slot hold percentage
        of 0.3%. Revenues were negatively impacted by the factors mentioned above,
        along
        with poor weather and road construction earlier in the year.
 
 For
        the
        nine-month period ended September 30, 2007, operating income was $4.9 million
        compared to $6.4 million in the prior year period, a decrease of $1.5 million,
        or 23.4%. The decline in operating income resulted from our reduced casino
        revenues; however, this was somewhat mitigated by a $0.7 million decline
        in
        operating costs and expenses, mostly due to lower casino expenses and gaming
        taxes.
  31
 **Table
            of Contents**
  
 **Corporate**
 
 Corporate
        operating expense for the quarterly and nine-month periods ended September
        30,
        2007 and 2006 were $1.8 million and $1.3 million, respectively, and $5.3
        million
        and $5.0 million, respectively. Corporate operating expenses reflect payroll,
        benefits, travel and other costs associated with our corporate staff and
        are not
        allocated to the properties. The third quarter of 2006 benefited from the
        reduction of accrued professional fees, thus contributing to lower quarterly
        expense. The same benefit was not recognized in the third quarter of
        2007.
   **Other
        income (expense)**
 
 Other
        expense increased by $0.3 million to $15.2 million for the quarter end September
        30, 2007 and by $1.1 million to $45.7 million for the nine-month period ended
        September 30, 2007, when compared to the same prior year periods. The main
        component of other expense is interest expense, which increased $0.3 million
        and
        $1.2 million, respectively, in the three- and nine-month periods ended September
        30, 2007 as compared to the prior year periods, due to higher interest rates
        and
        greater average amounts outstanding on our credit facility during the 2007
        periods as compared to the prior year periods. The accretion of the Discount
        Notes added $0.2 million and $0.6 million, respectively, in additional interest
        expense.
 
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 To
        date,
        we have financed our operations with internal cash flows from our operations
        and
        borrowings under the Senior Secured Credit Facility. We generate substantial
        cash flows from operating activities. In the nine months ended September
        30,
        2007 and 2006, we reported cash flows from operating activities of $36.5
        million
        and $37.7 million, respectively. We use our cash flows to meet our financial
        obligations, which consist principally of servicing our debt, funding capital
        improvements and making tax distributions to BDI.
 
 The
        Company has significant debt outstanding, including $41.5 million drawn on
        its
        Senior Secured Credit Facility ($38.5 million available to draw), $300.0
        million
        of Senior Secured Notes, $200.0 million of Senior Notes and $0.2 million
        of
        capital leases and other debt at September 30, 2007. As a result of the
        significant interest associated with our debt obligations and lower than
        anticipated financial performance, in the past, the Company has needed to
        amend
        the financial covenants of the Senior Secured Credit Facility in order to
        avoid
        a covenant violation under the Senior Secured Credit Facility (see discussion
        below).
 
 In
        2007,
        in addition to servicing the Company’s significant debt obligations, the Company
        plans to spend a total of approximately $34.4 million on property improvements.
        Included in the $34.4 million are the completed Fitzgeralds Tunica hotel
        remodel project and equipment purchases, which primarily consist of slot
        machines. Also included in the $34.4 million is the Fitzgeralds Black Hawk
        expansion and re-building of the Rohling Inn, which is anticipated to cost
        $19.0
        million in 2007 and a total of $31.9 million overall (see discussion below).
        The
        Company also made tax distributions to its manager in the second quarter
        of 2007
        of $2.2 million for resolution of an IRS audit and Indiana income taxes,
        and
        will need to make additional tax distributions based upon the state and federal
        taxable income generated by the Company.
 
 The
        Company faces significant competition in each of its markets. In addition,
        in
        the market in which our Majestic Properties compete, a new facility opened
        in
        August 2007 and another is scheduled to open in the fall of 2008. These new
        and
        improved facilities could have a negative impact on the operating cash flows
        generated by our Majestic Properties and the Company. If operating cash flows
        are not at a level to support the Company’s debt service obligations, planned
        capital expenditures, including the Fitzgeralds Black Hawk expansion, and
        tax
        and manager distributions, the Company will need to draw on its Senior Secured
        Credit Facility or seek other forms of financing. There is no guarantee that
        such financing would be available to the Company on reasonable terms, if
        at all,
        and the Company’s ability to incur additional debt is restricted by the terms of
        the Senior Secured Credit Facility and the indentures governing our outstanding
        Senior Secured Notes and Senior Notes. The Company may, therefore, be required
        to modify the scope or timing of its planned capital
        expenditures.
  32
 **Table
            of Contents**
  
 The
        Company will be required to pay any amounts outstanding on the Senior Secured
        Credit Facility, plus accrued interest thereon, in April 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 for such
        purposes.
 
 The
        Company had unrestricted cash and cash equivalents of $31.1 million at September
        30, 2007. The Company does not hold excess cash in its bank accounts. Any
        excess
        cash is used to pay down the Senior Secured Credit Facility. In the first
        nine
        months of 2007, we spent approximately $23.6 million for the purchase of
        slot
        machines, upgrading the Fitzgeralds Tunica hotel and other remodeling projects,
        the Fitzgeralds Black Hawk expansion and
        various remodeling and improvement projects at the Majestic Properties,
        including improvements to the restaurant operations within the Buffington
        Harbor
        pavilion.
 
 Fitzgeralds
        Black Hawk is expanding its facility by rebuilding the Masonic Building and
        Rohling Inn properties, as a part of a major casino expansion. To date the
        project is approximately 60% complete. Management expects the casino expansion
        to cost approximately $31.9 million, including the reconstruction of the
        Masonic
        Building and Rohling Inn and the purchase of associated gaming equipment
        and
        other furniture and fixtures. A portion of the costs to re-build the Rohling
        Inn
        will be covered by insurance. At this time, the insurance company has yet
        to
        determine how much of the reconstruction is covered under the Company’s policy,
        but has paid the Company $1.4 million against the claim. The Company is allowed,
        pursuant to the terms of the Senior Secured Credit Facility, to spend $25.0
        million on the Fitzgeralds Black Hawk expansion. Any amounts spent in excess
        of
        $25.0 million would come out of the allowable annual capital expenditures,
        as
        specified in the Senior Secured Credit Facility, of $25.0 million in 2007
        and
        $30.0 million in 2008. The Fitzgeralds Black Hawk expansion will be funded
        by
        cash flow from operations and advances from the Senior Secured Credit
        Facility.
 
 The
        Company is exploring the opportunity to replace its two existing gaming vessels
        in Gary, Indiana with two single-level gaming vessels. Management believes,
        with
        the new and improved casinos that have opened recently or are planned to
        open in
        its Indiana market, such vessels may be necessary to remain competitive.
        The two
        existing gaming vessels are multi-level, which makes it more difficult for
        guests to move about the casinos and less efficient for the Company in operating
        these casinos, as opposed to single-level casinos. While no specific cost
        has
        been established on developing two single-level gaming vessels, any financing
        would not be permitted by the covenants contained within the Company’s Senior
        Secured Credit Facility and the indentures governing the Senior Secured Notes
        and Senior Notes. Thus, to build two single-level gaming vessels would require
        a
        significant equity infusion from our member or a partner, or other alternative
        financing.
 
 In
        the
        past the Company had made distributions to fund its member’s income tax
        liabilities and the Company anticipates that it will make future distributions.
        The indentures governing the Senior Secured Notes and the Senior Notes and
        the
        loan and security agreement for the Senior Secured Credit Facility allow
        for
        distributions to our member 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 related to the add back of gross wagering tax
        when
        computing Indiana state income tax, plus interest, could have a material
        impact
        on the Company’s liquidity in the period that the taxes are paid, if any, and to
        the extent that the Company makes distributions to its member for tax purposes
        related to such resolution.
 
 The
        purchase of certain gaming facilities by larger more recognized brand names
        or
        the expansion of gaming in jurisdictions in which gambling is already legal
        (or
        currently illegal) could significantly increase competition for the Company
        and
        thereby require additional investment by the Company in its facilities, gaming
        devices and marketing efforts. If necessary, and to the extent permitted
        under
        the indentures governing the Senior Secured Notes and Senior Notes, the Company
        would seek additional financing through borrowings of debt or equity financing,
        subject to any governmental approvals. There can be no assurance that additional
        financing, if needed, will be available to the Company or that, if available,
        the financing will be on terms favorable to the Company.
  33
 **Table
            of Contents**
   **Credit
        Facility Amendments**
 
 On
        March 15, 2007, the Company entered into Amendment Seven to the Senior
        Secured Credit Facility. Amendment Seven modifies the Company’s minimum EBITDA
        requirement for each of the twelve-month periods ended March 31, 2007,
        June 30, 2007 and September 30, 2007, to $65.0 million, modifies the
        minimum EBITDA requirement for each of the 12-month periods ended
        December 31, 2007, March 31, 2008 and June 30, 2008, to $70.0 million,
        and modifies the minimum EBITDA requirement to $72.0 million and $74.0 million
        for each of the 12-month periods ended September 30, 2008 and
        December 31, 2008. Amendment Seven also modifies the Company’s interest
        coverage ratio requirement for each of the 12-month periods ended March 31,
        2007, June 30, 2007, September 30, 2007, December 31, 2007, March
        31, 2008 and June 30, 2008, to 1.20:1.0, and modifies the interest coverage
        ratio requirement to 1.25:1.0 for each of the 12-month periods ended
        September 30, 2008 and December 31, 2008.
 
 The
        Company was in compliance with the financial covenants contained in the Senior
        Secured Credit Facility at September 30 ,
        2007.
 
 
 **CRITICAL
        ACCOUNTING POLICIES**
 
 A
        description of our critical accounting policies is included in Item 7 of
        our
        Annual Report on Form 10-K for the year ended December 31, 2006. There has
        been
        no material change to these policies for the three- or nine-months ended
        September 31, 2007.
 
 **RECENTLY
        ISSUED ACCOUNTING PRONOUNCEMENTS**
  The
        Company keeps abreast of new generally accepted principles and disclosure
        reporting requirements issued by the SEC and other standard setting agencies.
        Recently issued accounting standards which may affect the financial results
        are
        noted in Note 3 of the Notes to Condensed Consolidated Financial Statements.
 
 
 **CONTRACTUAL
        COMMITMENTS**
 
 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,
        2006.
 
 
 
 **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,
        2006.
 
 
 **Item
                4T.**
              **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.
  34
 **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 over financial reporting
        during the quarter ended September 30, 2007 that have materially affected,
        or
        are reasonably likely to materially affect, the Company's internal controls
        over
        financial reporting.
 
  35
 **Table
            of Contents**
  **PART
        II****OTHER
        INFORMATION**
   **Item
                1.**
              **Legal
                Proceedings.**
 
 Information
        regarding legal proceedings appears in Part I - Item 3 of our Annual Report
        on
        Form 10-K for the fiscal year ended December 31, 2006, Part II - Item 1 of
        our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
        2007
        and June 30, 2007 and Note 5 to the Condensed Consolidated Financial Statements
        included herein.
 
 Anti-trust
        litigation.As we
        have previously disclosed in our Annual Report on Form 10-K for the year
        ended
        December 31, 2006, in June 2003, a complaint was filed in the U.S. District
        Court for the Northern District of Mississippi (“District Court”) 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. On August 13, 2007 the Court of Appeals reversed the
        District Court’s Order granting summary judgment in favor of the defendants, and
        remanded the case to the District Court. As the Court of Appeals ruling left
        open the option for defendants to renew their motion for summary judgment
        with
        the District Court, on October 25, 2007 the defendants again filed for summary
        judgment. While the Company intends to continue to vigorously defend the
        matter,
        the plaintiff and defendants are in the process of scheduling mediation.
        In the
        event that the defendants do not prevail in their renewed motion for summary
        judgment, or the matter is not otherwise resolved through mediation, the
        District Court will set the matter for trial in 2008. At this time, it is
        too early to determine the outcome of this mediation or litigation and the
        effect, if any, on the Company's financial position and results of
        operations.
  Majestic
        Star Real Property Assessment Appeals. The
        Company received notices of assessment dated July 20, 2007 from the Calumet
        Township (City of Gary, Indiana) Assessor updating the assessed valuation
        of the
        Company's real property, retroactive to March 1, 2006. These included notices
        that the property tax assessments of the Majestic Star and Majestic Star
        II
        vessels were to be increased by 166.2% and 184.1%, respectively.  Under
        Indiana law, licensed gaming vessels are assessed as real property. 
Without a commensurate reduction in the historical tax rate on real property,
        the combined increase in real property tax expense for the Majestic Star
        and
        Majestic Star II vessels alone would be $4.0 million for the period March
        1,
        2006 through December 31, 2006, and $3.6 million for the period January 1,
        2007
        through September 30, 2007.  The actual tax rate for 2007 has not yet been
        determined, and no property tax bills have yet been received. The Company
        believes that the new assessed valuations for the Majestic Star and Majestic
        Star II vessels are excessive and unsupportable and as a result, the Company
        has
        not established any reserves.  On September 4, 2007, the Company initiated
        administrative appeals of the vessels' assessments.  While the appeals are
        pending, the Company will pay tax based on the prior year's assessed values,
        as
        permitted by Indiana law.
   ****Item
                1A.****
              **Risk
                Factors.**
 Information
        regarding risk factors appears in Part I - Item 1A of our Annual Report on
        Form
        10-K for the fiscal year ended December 31, 2006. The following risk
        factors reflect certain material changes from the risks previously disclosed
        in
        our Annual Report on Form 10-K:
   **Increased
        Competition in Chicagoland Market**
  On
        August
        2, 2007, the Pokagon band of Potawatomi Indians opened the Four Winds Casino
        Resort in New Buffalo, Michigan. The Four Winds has increased competition
        in the
        Chicagoland area and has impacted our business.
  On
        September 19, 2007, Ameristar Casinos, Inc. acquired from Resorts
        International Holdings, LLC its subsidiary that owns and operates Resorts
        East
        Chicago. Ameristar has announced that it intends to make a number of major
        capital improvements to Resorts East Chicago. It intends to significantly
        expand
        the gaming facilities, improve access to the casino, build additional structured
        parking and upgrade the non-gaming amenities. While we cannot determine what
        effect this will have on our future operations in the Chicagoland market,
        it may
        have a significant impact on how we operate our business to remain competitive.
  36
 **Table
            of Contents**
  
 Harrah’s
        Entertainment, Inc. is constructing a two-level entertainment vessel including
        a
        108,000 square-foot casino to expand the Horseshoe Casino Hammond in Indiana.
        The project is scheduled for completion in the fall of 2008. While we cannot
        determine what effect this will have on our future operations in the Chicagoland
        market, it may have a significant impact on how we operate our business to
        remain competitive.
   **Increased
        Competition in the Black Hawk Market**
 
 Competitors
        in the Black Hawk market continue to develop and expand their properties,
        bring
        new amenities and additional gaming capacity to the market. Fitzgeralds Black
        Hawk is currently expanding its casino facility to provide a new restaurant
        and
        400 additional slots (see related discussion regarding Black Hawk construction
        projects below). With new competitor amenities and gaming positions coming
        on
        line, gamblers, including the customers of Fitzgeralds Black Hawk, will have
        more choices as to room accommodations, restaurants and casino games. Competitor
        amenities and gaming positions could impact the financial performance of
        our
        Fitzgeralds Black Hawk casino operation.
   **Higher
        energy costs**
 
 Due
        to
        the recent increase in energy prices, there is a greater risk that our patrons
        will have less discretionary income due to higher fuel costs. Customers may
        also
        be less likely to travel or may be more likely to reduce the number of trips
        to
        our casinos.
   **Fitzgeralds
        Black Hawk construction projects**
 
 If
        there
        is a shortfall in the insurance proceeds we expect to receive for the rebuilding
        of the Rohling Inn, we will need to reallocate our capital expenditure budget
        to
        cover these costs in order to stay within the capital expenditures limitation
        defined in our loan covenants. This will limit our ability to implement other
        planned expenditures at our properties.
   **Item
                5.**
              **Other
                Information.**  In
          lieu
          of filing a Current Report on Form 8-K pursuant to Item 1.01 thereof, Entry
          into
          a Material Definitive Agreement, the Company is providing the required
          disclosures, within the time period specified in General Instruction B
          to Form
          8-K, in this Report.
 
 On
          November 6, 2007, the Company entered into an Expense Reimbursement/Sharing
          Agreement (the “PITG Expense Sharing Agreement”) with PITG Gaming, LLC, a
          Delaware limited liability company, an indirectly owned subsidiary of BDI.
          A
          description of the material terms of the PITG Expense Sharing Agreement
          is set
          forth in Note 6 to the Consolidated Financial Statements in Item 1 of this
          Report and is incorporated herein by reference. The description of the
          material
          terms is qualified in its entirety by reference to the full text of the
          PITG
          Expense Sharing Agreement, which is filed as Exhibit 10.1 hereto and is
          incorporated herein by reference.
  37
 **Table
            of Contents**
  
 ****Item
                6.****
              **Exhibits.**
 
 (a)
            The
                following exhibits are filed as part of this
                report: 
 **Exhibit
                  No.**
              
              **Description
                  of Document**10.1*
              
              Expense
                Reimbursement Sharing Agreement, dated November 6, 2007, by and
                between the Majestic Star Casino, LLC and PITG Gaming,
                LLC.31.1*
              
              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*
              
              Certification
                  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.*
              Filed
                  herewith.
 
 
 
  38
 **Table
            of Contents**
   **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, 2007THE
                  MAJESTIC STAR CASINO, LLC*/s/
                  Don H. Barden*Don
                  H. BardenChairman,
                  President and Chief Executive Officer(Duly
                  Authorized Officer and 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(Duly
                  Authorized Officer and 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. II/*s/
                  Don H. Barden*Don
                  H. BardenPresident
                  and Chief Executive Officer(Duly
                  Authorized Officer and Principal Executive Officer)*/s/Jon
                  S. Bennett*Jon
                  S. BennettVice
                  President and Chief Financial Officer(Principal
                  Financial and Accounting Officer)
 
 
 S-1