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Majestic Investor Capital Corp, et al. – ‘10-Q’ for 6/30/03

On: Thursday, 8/14/03, at 4:31pm ET · For: 6/30/03 · Accession #: 950134-3-11879 · File #s: 333-81584, -04

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/14/03  Majestic Investor Capital Corp    10-Q        6/30/03    4:129K                                   RR Donnelley
          Majestic Investor Holdings LLC

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      40    212K 
 2: EX-31.1     Certification of Chief Executive Officer               2±     8K 
 3: EX-31.2     Certification of Chief Financial Officer               2±     8K 
 4: EX-32       Certification Pursuant to 18 U.S.C. Section 1350       1      7K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Consolidated Financial Statements Controls and Procedures Exhibits and Reports on Form 8-K Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk
1	1st Page - Filing Submission
2	Item 1. Consolidated Financial Statements
8	Legal Proceedings
23	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
37	Item 3. Quantitative and Qualitative Disclosures About Market Risk
"	Item 4. Controls and Procedures
"	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 40 TOC ↑Top Previous Next ↓Bottom Just 1st
 
 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 JUNE 30, 2003

or

[ ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)              
OF THE SECURITIES EXCHANGE ACT OF 1934

 Commission file number: 333-81584

DELAWARE                  MAJESTIC INVESTOR HOLDINGS, LLC         36-4468392    

DELAWARE                  MAJESTIC INVESTOR CAPITAL CORP.         36-4471622    

(State or other         (Exact name of registrant as           (I.R.S. Employer 
jurisdiction of           specified in its charter)          Identification No.)
incorporation or                                                                
organization)                                                                   
 ONE BUFFINGTON HARBOR DRIVE
 GARY, INDIANA
46406-3000
(219) 977-7823

(Address of principal executive offices 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 an accelerated filer (as       
defined in Rule 12b-2 of the Act)                                               

Yes             No   X                                                          
-----          -----                                                    

As of June 30, 2003, shares outstanding of each of the registrant's classes of  
common stock:                                                                   

Class                               Number of shares                            
-----                               ----------------                            
NOT APPLICABLE                      NOT APPLICABLE                              

10-Q 2nd Page of 40 TOC 1st Previous Next ↓Bottom Just 2nd
 MAJESTIC INVESTOR HOLDINGS, LLC

 INDEX

PART I       FINANCIAL INFORMATION                                      PAGE NO.
                                                                        --------

Item 1.  Consolidated Financial Statements                              

Consolidated Balance Sheets as of June 30, 2003       
          (Unaudited) and December 31, 2002                              1

Consolidated Statement of Operations for the three and
          six months ended June 30, 2003 and 2002 (Unaudited)            2

 Consolidated Statement of Cash Flows for the six months
          ended June 30, 2003 and 2002 (Unaudited)                       3

          Notes to Financial Statements                                  4

Item 2.  Management's Discussion and Analysis of Financial              
          Condition and Results of Operations                           21

 Item 3.  Quantitative and Qualitative Disclosures About Market Risk    35

 Item 4.  Controls and Procedures                                       35

PART II      OTHER INFORMATION                                                  

 Item 1.  Legal Proceedings                                             35

 Item 6.  Exhibits and Reports on Form 8-K                              35

 SIGNATURES                                                             37

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PART I FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS                                       

 MAJESTIC INVESTOR HOLDINGS, LLC
 CONSOLIDATED BALANCE SHEETS
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                   JUNE 30,    DECEMBER 31,
                                                                     2003          2002    
                                                                 ------------  ------------
                                                                                           
ASSETS                                                                                     
Current Assets:                                                                            

    Cash and cash equivalents                                    $ 16,134,826  $ 15,983,824

    Restricted cash                                                   500,000       250,000

    Accounts receivable, net of allowance for doubtful accounts                            
        of $154,877  and $239,066 as of June 30, 2003 and                                  
        December 31, 2002, respectively                             1,074,068     1,241,183

    Inventories                                                       895,892       929,126

    Prepaid expenses                                                1,595,652     1,644,735

    Note receivable from related party                                      -       700,000

    Other                                                              43,683        39,133
                                                                 ------------  ------------
                Total current assets                               20,244,121    20,788,001
                                                                 ------------  ------------

Property, equipment and improvements, net                         115,542,992   117,297,506

Intangible assets, net                                             16,894,246    17,691,746

Goodwill                                                            5,922,398     5,922,398

Other Assets:                                                                              

    Deferred financing costs, net of accumulated amortization                              
        of $2,104,474 and $1,407,041 as of June 30, 2003 and                               
        December 31, 2002, respectively                             6,019,807     6,714,902

    Restricted cash                                                 1,000,000     1,000,000

    Other assets, prepaid leases and deposits                       1,688,076     1,624,359
                                                                 ------------  ------------
                Total other assets                                  8,707,883     9,339,261
                                                                 ------------  ------------

                Total Assets                                     $167,311,640  $171,038,912
                                                                 ============  ============

LIABILITIES AND MEMBER'S  EQUITY                                                           

Current Liabilities:                                                                       

    Current maturities of long-term debt                         $     81,224  $    134,084

    Accounts payable                                                1,114,287     2,136,369

    Other accrued liabilities:                                                             

        Payroll and related                                         5,787,712     5,949,275

        Interest                                                    1,473,786     1,473,785

        Progressive jackpots                                        2,398,650     2,476,543

        Slot club liability                                           781,091       738,559

        Other accrued liabilities                                   3,471,667     4,401,378
                                                                 ------------  ------------
                Total current liabilities                          15,108,417    17,309,993
                                                                 ------------  ------------
Long-term debt, net of current maturities                                                  
                                                                  146,239,106   145,646,514
                                                                 ------------  ------------

                Total Liabilities                                 161,347,523   162,956,507

Commitments and contingencies                                                              

Member's Equity:                                                    5,964,117     8,082,405
                                                                 ------------  ------------
                Total Liabilities and Member's Equity            $167,311,640  $171,038,912
                                                                 ============  ============

The accompanying notes are an integral part of these
consolidated financial statements.

1 

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 MAJESTIC INVESTOR HOLDINGS, LLC
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                       FOR THE THREE MONTHS ENDED JUNE 30,  FOR THE SIX MONTHS ENDED JUNE 30,
                                              2003              2002              2003              2002     
                                          ------------      ------------      -------------    ------------- 
                                                                                                             
REVENUES:                                                                                                    
     Casino                               $ 39,541,474      $ 40,426,341      $  78,977,181    $  82,781,092 

     Rooms                                   3,584,913         3,938,875          7,383,698        8,027,386 

     Food and beverage                       4,754,847         4,886,744          9,615,787        9,982,845 

     Other                                     832,638           977,512          1,633,476        1,866,002 
                                          ------------      ------------      -------------    ------------- 

          Gross revenues                    48,713,872        50,229,472         97,610,142      102,657,325 

          Less promotional allowances       (5,544,430)       (5,754,298)       (11,161,541)     (11,877,753)
                                          ------------      ------------      -------------    ------------- 

          Net revenues                      43,169,442        44,475,174         86,448,601       90,779,572 
                                          ------------      ------------      -------------    ------------- 

COSTS AND EXPENSES:                                                                                          

     Casino                                 16,611,988        17,275,399         32,170,706       35,301,558 

     Rooms                                   1,641,287         1,863,809          3,187,183        3,632,309 

     Food and beverage                       2,564,150         2,943,591          5,062,350        5,713,709 

     Other                                     410,449           396,601            820,057          775,255 

     Gaming taxes                            4,459,307         4,779,074          9,034,620        9,798,828 

     Advertising and promotion               3,292,534         3,654,138          6,543,953        6,950,674 

     General and administrative              7,044,355         6,652,717         13,482,048       12,813,917 

     Depreciation and amortization           3,708,554         3,493,150          7,362,014        6,880,165 

     Pre-opening expenses                            -             6,103                  -           13,390 
                                          ------------      ------------      -------------    ------------- 

          Total costs and expenses          39,732,624        41,064,582         77,662,931       81,879,805 
                                          ------------      ------------      -------------    ------------- 

          Operating income                   3,436,818         3,410,592          8,785,670        8,899,767 
                                          ------------      ------------      -------------    ------------- 

OTHER INCOME (EXPENSE):                                                                                      

     Interest income                            11,202            30,196             34,145           61,804 

     Interest expense                       (4,426,995)       (4,593,471)        (8,855,085)      (9,108,858)

     Gain (loss) on sale of assets               9,961            (5,964)            24,961              578 

     Other non-operating expense                (9,421)           (9,883)           (18,900)         (27,375)
                                          ------------      ------------      -------------    ------------- 
          Total other expense               (4,415,253)       (4,579,122)        (8,814,879)      (9,073,851)
                                          ------------      ------------      -------------    ------------- 

          Net loss                        $   (978,435)     $ (1,168,530)     $     (29,209)   $    (174,084)
                                          ============      ============      =============    ============= 


The accompanying notes are an integral part of these
consolidated financial statements.

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 MAJESTIC INVESTOR HOLDINGS, LLC
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)

                                                        [Enlarge/Download Table]


                                                               FOR THE SIX MONTHS ENDED JUNE 30,
                                                                     2003             2002      
                                                                -------------    -------------  
                                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES:                                                           
Net loss                                                        $     (29,209)   $    (174,084) 
Adjustments to reconcile net loss to net cash provided by                                       
operating activities:                                                                           
      Depreciation                                                  5,232,958        4,810,511  
      Amortization                                                  2,129,056        2,069,654  
      Gain on sale of assets                                          (24,961)            (578) 
Changes in operating assets and liabilities:                                                    
      Decrease  in accounts receivable                                167,115          340,435  
      Decrease in inventories                                          33,233           43,289  
      Decrease (increase) in prepaid expenses                          49,083         (657,752) 
      (Increase) decrease  in other assets                            (68,269)         285,901  
      Decrease in accounts payable                                 (1,022,082)        (664,656) 
      (Increase) decrease  in amounts due to related parties,                                   
      net                                                              29,197          (17,983) 
      (Decrease) increase  in accrued payroll and related                                       
      expenses                                                       (181,564)         108,543  
      Increase in accrued interest                                          -          287,025  
      Decrease  in other accrued liabilities                         (974,264)        (150,582) 
                                                                -------------    -------------  
          Net cash provided by operating activities                 5,340,293        6,279,723  

CASH FLOWS FROM INVESTING ACTIVITIES:                                                           
      Increase in restricted cash                                    (250,000)        (250,000) 
      Acquisition of property, equipment and  improvements         (3,487,472)      (2,734,791) 
      Payment of acquisition related costs                                  -         (986,158) 
      Proceeds from seller from purchase price adjustment                   -        3,800,000  
      Proceeds from sale of equipment                                  33,989           33,867  
                                                                -------------    -------------  
          Net cash used in investing activities                    (3,703,483)        (137,082) 
                                                                -------------    -------------  

CASH FLOWS FROM FINANCING ACTIVITIES:                                                           
      Proceeds from line of credit                                          -        2,500,000  
      Repayment of line of credit                                           -       (7,007,565) 
      Payment of 11.653% Senior Secured Notes issuance costs           (2,337)      (1,084,355) 
      Cash paid to reduce long-term debt                              (94,392)         (65,140) 
      Repayment of loan to Barden Development, Inc.                   700,000                -  
      Distribution to Barden Development, Inc.                     (2,089,079)      (1,065,542) 
                                                                -------------    -------------  
          Net cash  used in financing activities                   (1,485,808)      (6,722,602) 
                                                                -------------    -------------  
Net  increase (decrease) in cash and cash equivalents                 151,002         (579,961) 
Cash and cash equivalents, beginning of period                     15,983,824       17,704,815  
                                                                -------------    -------------  
Cash and cash equivalents, end of period                        $  16,134,826    $  17,124,854  
                                                                =============    =============  

INTEREST PAID:                                                                                  
      Equipment Debt                                            $       8,787    $       8,361  
      Senior Secured Notes - Fixed Interest 11.653%                 8,842,704        8,707,126  
      Line of credit                                                       94           98,168  
                                                                -------------    -------------  
Total                                                           $   8,851,585    $   8,813,655  
                                                                =============    =============  


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.

3 

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MAJESTIC INVESTOR HOLDINGS, LLC 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  ORGANIZATION AND BASIS OF PRESENTATION                                 

       Majestic Investor Holdings, LLC (the "Company") is a Delaware limited
liability company formed on September 14, 2001. The Company owns and operates   
three Fitzgeralds brand casinos through its wholly-owned subsidiaries, Barden   
Mississippi Gaming, LLC or Fitzgeralds Tunica, Barden Colorado Gaming, LLC or   
Fitzgeralds Black Hawk and Barden Nevada Gaming, LLC or Fitzgeralds Las Vegas,  
each of which is a "restricted subsidiary" of the Company under the Indenture   
relating to the Company's 11.653% Senior Secured Notes (the "Notes"). Majestic  
Investor Capital Corp. ("MICC"), another wholly-owned subsidiary of the Company,
was formed specifically to facilitate the offering of the Company's Notes and   
does not have any assets or operations.                                         

        The Company is a wholly-owned subsidiary of Majestic Investor, LLC and
an indirect wholly-owned subsidiary of The Majestic Star Casino, LLC ("Majestic 
Star"), owner and operator of the Majestic Star Casino, a riverboat casino      
located at Buffington Harbor in Gary, Indiana. The Company is indirectly        
wholly-owned and controlled by Don H. Barden, the Company's Member, Chairman,   
President and Chief Executive Officer.                                          

       Except where otherwise noted, the words "we," "us," "our" and similar
terms, as well as the "Company," refer to Majestic Investor Holdings, LLC and   
all of its subsidiaries.                                                        

      The accompanying consolidated financial statements are unaudited and
include the accounts of the Company and the guarantor subsidiaries: Barden      
Mississippi Gaming, LLC, Barden Colorado Gaming, LLC and Barden Nevada Gaming,  
LLC. MICC, a wholly-owned subsidiary of the Company, is a non-guarantor         
subsidiary. However, MICC does not have any assets, obligations or operations.  
All significant intercompany transactions and balances have been eliminated.    
These financial statements have been prepared in accordance with accounting     
principles generally accepted in the United States ("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 prepared in accordance with GAAP 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 amount 
of revenues and expenses during the reporting period. Significant estimates     
incorporated into our condensed financial statements include the estimated      
usefulness of depreciable and amortizable assets, the estimated allowance for   
doubtful accounts receivable, estimated cash flows in assessing the             
recoverability of long-lived assets, estimated liabilities for our self-insured 
medical plan, slot bonus 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 period have been made. The results for the three and six months 
ended June 30, 2003 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 Company's Annual
Report on Form 10-K for the year ended December 31, 2002.                       

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MAJESTIC INVESTOR HOLDINGS, LLC 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)                     

        The consolidated financial statements and footnotes for the prior year
reflect certain reclassifications to conform to the current year presentation,  
which has no effect on previously reported net income.                          

NOTE 2.  Recently Issued Accounting Pronouncements                              

In April 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 145 ("SFAS 145"). Among other   
matters, SFAS 145 addresses the presentation for gains and losses on early      
retirements of debt in the statement of operations. SFAS 145 is effective for   
fiscal years beginning after May 15, 2003. Adoption of SFAS 145 did not have a  
material impact on the Company's financial condition or results of operations.  

        In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure        
Requirements for Guarantees, Including Guarantees of Indebtedness of Others."   
FIN 45 elaborates on the disclosures to be made by a guarantor in its interim   
and annual financial statements about its obligations under certain guarantees  
that it has issued. It also clarifies (for guarantees issued after January 1,   
2003) that a guarantor is required to recognize at the inception of a guarantee,
a liability for the fair value of the obligations undertaken in issuing the     
guarantee. At June 30, 2003, the Company did not have any guarantees outside of 
its consolidated group. Adoption of FIN 45 did not have a material impact on the
Company's financial condition or results of operations.                         

       In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities."
FIN 46 addresses the requirements for business enterprises to consolidate       
related entities in which they are determined to be the primary economic        
beneficiary as a result of their variable economic interests. FIN 46 is intended
to provide guidance in judging multiple economic interest in an entity and in   
determining the primary beneficiary. FIN 46 outlines disclosure requirements for
Variable Interest Entities ("VIEs") in existence prior to January 31, 2003,     
and outlines consolidation requirement for VIEs created after January 31, 2003. 
The Company has reviewed its major relationships and its overall economic       
interests with other companies consisting of related parties, companies in which
it has an equity position and other suppliers to determine the extent of its    
variable economic interest in these parties. The review has not resulted in a   
determination that the Company would be judged to be the primary economic       
beneficiary in any material relationships, or that any material entities would  
be judged to be VIEs of the Company. The Company believes it has appropriately  
reported the economic impact and its share of risks of its commercial           
relationships through its equity accounting along with appropriate disclosure of
its commitments.                                                                

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MAJESTIC INVESTOR HOLDINGS, LLC 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3.  COMMITMENTS AND CONTINGENCIES                                          

Gaming Regulations                                                              

         The ownership and operation of our casino gaming facilities are subject
to various state and local laws and regulations in the jurisdictions where they 
are located. In Nevada, our gaming operations are subject to the Nevada Gaming  
Control Act, and to the licensing and regulatory control of the Nevada Gaming   
Commission, the Nevada State Gaming Control Board and various local ordinances  
and regulations, including, without limitation, applicable city and county      
gaming and liquor licensing authorities. In Mississippi, our gaming operations  
are subject to the Mississippi Gaming Control Act, and to the licensing and/or  
regulatory control of the Mississippi Gaming Commission, the Mississippi State  
Tax Commission and various state and local regulatory agencies, including liquor
licensing authorities. In Colorado, our gaming operations are subject to the    
Limited Gaming Act of 1991, which created the Division of Gaming within the     
Colorado Department of Revenue and the Colorado Limited Gaming Control          
Commission to license, implement, regulate and supervise the conduct of limited 
gaming. Our operations are also subject to the Colorado Liquor Code and the     
state and local liquor licensing authorities. In addition, as Majestic Star does
business in the State of Indiana, the Company is subject to certain reviews by  
the Indiana Gaming Commission.                                                  

       Pursuant to new legislation signed into law by the Governor of Nevada
on July 23, 2003, the license fees on the number of gaming devices operated has 
been increased effective immediately, the tax on gross revenues will be         
increased effective on August 1, 2003, and the range of events covered by the   
casino entertainment tax will be expanded effective September 1, 2003.          
Fitzgeralds Las Vegas will also become subject to a payroll tax based on the    
wages paid to its employees effective October 1, 2003.                          

        In addition, in Colorado a statewide ballot measure has been announced
which would allow the installation of up to five hundred video lottery terminals
at each of five designated dog and horse racetracks along Colorado's front      
range. Proponents of the initiative have submitted the necessary signatures for 
the measure to appear on the November 2003 ballot and the Colorado secretary of 
state is reviewing the validity of those signatures; however, we are unable to  
predict whether such referendum will actually appear on the November ballot. If 
the measure does appear on the ballot, and if installation of the video lottery 
terminals is approved, our operations in Black Hawk could be adversely affected.

   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 of 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.                                                           

Legal Proceedings                                                               

        On December 17, 2002, a complaint was filed in the U.S. District Court
for the Northern District of Mississippi against Fitzgeralds Tunica and the     
former owner of Fitzgeralds Tunica, alleging among certain state law claims,    
violation of Title VII of the Civil Rights Act of 1964 and violation of 42      
U.S.C. Section 1981. The plaintiff is seeking back pay, front pay,              

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MAJESTIC INVESTOR HOLDINGS, LLC 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3.  COMMITMENTS AND CONTINGENCIES (CONTINUED)                              

compensatory damages and punitive damages in excess of $3 million. The Company  
intends to vigorously defend the lawsuit. However, it is too early to determine 
the outcome of this matter and the effect, if any, on the Company's financial   
position and results of operations.                                             

        On June 27, 2003, a complaint was filed in the U.S. District Court for
the Northern District of Mississippi against several Tunica-area casino owners  
and operators, including Fitzgeralds Tunica. The plaintiffs claim that the      
defendants conspired to agree not to enter into any advertising or other        
agreements with the plaintiffs, in violation of federal and state antitrust     
laws, as well as various other tort and contract claims. The plaintiffs are     
seeking treble, compensatory and punitive damages totaling approximately $33.0  
million, plus interest and attorney's fees. The Company intends to vigorously   
defend against this lawsuit. However, it is too early to determine the outcome  
and the effect, if any, on the Company's financial position and results of      
operations.                                                                     

       Various legal proceedings are pending against the Company. Management
considers all such pending proceedings, comprised primarily of personal injury  
and equal employment opportunity (EEO) claims, to be routine litigation         
incidental to the Company's business. 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 or results of operations.           

Other Contingencies                                                             

       The Company received assessments of additional amounts due related to
insurance premiums paid for the period December 6, 2001 through December 6,     
2002. These premiums, totaling $160,000, relate to an audit by the insurance    
carrier of our workers compensation and general liability plans. The Company had
the right to dispute the audit. The Company exercised its right. The Company is 
disputing the payroll numbers used in the audit and the use of a new higher     
rated labor category in calculating workers compensation premiums. This category
was not used when the premiums were originally estimated. The Company has not   
established an accrual for the assessment.                                      

NOTE 4.  RESTRICTED CASH                                                        

         At June 30, 2003 and December 31, 2002, restricted cash of $1.0 million
represents U.S. Treasury Notes held in an escrow account for the benefit of     
certain owners of land leased to Fitzgeralds Las Vegas. Also, at December 31,   
2002, restricted cash of $250,000 at the Company represents a letter of credit  
for self-insured workers compensation at Fitzgeralds Tunica and Fitzgeralds     
Black Hawk. At June 30, 2003, this amount has been increased to $500,000 when   
Fitzgeralds Las Vegas was added to the self-insured workers compensation        
program.                                                                        

NOTE 5.  INTANGIBLE ASSETS                                                      

Intangible assets primarily include $9.8 million for customer 
relationships, $3.7 million for tradename and $5.2 million for gaming licenses. 
Intangible assets for customer relationships and tradenames are being amortized 
over a period of 8-10 years. In accordance with SFAS 142, goodwill, and other   
indefinite lived intangible assets, such as the Company's gaming license, are   
not amortized but instead are subject to impairment tests at least annually.    

         The gross carrying amount and accumulated amortization of the Company's
intangible assets, other than goodwill, as of June 30, 2003, are as follows:    

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MAJESTIC INVESTOR HOLDINGS, LLC 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5. INTANGIBLE ASSETS (CONTINUED)                                           

                                                        [Enlarge/Download Table]


                                Gross Carrying    Accumulated       Net Amount         
                                    Amount       Amortization     June 30, 2003        
                                --------------  --------------   --------------        
                                (in thousands)  (in thousands)   (in thousands)        

                                                                                       
Amortized intangible assets:                                                           

Customer relationships          $        9,800  $       (1,926)    $      7,874   8 yrs

Tradename                                3,700            (580)           3,120  10 yrs

Riverboat excursion license                700               -              700  15 yrs
                                --------------  --------------   --------------        

Total                                   14,200          (2,506)          11,694        
                                --------------  --------------   --------------        

Unamortized intangible assets:                                                         

Gaming license                           5,200               -            5,200        
                                --------------  --------------   --------------        

Total                                    5,200               -            5,200        
                                --------------  --------------   --------------        

Total intangible assets         $       19,400  $       (2,506)    $     16,894        
                                ==============  ==============     ============        


    The amortization expense recorded on the intangible assets for the
three and six month periods ended June 30, 2003 and 2002 were both $0.4 million 
and $0.8 million, respectively.                                                 

NOTE 6.  GOODWILL                                                               

      The carrying amount of goodwill as of June 30, 2003 and December 31,
2002 was approximately $5,922,000. Goodwill is not amortized but instead subject
to impairment tests at least annually.                                          

NOTE 7.  LONG -- TERM DEBT                                                      

        On December 6, 2001, the Company and MICC, as co-issuer, issued $152.6
million of Notes due 2007. The net proceeds of $145,000,400 from the offering,  
together with an equity contribution from our member, were utilized to complete 
the acquisition of the Fitzgeralds properties.                                  

      The Notes bear interest at a fixed rate of 11.653% per annum payable
May 31 and November 30 each year, commencing May 31, 2002. Substantially all of 
the Company's current and future assets other than certain excluded assets are  
pledged as collateral. The Notes rank senior in right of payment to any of the  
Company's subordinated indebtedness and equally with any of the Company's senior
indebtedness.                                                                   

8 

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 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7.  LONG -- TERM DEBT (CONTINUED)                                          

         In connection with the issuance by the Company and MICC of $152,632,000
of unregistered 11.653% Senior Secured Notes due 2007 (the "Unregistered Notes")
on December 6, 2001, the Company entered in a registration rights agreement     
pursuant to which the Company agreed to file with the Securities and Exchange   
Commission ("SEC") a registration statement (the "Registration Statement") to   
exchange up to $152,632,000 principal amount of 11.653% Senior Secured Notes due
2007 registered under the Securities Act of 1933 (the "Registered Notes") for   
any and all of its outstanding Unregistered Notes. The registration rights      
agreement requires the Company to pay liquidated damages to the holders of the  
Unregistered Notes if the Registration Statement was not declared effective by  
the SEC on or prior to April 5, 2002. The Registration Statement was declared   
effective by the SEC on August 8, 2002 and the Company was required to pay      
liquidated damages pursuant to the terms of the registration rights agreement   
for the period from April 6, 2002 until August 8, 2002, at an amount per week   
per $1,000 principal amount of Registrable Securities equal to $0.05 for the    
first 90-day period following April 5, 2002, increasing by an additional $0.05  
per week with respect to each subsequent 90-day period, up to a maximum amount  
of $0.20 per week. On May 31, 2002, in connection with the first scheduled      
interest payment on the Unregistered Notes, the Company made its initial        
liquidated damages payment of $61,053 to the holders of the Unregistered Notes. 
The final liquidated damages payment of $114,474 was paid to the holders of the 
Unregistered Notes with the scheduled interest payment on November 30, 2002.    
Pursuant to the Registration Statement, the offer to exchange the Registered    
Notes for any or all of the Unregistered Notes commenced on August 8, 2002 and  
was completed on September 6, 2002.                                             

        On or after November 30, 2005, the Company has the right to redeem the
Notes from time to time at a price that will decrease over time from 105.827% of
the principal amount in 2005 to 100% of the principal amount in 2006, plus, in  
each case, accrued and unpaid interest. Prior to November 30, 2004, the Company 
may, at its option, apply part of the net proceeds from certain equity          
offerings, as defined, to redeem up to 35% of the principal amount of the Notes 
at 111.653% of their face amount, plus accrued and unpaid interest.             

      The Indenture contains covenants, which among other things, restrict
the Company's ability to (i) make certain distributions and payments, (ii) incur
additional indebtedness, (iii) enter into transactions with affiliates, (iv)    
sell assets or stock, and (v) merge, consolidate or transfer substantially all  
of its assets.                                                                  

        During 2002, the Company purchased for $759,037, plus accrued interest
Notes with a face value of $865,000. The Notes, net of unamortized original     
issue discount, were being carried at value of $827,994. The resulting gain was 
$68,957.                                                                        

Credit Facility                                                                 

        On December 6, 2001, the Company established a $15.0 million four-year
credit facility. The credit facility is collateralized by substantially all of  
the Company's current and future assets, other than the excluded assets. The    
lien on the collateral securing the Company's credit facility is senior to the  
lien on the collateral securing the Notes. The credit facility also contains    
financial covenants and restrictions on, among other things, indebtedness,      
investments, distributions and                                                  

9 

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 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. LONG -- TERM DEBT (CONTINUED)                                           

mergers. The interest rate can be at the Company's choice of LIBOR plus 2.0%, or
the base rate, which approximates the prime.                                    

Intercreditor Agreement                                                         

       In connection with the Company entering into its credit facility, the
trustee under the indenture (as collateral agent) entered into an intercreditor 
agreement with Wells Fargo Foothill, Inc. as the lender under the Company's     
credit facility, which, among other things, subordinates the liens securing     
the Notes to the liens securing the indebtedness under the Majestic Investor    
Holdings, LLC Credit Facility ("Holdings Credit Facility").                     

       The intercreditor agreement, among other things, limits the trustee's
rights in an event of default under the Notes. Under the intercreditor          
agreement, if the Notes become due and payable prior to the stated maturity or  
are not paid in full at the stated maturity at a time during which we have      
indebtedness outstanding under the Holdings Credit Facility, the trustee will   
not have the right to foreclose upon the collateral unless and until the lenders
under the Holdings Credit Facility fail to take steps to exercise remedies with 
respect to or in connection with the collateral within 180 days following notice
to such lenders of the occurrence of an event of default under the indenture. In
addition, the intercreditor agreement prevents the trustee and the holders of   
the Notes from pursuing remedies with respect to the collateral in an insolvency
proceeding. The intercreditor agreement also provides that the net proceeds from
the sale of collateral will first be applied to repay indebtedness outstanding  
under the Holdings Credit Facility and thereafter to the holders of the Notes.  

NOTE 8.  SEGMENT INFORMATION                                                    

         The Company owns and operates three properties as follows: a casino and
hotel located in downtown Las Vegas, Nevada; a casino and hotel located in      
Tunica, Mississippi; and a casino located in Black Hawk, Colorado (collectively,
the "Properties").                                                              

The Company identifies its business in three segments based on
geographic location. The Properties, in each of their segments, market primarily
to middle-income guests, emphasizing their Fitzgeralds brand and their          
"Fitzgerald Irish Luck" theme. The major products offered in each segment are as
follows: casino, hotel rooms (except in Black Hawk, Colorado) and food and      
beverage.                                                                       

        The accounting policies of each business segment are the same as those
described in the summary of significant accounting policies previously described
in the Company's Annual Report on Form 10-K for the year ended December 31,     
2002. There are minimal inter-segment sales. Corporate costs are allocated to   
the business segment through management fees and are reflected in "General and  
Administrative" expense.                                                        

     A summary of the Properties' operations by business segment for the
three and six months ended June 30, 2003 and June 30, 2002 is presented below:  

10

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 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8.  SEGMENT INFORMATION (CONTINUED)                                        

                                                        [Enlarge/Download Table]

                                          As of and for the Three Months Ended     As of and for the Six Months Ended  
                                          June 30, 2003          June 30, 2002    June 30, 2003          June 30, 2002 
                                         --------------         --------------   --------------         -------------- 
                                         (In thousands)         (In thousands)   (In thousands)         (In thousands) 
                                                                                                                       
Net revenues:                                                                                                          

         Fitzgeralds Tunica              $       22,688         $       23,574   $       45,654         $       47,922 

         Fitzgeralds Black Hawk                   8,535                  8,313           16,450                 17,275 

         Fitzgeralds Las Vegas                   11,946                 12,588           24,345                 25,583 
                                         --------------         --------------   --------------         -------------- 
                   Total                 $       43,169         $       44,475   $       86,449         $       90,780 
                                         --------------         --------------   --------------         -------------- 

Income (loss) from operations:                                                                                         

         Fitzgeralds Tunica              $        2,891         $        3,310   $        7,439         $        7,939 

         Fitzgeralds Black Hawk                   1,559                  1,530            2,790                  2,788 

         Fitzgeralds Las Vegas                     (325)                  (659)             (89)                  (419)

         Unallocated and other (1)                 (688)                  (770)          (1,354)                (1,408)
                                         --------------         --------------   --------------         -------------- 
                   Total                 $        3,437         $        3,411   $        8,786         $        8,900 
                                         --------------         --------------   --------------         -------------- 

Segment depreciation and                                                                                               
amortization                                                                                                           

         Fitzgeralds Tunica              $        1,928         $        1,835   $        3,833         $        3,615 

         Fitzgeralds Black Hawk                     412                    364              823                    727 

         Fitzgeralds Las Vegas                      703                    648            1,374                  1,265 

         Unallocated and other (1)                  666                    646            1,332                  1,273 
                                         --------------         --------------   --------------         -------------- 
                   Total                 $        3,709         $        3,493   $        7,362         $        6,880 
                                         --------------         --------------   --------------         -------------- 

Expenditures for additions to long-lived                                                                               
assets:                                                                                                                

         Fitzgeralds Tunica              $        1,529         $          983   $        1,795         $        1,496 

         Fitzgeralds Black Hawk                     523                    335              772                    439 

         Fitzgeralds Las Vegas                      372                    245              920                    800 
                                         --------------         --------------   --------------         -------------- 
                   Total                 $        2,424         $        1,563   $        3,487         $        2,735 
                                         --------------         --------------   --------------         -------------- 

Segment assets:                                                                                                        

         Fitzgeralds Tunica                                                      $       85,475         $       92,495 

         Fitzgeralds Black Hawk                                                          30,146                 30,943 

         Fitzgeralds Las Vegas                                                           37,457                 45,709 

         Unallocated and other (1)                                                      153,865                162,140 
                                                                                 --------------         -------------- 
                   Total                                                                306,943                331,287 

         Less:  Intercompany                                                           (139,631)              (153,723)
                                                                                 --------------         -------------- 
                   Total                                                         $      167,312         $      177,564 
                                                                                 --------------         -------------- 

(1) Unallocated and other include corporate items and eliminations that are not 
allocated to the operating segments.                                    

11

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 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9.  RELATED PARTY TRANSACTIONS                                             

On September 19, 2001, the Company entered into an LLC Manager
Agreement with Barden Development, Inc. ("BDI"), which was amended and restated 
effective December 6, 2001, pursuant to which BDI acts as the Manager of the    
Company. Distribution of profits to BDI are limited by the Indenture for the    
Notes for any fiscal quarter and shall not exceed 1% of net revenues plus 5% of 
consolidated cash flow for the immediately preceding fiscal quarter, provided   
that the payment of such distributions shall be subordinated to the payment in  
full of principal, interest and liquidated damages, as defined, if any, then due
on the Notes. During the six months ended June 30, 2003, distributions of       
$1,751,000 related to the fourth quarter of 2002 and first quarter of 2003 were 
paid to BDI in accordance with the LLC Manager Agreement.                       

       In December 2001, the Company issued a $700,000 note to BDI. The note
bore interest at a rate of 7% per annum. The principal and accrued but unpaid   
interest were due and payable in full on December 12, 2002. The principal and   
accrued interest was paid on March 17, 2003.                                    

    In April 2003, the Company, as authorized by the Indenture for the
Notes, made a $338,000 distribution to it's sole member for income taxes. The   
calculation for the distribution was based on the Company's net income during   
the three-month period ended March 31, 2003.                                    

NOTE 10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION                           

  The Company's $151.8 million of 11.653% Senior Secured Notes are
unconditionally and irrevocably guaranteed, jointly and severally, by all of the
restricted subsidiaries of the Company. The guarantees rank senior in right of  
payment to all existing and future subordinated indebtedness of these restricted
subsidiaries and equal in right of payment with all existing and future senior  
indebtedness of these restricted subsidiaries.                                  

       The following consolidating information presents financial statements
as of June 30, 2003 and December 31, 2002 and for the three and six months ended
June 30, 2003 and 2002, of the Company, the guarantor subsidiaries and the      
elimination entries necessary to combine such entities on a consolidated basis. 
MICC, a wholly-owned subsidiary of the Company, is a non-guarantor subsidiary.  
However, MICC does not have any assets, obligations or operations. Therefore, no
non-guarantor subsidiary information has been presented.                        

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 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)               
CONSOLIDATING BALANCE SHEET AS OF JUNE 30, 2003                                 

                                                        [Enlarge/Download Table]

                                                     Barden       Barden      Barden                                      
                                                  Mississippi    Colorado     Nevada                                      
                                       Parent     Gaming, LLC  Gaming, LLC  Gaming, LLC    Eliminating                    
                                   Non-Guarantor   Guarantor    Guarantor    Guarantor       Entries          Consolidated
                                   -------------  -----------  -----------  -----------   -------------       ------------
                                                                                                                          
ASSETS                                                                                                                    

Current Assets:                                                                                                           

    Cash and cash equivalents       $  2,435,280  $ 7,287,884  $ 2,330,813  $ 4,080,849   $           -       $ 16,134,826

    Restricted cash                      500,000            -            -            -               -            500,000

    Accounts receivable (net)                  -      442,253       81,051      550,764               -          1,074,068

    Inventories                                -      391,357      216,956      287,579               -            895,892

    Prepaid expenses and other            81,418      345,475      224,105      988,337               -          1,639,335

    Receivable from related party        334,085        1,720            -        1,330        (337,135) (a)             -
                                    ------------  -----------  -----------  -----------   -------------       ------------
            Total current assets       3,350,783    8,468,689    2,852,925    5,908,859        (337,135)        20,244,121
                                    ------------  -----------  -----------  -----------   -------------       ------------

Property and equipment, net                    -   66,036,727   21,836,255   27,670,010               -        115,542,992

Intangible assets, net                 5,200,000    6,520,778    3,390,968    1,782,500               -         16,894,246

Goodwill                                       -    3,997,904    1,924,494            -               -          5,922,398

Other Assets:                                                                                                             

    Deferred financing costs, net      6,019,807            -            -            -               -          6,019,807

    Restricted cash                            -            -            -    1,000,000               -          1,000,000

    Due from related parties         109,173,530            -            -            -    (109,173,530) (a)             -

    Other assets and deposits                  -      450,616      141,361    1,096,099               -          1,688,076

    Investment in subsidiaries        30,120,472            -            -            -     (30,120,472) (b)             -
                                    ------------  -----------  -----------  -----------   -------------       ------------
            Total other assets       145,313,809      450,616      141,361    2,096,099    (139,294,002)         8,707,883
                                    ------------  -----------  -----------  -----------   -------------       ------------

            Total Assets            $153,864,592  $85,474,714  $30,146,003  $37,457,468   $(139,631,137)      $167,311,640
                                    ============  ===========  ===========  ===========   =============       ============

LIABILITIES AND MEMBER'S  DEFICIT                                                                                         

Current Liabilities:                                                                                                      

    Current maturities of                                                                                                 

    long-term debt                  $          -  $         -  $         -  $    81,224   $           -       $     81,224

    Accounts payable                           -      692,274      422,013            -               -          1,114,287

    Other accrued liabilities:                                                                                            

            Payroll and related                -    2,638,722    1,033,848    2,115,142               -          5,787,712

            Interest                   1,473,786            -            -            -               -          1,473,786

            Progressive jackpots               -      887,914    1,254,819      255,917               -          2,398,650

            Slot club liabilities              -      124,771      348,603      307,717               -            781,091

            Other accrued                                                                                                 
             liabilities                 261,117    1,993,095      372,600    1,181,991        (337,136) (a)     3,471,667
                                    ------------  -----------  -----------  -----------   -------------       ------------
            Total current                                                                                                 
             liabilities               1,734,903    6,336,776    3,431,883    3,941,991        (337,136)        15,108,417
                                    ------------  -----------  -----------  -----------   -------------       ------------

Due to related parties                         -   56,700,000   16,542,454   35,931,075    (109,173,529) (a)             -

Long-term debt, net of current                                                                                            
 maturities                          146,165,572            -            -       73,534               -        146,239,106
                                    ------------  -----------  -----------  -----------   -------------       ------------

            Total Liabilities        147,900,475   63,036,776   19,974,337   39,946,600    (109,510,665)       161,347,523

Member's  Equity                       5,964,117   22,437,938   10,171,666   (2,489,132)    (30,120,472) (b)     5,964,117
                                    ------------  -----------  -----------  -----------   -------------       ------------

    Total Liabilities and                                                                                                 
     Member's  Equity               $153,864,592  $85,474,714  $30,146,003  $37,457,468   $(139,631,137)      $167,311,640
                                    ============  ===========  ===========  ===========   =============       ============


(a) To eliminate intercompany receivables and                                   
payables.                                                               

(b) To eliminate intercompany accounts and investment in subsidiaries.          

13

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 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)               
CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2002                             

                                                        [Enlarge/Download Table]

                                                     Barden       Barden      Barden                                      
                                                  Mississippi    Colorado     Nevada                                      
                                       Parent     Gaming, LLC  Gaming, LLC  Gaming, LLC    Eliminating                    
                                   Non-Guarantor   Guarantor    Guarantor    Guarantor       Entries          Consolidated
                                   -------------  -----------  -----------  -----------   -------------       ------------
                                                                                                                          

ASSETS                                                                                                                    

Current Assets:                                                                                                           

    Cash and cash equivalents       $  1,007,660  $ 7,852,914  $ 2,727,644  $ 4,395,606   $           -       $ 15,983,824

    Restricted cash                      250,000            -            -            -               -            250,000

    Accounts receivable (net)             52,695      547,541       48,168      592,779               -          1,241,183

    Inventories                                -      426,658      183,439      319,029               -            929,126

    Prepaid expenses and other           125,620      420,317      161,487      976,444               -          1,683,868

    Receivable form related party      4,748,371       15,670            -        1,760      (4,765,801) (a)             -

    Note receivable from related                                                                                          
     party                               700,000            -            -            -               -            700,000
                                    ------------  -----------  -----------  -----------   -------------       ------------
            Total current assets       6,884,346    9,263,100    3,120,738    6,285,618      (4,765,801)        20,788,001
                                    ------------  -----------  -----------  -----------   -------------       ------------

Property and equipment, net                    -   67,655,754   21,646,773   27,994,979               -        117,297,506

Intangible assets, net                 5,200,000    6,939,404    3,634,842    1,917,500               -         17,691,746

Goodwill                                       -    3,997,904    1,924,494            -               -          5,922,398

Other Assets:                                                                                                             

    Deferred financing costs, net      6,714,902            -            -            -               -          6,714,902

    Restricted cash                            -            -            -    1,000,000               -          1,000,000

    Due from related parties         116,816,043            -            -            -    (116,816,043) (a)             -

    Other assets, prepaid lease                                                                                           
     and deposits                              -      450,616      141,363    1,032,380               -          1,624,359

    Investment in subsidiaries        19,959,009            -            -            -     (19,959,009) (b)             -
                                    ------------  -----------  -----------  -----------   -------------       ------------
            Total other assets       143,489,954      450,616      141,363    2,032,380    (136,775,052)         9,339,261
                                    ------------  -----------  -----------  -----------   -------------       ------------

            Total Assets            $155,574,300  $88,306,778  $30,468,210  $38,230,477   $(141,540,853)      $171,038,912
                                    ============  ===========  ===========  ===========   =============       ============

LIABILITIES AND MEMBER'S  DEFICIT                                                                                         

Current Liabilities:                                                                                                      

    Current maturities of                                                                                                 
     long-term debt                 $          -  $         -  $         -  $   134,084   $           -       $    134,084

    Accounts payable                           -      574,366      457,238    1,104,765               -          2,136,369

    Other accrued liabilities:                                                                                            

            Payroll and related                -    2,929,467      984,890    2,034,918               -          5,949,275

            Accrued interest           1,473,785            -            -            -               -          1,473,785

            Progressive jackpots               -      760,975    1,475,807      239,761               -          2,476,543

            Slot club liabilities              -      268,737      343,048      126,774               -            738,559

            Other accrued                                                                                                 
             liabilities                 486,662    2,258,123      965,151      691,442               -          4,401,378
                                    ------------  -----------  -----------  -----------   -------------       ------------
            Total current                                                                                                 
             liabilities               1,960,447    6,791,668    4,226,134    4,331,744               -         17,309,993
                                    ------------  -----------  -----------  -----------   -------------       ------------

Due to related parties                         -   66,543,493   18,864,947   36,173,404    (121,581,844) (a)             -

Long-term debt, net of current                                                                                            
 maturities                          145,531,448            -            -      115,066               -        145,646,514
                                    ------------  -----------  -----------  -----------   -------------       ------------

            Total Liabilities        147,491,895   73,335,161   23,091,081   40,620,214    (121,581,844)       162,956,507

Member's  Equity:                      8,082,405   14,971,617    7,377,129   (2,389,737)    (19,959,009) (b)     8,082,405
                                    ------------  -----------  -----------  -----------   -------------       ------------

    Total Liabilities and                                                                                                 
     Member's Equity                $155,574,300  $88,306,778  $30,468,210  $38,230,477   $(141,540,853)      $171,038,912
                                    ============  ===========  ===========  ===========   =============       ============

(a) To eliminate intercompany receivables and payables.                         

(b) To eliminate intercompany accounts and investment in subsidiaries.          

14

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 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)               
CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2003  

                                                        [Enlarge/Download Table]


                                                    BARDEN         BARDEN        BARDEN                                     
                                                  MISSISSIPPI     COLORADO       NEVADA                                     
                                       PARENT     GAMING, LLC   GAMING, LLC   GAMING, LLC    ELIMINATING                    
                                  NON-GUARANTOR    GUARANTOR     GUARANTOR     GUARANTOR       ENTRIES         CONSOLIDATED 
                                  -------------   -----------   -----------   -----------   -------------      ------------ 
                                                                                                                            
REVENUES:                                                                                                                   

  Casino                           $          -   $21,430,097   $ 8,773,386   $ 9,337,991   $           -      $ 39,541,474 

  Rooms                                       -     1,960,836             -     1,624,077               -         3,584,913 

  Food and beverage                           -     2,292,361       506,613     1,955,873               -         4,754,847 

  Other                                       -       355,725        64,494       412,419               -           832,638 
                                   ------------   -----------   -----------   -----------   -------------      ------------ 

    Gross revenues                            -    26,039,019     9,344,493    13,330,360               -        48,713,872 

    Less promotional allowances               -    (3,350,861)     (809,833)   (1,383,736)              -        (5,544,430)
                                   ------------   -----------   -----------   -----------   -------------      ------------ 

    Net revenues                              -    22,688,158     8,534,660    11,946,624               -        43,169,442 
                                   ------------   -----------   -----------   -----------   -------------      ------------ 

COSTS AND EXPENSES:                                                                                                         

  Casino                                      -     9,625,916     2,899,532     4,086,540               -        16,611,988 

  Rooms                                       -       660,398             -       980,889               -         1,641,287 

  Food and beverage                           -       692,629       265,982     1,605,539               -         2,564,150 

  Other                                       -       109,983       157,504       142,962               -           410,449 

  Gaming taxes                                -     2,365,428     1,372,942       720,937               -         4,459,307 

  Advertising and promotion                   -     1,452,453       625,558     1,214,523               -         3,292,534 

  General and administrative             22,687     2,961,635     1,242,489     2,817,544               -         7,044,355 

  Depreciation and amortization         665,819     1,928,336       411,700       702,699               -         3,708,554 
                                   ------------   -----------   -----------   -----------   -------------      ------------ 

    Total costs and expenses            688,506    19,796,778     6,975,707    12,271,633               -        39,732,624 
                                   ------------   -----------   -----------   -----------   -------------      ------------ 

    Operating income (loss)            (688,506)    2,891,380     1,558,953      (325,009)              -         3,436,818 
                                   ------------   -----------   -----------   -----------   -------------      ------------ 

OTHER INCOME (EXPENSE):                                                                                                     

  Interest income                         6,973         3,358             -           871               -            11,202 

  Interest expense                   (4,421,439)            -             -        (5,556)              -        (4,426,995)

  Gain on sale of assets                      -         5,700         4,261             -               -             9,961 

  Other non-operating expense            (9,421)            -             -             -               -            (9,421)

  Equity in net income of                                                                                                   
   subsidiaries                       4,133,958             -             -             -      (4,133,958)(a)             - 
                                   ------------   -----------   -----------   -----------   -------------      ------------ 

    Total other income (expense)       (289,929)        9,058         4,261        (4,685)     (4,133,958)       (4,415,253)
                                   ------------   -----------   -----------   -----------   -------------      ------------ 

    Net income (loss)              $   (978,435)  $ 2,900,438   $ 1,563,214   $  (329,694)  $  (4,133,958)     $   (978,435)
                                   ============   ===========   ===========   ===========   =============      ============ 


(a) To eliminate equity in net income of subsidiaries.                          

15

10-Q 18th Page of 40 TOC 1st Previous Next ↓Bottom Just 18th
 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)               
CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2002  

                                                        [Enlarge/Download Table]

                                                    BARDEN         BARDEN        BARDEN                                      
                                                  MISSISSIPPI     COLORADO       NEVADA                                      
                                       PARENT     GAMING, LLC   GAMING, LLC   GAMING, LLC    ELIMINATING                     
                                  NON-GUARANTOR    GUARANTOR     GUARANTOR     GUARANTOR       ENTRIES          CONSOLIDATED 
                                  -------------   -----------   -----------   -----------   -------------       ------------ 
                                                                                                                             
REVENUES:                                                                                                                    

  Casino                           $          -   $22,299,988   $ 8,556,874   $ 9,569,479   $           -       $ 40,426,341 

  Rooms                                       -     2,075,539             -     1,863,336               -          3,938,875 

  Food and beverage                           -     2,314,354       452,951     2,119,439               -          4,886,744 

  Other                                       -       385,403        58,654       533,455               -            977,512 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Gross revenues                            -    27,075,284     9,068,479    14,085,709               -         50,229,472 

    Less promotional allowances               -    (3,501,279)     (755,589)   (1,497,430)              -         (5,754,298)
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Net revenues                              -    23,574,005     8,312,890    12,588,279               -         44,475,174 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

COSTS AND EXPENSES:                                                                                                          

  Casino                                      -     9,863,864     2,734,007     4,677,528               -         17,275,399 

  Rooms                                       -       919,408             -       944,401               -          1,863,809 

  Food and beverage                           -       794,577       270,474     1,878,540               -          2,943,591 

  Other                                       -        82,759       158,928       154,914               -            396,601 

  Gaming taxes                                -     2,653,370     1,362,580       763,124               -          4,779,074 

  Advertising and promotion                   -     1,542,658       841,754     1,269,726               -          3,654,138 

  General and administrative            118,377     2,571,693     1,051,794     2,910,853               -          6,652,717 

  Depreciation and amortization         646,178     1,835,362       363,668       647,942               -          3,493,150 

  Pre-opening expenses                    6,103             -             -             -               -              6,103 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Total costs and expenses            770,658    20,263,691     6,783,205    13,247,028               -         41,064,582 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Operating income (loss)            (770,658)    3,310,314     1,529,685      (658,749)              -          3,410,592 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

OTHER INCOME (EXPENSE):                                                                                                      

  Interest income                        18,286         7,553         1,747         2,610               -             30,196 

  Interest expense                   (4,585,293)            -          (625)       (7,553)              -         (4,593,471)

  Loss on sale of assets                      -             -        (5,964)            -               -             (5,964)

  Other non-operating expense            (9,883)            -             -             -                             (9,883)

  Equity in net income of                                                                                                    
   subsidiaries                       4,179,018             -             -             -      (4,179,018) (a)             - 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 
    Total other income (expense)       (397,872)        7,553        (4,842)       (4,943)     (4,179,018)        (4,579,122)
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Net income  (loss)             $ (1,168,530)  $ 3,317,867   $ 1,524,843   $  (663,692)  $  (4,179,018)      $ (1,168,530)
                                   ============   ===========   ===========   ===========   =============       ============ 


(a) To eliminate equity in net income of subsidiaries.                          

16

10-Q 19th Page of 40 TOC 1st Previous Next ↓Bottom Just 19th
 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)               
CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003    

                                                        [Enlarge/Download Table]

                                                    BARDEN         BARDEN        BARDEN                                      
                                                  MISSISSIPPI     COLORADO       NEVADA                                      
                                       PARENT     GAMING, LLC   GAMING, LLC   GAMING, LLC    ELIMINATING                     
                                  NON-GUARANTOR    GUARANTOR     GUARANTOR     GUARANTOR       ENTRIES          CONSOLIDATED 
                                  -------------   -----------   -----------   -----------   -------------       ------------ 
                                                                                                                             

REVENUES:                                                                                                                    

  Casino                            $         -   $43,240,166   $16,887,347   $18,849,668   $           -       $ 78,977,181 

  Rooms                                       -     3,886,505             -     3,497,193               -          7,383,698 

  Food and beverage                           -     4,637,252       989,998     3,988,537               -          9,615,787 

  Other                                       -       657,846       126,740       848,890               -          1,633,476 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Gross revenues                            -    52,421,769    18,004,085    27,184,288               -         97,610,142 

    Less promotional allowances               -    (6,768,253)   (1,553,928)   (2,839,360)              -        (11,161,541)
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Net revenues                              -    45,653,516    16,450,157    24,344,928               -         86,448,601 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

COSTS AND EXPENSES:                                                                                                          

  Casino                                      -    18,530,793     5,469,104     8,170,809               -         32,170,706 

  Rooms                                       -     1,263,235             -     1,923,948               -          3,187,183 

  Food and beverage                           -     1,327,314       548,038     3,186,998               -          5,062,350 

  Other                                       -       191,201       328,457       300,399               -            820,057 

  Gaming taxes                                -     4,927,248     2,645,970     1,461,402               -          9,034,620 

  Advertising and promotion                   -     2,723,931     1,341,033     2,478,989               -          6,543,953 

  General and administrative             22,687     5,417,514     2,503,877     5,537,970               -         13,482,048 

  Depreciation and amortization       1,331,557     3,833,304       823,402     1,373,751               -          7,362,014 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Total costs and expenses          1,354,244    38,214,540    13,659,881    24,434,266               -         77,662,931 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Operating income (loss)          (1,354,244)    7,438,976     2,790,276       (89,338)              -          8,785,670 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

OTHER INCOME (EXPENSE):                                                                                                      

  Interest income                        25,271         6,645             -         2,229               -             34,145 

  Interest expense                   (8,842,799)            -             -       (12,286)              -         (8,855,085)

  Gain on sale of assets                      -        20,700         4,261             -               -             24,961 

  Other non-operating expense           (18,900)            -             -             -               -            (18,900)

  Equity in net income of                                                                                                    
   subsidiaries                      10,161,463             -             -             -     (10,161,463) (a)             - 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 
    Total other income (expense)      1,325,035        27,345         4,261       (10,057)    (10,161,463)        (8,814,879)
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Net income (loss)              $    (29,209)  $ 7,466,321   $ 2,794,537   $   (99,395)  $ (10,161,463)      $    (29,209)
                                   ============   ===========   ===========   ===========   =============       ============ 

(a) To eliminate equity in net income of subsidiaries.                          

17

10-Q 20th Page of 40 TOC 1st Previous Next ↓Bottom Just 20th
 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)               
CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2002  

                                                        [Enlarge/Download Table]

                                                    BARDEN         BARDEN        BARDEN                                      
                                                  MISSISSIPPI     COLORADO       NEVADA                                      
                                       PARENT     GAMING, LLC   GAMING, LLC   GAMING, LLC    ELIMINATING                     
                                  NON-GUARANTOR    GUARANTOR     GUARANTOR     GUARANTOR       ENTRIES          CONSOLIDATED 
                                  -------------   -----------   -----------   -----------   -------------       ------------ 
                                                                                                                             
REVENUES:                                                                                                                    

  Casino                            $         -   $45,656,947   $17,774,179   $19,349,966   $           -       $ 82,781,092 

  Rooms                                       -     4,161,059             -     3,866,327               -          8,027,386 

  Food and beverage                           -     4,789,455       959,011     4,234,379               -          9,982,845 

  Other                                       -       721,382       117,238     1,027,382               -          1,866,002 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Gross revenues                            -    55,328,843    18,850,428    28,478,054               -        102,657,325 

    Less promotional allowances               -    (7,407,302)   (1,575,761)   (2,894,690)              -        (11,877,753)
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Net revenues                              -    47,921,541    17,274,667    25,583,364               -         90,779,572 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

COSTS AND EXPENSES:                                                                                                          

  Casino                                      -    19,772,855     6,278,505     9,250,198               -         35,301,558 

  Rooms                                       -     1,641,176             -     1,991,133               -          3,632,309 

  Food and beverage                           -     1,473,493       541,594     3,698,622               -          5,713,709 

  Other                                       -       167,799       325,344       282,112               -            775,255 

  Gaming taxes                                -     5,432,706     2,845,663     1,520,459               -          9,798,828 

  Advertising and promotion                   -     2,908,449     1,575,144     2,467,081               -          6,950,674 

  General and administrative            122,582     4,971,168     2,192,851     5,527,316               -         12,813,917 

  Depreciation and amortization       1,272,525     3,615,275       727,336     1,265,029               -          6,880,165 

  Pre-opening expenses                   13,390             -             -             -               -             13,390 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Total costs and expenses          1,408,497    39,982,921    14,486,437    26,001,950               -         81,879,805 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Operating income (loss)          (1,408,497)    7,938,620     2,788,230      (418,586)              -          8,899,767 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

OTHER INCOME (EXPENSE):                                                                                                      

  Interest income                        34,798        14,447         5,380         7,179               -             61,804 

  Interest expense                   (9,092,319)            -          (625)      (15,914)              -         (9,108,858)

  Gain (loss) on sale of assets               -         6,542        (5,964)            -               -                578 

  Other non-operating expense           (27,375)            -             -             -                            (27,375)

  Equity in net income of                                                                                                    
   subsidiaries                      10,319,309             -             -             -     (10,319,309) (a)             - 
                                   ------------   -----------   -----------   -----------   -------------       ------------ 
    Total other income (expense)      1,234,413        20,989        (1,209)       (8,735)    (10,319,309)        (9,073,851)
                                   ------------   -----------   -----------   -----------   -------------       ------------ 

    Net income  (loss)             $   (174,084)  $ 7,959,609   $ 2,787,021   $  (427,321)  $ (10,319,309)      $   (174,084)
                                   ============   ===========   ===========   ===========   =============       ============ 


(a) To eliminate equity in net income of subsidiaries.                          

18

10-Q 21st Page of 40 TOC 1st Previous Next ↓Bottom Just 21st
 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)               
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2003    

                                                        [Enlarge/Download Table]

                                                     BARDEN         BARDEN        BARDEN                                      
                                                   MISSISSIPPI     COLORADO       NEVADA                                      
                                        PARENT     GAMING, LLC   GAMING, LLC   GAMING, LLC    ELIMINATING                     
                                   NON-GUARANTOR    GUARANTOR     GUARANTOR     GUARANTOR       ENTRIES          CONSOLIDATED 
                                   -------------   -----------   -----------   -----------   -------------       ------------ 
                                                                                                                              

CASH FLOWS FROM OPERATING                                                                                                     
ACTIVITIES:                                                                                                                   

Net income (loss)                   $    (29,209)  $ 7,466,321   $ 2,794,537   $   (99,395)  $ (10,161,463) (a)  $    (29,209)

Adjustments to reconcile net                                                                                                  
  income (loss) to net cash                                                                                                   
  provided by operating activities:                                                                                           

  Depreciation                                 -     3,414,679       579,528     1,238,751               -          5,232,958 

  Amortization                         1,331,557       418,625       243,874       135,000               -          2,129,056 

  Income from wholly-owned                                                                                                    
   subsidiaries                      (10,161,463)            -             -             -      10,161,463 (a)              - 

  Gain on sale of assets                       -       (20,700)       (4,261)            -               -            (24,961)

Changes in operating assets and                                                                                               
 liabilities:                                                                                                                 

  Decrease (increase)  in accounts                                                                                            
   receivable, net                        52,695       105,288       (32,883)       42,015               -            167,115 

  Decrease (increase)  in                                                                                                     
   inventories                                 -        35,300       (33,517)       31,450               -             33,233 

  Decrease (increase)  in prepaid                                                                                             
   expenses                               44,202        74,842       (58,068)      (11,893)              -             49,083 

  Increase in other assets                     -             -        (4,550)      (63,719)              -            (68,269)

  (Decrease) increase  in accounts                                                                                            
   payable                                     -       117,908       (35,225)   (1,104,765)              -         (1,022,082)

  Increase (Decrease) in amounts                                                                                              
   due to related parties, net           511,872        46,594      (353,721)     (175,548)              -             29,197 

  (Decrease) increase  in accrued                                                                                             
   payroll and other expenses                  -      (290,746)       28,958        80,224               -           (181,564)

  (Decrease) increase  in other                                                                                               
   accrued liabilities                  (180,618)     (458,189)     (956,754)      621,297               -           (974,264)
                                    ------------   -----------   -----------   -----------   -------------       ------------ 

    Net cash provided by (used in)                                                                                            
     operating activities             (8,430,964)   10,909,922     2,167,918       693,417               -          5,340,293 
                                    ------------   -----------   -----------   -----------   -------------       ------------ 

CASH FLOWS FROM INVESTING                                                                                                     
ACTIVITIES:                                                                                                                   

  Acquisition of property, equipment                                                                                          
   and improvements                            -    (1,795,652)     (771,774)     (920,046)              -         (3,487,472)

  Increase in restricted cash          (250,000)            -             -             -               -            (250,000)

  Proceeds from sale of equipment              -        20,700         7,025         6,264               -             33,989 
                                    ------------   -----------   -----------   -----------   -------------       ------------ 
    Net cash used in investing                                                                                                
     activities                         (250,000)   (1,774,952)     (764,749)     (913,782)              -         (3,703,483)
                                    ------------   -----------   -----------   -----------   -------------       ------------ 
CASH FLOWS FROM FINANCING                                                                                                     
ACTIVITIES:                                                                                                                   

  Payment of 11.653% Senior Secured                                                                                           
   Notes issuance costs                   (2,337)            -             -             -               -             (2,337)

  Cash paid to reduce long-term debt           -             -             -       (94,392)              -            (94,392)

  Repayment of loan to Barden                                                                                                 
   Development, Inc.                     700,000             -             -             -               -            700,000 

  Cash advances (to) from                                                                                                     
   affiliates, net                    11,500,000    (9,700,000)   (1,800,000)            -               -                  - 

  Distribution to Barden                                                                                                      
   Development,  Inc.                 (2,089,079)            -             -             -               -         (2,089,079)
                                    ------------   -----------   -----------   -----------   -------------       ------------ 

    Net cash provided by (used in)                                                                                            
     financing activities             10,108,584    (9,700,000)   (1,800,000)      (94,392)              -         (1,485,808)
                                    ------------   -----------   -----------   -----------   -------------       ------------ 

Net increase (decrease) in cash and                                                                                           
 cash equivalents                      1,427,620      (565,030)     (396,831)     (314,757)              -            151,002 

Cash and cash equivalents,                                                                                                    
 beginning of period                   1,007,660     7,852,914     2,727,644     4,395,606               -         15,983,824 
                                    ------------   -----------   -----------   -----------   -------------       ------------ 

Cash and cash equivalents, end of                                                                                             
 period                             $  2,435,280   $ 7,287,884   $ 2,330,813   $ 4,080,849   $           -       $ 16,134,826 
                                    ============   ===========   ===========   ===========   =============       ============ 

(a) To eliminate intercompany investment in subsidiaries.                       

19

10-Q 22nd Page of 40 TOC 1st Previous Next ↓Bottom Just 22nd
 MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10.  SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)              
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2002    

                                                        [Enlarge/Download Table]

                                                     BARDEN         BARDEN        BARDEN                                       
                                                   MISSISSIPPI     COLORADO       NEVADA                                       
                                        PARENT     GAMING, LLC   GAMING, LLC   GAMING, LLC    ELIMINATING                      
                                   NON-GUARANTOR    GUARANTOR     GUARANTOR     GUARANTOR       ENTRIES           CONSOLIDATED 
                                   -------------   -----------   -----------   -----------   -------------        ------------ 
                                                                                                                               

CASH FLOWS FROM OPERATING                                                                                                      
ACTIVITIES:                                                                                                                    

Net income  (loss)                  $   (174,084)  $ 7,959,609   $ 2,787,021   $  (427,321)  $ (10,319,309) (a)   $   (174,084)

Adjustments to reconcile net income                                                                                            
  (loss) to net cash  provided by                                                                                              
  operating activities:                                                                                                        

  Depreciation                                 -     3,196,650       483,462     1,130,399               -           4,810,511 

  Amortization                         1,272,525       418,625       243,874       134,630               -           2,069,654 

  (Gain) loss on sale of assets                -        (6,542)        5,964             -               -                (578)

  Income from wholly-owned                                                                                                     
    subsidiaries                     (10,319,309)            -             -             -      10,319,309   (a)             - 

Changes in operating assets and                                                                                                
  liabilities:                                                                                                                 

  (Increase) decrease  in accounts                                                                                             
    receivable, net                      242,415       119,249        31,880       (53,109)              -             340,435 

  (Increase) decrease in inventories           -       (15,666)      (23,684)       82,639               -              43,289 

  Increase  in prepaid expenses          (41,000)      (85,288)     (188,702)     (342,762)              -            (657,752)

  (Increase) decrease  in other                                                                                                
    assets                             1,035,123        15,864        11,417      (776,503)              -             285,901 

  Increase (decrease) in accounts                                                                                              
    payable                                    -      (155,012)      142,423      (652,067)              -            (664,656)

  Increase (decrease) in amounts                                                                                               
    due to related parties, net        2,233,011      (298,400)   (1,253,400)       22,373        (721,567) (b)        (17,983)

  Increase in accrued interest           287,025             -             -             -               -             287,025 

  Increase (decrease) in accrued                                                                                               
    payroll and  related expenses              -       223,256       (44,976)      (69,737)              -             108,543 

  Increase (decrease) in other                                                                                                 
    accrued liabilities               (1,099,212)     (387,003)      877,065       458,568               -            (150,582)
                                    ------------   -----------   -----------   -----------   -------------        ------------ 

    Net cash provided by (used in)                                                                                             
      operating activities            (6,563,506)   10,985,342     3,072,344      (492,890)       (721,567)          6,279,723 
                                    ------------   -----------   -----------   -----------   -------------        ------------ 

CASH FLOWS FROM INVESTING                                                                                                      
ACTIVITIES:                                                                                                                    

  Payment for acquisition related                                                                                              
    costs                               (986,158)            -             -             -               -            (986,158)

  Increase in restricted cash           (250,000)            -             -             -               -            (250,000)

  Proceeds from seller for purchase                                                                                            
    price adjustment                   3,800,000             -             -             -               -           3,800,000 

  Proceeds from sale of equipment              -         6,542        27,325             -               -              33,867 

  Acquisition of property, equipment                                                                                           
    and improvements                           -    (1,496,044)     (438,835)     (799,912)              -          (2,734,791)
                                    ------------   -----------   -----------   -----------   -------------        ------------ 
    Net cash provided by (used in)                                                                                             
      investing activities             2,563,842    (1,489,502)     (411,510)     (799,912)              -            (137,082)
                                    ------------   -----------   -----------   -----------   -------------        ------------ 

CASH FLOWS FROM FINANCING                                                                                                      
ACTIVITIES:                                                                                                                    

  Payment of 11.653% Senior Secured                                                                                            
    Notes issuance costs              (1,084,355)            -             -             -               -          (1,084,355)

  Cash advances (to) from affiliates  10,650,089    (8,786,096)   (3,571,045)      985,485         721,567  (b)              - 

  Line of credit, net                 (4,507,565)            -             -             -               -          (4,507,565)

  Distribution to Barden                                                                                                       
    Development, Inc.                 (1,065,542)            -             -             -               -          (1,065,542)

  Cash paid to reduce long-term debt           -             -             -       (65,140)              -             (65,140)
                                    ------------   -----------   -----------   -----------   -------------        ------------ 

    Net cash provided by (used in)                                                                                             
      financing activities             3,992,627    (8,786,096)   (3,571,045)      920,345         721,567          (6,722,602)
                                    ------------   -----------   -----------   -----------   -------------        ------------ 

Net increase (decrease)  in cash                                                                                               
  and cash equivalents                    (7,037)      709,744      (910,211)     (372,457)              -            (579,961)

Cash and cash equivalents,                                                                                                     
  beginning of period                    498,363     8,452,344     3,795,722     4,958,386               -          17,704,815 
                                    ------------   -----------   -----------   -----------   -------------        ------------ 

Cash and cash equivalents, end of                                                                                              
  period                            $    491,326   $ 9,162,088   $ 2,885,511   $ 4,585,929   $           -        $ 17,124,854 
                                    ============   ===========   ===========   ===========   =============        ============ 

(a) To eliminate intercompany investment in subsidiaries.                       

(b) To eliminate intercompany receivables and payables.                         

20

10-Q 23rd Page of 40 TOC 1st Previous Next ↓Bottom Just 23rd
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS                                                                   

STATEMENT OF FORWARD-LOOKING INFORMATION                                        

  This report includes statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as 
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
are subject to the safe harbor provisions of those sections and the Private     
Securities Litigation Reform Act of 1995. Words such as "believes",             
"anticipates", "estimates", "plans", "intends", "expects", "will" or "could"    
used in the Company's reports filed with the Securities and Exchange Commission 
are intended to identify forward-looking statements. All forward-looking        
statements involve risks and uncertainties. Although the Company believes its   
expectations are based upon reasonable assumptions within the bounds of its     
current knowledge of its business and operations, there can be no assurances    
that actual results will not materially differ from expected results. The       
Company cautions that these and similar statements included in this report and  
in previously filed periodic reports are further qualified by important factors 
that could cause actual results to differ materially from those in the          
forward-looking statements. Such factors include, without limitation: the       
ability to fund planned development needs and to service debt from existing     
operations and from new financing; increased competition in existing markets or 
the opening of new gaming jurisdictions; a decline in the public acceptance of  
gaming; the limitation, conditioning or suspension of our gaming licenses;      
increases in or new taxes imposed on gaming revenues and gaming devices;        
admission taxes; a finding of unsuitability by regulatory authorities with      
respect to the Company or its officers or key employees; loss and/or retirement 
of key employees; significant increase in fuel or transportation prices; adverse
economic conditions in the Company's markets; severe and unusual weather in our 
markets; adverse results of significant litigation matters; non-renewal of the  
Company's gaming licenses from the appropriate governmental authorities in      
Nevada, Mississippi and Colorado; and continuing effects of terrorist attacks   
and any future occurrences of terrorist attacks or other destabilizing events.  

         For more information on these and other factors, see the Company's most
recently filed Form 10-K. We caution readers not to place undue reliance on     
forward-looking statements, which speak only as of the date hereof. All         
subsequent written and oral forward-looking statements attributable to us are   
expressly qualified in their entirety by the cautionary statements and factors  
that may affect future results contained throughout this report. The Company    
undertakes no obligation to publicly release any revisions to such              
forward-looking statements to reflect events or circumstances after the date    
hereof.                                                                         

     The following discussion should be read in conjunction with, and is
qualified in its entirety by, our financial statements, including the notes     
thereto listed in Item 1.                                                       

OVERVIEW                                                                        

       The Company was formed on September 14, 2001, commenced operations of
the Fitzgeralds casinos on December 7, 2001, and accordingly has a limited      
operating history. The Company operates casino hotels (except in Black Hawk,    
Colorado) in Tunica County, Mississippi ("Fitzgeralds Tunica"), Black Hawk,     
Colorado ("Fitzgeralds Black Hawk") and Las Vegas, Nevada ("Fitzgeralds Las     
Vegas"). The discussion of operations herein will                               

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focus on events and the Company's revenues and expenses during the three and    
six-month periods ended June 30, 2003 and 2002.                                 

        The gaming operations of the Company's properties may be seasonal and,
depending on the location and other circumstances, the effects of such          
seasonality could be significant. The properties' results are affected by       
inclement weather in relevant markets. For example, the Fitzgeralds Black Hawk  
site, located in the Rocky Mountains of Colorado, is subject to snow and icy    
road conditions during the winter months. Any such severe weather conditions may
discourage potential customers from visiting the Black Hawk facilities. Also, at
Fitzgeralds Las Vegas, business levels are generally weaker from Thanksgiving   
through the middle of January (except during the week between Christmas and New 
Year's) and throughout the summer, and generally stronger from mid-January      
through Easter and from mid-September through Thanksgiving. At Fitzgeralds      
Tunica and Fitzgeralds Black Hawk, business levels are typically weaker from    
Thanksgiving through the end of the winter (except during the week between      
Christmas and New Year's) and typically stronger from mid-June to mid-November. 
Accordingly, the Company's results of operations are expected to fluctuate from 
quarter to quarter and the results for any fiscal quarter may not be indicative 
of results for future fiscal quarters.                                          

RESULTS OF OPERATIONS                                                           

  The following discussion provides a comparison of the results of
operations of the Company and its subsidiaries on a consolidated basis, for the 
three and six months ended June 30, 2003, with the three and six months ended   
June 30, 2002. On a consolidated basis, gross revenues decreased approximately  
$1,516,000 or 3.0% to approximately $48,714,000 during the three months ended   
June 30, 2003, compared to $50,230,000 during the three months ended June 30,   
2002. For the six-months ending June 30, 2003, gross revenues decreased         
$5,047,000 or 4.9% to $97,610,000 from $102,657,000 in the six-month period     
ended June 30, 2002.                                                            

       The following table sets forth information derived from the Company's
consolidated statements of operations for the three and six month periods ended 
June 30, 2003 and 2002, expressed as a percentage of gross revenues.            

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 CONSOLIDATED STATEMENTS OF OPERATIONS - SUMMARY INFORMATION
(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                  FOR THE THREE MONTHS ENDED JUNE 30,  FOR THE SIX MONTHS ENDED JUNE 30,
                        2003            2002                2003            2002        
                    ------------    -----------          -----------    -------------   
                                                                                        
Gross revenues      $     48,714    $    50,229          $    97,610    $     102,657   
Operating income    $      3,437    $     3,411          $     8,786    $       8,900   
EBITDA (1)          $      7,145    $     6,904          $    16,148    $      15,780   


CONSOLIDATED STATEMENTS OF OPERATIONS - PERCENTAGE OF GROSS REVENUES

                                                        [Enlarge/Download Table]


                                       FOR THE THREE MONTHS ENDED JUNE 30,  FOR THE SIX MONTHS ENDED JUNE 30, 
                                              2003              2002              2003              2002      
                                          ------------      -----------        -----------      ------------- 
                                                                                                              
REVENUES:                                                                                                     

     Casino                                      81.2 %           80.5 %             80.9 %             80.7 %

     Rooms                                        7.3 %            7.8 %              7.5 %              7.8 %

     Food and beverage                            9.8 %            9.7 %              9.9 %              9.7 %

     Other                                        1.7 %            2.0 %              1.7 %              1.8 %
                                          -----------       ----------         ----------       ------------  
          Gross revenues                        100.0 %          100.0 %            100.0 %            100.0 %

          Less promotional allowances           (11.4)%          (11.5)%            (11.4)%            (11.6)%
                                          -----------       ----------         ----------       ------------  
          Net revenues                           88.6 %           88.5 %             88.6 %             88.4 %

COSTS AND EXPENSES:                                                                                           

     Casino                                      34.1 %           34.4 %             33.0 %             34.4 %

     Rooms                                        3.4 %            3.7 %              3.3 %              3.5 %

     Food and beverage                            5.3 %            5.9 %              5.2 %              5.6 %

     Other                                        0.8 %            0.8 %              0.8 %              0.8 %

     Gaming taxes                                 9.1 %            9.5 %              9.3 %              9.5 %

     Advertising and promotion                    6.8 %            7.3 %              6.7 %              6.8 %

     General and administrative                  14.4 %           13.2 %             13.8 %             12.5 %

     Depreciation and amortization                7.6 %            6.9 %              7.5 %              6.7 %

     Pre-opening expenses                           - %              - %                - %                - %
                                          -----------       ----------         ----------       ------------  
          Total costs and expenses               81.5 %           81.7 %             79.6 %             79.8 %
                                          -----------       ----------         ----------       ------------  
          Operating income                        7.1 %            6.8 %              9.0 %              8.6 $

OTHER INCOME (EXPENSE):                                                                                       

     Interest expense                            (9.1)%           (9.1)%             (9.0)%             (8.8)%
                                          -----------       ----------         ----------       ------------  
          Total other expense                    (9.1)%           (9.1)%             (9.0)%             (8.8)%
                                          -----------       ----------         ----------       ------------  

          Net income (loss)                      (2.0)%           (2.3)%                - %             (0.2)%
                                          ===========       ==========         ==========       ============  

          EBITDA (1)                             14.7 %           13.7 %             16.5 %             15.4 %


(1)  EBITDA is defined as earnings from operations before interest, taxes,      
     depreciation and amortization. EBITDA is presented solely as a supplemental
    disclosure because management believes that it is a widely used measure of
 operating performance in the gaming industry, and a principal basis for
valuation of gaming companies. Other companies may calculate EBITDA   
     differently. Management uses EBITDA as a measure of the Company's operating
    performance. EBITDA should not be construed as an alternative to operating
  income, as an indicator of the Company's operating performance, or as an
alternative to cash flows from operating activities, as a measure of  
 liquidity, or any other measure determined in accordance with generally
  accepted accounting principles. The Company has significant uses of cash
     including capital expenditures, interest payments, taxes and debt principal
repayments, which are not reflected in EBITDA.                        

A reconciliation of operating income to EBITDA follows:               

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RECONCILIATION OF OPERATING INCOME TO EBITDA
 (IN MILLIONS)

                                                        [Enlarge/Download Table]


                                     FOR THE THREE MONTHS ENDED JUNE 30,  FOR THE SIX MONTHS ENDED JUNE 30,
                                            2003            2002                 2003            2002      
                                           ------          ------               ------          ------     
                                                                                                           
Operating income                           $  3.4          $  3.4               $  8.8          $  8.9     

      Depreciation and amortization           3.7             3.5                  7.3             6.9     
                                           ------          ------               ------          ------     

      EBITDA                               $  7.1          $  6.9               $ 16.1          $ 15.8     
                                           ======          ======               ======          ======     


THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002   

      Consolidated gross revenues for the three months ended June 30, 2003
amounted to approximately $48,714,000, a decrease of approximately $1,516,000 or
3.0% from consolidated gross revenues recorded in the three months ended June   
30, 2002. The 3.0% decrease in consolidated gross revenues was primarily        
attributable to a $995,000 or 2.8% decrease in slot revenues and a $354,000 or  
9.0% decrease in room revenues. For the three months ended June 30, 2003, gross 
revenues for Fitzgeralds Tunica accounted for $26,039,000, or 53.5% of total    
consolidated gross revenues, Fitzgeralds Black Hawk accounted for $9,345,000, or
19.2% of total consolidated gross revenues revenues, and Fitzgeralds Las Vegas  
accounted for $13,330,000, or 27.3% of total consolidated gross revenues,       
compared to $27,075,000, or 53.9%, $9,068,000, or 18.1% and $14,086,000, or     
28.0%, respectively, for the three months ended June 30, 2002.                  

The Company's business can be separated into four operating departments: casino,
rooms (except Fitzgeralds Black Hawk), food and beverage, and other.            
Consolidated casino revenues for the three months ended June 30, 2003 totaled   
$39,541,000, or 81.2% of consolidated gross revenues, of which $34,919,000 or   
88.3% were derived from slot machine revenues, and $4,622,000 or 11.7% were     
derived from table game revenues, compared to consolidated casino revenues of   
$40,426,000 or 80.5% of consolidated gross revenues, of which $35,914,000 or    
88.8% were derived from slot machine revenues, and $4,512,000 or 11.2% were     
derived from table games revenues for the three months ended June 30, 2002.     
Casino revenues attributable to Fitzgeralds Tunica were $21,430,000, or 82.3% of
its gross revenues, of which $19,384,000 or 90.5% were derived from slot machine
revenues, and $2,046,000 or 9.5% were derived from table games revenues for the 
three months ended June 30, 2003, compared to casino revenues of $22,300,000 or 
82.4% of its gross revenues, of which $19,956,000 or 89.5% were derived from    
slot machine revenues, and $2,344,000, or 10.5%, were derived from table games  
revenues for the three months ended June 30, 2002. Casino revenues attributed to
Fitzgeralds Black Hawk were $8,773,000, or 93.9% of its gross revenues, of which
$8,606,000, or 98.1%, were derived from slot machine revenues and $167,000 or   
1.9% were derived from table game revenues for the three months ended June 30,  
2003, compared to casino revenues of $8,557,000, or 94.4% of its gross revenues,
of which $8,406,000 or 98.2% were derived from slot machine revenues and        
$151,000, or 1.8%, were derived from table games revenues for the three months  
ended June 30, 2002. Casino revenues attributable to Fitzgeralds Las Vegas were 
$9,338,000, or 70.1% of its gross revenues, of which $6,928,000, or 74.2%, were 
derived from slot machine revenues and $2,410,000, or 25.8%, were derived from  
table game revenues for the three months ended June 30, 2003, compared to casino
revenues of $9,569,000, or 67.9% of its gross revenues, of which $7,552,000, or 
78.9%, were derived from slot machine revenues and $2,017,000, or 21.1%, were   
derived from table game revenues for the three months ended June 30, 2002.      

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The Company feels that the weakness in its revenues, particularly slot revenues,
can be attributed to a slow economy, attention drawn to the conflict with Iraq, 
periods of poor weather and the competitive environment that exists in each of  
its markets.                                                                    

         The consolidated average number of slot machines in operation was 2,830
during the three months ended June 30, 2003, compared to 2,844 during the three 
months ended June 30, 2002. Fitzgeralds Tunica accounted for 1,350, or 47.7%,   
Fitzgeralds Black Hawk accounted for 592, or 20.9%, and Fitzgeralds Las Vegas   
accounted for 888, or 31.4%. The consolidated average win per slot machine per  
day was approximately $136 for the three months ended June 30, 2003, with an    
average of approximately $158, $160 and $86 at Fitzgeralds Tunica, Fitzgeralds  
Black Hawk and Fitzgeralds Las Vegas, respectively, compared to the consolidated
average win per slot machine per day of $139 for the three months ended June 30,
2002 with an average of approximately $159, $156 and $95 at Fitzgeralds Tunica, 
Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively. The consolidated
average number of table games in operation during the three months ended June   
30, 2003 was 66, of which Fitzgeralds Tunica accounted for 34, or 51.5%,        
Fitzgeralds Black Hawk accounted for 6, or 9.1%, and Fitzgeralds Las Vegas      
accounted for 26, or 39.4%. The consolidated average win per table game per day 
during the three months ended June 30, 2003 was approximately $719, with an     
average of approximately $661, $306, and $891 at Fitzgeralds Tunica, Fitzgeralds
Black Hawk and Fitzgeralds Las Vegas, respectively, compared to the consolidated
average win per table game per day of $712 for the three months ended June 30,  
2002 with an average of approximately $743, $276 and $776 at Fitzgeralds Tunica,
Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively. With respect to 
Fitzgeralds Black Hawk the maximum wager is limited to $5.00.                   

         Consolidated room revenues for the three months ended June 30, 2003 was
$3,585,000, or 7.3% of consolidated gross revenues, compared to $3,939,000, or  
7.8% of consolidated gross revenues for the three months ended June 30, 2002. Of
this amount, Fitzgeralds Tunica accounted for $1,961,000, or 54.7%, with 507    
rooms and Fitzgeralds Las Vegas accounted for $1,624,000, or 45.3%, with 638    
rooms, compared to $2,076,000, or 52.7%, with 507 rooms at Fitzgeralds Tunica   
and $1,863,000, or 47.3%, with 638 rooms at Fitzgeralds Las Vegas during the    
three months ended June 30, 2002. During the three months ended June 30, 2003,  
at Fitzgeralds Tunica the average daily rate was $46 and the occupancy rate was 
92.3% and at Fitzgeralds Las Vegas the average daily rate was $34 and the       
occupancy rate was 81.3%, compared to $49 and 92.0%, respectively, at           
Fitzgeralds Tunica and $34 and 93.4%, respectively, at Fitzgeralds Las Vegas    
during the three months ended June 30, 2002.                                    

         Consolidated food and beverage revenues for the three months ended June
30, 2003 amounted to $4,755,000, or 9.8% of consolidated gross revenues,        
compared to $4,887,000, or 9.7% of consolidated gross revenues for the three    
months ended June 30, 2002. Of this amount, Fitzgeralds Tunica accounted for    
$2,292,000, or 48.2%, Fitzgeralds Black Hawk accounted for $507,000, or 10.7%   
and Fitzgeralds Las Vegas accounted for $1,956,000, or 41.1%, compared to       
$2,314,000, or 47.4%, $453,000, or 9.2%, and $2,120,000, or 43.4% at Fitzgeralds
Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively, during  
the three months ended June 30, 2002.                                           

   Other consolidated revenues consisted primarily of commission and
retail income and totaled approximately $833,000, or 1.7% of consolidated gross 
revenues for the three months ended June 30, 2003, compared to $978,000, or 2.0%
of consolidated gross revenues                                                  

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for the three months ended June 30, 2002. Of this amount, Fitzgeralds Tunica    
accounted for $356,000 or 42.7%, Fitzgeralds Black Hawk accounted for           
approximately $65,000 or 7.8%, and Fitzgeralds Las Vegas accounted for $412,000,
or 49.5% during the three months ended June 30, 2003, compared to $385,000, or  
39.4%, $59,000, or 6.0%, and $534,000, or 54.6%, at Fitzgeralds Tunica,         
Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively, during the three
months ended June 30, 2002.                                                     

    Consolidated promotional allowances included in consolidated gross
revenues for the three months ended June 30, 2003 were $5,544,000, or 11.4% of  
consolidated gross revenues compared to $5,754,000, or 11.5% of consolidated    
gross revenues during the three months ended June 30, 2002. Of this amount,     
Fitzgeralds Tunica accounted for $3,351,000, or 60.4%, Fitzgeralds Black Hawk   
accounted for $810,000, or 14.6%, and Fitzgeralds Las Vegas accounted for       
$1,383,000, or 25.0% during the three months ended June 30, 2003, compared to   
$3,501,000, or 60.8%, $756,000, or 13.2%, and $1,497,000, or 26.0%, at          
Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,           
respectively, during the three months ended June 30, 2002. The decline in       
promotional allowances is directly associated with the decline in casino        
revenues. The most substantial portion of the decline in promotional allowances 
comes from reduced complimentaries to our casino guests and a reduction in slot 
club points earned.                                                             

        Consolidated casino operating expenses for the three months ended June
30, 2003 were $16,612,000, or 34.1% of consolidated gross revenues and 42.0% of 
consolidated casino revenues, compared to $17,275,000, or 34.4% of consolidated 
gross revenues and 42.7% of consolidated casino revenues for the three months   
ended June 30, 2002. For the three months ended June 30, 2003 and June 30, 2002,
these expenses were primarily comprised of salaries, wages and benefits, and    
operating expenses of the casino. Of the consolidated casino operating expenses,
Fitzgeralds Tunica accounted for $9,626,000, or 57.9%, Fitzgeralds Black Hawk   
accounted for $2,899,000, or 17.5%, and Fitzgeralds Las Vegas accounted for     
$4,087,000, or 24.6% during the three months ended June 30, 2003, compared to   
$9,864,000 or 57.1%, $2,734,000 or 15.8% and $4,677,000 or 27.1% at Fitzgeralds 
Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively, during  
the three months ended June 30, 2002. The decline in casino operating expenses  
is the result of lower slot machine lease and participation expenses of         
$382,000, reduced cost of complimentaries of $326,000 and lower promotional     
related expenses of $145,000.                                                   

       Consolidated rooms expenses for the three months ended June 30, 2003,
were $1,641,000, or 3.4% of consolidated gross revenues, compared to $1,864,000,
or 3.7% of consolidated gross revenues during the three months ended June 30,   
2002. These expenses were primarily comprised of salaries, wages and benefits,  
and operating expenses of the hotels. Of the consolidated rooms operating       
expenses, Fitzgeralds Tunica accounted for $660,000 or 40.2% and Fitzgeralds Las
Vegas accounted for $981,000 or 59.8% during the three months ended June 30,    
2003, compared to $919,000 or 49.3% and $945,000 or 50.7% at Fitzgeralds Tunica 
and Fitzgeralds Las Vegas, respectively, during the three months ended June 30, 
2002. Room expenses were generally lower in the three-month period ended June   
30, 2003 compared to the same period in 2002 due to lower room occupancies at   
both Fitzgeralds Tunica and Fitzgeralds Las Vegas.                              

         Consolidated food and beverage expenses for the three months ended June
30, 2003 were $2,564,000, or 5.3% of consolidated gross revenues, compared to   
$2,944,000, or 5.9% of consolidated gross revenues during the three months ended
June 30, 2002. Of the consolidated food and beverage expenses, Fitzgeralds      
Tunica accounted for $693,000, or 27.0%, Fitzgeralds Black Hawk accounted for   
$266,000, or 10.4% and Fitzgeralds Las                                          

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Vegas accounted for $1,605,000, or 62.6% during the three months ended June 30, 
2003, compared to $795,000, or 27.0%, $270,000, or 9.2% and $1,879,000, or 63.8%
at Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,        
respectively, during the three months ended June 30, 2002. The decline in food  
and beverage expenses is primarily attributable to labor cost savings and       
reduced cost of sales.                                                          

       Consolidated gaming taxes totaled $4,459,000, or 9.1% of consolidated
gross revenues and 11.3% of consolidated casino revenues for the three months   
ended June 30, 2003, compared to $4,779,000, or 9.5% of consolidated gross      
revenues and 11.8% of consolidated casino revenues during the three months ended
June 30, 2002. During the three months ended June 30, 2003, Fitzgeralds Tunica  
accounted for $2,365,000, or 53.0%, Fitzgeralds Black Hawk accounted for        
$1,373,000, or 30.8%, and Fitzgeralds Las Vegas accounted for $721,000, or      
16.2%, compared to $2,653,000, or 55.5%, $1,363,000, or 28.5% and $763,000, or  
16.0% at Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,  
respectively, during the three months ended June 30, 2002. The decline in gaming
taxes is directly associated with the decline in casino revenues. Pursuant to   
new leglislation signed into law by the Govenor of Nevada on July 23, 2003, the 
license fees on the number of gaming devices operated has been increased        
effective immediately. The tax on gross revenues will be increased effective on 
August 1, 2003 and the range of events covered by the casino entertainment tax  
will be expanded effective September 1, 2003. Fitzgeralds Las Vegas will also   
become subject to a payroll tax based on the wages paid to its Fitzgeralds Las  
Vegas employees effective October 1, 2003.                                      

        Consolidated advertising and promotion expenses totaled $3,293,000, or
6.8% of consolidated gross revenues for the three months ended June 30, 2003,   
compared to $3,654,000, or 7.3% of consolidated gross revenues during the three 
months ended June 30, 2002. Fitzgeralds Tunica accounted for $1,452,000, or     
44.1%, Fitzgeralds Black Hawk accounted for $626,000, or 19.0%, and Fitzgeralds 
Las Vegas accounted for $1,215,000 or 36.9%, respectively, during the three     
months ended June 30, 2003, compared to $1,542,000, or 42.2%, $842,000, or 23.0%
and $1,270,000, or 34.8% at Fitzgeralds Tunica, Fitzgeralds Black Hawk and      
Fitzgeralds Las Vegas, respectively, during the three months ended June 30,     
2002.                                                                           

       Consolidated general and administrative expenses for the three months
ended June 30, 2003 were $7,044,000, or 14.4% of consolidated gross revenues,   
compared to $6,653,000, or 13.2% for the three months ended June 30, 2002.      
During the three months ended June 30, 2003, Fitzgeralds Tunica accounted for   
$2,961,000, or 42.0%, Fitzgeralds Black Hawk accounted for $1,242,000, or 17.7%,
and Fitzgeralds Las Vegas accounted for $2,818,000, or 40.0%, compared to       
$2,572,000, or 38.7%, $1,052,000, or 15.8% and $2,911,000, or 43.7%, at         
Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas            
respectively, for the three months ended June 30, 2002. Also, unallocated       
corporate expenses accounted for $23,000 and $118,000 during the three months   
ended June 30, 2003 and 2002, respectively.                                     

       Consolidated depreciation and amortization for the three months ended
June 30, 2003 were approximately $3,709,000, or 7.6% of consolidated gross      
revenues, compared to $3,493,000, or 6.9% of consolidated gross revenues during 
the three months ended June 30, 2002. Fitzgeralds Tunica accounted for          
$1,928,000, or 52.0%, Fitzgeralds Black Hawk accounted for $412,000, or 11.1%,  
and Fitzgeralds Las Vegas accounted for $703,000 or 18.9% during the three      
months ended June 30, 2003, compared to $1,835,000, or 52.5%, $364,000, or 10.4%
and $648,000, or 18.6%, respectively, during the three months ended June 30,    
2002. Corporate amortization of deferred financing costs and the discount on the
Notes accounted for $666,000, or 18.0% of consolidated depreciation and         
amortization during the three months ended June 30, 2003 compared to $646,000,  
or 18.5% during the                                                             

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three months ended June 30, 2002. Of the consolidated depreciation and          
amortization expense, $2,644,000, or 71.3%, is depreciation expense, and        
$1,065,000, or 28.7% is amortization expense during the three months ended June 
30, 2003, compared to $2,448,000, or 70.1% and $1,045,000, or 29.9%,            
respectively, during the three months ended June 30, 2002.                      

        Consolidated operating income for the three months ended June 30, 2003
was $3,437,000, or 7.1% of consolidated gross revenues compared to $3,411,000,  
or 6.8% of consolidated gross revenues during the three months ended June 30,   
2002. Fitzgeralds Tunica accounted for operating income of $2,891,000, or 84.1%,
Fitzgeralds Black Hawk accounted for operating income of $1,559,000, or 45.4%,  
and Fitzgeralds Las Vegas accounted for an operating loss of $325,000, or (9.5)%
for the three months ended June 30, 2003 compared to $3,310,000, or 97.0%,      
$1,530,000, or 44.9% and an operating loss of $659,000, or (19.3)%, at          
Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,           
respectively, for the three months ended June 30, 2002. The unallocated         
corporate loss principally for amortization was $688,000 or (20.0)% of          
consolidated operating income for the three months ended June 30, 2003 compared 
to $770,000, or (22.6)% for the three months ended June 30, 2002.               

       Consolidated net interest expense for the three months ended June 30,
2003 was $4,416,000, or 9.1% of consolidated gross revenues compared to         
$4,563,000, or 9.1% of consolidated gross revenues during the three months ended
June 30, 2002. Fitzgeralds Tunica accounted for interest income of $3,000 and   
Fitzgeralds Las Vegas accounted for net interest expense of $5,000 during the   
three months ended June 30, 2003, compared to net interest income of $8,000 at  
Fitzgeralds Tunica, net interest income of $1,000 at Fitzgeralds Black Hawk and 
net interest expense of $5,000 at Fitzgeralds Las Vegas during the three months 
ended June 30, 2002. The unallocated corporate net interest expense primarily   
associated with the Notes was $4,414,000 during the three months ended June 30, 
2003 compared $4,567,000 during the three months ended June 30, 2002.           

       As a result of the foregoing, the Company realized a consolidated net
loss of $978,000 for the three months ended June 30, 2003, compared to a        
consolidated net loss of $1,169,000 for the three months ended June 30, 2002.   
Fitzgeralds Tunica accounted for net income of $2,900,000, Fitzgeralds Black    
Hawk accounted for net income of $1,563,000 and Fitzgeralds Las Vegas accounted 
for a net loss of $329,000 during the three months ended June 30, 2003, compared
to $3,318,000, $1,525,000, and a net loss of $664,000, at Fitzgeralds Tunica,   
Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively, during the three
months ended June 30, 2002. The unallocated loss at the corporate level was     
$5,112,000 and $5,348,000 for the three months ended June 30,2003 and 2002,     
respectively.                                                                   

SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002       

    Consolidated gross revenues for the six months ended June 30, 2003
amounted to approximately $97,610,000, a decrease of approximately $5,047,000 or
4.9% from consolidated gross revenues recorded in the six months ended June 30, 
2002. The 4.9% decrease in consolidated gross revenues was primarily            
attributable to a $3,686,000 or 5.0% decrease in slot revenues and a $644,000 or
8.0% decrease in room revenues. For the six months ended June 30, 2003,         
Fitzgeralds Tunica accounted for $52,422,000, or 53.7% of total gross revenues, 
Fitzgeralds Black Hawk accounted for $18,004,000, or 18.4% of total gross       
revenues, and Fitzgeralds Las Vegas accounted for $27,184,000, or 27.9% of total
gross revenues, compared to $55,329,000, or 53.9%, $18,850,000, or 18.4% and    
$28,478,000, or                                                                 

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27.7% at Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,  
respectively for the six month period ended June 30, 2002.                      

The Company's business can be separated into four operating   
departments: casino, rooms (except Fitzgeralds Black Hawk), food and beverage,  
and other. Consolidated casino revenues for the six months ended June 30, 2003  
totaled $78,977,000, or 80.9% of consolidated gross revenues, of which          
$69,479,000 or 88.0% were derived from slot machine revenues, and $9,498,000 or 
12.0% were derived from table game revenues, compared to consolidated casino    
revenues of $82,781,000 or 80.7% of consolidated gross revenues, of which       
$73,165,000 or 88.4% were derived from slot machine revenues, and $9,616,000 or 
11.6% were derived from table games revenues for the six months ended June 30,  
2002. Casino revenues attributed to Fitzgeralds Tunica were $43,240,000, or     
82.5% of its gross revenues, of which $39,061,000 or 90.3% were derived from    
slot machine revenues, and $4,179,000 or 9.7% were derived from table games     
revenues for the six months ended June 30, 2003, compared to casino revenues of 
$45,657,000 or 82.5% of its gross revenues, of which $40,823,000 or 89.4% were  
derived from slot machine revenues, and $4,834,000 or 10.6% were derived from   
table games revenues for the three months ended June 30, 2002. Casino revenues  
attributed to Fitzgeralds Black Hawk were $16,887,000, or 93.8% of its gross    
revenues, of which $16,575,000 or 98.1% were derived from slot machine revenues 
and $312,000 or 1.9% were derived from table game revenues for the six months   
ended June 30, 2003, compared to casino revenues of $17,774,000, or 94.3% of its
gross revenues, of which $17,426,000 or 98.0% were derived from slot machine    
revenues and $348,000, or 2.0%, were derived from table games revenues for the  
six months ended June 30, 2002. Casino revenues attributed to Fitzgeralds Las   
Vegas were $18,850,000, or 69.3% of its gross revenues, of which $13,843,000, or
73.4%, were derived from slot machine revenues and $5,007,000, or 26.6%, were   
derived from table game revenues for the six months ended June 30, 2003,        
compared to casino revenues of $19,350,000, or 67.9% of its gross revenues, of  
which $14,916,000, or 77.1%, were derived from slot machine revenues and        
$4,434,000, or 22.9%, were derived from table game revenues for the six months  
ended June 30, 2002. The Company feels that the weakness in its revenues,       
particularly slot revenues, can be attributed to a slow economy, attention drawn
to the conflict with Iraq, periods of poor weather and competitive conditions in
each of the markets in which our Fitzgeralds properties operate.                

         The consolidated average number of slot machines in operation was 2,831
during the six months ended June 30, 2003, compared to 2,880 during the six     
months ended June 30, 2002. Fitzgeralds Tunica accounted for 1,349, or 47.7%,   
Fitzgeralds Black Hawk accounted for 592, or 20.9% and Fitzgeralds Las Vegas    
accounted for 890, or 31.4%. The consolidated average win per slot machine per  
day was approximately $136 for the six months ended June 30, 2003, with an      
average of approximately $160, $155 and $86 at Fitzgeralds Tunica, Fitzgeralds  
Black Hawk and Fitzgeralds Las Vegas, respectively, compared to the consolidated
average win per slot machine per day of $140 for the six months ended June 30,  
2002 with an average of approximately $164, $162 and $91 at Fitzgeralds Tunica, 
Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively. The consolidated
average number of table games in operation during the six months ended June 30, 
2003 was 65, of which Fitzgeralds Tunica accounted for 34, or 52.3%, Fitzgeralds
Black Hawk accounted for 6, or 9.2%, and Fitzgeralds Las Vegas accounted for 25,
or 38.5%. The consolidated average win per table game per day during the six    
months ended June 30, 2003 was approximately $752, with an average of           
approximately $679, $288, and $960 at Fitzgeralds Tunica, Fitzgeralds Black Hawk
and Fitzgeralds Las Vegas, respectively,                                        

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compared to the consolidated average win per table game per day of $779 for the 
six months ended June 30, 2002 with an average of approximately $778, $320 and  
$896 at Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,   
respectively. With respect to Fitzgeralds Black Hawk the maximum wager is       
limited to $5.00.                                                               

       Consolidated room revenues for the six months ended June 30, 2003 was
$7,384,000, or 7.5% of consolidated gross revenues, compared to $8,027,000, or  
7.8% of consolidated gross revenues for the six months ended June 30, 2002. Of  
this amount, Fitzgeralds Tunica accounted for $3,887,000, or 52.6%, with 507    
rooms and Fitzgeralds Las Vegas accounted for $3,497,000, or 47.4%, with 638    
rooms, compared to $4,161,000, or 51.8%, with 507 rooms at Fitzgeralds Tunica   
and $3,866,000, or 48.2%, with 638 rooms at Fitzgeralds Las Vegas during the six
months ended June 30, 2002. During the six months ended June 30, 2003, at       
Fitzgeralds Tunica the average daily rate was $47 and the occupancy rate was    
91.3% and at Fitzgeralds Las Vegas the average daily rate was $37 and the       
occupancy rate was 81.5%, compared to $49 and 93.8%, respectively, at           
Fitzgeralds Tunica and $37 and 89.1%, respectively, at Fitzgeralds Las Vegas    
during the six months ended June 30, 2002.                                      

       Consolidated food and beverage revenues for the six months ended June
30, 2003 amounted to $9,616,000, or 9.9% of consolidated gross revenues,        
compared to $9,983,000, or 9.7% of consolidated gross revenues for the six      
months ended June 30, 2002. Of this amount, Fitzgeralds Tunica accounted for    
$4,637,000, or 48.2%, Fitzgeralds Black Hawk accounted for $990,000, or 10.3%   
and Fitzgeralds Las Vegas accounted for $3,989,000, or 41.5%, compared to       
$4,790,000, or 48.0%, $959,000, or 9.6%, and $4,234,000, or 42.4% at Fitzgeralds
Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively, during  
the six months ended June 30, 2002.                                             

   Other consolidated revenues consisted primarily of commission and
retail income and totaled approximately $1,634,000, or 1.7% of consolidated     
gross revenues for the six months ended June 30, 2003, compared to $1,866,000,  
or 1.8% of consolidated gross revenues for the six months ended June 30, 2002.  
Of this amount, Fitzgeralds Tunica accounted for $658,000 or 40.3%, Fitzgeralds 
Black Hawk accounted for approximately $127,000 or 7.8%, and Fitzgeralds Las    
Vegas accounted for $849,000, or 51.9% during the six months ended June 30,     
2003, compared to $722,000, or 38.7%, $117,000, or 6.2%, and $1,027,000, or     
55.1% at Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,  
respectively, during the six months ended June 30, 2002.                        

    Consolidated promotional allowances included in consolidated gross
revenues for the six months ended June 30, 2003 were $11,162,000 or 11.4% of    
consolidated gross revenues compared to $11,878,000 or 11.6% of consolidated    
gross revenues during the six months ended June 30, 2002. Of this amount,       
Fitzgeralds Tunica accounted for $6,768,000, or 60.7%, Fitzgeralds Black Hawk   
accounted for $1,554,000, or 13.9%, and Fitzgeralds Las Vegas accounted for     
$2,840,000, or 25.4% during the six months ended June 30, 2003, compared to     
$7,407,000, or 62.3%, $1,576,000, or 13.3%, and $2,895,000, or 24.4% at         
Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,           
respectively, during the six months ended June 30, 2002. The decline in         
promotional allowances is directly associated with the decline in casino        
revenues. The most substantial portion of the decline in promotional allowances 
comes from reduced complimentaries to our casino guests.                        

      Consolidated casino operating expenses for the six months ended June
30, 2003 were $32,171,000, or 33.0% of consolidated gross revenues and 40.7% of 
consolidated casino revenues, compared to $35,302,000, or 34.4% of consolidated 
gross revenues and 42.6% of consolidated casino revenues for the six months     
ended June 30, 2002. For the six months                                         

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ended June 30, 2003 and June 30, 2002, these expenses were primarily comprised  
of salaries, wages and benefits, and operating expenses of the casinos. Of the  
consolidated casino operating expenses, Fitzgeralds Tunica accounted for        
$18,531,000, or 57.6%, Fitzgeralds Black Hawk accounted for $5,469,000, or      
17.0%, and Fitzgeralds Las Vegas accounted for $8,171,000, or 25.4% during the  
six months ended June 30, 2003, compared to $19,773,000 or 56.0%, $6,279,000 or 
17.8% and $9,250,000 or 26.2% at Fitzgeralds Tunica, Fitzgeralds Black Hawk and 
Fitzgeralds Las Vegas, respectively, during the six months ended June 30, 2002. 
The decline in casino operating expenses is the result of lower slot machine    
participation and lease expenses of $573,000, lower payroll and related expenses
of $319,000, lower progressive expenses of $228,000, lower casino promotional   
expenses of $454,000 and lower cost of complimentaries of $669,000.             

         Consolidated rooms expenses for the six months ended June 30, 2003 were
$3,187,000, or 3.3% of consolidated gross revenues, compared to $3,632,000, or  
3.5% of consolidated gross revenues during the six months ended June 30, 2002.  
These expenses were primarily comprised of salaries, wages and benefits, and    
operating expenses of the hotels. Of the consolidated rooms operating expenses, 
Fitzgeralds Tunica accounted for $1,263,000 or 39.6% and Fitzgeralds Las Vegas  
accounted for $1,924,000 or 60.4% during the six months ended June 30, 2003,    
compared to $1,641,000 or 45.2% and $1,991,000 or 54.8% at Fitzgeralds Tunica   
and Fitzgeralds Las Vegas, respectively, during the six months ended June 30,   
2002. Room expenses were generally lower in the six-month period ended June 30, 
2003, compared to the same period in 2002 due to lower room occupancies at      
both Fitzgeralds Tunica and Fitzgeralds Las Vegas.                              

       Consolidated food and beverage expenses for the six months ended June
30, 2003, were $5,062,000, or 5.2% of consolidated gross revenues, compared to  
$5,714,000, or 5.6% of consolidated gross revenues during the six months ended  
June 30, 2002. Of the consolidated food and beverage expenses, Fitzgeralds      
Tunica accounted for $1,327,000, or 26.2%, Fitzgeralds Black Hawk accounted for 
$548,000, or 10.8% and Fitzgeralds Las Vegas accounted for $3,187,000, or 63.0% 
during the six months ended June 30, 2003, compared to $1,473,000, or 25.8%,    
$542,000, or 9.5% and $3,699,000, or 64.7% at Fitzgeralds Tunica, Fitzgeralds   
Black Hawk and Fitzgeralds Las Vegas, respectively, during the six months ended 
June 30, 2002. The primary decline in food and beverage expenses comes from     
reduced labor costs and lower costs of sales.                                   

       Consolidated gaming taxes totaled $9,035,000, or 9.3% of consolidated
gross revenues and 11.4% of consolidated casino revenues for the six months     
ended June 30, 2003, compared to $9,799,000, or 9.5% of consolidated gross      
revenues and 11.8% of consolidated casino revenues during the six months ended  
June 30, 2002. During the six months ended June 30, 2003, Fitzgeralds Tunica    
accounted for $4,927,000, or 54.5%, Fitzgeralds Black Hawk accounted for        
$2,646,000, or 29.3%, and Fitzgeralds Las Vegas accounted for $1,462,000, or    
16.2%, compared to $5,433,000, or 55.4%, $2,845,000, or 29.1% and $1,521,000, or
15.5% at Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,  
respectively, during the six months ended June 30, 2002. The decline in gaming  
taxes is directly associated with the decline in casino revenues. Pursuant to   
new legislation signed into law by the Governor of Nevada on July 23, 2003, the 
license fees on the number of gaming devices operated has been increased        
effective immediately. The tax on gross revenues will be increased effective    
August 1, 2003 and the range of events covered by the casino entertainment tax  
will be expanded effective September 1, 2003. Fitzgeralds Las Vegas will also   
become subject to a payroll tax based on the wages paid to its employees        
effective October 1, 2003.                                                      

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        Consolidated advertising and promotion expenses totaled $6,544,000, or
6.7% of consolidated gross revenues for the six months ended June 30, 2003,     
compared to $6,951,000, or 6.8% of consolidated gross revenues during the six   
months ended June 30, 2002. Fitzgeralds Tunica accounted for $2,724,000, or     
41.6%, Fitzgeralds Black Hawk accounted for $1,341,000, or 20.5%, and           
Fitzgeralds Las Vegas accounted for $2,479,000 or 37.9%, respectively, during   
the six months ended June 30, 2003, compared to $2,909,000, or 41.8%,           
$1,575,000, or 22.7% and $2,467,000, or 35.5% at Fitzgeralds Tunica, Fitzgeralds
Black Hawk and Fitzgeralds Las Vegas, respectively, during the six months ended 
June 30, 2002.                                                                  

     Consolidated general and administrative expenses for the six months
ended June 30, 2003 were $13,482,000, or 13.8% of consolidated gross revenues,  
compared to $12,814,000, or 12.5% for the six months ended June 30, 2002. During
the six months ended June 30, 2003, Fitzgeralds Tunica accounted for $5,418,000,
or 40.2%, Fitzgeralds Black Hawk accounted for $2,504,000, or 18.6%, and        
Fitzgeralds Las Vegas accounted for $5,538,000, or 41.0%, compared to           
$4,971,000, or 38.8%, $2,193,000, or 17.1% and $5,527,000, or 43.1% at          
Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,           
respectively, for the six months ended June 30, 2002. Also, unallocated         
corporate expenses accounted for $22,000 and $123,000 during the six months     
ended June 30, 2003 and 2002, respectively.                                     

     Consolidated depreciation and amortization for the six months ended
June 30, 2003 were approximately $7,362,000, or 7.5% of consolidated gross      
revenues, compared to $6,880,000, or 6.7% of consolidated gross revenues during 
the six months ended June 30, 2002. Fitzgeralds Tunica accounted for $3,833,000,
or 52.1%, Fitzgeralds Black Hawk accounted for $823,000, or 11.2%, and          
Fitzgeralds Las Vegas accounted for $1,374,000 or 18.6% during the six months   
ended June 30, 2003, compared to $3,615,000, or 52.5%, $727,000, or 10.6% and   
$1,265,000, or 18.4% at Fitzgeralds Tunica, Fitzgeralds Black Hawk and          
Fitzgeralds Las Vegas, respectively, during the six months ended June 30, 2002. 
Corporate amortization of deferred financing costs and the discount on the Notes
accounted for $1,332,000, or 18.1% of consolidated depreciation and amortization
during the six months ended June 30, 2003 compared to $1,273,000, or 18.5%      
during the six months ended June 30, 2002. Of the consolidated depreciation and 
amortization expense, $5,233,000, or 71.1%, is depreciation expense, and        
$2,129,000, or 28.9% is amortization expense during the six months ended June   
30, 2003, compared to $4,810,000, or 69.9%, $2,070,000, or 30.1%, respectively, 
during the six months ended June 30, 2002.                                      

      Consolidated operating income for the six months ended June 30, 2003
was $8,786,000, or 9.0% of consolidated gross revenues compared to $8,900,000,  
or 8.6% of consolidated gross revenues during the six months ended June 30,     
2002. Fitzgeralds Tunica accounted for operating income of $7,439,000, or 84.7%,
Fitzgeralds Black Hawk accounted for operating income of $2,790,000, or 31.7%   
and Fitzgeralds Las Vegas accounted for an operating loss of $89,000, or (1.0)% 
for the six months ended June 30, 2003, compared to $7,939,000, or 89.2%,       
$2,788,000, or 31.3%, an operating loss of $419,000, or (4.7)% at Fitzgeralds   
Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively, for the 
six months ended June 30, 2002. The unallocated corporate loss principally for  
amortization was $1,354,000 or (15.4)% of consolidated operating income for the 
six months ended June 30, 2003 compared to $1,408,000, or (15.8)% for the six   
months ended June 30, 2002.                                                     

     Consolidated net interest expense for the six months ended June 30,
2003 was $8,821,000, or 9.0% of consolidated gross revenues compared to         
$9,047,000, or 8.8% of                                                          

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consolidated gross revenues during the six months ended June 30, 2002.          
Fitzgeralds Tunica accounted for interest income of $7,000 and Fitzgeralds Las  
Vegas accounted for net interest expense of $10,000 during the six months ended 
June 30, 2003, compared to net interest income of $14,000 at Fitzgeralds Tunica,
net interest income of $5,000 at Fitzgeralds Black Hawk and net interest expense
of $9,000 at Fitzgeralds Las Vegas during the six months ended June 30, 2002.   
The unallocated corporate net interest expense primarily associated with the    
Company's Notes was $8,818,000 during the six months ended June 30, 2003        
compared to $9,057,000 during the six months ended June 30, 2002.               

       As a result of the foregoing, the Company realized a consolidated net
loss of $29,000 for the six months ended June 30, 2003, compared to a           
consolidated net loss of $174,000 for the six months ended June 30, 2002.       
Fitzgeralds Tunica accounted for net income of $7,466,000, Fitzgeralds Black    
Hawk accounted for net income of $2,795,000 and Fitzgeralds Las Vegas accounted 
for a net loss of $99,000 during the six months ended June 30, 2003, compared to
$7,959,000, $2,787,000, and a net loss of $427,000 at Fitzgeralds Tunica,       
Fitzgeralds Black Hawk and Fitzgeralds Las Vegas respectively, during the six   
months ended June 30, 2002. The unallocated loss at the corporate level was     
$10,191,000 and $10,493,000 for the six months ended June 30, 2003 and 2002,    
respectively.                                                                   

     EBITDA (defined as earnings from operations before interest, taxes,
depreciation and amortization) for the three and six months ended June 30, 2003 
was $7,145,000 and $16,148,000, respectively, compared to $6,904,000 and        
$15,780,000, respectively, for the three and six months ended June 30, 2002, an 
improvement of approximately $241,000 and $368,000, respectively. EBITDA at     
Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas were       
$4,820,000, $1,971,000 and $378,000, respectively, for the three months ended   
June 30, 2003, compared to $5,146,000, $1,893,000 and a negative $11,000 at     
Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,           
respectively, for the three months ended June 30, 2002. Fitzgeralds Tunica      
accounted for $11,272,000, Fitzgeralds Black Hawk accounted for $3,614,000 and  
Fitzgeralds Las Vegas accounted for $1,284,000 during the six months ended June 
30, 2003, compared to $11,554,000, $3,516,000 and $846,000 at Fitzgeralds       
Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively, during  
the six months ended June 30, 2002. EBITDA is presented solely as a supplemental
disclosure because management believes that it is a widely used measure of      
operating performance in the gaming industry, and a principal basis for         
valuation of gaming companies. Other companies may calculate EBITDA differently.
Management uses EBITDA as a measure of the Company's operating performance.     
EBITDA should be not construed as an alternative to operating income, as an     
indicator of the Company's operating performance, or as an alternative to cash  
flows from operating activities, as a measure of liquidity, or as any other     
measure determined in accordance with generally accepted accounting principles. 
The Company has significant uses of cash including capital expenditures,        
interest payments, taxes and debt principal repayments, which are not reflected 
in EBITDA. A reconciliation of operating income/(loss) to EBITDA is included in 
the Consolidated Statements of Operations Summary Information.                  

LIQUIDITY AND CAPITAL RESOURCES                                                 

At June 30, 2003, the Company had cash and cash equivalents of
approximately $16,135,000. Cash and cash equivalents included $2,435,000 at the 
Company, $7,288,000 at Fitzgeralds Tunica, $2,331,000 at Fitzgeralds Black Hawk 
and $4,081,000 at Fitzgeralds Las Vegas.                                        

       The Company has met its capital requirements to date through net cash
from operations. For the six months ended June 30, 2003, net cash provided by   
operating activities totaled approximately $5,340,000 and cash used by investing
activities totaled approximately $3,703,000. The Company invested $3,487,000    
primarily for gaming and non-gaming equipment and restricted cash in the amount 
of $250,000 as collateral for a letter of credit associated with worker's       
compensation insurance. For the six months ended                                

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June 30, 2002, cash provided by operating activities totaled approximately      
$6,280,000 and cash used by investing activities totaled approximately $137,000.
The Company for the six months ended June 30, 2002, invested $2,735,000         
primarily for gaming and non-gaming equipment and $986,000 for the payment of   
professional fees related to the acquisition. In addition, the Company in the   
six month period ended June 30, 2002 received $3,800,000 from Fitzgeralds Gaming
Corporation, seller of the assets and certain liabilities of the three          
Fitzgeralds properties, as a purchase price adjustment to the acquisition. For  
the six months ended June 30, 2003, cash used in financing activities totaled   
$1,486,000. The primary financing activities were $2,089,000 paid to BDI        
pursuant to the Company's management agreement with BDI and $700,000 received   
from BDI in satisfaction of principal on an outstanding note. For the six months
ended June 30, 2002, cash used in financing activities totaled $6,723,000. The  
primary financing activities were $4,508,000 repaid on the Company's credit     
facility, $1,084,000 expended for professional fees related to the issuance of  
the Notes, $1,066,000 paid to BDI pursuant to the Company's management agreement
with BDI.                                                                       

      Management believes that the Company's cash flow from operations and
its current lines of credit will be adequate to meet the Company's anticipated  
future requirements for working capital, its capital expenditures and scheduled 
payments of interest and principal on the Notes and other permitted indebtedness
for the year 2003. If necessary and to the extent permitted under the Indenture 
for the Notes, the Company will seek additional financing through borrowings and
debt or equity financing. 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. In addition, there is no   
assurance that the Company's estimate of its reasonably anticipated liquidity   
needs is accurate or that unforeseen events will not occur, resulting in the    
need to raise additional funds.                                                 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS                                       

In April 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 145 ("SFAS 145"). Among other   
matters, SFAS 145 addresses the presentation for gains and losses on early      
retirements of debt in the statement of operations. SFAS 145 is effective for   
fiscal years beginning after May 15, 2003. Adoption of SFAS 145 did not have a  
material impact on the Company's financial condition or results of operations.  

        In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure        
Requirements for Guarantees, Including Guarantees of Indebtedness of Others."   
FIN 45 elaborates on the disclosures to be made by a guarantor in its interim   
and annual financial statement about its obligations under certain guarantees   
that it has issued. It also clarifies (for guarantees issued after January 1,   
2003) that a guarantor is required to recognize at the inception of a guarantee,
a liability for the fair value of the obligations undertaken in issuing the     
guarantee. At June 30, 2003, the Company did not have any guarantees outside of 
its consolidated group. Adoption of FIN 45 did not have a material impact on the
Company's financial condition or results of operations.                         

       In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities."
FIN 46 addresses the requirements for business enterprises to consolidate       
related entities in which they are determined to be the primary economic        
beneficiary as a result of their variable                                       

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economic interests. FIN 46 is intended to provide guidance in judging multiple  
economic interests in an entity and in determining the primary beneficiary. FIN 
46 outlines disclosure requirements for Variable Interest Entities ("VIEs") in  
existence prior to January 31, 2003, and outlines consolidation requirement for 
VIEs created after January 31, 2003. The Company has reviewed its major         
relationships and its overall economic interests with other companies consisting
of related parties, companies in which it has an equity position and other      
suppliers to determine the extent of its variable economic interest in these    
parties. The review has not resulted in a determination that the Company would  
be judged to be the primary economic beneficiary in any material relationships, 
or that any material entities would be judged to be VIEs of the Company. The    
Company believes it has appropriately reported the economic impact and its share
of risks of its commercial relationships through its equity accounting along    
with appropriate disclosure of its commitments.                                 

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, 
2002.                                                                           

ITEM 4.  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 Commission's rules and forms. 
There have been no significant changes in the Company's internal controls or in 
other factors which could significantly affect internal controls subsequent to  
the date the Company carried out its evaluation.                                

 PART II OTHER INFORMATION
ITEM 1.  LEGAL PROCEEDINGS                                                      

        On June 27, 2003, a complaint was filed in the U.S. District Court for
the Northern District of Mississippi against several Tunica-area casino owners  
and operators, including Fitzgeralds Tunica.  The plaintiffs claim that the     
defendants conspired to agree not to enter into any advertising or other        
agreements with the plaintiffs, in violation of federal and state antitrust     
laws, as well as various other tort and contract claims.  The plaintiffs are    
seeking treble, compensatory and punitive damages totaling approximately $33.0  
million, plus interest and attorney's fees.  The Company intends to vigorously  
defend against this lawsuit.  However, it is too early to determine the outcome 
and the effect, if any, on the Company's financial position and results of      
operations.                                                                     

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                       

(a)  The following exhibits are filed as part of this report:                   

Exhibit No.       Description of Document                                       

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.                    

35

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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.         

(b)        The following reports on Form 8-K filed during the six months ended  
June 30, 2003:                                            

On May 8, 2003, the Company filed a report on Form 8-K under Items 7, 9 and 12  
to furnish a press release announcing the Company's financial results for its   
first quarter ended March 31, 2003.                                             

36

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.                           

MAJESTIC INVESTOR HOLDINGS, LLC                                                 

By:     /s/ Don H. Barden                                        August 14, 2003
-----------------------------------------------------                   
Don H. Barden, Member, Chairman, President and Chief Executive Officer  

By:     /s/ Jon S. Bennett                                       August 14, 2003
-----------------------------------------------------                   
Jon S. Bennett, Vice President and Chief Financial Officer              
(Principal Financial and Accounting Officer)                            

MAJESTIC INVESTOR CAPITAL CORP.                                                 

By:     /s/ Don H. Barden                                        August 14, 2003
-----------------------------------------------------                   
Don H. Barden, Chairman, President and Chief Executive Officer          

By:     /s/ Jon S. Bennett                                       August 14, 2003
-----------------------------------------------------                   
Jon S. Bennett, Vice President and Chief Financial Officer              
(Principal Financial and Accounting Officer)                            

37

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 EXHIBIT INDEX

Exhibit No.       Description of Document                                       

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.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	11/30/05	11
	11/30/04	11
	10/1/03	8	33
	9/1/03	8	33
Filed on:	8/14/03	39
	8/1/03	8	33
	7/23/03	8	33
For Period End:	6/30/03	1	38
	6/27/03	9	37
	5/15/03	7	36	10-Q
	5/8/03	38		8-K
	3/31/03	14	38	10-K, 10-Q
	3/17/03	14
	1/31/03	7	37
	1/1/03	7	36
	12/31/02	3	37	10-K
	12/17/02	8
	12/12/02	14
	12/6/02	9
	11/30/02	11
	9/6/02	11		8-K
	8/8/02	11		424B3, 8-K
	6/30/02	2	36	10-Q
	5/31/02	10	11
	4/6/02	11
	4/5/02	11
	12/7/01	23
	12/6/01	9	14
	9/19/01	14
	9/14/01	6	23
				List all Filings

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Filing Submission 0000950134-03-011879 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Majestic Investor Capital Corp, et al. – ‘10-Q’ for 6/30/03

On: Thursday, 8/14/03, at 4:31pm ET · For: 6/30/03 · Accession #: 950134-3-11879 · File #s: 333-81584, -04

Previous ‘10-Q’: ‘10-Q’ on 5/15/03 for 3/31/03 · Latest ‘10-Q’: This Filing

Quarterly Report — Form 10-QFiling Table of Contents

10-Q — Quarterly ReportDocument Table of Contents

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Quarterly Report — Form 10-Q
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