Jacobs Entertainment 10-Q 2007 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 333-88242

JACOBS ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Delaware	34-1959351
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
17301 West Colfax Ave., Suite 250,
Golden, Colorado	80401
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (303) 215-5200

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 such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer x

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

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

Class	Outstanding as of August 7, 2007
Class A Common Stock, $.01 par value	1,320 shares
Class B Common Stock, $.01 par value	180 shares

Jacobs Entertainment, Inc.

Index

PART I.		FINANCIAL INFORMATION
	Item 1.	Financial Statements:
		Unaudited Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006
		Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006
		Unaudited Condensed Consolidated Statements of Stockholder’s Equity for the year ended December 31, 2006 and the six months ended June 30, 2007
		Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006
		Notes to Unaudited Condensed Consolidated Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk
	Item 4.	Controls and Procedures
PART II.		OTHER INFORMATION
	Item 1.	Legal Proceedings
	Item 1A.	Risk Factors
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3.	Defaults Upon Senior Securities
	Item 4.	Submission of Matters to a Vote of Security Holders
	Item 5.	Other Information
	Item 6.	Exhibits
SIGNATURES
EXHIBIT INDEX

Part I. FINANCIAL INFORMATION

Item 1.     Financial Statements.

JACOBS ENTERTAINMENT, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

	June 30, 2007			December 31, 2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	23,221		$	24,101
Restricted cash	5,848			951
Accounts receivable, net	3,562			4,512
Due from affiliate				316
Inventory	3,114			2,572
Prepaid expenses and other current assets	5,134			2,821
Total current assets	40,879			35,273
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements	56,038			55,822
Building and improvements	172,508			161,533
Equipment, furniture and fixtures	73,850			61,010
Leasehold improvements	2,428			2,426
Construction in progress	981			10,262
	305,805			291,053
Less accumulated depreciation	(62,472		)	(55,119		)
Property, plant and equipment, net	243,333			235,934
OTHER ASSETS:
Goodwill	39,973			36,674
Identifiable intangible assets, net	8,276			8,500
Debt issue costs, net	9,000			9,369
Investment in equity securities	12,530			9,942
Other assets	1,766			1,869
TOTAL	$	355,757		$	337,561
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	23,068		$	23,075
Gaming taxes payable	2,175			3,191
Interest payable	1,431			1,368
Distributions payable				1,000
Due to affiliate	100
Current portion of long-term debt and capital lease obligations	1,268			1,297
Total current liabilities	28,042			29,931
Long-term debt and capital lease obligations	288,654			275,767
Other liabilities	581			473
Total liabilities	317,277			306,171
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDER’S EQUITY:
Class A Common stock $.01 par value; 1,800 shares authorized, 1,320 issued and outstanding as of June 30, 2007 and December 31, 2006	—			—
Class B Common stock $.01 par value; 200 shares authorized, 180 issued and outstanding as of June 30, 2007 and December 31, 2006	—			—
Additional paid-in capital	32,522			32,522
Retained earnings (accumulated deficit)	1,372			(3,131		)
Accumulated other comprehensive income	4,586			1,999
Total stockholder’s equity	38,480			31,390
TOTAL	$	355,757		$	337,561

See notes to unaudited condensed consolidated financial statements.

3

JACOBS ENTERTAINMENT, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
REVENUES
Gaming:
Casino	$	36,893		$	28,800		$	71,393		$	58,243
Truck stop	14,923			14,503			31,077			31,579
Pari-mutuel	11,184			10,615			21,044			19,679
Food and beverage	7,638			5,620			14,348			11,147
Convenience store — fuel	20,840			20,089			38,521			37,206
Convenience store — other	2,751			2,466			5,249			4,854
Hotel	1,203			586			2,113			1,097
Other	1,385			985			2,498			1,659
Total revenues	96,817			83,664			186,243			165,464
Less: Promotional allowances	(7,753		)	(6,387		)	(14,911		)	(12,917		)
Net revenues	89,064			77,277			171,332			152,547
COSTS AND EXPENSES
Gaming:
Casino	13,295			10,124			25,406			20,654
Truck stop	8,967			8,151			18,174			16,993
Pari-mutuel	8,821			8,200			16,190			15,470
Food and beverage	4,063			2,969			7,659			5,615
Convenience store — fuel	19,673			19,234			36,351			35,430
Convenience store — other	3,664			3,233			6,993			6,384
Hotel	277			82			520			157
Marketing, general and administrative	16,529			13,917			33,371			25,714
Depreciation and amortization	4,403			3,222			8,373			6,368
Total costs and expenses	79,692			69,132			153,037			132,785
OPERATING INCOME	9,372			8,145			18,295			19,762
Interest income	81			99			158			148
Interest expense, net of amounts capitalized	(7,089		)	(12,206		)	(13,850		)	(18,180		)
Pre-payment penalties, tender and consent costs				(9,321		)				(9,321		)
NET INCOME (LOSS)	$	2,364		$	(13,283	)	$	4,603		$	(7,591	)

See notes to unaudited condensed consolidated financial statements.

4

JACOBS ENTERTAINMENT, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(Dollars in Thousands)

	Common Stock			Additiona1			Retained Earnings			Accumulated Other
	Class A	Class B		Paid-in			(Accumulated			Comprehensive
	Shares	Shares	Amount*	Capital			Deficit)			Income		Total
BALANCES, JANUARY 1, 2006	1,320	180	$	$	54,541		$	14,186				$	68,727
Capital contribution				5,685								5,685
Distributions				(27,704		)	(6,501		)			(34,205		)
Comprehensive income (loss):
Net change in fair value of equity securities available-for-sale										$	1,999	1,999
Net loss							(10,816		)			(10,816		)
Total comprehensive loss												(8,817		)
BALANCES, DECEMBER 31, 2006	1,320	180	$	$	32,522		$	(3,131	)	$	1,999	$	31,390
Distributions							(100		)			(100		)
Comprehensive income:
Net change in fair value of equity securities available-for-sale										2,587		2,587
Net income							4,603					4,603
Total comprehensive income												7,190
BALANCES, JUNE 30, 2007	1,320	180	$	$	32,522		$	1,372		$	4,586	$	38,480

*The par value amount of Jacobs Entertainment, Inc. common stock outstanding for the periods presented is less than $500 and is therefore presented as $0 due to rounding.

See notes to unaudited condensed consolidated financial statements.

5

JACOBS ENTERTAINMENT, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	Six Months Ended  June 30,
	2007			2006
OPERATING ACTIVITIES:
Net income (loss)	$	4,603		$	(7,591	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	8,373			6,368
(Gain)/Loss on sale of equipment	(77		)	138
Deferred financing cost amortization and write-off	696			6,702
Note issue discount amortization and write-off				2,189
Note issue premium amortization and write-off				(1,811		)
Other	30
Changes in operating assets and liabilities, net of acquisitions:
Restricted cash	(4,897		)	(3,648		)
Accounts receivable	950			(465		)
Inventory	(542		)	(204		)
Prepaid expenses and other assets	(2,210		)	(2,335		)
Accounts payable and accrued expenses	4,518			5,238
Gaming taxes payable	(1,016		)	(1,301		)
Interest payable	63			(7,146		)
Due from/to affiliate	416			(1,096		)
Net cash provided by (used in) operating activities	10,907			(4,962		)
INVESTING ACTIVITIES:
Additions to property, plant and equipment	(18,900		)	(7,895		)
Proceeds from sale of equipment	129			23
Purchase of device rights	(194		)	(725		)
Acquisitions, net of cash acquired:
Casino				(14,637		)
Truck stops	(4,223		)	(2,289		)
Net cash used in investing activities	(23,188		)	(25,523		)
FINANCING ACTIVITIES:
Proceeds from note issuance				210,000
Payments to obtain financing	(327		)	(9,688		)
Proceeds from long-term debt				40,000
Proceeds from revolving line of credit	15,500			9,191
Payments on long-term debt (including $19,489 paid to related parties in 2006)	(672		)	(171,842		)
Payments on revolving line of credit	(2,000		)	(13,781		)
Distributions to stockholders	(1,100		)	(33,205		)
Net cash provided by financing activities	11,401			30,675
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(880		)	190
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	24,101			23,619
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	23,221		$	23,809
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (including $768 paid to related parties in 2006), net of amounts capitalized of $159 and $0 for the six months ended June 30, 2007 and 2006, respectively	$	13,273		$	17,684
Non-cash investing and financing activities:
Capital contribution exchanged for retirement of note paid by affiliate				$	5,685
Acquisition of property for payables incurred	$	956		$	762
Acquisition of property under capital lease agreements				$	255

See notes to unaudited condensed consolidated financial statements.

6

JACOBS ENTERTAINMENT, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

1.BUSINESS AND ORGANIZATION

Jacobs Entertainment, Inc. (“JEI,” the “Company,” “us,” “our,” or “we”) was formed on April 17, 2001, as a Subchapter S Corporation under the Internal Revenue Code of 1986, as amended, to become a geographically diversified gaming and pari-mutuel wagering company with properties in Colorado, Nevada, Louisiana, and Virginia. Effective January 31, 2007, we became a wholly-owned subsidiary of Jacobs Investments, Inc. (“JII”), which in turn is 50% owned by Jeffrey P. Jacobs, our Chief Executive Officer, and two of his family trusts, and 50% owned by a revocable and an irrevocable trust established by Richard E. Jacobs.  These persons and their affiliates are referred to herein as “Jacobs.”  As of June 30, 2007, we own and operate five casinos through wholly-owned subsidiaries. Our casinos include The Lodge Casino at Black Hawk (“The Lodge”) and the Gilpin Hotel Casino (“Gilpin”), both in Black Hawk, Colorado, the Gold Dust West Casino (“Gold Dust West-Reno”) in Reno, Nevada and the Gold Dust West-Carson City (formerly Piñon Plaza Resort) in Carson City, Nevada.  Additionally, we developed a new casino in Elko, Nevada (“Gold Dust West-Elko”), which opened on March 5, 2007.  JEI also owns and operates 17 truck plaza video gaming facilities in Louisiana through two wholly-owned subsidiaries, Jalou LLC and Jalou II, which are collectively referred to as “Jalou,” “truck stops” or “truck plazas.”  We also receive a percentage of gaming revenue from an additional truck plaza video gaming facility.  Finally, JEI owns and operates a horse racing track with nine satellite wagering facilities in Virginia through a wholly-owned subsidiary, Colonial Holdings, Inc. (“Colonial”).

On June 16, 2006, we acquired three truck plaza video gaming facilities, land and equipment in Louisiana previously owned by Jacobs.  The purchase of these truck plaza video gaming facilities was accounted for as a combination of entities under common control, which is similar to the pooling of interests method of accounting for business combinations.  Accordingly, the accompanying unaudited condensed consolidated 2006 financial statements have been retroactively adjusted to include the operations of the acquired truck plazas from January 1, 2006.  See Note 7 below.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Condensed Consolidated Financial Statements – In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of our financial position as of June 30, 2007 and December 31, 2006, and the results of our operations for the three and six months ended June 30, 2007 and 2006, and our changes in stockholder’s equity for the year ended December 31, 2006 and the six months ended June 30, 2007 and our cash flows for the six months ended June 30, 2007 and 2006.  All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto in our Form 10-K report for the year ended December 31, 2006 filed with the U.S. Securities and Exchange Commission.  Our significant accounting policies are discussed in detail in Note 2 to the financial statements contained in our Form 10-K report.  The results of interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2007.

Reclassifications – In the accompanying unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2006, we have changed the classification of changes in restricted cash balances to present such activity as an operating activity.  We previously presented such changes as an investing activity.  This reclassification has resulted in a $3,648 increase to investing cash flows during the six months ended June 30, 2006 and a corresponding decrease to operating cash flows from the amounts previously reported.  We believe this reclassification is immaterial as it had no impact on our financial position or results of operations.

New Accounting Pronouncements—In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements.”  Statement No. 157 establishes a single definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurements, and requires new disclosures of assets and liabilities measured at fair value based on their level in the hierarchy.  Statement No. 157 is effective for all fiscal years beginning after November 15, 2007 and is to be applied prospectively.  Statement No. 157 is effective for the Company on January 1, 2008. The Company has not yet assessed the impact of Statement No. 157 on our consolidated results of operations, cash flows, or financial position.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FAS 115, which allows entities to choose at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. Statement No. 159 also establishes presentation disclosure requirements designed to draw comparison between entities that elect different measurement attributes for similar assets and liabilities. Statement No. 159 is effective for the Company on January 1, 2008. The Company has not yet assessed the impact of Statement No. 159 on our consolidated results of operations, cash flows, or financial position.

7

3.GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

We test goodwill for impairment as of September 30th each year or when circumstances indicate it is necessary.  Testing compares the estimated fair values of our reporting units to the reporting units’ carrying value.  We consider a variety of factors when estimating the fair value of our reporting units, including estimates about future operating results of each reporting unit, multiples of EBITDA, investment banker market analysis, and recent sales of comparable business units if such information is available to us.  A variety of estimates and judgments about the relevance and comparability of these factors to the reporting units are made.  We believe the carrying value of the goodwill in our reporting units is not impaired.  In addition, we have reassessed the useful lives of our identifiable intangible assets without any change to the previously established amortization periods of such assets.

The change in the carrying amount of goodwill for the six months ended June 30, 2007 is as follows:

Balance as of December 31, 2006	$	36,674
Goodwill acquired during period	3,299
Balance as of June 30, 2007	$	39,973

Identifiable intangible assets as of June 30, 2007 and December 31, 2006, consist of the following:

	Weighted	June 30, 2007						December 31, 2006
	Average Remaining Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable intangible assets:
Revenue rights	44.50	$	6,000	$	660	$	5,340	$	6,000	$	600	$	5,400
Device use rights	2.80	6,858		4,150		2,708		6,664		3,719		2,945
Other	6.62	679		451		228		560		405		155
Total		$	13,537	$	5,261	$	8,276	$	13,224	$	4,724	$	8,500

Aggregate amortization expense of identifiable intangible assets was $256 and $315 for the three months ended June 30, 2007 and 2006, respectively, and $537 and $641 for the six months ended June 30, 2007 and 2006, respectively.

Estimated amortization expense for the years ending December 31:

2007 (remaining 6 months)	$	490
2008	951
2009	906
2010	675
2011	350
Thereafter	4,904
Total	$	8,276

4.SEGMENTS

At June 30, 2007 and 2006, we have four segments representing the geographic regions of our operations.  Each segment is managed separately because of the unique characteristics of its revenue stream and customer base.

We have aggregated our operations into the four segments based on similarities in the nature of the properties’ businesses, customers and regulatory environment in which each property operates. The Colorado segment consists of The Lodge and Gilpin casinos.  Our Nevada segment includes the Gold Dust West-Reno, Gold Dust West-Carson City and Gold Dust West-Elko casinos.  The Louisiana operations consist of Jalou’s truck plaza/video poker facilities, and the Virginia segment consists of Colonial’s pari-mutuel operations and its satellite wagering facilities.

8

The accounting policies of the segments are the same as those described in Note 2 above and those included in our Form 10-K report for the year ended December 31, 2006.  The corporate adjustments and eliminations represent all other income and expenses, and are also presented.  The following segment information is presented after elimination of inter-segment transactions.

As of and for the Three Months Ended June 30, 2007

	Colorado			Nevada			Louisiana			Virginia		Corporate Adjustments and Eliminations			Total
Revenues:
Gaming
Casino	$	26,803		$	10,090										$	36,893
Truck stop							$	14,923							14,923
Pari-mutuel										$	11,184				11,184
Food and beverage	2,638			2,392			1,768			840					7,638
Convenience store — fuel							20,840								20,840
Convenience store — other							2,751								2,751
Hotel	487			716											1,203
Other	228			377			252			528					1,385
Total revenues	30,156			13,575			40,534			12,552					96,817
Less: Promotional allowances	(4,811		)	(1,715		)	(1,227		)						(7,753		)
Net revenues	$	25,345		$	11,860		$	39,307		$	12,552				$	89,064
Depreciation and amortization	$	1,520		$	1,375		$	812		$	527	$	169		$	4,403
Interest income	$	14		$	17		$	20		$	16	$	14		$	81
Interest expense, net of amounts capitalized	$	2,211		$	1,535		$	975		$	152	$	2,216		$	7,089
Net income (loss)	$	4,866		$	(978	)	$	2,791		$	169	$	(4,484	)	$	2,364
EBITDA(1)	$	8,583		$	1,915		$	4,558		$	832	$	(2,113	)	$	13,775
Goodwill	$	6,711		$	9,035		$	24,227							$	39,973
Identifiable intangible assets, net							$	8,276							$	8,276
Property, plant and equipment, net	$	91,216		$	44,710		$	37,651		$	67,263	$	2,493		$	243,333
Total assets	$	112,669		$	62,601		$	82,312		$	78,380	$	19,795		$	355,757
Long-term debt	$	86,972		$	62,068		$	39,030		$	5,694	$	94,890		$	288,654
Capital expenditures	$	2,107		$	3,128		$	744		$	366	$	62		$	6,407

9

As of and for the Six Months Ended June 30, 2007

												Corporate
												Adjustments
												and
	Colorado			Nevada			Louisiana			Virginia		Eliminations			Total
Revenues:
Gaming
Casino	$	52,581		$	18,812										$	71,393
Truck stop							$	31,077							31,077
Pari-mutuel										$	21,044				21,044
Food and beverage	5,043			4,356			3,546			1,403					14,348
Convenience store — fuel							38,521								38,521
Convenience store — other							5,249								5,249
Hotel	955			1,158											2,113
Other	419			726			529			824					2,498
Total revenues	58,998			25,052			78,922			23,271					186,243
Less: Promotional allowances	(9,294		)	(3,346		)	(2,271		)						(14,911		)
Net revenues	$	49,704		$	21,706		$	76,651		$	23,271				$	171,332
Depreciation and amortization	$	2,998		$	2,326		$	1,648		$	1,054	$	347		$	8,373
Interest income	$	26		$	30		$	42		$	30	$	30		$	158
Interest expense, net of amounts capitalized	$	4,423		$	2,903		$	1,944		$	300	$	4,280		$	13,850
Net income (loss)	$	9,440		$	(3,070	)	$	6,673		$	179	$	(8,619	)	$	4,603
EBITDA(1)	$	16,835		$	2,129		$	10,223		$	1,503	$	(4,022	)	$	26,668
Goodwill	$	6,711		$	9,035		$	24,227							$	39,973
Identifiable intangible assets, net							$	8,276							$	8,276
Property, plant and equipment, net	$	91,216		$	44,710		$	37,651		$	67,263	$	2,493		$	243,333
Total assets	$	112,669		$	62,601		$	82,312		$	78,380	$	19,795		$	355,757
Long-term debt	$	86,972		$	62,068		$	39,030		$	5,694	$	94,890		$	288,654
Capital expenditures	$	4,120		$	12,943		$	1,034		$	704	$	99		$	18,900

10

As of and for the Three Months Ended June 30, 2006

(Balance Sheet Data as of December 31, 2006)

	Colorado			Nevada			Louisiana			Virginia		Corporate Adjustments and Eliminations			Total
Revenues
Gaming
Casino	$	23,109		$	5,691										$	28,800
Truck stop							$	14,503							14,503
Pari-mutuel										$	10,615				10,615
Food and beverage	2,479			834			1,558			749					5,620
Convenience store — fuel							20,089								20,089
Convenience store — other							2,466								2,466
Hotel	471			115											586
Other	217			59			191			518					985
Total revenues	26,276			6,699			38,807			11,882					83,664
Less: Promotional allowances	(4,437		)	(1,036		)	(914		)						(6,387		)
Net revenues	$	21,839		$	5,663		$	37,893		$	11,882				$	77,277
Depreciation and amortization	$	1,378		$	406		$	857		$	535	$	46		$	3,222
Interest income	$	12		$	9		$	28		$	16	$	34		$	99
Interest expense, net of amounts capitalized	$	5,944		$	1,814		$	969		$	170	$	3,309		$	12,206
Net income (loss)	$	(837	)	$	(368	)	$	3,114		$	15	$	(15,207	)	$	(13,283	)
EBITDA(1)	$	6,473		$	1,843		$	4,912		$	704	$	(11,886	)	$	2,046
Goodwill	$	6,711		$	9,013		$	20,950							$	36,674
Identifiable intangible assets, net							$	8,500							$	8,500
Property, plant and equipment, net	$	91,557		$	36,973		$	36,940		$	67,717	$	2,747		$	235,934
Total assets	$	111,909		$	53,551		$	79,005		$	73,785	$	19,311		$	337,561
Long-term debt	$	87,255		$	62,191		$	39,054		$	5,727	$	81,540		$	275,767
Capital expenditures	$	1,475		$	632		$	665		$	779	$	338		$	3,889

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As of and for the Six Months Ended June 30, 2006

(Balance Sheet Data as of December 31, 2006)

	Colorado			Nevada			Louisiana			Virginia			Corporate Adjustments and Eliminations			Total
Revenues
Gaming
Casino	$	46,680		$	11,563											$	58,243
Truck stop							$	31,579								31,579
Pari-mutuel										$	19,679					19,679
Food and beverage	5,080			1,643			3,148			1,276						11,147
Convenience store — fuel							37,206									37,206
Convenience store — other							4,854									4,854
Hotel	915			182												1,097
Other	387			85			356			831						1,659
Total revenues	53,062			13,473			77,143			21,786						165,464
Less: Promotional allowances	(8,960		)	(2,123		)	(1,834		)							(12,917		)
Net revenues	$	44,102		$	11,350		$	75,309		$	21,786					$	152,547
Depreciation and amortization	$	2,717		$	788		$	1,680		$	1,047		$	136		$	6,368
Interest income	$	21		$	17		$	53		$	21		$	36		$	148
Interest expense, net of amounts capitalized	$	8,744		$	2,608		$	1,743		$	322		$	4,763		$	18,180
Net income (loss)	$	1,747		$	452		$	8,694		$	(296	)	$	(18,188	)	$	(7,591	)
EBITDA(1)	$	13,187		$	3,831		$	12,064		$	1,052		$	(13,325	)	$	16,809
Goodwill	$	6,711		$	9,013		$	20,950								$	36,674
Identifiable intangible assets, net							$	8,500								$	8,500
Property, plant and equipment, net	$	91,557		$	36,973		$	36,940		$	67,717		$	2,747		$	235,934
Total assets	$	111,909		$	53,551		$	79,005		$	73,785		$	19,311		$	337,561
Long-term debt	$	87,255		$	62,191		$	39,054		$	5,727		$	81,540		$	275,767
Capital expenditures	$	3,456		$	999		$	1,256		$	1,605		$	579		$	7,895

(1)EBITDA (earnings before interest, income taxes, depreciation and amortization) is presented as supplemental information in the tables above and in the discussion of our operating results. EBITDA can be reconciled directly to our condensed consolidated net income (loss) by adding the amounts shown for depreciation, amortization, income taxes and interest to net income (loss). This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States of America, such as net income (loss), nor should it be considered as an indicator of our overall financial performance. Our calculation of EBITDA may be different from the calculation used by other companies and comparability may be limited. Management believes that presentation of a non-GAAP financial measure such as EBITDA is useful because it allows holders of our debt and management to evaluate and compare our operating results from continuing operations from period to period in a meaningful and consistent manner in addition to standard GAAP financial measures. Management internally evaluates the performance of our segments using EBITDA measures as do most analysts following the gaming industry. EBITDA is also a key component of certain financial covenants in our debt agreements.

5.COMMITMENTS AND CONTINGENCIES

Commitments

Colonial has entered into an agreement with a totalisator company which provides wagering services and designs, programs, and manufactures totalisator systems for our pari-mutuel wagering applications.  The basic terms of the agreement state that the totalisator company shall provide totalisator services to Colonial for all wagering held at Colonial’s facilities to 2012, and to provide replacement equipment for existing equipment, at a rate of .385% of handle up to $270,000 in handle.  Handle above $270,000 will be charged a rate of .345%.  The agreement also provides for a minimum charge per calendar year of $210.  In addition, Colonial has entered into agreements with a company which provides broadcasting and simulcasting equipment and services.  The agreements for live racing broadcasting and simulcasting services at the horse racing track, and equipment leases at two of the satellite wagering facilities continue

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until December 31, 2007.  Total expense incurred for totalisator and broadcasting and simulcasting equipment was $286 and $278 for the three months ended June 30, 2007 and 2006, respectively, and $520 and $500 for the six months ended June 30, 2007 and 2006, respectively.

The Company’s operating leases include various land and building leases for certain properties in Nevada, Louisiana and Virginia, leases for office space in Colorado, Louisiana, Virginia and Florida, as well as leases for automobiles and other property and equipment at all locations, expiring at various dates.  Total expense under these non-cancelable operating leases was $740 and $528 during the three months ended June 30, 2007 and 2006, respectively, and $1,464 and $989 for the six months ended June 30, 2007 and 2006, respectively.

Other long-term obligations and commitments at JEI also include the Jacobs Investments Management Co. Inc. (“JIMCO”) management agreement (see Note 6).  In accordance with the amended and restated agreement, total expense related to the JIMCO agreement was $312 and $512 during the three months ended June 30, 2007 and 2006, respectively, and $625 and $625 for the six months ended June 30, 2007 and 2006, respectively.

Additionally, under Louisiana law, video poker machines must be owned by Louisiana residents.  The Jalou truck plaza video gaming facilities pay one dollar per operating video poker machine per day to the third party owner of the machines in order to maintain the machines used in our truck plaza operations, plus $1 per machine annually for the owner’s licensing costs. Total expense under these obligations was $292 and $274 for the three months ended June 30, 2007 and 2006, respectively, and $583 and $522 for the six months ended June 30, 2007 and 2006, respectively.

Contingencies

We are involved in routine litigation arising in the ordinary course of our business pertaining to workers compensation claims, equal opportunity employment issues, or guest injury claims.  All such claims are routinely turned over to our insurance providers.  None of the claims is expected to have a material impact on our financial position, results of operations or cash flows.  We believe these matters are covered by appropriate insurance policies.

During the second quarter of 2007, the Colorado legislature approved a bill banning smoking at Colorado casinos starting January 1, 2008.  We are taking steps to construct climate tempered outdoor sheltered smoking areas at the Lodge and Gilpin as allowed by the new legislation.  We believe there may be financial impacts during the first quarter of 2008; however, we believe that there will not be long term effects.

6.RELATED PARTY TRANSACTIONS

In order to assist us in our efforts to research, develop, perform due diligence on and possibly acquire new gaming opportunities, we entered into an agreement with Premier One Development Company effective October 1, 1997. On May 9, 2000, Premier merged into JIMCO, 82% of which is owned by Jeffrey P. Jacobs and the remaining 18% of which is owned in equal portions by two former directors of Colonial. The agreement was renewed on January 2, 2003 for a period of nine years, at $450 per year, payable on January 15 of each year.  JEI paid $450 in January 2006 for the year’s services by JIMCO.  On June 16, 2006, the agreement was amended and restated effective January 1, 2006 for a period of 20 years, at $1,250 per year payable in two equal installments of $625 January 1st and July 1st each year plus two and one-half percent (2.5%) of budgeted development costs for projects undertaken by us, if certain debt covenant ratios are met.  In accordance with the amended and restated agreement, $625 was paid in January 2007.  Additionally, for the three months and six months ended June 30, 2007, we paid or accrued $0 and $359, respectively, to JIMCO for development projects undertaken by us.

We provide monthly management and accounting services for various truck stops owned by Jacobs.  Charges for these management services totaled $303 and $68 for the three months ended June 30, 2007 and 2006, respectively, and $624 and $119 for the six months ended June 30, 2007 and 2006, respectively. Additionally, we provide shared services such as a branded fuel card that can be used at the truck stops owned both by us and Jacobs, and repair parts purchased by Jacobs from us.  These transactions result in receivables from and payables to our affiliate.  As of June 30, 2007, these transactions resulted in net payables to affiliate totaling $100, and as of December 31, 2006, these transactions resulted in net receivables from affiliate totaling $316.

We have acquired from affiliated parties several options to lease and options to purchase land and certain improvements on the west bank of the Cuyahoga River in Cleveland, Ohio.  We refer to these properties, covering an aggregate of approximately 624,000 square feet of land (14.4 acres) and a building comprised of 47,380 square feet of net rentable space, as the Nautica Properties.  The Nautica Properties consist of six parcels and require aggregate option payments totaling $500 per year.  The option agreements give us the right during the next three years to purchase two parcels and the right to purchase or enter into long-term leases on the other four parcels.  In general, the purchase price of the parcels would be based on independent appraisals of the land and improvement values, if casino gaming were to become legal in Ohio and the Nautica Properties were a licensed gaming venue.  Our Chairman and Chief Executive Officer owns varying interests in five of the six parcels.

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Although we may elect not to exercise the options unless casino gaming opportunities arise, we nonetheless have the right to acquire all or part of the Nautica Properties for other purposes.  If casino gaming is not legal but we decide to exercise our options, the aggregate purchase price would be approximately $6,200 for two parcels and the aggregate annual lease payments on four parcels would be approximately $450.  The purchase price and rent payments would be increased if, in the future, casino gaming became legal in Ohio and a casino is licensed at Nautica.

7.SALE OF DEBT AND RECENT ACQUISITION ACTIVITY

On June 16, 2006, we completed the issuance of senior unsecured notes in the amount of $210,000 bearing interest at 9¾% due June 15, 2014 with interest only payments due each June 15 and December 15, beginning on December 15, 2006.  In conjunction with the closing of these notes, we entered into a new $100,000 senior secured credit facility consisting of: (i) a $40,000 five-year revolving credit facility; (ii) a $40,000 six-year term loan facility; and (iii) a $20,000 six-year delayed draw term loan.  Borrowings under our senior secured credit facility bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the prime rate, as defined, and (2) the federal funds rate plus ½ of 1% or (b) a LIBOR rate for the interest period relevant to such borrowing adjusted for certain costs.  As of June 30, 2007, $26,500 was available on the revolving credit facility.  Proceeds from the senior unsecured notes and the term loan were used to (i) pay off $148,000 aggregate principal amount of our outstanding 117/8% senior secured notes due 2009, along with accrued and unpaid interest of $6,652 and to pay related tender and consent costs of $9,321, (ii) acquire the assets of Piñon Plaza (renamed Gold Dust West-Carson City) in Carson City, Nevada for a purchase price of $15,243 including acquisition costs (see below), (iii) acquire three truck plazas and raw land in Louisiana from an affiliated party for $14,380 and $620, respectively (see below), (iv) acquire two additional truck plazas for a purchase price of $2,566 and $3,456 including acquisition costs (see below), (v) pay a distribution to our stockholders in connection with December 2005 truck plaza acquisitions of $8,825, (vi) pay a distribution to our stockholders of $10,000, (vii) refinance approximately $26,568 aggregate principal amount of existing indebtedness (including $19,489 of subordinated debt held by our stockholders), along with $840 accrued and unpaid interest, (viii) pay related fees and expenses associated with the issuance of approximately $9,688.  Excess uses over the initial borrowings were paid from our cash.  The unsecured portion of our debt is in the form of $210,000 of 9¾% unsecured senior notes that rank equally in right of payment with all of our existing and future unsecured senior indebtedness and senior to any existing and future subordinated indebtedness.  The notes are effectively subordinated to any secured indebtedness (including indebtedness under our senior credit facility) up to the value of the collateral securing such indebtedness.  The notes are guaranteed by our current and future restricted subsidiaries that also guarantee our senior credit facility.

We filed a registration statement (the “Exchange Offer Registration Statement”) with the Securities and Exchange Commission (“SEC”) with respect to the offer to exchange (the “Exchange Offer”) our privately placed senior unsecured notes for identical registered notes.  The Exchange Offer Registration Statement was declared effective by the SEC on October 3, 2006.  The Exchange Offer was concluded on November 21, 2006.

There are many restrictions and covenants placed upon us under both our secured and unsecured indebtedness. For example, among other things, we are required to maintain certain operating performance ratios, our covenants impose various restrictions on us as to the timing of redemptions of our notes, there are various change of control covenants, and there are many other restrictive and operational limitations on us that would be difficult or impossible for us to change.  The occurrence of any one of these events and/or covenant violations to our debt agreements could have a material adverse effect on our business, financial condition, results of operations, prospects and ability to satisfy our obligations under our debt agreements.  We entered into an amendment of our credit agreement which revised certain debt covenant ratios and became effective May 4, 2007.  Essentially, the amendment increases the maximum permitted total leverage ratio, increases the maximum permitted senior secured leverage ratio, decreases the minimum interest coverage ratio and adjusts the test periods all to reflect our current expectations as to forecasted performance. At June 30, 2007, we are in compliance with the revised financial covenants.

On June 16, 2006, with the proceeds of the refinancing described above, we acquired from Jacobs, three truck plaza video gaming facilities for $14,380 and raw land and equipment for $620 to possibly develop a fourth truck plaza video gaming facility.  Two of the three truck plaza video gaming facilities acquired, Jalou Diamond and Jalou of St. Martin are located in Broussard, Louisiana, and the third facility, Jalou Magic, is located in Vinton, Louisiana.  The land and equipment on which we may develop a fourth truck plaza video gaming facility is also located in Vinton, Louisiana.  The acquisitions of the three truck plaza facilities, the raw land and equipment were accounted for as a combination of entities under common control, and as such are reflected for accounting and financial reporting purposes similar to a pooling of interests.  Therefore, the acquisitions have been recorded at Jacobs’ historical cost basis in the assets transferred.  Accordingly, the accompanying unaudited condensed consolidated financial statements have been

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retroactively restated from January 1, 2006 through June 16, 2006 to include the operations of the acquired truck plazas as though the transactions had occurred at January 1, 2006.

A distribution of $14,380 was recorded on the acquisition date as the assets of the entities acquired have been retroactively accounted for in JEI’s financial statements.  Therefore a net distribution of $6,987 (the $14,380 distribution reduced by the $7,393 of net assets acquired) results from the transactions.

The following table summarizes the net assets acquired and liabilities assumed as of June 16, 2006, for the transactions occurring on that date:

	St. Martin		Diamond		Magic		Total
Current assets	$	1,056	$	772	$	641	$	2,469
Property and equipment, net	1,622		1,113		1,688		4,423
Goodwill			628				628
Other assets	86		74		59		219
Identifiable intangible assets	195		127		83		405
Total assets acquired	2,959		2,714		2,471		8,144
Current liabilities assumed	191		384		176		751
Net assets acquired	$	2,768	$	2,330	$	2,295	$	7,393

On June 21, 2006, we acquired from an unaffiliated party the Texas Pelican Truck Plaza (“Vinton”), in Vinton, Louisiana for $2,169, plus estimated acquisition costs of $397.  Additionally, we entered into a lease covering the land, building, furniture, fixtures and equipment used by Vinton in the operation of its video gaming facility, the convenience store, and the food and beverage outlet.  The lease has a five year term with two five year extensions at the option of JEI.  Rentals under the lease are $480 per year for years one through five, $540 per year for years six through ten, and $600 per year for years eleven through fifteen.  JEI has the right to purchase the leased property for $5,000 during the first five year term reduced by a $100 option payment credit, and a $8 credit for each month in which rent has been paid with a maximum credit of $450 irrespective of the number of months paid.  After the first term and through all remaining terms, JEI has the right to purchase the leased property for $5,000.

Under the purchase method of accounting, the total purchase price is allocated to Vinton’s tangible and intangible assets and liabilities based on their estimated fair value as of the acquisition date.  Fair values for property and equipment were based upon a valuation performed. Goodwill resulting from the Vinton transaction is attributable to anticipated future cash flows associated with the acquired entity.  The following table summarizes the allocation of the purchase price to net assets acquired and liabilities assumed as of June 21, 2006, for the purchase of Vinton:

	Vinton
Property and equipment	$	255
Goodwill	2,277
Identifiable intangible assets	305
Total assets acquired	2,837
Current liabilities	61
Long-term liabilities	210
Total liabilities assumed	271
Net assets acquired	$	2,566

On June 25, 2006, we acquired the assets of the Piñon Plaza Resort (“Piñon Plaza”), a division of Capital City Entertainment, Inc. (“CCI”).  In January 2007 we rebranded Piñon Plaza to Gold Dust West-Carson City.  Under the purchase method of accounting, the total purchase price is allocated to Gold Dust West-Carson City’s tangible and intangible assets and liabilities based on their estimated fair value as of the acquisition date.  Fair values for property and equipment have been determined based upon a valuation performed.  Goodwill resulting from the Gold Dust West-Carson City transaction is attributable to anticipated future cash flows associated with the acquired entity.

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The assets purchased included all of the personal property, buildings and improvements used by Gold Dust West-Carson City in the operation of its casino, hotel, bowling alley and RV Park in Carson City, Nevada.  The purchase price for the assets was $14,500 plus $519 for cash on hand at closing and acquisition costs of $224.  Additionally, we entered into a triple net ground lease covering land underlying the assets which began at the closing date of the asset purchase.  The lessor is a family trust affiliated with CCI.  The lease has a ten year term with two ten year extensions at the option of JEI.  Rentals under the lease are $250 per year for years one through five, $300 per year for years six through ten, and a rate based on an appraisal performed by a Member of the Appraisal Institute (“MAI”) of the property during the first and second extension terms.  JEI has the right to purchase the leased land at an MAI appraised value at the end of the first ten year term.  It also has a right of first refusal should the lessor seek to sell the leased land to a third party.

The following table summarizes the allocation of the purchase price to net assets acquired and liabilities assumed as of June 25, 2006, for the purchase of Gold Dust West-Carson City:

	Gold Dust West-Carson City
Current assets	$	679
Property and equipment	14,500
Goodwill	199
Total assets acquired	15,378
Current liabilities assumed	135
Net assets acquired	$	15,243

On July 12, 2006, we acquired from an unaffiliated party the St. Helena Truck Plaza in Amite, Louisiana (“St. Helena”) which includes a truck plaza, convenience store, casino and food and beverage outlet operation for $3,094, plus $200 for cash on hand at closing, $90 for inventory and acquisition costs of $72.

Under the purchase method of accounting, the total purchase price is allocated to St. Helena’s tangible and intangible assets and liabilities based on their estimated fair value as of the acquisition date.  Fair values for property and equipment were based upon a valuation performed. Goodwill resulting from the St. Helena transaction is attributable to anticipated future cash flows associated with the acquired entity.  The following table summarizes the allocation of the purchase price to net assets acquired and liabilities assumed as of July 12, 2006, for the purchase of St. Helena:

	St. Helena
Current assets	$	290
Property and equipment	2,330
Goodwill	444
Identifiable intangible assets	395
Total assets acquired	3,459
Current liabilities	3
Net assets acquired	$	3,456

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

On February 9, 2007, we began operating the convenience store and fuel operations and on March 29, 2007, we acquired Silver Dollar for $4,000 plus acquisition costs of $186.  Silver Dollar will also offer video poker devices once approved by Louisiana gaming regulators.

The following table summarizes the preliminary allocation of the purchase price to net assets acquired as of March 29, 2007, for the purchase of Silver Dollar:

	Silver Dollar
Property and equipment	$	803
Goodwill	3,283
Identifiable intangible assets	100
Total assets acquired	$	4,186

Goodwill resulting from the Silver Dollar transaction is attributable to anticipated future cash flows associated with the acquired entity.  Any change in the fair value of the net assets of Silver Dollar during the purchase price allocation period (generally within one year of the acquisition date) will change the amount of the purchase price allocated to goodwill. The final allocation of the purchase price and its effect on the results of operations may differ significantly from the proforma operating results included herein.

Assuming the acquisitions of Vinton, Gold Dust West-Carson City, St. Helena and Silver Dollar had occurred as of January 1, 2006, our unaudited proforma net revenues, costs and expenses, and net income (loss) would have been as follows:

	Three Months Ended		Three Months Ended			Six Months Ended		Six Months Ended
	June 30, 2007		June 30, 2006			June 30, 2007		June 30, 2006
Net revenues	$	89,064	$	82,933		$	171,332	$	163,949
Costs and expenses	86,700		96,453			166,729		172,024
Net income (loss)	$	2,364	$	(13,520	)	$	4,603	$	(8,075	)

These unaudited proforma results are presented for comparative purposes only.  The proforma results are not necessarily indicative of what our actual results would have been had the acquisitions been completed as of January 1, 2006, nor are they indicative of future operating results.

8.      INVESTMENT IN EQUITY SECURITIES

During 2006, we acquired approximately three percent of the outstanding shares of a publicly-traded company. Other entities affiliated with our two directors also invested in the company, increasing the combined ownership to approximately 13% of its outstanding common shares. Our investment is accounted for as available-for-sale equity securities and has been recorded at fair value in other assets, with unrealized gains recognized as accumulated other comprehensive income.  As of June 30, 2007, the fair value of our investment in this company is $12,530 and unrealized gains included in accumulated other comprehensive income total $4,586. As of December 31, 2006, the fair value was $9,942 and unrealized gains included in accumulated other comprehensive income totaled $1,999.

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9.CONDENSED CONSOLIDATING FINANCIAL INFORMATION

On June 16, 2006, we completed a debt refinancing in the form of secured and unsecured indebtedness.  The secured portion of our indebtedness, which was with a bank syndicate group, consists of a $100,000 senior secured credit facility comprising: (1) a $40,000 six-year term loan facility; (2) a $40,000 five-year revolving credit facility; and (3) a $20,000 six-year delayed draw term loan facility.  The unsecured portion of our debt is in the form of $210,000 of 9¾% unsecured senior notes.  The senior secured credit facility and the unsecured senior notes are both guaranteed by our current and future restricted subsidiaries.  Each subsidiary guarantor is 100% owned by the parent company, all guarantees are full and unconditional and joint and several, and all subsidiaries of JEI guarantee the debt.

The following information sets forth our Condensed Consolidating Balance Sheets as of June 30, 2007 and December 31, 2006, the Condensed Consolidating Statements of Operations for the three and six months ended June 30, 2007 and 2006, and the Condensed Consolidating Statements of Cash Flows for the six months ended June 30, 2007 and 2006 as required by Rule 3-10 of Regulation S-X of the Securities Exchange Act of 1934, as amended.  Investments in our subsidiaries are accounted for on the equity method.  Accordingly, entries necessary to consolidate the Parent Company Issuer and our Subsidiary Guarantors are reflected in the eliminations column.

JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

AS OF JUNE 30, 2007

	Parent
	Company		Subsidiary
	Issuer		Guarantors		Eliminations			Consolidated
ASSETS
Current assets	$	720	$	40,159				$	40,879
Property, plant and equipment, net	2,493		240,840					243,333
Net investment in and advances to subsidiaries	116,866				$	(116,866	)	—
Other long-term assets	16,582		54,963					71,545
Total assets	$	136,661	$	335,962	$	(116,866	)	$	355,757
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities	$	3,248	$	24,794				$	28,042
Long-term debt	94,890		193,764					288,654
Other long-term liabilities	43		538					581
Stockholder’s equity	38,480		116,866		$	(116,866	)	38,480
Total liabilities and stockholder’s equity	$	136,661	$	335,962	$	(116,866	)	$	355,757

AS OF DECEMBER 31, 2006

	Parent
	Company		Subsidiary
	Issuer		Guarantors		Eliminations			Consolidated
ASSETS
Current assets	$	2,534	$	32,739				$	35,273
Property, plant and equipment, net	2,747		233,187					235,934
Net investment in and advances to subsidiaries	98,073				$	(98,073	)	—
Other long-term assets	14,030		52,324					66,354
Total assets	$	117,384	$	318,250	$	(98,073	)	$	337,561
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities	$	4,403	$	25,528				$	29,931
Long-term debt	81,540		194,227					275,767
Other long-term liabilities	51		422					473
Stockholders’ equity	31,390		98,073		$	(98,073	)	31,390
Total liabilities and stockholders’ equity	$	117,384	$	318,250	$	(98,073	)	$	337,561

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JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2007

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	89,064					$	89,064
Costs and expenses	$	(2,282	)	(77,410		)				(79,692		)
Interest expense, net	(1,804		)	(5,204		)				(7,008		)
Equity in earnings of subsidiaries	6,450						$	(6,450	)	—
Net income	$	2,364		$	6,450		$	(6,450	)	$	2,364

FOR THE THREE MONTHS ENDED JUNE 30, 2006

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	77,277					$	77,277
Costs and expenses	$	(2,612	)	(66,520		)				(69,132		)
Interest expense, net	(2,878		)	(9,229		)				(12,107		)
Pre-payment penalties, tender and consent costs	(9,321		)							(9,321		)
Equity in earnings of subsidiaries	1,528						$	(1,528	)	—
Net income (loss)	$	(13,283	)	$	1,528		$	(1,528	)	$	(13,283	)

FOR THE SIX MONTHS ENDED JUNE 30, 2007

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	171,332					$	171,332
Costs and expenses	$	(4,369	)	(148,668		)				(153,037		)
Interest expense, net	(3,461		)	(10,231		)				(13,692		)
Equity in earnings of subsidiaries	12,433						$	(12,433	)	—
Net income	$	4,603		$	12,433		$	(12,433	)	$	4,603

FOR THE SIX MONTHS ENDED JUNE 30, 2006

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	152,547					$	152,547
Costs and expenses	$	(4,140	)	(128,645		)				(132,785		)
Interest expense, net	(3,938		)	(14,094		)				(18,032		)
Pre-payment penalties, tender and consent costs	(9,321		)							(9,321		)
Equity in earnings of subsidiaries	9,808						$	(9,808	)	—
Net income (loss)	$	(7,591	)	$	9,808		$	(9,808	)	$	(7,591	)

19

JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2007

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations	Consolidated
Net cash provided by operating activities	$	10,292		$	615			$	10,907
INVESTING ACTIVITIES:
Additions to property, plant and equipment	(99		)	(18,801		)		(18,900		)
Proceeds from sale of equipment				129				129
Purchase of device rights				(194		)		(194		)
Acquisitions of truck stops, net of cash acquired				(4,223		)		(4,223		)
Net cash used in investing activities	(99		)	(23,089		)		(23,188		)
FINANCING ACTIVITIES:
Payments to obtain financing				(327		)		(327		)
Proceeds from revolving line of credit	15,500							15,500
Payments on long-term debt	(350		)	(322		)		(672		)
Payments on revolving line of credit	(2,000		)					(2,000		)
Net advances to/from subsidiaries	(23,852		)	23,852				—
Distributions to stockholders	(1,100		)					(1,100		)
Net cash provided by (used in) financing activities	(11,802		)	23,203				11,401
Net Increase (Decrease) in Cash and Cash Equivalents	(1,609		)	729				(880		)
Cash and Cash Equivalents — Beginning of Period	1,852			22,249				24,101
Cash and Cash Equivalents — End of Period	$	243		$	22,978			$	23,221

20

JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2006

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations	Consolidated
Net cash provided by (used in) operating activities	$	(5,029	)	$	67			$	(4,962	)
INVESTING ACTIVITIES:
Additions to property, plant and equipment	(583		)	(7,312		)		(7,895		)
Proceeds from sale of equipment				23				23
Purchase of device rights				(725		)		(725		)
Acquisitions, net of cash acquired:
Casino				(14,637		)		(14,637		)
Truck stops				(2,289		)		(2,289		)
Net cash used in investing activities	(583		)	(24,940		)		(25,523		)
FINANCING ACTIVITIES:
Proceeds from note issuance	47,742			162,258				210,000
Payments to obtain financing	(4,147		)	(5,541		)		(9,688		)
Proceeds from long-term debt	34,648			5,352				40,000
Proceeds from revolving line of credit				9,191				9,191
Payments on long-term debt	(41,938		)	(129,904		)		(171,842		)
Payments on revolving line of credit				(13,781		)		(13,781		)
Net advances to/from subsidiaries	3,788			(3,788		)		—
Distributions to stockholders	(33,205		)					(33,205		)
Net cash provided by financing activities	6,888			23,787				30,675
Net Increase (Decrease) in Cash and Cash Equivalents	1,276			(1,086		)		190
Cash and Cash Equivalents — Beginning of Period	688			22,931				23,619
Cash and Cash Equivalents — End of Period	$	1,964		$	21,845			$	23,809

21

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This section discusses the results of our operations for the three and six months ended June 30, 2007 and 2006. We recommend reading the following discussions and analyses in conjunction with our unaudited condensed consolidated financial statements, including the notes and other financial information contained in this Form 10-Q, as well as our audited consolidated financial statements as of December 31, 2006, included in our Form 10-K report filed with the Securities and Exchange Commission (“10-K Report”). Certain statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations constitute “forward-looking statements,” which statements involve risks and uncertainties. In this regard, see the section “Risk Factors” in Item 1A of our 10-K Report.

The historical information should not necessarily be taken as a reliable indicator of our future performance.

TABLE OF CONTENTS TO MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (MD&A)

Description of item
1.	Significant transactions occurring during the six months ended June 30, 2007	22
2.	Overview and discussion of our operations	23
3.	Comparison of our results of operations for the three months ended June 30, 2007 as compared to the three months ended June 30, 2006	25
4.	Comparison of our results of operations for the six months ended June 30, 2007 as compared to the six months ended June 30, 2006	28
5.	EBITDA segment information	31
6.	Liquidity and capital resources	34
7.	Critical accounting policies and estimates	36

1. Significant transactions occurring during the six months ended June 30, 2007

Jacobs Investments, Inc.

Effective January 31, 2007, we became a wholly-owned subsidiary of Jacobs Investments, Inc. (“JII”), which in turn is 50% owned by Jeffrey P. Jacobs, our Chief Executive Officer, and two of his family trusts, and 50% owned by a revocable trust and an irrevocable trust established by Richard E. Jacobs.  This change in ownership had no impact on our financial position or results of operations.

Rebranding of Piñon Plaza in Carson City, Nevada

On June 25, 2006 we acquired the Piñon Plaza Hotel and Casino in Carson City, Nevada.  We have made numerous modifications to the property and on January 24, 2007 we rebranded Piñon Plaza to “Gold Dust West-Carson City.”  We believe these modifications and the rebranding will enhance the operational performance of Gold Dust West-Carson City.

Development and Opening of Gold Dust West-Elko in Elko, Nevada

In 2006, we entered into a land and building lease to develop a new casino in Elko, Nevada (“Gold Dust West-Elko”) that features a 13,000 square-foot casino with approximately 350 Ticket-In Ticket-Out (“TITO”) slot machines and seven table games, as well as a restaurant, sports bar and sports book.  During December 2006, we borrowed $20 million on our delayed draw term loan facility which was utilized to complete this development. The casino opened on March 5, 2007.

Acquisition of Silver Dollar Truck Plaza

On October 4, 2006, we entered into an asset purchase agreement with an unaffiliated party to acquire the Silver Dollar truck plaza in Shreveport, Caddo Parish, Louisiana (“Silver Dollar”), which was under construction.  On January 15, 2007, we agreed with the seller to operate the business and simultaneously assume the terms of its land lease.  On February 9, 2007, we began operating the convenience store and fuel operations and on March 29, 2007, we acquired Silver Dollar for $4.0 million plus acquisition costs of $0.2 million.  Silver Dollar will also offer up to 50 video poker devices once approved by Louisiana gaming regulators, which is expected to be received during the third quarter of 2007.

22

2. Overview and discussion of our operations

We have four segments representing the geographic regions of our operations: Colorado, Nevada, Louisiana and Virginia. Each segment is managed separately because of the unique characteristics of its revenue stream, regulatory environment and customer base.

Our casino properties in Colorado (The Lodge and Gilpin casinos) and Nevada (the Gold Dust West-Reno, Gold Dust West-Carson City and Gold Dust West-Elko casinos) are each managed by a Regional Vice President who reports to our Chief Operating Officer (“COO”) who is located in our Golden, Colorado offices. Further, our 18 video poker truck plaza operations are managed by our Regional Vice President of Louisiana Operations who also reports to our COO. Our COO reports to our President, who is also located in Golden, Colorado.  Our President reports directly to our Chief Executive Officer (“CEO”). Our Virginia racetrack and satellite wagering facilities are managed by our on-site President of Pari-Mutuel Operations, and he also reports directly to our CEO. Our management team conducts monthly video conferencing and teleconferencing calls with our CEO. Through the recent centralization of our operations in Golden, Colorado, we believe we are achieving economies of scale in accounting, human resources, centralized purchasing and other areas. We expect to continue to consolidate several of our other corporate functions as we expand our operations and acquire additional properties.

When we analyze and manage our segments, we focus on several measurements that we believe provide us with the necessary ratios and key performance indicators for us to determine how we are performing versus our competition and against our own internal goals and budgets. We confer monthly and discuss and analyze significant variances in an effort to identify trends and changes in our business. We focus on EBITDA (earnings before interest, taxes, depreciation and amortization) as one of the primary measurements of reviewing and analyzing the operating results of each segment. While we recognize that EBITDA is not a generally accepted accounting principle, (i.e. it is a non-GAAP financial measure), we nonetheless believe it is useful because it allows holders of our debt and management to evaluate and compare operating results from continuing operations from period to period in a meaningful and consistent manner in addition to standard GAAP financial measures. Additionally, most financial analysts following the gaming industry utilize EBITDA as a financial measurement, and when our debt holders (both secured and unsecured) inquire and discuss our operational performance with us, they consistently inquire about our EBITDA performance levels versus the prior year as well as our EBITDA margins versus our competitors. Finally, EBITDA is a key component of certain financial covenants contained in our debt agreements, among other things, and as such it is a critical ingredient that we must watch in order to ensure compliance with our bank credit agreement and our note indenture covenants, measure our historical operating performance, and determine our ability to achieve future growth.

In addition to the above performance measurements, we pay particular attention to our monthly and annual cash flow. Our business is sensitive to shifts in volumes and levels of activity and we find it necessary to watch our cash closely. Every six months (June 15 and December 15) we have a cash interest payment due on our $210 million senior unsecured notes amounting to $10.2 million. Additionally, we have drawn $60 million on our senior secured credit facility with interest due at varying intervals.  As previously discussed, we have a $40 million revolving loan with a bank group on which we can draw as needed in order to facilitate the cash flow we generate from operations. This is generally a function of the timing of generating cash from operations coupled with the amount of cash we need to run the business—i.e., our cash inventory. Presently, we estimate that we require approximately $15 million of cash inventory to operate our properties. We may be able to reduce this amount as we consolidate cash from our various operations. This may help to reduce the amount of borrowings we need to pay interest on our notes and/or to finance operations, which would be another by-product of our goal to centralize our business operations.  See “Liquidity and Capital Resources.”

Colorado

Our Colorado operations consist of The Lodge Casino at Black Hawk (“The Lodge”) and the Gilpin Casino (“Gilpin”), both of which are located in Black Hawk, Colorado. The competitive aspects of the market in Black Hawk continue to be a significant factor in our operations. As a result of the increased level of development activity in Black Hawk over the last three years, there were 10,084 gaming devices in the city at June 30, 2007. At June 30, 2007, we had 1,454 devices in this market (993 at The Lodge and 461 at the Gilpin), which represented approximately 14% of the total devices in the Black Hawk market.

23

Nevada

Our Nevada operations consist of Gold Dust West-Reno, located in Reno, Nevada, which was acquired on January 5, 2001 and Gold Dust West-Carson City, located in Carson City, Nevada, which was acquired on June 25, 2006. Additionally, our newly-developed casino, Gold Dust West-Elko, located in Elko, Nevada, opened on March 5, 2007.  As in Colorado, our Nevada casinos operate in highly competitive markets. With the added competition from Indian Gaming in California, all Northern Nevada casinos are now advertising themselves as “locals’ casinos.”

Louisiana

The Louisiana truck plaza video gaming properties consist of 17 truck plaza gaming facilities located in Louisiana and a share in the gaming revenues of an additional truck plaza.  Each truck plaza features a convenience store, fueling operations, a restaurant and 50 video gaming devices (except our Eunice and Vinton locations which each have 40 video gaming devices, our St. Martin and Diamond locations which have 48 and 47 devices, respectively, and our newly-acquired Silver Dollar that does not yet have any video gaming devices).

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

All video poker activity is reported instantaneously via a computer phone line directly to the Louisiana State Police. The Louisiana truck plazas’ revenues are heavily dependent on meeting the minimum gallons of fuel sales requirements necessary to operate video poker gaming machines in Louisiana. These requirements must be complied with on a quarterly basis. In the event of noncompliance, the Louisiana State Police must turn off a portion of the video poker machines. Management of the Louisiana truck plazas believe that they will continue to meet the fuel sales requirements necessary to operate video poker gaming machines in Louisiana at current levels.

Virginia

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

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

24

3. Comparison of our results of operations for the three months ended June 30, 2007 as compared to the three months ended June 30, 2006.

The following table summarizes our consolidated results of operations for the three months ended June 30, 2007 and 2006 (dollars in thousands):

	Three Months Ended
	June 30,
	2007			2006			$ Change			% Variance
REVENUES
Gaming:
Casino	$	36,893		$	28,800		$	8,093		28.10	%
Truck stop	14,923			14,503			420			2.90	%
Pari-mutuel	11,184			10,615			569			5.36	%
Food and beverage	7,638			5,620			2,018			35.91	%
Convenience store – fuel	20,840			20,089			751			3.74	%
Other	5,339			4,037			1,302			32.25	%
Less: Promotional allowances	(7,753		)	(6,387		)	(1,366		)	21.39	%
Net revenues	89,064			77,277			11,787			15.25	%
COSTS AND EXPENSES
Gaming:
Casino	13,295			10,124			3,171			31.32	%
Truck stop	8,967			8,151			816			10.01	%
Pari-mutuel	8,821			8,200			621			7.57	%
Food and beverage	4,063			2,969			1,094			36.85	%
Convenience store – fuel	19,673			19,234			439			2.28	%
Other	3,941			3,315			626			18.88	%
Marketing, general and administrative	16,529			13,917			2,612			18.77	%
Depreciation and amortization	4,403			3,222			1,181			36.65	%
Total costs and expenses	79,692			69,132			10,560			15.28	%
OPERATING INCOME	9,372			8,145			1,227			15.06	%
Interest expense, net	(7,008		)	(12,107		)	5,099			-42.12	%
Pre-payment penalties, tender and consent costs				(9,321		)	9,321			-100.00	%
NET INCOME (LOSS)	$	2,364		$	(13,283	)	$	15,647		117.80	%

Casino revenues increased $8.1 million or 28% from $28.8 million for the three months ended June 30, 2006 to $36.9 million for the three months ended June 30, 2007.  The increase in casino revenues is a result of increased casino revenues at The Lodge of $3.5 million and Gilpin of $0.2 million.  Additionally, Gold Dust West-Carson City, which was acquired on June 25, 2006, contributed $2.3 million and Gold Dust West-Elko, which opened on March 5, 2007, contributed $2.3 million.  These increases were somewhat offset by a decrease at Gold Dust West-Reno of $0.2 million.  The increase in the casino revenues at our Colorado properties is a result of several factors.  We have expanded capital investments in our slot product over the last year, as well as the completion of the south entrance of The Lodge.  Additionally, City of Black Hawk casino win grew 5% during the second quarter of 2007 compared to the same period of 2006.

Truck stop gaming revenues increased $0.4 million or 3% for the three months ended June 30, 2007 compared to the three months ended June 30, 2006. The acquisitions of the Vinton and St. Helena locations, purchased in June and July 2006, respectively, resulted in increased revenues totaling $1.4 million. This increase is partially offset by a year-over-year decrease of $1.0 million due to increased business levels in the second quarter of 2006 as a result of Hurricanes Katrina and Rita, which hit the Louisiana, Mississippi and Texas Gulf Coast in August and September 2005, respectively, disrupting riverboat and other casino competition in the region.  No such increased business levels existed in 2007.

25

Pari-mutuel revenues increased $0.6 million or 5% from $10.6 million to $11.2 million for the three months ended June 30, 2006 compared to the three months ended June 30, 2007, respectively.  The increase in revenues is primarily attributable to an increase of $0.5 million at the racetrack and off track wagering facilities combined with an increase of $0.1 million in account wagering revenues.

Food and beverage revenues increased $2.0 million or 36% from $5.6 million to $7.6 million for the three months ended June 30, 2006 compared to the three months ended June 30, 2007, respectively.  This increase is attributable to $0.9 million generated by Gold Dust West-Carson City and $0.6 million generated by Gold Dust West-Elko, as well as increases of $0.1 million at The Lodge, $0.2 million at the truck stop facilities, $0.1 million at Colonial and $0.1 million at Gold Dust West-Reno. The increase at the truck stops is attributable to the addition of the Vinton and St. Helena locations in June and July 2006, respectively.

Convenience store-fuel revenues increased $0.8 million or 4% for the three months ended June 30, 2007 compared to the three months ended June 30, 2006.  The addition of the St. Helena and Silver Dollar truck stops in July 2006 and February 2007, respectively, added $2.2 million of fuel revenues. This increase is partially offset by a year-over-year decrease of $1.4 million due to increased business levels in the second quarter of 2006 as a result of Hurricanes Katrina and Rita, which hit the Louisiana, Mississippi and Texas Gulf Coast in August and September 2005, respectively, disrupting riverboat and other casino competition in the region.  No such increased business levels existed in 2007.  The average selling price of fuel increased slightly from $2.78 per gallon in the second quarter of 2006 to $2.79 per gallon in the second quarter of 2007.

Other revenues increased $1.3 million or 32% from $4.0 million for the three months ended June 30, 2006 to $5.3 million for the three months ended June 30, 2007.  The increase is primarily attributable to Gold Dust West-Carson City which was acquired on June 25, 2006 and contributed $0.9 million, and an increase of $0.4 million at the truck stops was primarily due to the Vinton and St. Helena truck stops which were acquired in June and July 2006, respectively.

Promotional allowances increased $1.4 million or 21% from $6.4 million for the three months ended June 30, 2006 to $7.8 million for the three months ended June 30, 2007.  The increase is attributable to an increase in promotional allowances at The Lodge of $0.4 million and the truck stops of $0.3 million, while Gold Dust West-Carson City contributed $0.5 million and Gold Dust West-Elko contributed $0.3 million.  These increases were somewhat offset by a decrease of $0.1 million at Gold Dust West-Reno.

Casino expenses increased $3.2 million or 31% from $10.1 million to $13.3 million for the three months ended June 30, 2006 compared to the three months ended June 30, 2007, respectively.  Of this increase, $1.0 million is due to the addition of Gold Dust West-Carson City and $0.9 million is due to the addition of Gold Dust West-Elko.  Additionally, casino expenses at The Lodge increased by $1.1 million and at the Gilpin by $0.2 million, primarily due to gaming taxes as a result of increased casino revenues.

Truck stop gaming expenses increased $0.8 million or 10% for the three months ended June 30, 2007 compared to the three months ended June 30, 2006.  The 2007 video gaming expenses from the Vinton and St. Helena locations purchased in June and July 2006, respectively, account for an increase of $0.9 million.  This increase is partially offset by a year-over-year decrease of $0.1 million due to increased business levels in the second quarter of 2006 as a result of Hurricanes Katrina and Rita, which hit the Louisiana, Mississippi and Texas Gulf Coast in August and September 2005, respectively, disrupting riverboat and other casino competition in the region.  No such increased business levels existed in 2007.

Pari-mutuel costs and expenses increased $0.6 million or 8% from $8.2 million to $8.8 million for the three months ended June 30, 2006 compared to the three months ended June 30, 2007, respectively.  The increase is primarily attributable to increased amortization of estimated purse expense of $0.3 million combined with increased pari-mutuel taxes and other direct expenses associated with increased pari-mutuel revenues in 2007.

Food and beverage costs and expenses increased $1.1 million or 37% for the three month period ended June 30, 2007 compared to the three month period ended June 30, 2006, and is due to the additions of Gold Dust West-Carson City, Gold Dust West-Elko and the Vinton and St. Helena truck stops.

26

Convenience store-fuel expenses increased $0.4 million or 2% for the three months ended June 30, 2007 compared to the three months ended June 30, 2006.  The addition of the St. Helena and Silver Dollar truck stops in July 2006 and February 2007, respectively, added $2.1 million of fuel expenses. This increase was offset by a year-over-year decrease totaling $1.7 million primarily due to increased business levels during the second quarter of 2006 due to Hurricanes Katrina and Rita, which hit the Louisiana, Mississippi and Texas Gulf Coast in August and September 2005, respectively, disrupting riverboat and other casino competition in the region.  No such increased business levels existed in 2007.  The average cost of fuel remained flat at $2.63 per gallon.

Other costs and expenses increased $0.6 million or 19% for the three months ended June 30, 2007 compared to the three months ended June 30, 2006 and were attributable to the addition of hotel operations at Gold Dust West-Carson City, which was acquired on June 25, 2006, and convenience store-other costs generated by the addition of the St. Helena and Silver Dollar truck stops in July 2006 and February 2007, respectively.

Marketing, general and administrative expenses increased $2.6 million or 19% from $13.9 million to $16.5 million for the three months ended June 30, 2006 compared to the three months ended June 30, 2007, respectively.  This increase is the result of the addition of our Gold Dust West-Carson City casino which accounted for $1.7 million of the increase and our Gold Dust West-Elko casino which accounted for $1.1 million of the increase, as well as increases at Gold Dust West-Reno of $0.1 million, The Lodge of $0.1 million, and truck stops of $0.2 million.  These increases are somewhat offset by decreases of $0.4 million in corporate overhead expenses, $0.1 million at Colonial and $0.1 million at the Gilpin.  The increased marketing costs at our operating units drove increased revenues for all segments.  The increase at the truck stops was primarily due to the addition of office space and additional staff to accommodate expansion.  The decrease in our corporate overhead expenses was the result of an additional accrual totaling $0.2 million during the second quarter of 2006 for management fees to Jacobs Investments Management Co. Inc. in accordance with the amended and restated agreement, $0.3 million of political campaign costs incurred during the second quarter of 2006 and a $0.1 million gain in 2007 on the sale of an airplane, somewhat offset by increases of $0.1 million in labor costs and $0.1 million in other costs and expenses.  The decrease at Colonial is primarily attributable to a one-time accrual for the Virginia Thoroughbred Association’s share of account wagering which occurred during the second quarter of 2006.

Depreciation and amortization expense increased $1.2 million from $3.2 million to $4.4 million for the three months ended June 30, 2006 compared to the three months ended June 30, 2007, respectively.  Of this increase, $0.5 million is attributable to the acquisition of Gold Dust West-Carson City and $0.5 million is attributable to Gold Dust West-Elko. Additionally, The Lodge increased by $0.1 million primarily due to the new south entrance and corporate increased by $0.1 million due to capital asset purchases.

Net interest expense decreased $5.1 million for the three months ended June 30, 2007 compared to the same period of 2006.  As a result of our debt refinancing during the second quarter of 2006, we wrote off $5.7 million in financing fees and $1.9 million of note issue discount, partially offset by the write off of $1.5 million of note issue premium, on the debt refinanced. This net decrease is somewhat offset by an increase in additional debt outstanding during the three months ended June 30, 2007 compared to the three months ended June 30, 2006, partially offset by lower effective interest rates as a result of the refinancing transactions which occurred in June 2006.

Pre-payment penalties, tender and consent costs in the amount of $9.3 million were incurred during the three months ended June 30, 2006.  These costs represent the premium required to purchase the senior secured notes in 2006, prior to their maturity in 2009 and consent solicitation fees and expenses as part of the tender offer for such notes.  See Note 7 of the unaudited condensed consolidated financial statements.  No comparable transaction occurred during 2007.

27

4. Comparison of our results of operations for the six months ended June 30, 2007 as compared to the six months ended June 30, 2006.

The following table summarizes our consolidated results of operations for the six months ended June 30, 2007 and 2006 (dollars in thousands):

	Six Months Ended
	June 30,
	2007			2006			$ Change			% Variance
REVENUES
Gaming:
Casino	$	71,393		$	58,243		$	13,150		22.58	%
Truck stop	31,077			31,579			(502		)	-1.59	%
Pari-mutuel	21,044			19,679			1,365			6.94	%
Food and beverage	14,348			11,147			3,201			28.72	%
Convenience store – fuel	38,521			37,206			1,315			3.53	%
Other	9,860			7,610			2,250			29.57	%
Less: Promotional allowances	(14,911		)	(12,917		)	(1,994		)	15.44	%
Net revenues	171,332			152,547			18,785			12.31	%
COSTS AND EXPENSES
Gaming:
Casino	25,406			20,654			4,752			23.01	%
Truck stop	18,174			16,993			1,181			6.95	%
Pari-mutuel	16,190			15,470			720			4.65	%
Food and beverage	7,659			5,615			2,044			36.40	%
Convenience store – fuel	36,351			35,430			921			2.60	%
Other	7,513			6,541			972			14.86	%
Marketing, general and administrative	33,371			25,714			7,657			29.78	%
Depreciation and amortization	8,373			6,368			2,005			31.49	%
Total costs and expenses	153,037			132,785			20,252			15.25	%
OPERATING INCOME	18,295			19,762			(1,467		)	-7.42	%
Interest expense, net	(13,692		)	(18,032		)	4,340			-24.07	%
Pre-payment penalties, tender and consent costs				(9,321		)	9,321			-100.00	%
NET INCOME (LOSS)	$	4,603		$	(7,591	)	$	12,194		160.64	%

Casino revenues increased $13.2 million or 23% from $58.2 million for the six months ended June 30, 2006 to $71.4 million for the six months ended June 30, 2007.  The increase in casino revenues is a result of increased casino revenues at The Lodge of $5.0 million or 14% and the Gilpin of $0.9 million or 8%.  Additionally, Gold Dust West-Carson City, which was acquired on June 25, 2006, contributed $4.3 million and Gold Dust West-Elko, which opened March 5, 2007, contributed $3.2 million.  These increases were somewhat offset by a decrease at Gold Dust West-Reno of $0.2 million.  The increase in the casino revenues at our Colorado properties is a result of several factors.  We have expanded capital investments in our slot product over the last year, as well as the completion of the south entrance of The Lodge. Additionally, City of Black Hawk casino win grew 4% during the first six months of 2007 compared to the same period of 2006.

Truck stop gaming revenues decreased $0.5 million or 2% for the six months ended June 30, 2007 compared to the six months ended June 30, 2006.  Hurricanes Katrina and Rita, which hit the Louisiana, Mississippi and Texas Gulf Coast in August and September 2005, respectively, disrupted riverboat and other casino competition in the region.  For the first six months of 2006, JEI’s truck stops benefited from the reduction in competition as well as the population relocation from the New Orleans area, resulting in a year-over-year decrease of $3.5 million.  No such increased business levels existed in 2007. This decrease is partially offset by an increase of $3.0 million due to the acquisitions of the Vinton and St. Helena locations, purchased in June and July 2006, respectively.

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Pari-mutuel revenues increased $1.3 million or 7% from $19.7 million to $21.0 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2007, respectively.  The increase in revenues is primarily attributable to the reopening of the Broad Street off track wagering facility which was closed for renovations from February 26, 2006 through April 19, 2006, combined with an increase in wagering revenues at the other off track wagering facilities and an increase in account wagering revenues.

Food and beverage revenues increased $3.2 million or 29% from $11.1 million to $14.3 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2007, respectively.  This increase is attributable to $1.7 million generated by Gold Dust West-Carson City and $0.8 million generated by Gold Dust West-Elko, as well as increases of $0.2 million at Gold Dust West-Reno, $0.1 million at Colonial and $0.4 million at the truck stop facilities. The increase at the truck stops is primarily attributable to the addition of the Vinton and St. Helena locations in June 2006 and July 2006, respectively.

Convenience store-fuel revenues increased $1.3 million or 4% from $37.2 million to $38.5 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2007, respectively.  The addition of the St. Helena and Silver Dollar truck stops in July 2006 and February 2007, respectively, added $3.4 million of fuel revenues. This increase was offset by a year-over-year decrease totaling $2.1 million due to increased business levels during the first six months of 2006 due to Hurricanes Katrina and Rita, which hit the Louisiana, Mississippi and Texas Gulf Coast in August and September 2005, respectively, disrupting competition in the region.  No such increased business levels existed in 2007.  Additionally, new competitors have recently entered some of our markets, which have negatively impacted fuel revenues. The average selling price of fuel remained flat at $2.59 per gallon for the six months ended June 30, 2007 and 2006.

Other revenues increased $2.3 million or 30% from $7.6 million for the six months ended June 30, 2006 to $9.9 million for the six months ended June 30, 2007.  The increase is primarily attributable to Gold Dust West-Carson City which was acquired on June 25, 2006 and contributed $1.6 million, and an increase of $0.7 million due to the Vinton, St. Helena and  Silver Dollar truck stops which were acquired in June 2006, July 2006 and February 2007, respectively.

Promotional allowances increased $2.0 million or 15% from $12.9 million for the six months ended June 30, 2006 to $14.9 million for the six months ended June 30, 2007.  The increase is attributable to an increase in promotional allowances at the truck stops of $0.4 million and The Lodge of $0.3 million, while Gold Dust West-Carson City contributed $0.9 million and Gold Dust West-Elko contributed $0.4 million.  The increase at the truck stops is primarily due to complimentary food and beverage sales at the Vinton and St. Helena locations which were purchased in June 2006 and July 2006, respectively.

Casino expenses increased $4.7 million or 23% from $20.7 million to $25.4 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2007, respectively.  Of this increase, $1.9 million is due to the addition of Gold Dust West-Carson City and $1.2 million is due to the addition of Gold Dust West-Elko.  Additionally, casino expenses increased by $1.4 million at The Lodge and $0.3 million at the Gilpin due to gaming taxes as a result of increased casino revenues.  These increases were somewhat offset by a decrease of $0.1 million at Gold Dust West-Reno.

Truck stop gaming expenses increased $1.2 million or 7% for the six months ended June 30, 2007 compared to the six months ended June 30, 2006.  The 2007 video gaming expenses from the Vinton and St. Helena locations purchased in June and July 2006, respectively, account for an increase of $1.8 million.  This increase is partially offset by a year-over-year decrease of $0.6 million due to increased business levels during the first six months of 2006 as a result of Hurricanes Katrina and Rita, which hit the Louisiana, Mississippi and Texas Gulf Coast in August and September 2005, respectively, disrupting riverboat and other casino competition in the region.  No such increased business levels existed in 2007.

Pari-mutuel costs and expenses increased $0.7 million or 5% from $15.5 million to $16.2 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2007, respectively.  The increase is primarily attributable to pari-mutuel taxes and other direct expenses associated with increased pari-mutuel revenues, combined with other operating costs attributable to the reopening of the Broad Street off track wagering facility which was closed for renovations from February 26, 2006 through April 19, 2006, partially offset by a decrease in track materials costs resulting from a one-time purchase in 2006.

Food and beverage costs and expenses increased $2.0 million or 36% for the six month period ended June 30, 2007 compared to the six month period ended June 30, 2006, and is primarily due to the additions of Gold Dust West-Carson City and Gold Dust West-Elko.

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Convenience store-fuel expenses increased $0.9 million or 3% for the six months ended June 30, 2007 compared to the six months ended June 30, 2006.  The addition of the St. Helena and Silver Dollar truck stops in July 2006 and February 2007, respectively, added $3.3 million of fuel expenses. This increase was offset by a year-over-year decrease of $2.4 million due to a decrease in the average cost of fuel from $2.45 per gallon in 2006 to $2.43 per gallon in 2007, as well as increased business levels during the first six months of 2006 due to Hurricanes Katrina and Rita, which hit the Louisiana, Mississippi and Texas Gulf Coast in August and September 2005, respectively, disrupting competition in the region.  No such increased business levels existed in 2007.  Additionally, new competitors have recently entered some of our markets, which have negatively impacted fuel volumes.

Other costs and expenses increased $1.0 million or 15% for the six months ended June 30, 2007 compared to the six months ended June 30, 2006 and were primarily attributable to the addition of hotel operations at Gold Dust West-Carson City, which was acquired on June 25, 2006, and convenience store-other costs generated by the addition of the St. Helena and Silver Dollar truck stops in July 2006 and February 2007, respectively.

Marketing, general and administrative expenses increased $7.7 million or 30% from $25.7 million to $33.4 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2007, respectively.  This increase is the result of the addition of our Gold Dust West-Carson City casino which accounted for $3.9 million of the increase and our Gold Dust West-Elko casino which accounted for $2.2 million of the increase, as well as increases at The Lodge of $0.3 million, Gold Dust West-Reno of $0.4 million, Colonial of $0.3 million, truck stops of $0.5 million and corporate overhead expenses of $0.1 million.  The increased marketing costs at our operating units drove increased revenues for all segments.  The increase at our three Nevada casinos was substantially due to expenses incurred in launching and rebranding Gold Dust West.  The increase at Colonial is primarily attributable to $0.6 million in non-recurring lobbying costs incurred during 2007, partially offset by decreased security costs resulting from a change in security services.  This is also combined with the decrease attributable to the 2006 write-off of assets under renovation and the one-time accrual for the Virginia Thoroughbred Association’s share of account wagering. The increase at the truck stops was primarily due to the addition of office space and additional staff to accommodate expansion.  The increase in our corporate overhead was the result of an increase in legal expenses of $0.2 million, labor costs of $0.2 million and travel expenses of $0.1 million, somewhat offset by $0.3 million of political campaign costs incurred during 2006 and a $0.1 million gain in 2007 on the sale of an airplane.

Depreciation and amortization expense increased $2.0 million or 31% from $6.4 million to $8.4 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2007, respectively.  Of this increase, $0.9 million is attributable to the acquisition of Gold Dust West-Carson City and $0.7 million is attributable to Gold Dust West-Elko.  Additionally, The Lodge increased by $0.2 million primarily due to the new south entrance and corporate increased by $0.2 million due to capital asset purchases, as well as an increase of $0.1 million at the Gilpin, somewhat offset by a decrease of $0.1 million at Gold Dust West-Reno.

Net interest expense decreased $4.3 million for the six months ended June 30, 2007 compared to the same period of 2006.  As a result of our debt refinancing during the second quarter of 2006, we wrote off $5.7 million in financing fees and $1.9 million of note issue discount, partially offset by the write off of $1.5 million of note issue premium, on the debt refinanced. This net decrease is somewhat offset by an increase in additional debt outstanding during the six months ended June 30, 2007 compared to the six months ended June 30, 2006, partially offset by lower effective interest rates as a result of the refinancing transactions which occurred in June 2006.

Pre-payment penalties, tender and consent costs in the amount of $9.3 million were incurred during the six months ended June 30, 2006. These costs represent the premium required to purchase the senior secured notes in 2006, prior to their maturity in 2009 and consent solicitation fees and expenses as part of the tender offer for such notes.  See Note 7 of the unaudited condensed consolidated financial statements.  No comparable transaction occurred during 2007.

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5. EBITDA segment information

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

The information presented is by each segment in which we have operations and also presents our EBITDA (earnings before interest, income taxes, depreciation and amortization) for each segment. We believe that the presentation of a non-GAAP financial measure such as EBITDA is useful because it allows investors and management to evaluate and compare our operating results from continuing operations from period to period in a meaningful and consistent manner in addition to standard GAAP financial measures. Management internally evaluates the performance of our segments using EBITDA measures as do most analysts following the gaming industry. EBITDA is an element of certain key financial covenants in our debt agreements and, as such, is a critical component that we closely watch in order to determine our ability to achieve future growth and to ensure we are in compliance with our debt agreements. We present EBITDA in the tables below to provide further discussion and analysis of our operating results. EBITDA can be reconciled directly to our consolidated net income (loss) by adding the amounts shown for depreciation and amortization, interest and income taxes to net income (loss). This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States of America, such as net income (loss), nor should it be considered as an indicator of our overall financial performance. Our calculation of EBITDA may be different from the calculation used by other companies and comparability may be limited.

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The following is a summary of the net revenues, costs and expenses and EBITDA, for the three and six months ended June 30, 2007 and 2006 (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
NET REVENUES
Colorado:
The Lodge	$	19,580		$	16,331		$	37,938		$	33,296
Gilpin	5,765			5,508			11,766			10,806
Total Colorado	25,345			21,839			49,704			44,102
Nevada:
Gold Dust West-Reno	5,461			5,499			11,186			11,186
Gold Dust West-Carson City	3,802			164			6,896			164
Gold Dust West-Elko	2,597						3,624
Total Nevada	11,860			5,663			21,706			11,350
Louisiana	39,307			37,893			76,651			75,309
Virginia	12,552			11,882			23,271			21,786
Total Net Revenues	89,064			77,277			171,332			152,547
COSTS AND EXPENSES (excluding depreciation and amortization, net interest expense and income taxes)
Colorado:
The Lodge	12,668			11,415			24,661			23,011
Gilpin	4,094			3,951			8,208			7,904
Total Colorado	16,762			15,366			32,869			30,915
Nevada:
Gold Dust West-Reno	3,678			3,632			7,618			7,331
Gold Dust West-Carson City	3,772			188			7,871			188
Gold Dust West-Elko	2,495						4,088
Total Nevada	9,945			3,820			19,577			7,519
Louisiana	34,749			32,981			66,428			63,245
Virginia	11,720			11,178			21,768			20,734
Net corporate overhead	2,113			11,886			4,022			13,325
Total Costs and Expenses	75,289			75,231			144,664			135,738
EBITDA
Colorado:
The Lodge	6,912			4,916			13,277			10,285
Gilpin	1,671			1,557			3,558			2,902
Total Colorado	8,583			6,473			16,835			13,187
Nevada:
Gold Dust West-Reno	1,783			1,867			3,568			3,855
Gold Dust West-Carson City	30			(24		)	(975		)	(24		)
Gold Dust West-Elko	102						(464		)
Total Nevada	1,915			1,843			2,129			3,831
Louisiana	4,558			4,912			10,223			12,064
Virginia	832			704			1,503			1,052
Net corporate overhead	(2,113		)	(11,886		)	(4,022		)	(13,325		)
Total EBITDA	$	13,775		$	2,046		$	26,668		$	16,809

See sections 3 and 4 above, “Comparison of our results of operations for the three months ended June 30, 2007 as compared to the three months ended June 30, 2006” and “Comparison of our results of operations for the six months ended June 30, 2007 as compared to the six months ended June 30, 2006,” which provide explanations regarding the fluctuations in our revenues and costs and expenses by property and segment.

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

Three months ended June 30, 2007	EBITDA			Depreciation and Amortization		Interest Expense, net		Net Income (Loss)
Colorado:
The Lodge	$	6,912		$	1,064	$	1,725	$	4,123
Gilpin	1,671			456		472		743
Total Colorado	8,583			1,520		2,197		4,866
Nevada:
Gold Dust West-Reno	1,783			387		652		744
Gold Dust West- Carson City	30			464		380		(814		)
Gold Dust West-Elko	102			524		486		(908		)
Total Nevada	1,915			1,375		1,518		(978		)
Louisiana	4,558			812		955		2,791
Virginia	832			527		136		169
Corporate overhead	(2,113		)	169		2,202		(4,484		)
TOTAL	$	13,775		$	4,403	$	7,008	$	2,364

Three months ended June 30, 2006	EBITDA			Depreciation and Amortization		Interest Expense, net		Net Income (Loss)
Colorado:
The Lodge	$	4,916		$	946	$	4,576	$	(606	)
Gilpin	1,557			432		1,356		(231		)
Total Colorado	6,473			1,378		5,932		(837		)
Nevada:
Gold Dust West-Reno	1,867			391		1,741		(265		)
Gold Dust West- Carson City	(24		)	15		64		(103		)
Gold Dust West-Elko
Total Nevada	1,843			406		1,805		(368		)
Louisiana	4,912			857		941		3,114
Virginia	704			535		154		15
Corporate overhead (1)	(11,886		)	46		3,275		(15,207		)
TOTAL	$	2,046		$	3,222	$	12,107	$	(13,283	)

Six months ended June 30, 2007	EBITDA			Depreciation and Amortization		Interest Expense, net		Net Income (Loss)
Colorado:
The Lodge	$	13,277		$	2,091	$	3,452	$	7,734
Gilpin	3,558			907		945		1,706
Total Colorado	16,835			2,998		4,397		9,440
Nevada:
Gold Dust West-Reno	3,568			738		1,301		1,529
Gold Dust West- Carson City	(975		)	897		761		(2,633		)
Gold Dust West-Elko	(464		)	691		811		(1,966		)
Total Nevada	2,129			2,326		2,873		(3,070		)
Louisiana	10,223			1,648		1,902		6,673
Virginia	1,503			1,054		270		179
Corporate overhead	(4,022		)	347		4,250		(8,619		)
TOTAL	$	26,668		$	8,373	$	13,692	$	4,603

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Six months ended June 30, 2006	EBITDA			Depreciation and Amortization		Interest Expense, net		Net Income (Loss)
Colorado:
The Lodge	$	10,285		$	1,870	$	6,646	$	1,769
Gilpin	2,902			847		2,077		(22		)
Total Colorado	13,187			2,717		8,723		1,747
Nevada:
Gold Dust West-Reno	3,855			773		2,527		555
Gold Dust West- Carson City	(24		)	15		64		(103		)
Gold Dust West-Elko
Total Nevada	3,831			788		2,591		452
Louisiana	12,064			1,680		1,690		8,694
Virginia	1,052			1,047		301		(296		)
Corporate overhead (1)	(13,325		)	136		4,727		(18,188		)
TOTAL	$	16,809		$	6,368	$	18,032	$	(7,591	)

(1)Included in corporate overhead for 2006 is $9.3 million in pre-payment penalties, tender and consent costs for our debt refinancing.

6. Liquidity and capital resources

As of June 30, 2007, we had cash and cash equivalents of $23.2 million compared to $24.1 million in cash and cash equivalents as of December 31, 2006. The $0.9 million decrease is the result of $10.9 million cash provided by operating activities, $23.2 million cash used in investing activities, and $11.4 million provided by financing activities, which are further discussed below.

During the six months ended June 30, 2007, we completed several transactions which impacted our liquidity.  We completed the rebranding of Gold Dust West-Carson City and the development of Gold Dust West-Elko.  On March 29, 2007, we acquired the Silver Dollar truck plaza facility from an unrelated third party. These transactions are discussed in greater detail above in the section “Significant transactions occurring during the six months ended June 30, 2007.”

As of June 30, 2007, we have $26.5 million available on our revolving senior credit facility for acquisitions and/or capital expenditure programs. The revolving senior credit facility carries an interest rate of 3.00% above LIBOR and expires in June 2011.

While our owners have made capital contributions to facilitate various acquisitions of the Company from time to time, we can give no assurance that they will continue to do so in the future. Additionally, as we are a Subchapter S Corporation, we may from time to time make distributions to our owners on any taxes due as a result of taxable income generated by us. Furthermore, annual distributions may be made to our owners in an aggregate amount not to exceed the greater of $1 million and 50% of consolidated net income for the immediately prior fiscal year.

As of June 30, 2007, our total debt approximates $289.9 million. Our future liquidity, which includes our ability to make semi-annual interest payments on June 15 and December 15 of each year, depends upon our future operational success.

We believe that our cash flow from operations, cash and cash equivalents and our $40 million senior revolving credit facility discussed above will be adequate to meet our debt service obligations and operational expenditures, as well as our capital expenditure requirements for the next twelve months. In addition to the development of our new casino in Elko, Nevada, capital expenditures for 2007, excluding development projects, are projected to be $13.3 million, of which $6.7 million has been spent during the first six months of 2007. While we believe these sources will provide us sufficient liquidity over the next twelve months, we can give no assurance that these sources of cash will be sufficient to enable us to do so. Further, in addition to our normal capital expenditure requirements, we anticipate that we will pursue the acquisition of other properties and continue to engage in the pursuit of new development opportunities. It is possible that we may need to enter into new financing arrangements and raise additional capital in the future if we are unable to generate sufficient cash to sustain expansion. Our ability to incur additional debt is further restricted by the terms and covenants of our senior secured and senior unsecured notes. We can give no assurance that we will be able to raise any capital or obtain the necessary sources of liquidity and financing on favorable terms, if at all. Additionally, any debt financing that we may incur in the future will increase the amount of our total outstanding indebtedness and our debt service requirements, and therefore heighten the related risks we currently face.

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We also face the risk that there could be a decline in the demand for our products and services, which would reduce our ability to generate funds from operations.  While we believe our cash flows are geographically diverse, at present we do have a significant concentration of cash flows generated in the Black Hawk, Colorado and Louisiana markets.  Should the Black Hawk or Louisiana markets decline or become saturated or should competition erode our market share, we would suffer a decline in available funds generated from operations.  If this were to occur, there exists the possibility that our credit rating could be downgraded, which would further reduce our ability to access the capital markets and obtain additional or alternative financing.  See the section “Risk Factors” in Item 1A of our 10-K Report.

The following table provides disclosure concerning JEI’s obligations and commitments to make future payments under contracts, such as debt and lease agreements, and purchase and other long-term obligations as of June 30, 2007.

(In Thousands)	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Long-term debt (1)	$	468,126	$	28,519	$	57,579	$	124,618	$	257,410
Operating leases (2)	38,734		2,676		5,105		3,399		27,554
Other long-term obligations (3)	24,720		1,750		3,367		2,728		16,875
Total contractual cash obligations	$	531,580	$	32,945	$	66,051	$	130,745	$	301,839

(1)Long-term debt includes principal and interest owing under the terms of our senior unsecured notes, our senior secured credit facility, the Black Hawk special assessment bonds, indebtedness of Colonial and various capital leases.

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

(3)Other long-term obligations include a management agreement with Jacobs Investments Management Co. Inc. and our obligation to pay $1 per operating video poker machine per day to the third party owner of the machines in order to maintain the machines used in our truck plaza operations, plus $1,050 per machine annually for the owner’s licensing costs.

In addition, we have the following commitments and obligations:

·JEI, through its subsidiary Colonial, has entered into an agreement with a totalisator company, which provides wagering services and designs, programs, and manufactures totalisator systems for use in wagering applications.  On March 16, 2005, Colonial entered into an amendment with the totalisator company extending the term of the agreement to 2012, provides replacement equipment for the existing equipment, and increases the rate to .385% of handle up to $270 million in handle. Handle above $270 million is charged a rate of .345%. The amendment also provides for minimum charge per calendar year of $210,000.

·JEI, through the Lucky Magnolia truck plaza, has an obligation to pay to an individual 4.9% of its net video poker revenue, after associated state taxes, for as long as video poker machines are operated on the property.

Finally, our outstanding senior secured notes aggregating $210 million cannot be redeemed until June 15, 2010. We can, however, with proceeds from an equity offering on more than one occasion redeem up to 35% of the aggregate principal amount of the notes at a redemption price of 109.75% of the principal amount thereof, plus accrued and unpaid interest.

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7. Critical accounting policies and estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We periodically evaluate our policies and the estimates and assumptions related to these policies. All of our subsidiary companies operate in a highly regulated industry. Our Colorado, Nevada, Louisiana and Virginia operations are subject to regulations that describe and regulate operating and internal control procedures. The majority of our casino revenue is in the form of cash, personal checks, credit cards or gaming chips and tokens, which by their nature do not require complex estimations. We estimate certain liabilities with payment periods that extend for longer than several months. Such estimates include our slot club liabilities, outstanding gaming chip, token and pari-mutuel ticket liability, self-insured medical and workers compensation liabilities, and litigation costs. We believe that these estimates are reasonable based on our past experience with the business and based upon our assumptions related to possible outcomes in the future. Future actual results will likely differ from these estimates.

Property and equipment

We have a significant investment in long-lived property and equipment, representing approximately 68% of our total assets, which includes the recent acquisitions of Gold Dust West-Carson City and the video gaming truck stops. We estimate that the undiscounted future cash flows expected to result from the use of these assets exceed the current carrying value of these assets. Any adverse change to the estimate of these undiscounted cash flows could necessitate an impairment charge that would adversely affect operating results. We review the carrying value of our property and equipment when events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use. Further, we assign lives to our assets based on our standard policy, which is established by management as representative of the useful life of each class of assets. Should the actual useful life of a class of assets differ from the estimated useful life, we would record an impairment charge. We review useful lives and obsolescence and assess the commercial viability of our assets periodically.

Goodwill and other intangible assets

At June 30, 2007, we have $40.0 million in goodwill recorded on our consolidated balance sheet resulting from the acquisition of businesses. We do not have any other nonamortizing intangible assets on our consolidated balance sheet. We annually review our goodwill for impairment. The annual evaluation of goodwill requires the use of estimates about future operating results of each reporting unit to determine its estimated fair value. Changes in forecasted operations can materially affect these estimates. Once an impairment of goodwill has been recorded, it cannot be reversed.

Our three reporting units with goodwill balances at June 30, 2007 are Colorado ($6.7 million), Nevada ($9.0 million) and Louisiana ($24.3 million). There is no goodwill recorded in our Virginia reporting unit. We performed our most recent annual impairment test for these reporting units as of September 30, 2006 and updated the test at December 31, 2006. Our annual impairment test included an analysis of the gaming industry overall as well as an analysis of the specific locations in which we operate. We determined the fair values for each of these reporting units using both the market approach (recent comparable transactions from which we derived an applicable valuation multiple) and the income approach (net present value of our anticipated future cash flows). These fair values were then compared to the carrying values for the respective reporting unit and determined that goodwill is not impaired at any of our reporting units. Furthermore, if the fair value of these reporting units declined by 10%, no goodwill impairment would exist.

We have also reassessed the useful lives of our identifiable intangible assets without any change to the previously established amortization periods of such assets.

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Item 3.Quantitative and Qualitative Disclosure about Market Risk

Market Risk

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

On June 16, 2006, we issued $210 million of 9¾% senior unsecured notes due in 2014 and we issued $40 million in a secured term loan financing.  The proceeds of these two issuances were used to finance our acquisitions, refinance existing debt and for working capital purposes. Additionally, during December 2006, we borrowed $20 million on the secured delayed draw term loan facility which was used to complete the development of our new casino in Elko, Nevada. We have available a secured revolving facility of $40 million. The senior unsecured notes bear interest at a fixed rate of 9¾% and our senior secured debt, of which $73.0 million is outstanding as of June 30, 2007, bears interest at a blended rate of 8.35% at June 30, 2007 (3.00% above LIBOR).

If market interest rates increase, our cash requirements for interest on the senior secured credit facility balance would also increase. Conversely, if market interest rates decrease, our cash requirements for interest on the senior secured credit facility balance would also decrease. There would be an approximate change in our cash requirements of $0.6 million annually for interest should market rates increase or decrease by 10% compared to interest rate levels at June 30, 2007.

We currently do not invest in derivative financial instruments, interest rate swaps or other similar investments to alter interest rate exposure.

Item 4.Controls and Procedures.

We have carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2007. Based on such evaluation, we have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.Legal Proceedings

We are involved in routine litigation arising in the ordinary course of our business pertaining to workers compensation claims, equal opportunity employment issues, or guest injury claims.  All such claims are routinely turned over to our insurance providers.  None of the claims is expected to have a material impact on our financial position, results of operations or cash flows.  We believe these matters are covered by appropriate insurance policies.

Item 1A.Risk Factors

There has been no material change in the risk factors disclosed in our Form 10-K report filed March 27, 2007.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.Defaults Upon Senior Securities

None

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

None

Item 5.Other Information

None

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Item 6.Exhibits

(a) Exhibits

31.1	Certification of the Chief Executive Officer pursuant to Rule 15d – 14(a) under the Securities Exchange Act of 1934, filed under exhibit 31 of Item 601 of Regulation S-K.
31.2	Certification of the Chief Financial Officer pursuant to Rule 15d – 14(a) under the Securities Exchange Act of 1934, filed under exhibit 31 of Item 601 of Regulation S-K.
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of Item 601 of Regulation S-K.
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of Item 601 of Regulation S-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Jacobs Entertainment, Inc.
	Registrant
Date: August 7, 2007	By:	/s/ Jeffrey P. Jacobs
	Jeffrey P. Jacobs, Chief Executive Officer                            and Chairman of the Board of Directors
		/s/ Brett A. Kramer
	Brett A. Kramer, Chief Financial Officer

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EXHIBIT INDEX

EXHIBIT NUMBER	DESCRIPTION
31.1	Certification of the Chief Executive Officer pursuant to Rule 15d – 14(a) under the Securities Exchange Act of 1934, filed under Exhibit 31 of Item 601 of Regulation S-K.
31.2	Certification of the Chief Financial Officer pursuant to Rule 15d – 14(a) under the Securities Exchange Act of 1934, filed under Exhibit 31 of Item 601 of Regulation S-K.
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of Item 601 of Regulation S-K.
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of Item 601 of Regulation S-K.

39