Jacobs Entertainment 10-Q 2010 Q3 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 September 30, 2010

OR

¨ 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

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

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

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

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

Class	Outstanding as of November 12, 2010
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	3
Item 1.	Financial Statements:	3
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009	3
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009	4
	Unaudited Condensed Consolidated Statements of Stockholder’s Equity for the nine months ended September 30, 2010 and 2009	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
SIGNATURES		41
EXHIBIT INDEX		42

2

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements.

JACOBS ENTERTAINMENT, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

	September 30, 2010			December 31, 2009 (As adjusted, see Note 7)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	25,699		$	24,205
Restricted cash		1,980			1,121
Accounts receivable, net		2,653			2,993
Due from affiliates		931			1,023
Inventory		3,047			3,039
Prepaid expenses and other current assets		3,470			2,850
Total current assets		37,780			35,231
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements		62,455			62,397
Building and improvements		191,826			190,236
Equipment, furniture and fixtures		99,775			95,164
Leasehold improvements		3,213			3,201
Construction in progress		1,103			594
		358,372			351,592
Less accumulated depreciation		(120,885	)		(107,285	)
Property, plant and equipment, net		237,487			244,307
OTHER NONCURRENT ASSETS:
Goodwill		46,471			46,471
Identifiable intangible assets, net		7,092			8,173
Debt issue costs, net		5,604			5,695
Investment in equity securities		1,408			1,058
Other assets		1,998			2,605
TOTAL	$	337,840		$	343,540
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	8,246		$	6,367
Accrued expenses		22,193			15,984
Due to affiliates		316			1,469
Current portion of long-term debt and capital lease obligations		4,302			2,117
Total current liabilities		35,057			25,937
Long-term debt and capital lease obligations		275,594			291,070
Other noncurrent liabilities		1,087			1,011
Total liabilities		311,738			318,018
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDER’S EQUITY:
Class A Common stock $.01 par value; 1,800 shares authorized, 1,320 shares issued and outstanding as of September 30, 2010 and December 31, 2009		—			—
Class B Common stock $.01 par value; 200 shares authorized, 180 shares issued and outstanding as of September 30, 2010 and December 31, 2009		—			—
Additional paid-in capital		27,724			30,657
Accumulated deficit		(1,622	)		(5,135	)
Total stockholder’s equity		26,102			25,522
TOTAL	$	337,840		$	343,540

See notes to unaudited condensed consolidated financial statements.

3

JACOBS ENTERTAINMENT, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009 (As adjusted, see  Note 7)			2010			2009 (As adjusted, see Note 7)
REVENUES
Gaming:
Casino	$	35,793		$	38,732		$	106,298		$	106,353
Truck stop		14,787			14,733			45,951			48,186
Pari-mutuel		7,045			8,169			21,674			25,652
Food and beverage		7,410			8,148			21,940			22,781
Convenience store — fuel		21,636			16,231			65,383			44,144
Convenience store — other		2,970			2,959			8,349			9,752
Hotel		1,140			1,124			2,975			2,796
Other		1,678			1,795			4,971			4,950
Total revenues		92,459			91,891			277,541			264,614
Less: Promotional allowances		(8,893	)		(9,453	)		(26,684	)		(26,334	)
Net revenues		83,566			82,438			250,857			238,280
COSTS AND EXPENSES
Gaming:
Casino		12,531			13,208			36,940			35,487
Truck stop		9,255			9,433			27,943			29,196
Pari-mutuel		5,783			7,016			16,934			20,486
Food and beverage		3,563			3,692			10,363			10,344
Convenience store — fuel		20,291			15,196			61,460			41,250
Convenience store — other		3,885			3,577			10,926			11,804
Hotel		235			294			614			683
Marketing, general and administrative		15,975			17,785			47,308			48,753
Unrealized gain on change in fair value of investment in equity securities		(90	)		(456	)		(350	)		(1,123	)
Depreciation and amortization		5,323			5,393			15,955			15,930
Total costs and expenses		76,751			75,138			228,093			212,810
OPERATING INCOME		6,815			7,300			22,764			25,470
Interest income		9			5			22			25
Interest expense		(6,506	)		(6,316	)		(19,273	)		(18,949	)
NET INCOME	$	318		$	989		$	3,513		$	6,546

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
	Class A Shares		Class B Shares		Amount*		Additional Paid-in Capital			Accumulated Deficit			Noncontrolling Interest		Total
BALANCES, JANUARY 1, 2010 (As adjusted, see Note 7)		1,320		180	$	—	$	30,657		$	(5,135	)	$	—	$	25,522
Capital contribution								867								867
Distributions								(3,800	)							(3,800	)
Net income**											3,513					3,513
BALANCES, SEPTEMBER 30, 2010		1,320		180	$	—	$	27,724		$	(1,622	)	$	—	$	26,102

	Common Stock
	Class A Shares		Class B Shares		Amount*		Additional Paid-in Capital			(Accumulated Deficit) Retained Earnings			Noncontrolling Interest			Total
BALANCES, JANUARY 1, 2009 (As adjusted, see Note 7)		1,320		180	$	—	$	32,953		$	(6,827	)	$	212		$	26,338
Capital contribution								942									942
Distributions								(3,238	)								(3,238	)
Acquisition of noncontrolling interest														(212	)		(212	)
Net income (As adjusted, see Note 7)**											6,546						6,546
BALANCES, SEPTEMBER 30, 2009 (As adjusted, see Note 7)		1,320		180	$	—	$	30,657		$	(281	)	$	—		$	30,376

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

** For the nine months ended September 30, 2010 and 2009, comprehensive income is equal to net income and is entirely attributable to the Jacobs Entertainment, Inc. stockholder.

See notes to unaudited condensed consolidated financial statements.

5

JACOBS ENTERTAINMENT, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	Nine Months  Ended September 30,
	2010			2009 (As  adjusted, see Note 7)
OPERATING ACTIVITIES:
Net income	$	3,513		$	6,546
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,955			15,930
Unrealized gain on change in fair value of investment in equity securities		(350	)		(1,123	)
Loss on disposal of equipment		78			23
Deferred financing cost amortization		1,591			1,234
Other		6			7
Changes in operating assets and liabilities, net of acquisitions:
Restricted cash		(859	)		(836	)
Accounts receivable, net		389			(187	)
Inventory		(8	)		1
Prepaid expenses and other assets		(1,210	)		(821	)
Accounts payable		2,319			(1,876	)
Accrued expenses and other noncurrent liabilities		6,220			5,749
Due from/to affiliates		(257	)		(136	)
Net cash provided by operating activities		27,387			24,511
INVESTING ACTIVITIES:
Additions to property, plant and equipment		(8,540	)		(13,021	)
Proceeds from sale of equipment		163			329
Purchases of device rights		(74	)		(965	)
Acquisition of noncontrolling interest		—			(212	)
Net cash used in investing activities		(8,451	)		(13,869	)
FINANCING ACTIVITIES:
Payments to obtain financing		(1,500	)		(555	)
Borrowings on revolving line of credit		14,000			18,713
Payments on long-term debt		(1,642	)		(880	)
Payments on revolving line of credit		(24,500	)		(21,750	)
Distributions to stockholder		(3,800	)		(3,238	)
Net cash used in financing activities		(17,442	)		(7,710	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		1,494			2,932
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		24,205			21,881
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	25,699		$	24,813
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	12,605		$	12,640
Non-cash investing and financing activities:
Capital contribution exchanged for retirement of liabilities paid by affiliate	$	867		$	942
Non-cash additions to property	$	754		$	485
Acquisition of property under note payable agreement	$	120		$	—

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 to become a geographically diversified gaming and pari-mutuel wagering company with properties in Colorado, Nevada, Louisiana, and Virginia. We are a wholly-owned subsidiary of Jacobs Investments, Inc. (“JII”) and a Qualified Subchapter S-Corporation Subsidiary under the Internal Revenue Code of 1986, as amended. Jeffrey P. Jacobs, our Chief Executive Officer (“CEO”), and his family trusts own 100% of JII’s outstanding Class A and Class B shares. Our CEO and his affiliates are referred to herein as “Jacobs.” We have four reportable segments (Colorado, Nevada, Louisiana and Virginia), as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280,Segment Reporting. See Note 4.

As of September 30, 2010, 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-Reno (“Gold Dust West-Reno”) in Reno, Nevada, the Gold Dust West-Carson City (“Gold Dust West-Carson City”) in Carson City, Nevada and the Gold Dust West-Elko (“Gold Dust West-Elko”) in Elko, Nevada. JEI also owns and operates 18 truck plaza video gaming facilities in Louisiana, 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 ten satellite wagering facilities in Virginia through a wholly-owned subsidiary, Colonial Holdings, Inc. (“Colonial”).

On August 16, 2010, we acquired a parcel of land and its related business from Flats Development, Inc. (“Flats”) in what we call the Nautica Properties area in Cleveland, Ohio. Flats was controlled by the mother and sister of our CEO, and is therefore deemed to be an entity under common control. Therefore, the acquisition of Flats and its related business was accounted for as a combination of entities under common control. Accordingly, the accompanying unaudited condensed consolidated financial statements have been retroactively adjusted to include the operations of Flats from January 1, 2009. See Notes 6 and 7 below.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Condensed Consolidated Financial Statements –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 September 30, 2010 and December 31, 2009, the results of our operations for the three and nine months ended September 30, 2010 and 2009, and changes in stockholder’s equity and cash flows for the nine months ended September 30, 2010 and 2009. All intercompany transactions and balances have been eliminated in consolidation. We have evaluated subsequent events through the date on which the financial statements are issued.

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, 2009 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, 2010.

Long-Lived Assets–During the third quarter of 2010, we were required, pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360,Property, Plant and Equipment, to assess our ability to recover the recorded cost of the Gold Dust West-Carson City long-lived assets. We have prepared a cash flow analysis based on management’s best estimate in an effort to assess the likelihood of recovering the cost of these assets. Based on these projections and the related underlying assumptions as well as our knowledge of the Carson City market, we believe that we will be able to recover the carrying cost of these assets as of September 30, 2010 and no impairment currently exists. However, future events such as actual performance versus projected performance, continued market decline, increased and/or changing competitive forces, or other unforeseen events could change our estimates and cause us to recognize an impairment in the carrying value of the Gold-Dust West-Carson City long-lived assets in future periods. Such an impairment could be material to our financial position and results of operations.

7

JACOBS ENTERTAINMENT, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(DOLLARS IN THOUSANDS)

New Accounting Guidance–New authoritative accounting guidance under FASB ASC Topic 810,Consolidation (“ASC Topic 810”), amends existing accounting literature to require an enterprise to perform an analysis to determine whether any variable interest held gives it a controlling financial interest in a variable interest entity and requires an ongoing reassessment of this nature. The standard also requires enhanced disclosures that will provide more transparent information about an entity’s involvement in a variable interest entity. The standard was effective for us on January 1, 2010. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

3. GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

We test goodwill for impairment as of September 30 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 analyses, 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. As of September 30, 2010, we believe the carrying value of the goodwill held in our reporting units was not impaired. There has been no change in the carrying amount of goodwill during 2010 or 2009.

In addition, as of September 30, 2010, we have reassessed the useful lives of our identifiable intangible assets without any change to the previously established amortization periods of such assets. Identifiable intangible assets as of September 30, 2010 and December 31, 2009, consist of the following:

			September 30, 2010						December 31, 2009
	Weighted Average Remaining Life		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable intangible assets:
Revenue rights		41.25	$	6,000	$	1,050	$	4,950	$	6,000	$	960	$	5,040
Device use rights		2.62		9,118		7,123		1,995		9,064		6,275		2,789
Restriction agreements		3.24		1,369		1,222		147		1,369		1,025		344
Total			$	16,487	$	9,395	$	7,092	$	16,433	$	8,260	$	8,173

Aggregate amortization expense of identifiable intangible assets was $362 and $436 for the three months ended September 30, 2010 and 2009, respectively, and $1,151 and $1,419 for the nine months ended September 30, 2010 and 2009, respectively.

Estimated amortization expense for the years ending December 31:

2010 (remaining 3 months)	$	344
2011		909
2012		723
2013		422
2014		222
Thereafter		4,472
Total	$	7,092

4. SEGMENTS

Our CEO is the chief operating decision maker. At September 30, 2010 and 2009, we had 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 these 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 truck plaza/video poker facilities, and the Virginia segment consists of Colonial’s pari-mutuel operations and satellite wagering facilities.

8

JACOBS ENTERTAINMENT, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(DOLLARS IN THOUSANDS)

The accounting policies of the segments are the same as those described in Note 2 above and those included in Note 2 of our Form 10-K report for the year ended December 31, 2009. The corporate adjustments, eliminations and other represent all other income and expenses, and are also presented.

As of and for the Three Months Ended September 30, 2010

	Colorado			Nevada			Louisiana			Virginia			Corporate Adjustments, Eliminations and Other			Total
Revenues:
Gaming
Casino	$	27,204		$	8,589											$	35,793
Truck stop							$	14,787									14,787
Pari-mutuel										$	7,045						7,045
Food and beverage		3,161			2,372			1,281			596						7,410
Convenience store — fuel								21,636									21,636
Convenience store — other								2,970									2,970
Hotel		496			644												1,140
Other		304			306			377			532		$	159			1,678
Total revenues		31,165			11,911			41,051			8,173			159			92,459
Less: Promotional allowances		(6,032	)		(1,621	)		(1,240	)								(8,893	)
Net revenues	$	25,133		$	10,290		$	39,811		$	8,173		$	159		$	83,566
Depreciation and amortization	$	1,687		$	1,603		$	1,234		$	583		$	216		$	5,323
Interest income	$	—		$	—		$	1		$	4		$	4		$	9
Interest expense	$	2,162		$	1,350		$	1,089		$	131		$	1,774		$	6,506
Net income (loss)	$	4,498		$	(1,414	)	$	1,957		$	(626	)	$	(4,097	)	$	318
EBITDA(1)	$	8,347		$	1,539		$	4,279		$	84		$	(2,111	)	$	12,138
Goodwill	$	6,711		$	8,836		$	30,924								$	46,471
Identifiable intangible assets, net							$	7,092								$	7,092
Property, plant and equipment, net	$	88,815		$	38,820		$	39,235		$	62,327		$	8,290		$	237,487
Total assets	$	110,876		$	55,063		$	89,081		$	68,288		$	14,532		$	337,840
Long-term debt	$	84,770		$	61,169		$	51,089		$	4,882		$	73,684		$	275,594
Capital expenditures	$	955		$	911		$	667		$	256		$	97		$	2,886

9

JACOBS ENTERTAINMENT, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(DOLLARS IN THOUSANDS)

As of and for the Nine Months Ended September 30, 2010

	Colorado			Nevada			Louisiana			Virginia			Corporate Adjustments, Eliminations and Other			Total
Revenues:
Gaming
Casino	$	79,762		$	26,536											$	106,298
Truck stop							$	45,951									45,951
Pari-mutuel										$	21,674						21,674
Food and beverage		9,166			7,037			4,119			1,618						21,940
Convenience store — fuel								65,383									65,383
Convenience store — other								8,349									8,349
Hotel		1,452			1,523												2,975
Other		776			963			1,522			1,287		$	423			4,971
Total revenues		91,156			36,059			125,324			24,579			423			277,541
Less: Promotional allowances		(17,997	)		(5,008	)		(3,679	)								(26,684	)
Net revenues	$	73,159		$	31,051		$	121,645		$	24,579		$	423		$	250,857
Depreciation and amortization	$	5,110		$	4,715		$	3,747		$	1,691		$	692		$	15,955
Interest income	$	—		$	—		$	10		$	8		$	4		$	22
Interest expense	$	6,499		$	3,947		$	3,171		$	412		$	5,244		$	19,273
Net income (loss)	$	12,573		$	(3,098	)	$	7,959		$	(845	)	$	(13,076	)	$	3,513
EBITDA(1)	$	24,182		$	5,564		$	14,867		$	1,250		$	(7,144	)	$	38,719
Goodwill	$	6,711		$	8,836		$	30,924								$	46,471
Identifiable intangible assets, net							$	7,092								$	7,092
Property, plant and equipment, net	$	88,815		$	38,820		$	39,235		$	62,327		$	8,290		$	237,487
Total assets	$	110,876		$	55,063		$	89,081		$	68,288		$	14,532		$	337,840
Long-term debt	$	84,770		$	61,169		$	51,089		$	4,882		$	73,684		$	275,594
Capital expenditures	$	2,900		$	2,615		$	1,439		$	1,226		$	360		$	8,540

10

JACOBS ENTERTAINMENT, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(DOLLARS IN THOUSANDS)

As of and for the Three Months Ended September 30, 2009

(Balance Sheet Data as of December 31, 2009)

	Colorado			Nevada			Louisiana			Virginia			Corporate Adjustments, Eliminations and Other (As adjusted, see Note 7)			Total (As adjusted, see Note 7)
Revenues:
Gaming
Casino	$	29,263		$	9,469											$	38,732
Truck stop							$	14,733									14,733
Pari-mutuel										$	8,169						8,169
Food and beverage		3,323			2,347			1,719			759						8,148
Convenience store — fuel								16,231									16,231
Convenience store — other								2,959									2,959
Hotel		516			608												1,124
Other		266			329			278			740		$	182			1,795
Total revenues		33,368			12,753			35,920			9,668			182			91,891
Less: Promotional allowances		(5,922	)		(2,318	)		(1,213	)								(9,453	)
Net revenues	$	27,446		$	10,435		$	34,707		$	9,668		$	182		$	82,438
Depreciation and amortization	$	1,821		$	1,535		$	1,277		$	527		$	233		$	5,393
Interest income	$	—		$	—		$	—		$	4		$	1		$	5
Interest expense	$	2,169		$	1,271		$	1,011		$	149		$	1,716		$	6,316
Net income (loss)	$	5,523		$	(1,200	)	$	1,748		$	(651	)	$	(4,431	)	$	989
EBITDA(1)	$	9,513		$	1,606		$	4,036		$	21		$	(2,483	)	$	12,693
Goodwill	$	6,711		$	8,836		$	30,924								$	46,471
Identifiable intangible assets, net							$	8,173								$	8,173
Property, plant and equipment, net	$	91,585		$	40,907		$	40,294		$	62,964		$	8,557		$	244,307
Total assets	$	113,679		$	57,580		$	90,201		$	67,847		$	14,233		$	343,540
Long-term debt	$	84,981		$	61,337		$	51,115		$	4,902		$	88,735		$	291,070
Capital expenditures	$	2,297		$	979		$	1,385		$	95		$	234		$	4,990

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(DOLLARS IN THOUSANDS)

As of and for the Nine Months Ended September 30, 2009

(Balance Sheet Data as of December 31, 2009)

	Colorado			Nevada			Louisiana			Virginia			Corporate Adjustments, Eliminations and Other (As adjusted, see Note 7)			Total (As adjusted, see Note 7)
Revenues:
Gaming
Casino	$	77,648		$	28,705											$	106,353
Truck stop							$	48,186									48,186
Pari-mutuel										$	25,652						25,652
Food and beverage		8,666			6,738			5,373			2,004						22,781
Convenience store — fuel								44,144									44,144
Convenience store — other								9,752									9,752
Hotel		1,279			1,517												2,796
Other		699			1,042			1,162			1,540		$	507			4,950
Total revenues		88,292			38,002			108,617			29,196			507			264,614
Less: Promotional allowances		(16,236	)		(6,613	)		(3,485	)								(26,334	)
Net revenues	$	72,056		$	31,389		$	105,132		$	29,196		$	507		$	238,280
Depreciation and amortization	$	5,297		$	4,525		$	3,827		$	1,586		$	695		$	15,930
Interest income	$	—		$	—		$	5		$	16		$	4		$	25
Interest expense	$	6,518		$	3,816		$	3,035		$	445		$	5,135		$	18,949
Net income (loss)	$	13,137		$	(2,597	)	$	8,284		$	(421	)	$	(11,857	)	$	6,546
EBITDA(1)	$	24,952		$	5,744		$	15,141		$	1,594		$	(6,031	)	$	41,400
Goodwill	$	6,711		$	8,836		$	30,924								$	46,471
Identifiable intangible assets, net							$	8,173								$	8,173
Property, plant and equipment, net	$	91,585		$	40,907		$	40,294		$	62,964		$	8,557		$	244,307
Total assets	$	113,679		$	57,580		$	90,201		$	67,847		$	14,233		$	343,540
Long-term debt	$	84,981		$	61,337		$	51,115		$	4,902		$	88,735		$	291,070
Capital expenditures	$	5,922		$	2,409		$	3,077		$	832		$	781		$	13,021

(1) EBITDA (earnings before interest, income taxes, depreciation and amortization) is presented as supplemental information in the tables above as it is a key measure of operating performance used by our chief operating decision maker. EBITDA can be reconciled directly to our unaudited 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 $205. In addition, effective May 1, 2009, Colonial has entered into an agreement with a company which provides broadcasting and simulcasting equipment and services. The agreements for live racing

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(DOLLARS IN THOUSANDS)

broadcasting and simulcasting services at the horse racing track expires December 31, 2011. Total expense incurred for totalisator and broadcasting and simulcasting services was $203 and $235 for the three months ended September 30, 2010 and 2009, respectively, and $570 and $630 for the nine months ended September 30, 2010 and 2009, respectively.

The Interstate Horse Racing Act requires that we secure the consent of the Virginia Horsemen’s Benevolence and Protective Association (the “VaHBPA”) and the Virginia Harness Horse Association (“VHHA”) to export the simulcasting of races. These consents are usually contained in the agreement between each group and Colonial. We have an agreement with the VHHA that expires December 31, 2011 and an agreement with the VaHBPA that expires December 31, 2012.

JEI Distributing, LLC (“JEID”), a wholly-owned subsidiary of JEI, has entered into various fuel supply agreements with CITGO Petroleum Corporation (“CITGO”). The agreements provide for the purchase and sale of CITGO branded and unbranded gasoline and diesel fuel. On December 21, 2009, JEID and CITGO entered into a five-year Marketer Franchise Agreement (the “MFA”) which created a franchise relationship between JEID and CITGO and requires JEID to purchase at least 90% of certain listed monthly quantities of gasoline from CITGO in order to maintain the franchise and not be in violation of the MFA. Under the MFA, CITGO grants JEID, for the term of the MFA, the right to use CITGO’s applicable brand names, trademarks and other forms of CITGO’s identification, in the manner established by CITGO, in connection with the resale by JEID of products acquired under CITGO’s brand names. Additionally, on December 21, 2009, JEID and CITGO entered into an Unbranded Rack Sales Agreement (the “RSA”). Although the initial term of the RSA is five years followed by annual renewals, the RSA provides that either party may terminate the RSA, without cause, upon providing thirty days written notice. The RSA requires JEID to purchase at least 90% of certain listed monthly quantities of fuel from CITGO in order to qualify for CITGO’s rack posting pricing in effect and not be in violation of the RSA. The Addendum to Unbranded Rack Sales Agreement between JEID and CITGO, also dated December 21, 2009, amends the pricing for unbranded fuel under the RSA. The amended pricing equals the sum of the base price and an adder fee that is dependent on the location of the terminal where the product is delivered.

Operating Leases

Our 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 $861 and $821 during the three months ended September 30, 2010 and 2009, respectively, and $2,332 and $2,279 for the nine months ended September 30, 2010 and 2009, 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.

6. RELATED PARTY TRANSACTIONS

JIMCO Management Agreement

In order to assist us in our efforts to research, develop, perform due diligence on and possibly acquire new gaming opportunities, we have an agreement with Jacobs Investments Management Co. Inc. (“JIMCO”), 82% of which is owned by Jeffrey P. Jacobs and the remaining 18% of which is owned in equal portions by two of his business associates. This agreement calls for $1,250 per year payable in two equal installments of $625 on January 1^st and July 1^st plus 2.5% of budgeted development costs for projects undertaken by us, if certain debt covenant ratios are met. Total expenses incurred under this agreement with JIMCO were $313 and $313 during the three months ended September 30, 2010 and 2009, respectively, and $938 and $938 for the nine months ended September 30, 2010 and 2009, respectively. As of September 30, 2010 and December 31, 2009, these transactions resulted in net payables to affiliates totaling $313 and $625, respectively.

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(DOLLARS IN THOUSANDS)

Transactions with Affiliate Truck Stops

We allocate management, accounting and overhead costs incurred by JEI to various truck stops owned by Jacobs. These costs totaled $297 and $296 for the three months ended September 30, 2010 and 2009, respectively, and $910 and $865 for the nine months ended September 30, 2010 and 2009, respectively. Additionally, to help JEI reach the fuel sale volume necessary to qualify for the reduced pricing structure under the CITGO contracts discussed in Note 5 above, JEI entered into agreements with affiliates to provide gasoline and diesel fuel at cost for their fuel operations, which totaled $2,048 and $6,517 for the three and nine months ended September 30, 2010, respectively. These transactions result in receivables from and payables to our affiliates. As of September 30, 2010 and December 31, 2009, these transactions resulted in net receivables from affiliates totaling $438 and $390, respectively.

Jalou Device Owner, L.P.

Additionally, under Louisiana law, video poker machines must be owned by Louisiana residents. Through October 2009, the Jalou truck plaza video gaming facilities paid a fee to the third party owner of the machines in order to maintain the machines used in our truck plaza operations, plus reimbursement for the owner’s licensing costs and various other expenses. Beginning in November 2009, the ownership of the video poker machines and the related repair parts inventory used by the Jalou truck plazas was transferred from the third party owner to a related party, Jalou Device Owner, L.P. (“Device Owner”), of which Gameco Holdings, Inc. (“Gameco”), a wholly-owned subsidiary of JII, owns 49% and is its general partner. Two Louisiana residents own 51% and are the limited partners of Device Owner. The Jalou truck plazas pay 90 cents per operating video poker machine per day to Device Owner, plus reimbursement for the owner’s licensing costs. Total expense under these obligations was $326 and $274 for the three months ended September 30, 2010 and 2009, respectively, and $975 and $819 for the nine months ended September 30, 2010 and 2009, respectively. As of September 30, 2010 and December 31, 2009, the transfer of the repair parts inventory from us to Device Owner, ongoing repair parts purchased from Device Owner and device owner fees paid resulted in net receivables from affiliates totaling $449 and $588, respectively.

Other Related Party Transactions

As of September 30, 2010 and December 31, 2009, we also had various immaterial receivables from JII and other Jacobs affiliates totaling $44 and $45, respectively. We also had payables to affiliates totaling $113 at December 31, 2009 due to the R.E. Jacobs Group, an affiliate, for JEI-related airplane usage during 2009. This payment was made during the first quarter of 2010.

Nautica Properties

During July 2006, we acquired from affiliated parties several options to lease and options to purchase six parcels of 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.

During March 2008, we exercised our option to acquire one of these parcels and its parking lot business referred to as “Lot D.” On April 1, 2008, we purchased this parcel for $800. Additionally, on January 15, 2009, we exercised our option to acquire a building and its related business referred to as “Sugar Warehouse,” and on January 21, 2009, we purchased this building for $2,450 from the limited partnership that owned this building. An affiliate of our CEO owned 82% of the general partner interests and 16.4% of the limited partner interests of the seller. See Note 7 below.

On July 7, 2010, we exercised our option and entered into a purchase agreement with Flats Development, Inc. to acquire a certain parcel of land and its related business for $2,800. Closing of the transaction occurred on August 16, 2010. Flats Development, Inc. was controlled by the mother and sister of our CEO, and is therefore deemed to be an entity under common control. See Note 7 below.

In July 2010, we amended three of the option agreements and extended the option period to July 11, 2012 giving us the right to purchase or enter into long-term leases on these remaining three parcels. The Nautica Properties currently require aggregate option payments totaling $150 per year. Our CEO owns varying interests in the three remaining parcels.

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(DOLLARS IN THOUSANDS)

Although we may elect not to exercise all 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 legalized on the Nautica Properties but we decide to exercise our three remaining options, the aggregate annual lease payments on the remaining three parcels would be approximately $355. If all three remaining parcels are purchased and none leased, the total purchase price would be approximately $3,550, less any aggregate option payments previously made. The purchase price and rent payments would be increased based on independent appraisals of the land and improvement values if, in the future, casino gaming were to become legalized in Ohio and a casino is licensed on the Nautica Properties.

On November 3, 2009, a constitutional amendment (“Issue 3”) was passed in Ohio which permits casino gaming at designated locations in Cincinnati, Cleveland, Columbus and Toledo. None of the designated locations is owned by JEI or its affiliates. We continue to evaluate the impact Issue 3 might have on our development efforts on the Nautica Properties in Ohio.

7. RECENT ACQUISITION ACTIVITY

Acquisition of Sugar Warehouse

As discussed in Note 6 above, on January 21, 2009, we acquired Sugar Warehouse for $2,450. Sugar Warehouse is a building comprised of 47,380 square feet of net rentable space with commercial tenants. The acquisition of Sugar Warehouse and its related business was accounted for as a combination of entities under common control. Therefore, the portion acquired from our CEO has been recorded at the historical cost bases in the assets and liabilities transferred and the portion acquired from third parties has been recorded at fair value at the acquisition date using the acquisition method of accounting in accordance with FASB ASC Topic 805,Business Combinations. A distribution of $2,238 was recorded on the acquisition date for the portion of the purchase price attributable to our CEO. Additionally, the net assets attributable to the noncontrolling interest holders have been reflected as a separate component of equity.

If casino gaming were to become legalized in Ohio within seven years from the purchase date and a for-profit casino is licensed on the Nautica Properties, the purchase price of Sugar Warehouse could increase based on independent appraisals of the land and improvement values. Any additional purchase price shall be equal to the fair market value of the property at the time that a license is issued to JEI in the State of Ohio for a for-profit casino less the purchase price previously paid. The fair market value shall be determined based upon the average of three independent appraisals prepared at that time. There is no maximum additional purchase price. We will continue to evaluate the fair value of this additional contingent purchase price at each balance sheet date throughout the term of the agreement. If applicable, any additional purchase price would be accounted for consistently with the original acquisition accounting, whereby the portion attributable to the related party would be accounted for as a combination of entities under common control and as a distribution, and the portion attributable to third parties would be accounted for using the acquisition method of accounting. At September 30, 2010, the fair value of the Sugar Warehouse contingent purchase price was immaterial to the financial position of JEI but could have a material impact in the future if and when a casino license is granted for this site.

The following table summarizes the net assets acquired and liabilities assumed as of January 21, 2009, for the Sugar Warehouse acquisition considering both the portion acquired from our CEO and the noncontrolling interest holders:

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

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(DOLLARS IN THOUSANDS)

The following schedule discloses the effects on JEI’s equity due to the change in ownership interest in Sugar Warehouse discussed above:

	Nine Months Ended September 30,
	2010		2009 (As adjusted, see below)
Net income attributable to JEI	$	3,513	$	6,546
Decrease in JEI’s equity for purchase of Sugar Warehouse noncontrolling interest		—		(212	)
Change from net income attributable to JEI and purchase of the noncontrolling interest	$	3,513	$	6,334

For the three months ended September 30, 2010 and 2009, there is no impact to equity due to the change in ownership interest in Sugar Warehouse discussed above other than net income attributable to JEI.

Acquisition of Flats Development, Inc.

As discussed in Notes 1 and 6 above, on August 16, 2010, we acquired Flats for $2,800. The acquisition of Flats and its related business was accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded at our related party’s historical cost bases in the assets and liabilities transferred. Accordingly, the accompanying unaudited condensed consolidated financial statements have been retroactively adjusted to include the operations of the parking lot business from January 1, 2009 to include the operations of the business as though the transaction had occurred at January 1, 2009. A distribution of $2,800 was recorded on the acquisition date, and the net assets of the entity acquired have been retroactively accounted for in our financial statements.

If casino gaming were to become legalized in Ohio within seven years from the purchase date and a for-profit casino is licensed on the Nautica Properties, the purchase price of Flats could increase based on independent appraisals of the land and improvement values. Any additional purchase price shall be equal to the fair market value of the property at the time that a license is issued to JEI in the State of Ohio for a for-profit casino less the purchase price previously paid. The fair market value shall be determined based upon the average of three independent appraisals prepared at that time. There is no maximum additional purchase price. We will continue to evaluate the fair value of this additional contingent purchase price at each balance sheet date throughout the term of the agreement. If applicable, any additional purchase price would be accounted for consistently with the original acquisition accounting. At September 30, 2010, the fair value of the Flats contingent purchase price was immaterial to the financial position of JEI but could have a material impact in the future if and when gaming becomes legalized in Ohio and a casino license is granted for this site.

The following table summarizes the net assets acquired and liabilities assumed as of August 16, 2010, for the Flats acquisition:

	Flats
Property and equipment, net	$	1,652
Current liabilities assumed		15
Net assets acquired	$	1,637

Acquisition of Land and Land Options along the Gulf Coast of Mississippi

During 2008, we completed several land purchase transactions with owners of real estate along the Gulf Coast of Mississippi, resulting in total purchases of $3,047, including acquisition costs of $246. During January 2009, we completed one additional land purchase transaction at a total purchase price of $307.

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(DOLLARS IN THOUSANDS)

During September 2008, we entered into two land purchase options totaling $160. During the second quarter of 2009, these two land purchase options were extended to July 1, 2010 for $200. These option agreements expired unexercised in June 2010. During November 2008, we entered into a third land purchase option totaling $100, which expired unexercised in May 2009.

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

8. LONG-TERM DEBT

On June 16, 2006, we issued senior unsecured notes in the amount of $210,000 bearing interest at 9 ³/4% due June 15, 2014 with interest only payments due each June 15 and December 15. We also have a $100,000 senior secured credit facility consisting of: (i) a $40,000 revolving credit facility; (ii) a $40,000 six-year term loan facility due June 2012; and (iii) a $20,000 six-year delayed draw term loan due June 2012. 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 ¹/2 of 1% or (b) a LIBOR rate for the interest period relevant to such borrowing adjusted for certain costs. At September 30, 2010, the blended interest rate on our senior secured credit facility was approximately 3.31%. As of September 30, 2010, $31,500 was available on the revolving credit facility.

Our $210,000 of 9 ³/4% senior unsecured notes 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. Beginning June 15, 2010, we can redeem all or part of our outstanding senior unsecured notes aggregating $210,000 at the redemption prices set forth below, plus accrued and unpaid interest. The redemption prices, expressed as a percentage of the principal amount, for the 12-month period beginning on June 15 of the years indicated below are as follows:

Year	Percentage
2010		104.875	%
2011		102.438	%
2012 and thereafter		100.000	%

There are many restrictions and covenants placed upon us under both our secured and unsecured indebtedness. 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. The failure to repay or maintain compliance with our covenants on any of our indebtedness would result in an event of default under both our senior credit facility and our indenture.

On March 31, 2010, we entered into an Amendment and Restatement Agreement (the “Amendment”) to the credit agreement. Generally, the Amendment, among other things, adjusted our bank financial covenants, allowed for the exclusion of certain items from EBITDA for purposes of calculating our revised financial covenants, and other minor amendments. Additionally, all but $3,000 of our revolving senior credit facility aggregating $40,000 due June 2011 (“Class B Revolving Loans”) was extended to June 2012 (“Class A Revolving Loans”). We have the ability to raise an additional $3,000 to fully replace the revolver capacity should we so choose.

As a result of the Amendment, our interest rate increased by 0.25% on the drawn Class B Revolving Loans balance and by 0.50% on the drawn Class A Revolving Loans balance, and our interest rate on the Tranche B Term Loan and Delayed Draw Tranche B Term Loan (aggregating $57,500 at September 30, 2010) increased from 2.75% above LIBOR to 3.00% above LIBOR. The total cost of the Amendment, including the bank consent fees, the fees to the joint

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(DOLLARS IN THOUSANDS)

lead arrangers, legal, accounting and other costs was $1,982. Of these costs, $1,500 will be amortized to interest expense over the remaining life of the credit facility which is approximately two years and the remainder was expensed as incurred. At September 30, 2010, we were in compliance with our financial covenants.

9. FAIR VALUE OF FINANCIAL INSTRUMENTS

Effective January 1, 2008, we adopted the provisions of FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) for all financial and nonfinancial assets and liabilities measured at fair value on a recurring basis. Effective January 1, 2009, we adopted the provisions of ASC Topic 820 pertaining to nonrecurring fair value measurements of nonfinancial assets and nonfinancial liabilities. The guidance establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes market or observable inputs as the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The guidance establishes a hierarchy for grouping these assets and liabilities, based on the significance level of the following inputs:

• Level 1 — inputs are unadjusted quoted prices foridentical assets or liabilities in active markets.

• Level 2 — inputs include quoted prices forsimilar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 — inputs are unobservable and considered significant to the fair value measurement.

A financial instrument’s categorization within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Investment in Equity Securities

We own approximately three percent of the outstanding shares of MTR Gaming Group, Inc. (“MTR”), a publicly-traded gaming company. Our CEO, Jeffrey P. Jacobs, his father, as well as other affiliated entities have also invested in MTR, increasing their combined ownership to 18.5% of the outstanding common shares of MTR, making the group MTR’s largest shareholder. Effective May 6, 2008, our CEO was appointed to the Board of Directors of MTR, and effective October 31, 2008, he was appointed Chairman and three of his nominees were added as Board members. On June 5, 2009, our CEO’s father died and on July 31, 2009, a trust established by our CEO was bequeathed the shares formerly held by his father. As a result, our CEO and his family trusts now control the entire 18.5% interest in MTR. Effective March 12, 2010, our CEO resigned from MTR’s Board of Directors.

The fair value of our investment in MTR is based entirely upon quoted market prices, which is a Level 1 input. As of September 30, 2010 and December 31, 2009, the fair value of our investment in MTR was $1,408 and $1,058, respectively. We have elected the fair value option permitted by FASB ASC Topic 825, Financial Instruments (“ASC Topic 825”), and therefore, we recognize changes in the fair value of our investment in MTR as unrealized gains/losses in earnings based on its quoted market price. We recorded an unrealized gain on the change in the fair value of the investment totaling $90 and $456 for the three months ended September 30, 2010 and 2009, respectively, and $350 and $1,123 for the nine months ended September 30, 2010 and 2009, respectively.

Other Financial Instruments

The following disclosure of estimated fair value of our financial instruments has been determined using available market information and generally accepted valuation methodologies. However, considerable judgment is required to interpret market data in order to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(DOLLARS IN THOUSANDS)

The estimated fair value of our financial instruments is as follows:

	As of September 30, 2010				As of December 31, 2009 (As adjusted, see Note 7)
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Liabilities—Debt and capital lease obligations	$	279,896	$	265,453	$	293,187	$	285,264

The estimation methodologies utilized are summarized as follows:

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

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

10. ACCRUED EXPENSES

Accrued expenses as of September 30, 2010 and December 31, 2009, include the following:

	September  30, 2010		December 31, 2009 (As adjusted, see Note 7)
Payroll and related	$	4,170	$	3,887
Gaming taxes payable		3,471		3,213
Interest payable		6,028		941
Property taxes payable		1,604		1,087
Slot club liability		1,310		1,169
Progressive jackpot liability		1,058		1,381
Purses due horsemen		1,101		598
Other		3,451		3,708
	$	22,193	$	15,984

11. 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 consisting of: (i) a $40,000 revolving credit facility; (ii) a $40,000 six-year term loan facility; and (iii) a $20,000 six-year delayed draw term loan. The unsecured portion of our debt is in the form of $210,000 of 9 ³/4% 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 securities.

The following information sets forth our Unaudited Condensed Consolidating Balance Sheets as of September 30, 2010 and December 31, 2009, the Unaudited Condensed Consolidating Statements of Operations for the three and nine months ended September 30, 2010 and 2009, and the Unaudited Condensed Consolidating Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 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.

19

JACOBS ENTERTAINMENT, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(DOLLARS IN THOUSANDS)

JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

AS OF SEPTEMBER 30, 2010

	Parent Company Issuer			Subsidiary Guarantors		Eliminations			Consolidated
ASSETS
Current assets	$	1,572		$	36,208				$	37,780
Property, plant and equipment, net		962			236,525					237,487
Net investment in and advances to subsidiaries		99,215				$	(99,215	)		—
Other long-term assets		4,530			58,043					62,573
Total assets	$	106,279		$	330,776	$	(99,215	)	$	337,840
LIABILITIES AND EQUITY
Current liabilities	$	6,607		$	28,450				$	35,057
Long-term debt		272,400			3,194					275,594
Long-term debt (receivable from) payable to affiliate		(198,832	)		198,832					—
Other long-term liabilities		2			1,085					1,087
Stockholder’s equity		26,102			99,215	$	(99,215	)		26,102
Total liabilities and equity	$	106,279		$	330,776	$	(99,215	)	$	337,840

AS OF DECEMBER 31, 2009

(As adjusted, see Note 7)

	Parent
	Company			Subsidiary
	Issuer			Guarantors		Eliminations			Consolidated
ASSETS
Current assets	$	644		$	34,587				$	35,231
Property, plant and equipment, net		1,404			242,903					244,307
Net investment in and advances to subsidiaries		110,238				$	(110,238	)		—
Other long-term assets		3,655			60,347					64,002
Total assets	$	115,941		$	337,837	$	(110,238	)	$	343,540
LIABILITIES AND EQUITY
Current liabilities	$	3,023		$	22,914				$	25,937
Long-term debt		286,569			4,501					291,070
Long-term debt (receivable from) payable to affiliate		(199,182	)		199,182					—
Other long-term liabilities		9			1,002					1,011
Stockholder’s equity		25,522			110,238	$	(110,238	)		25,522
Total liabilities and equity	$	115,941		$	337,837	$	(110,238	)	$	343,540

20

JACOBS ENTERTAINMENT, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(DOLLARS IN THOUSANDS)

JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	83,566					$	83,566
Costs and expenses	$	(2,140	)		(74,611	)					(76,751	)
Interest expense, net		(1,363	)		(5,134	)					(6,497	)
Equity in earnings of subsidiaries		3,821					$	(3,821	)		—
Net income	$	318		$	3,821		$	(3,821	)	$	318

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009

(As adjusted, see Note 7)

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	82,451		$	(13	)	$	82,438
Costs and expenses	$	(2,667	)		(72,484	)		13			(75,138	)
Interest expense, net		(1,307	)		(5,004	)					(6,311	)
Equity in earnings of subsidiaries		4,963						(4,963	)		—
Net income	$	989		$	4,963		$	(4,963	)	$	989

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	250,882		$	(25	)	$	250,857
Costs and expenses	$	(7,484	)		(220,634	)		25			(228,093	)
Interest expense, net		(4,031	)		(15,220	)					(19,251	)
Equity in earnings of subsidiaries		15,028					$	(15,028	)		—
Net income	$	3,513		$	15,028		$	(15,028	)	$	3,513

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

(As adjusted, see Note 7)

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	238,443		$	(163	)	$	238,280
Costs and expenses	$	(6,669	)		(206,304	)		163			(212,810	)
Interest expense, net		(3,920	)		(15,004	)					(18,924	)
Equity in earnings of subsidiaries		17,135						(17,135	)		—
Net income	$	6,546		$	17,135		$	(17,135	)	$	6,546

21

JACOBS ENTERTAINMENT, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(DOLLARS IN THOUSANDS)

JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations	Consolidated
Net cash provided by operating activities	$	21,244		$	6,143		$	$	27,387
INVESTING ACTIVITIES:
Additions to property, plant and equipment		(137	)		(8,403	)			(8,540	)
Proceeds from sale of equipment					163				163
Purchases of device rights					(74	)			(74	)
Net cash used in investing activities		(137	)		(8,314	)			(8,451	)
FINANCING ACTIVITIES:
Payments to obtain financing		(1,500	)						(1,500	)
Proceeds from revolving line of credit		14,000							14,000
Payments on long-term debt		(305	)		(1,337	)			(1,642	)
Payments on revolving line of credit		(24,500	)						(24,500	)
Net advances to/from subsidiaries		(4,140	)		4,140				—
Distributions to stockholder		(3,800	)						(3,800	)
Net cash (used in) provided by financing activities		(20,245	)		2,803				(17,442	)
Net Increase in Cash and Cash Equivalents		862			632				1,494
Cash and Cash Equivalents — Beginning of Period		191			24,014				24,205
Cash and Cash Equivalents — End of Period	$	1,053		$	24,646		$	$	25,699

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

(As adjusted, see Note 7)

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations	Consolidated
Net cash provided by operating activities	$	12,929		$	11,582		$	$	24,511
INVESTING ACTIVITIES:
Additions to property, plant and equipment		(89	)		(12,932	)			(13,021	)
Proceeds from sale of equipment					329				329
Purchases of device rights					(965	)			(965	)
Acquisition of noncontrolling interest		(212	)						(212	)
Net cash used in investing activities		(301	)		(13,568	)			(13,869	)
FINANCING ACTIVITIES:
Payments to obtain financing		(555	)						(555	)
Proceeds from revolving line of credit		18,713							18,713
Payments on long-term debt		(304	)		(576	)			(880	)
Payments on revolving line of credit		(21,750	)						(21,750	)
Net advances to/from subsidiaries		(5,352	)		5,352				—
Distributions to stockholder		(3,238	)						(3,238	)
Net cash (used in) provided by financing activities		(12,486	)		4,776				(7,710	)
Net Increase in Cash and Cash Equivalents		142			2,790				2,932
Cash and Cash Equivalents — Beginning of Period		487			21,394				21,881
Cash and Cash Equivalents — End of Period	$	629		$	24,184		$	$	24,813

22

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 nine months ended September 30, 2010 and 2009. 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, 2009, 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:

1.	Significant transactions occurring during 2010	23
2.	Overview and discussion of our operations	24
3.	Comparison of our results of operations for the three months ended September 30, 2010 to the three months ended September 30, 2009	26
4.	Comparison of our results of operations for the nine months ended September 30, 2010 to the nine months ended September 30, 2009	28
5.	Segment information	30
6.	Liquidity and capital resources	34
7.	Critical accounting policies and estimates	36

1. Significant transactions occurring during 2010

Amendment to Credit Agreement

On March 31, 2010, we entered into an Amendment and Restatement Agreement (the “Amendment”) to our credit agreement. Generally, the Amendment, among other things, adjusted our bank financial covenants, allowed for the exclusion of certain items from EBITDA for purposes of calculating our revised financial covenants, and other minor amendments. Additionally, all but $3.0 million of our revolving senior credit facility aggregating $40.0 million due June 2011 (“Class B Revolving Loans”) was extended to June 2012 (“Class A Revolving Loans”). We have the ability to raise an additional $3.0 million to fully replace the revolver capacity should we so choose.

As a result of the Amendment, our interest rate increased by 0.25% on the drawn Class B Revolving Loans balance and by 0.50% on the drawn Class A Revolving Loans balance, and our interest rate on the Tranche B Term Loan and Delayed Draw Tranche B Term Loan (aggregating $57.5 million at September 30, 2010) increased from 2.75% above LIBOR to 3.00% above LIBOR. The total cost of the Amendment, including the bank consent fees, the fees to the joint lead arrangers, legal, accounting and other costs was approximately $2.0 million. Of these costs, $1.5 million will be amortized to interest expense over the remaining life of the credit facility which is approximately 2 years and the remainder was expensed as incurred. At September 30, 2010, we were in compliance with our financial covenants.

Nautica Properties

In July 2010, we amended three of the option agreements and extended the option period to July 11, 2012 giving us the right to purchase or enter into long-term leases on these remaining three parcels. Additionally, on July 7, 2010, we exercised the option and entered into a purchase agreement with Flats Development, Inc. (“Flats”) to acquire a certain parcel of land and its related business for $2.8 million. Closing of the transaction occurred on August 16, 2010. Flats was controlled by the mother and sister of our Chief Executive Officer (“CEO”), and is therefore deemed to be an entity under common control. Therefore, the acquisition of Flats and its related business was accounted for as a combination of entities under common control. The acquisition has been recorded at the historical cost bases in the assets and liabilities transferred. Accordingly, the unaudited condensed consolidated financial statements and the accompanying management’s discussion and analysis of financial condition and results of operations presented in this Form 10-Q have been retroactively adjusted to include the operations of Flats from January 1, 2009. See Note 7 of the unaudited condensed consolidated financial statements. Our CEO owns varying interests in the three remaining Nautica Property parcels.

23

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 CEO is the chief operating decision maker. 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 managed by our Chief Operating Officer (“COO”) who is located in our Golden, Colorado corporate offices. Our 18 video poker truck plaza operations are also managed by our COO. Our COO reports to our President, who is also located in Golden, Colorado. Our President reports directly to our CEO. Our Virginia racetrack and satellite wagering facilities are managed by our on-site President of Pari-Mutuel Operations, and he reports directly to our CEO.

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, income 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 and/or financing.

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 levels. We have a $40 million revolving loan with a bank group on which we can draw as needed in order to augment 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. 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. At September 30, 2010, there were approximately 8,750 slot machines in the city of Black Hawk. We had 1,377 slot machines in this market (978 at The Lodge and 399 at the Gilpin), which represented approximately 16% of the total slot machines in Black Hawk. Additionally, there were 186 table games in the city of Black Hawk. We had 41 table games in this market (35 at The Lodge and 6 at the Gilpin), which represented approximately 22% of the total table games in Black Hawk. On March 15, 2010, we closed the Gilpin poker room.

New gaming regulation, which became effective on July 2, 2009 at Colorado casinos, allowed for the introduction of craps and roulette, increased the maximum wager limit to $100, and allows for 24-hour gaming operations. During 2009, our Colorado properties were affected by a number of events related to preparing our properties to take advantage of the higher limits, new games and extended hours. We reduced the slot machine count to accommodate the addition of table games. Our casino floors at both The Lodge and Gilpin were disrupted during the second quarter of 2009 to install new carpet, additional surveillance and new table games. On September 9, 2009, we began a construction project to expand our casino floor space at The Lodge. The project was completed November 16, 2009.

24

Nevada

Our Nevada operations consist of Gold Dust West-Reno, located in Reno, Nevada, which was acquired on January 5, 2001; Gold Dust West-Carson City, located in Carson City, Nevada, which was acquired on June 25, 2006; and Gold Dust West-Elko, located in Elko, Nevada, which we developed and opened on March 5, 2007. As in Colorado, our Nevada casinos operate in highly competitive markets. As a result of the added competition from Indian Gaming in California, many Northern Nevada casinos advertise themselves as “locals’ casinos.”

Louisiana

The Louisiana truck plaza video gaming facilities consist of 18 truck plazas 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 up to 50 video gaming devices in the casino depending on the level of fuel sales and available space. At September 30, 2010, our truck plaza video gaming facilities had a combined total of 944 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 via a computer phone line directly to the Louisiana State Police. The Louisiana truck plazas’ revenues are dependent on meeting the minimum gallons of fuel sales requirements necessary to operate video poker gaming machines in Louisiana. The fuel sales requirements must be complied with on an annual basis (except for the first year of operations during which it must be complied with on a quarterly basis) and in the event of noncompliance, the Louisiana State Police will turn off a portion of the video poker machines until the minimum fuel sales requirements are met. Management of the Louisiana truck plazas believes that they will continue to meet the fuel sales requirements necessary to operate video poker gaming machines in Louisiana at current levels, however, we can give no assurances in this regard.

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.

On April 28, 2010, we opened a satellite wagering facility in Henrico County, Virginia, and on August 27, 2010, we opened a satellite wagering facility in Richmond, Virginia. As of September 30, 2010, we operate ten satellite wagering facilities in Virginia.

25

3. Comparison of our results of operations for the three months ended September 30, 2010 to the three months ended September 30, 2009.

The following table summarizes our consolidated results of operations for the three months ended September 30, 2010 and 2009 (dollars in thousands):

	Three Months Ended September 30,
	2010			2009 (As adjusted, see Note 7 of Financial Statements)			$ Change			% Variance
REVENUES
Gaming:
Casino	$	35,793		$	38,732		$	(2,939	)		-7.59	%
Truck stop		14,787			14,733			54			0.37	%
Pari-mutuel		7,045			8,169			(1,124	)		-13.76	%
Food and beverage		7,410			8,148			(738	)		-9.06	%
Convenience store – fuel		21,636			16,231			5,405			33.30	%
Other		5,788			5,878			(90	)		-1.53	%
Less: Promotional allowances		(8,893	)		(9,453	)		560			-5.92	%
Net revenues		83,566			82,438			1,128			1.37	%
COSTS AND EXPENSES
Gaming:
Casino		12,531			13,208			(677	)		-5.13	%
Truck stop		9,255			9,433			(178	)		-1.89	%
Pari-mutuel		5,783			7,016			(1,233	)		-17.57	%
Food and beverage		3,563			3,692			(129	)		-3.49	%
Convenience store – fuel		20,291			15,196			5,095			33.53	%
Other		4,120			3,871			249			6.43	%
Marketing, general and administrative		15,975			17,785			(1,810	)		-10.18	%
Unrealized gain on change in fair value of investment in equity securities		(90	)		(456	)		366			-80.26	%
Depreciation and amortization		5,323			5,393			(70	)		-1.30	%
Total costs and expenses		76,751			75,138			1,613			2.15	%
OPERATING INCOME		6,815			7,300			(485	)		-6.64	%
Interest expense, net		(6,497	)		(6,311	)		(186	)		2.95	%
NET INCOME	$	318		$	989		$	(671	)		-67.85	%

All comparisons below begin with the third quarter 2010 results followed by the third quarter 2009 results.

Casino revenues decreased $2.9 million or 8% to $35.8 million from $38.7 million. The decrease in casino revenues is due to decreases at The Lodge of $1.1 million or 5%, the Gilpin of $0.9 million or 15%, Gold Dust West-Reno of $0.7 million or 15%, and Gold Dust West-Elko of $0.2 million or 7%. On July 2, 2009, Amendment 50 became effective in Colorado resulting in very strong results for the third quarter of 2009 which were not repeated in the third quarter of 2010. At The Lodge and Gilpin, we experienced a decrease in slot coin-in compared to the prior year, combined with a decrease in player banked poker revenues. Overall, the City of Black Hawk casino win decreased by 2% during the third quarter of 2010 compared to the same period of 2009. Gold Dust West-Reno continues to be negatively impacted by continued market declines.

Truck stop gaming revenues increased less than $0.1 million to $14.8 million from $14.7 million and is consistent with the statewide truck stop video gaming revenue increase for the third quarter of 2010 compared to the same period of 2009.

26

Pari-mutuel revenues decreased $1.1 million or 14% to $7.0 million from $8.1 million. The decrease in revenues is attributable to a $0.9 million decrease in wagering revenues at the racetrack and off track wagering facilities primarily due to a decrease in overall attendance compared to the prior year, combined with a $0.2 million decrease in account wagering revenues resulting from revised profit sharing agreements with the horsemen’s groups.

Food and beverage revenues decreased $0.7 million or 9% to $7.4 million from $8.1 million. This decrease is attributable to decreases of $0.4 million at the truck stops, $0.1 million at Gilpin, and $0.2 million at Colonial due to the lower level of gaming activity.

Convenience store-fuel revenues increased $5.4 million or 33% to $21.6 million from $16.2 million. This resulted from the average selling price of fuel increasing to $2.64 per gallon in 2010 from $2.42 per gallon in 2009, combined with a 22% increase in volume. In December 2009, JEI entered into a fuel supply agreement with CITGO Petroleum Corporation. To help JEI reach the fuel sale volume necessary to qualify for the reduced pricing structure under the CITGO contract, JEI entered into agreements with affiliates to provide fuel at cost for their fuel operations. The increase in fuel sales volume for this period was primarily due to the new affiliate agreements. The increase in fuel sales associated with the new affiliate agreements was $2.0 million during the third quarter of 2010.

Other revenues decreased $0.1 million or 2% to $5.8 million from $5.9 million and were primarily attributable to a decrease at Colonial.

Promotional allowances decreased $0.6 million or 6% to $8.9 million from $9.5 million, and is primarily attributable to a decrease in promotional allowances of $0.6 million at Gold Dust West-Reno, $0.2 million at the Gilpin and $0.1 million at Gold Dust West-Elko, somewhat offset by an increase of $0.3 million at The Lodge.

Casino expenses decreased $0.7 million or 5% to $12.5 million from $13.2 million. This decrease in casino expenses is primarily the result of decreases of $0.2 million at The Lodge and $0.5 million at the Gilpin. These decreases at our Colorado properties were primarily due to a reduction in labor combined with decreased gaming taxes resulting from a decrease in casino revenues.

Truck stop gaming expenses decreased $0.2 million or 2% to $9.2 million from $9.4 million and is primarily due to a reduction in labor expenses.

Pari-mutuel costs and expenses decreased $1.2 million or 18% to $5.8 million from $7.0 million. The decrease is attributable to a $0.8 million decrease in direct costs resulting from decreased pari-mutuel revenues combined with a $0.4 million decrease in account wagering costs due to revised profit sharing agreements with horsemen’s groups.

Food and beverage costs and expenses decreased $0.1 million or 3% to $3.6 million from $3.7 million, and is due to decreases of $0.2 million at the truck stops and $0.1 million at Colonial, somewhat offset by increases of $0.1 million at The Lodge and $0.1 million at the Nevada casinos combined.

Convenience store-fuel expenses increased $5.1 million or 34% to $20.3 million from $15.2 million. The increase was primarily due to an increase in the average cost of fuel to $2.48 per gallon in 2010 from $2.26 per gallon in 2009, combined with an increase in volume as discussed in convenience store-fuel revenues above. The increase in fuel costs associated with the new affiliate agreements was $2.0 million during the third quarter of 2010.

Other costs and expenses increased $0.2 million or 6% to $4.1 million from $3.9 million, and were primarily attributable to a $0.3 million increase in convenience store expenses at the truck stops, somewhat offset by with a $0.1 million decrease in hotel expenses at The Lodge.

Marketing, general and administrative expenses decreased $1.8 million or 10% to $16.0 million from $17.8 million. This decrease is primarily the result of decreased player promotions at The Lodge of $0.4 million, the Gilpin of $0.1 million, Gold Dust West-Reno of $0.1 million, and Gold Dust West-Elko of $0.1 million. Furthermore, the truck stops decreased by $0.1 million and Colonial’s expenses decreased by $0.2 million primarily due to labor costs. Corporate and other expenses decreased by $0.8 million primarily due to reductions of $0.3 million in professional accounting fees, $0.3 million for political contributions, $0.2 million for legal and license fees.

27

We account for our investment in MTR Gaming Group, Inc. (“MTR”) as an equity security, in accordance with the fair value option permitted by FASB ASC Topic 825,Financial Instruments(“ASC Topic 825”). An increase in the stock price during the third quarter of 2010 resulted in an unrealized gain on the change in fair value of investment in equity securities totaling $0.1 million compared to an unrealized gain totaling $0.5 million during the third quarter of 2009.

Depreciation and amortization expense decreased less than $0.1 million to $5.3 million.

Net interest expense increased $0.2 million or 3% to $6.5 million from $6.3 million. The increase is attributable to higher effective interest rates on our variable rate bank debt, somewhat offset by a decrease in debt outstanding during the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

4. Comparison of our results of operations for the nine months ended September 30, 2010 to the nine months ended September 30, 2009.

The following table summarizes our consolidated results of operations for the nine months ended September 30, 2010 and 2009 (dollars in thousands):

	Nine Months Ended September 30,
	2010			2009 (As adjusted, see Note 7 of Financial Statements)			$ Change			% Variance
REVENUES
Gaming:
Casino	$	106,298		$	106,353		$	(55	)		-0.05	%
Truck stop		45,951			48,186			(2,235	)		-4.64	%
Pari-mutuel		21,674			25,652			(3,978	)		-15.51	%
Food and beverage		21,940			22,781			(841	)		-3.69	%
Convenience store – fuel		65,383			44,144			21,239			48.11	%
Other		16,295			17,498			(1,203	)		-6.88	%
Less: Promotional allowances		(26,684	)		(26,334	)		(350	)		1.33	%
Net revenues		250,857			238,280			12,577			5.28	%
COSTS AND EXPENSES
Gaming:
Casino		36,940			35,487			1,453			4.09	%
Truck stop		27,943			29,196			(1,253	)		-4.29	%
Pari-mutuel		16,934			20,486			(3,552	)		-17.34	%
Food and beverage		10,363			10,344			19			0.18	%
Convenience store – fuel		61,460			41,250			20,210			48.99	%
Other		11,540			12,487			(947	)		-7.58	%
Marketing, general and administrative		47,308			48,753			(1,445	)		-2.96	%
Unrealized gain on change in fair value of investment in equity securities		(350	)		(1,123	)		773			-68.83	%
Depreciation and amortization		15,955			15,930			25			0.16	%
Total costs and expenses		228,093			212,810			15,283			7.18	%
OPERATING INCOME		22,764			25,470			(2,706	)		-10.62	%
Interest expense, net		(19,251	)		(18,924	)		(327	)		1.73	%
NET INCOME	$	3,513		$	6,546		$	(3,033	)		-46.33	%

28

All comparisons below begin with the year-to-date 2010 results followed by the year-to-date 2009 results.

Casino revenues decreased less than $0.1 million to $106.3 million from $106.4 million. The decrease in casino revenues is due to decreases at the Gilpin of $0.6 million or 4%, Gold Dust West-Reno of $1.9 million or 13% and Gold Dust West-Elko of $0.3 million or 3%, offset by an increase at The Lodge of $2.7 million or 4%. Revenues at The Lodge increased primarily due to Amendment 50 becoming effective July 2, 2009. Amendment 50 seems to be benefiting the larger casino properties in Black Hawk. Overall, the City of Black Hawk casino win increased 7% during the first nine months of 2010 compared to the same period of 2009. Gold Dust West-Reno continues to be negatively impacted by continued market declines.

Truck stop video poker gaming revenues decreased $2.2 million or 5% to $46.0 million from $48.2 million. The decrease in revenues was experienced at nearly all of our truck stop locations and is consistent with the statewide truck stop video gaming revenue decline of 4% resulting from the continued general economic conditions, including higher unemployment and decreased disposable income, for the first nine months of 2010 compared to the same period of 2009.

Pari-mutuel revenues decreased $4.0 million or 16% to $21.7 million from $25.7 million. The decrease in revenues is attributable to a $3.3 million decrease in wagering revenues at the racetrack and off track wagering facilities primarily due to an overall decrease in attendance in 2010 compared to 2009, combined with a $0.6 million decrease in account wagering revenues primarily due to a decrease in commission revenue resulting from revised profit sharing agreements with horsemen’s groups as compared to the prior year.

Food and beverage revenues decreased $0.8 million or 4% to $21.9 million from $22.8 million. This decrease is primarily attributable to decreases of $1.2 million at the truck stop facilities and $0.4 million at Colonial which correspond to the decrease in gaming revenues, somewhat offset by increases of $0.5 million at The Lodge, $0.1 million at Gold Dust West-Reno, $0.1 million at Gold Dust West-Carson City and $0.1 million at Gold Dust West-Elko.

Convenience store-fuel revenues increased $21.2 million or 48% to $65.4 million from $44.1 million. The increase was primarily due to an increase in the average selling price of fuel to $2.67 per gallon in 2010 from $2.17 per gallon in 2009, combined with a 21% increase in volume. In December 2009, JEI entered into a fuel supply agreement with CITGO Petroleum Corporation. To help JEI reach the fuel sale volume necessary to qualify for the reduced pricing structure under the CITGO contract, JEI entered into agreements with affiliates to provide fuel at cost for their fuel operations. The increase in fuel sales volume for this period was primarily due to the new affiliate agreements. The increase in fuel sales associated with the new affiliate agreements was $6.5 million in 2010.

Other revenues decreased $1.2 million or 7% to $16.3 million from $17.5 million and were primarily attributable to a $1.4 million decrease in convenience store revenues at the truck stops and receipt of $0.3 million in 2009 of insurance proceeds in excess of hurricane losses incurred during late 2008 at our truck stops, somewhat offset by a one-time oil and gas royalty received in April 2010 totaling $0.5 million and an increase in hotel revenues totaling $0.2 million at The Lodge. Additionally, other revenues at Colonial, Lot D and Sugar Warehouse decreased by a combined $0.2 million.

Promotional allowances increased $0.4 million or 1% to $26.7 million from $26.3 million. Promotional allowances increased by $2.0 million at The Lodge, $0.1 million at Gold Dust West-Carson City and $0.2 million at the truck stops, somewhat offset by decreases of $1.5 million at Gold Dust West-Reno, $0.2 million at the Gilpin and $0.2 million at Gold Dust West-Elko.

Casino expenses increased $1.5 million or 4% to $36.9 million from $35.5 million. Increases of $1.8 million at The Lodge and $0.1 million at Gold Dust West-Carson City were somewhat offset by decreases of $0.1 million at the Gilpin, $0.1 million at Gold Dust West-Reno and $0.2 million at Gold Dust West-Elko. The increase at The Lodge was primarily due to additional staffing for the table games and extended hours.

Truck stop gaming expenses decreased $1.3 million or 4% to $27.9 million from $29.2 million and is primarily due to direct costs associated with decreased truck stop video poker gaming revenues.

Pari-mutuel costs and expenses decreased $3.6 million or 17% to $16.9 million from $20.5 million. The decrease is attributable to a $2.4 million decrease in direct costs resulting from decreased pari-mutuel revenues primarily as a result of an overall decrease in attendance as compared to the prior year, combined with a $1.2 million decrease in costs associated with account wagering resulting from revised profit sharing agreements with horsemen’s groups.

29

Food and beverage costs and expenses were flat at $10.4 million. Increases of $0.4 million at The Lodge, $0.1 million at the Gilpin, $0.1 million at Gold Dust West-Reno, $0.3 million at Gold Dust West-Carson City and $0.2 million at Gold Dust West-Elko, were offset by decreases of $0.9 million at the truck stops and $0.2 million at Colonial.

Convenience store-fuel expenses increased $20.2 million or 49% to $61.5 million from $41.3 million. The increase was primarily due to an increase in the average cost of fuel to $2.52 per gallon in 2010 from $2.03 per gallon in 2009, combined with an increase in volume as discussed in convenience store-fuel revenues above. In January 2010, we also collected $0.3 million in accounts receivable that had been fully reserved in December 2008. The increase in fuel costs associated with the new affiliate agreements was $6.5 million in 2010.

Other costs and expenses decreased $0.9 million or 8% to $11.5 million from $12.5 million, and were attributable to a $0.8 million decrease in convenience store expenses at the truck stops which correlates to the decrease in convenience store revenues combined with a $0.1 million decrease in hotel expenses at The Lodge.

Marketing, general and administrative expenses decreased $1.4 million or 3% to $47.3 million from $48.7 million. This decrease is primarily the result of decreases of $0.2 million at The Lodge, $0.2 million at Gold Dust West-Reno, $0.2 million at Gold Dust West-Carson City, $0.1 million at Gold Dust West-Elko, $0.5 million at Colonial and $0.4 million at the truck stops. These decreases are somewhat offset by a net increase of $0.2 million at corporate comprised of the following: (a) $0.5 million of costs incurred during 2010 related to the amendment to our credit agreement; combined with increases of (b) $0.2 million for corporate payroll; and (c) $0.2 million for travel expenses at corporate; offset by decreases of (d) $0.2 million in legal expenses; (e) $0.3 million in professional accounting fees; (f) $0.1 million for political contributions and (g) $0.1 million for other corporate expenses.

We account for our investment in MTR as an equity security, in accordance with the fair value option permitted by ASC Topic 825. An increase in the stock price during the first nine months of 2010 resulted in an unrealized gain on the change in fair value of investment in equity securities totaling $0.3 million compared to an unrealized gain totaling $1.1 million during the same period of 2009.

Depreciation and amortization expense was flat at approximately $16.0 million.

Net interest expense increased by $0.3 million or 2% to $19.2 million from $18.9 million and is attributable to higher effective interest rates on our variable rate bank debt, somewhat offset by a decrease in debt outstanding for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

5. 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 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 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.

30

The following is a summary of the net revenues, costs and expenses and EBITDA, for the three and nine months ended September 30, 2010 and 2009 (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009 (As adjusted, see Note 7 of Financial Statements)			2010			2009 (As adjusted, see Note 7 of Financial Statements)
NET REVENUES
Colorado:
The Lodge	$	20,629		$	22,063		$	59,358		$	57,778
Gilpin		4,504			5,383			13,801			14,278
Total Colorado		25,133			27,446			73,159			72,056
Nevada:
Gold Dust West-Reno		4,386			4,462			13,309			13,591
Gold Dust West-Carson City		3,351			3,317			9,657			9,686
Gold Dust West-Elko		2,553			2,656			8,085			8,112
Total Nevada		10,290			10,435			31,051			31,389
Louisiana		39,811			34,707			121,645			105,132
Virginia		8,173			9,668			24,579			29,196
Corporate and other		159			182			423			507
Total Net Revenues		83,566			82,438			250,857			238,280
COSTS AND EXPENSES (excluding depreciation and amortization, net interest expense and income taxes)
Colorado:
The Lodge		13,328			13,927			38,631			36,774
Gilpin		3,458			4,006			10,346			10,330
Total Colorado		16,786			17,933			48,977			47,104
Nevada:
Gold Dust West-Reno		3,063			3,146			9,055			9,257
Gold Dust West-Carson City		3,413			3,344			9,785			9,594
Gold Dust West-Elko		2,275			2,339			6,647			6,794
Total Nevada		8,751			8,829			25,487			25,645
Louisiana		35,532			30,671			106,778			89,991
Virginia		8,089			9,647			23,329			27,602
Corporate overhead and other (1)(2)		2,270			2,665			7,567			6,538
Total Costs and Expenses		71,428			69,745			212,138			196,880
EBITDA
Colorado:
The Lodge		7,301			8,136			20,727			21,004
Gilpin		1,046			1,377			3,455			3,948
Total Colorado		8,347			9,513			24,182			24,952
Nevada:
Gold Dust West-Reno		1,323			1,316			4,254			4,334
Gold Dust West-Carson City		(62	)		(27	)		(128	)		92
Gold Dust West-Elko		278			317			1,438			1,318
Total Nevada		1,539			1,606			5,564			5,744
Louisiana		4,279			4,036			14,867			15,141
Virginia		84			21			1,250			1,594
Corporate overhead and other (1)(2)		(2,111	)		(2,483	)		(7,144	)		(6,031	)
Total EBITDA	$	12,138		$	12,693		$	38,719		$	41,400

See Notes on page 34.

31

General

See sections 3 and 4 above for comparisons of our results of operations for the three and nine months ended September 30, 2010 to the three months and nine months ended September 30, 2009, which provide explanations regarding the fluctuations in our revenues and costs and expenses by property and segment.

Throughout 2010 and 2009, net revenues at many of our properties continue to be negatively impacted by local and general economic conditions, including higher unemployment and decreased disposable income, somewhat offset by an increase in fuel prices. However, during the nine months ended September 30, 2010, The Lodge benefited from the new games, higher limits and extended hours that began on July 2, 2009. Except for The Lodge, costs and expenses are generally lower due to cost management efforts at all of our properties, combined with a decrease in direct costs associated to the decrease in net revenues. Year-over-year, costs and expenses increased at The Lodge as a result of additional personnel, training and other expenses resulting from the new gaming legislation, combined with increased gaming taxes resulting from increased revenues.

The Lodge

EBITDA at The Lodge decreased $0.8 million or 10% for the three months ended September 30, 2010 compared to the same period of 2009 and decreased $0.3 million or 1% for the nine months ended September 30, 2010 compared to the same period of 2009. Revenues for the third quarter of 2009 were higher than typical due to the impact of Amendment 50 resulting in a negative variance for the quarter; however, the revenues for the nine months ended September 30, 2010 were positively impacted by Amendment 50. Labor costs, gaming taxes and other expenses were consistent with the change in revenues.

Gilpin

EBITDA at the Gilpin decreased $0.3 million or 24% for the three months ended September 30, 2010 compared to the same period of 2009 and decreased $0.5 million or 12% for the nine months ended September 30, 2010 compared to the same period of 2009. Year-to-date, table games revenues increased primarily due to the new gaming legislation, offset by a decrease in player banked poker due to the March 2010 closure of the poker room at the Gilpin combined with a decrease in slots and other revenues due to the general economic conditions discussed in the “General” section above.

Gold Dust West-Reno

EBITDA at Gold Dust West-Reno was flat at $1.3 million for the three months ended September 30, 2010 compared to the same period of 2009 but decreased $0.1 million or 2% for the nine months ended September 30, 2010 compared to the same period of 2009. For both the three and nine months ended September 30, 2010 compared to the same periods in 2009, we experienced a decrease in slot revenues resulting from the local and general economic conditions discussed in the “General” section above, substantially offset by a decrease in promotional allowances.

Gold Dust West-Carson City

EBITDA at Gold Dust West-Carson City decreased less than $0.1 million for the three months ended September 30, 2010 compared to the same period of 2009 and $0.2 million for the nine months ended September 30, 2010 compared to the same period of 2009. On April 1, 2010, we opened a new restaurant resulting in additional labor, food and beverage and other start-up costs.

Gold Dust West-Elko

EBITDA at Gold Dust West-Elko decreased less than $0.1 million or 12% for the three months ended September 30, 2010 compared to the same period of 2009 but increased $0.1 million or 9% for the nine months ended September 30, 2010 compared to the same period of 2009. Net revenues were down $0.1 million for the third quarter and less than $0.1 million year to date due primarily to lower slot revenues, somewhat offset by a decrease in promotional allowances. Costs were approximately $0.1 million below 2009 for both the three and nine months ended September 30, 2010.

32

Louisiana

EBITDA at the Louisiana truck stops increased $0.2 million or 6% for the third quarter and decreased $0.3 million or 2% for the nine months ended September 30, 2010 compared to the same period of 2009. Gaming revenues were slightly better in the third quarter of 2010 compared to 2009 but both gaming and non-gaming revenues were below 2009 year-to-date resulting from the general economic conditions discussed in the “General” section above. However, we achieved a slight increase in fuel gross profit per gallon for both the quarter and year-to-date compared to 2009.

Virginia

EBITDA at our pari-mutuel operations in Virginia increased $0.1 million for the three months ended September 30, 2010 compared to the same period of 2009 but decreased $0.3 million or 22% for the nine months ended September 30, 2010 compared to the same period of 2009. The third quarter increase is primarily attributable to a $1.5 million decrease in pari-mutuel and other revenues which were more than offset by a decrease in pari-mutuel operations costs and marketing, general and administrative expenses. The year to date decrease is attributable to an overall decrease in revenues totaling $4.6 million, somewhat offset by decreased pari-mutuel costs combined with decreased management, general and administrative and food and beverage costs and expenses.

Corporate Overhead and Other

The EBITDA loss at corporate decreased by $0.4 million for the three months ended September 30, 2010 but increased by $1.1 million for the nine months ended September 30, 2010 compared to the same periods of 2009 and is primarily due to: (1) year-over-year decreases in the stock price of our investment in MTR, (2) decreased political contributions, professional accounting and legal and license expenses, somewhat offset by $0.5 million incurred during the year 2010 for one-time costs related to the March 31, 2010 amendment to our credit agreement.

Reconciliation of EBITDA to Net Income (Loss)

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 September 30, 2010	EBITDA			Depreciation and Amortization		Interest Expense, net		Net Income (Loss)
Colorado:
The Lodge	$	7,301		$	1,245	$	1,691	$	4,365
Gilpin		1,046			442		471		133
Total Colorado		8,347			1,687		2,162		4,498
Nevada:
Gold Dust West-Reno		1,323			398		655		270
Gold Dust West-Carson City		(62	)		573		383		(1,018	)
Gold Dust West-Elko		278			632		312		(666	)
Total Nevada		1,539			1,603		1,350		(1,414	)
Louisiana		4,279			1,234		1,088		1,957
Virginia		84			583		127		(626	)
Corporate overhead and other (1)		(2,111	)		216		1,770		(4,097	)
TOTAL	$	12,138		$	5,323	$	6,497	$	318

Three months ended September 30, 2009 (As adjusted, see Note 7 of Financial Statements)	EBITDA			Depreciation and Amortization		Interest Expense, net		Net Income (Loss)
Colorado:
The Lodge	$	8,136		$	1,328	$	1,693	$	5,115
Gilpin		1,377			493		476		408
Total Colorado		9,513			1,821		2,169		5,523
Nevada:
Gold Dust West-Reno		1,316			403		654		259
Gold Dust West-Carson City		(27	)		516		384		(927	)
Gold Dust West-Elko		317			616		233		(532	)
Total Nevada		1,606			1,535		1,271		(1,200	)
Louisiana		4,036			1,277		1,011		1,748
Virginia		21			527		145		(651	)
Corporate overhead and other (2)		(2,483	)		233		1,715		(4,431	)
TOTAL	$	12,693		$	5,393	$	6,311	$	989

33

Nine months ended September 30, 2010	EBITDA			Depreciation and Amortization		Interest Expense, net		Net Income (Loss)
Colorado:
The Lodge	$	20,727		$	3,782	$	5,076	$	11,869
Gilpin		3,455			1,328		1,423		704
Total Colorado		24,182			5,110		6,499		12,573
Nevada:
Gold Dust West-Reno		4,254			1,150		1,964		1,140
Gold Dust West-Carson City		(128	)		1,684		1,150		(2,962	)
Gold Dust West-Elko		1,438			1,881		833		(1,276	)
Total Nevada		5,564			4,715		3,947		(3,098	)
Louisiana		14,867			3,747		3,161		7,959
Virginia		1,250			1,691		404		(845	)
Corporate overhead and other (1)		(7,144	)		692		5,240		(13,076	)
TOTAL	$	38,719		$	15,955	$	19,251	$	3,513

Nine months ended September 30, 2009 (As adjusted, see Note 7 of Financial Statements)	EBITDA			Depreciation and Amortization		Interest Expense, net		Net Income (Loss)
Colorado:
The Lodge	$	21,004		$	3,836	$	5,090	$	12,078
Gilpin		3,948			1,461		1,428		1,059
Total Colorado		24,952			5,297		6,518		13,137
Nevada:
Gold Dust West-Reno		4,334			1,200		1,964		1,170
Gold Dust West-Carson City		92			1,504		1,151		(2,563	)
Gold Dust West-Elko		1,318			1,821		701		(1,204	)
Total Nevada		5,744			4,525		3,816		(2,597	)
Louisiana		15,141			3,827		3,030		8,284
Virginia		1,594			1,586		429		(421	)
Corporate overhead and other (2)		(6,031	)		695		5,131		(11,857	)
TOTAL	$	41,400		$	15,930	$	18,924	$	6,546

(1) Included in corporate overhead and other for the three and nine months ended September 30, 2010 is a $0.1 million gain and $0.3 million gain, respectively, on the change in fair value of investment in equity securities, and costs incurred related to the amendment to our credit agreement totaling $0.5 million for the nine months ended September 30, 2010.

(2) Included in corporate overhead and other for the three and nine months ended September 30, 2009 is a $0.5 million gain and $1.1 million gain, respectively, on the change in fair value of investment in equity securities, and costs incurred related to Ohio Issue 3 totaling $0.4 million for the three and nine months ended September 30, 2009.

6. Liquidity and capital resources

As of September 30, 2010, we had cash and cash equivalents of $25.7 million compared to $24.2 million in cash and cash equivalents as of December 31, 2009. The increase of $1.5 million is the result of $27.4 million cash provided by operating activities, $8.5 million cash used in investing activities, and $17.4 million cash used in financing activities, which is further discussed below. Our primary sources of liquidity are cash provided by operating activities and external borrowings. Our primary uses of cash are for debt service, capital improvements, development and acquisitions. Cash flows provided by operating activities increased $2.9 million for the nine months ended September 30, 2010 compared to September 30, 2009 primarily due to an increase in accounts payable and other accrued liabilities, somewhat offset by the decrease in operating income after adjusting for non-cash transactions.

Cash used in investing activities during the nine months ended September 30, 2010 and 2009 was the result of property and equipment and device rights additions totaling $8.6 million and $13.7 million, respectively, for ongoing capital investments at our existing properties, offset by $0.1 million and $0.3 million, respectively, of proceeds from the sale of equipment. In addition, cash used in investing activities during the nine months ended September 30, 2009 included $0.3 million for Mississippi land purchase transactions and $0.2 million to acquire the noncontrolling interest of Sugar Warehouse.

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The cash provided by or used in our financing activities varies significantly from year to year depending upon the cash provided by operations and investing activities, both of which are discussed above, as well as our cash position. The cash used in financing activities during the nine months ended September 30, 2010 was the result of net repayments on the revolving senior credit facility totaling $10.5 million, payments on long-term debt totaling $1.6 million, payments to obtain financing totaling $1.5 million and distributions to stockholder totaling $3.8 million, including $2.8 million for the purchase of Flats.

As of September 30, 2010, we had $31.5 million available on our $40 million revolving senior credit facility for acquisitions, capital expenditure programs and working capital. As of September 30, 2010, our total debt approximates $279.9 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. Our failure to pay interest, repay our indebtedness when due, or maintain compliance with our debt covenants would result in an event of default under both our senior credit facility and our note indenture. At September 30, 2010, we were in compliance with our financial covenants.

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

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. During 2010, we anticipate spending approximately $13 million for discretionary capital expenditures. 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 bank credit facility 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.

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.

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The following table provides disclosure concerning our obligations and commitments to make future payments under contracts, such as debt and lease agreements, and purchase and other long-term obligations as of September 30, 2010.

(In Thousands)	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Long-term debt (1)	$	362,180	$	26,780	$	104,889	$	230,511	$	—
Capital lease obligations		7,352		537		948		1,616		4,251
Operating leases (2)		34,985		2,824		4,502		3,984		23,675
Purchase obligations (3)		270,996		65,047		130,093		75,856		—
Other long-term obligations (4)		21,649		2,110		3,509		2,905		13,125
Total contractual cash obligations	$	697,162	$	97,298	$	243,941	$	314,872	$	41,051

(1) Long-term debt includes principal and interest owing under the terms of our senior unsecured notes, our senior secured credit facility and the Black Hawk special assessment bonds. Interest on variable rate debt is computed based on rates outstanding at September 30, 2010.

(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) Purchase obligations include five-year fuel supply agreements for gasoline and diesel fuel. Fuel volumes are specified in the contracts. The purchase price is a variable market-based price. The long-term obligations in this table were derived using the applicable contract prices for gasoline and diesel fuel at September 30, 2010 multiplied by the actual fuel volumes per the contracts.

(4) Other long-term obligations include a 20-year, $1.25 million per year management agreement with Jacobs Investments Management Co. Inc., an affiliated company, and our obligation to pay $0.90 per operating video poker machine per day to Jalou Device Owner, L.P., the related party owner of the video poker machines in order to maintain the machines used in our truck plaza operations. In addition, 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. The amendment provides for a minimum charge per calendar year of $205,000. Other long-term obligations also include various surveillance and service agreements in Louisiana and at the corporate office.

Finally, beginning June 15, 2010, we can redeem all or part of our outstanding senior unsecured notes aggregating $210 million at the redemption prices set forth below, plus accrued and unpaid interest. The redemption prices, expressed as a percentage of the principal amount, for the 12-month period beginning on June 15 of the years indicated below are as follows:

Year	Percentage
2010		104.875	%
2011		102.438	%
2012 and thereafter		100.000	%

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.

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Property and equipment

We have a significant investment in long-lived property and equipment, representing approximately 70% of our total assets. 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. During 2009, based on operating results, we performed an impairment analysis of property and equipment at our Gold Dust West-Carson City and Virginia reporting units, and we determined that property and equipment is not impaired at either reporting unit.

During the third quarter of 2010, we were required, pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360,Property, Plant and Equipment, to assess our ability to recover the recorded cost of the Gold Dust West-Carson City long-lived assets. We have prepared a cash flow analysis based on management’s best estimate in an effort to assess the likelihood of recovering the cost of these assets. Based on these projections and the related underlying assumptions as well as our knowledge of the Carson City market, we believe that we will be able to recover the carrying cost of these assets as of September 30, 2010 and no impairment currently exists. However, future events such as actual performance versus projected performance, continued market decline, increased and/or changing competitive forces, or other unforeseen events could change our estimates and cause us to recognize an impairment in the carrying value of the Gold-Dust West-Carson City long-lived assets in future periods. Such an impairment could be material to our financial position and results of operations.

Goodwill and other intangible assets

We have $46.5 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.

Our reporting units with goodwill balances at September 30, 2010 are The Lodge ($4.2 million), Gilpin ($2.5 million), Gold Dust West-Reno ($8.8 million) and Louisiana ($31.0 million). There is no goodwill recorded in our Gold Dust West-Carson City, Gold Dust West-Elko or Virginia reporting units. We performed our most recent annual impairment test for these reporting units as of September 30, 2010. 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. We determined that goodwill was not impaired at any of our reporting units. Furthermore, if the fair value of any of our reporting units declined by 10%, no goodwill impairment would be required.

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.

We have issued $210 million of 9 ³/4% fixed rate senior unsecured notes due in 2014 and a $100 million variable rate senior secured credit facility consisting of: (i) a $40 million revolving credit facility, of which $3 million is due in 2011 and the remainder is due in 2012, (ii) a $40 million term loan facility due in 2012, and (iii) a $20 million delayed draw term loan due in 2012. As of September 30, 2010, $8.5 million is outstanding on the senior secured revolving credit facility and $57.5 million is outstanding on our senior secured term loan debt, bearing interest at a blended variable rate approximating 3.31% at September 30, 2010. As of September 30, 2010, $31.5 million is available on the revolving credit facility.

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 $0.2 million annually for interest should market rates increase or decrease by 10% compared to interest rate levels at September 30, 2010.

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

JEI owns an investment in the publicly traded equity of MTR Gaming Group, Inc. (“MTR”). Market prices for equity securities are subject to fluctuation. Fluctuation in the market price of such a security may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments, and general market conditions. Consequently, the amount realized on any ultimate sale of this investment may significantly differ from the reported market value as of September 30, 2010.

The recent severe economic downturn and adverse conditions in the local, regional, national and global markets has negatively affected our operations, and may continue to negatively affect our operations in the future. During periods of economic contraction such as the current period, our revenues may decrease while some of our costs remain fixed or even increase, resulting in decreased earnings. Gaming and other leisure activities we offer represent discretionary expenditures and participation in such activities may decline during economic downturns, during which consumers generally earn less disposable income. Even an uncertain economic outlook may adversely affect consumer spending in our gaming operations and related facilities, as consumers spend less in anticipation of a potential economic downturn. Furthermore, other uncertainties, including national and global economic conditions, terrorist attacks or other global events, could adversely affect consumer spending, increase gasoline prices and adversely affect our operations.

We use significant amounts of electricity, natural gas and other forms of energy. While we have generally not experienced any major shortages of energy, any substantial increases in the cost of electricity and natural gas in the United States could negatively impact our operating results. The extent of any impact is subject to the magnitude and duration of the energy price increases and could be material.

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

We are a highly levered company. While we intend to finance expansion and capital expenditures with existing cash, cash flow from operations and/or borrowings under our existing senior secured credit facilities, we may require additional financing to support our continued growth. However, due to the existing uncertainty in the capital and credit markets, our access to capital may not be available on terms acceptable to us or at all. Further, if adverse regional and national economic conditions persist or worsen, we could experience decreased revenues from our operations attributable to decreases in consumer spending levels and could fail to satisfy the financial and other restrictive covenants to which we are subject under our existing indebtedness.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness 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 September 30, 2010. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer 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, evaluated and reported, as applicable, within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, 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.

Changes in Internal Control over Financial Reporting

There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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. We believe these matters are covered by appropriate insurance policies, less applicable deductibles which are accrued in our financial statements. None of the claims or payment of deductibles is expected to have a material impact on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

There has been no material change in the risk factors disclosed in our Form 10-K report for the year ended December 31, 2009, filed with the Securities and Exchange Commission on March 30, 2010.

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

None

Item 3. Defaults Upon Senior Securities

None

Item 5. Other Information

None

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.

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SIGNATURES

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

	Jacobs Entertainment, Inc.
	Registrant
Date: November 12, 2010	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.

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