Jacobs Entertainment 10-Q 2011 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

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 incorporation or organization)	(I.R.S. Employer 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  x    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 August 15, 2011
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 June 30, 2011 and December 31, 2010	3
	Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010	4
	Unaudited Condensed Consolidated Statements of Stockholder’s Equity for the six months ended June 30, 2011 and 2010	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION	41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
SIGNATURES		43
EXHIBIT INDEX		44

2

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements.

JACOBS ENTERTAINMENT, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

		00000000000			00000000000
	June 30, 2011			December 31, 2010 (As adjusted, see Note 7)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	28,409		$	24,703
Restricted cash		4,613			1,226
Accounts receivable, net		4,321			3,197
Due from affiliates		1,488			2,671
Inventory		3,933			3,901
Prepaid expenses and other current assets		4,221			3,059
Total current assets		46,985			38,757
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements		64,727			64,031
Building and improvements		201,031			198,962
Equipment, furniture and fixtures		107,391			104,928
Leasehold improvements		3,213			3,213
Construction in progress		907			1,033
		377,269			372,167
Less accumulated depreciation		(146,408	)		(128,686	)
Property, plant and equipment, net		230,861			243,481
OTHER NONCURRENT ASSETS:
Goodwill		48,728			48,728
Identifiable intangible assets, net		8,684			8,274
Debt issue costs, net		3,850			5,016
Investment in equity securities		2,465			1,652
Other assets		1,729			1,731
TOTAL	$	343,302		$	347,639
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	9,228		$	8,498
Accrued expenses		18,640			16,811
Due to affiliates		228			639
Current portion of long-term debt and capital lease obligations		85,148			21,561
Total current liabilities		113,244			47,509
Long-term debt and capital lease obligations		213,120			281,692
Other noncurrent liabilities		1,169			1,114
Total liabilities		327,533			330,315
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 June 30, 2011 and December 31, 2010		—			—
Class B Common stock $.01 par value; 200 shares authorized, 180 shares issued and outstanding as of June 30, 2011 and December 31, 2010		—			—
Additional paid-in capital		37,015			31,825
Accumulated deficit		(21,246	)		(15,124	)
Total stockholder’s equity of Jacobs Entertainment, Inc.		15,769			16,701
Noncontrolling interest		—			623
Total stockholder’s equity		15,769			17,324
TOTAL	$	343,302		$	347,639

See notes to unaudited condensed consolidated financial statements.

3

JACOBS ENTERTAINMENT, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands)

	Three Months Ended June  30,						Six Months Ended June  30,
	2011			2010 (As adjusted, see Note 7)			2011			2010 (As adjusted, see Note 7)
REVENUES
Gaming:
Casino	$	36,682		$	36,549		$	72,776		$	70,505
Truck stop		17,981			16,906			37,489			35,709
Pari-mutuel		7,779			8,254			14,161			14,629
Food and beverage		7,395			7,779			14,472			15,256
Convenience store — fuel		32,349			26,754			59,038			48,757
Convenience store — other		3,748			3,500			7,092			6,586
Hotel		1,040			1,054			1,792			1,835
Other		1,579			2,120			2,812			3,394
Total revenues		108,553			102,916			209,632			196,671
Less: Promotional allowances		(9,344	)		(9,097	)		(18,594	)		(18,133	)
Net revenues		99,209			93,819			191,038			178,538
COSTS AND EXPENSES
Gaming:
Casino		12,579			12,687			25,041			24,409
Truck stop		10,712			10,507			21,968			21,493
Pari-mutuel		6,204			6,379			11,054			11,151
Food and beverage		3,791			4,002			7,121			7,458
Convenience store — fuel		30,420			25,180			56,062			45,862
Convenience store — other		4,919			4,473			9,309			8,465
Hotel		236			102			398			379
Marketing, general and administrative		16,388			16,202			32,452			31,912
Unrealized (gain) loss on change in fair value of investment in equity securities		(333	)		326			(813	)		(260	)
Impairment of long-lived assets		10,065			—			10,065			—
Depreciation and amortization		5,632			5,570			11,234			11,167
Total costs and expenses		100,613			85,428			183,891			162,036
OPERATING (LOSS) INCOME		(1,404	)		8,391			7,147			16,502
Interest income		5			4			17			14
Interest expense		(6,514	)		(6,795	)		(13,286	)		(13,362	)
NET (LOSS) INCOME		(7,913	)		1,600			(6,122	)		3,154
Net (income) loss of subsidiary attributable to the noncontrolling interest		—			(6	)		—			3
NET (LOSS) INCOME ATTRIBUTABLE TO JACOBS ENTERTAINMENT, INC.	$	(7,913	)	$	1,594		$	(6,122	)	$	3,157

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, 2011 (As adjusted, see Note 7)		1,320		180	$	—	$	31,825		$	(15,124	)	$	623		$	17,324
Capital contributions								20,913									20,913
Distributions								(15,723	)								(15,723	)
Acquisition of noncontrolling interest														(623	)		(623	)
Net loss**											(6,122	)					(6,122	)
BALANCES, JUNE 30, 2011		1,320		180	$	—	$	37,015		$	(21,246	)	$	—		$	15,769

	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	$	—	$	34,758		$	(17,048	)	$	618		$	18,328
Distributions								(1,000	)								(1,000	)
Net income (loss) (As adjusted, see Note 7)**											3,157			(3	)		3,154
BALANCES, JUNE 30, 2010 (As adjusted, see Note 7)		1,320		180	$	—	$	33,758		$	(13,891	)	$	615		$	20,482

* 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 six months ended June 30, 2011 and 2010, comprehensive (loss) income is equal to net (loss) income and is entirely attributable to the Jacobs Entertainment, Inc. stockholder other than the net loss attributable to the noncontrolling interest.

See notes to unaudited condensed consolidated financial statements.

5

JACOBS ENTERTAINMENT, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	Six Months Ended June 30,
	2011			2010 (As adjusted, see Note 7)
OPERATING ACTIVITIES:
Net (loss) income	$	(6,122	)	$	3,154
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		11,234			11,167
Impairment of long-lived assets		10,065			—
Unrealized gain on change in fair value of investment in equity securities		(813	)		(260	)
(Gain) loss on sale of equipment		(7	)		7
Deferred financing cost amortization		1,166			1,005
Other		—			4
Changes in operating assets and liabilities, net of acquisitions:
Restricted cash		(3,387	)		(2,541	)
Accounts receivable, net		(1,136	)		(380	)
Inventory		(32	)		190
Prepaid expenses and other assets		(1,160	)		(1,747	)
Accounts payable		1,694			2,576
Accrued expenses and other noncurrent liabilities		2,017			673
Due from/to affiliates		(1,124	)		(729	)
Net cash provided by operating activities		12,395			13,119
INVESTING ACTIVITIES:
Additions to property, plant and equipment		(8,077	)		(5,734	)
Proceeds from sale of equipment		116			138
Purchases of device rights		(1,217	)		—
Acquisition of noncontrolling interest		(1,243	)		—
Net cash used in investing activities		(10,421	)		(5,596	)
FINANCING ACTIVITIES:
Payments to obtain financing		—			(1,500	)
Borrowings on revolving line of credit		30,800			13,000
Payments on long-term debt		(361	)		(1,432	)
Payments on revolving line of credit		(14,300	)		(16,000	)
Distributions to stockholder		(14,407	)		(1,000	)
Net cash provided by (used in) financing activities		1,732			(6,932	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		3,706			591
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		24,703			24,623
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	28,409		$	25,214
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	12,036		$	12,258
Non-cash investing and financing activities:
Capital contributions exchanged for retirement of liabilities paid by affiliate	$	20,913		$	—
Capital distributions for assets retained by affiliate	$	1,316		$	—
Non-cash additions to property	$	488		$	456
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 common stock. These persons and their 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 June 30, 2011, we owned and operated five casinos through wholly-owned subsidiaries. Our casinos include The Lodge Casino at Black Hawk (“The Lodge”) and the Gilpin Hotel Casino (“Gilpin”), both in Black Hawk, Colorado, the Gold Dust West Casino (“Gold Dust West-Reno”) in Reno, Nevada, 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 21 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 business and its related assets referred to as “Flats” for $2,800 based in what we call the Nautica Properties area in Cleveland, Ohio. Flats was controlled by the mother and sister of our CEO and was accounted for as a combination of entities under common control. See Note 7. On January 18, 2011, we acquired another Nautica Properties based business and its related assets referred to as “Nautica Phase 2” for $1,250 from a limited partnership. The general partner owned 1% and the limited partners owned 99% of the limited partnership. Our CEO owned 58% of the general partner interests and controlled the partnership. Third parties owned the remaining 42% of the general partner interests and the 99% limited partnership interest. Therefore, the portion of Nautica Phase 2 acquired from our CEO has been recorded at the historical cost bases in the assets and liabilities transferred and the portion of Nautica Phase 2 acquired from third parties has been recorded at fair value at the acquisition date using the acquisition method of accounting. See Note 7.

Additionally, on January 31, 2011, we acquired two truck plaza video gaming facilities in Louisiana, Cash Magic Springhill, LLC (“Springhill”) and Cash Magic Vivian, LLC (“Vivian”), for $5,462 and $4,913, respectively, which were previously wholly owned by another JII subsidiary, Gameco Holdings, Inc. (“Gameco”). On March 31, 2011, we acquired one additional truck plaza video gaming facility in Louisiana, Jalou Forest Gold, LLC (“Forest Gold”), for $3,025, which was also previously wholly owned by Gameco. The acquisitions of these truck stops were accounted for as combinations of entities under common control. Accordingly, the accompanying unaudited condensed consolidated financial statements have been retroactively adjusted to include the operations of these businesses from January 1, 2010. See Note 7.

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 June 30, 2011 and December 31, 2010, the results of our operations for the three and six months ended June 30, 2011 and 2010, and changes in stockholder’s equity and cash flows for the six months ended June 30, 2011 and 2010. 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, 2010 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, 2011.

7

New Accounting Guidance–New authoritative accounting guidance under FASB ASC Topic 924,Entertainment-Casinos (“ASC Topic 924”), clarified existing literature that an entity should accrue jackpot liabilities and charge to revenues when an entity has the obligation to pay the jackpot (or a portion thereof as applicable). This guidance applies to both base jackpots and the incremental portion of progressive jackpots. The standard was effective for us on January 1, 2011. The adoption of this standard did not have a material impact on our consolidated financial statements.

In May 2011, the FASB issued new fair value measurement authoritative guidance that clarifies the application of fair value measurement and disclosure requirements and changes particular principles or requirements for measuring fair value. This guidance is effective for annual periods beginning after December 15, 2011. We are currently evaluating the provisions of this guidance and assessing the impact, if any, it may have on our fair value disclosures.

In June 2011, the FASB issued new authoritative guidance that states an entity that reports items of other comprehensive income has the option to present the components of net income and comprehensive income in either one continuous financial statement, or two consecutive financial statements. This guidance is effective for annual periods beginning after December 15, 2011. We are currently evaluating the provisions of this guidance and assessing the impact it will have on our comprehensive income disclosures.

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 the future operating results of each reporting unit, multiples of EBITDA (earnings before interest, income taxes, depreciation and amortization), 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, prior to the acquisition by JEI, we determined the carrying value of the goodwill at Forest Gold was impaired. Market conditions in 2010 resulted in Forest Gold not meeting the financial performance expectations originally forecast at the time of acquisition. Consequently, Forest Gold recorded a goodwill impairment charge of $836 during the year third quarter of 2010. There have been no circumstances subsequently to indicate any additional impairment testing is required. There has been no change in the carrying amount of goodwill during 2011.

In addition, as of June 30, 2011, 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 June 30, 2011 and December 31, 2010, consist of the following:

			June 30, 2011						December 31, 2010 (As adjusted, see Note 7)
	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		40.50	$	6,000	$	1,140	$	4,860	$	6,000	$	1,080	$	4,920
Device use rights		2.74		11,623		8,174		3,449		10,987		8,047		2,940
Restriction agreements		5.21		743		368		375		743		329		414
Total			$	18,366	$	9,682	$	8,684	$	17,730	$	9,456	$	8,274

8

Aggregate amortization expense of identifiable intangible assets was $418 and $452 for the three months ended June 30, 2011 and 2010, respectively, and $807 and $922 for the six months ended June 30, 2011 and 2010, respectively.

Estimated amortization expense for the years ending December 31:

2011 (remaining 6 months)	$	715
2012		1,314
2013		932
2014		702
2015		606
Thereafter		4,415
Total	$	8,684

4. SEGMENTS

Our CEO is our chief operating decision maker. At June 30, 2011 and 2010, 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 our truck plaza/video poker facilities, and the Virginia segment consists of Colonial’s pari-mutuel operations and satellite wagering facilities.

The accounting policies of the segments are the same as those described in Note 2 above and those included in our Form 10-K report for the year ended December 31, 2010. The corporate adjustments, eliminations and other represent all other income and expenses and are also presented.

9

As of and for the Three Months Ended June 30, 2011

	Colorado			Nevada			Louisiana			Virginia			Corporate Adjustments, Eliminations and Other			Total
Revenues:
Gaming
Casino	$	27,543		$	9,139											$	36,682
Truck stop							$	17,981									17,981
Pari-mutuel										$	7,779						7,779
Food and beverage		2,978			2,455			1,420			542						7,395
Convenience store — fuel								32,349									32,349
Convenience store — other								3,748									3,748
Hotel		470			570												1,040
Other		235			309			434			439		$	162			1,579
Total revenues		31,226			12,473			55,932			8,760			162			108,553
Less: Promotional allowances		(6,323	)		(1,528	)		(1,493	)								(9,344	)
Net revenues	$	24,903		$	10,945		$	54,439		$	8,760		$	162		$	99,209
Depreciation and amortization	$	1,677		$	1,673		$	1,502		$	584		$	196		$	5,632
Interest income	$	—		$	—		$	1		$	4		$	—		$	5
Interest expense	$	2,158		$	1,274		$	1,104		$	128		$	1,850		$	6,514
Net income (loss)	$	4,547		$	(10,845	)	$	2,982		$	(376	)	$	(4,221	)	$	(7,913	)
EBITDA(1)	$	8,382		$	(7,898	)	$	5,587		$	332		$	(2,175	)	$	4,228
Goodwill	$	6,711		$	8,836		$	33,181								$	48,728
Identifiable intangible assets, net							$	8,684								$	8,684
Property, plant and equipment, net	$	77,882		$	36,405		$	44,852		$	61,846		$	9,876		$	230,861
Total assets	$	111,521		$	42,955		$	101,816		$	71,387		$	15,623		$	343,302
Long-term debt	$	84,771		$	42,149		$	33,514		$	4,862		$	47,824		$	213,120
Capital expenditures	$	1,597		$	461		$	544		$	631		$	210		$	3,443

10

As of and for the Six Months Ended June 30, 2011

	Colorado			Nevada			Louisiana			Virginia			Corporate Adjustments, Eliminations and Other			Total
Revenues:
Gaming
Casino	$	54,601		$	18,175											$	72,776
Truck stop							$	37,489									37,489
Pari-mutuel										$	14,161						14,161
Food and beverage		5,955			4,781			2,909			827						14,472
Convenience store — fuel								59,038									59,038
Convenience store — other								7,092									7,092
Hotel		943			849												1,792
Other		453			615			828			649		$	267			2,812
Total revenues		61,952			24,420			107,356			15,637			267			209,632
Less: Promotional allowances		(12,553	)		(3,061	)		(2,980	)								(18,594	)
Net revenues	$	49,399		$	21,359		$	104,376		$	15,637		$	267		$	191,038
Depreciation and amortization	$	3,325		$	3,364		$	2,998		$	1,151		$	396		$	11,234
Interest income	$	—		$	—		$	5		$	12		$	—		$	17
Interest expense	$	4,315		$	2,548		$	2,401		$	257		$	3,765		$	13,286
Net income (loss)	$	8,791		$	(12,123	)	$	6,125		$	(534	)	$	(8,381	)	$	(6,122	)
EBITDA(1)	$	16,431		$	(6,211	)	$	11,519		$	862		$	(4,220	)	$	18,381
Goodwill	$	6,711		$	8,836		$	33,181								$	48,728
Identifiable intangible assets, net							$	8,684								$	8,684
Property, plant and equipment, net	$	77,882		$	36,405		$	44,852		$	61,846		$	9,876		$	230,861
Total assets	$	111,521		$	42,955		$	101,816		$	71,387		$	15,623		$	343,302
Long-term debt	$	84,771		$	42,149		$	33,514		$	4,862		$	47,824		$	213,120
Capital expenditures	$	3,414		$	1,635		$	1,018		$	1,143		$	867		$	8,077

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

(Balance Sheet Data as of December 31, 2010)

	Colorado			Nevada			Louisiana (As adjusted, see Note 7)			Virginia			Corporate Adjustments, Eliminations and Other (As adjusted, see Note 7)			Total (As adjusted, see Note 7)
Revenues:
Gaming
Casino	$	27,387		$	9,162											$	36,549
Truck stop							$	16,906									16,906
Pari-mutuel										$	8,254						8,254
Food and beverage		3,053			2,367			1,688			671						7,779
Convenience store — fuel								26,754									26,754
Convenience store — other								3,500									3,500
Hotel		482			572												1,054
Other		255			325			846			536		$	158			2,120
Total revenues		31,177			12,426			49,694			9,461			158			102,916
Less: Promotional allowances		(6,049	)		(1,662	)		(1,386	)								(9,097	)
Net revenues	$	25,128		$	10,764		$	48,308		$	9,461		$	158		$	93,819
Depreciation and amortization	$	1,698		$	1,567		$	1,518		$	564		$	223		$	5,570
Interest income	$	—		$	—		$	1		$	3		$	—		$	4
Interest expense	$	2,167		$	1,311		$	1,360		$	134		$	1,823		$	6,795
Net income (loss)	$	4,731		$	(572	)	$	2,525		$	(42	)	$	(5,042	)	$	1,600
EBITDA(1)	$	8,596		$	2,306		$	5,402		$	653		$	(2,996	)	$	13,961
Goodwill	$	6,711		$	8,836		$	33,181								$	48,728
Identifiable intangible assets, net							$	8,274								$	8,274
Property, plant and equipment, net	$	88,587		$	38,124		$	46,019		$	61,856		$	8,895		$	243,481
Total assets	$	110,380		$	54,412		$	101,306		$	66,959		$	14,582		$	347,639
Long-term debt	$	84,771		$	61,113		$	53,989		$	4,875		$	76,944		$	281,692
Capital expenditures	$	913		$	1,141		$	552		$	371		$	122		$	3,099

12

As of and for the Six Months Ended June 30, 2010

(Balance Sheet Data as of December 31, 2010)

	Colorado			Nevada			Louisiana (As adjusted, see Note 7)			Virginia			Corporate Adjustments, Eliminations and Other (As adjusted, see Note 7)			Total (As adjusted, see Note 7)
Revenues:
Gaming
Casino	$	52,558		$	17,947											$	70,505
Truck stop							$	35,709									35,709
Pari-mutuel										$	14,629						14,629
Food and beverage		6,005			4,665			3,564			1,022						15,256
Convenience store — fuel								48,757									48,757
Convenience store — other								6,586									6,586
Hotel		956			879												1,835
Other		472			657			1,200			755		$	310			3,394
Total revenues		59,991			24,148			95,816			16,406			310			196,671
Less: Promotional allowances		(11,965	)		(3,387	)		(2,781	)								(18,133	)
Net revenues	$	48,026		$	20,761		$	93,035		$	16,406		$	310		$	178,538
Depreciation and amortization	$	3,423		$	3,112		$	3,048		$	1,108		$	476		$	11,167
Interest income	$	—		$	—		$	10		$	4		$	—		$	14
Interest expense	$	4,337		$	2,597		$	2,669		$	281		$	3,478		$	13,362
Net income (loss)	$	8,075		$	(1,684	)	$	5,964		$	(219	)	$	(8,982	)	$	3,154
EBITDA(1)	$	15,835		$	4,025		$	11,671		$	1,166		$	(5,028	)	$	27,669
Goodwill	$	6,711		$	8,836		$	33,181								$	48,728
Identifiable intangible assets, net							$	8,274								$	8,274
Property, plant and equipment, net	$	88,587		$	38,124		$	46,019		$	61,856		$	8,895		$	243,481
Total assets	$	110,380		$	54,412		$	101,306		$	66,959		$	14,582		$	347,639
Long-term debt	$	84,771		$	61,113		$	53,989		$	4,875		$	76,944		$	281,692
Capital expenditures	$	1,945		$	1,704		$	852		$	970		$	263		$	5,734

(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 an agreement with a totalisator company which provides wagering services and designs, programs, and manufactures totalisator systems for our pari-mutuel wagering applications. In addition, Colonial has an agreement with a company which provides broadcasting and simulcasting equipment and services. Total expense incurred for totalisator and broadcasting and simulcasting services was $215 and $217 for the three months ended June 30, 2011 and 2010, respectively, and $358 and $367 for the six months ended June 30, 2011 and 2010, respectively.

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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 $769 and $724 for the three months ended June 30, 2011 and 2010, respectively, and $1,499 and $1,474 for the six months ended June 30, 2011 and 2010, 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 a consulting 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 payments of $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 $312 and $312 for the three months ended June 30, 2011 and 2010, respectively, and $625 and $625 for the six months ended June 30, 2011 and 2010, respectively.

Transactions with Affiliate Truck Stops

We allocate management, accounting and overhead costs incurred by JEI to truck stops owned by Gameco. These costs totaled $86 and $94 for the three months ended June 30, 2011 and 2010, respectively, and $156 and $159 for the six months ended June 30, 2011 and 2010, respectively. Additionally, to help JEI reach the fuel sale volume necessary to qualify for the reduced pricing structure under our fuel supply agreements, we entered into agreements with various Gameco subsidiaries to provide gasoline and diesel fuel at cost for their fuel operations, which totaled $1,624 and $1,695 for the three months ended June 30, 2011 and 2010, respectively, and $2,736 and $2,535 for the six months ended June 30, 2011 and 2010, respectively. As of June 30, 2011, Gameco owns one remaining truck stop.

Jalou Device Owner, L.P.

Under Louisiana law, video poker machines must be owned by Louisiana residents. The video poker machines and the related repair parts inventory used by the Jalou truck plazas are owned by Jalou Device Owner, L.P. (“Device Owner”), of which Gameco owns 49% and is the general partner. Two Louisiana residents own 51% and are the limited partners. The Jalou truck plazas pay 90 cents per operating video poker machine per day to Device Owner, plus reimbursement for Device Owner’s licensing costs. Total expense under these arrangements was $377 and $377 for the three months ended June 30, 2011 and 2010, respectively, and $753 and $753 for the six months ended June 30, 2011 and 2010, respectively.

Other Related Party Transactions

Nautica Phase 2 periodically provided working capital advances to JIMCO. These advances totaled $583 as of December 31, 2010 and are included in the balances due from affiliates discussed below. These working capital advances were settled upon acquisition of Nautica Phase 2 by JEI during 2011.

Balances Due To/From Affiliates

Each of the above related party transactions results in either receivables from or payables to our affiliates. As of June 30, 2011 and December 31, 2010, these transactions resulted in net receivables from affiliates totaling $1,488 and $2,671, respectively. As of June 30, 2011 and December 31, 2010, these transactions resulted in net payables to affiliates totaling $228 and $639, respectively.

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Nautica Properties

During July 2006, we acquired from affiliated parties options to lease and options to purchase six businesses and their related assets, including various parcels of land, buildings and related improvements, on the west bank of the Cuyahoga River in Cleveland, Ohio. We refer to these businesses and their related assets as the Nautica Properties.

In July 2010, we amended the three remaining unexercised option agreements and extended the option periods to July 2012, giving us the right to purchase or enter into long-term leases on the three remaining Nautica Properties businesses and their related assets. On January 18, 2011, we exercised one of these remaining option agreements and acquired a fourth Nautica Properties business and its related assets referred to as “Nautica Phase 2.” See Note 7.

The remaining two unexercised options on the Nautica Properties require aggregate option payments totaling $100 per year. Our CEO owns varying interests in the two remaining parcels. Although we may elect not to exercise the remaining options unless casino gaming opportunities arise, we nonetheless have the right to acquire all or part of the remaining Nautica Properties for other purposes. If we decide to exercise our two remaining options, the aggregate annual lease payments on the remaining two parcels would be $230. If both remaining parcels are purchased, the total purchase price would be $2,300. The purchase price and rent payments would be increased based on independent appraisals of the land, improvements and other assets values if, in the future, a casino were to be licensed on the Nautica Properties.

7. RECENT ACQUISITION ACTIVITY

Acquisition of Flats Development, Inc.

As discussed in Note 1, on August 16, 2010, we acquired Flats for $2,800. The acquisition of Flats and its parking lot business was accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded at the historical cost bases in the assets and liabilities transferred. 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 the accompanying unaudited condensed consolidated financial statements since January 1, 2010. Therefore, an effective net distribution of $1,163 (the $2,800 distribution reduced by the $1,637 of net assets acquired) results from the transaction.

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, improvements and other asset 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. 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 as a combination of entities under common control. At June 30, 2011, 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 a casino license is granted for the Nautica Properties.

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

15

Acquisition of Nautica Phase 2

As discussed in Note 1, on January 18, 2011, we acquired Nautica Phase 2 for $1,250. The acquisition of Nautica Phase 2 and its parking lot business was accounted for as a combination of entities under common control. Therefore, the portion of Nautica Phase 2 acquired from our CEO has been recorded at the historical cost bases in the assets and liabilities transferred and the portion of Nautica Phase 2 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 $7 was recorded on the acquisition date for the portion of the purchase price attributable to our CEO. The net assets of the entity acquired have been retroactively accounted for in the accompanying unaudited condensed consolidated financial statements since January 1, 2010. 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 Nautica Phase 2 could increase based on independent appraisals of the land, improvements and other asset 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. 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 our CEO 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 June 30, 2011, the fair value of the Nautica Phase 2 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 the Nautica Properties.

The following table summarizes the preliminary allocation of the purchase price to net assets acquired and liabilities assumed as of January 18, 2011, for the Nautica Phase 2 acquisition:

	Nautica Phase 2
Property and equipment, net	$	1,305
Current liabilities assumed		62
Net assets acquired	$	1,243

Any change in the fair value of the net assets of Nautica Phase 2 during the purchase price allocation period (generally within one year of the acquisition date) may result in an allocation to goodwill.

The following schedule discloses the effects on JEI’s equity due to the change in ownership interest in Nautica Phase 2 discussed above:

	Six Months Ended June 30,
	2011			2010
Net (loss) income attributable to JEI	$	(6,122	)	$	3,157
Decrease in JEI’s equity for purchase of Nautica Phase 2 noncontrolling interest		(623	)		—
Change from net (loss) income attributable to JEI and purchase of the noncontrolling interest	$	(6,745	)	$	3,157

Acquisitions of Springhill and Vivian

On January 31, 2011, we acquired two truck plaza video gaming facilities in Louisiana, Springhill and Vivian, for $10,375, which were previously wholly owned by Gameco. The acquisitions of these truck plaza facilities were accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded at the historical cost bases in the assets and liabilities transferred. A distribution totaling $10,375 was recorded on the acquisition date, and the net assets of the entity acquired have been retroactively accounted for in the accompanying unaudited condensed consolidated financial statements since January 1, 2010. Therefore, an effective net distribution of $2,904 (the $10,375 distribution reduced by the $7,471 of net assets acquired) results from the transactions.

16

At December 31, 2010, Springhill’s and Vivian’s outstanding debt totaled $4,600 and $4,000, respectively, and has been included in the restated unaudited condensed consolidated balance sheet. On January 31, 2011, with proceeds from the sales of Springhill and Vivian, Gameco repaid the outstanding principal and interest of $8,629. The debt was not assumed by JEI and is reflected as a capital contribution in the statement of stockholder’s equity.

The following table summarizes the net assets acquired and liabilities assumed as of January 31, 2011, for the acquisitions occurring on that date:

	Springhill		Vivian		Total
Current assets	$	495	$	507	$	1,002
Property and equipment, net		2,309		2,555		4,864
Goodwill		1,376		—		1,376
Identifiable intangible assets		318		288		606
Other assets		27		12		39
Total assets acquired		4,525		3,362		7,887
Current liabilities assumed		188		228		416
Net assets acquired	$	4,337	$	3,134	$	7,471

Acquisition of Forest Gold

On March 31, 2011, we acquired the Forest Gold truck plaza video gaming facility for $3,025 from Gameco. Forest Gold is located in Amite, Louisiana. The acquisition of the truck plaza facility was accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded at the historical cost bases in the assets and liabilities transferred. A distribution of $3,025 was recorded on the acquisition date, and the net assets of the entity acquired have been retroactively accounted for in the accompanying unaudited condensed consolidated financial statements since January 1, 2010. Therefore, an effective net distribution of $65 (the $3,025 distribution reduced by the $2,960 of net assets acquired) results from the transaction.

At December 31, 2010, Forest Gold’s outstanding debt totaled $12,123 and has been included in the restated unaudited condensed consolidated balance sheet. At March 31, 2011, the outstanding principal and accrued interest totaling $12,282 were not assumed by JEI and are reflected as a capital contribution in the statement of stockholder’s equity.

The following table summarizes the net assets acquired and liabilities assumed as of March 31, 2011, for the acquisition occurring on that date:

	Forest Gold
Current assets	$	419
Property and equipment, net		2,056
Goodwill		880
Identifiable intangible assets		251
Total assets acquired		3,606
Current liabilities assumed		646
Net assets acquired	$	2,960

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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 (of which $3,000 expired June 2011 and the remainder is due June 2012); (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 June 30, 2011, the blended interest rate on our senior secured credit facility was approximately 3.35%. As of June 30, 2011, $9,000 was available on the revolving credit facility. Outstanding borrowings on the senior secured credit facility are due within 12 months and are therefore classified as current portion of long-term debt at June 30, 2011. We are evaluating refinance alternatives and anticipate having a new facility in place prior to the June 2012 maturity of the senior secured 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
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 note indenture. Annual distributions may be made to our owner in an aggregate amount not to exceed the greater of $1,000 or 50% of consolidated net income as defined in our credit agreement and indenture. At June 30, 2011, we were in compliance with our financial covenants.

9. FAIR VALUE OF FINANCIAL INSTRUMENTS

FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”), establishes a framework for measuring fair value and requires specific 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 identifies 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.

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Recurring Fair Value Measurements – 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 affiliates have also historically invested in MTR, which resulted in a combined ownership of approximately 18.3% of the outstanding common shares of MTR and thus making the affiliated group MTR’s largest shareholder.

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) loss on the change in the fair value of the investment totaling $(333) and $326 for the three months ended June 30, 2011 and 2010, respectively, and $(813) and $(260) for the six months ended June 30, 2011 and 2010, respectively.

The following table presents information about our financial assets measured at fair value on a recurring basis as of June 30, 2011, aggregated by the level in the fair value hierarchy within which those assets fall:

Assets Measured at Fair Value on a Recurring Basis at June 30, 2011
	Total Fair Value		Level 1		Level 2		Level 3
Investment in equity securities	$	2,465	$	2,465		—		—

The following table presents information about our financial assets measured at fair value on a recurring basis as of December 31, 2010, aggregated by the level in the fair value hierarchy within which those assets fall:

Assets Measured at Fair Value on a Recurring Basis at December 31, 2010
	Total Fair Value		Level 1		Level 2		Level 3
Investment in equity securities	$	1,652	$	1,652		—		—

Effective May 6, 2008, our CEO was appointed to the MTR board of directors, and on October 31, 2008, he became the chairman of the MTR board. In March 2010, our CEO resigned from MTR’s board of directors. For the period that our CEO was the chairman of the MTR board, we reached a level of significant influence. Therefore, consistent with the requirements of ASC Topic 825 and Rule 4-08(g) of Regulation S-X of the Securities Exchange Act of 1934, the following is summary level financial information of MTR for the three months ended March 31, 2010 as derived from its reports filed with the SEC:

	Three Months Ended March  31, 2010
Net revenues	$	99,359
Total operating expenses		90,069
Loss from continuing operations		(3,137	)
Net loss		(3,280	)

Nonrecurring Fair Value Measurements – Property, Plant and Equipment

We apply the provisions of the fair value measurement standard to our nonrecurring, non-financial measurements including property, plant and equipment impairments. These assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments only in certain circumstances. Property, plant and equipment is evaluated for impairment and reduced to fair value when there is an indication that the carrying costs exceed the sum of the undiscounted cash flows.

19

During the second quarter 2011, we evaluated our ability to recover the recorded cost of Gold Dust West-Carson City. See Note 11. Based on this evaluation, we recorded an impairment of long-lived assets totaling $10,065 related to this property. We used Level 3 inputs and income valuation, market valuation, and cost valuation techniques to measure the fair value of the Gold Dust West-Carson City asset group as of June 30, 2011. We considered a variety of factors when estimating the fair value of the asset group, including estimates about the future operating results, appropriate discount rates, multiples of EBITDA (earnings before interest, income taxes, depreciation and amortization), investment banker market analyses, and recent sales of comparable assets. A variety of estimates and judgments about the relevance and comparability of this information to our assets were made.

The following table presents information about our non-financial assets measured at fair value on a nonrecurring basis as of June 30, 2011, aggregated by the level in the fair value hierarchy within which those assets fall:

Assets Measured at Fair Value on a Nonrecurring Basis at June 30, 2011
	Total Fair Value		Level 1		Level 2		Level 3
Property, plant and equipment	$	6,100		—		—	$	6,100

There was no property, plant and equipment measured at fair value within the accompanying balance sheet at December 31, 2010.

Other Estimated Fair Value Disclosures

The following disclosure of estimated fair value of our debt and capital lease obligations 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.

The estimated fair value of our debt and capital lease obligations is as follows:

		As of June 30, 2011				As of December 31, 2010 (As adjusted, see Note 7)
				Estimated				Estimated
	��	Carrying		Fair		Carrying		Fair
		Amount		Value		Amount		Value
Liabilities—Debt and capital lease obligations		$	298,268	$	303,584	$	303,253	$	301,358

20

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 June 30, 2011 and December 31, 2010, include the following:

	June 30, 2011		December 31, 2010 (As adjusted, see Note 7)
Payroll and related	$	5,412	$	4,897
Gaming taxes payable		2,071		3,318
Interest payable		910		958
Property taxes payable		1,281		1,134
Slot club liability		1,382		1,199
Progressive jackpot liability		1,339		1,260
Purses due horsemen		2,987		511
Other		3,258		3,534
	$	18,640	$	16,811

11. IMPAIRMENT OF LONG-LIVED ASSETS

During the second quarter 2011, based on operating results, we were required, pursuant to FASB 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 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 not be able to recover the carrying cost of these assets, and therefore, Gold Dust West-Carson City recorded an impairment of long-lived assets totaling $10,065 during the second quarter ended June 30, 2011. 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 additional 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.

12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Our senior secured credit facility and 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 June 30, 2011 and December 31, 2010, the Unaudited Condensed Consolidating Statements of Operations for the three and six months ended June 30, 2011 and 2010, and the Unaudited Condensed Consolidating Statements of Cash Flows for the six months ended June 30, 2011 and 2010 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.

21

JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

AS OF JUNE 30, 2011

	Parent
	Company			Subsidiary
	Issuer			Guarantors		Eliminations			Consolidated
ASSETS
Current assets	$	932		$	46,053				$	46,985
Property, plant and equipment, net		858			230,003					230,861
Net investment in and advances to subsidiaries		96,059				$	(96,059	)		—
Other long-term assets		4,436			61,020					65,456
Total assets	$	102,285		$	337,076	$	(96,059	)	$	343,302
LIABILITIES AND EQUITY
Current liabilities	$	87,017		$	26,227				$	113,244
Current portion of long-term debt (receivable from) payable to affiliate		(48,249	)		48,249					—
Long-term debt		210,000			3,120					213,120
Long-term debt (receivable from) payable to affiliate		(162,258	)		162,258					—
Other long-term liabilities		6			1,163					1,169
Stockholder’s equity		15,769			96,059	$	(96,059	)		15,769
Total liabilities and equity	$	102,285		$	337,076	$	(96,059	)	$	343,302

AS OF DECEMBER 31, 2010

(As adjusted, see Note 7)

	Parent
	Company			Subsidiary
	Issuer			Guarantors		Eliminations			Consolidated
ASSETS
Current assets	$	554		$	38,203				$	38,757
Property, plant and equipment, net		897			242,584					243,481
Net investment in and advances to subsidiaries		93,840				$	(93,840	)		—
Other long-term assets		4,389			61,012					65,401
Total assets	$	99,680		$	341,799	$	(93,840	)	$	347,639
LIABILITIES AND EQUITY
Current liabilities	$	5,884		$	41,625				$	47,509
Long-term debt		275,250			6,442					281,692
Long-term debt (receivable from) payable to affiliate		(198,782	)		198,782					—
Other long-term liabilities		4			1,110					1,114
Stockholder’s equity		17,324			93,840	$	(93,840	)		17,324
Total liabilities and equity	$	99,680		$	341,799	$	(93,840	)	$	347,639

22

JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2011

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations		Consolidated
Net revenues				$	99,209				$	99,209
Costs and expenses	$	(2,261	)		(98,352	)				(100,613	)
Interest expense, net		(1,456	)		(5,053	)				(6,509	)
Equity in earnings of subsidiaries		(4,196	)				$	4,196		—
Net (loss) income	$	(7,913	)	$	(4,196	)	$	4,196	$	(7,913	)

FOR THE THREE MONTHS ENDED JUNE 30, 2010

(As adjusted, see Note 7)

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	93,844		$	(25	)	$	93,819
Costs and expenses	$	(3,154	)		(82,299	)		25			(85,428	)
Interest expense, net		(1,415	)		(5,376	)					(6,791	)
Equity in earnings of subsidiaries		6,163						(6,163	)		—
Noncontrolling interest					(6	)					(6	)
Net income attributable to JEI	$	1,594		$	6,163		$	(6,163	)	$	1,594

FOR THE SIX MONTHS ENDED JUNE 30, 2011

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	191,063		$	(25	)	$	191,038
Costs and expenses	$	(4,347	)		(179,569	)		25			(183,891	)
Interest expense, net		(2,974	)		(10,295	)					(13,269	)
Equity in earnings of subsidiaries		1,199						(1,199	)		—
Net (loss) income	$	(6,122	)	$	1,199		$	(1,199	)	$	(6,122	)

FOR THE SIX MONTHS ENDED JUNE 30, 2010

(As adjusted, see Note 7)

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations			Consolidated
Net revenues				$	178,588		$	(50	)	$	178,538
Costs and expenses	$	(5,344	)		(156,742	)		50			(162,036	)
Interest expense, net		(2,668	)		(10,680	)					(13,348	)
Equity in earnings of subsidiaries		11,169						(11,169	)		—
Noncontrolling interest					3						3
Net income attributable to JEI	$	3,157		$	11,169		$	(11,169	)	$	3,157

23

JACOBS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations		Consolidated
Net cash provided by operating activities	$	9,576		$	2,819		$	—	$	12,395
INVESTING ACTIVITIES:
Additions to property, plant and equipment		(407	)		(7,670	)				(8,077	)
Proceeds from sale of equipment					116					116
Purchases of device rights					(1,217	)				(1,217	)
Acquisition of noncontrolling interest		(1,243	)							(1,243	)
Net cash used in investing activities		(1,650	)		(8,771	)				(10,421	)
FINANCING ACTIVITIES:
Proceeds from revolving line of credit		30,800								30,800
Payments on long-term debt		(201	)		(160	)				(361	)
Payments on revolving line of credit		(14,300	)							(14,300	)
Net advances to/from subsidiaries		(9,613	)		9,613					—
Distributions to stockholder		(14,407	)							(14,407	)
Net cash (used in) provided by financing activities		(7,721	)		9,453					1,732
Net Increase in Cash and Cash Equivalents		205			3,501					3,706
Cash and Cash Equivalents — Beginning of Period		196			24,507					24,703
Cash and Cash Equivalents — End of Period	$	401		$	28,008		$	—	$	28,409

FOR THE SIX MONTHS ENDED JUNE 30, 2010

(As adjusted, see Note 7)

	Parent
	Company			Subsidiary
	Issuer			Guarantors			Eliminations		Consolidated
Net cash provided by operating activities	$	7,626		$	5,493		$	—	$	13,119
INVESTING ACTIVITIES:
Additions to property, plant and equipment		(101	)		(5,633	)				(5,734	)
Proceeds from sale of equipment					138					138
Net cash used in investing activities		(101	)		(5,495	)				(5,596	)
FINANCING ACTIVITIES:
Payments to obtain financing		(1,500	)							(1,500	)
Proceeds from revolving line of credit		13,000								13,000
Payments on long-term debt		(203	)		(1,229	)				(1,432	)
Payments on revolving line of credit		(16,000	)							(16,000	)
Net advances to/from subsidiaries		(1,768	)		1,768					—
Distributions to stockholder		(1,000	)							(1,000	)
Net cash (used in) provided by financing activities		(7,471	)		539					(6,932	)
Net Increase in Cash and Cash Equivalents		54			537					591
Cash and Cash Equivalents — Beginning of Period		191			24,432					24,623
Cash and Cash Equivalents — End of Period	$	245		$	24,969		$	—	$	25,214

24

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

This section discusses the results of our operations for the three and six months ended June 30, 2011 and 2010. 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, 2010, included in our Form 10-K report filed with the Securities and Exchange Commission (��10-K Report”). Certain statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations constitute “forward-looking statements,” which statements involve risks and uncertainties. In this regard, see the section “Risk Factors” in Item 1A of our 10-K Report.

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

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

Description of item
1.	Significant transactions occurring during 2011	25
2.	Overview and discussion of our operations	25
3.	Comparison of our results of operations for the three months ended June 30, 2011 to the three months ended June 30, 2010	28
4.	Comparison of our results of operations for the six months ended June 30, 2011 to the six months ended June 30, 2010	30
5.	Segment information	32
6.	Liquidity and capital resources	36
7.	Critical accounting policies and estimates	38

1. Significant transactions occurring during 2011

Acquisitions

On January 18, 2011, we acquired a Nautica Properties based business and its related assets referred to as “Nautica Phase 2” for $1.25 million from a limited partnership. The general partner owned 1% and the limited partners owned 99% of the limited partnership. Our Chief Executive Officer (“CEO”) owned 58% of the general partner interests and controlled the partnership. Third parties owned the remaining 42% of the general partner interests and the 99% limited partnership interest. Therefore, the portion of Nautica Phase 2 acquired from our CEO has been recorded at the historical cost bases in the assets and liabilities transferred and the portion of Nautica Phase 2 acquired from third parties has been recorded at fair value at the acquisition date using the acquisition method of accounting. See Note 7 of the unaudited condensed consolidated financial statements.

Additionally, on January 31, 2011, we acquired two truck plaza video gaming facilities in Louisiana, Cash Magic Springhill, LLC (“Springhill”) and Cash Magic Vivian, LLC (“Vivian”), for $5.5 million and $4.9 million, respectively, which were previously wholly owned by another JII subsidiary, Gameco Holdings, Inc. (“Gameco”). On March 31, 2011, we acquired one additional truck plaza video gaming facility in Louisiana, Jalou Forest Gold, LLC (“Forest Gold”), for $3.0 million, which was also previously wholly owned by Gameco. The acquisitions of these truck stops were accounted for as combinations of entities under common control. Accordingly, the accompanying unaudited condensed consolidated financial statements have been retroactively adjusted to include the operations of these businesses from January 1, 2010. See Note 7 of the unaudited condensed consolidated financial statements.

2. Overview and discussion of our operations

Our CEO is our chief operating decision maker. As of June 30, 2011, we had 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 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.

25

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 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 also 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 monitor our cash levels 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 currently have $57.1 million outstanding on our senior secured credit facility with interest due at varying levels. As of June 30, 2011, $28.0 million was outstanding on the $40 million senior secured revolving credit facility (of which $3 million expired June 2011 and the remainder is due June 2012) we have 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 June 30, 2011, there were approximately 8,300 slot machines in the city of Black Hawk. We had 1,366 slot machines in this market (984 at The Lodge and 382 at the Gilpin), which represented approximately 16% of the total slot machines in Black Hawk. Additionally, there were 203 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 20% of the total table games in Black Hawk.

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.”

26

Louisiana

The Louisiana truck plaza video gaming facilities consist of 21 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 June 30, 2011, our truck plaza video gaming facilities had a combined total of 1,095 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. As of June 30, 2011, we operated ten satellite wagering facilities in Virginia. 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.

Since 2004, Colonial Downs has operated an internet account wagering platform in Virginia called EZ Horseplay. In early 2009, Colonial Downs commenced development of a custom built account wagering support kiosk that allows a customer to remotely open a wagering account, fund the account with cash, take a cash withdrawal from their account and print a race track program. The first kiosks, along with a touchscreen version of the EZ Horseplay internet account wagering platform, were deployed in September 2009. As of June 30, 2011, we have deployed approximately 55 kiosks in private clubs, bars and restaurants in Virginia.

27

3. Comparison of our results of operations for the three months ended June 30, 2011 to the three months ended June 30, 2010.

The following table summarizes our consolidated results of operations for the three months ended June 30, 2011 and 2010 (dollars in thousands):

	Three Months Ended
	June 30,
	2011			2010 (As adjusted, see Note 7 of Financial Statements)			$ Change			% Variance
REVENUES
Gaming:
Casino	$	36,682		$	36,549		$	133			0.36	%
Truck stop		17,981			16,906			1,075			6.36	%
Pari-mutuel		7,779			8,254			(475	)		-5.75	%
Food and beverage		7,395			7,779			(384	)		-4.94	%
Convenience store – fuel		32,349			26,754			5,595			20.91	%
Other		6,367			6,674			(307	)		-4.60	%
Less: Promotional allowances		(9,344	)		(9,097	)		(247	)		2.72	%
Net revenues		99,209			93,819			5,390			5.75	%
COSTS AND EXPENSES
Gaming:
Casino		12,579			12,687			(108	)		-0.85	%
Truck stop		10,712			10,507			205			1.95	%
Pari-mutuel		6,204			6,379			(175	)		-2.74	%
Food and beverage		3,791			4,002			(211	)		-5.27	%
Convenience store – fuel		30,420			25,180			5,240			20.81	%
Other		5,155			4,575			580			12.68	%
Marketing, general and administrative		16,388			16,202			186			1.15	%
Unrealized (gain) loss on change in fair value of investment in equity securities		(333	)		326			(659	)		n/a
Impairment of long-lived assets		10,065			—			10,065			n/a
Depreciation and amortization		5,632			5,570			62			1.11	%
Total costs and expenses		100,613			85,428			15,185			17.78	%
OPERATING (LOSS) INCOME		(1,404	)		8,391			(9,795	)		n/a
Interest expense, net		(6,509	)		(6,791	)		282			-4.15
Noncontrolling interest		—			(6	)		6			-100.00	%
NET (LOSS) INCOME ATTRIBUTABLE TO JEI	$	(7,913	)	$	1,594		$	(9,507	)		n/a

All comparisons below begin with the second quarter 2011 results followed by the second quarter 2010 results.

Casino revenues increased $0.1 million to $36.7 million from $36.6 million. The increase in casino revenues is due to increases at the Gilpin of $0.7 million or 15% and Gold Dust West-Elko of $0.2 million or 8%, somewhat offset by decreases at The Lodge of $0.6 million or 3% and Gold Dust West-Carson City of $0.2 million or 8%. Revenues at the Gilpin increased primarily due to an increase in slot coin-in associated to a new marketing program. The decrease in revenues at The Lodge was primarily due to decreases in player banked poker and table games.

Truck stop gaming revenues increased $1.1 million or 6% to $18.0 million from $16.9 million. The increase in revenues exceeded the statewide truck stop video gaming revenue increase of 2% resulting from the installation of new video gaming devices and remodeling of certain locations.

28

Pari-mutuel revenues decreased $0.5 million or 6% to $7.8 million from $8.3 million. A $0.6 million decrease in wagering revenues at the off track wagering facilities primarily due to a decrease in overall attendance compared to the prior year, combined with a $0.3 million decrease in revenues at the racetrack as a result of 11 fewer race days, was partially offset by a $0.4 million increase in account wagering revenues.

Food and beverage revenues decreased $0.4 million or 5% to $7.4 million from $7.8 million. This decrease is primarily attributable to a decrease of $0.3 million at the truck stops, of which $0.2 million is the result of outsourcing the food and beverage operations at Springhill and Vivian in 2011. Additionally, decreases of $0.1 million at The Lodge and $0.1 million at Colonial were somewhat offset by an increase of $0.1 million at Gold Dust West-Elko.

Convenience store-fuel revenues increased $5.6 million or 21% to $32.3 million from $26.7 million. This resulted from the average selling price of fuel increasing to $3.73 per gallon in 2011 from $2.74 per gallon in 2010, somewhat offset by an 11% decrease in volume.

Other revenues decreased $0.3 million or 5% to $6.4 million from $6.7 million and was primarily attributable to a one-time oil and gas royalty received in April 2010 totaling $0.5 million at the truck stops, somewhat offset by a $0.2 million increase in convenience store revenues at the truck stops.

Promotional allowances increased $0.2 million or 3% to $9.3 million from $9.1 million, and is primarily attributable to an increase in promotional allowances of $0.6 million at the Gilpin attributable to a new marketing program resulting in additional casino revenues, somewhat offset by decreases of $0.3 million at The Lodge and $0.1 million at Gold Dust West-Carson City.

Casino expenses decreased $0.1 million or 1% to $12.6 million from $12.7 million. A decrease of $0.3 million at The Lodge was somewhat offset by increases of $0.1 million at the Gilpin and $0.1 million at Gold Dust West-Elko. These changes in casino expenses are consistent with the changes in casino revenues at these locations.

Truck stop gaming expenses increased $0.2 million or 2% to $10.7 million from $10.5 million and is primarily due to direct costs associated with increased truck stop video poker gaming revenues.

Pari-mutuel costs and expenses decreased $0.2 million or 3% to $6.2 million from $6.4 million. The decrease is attributable to a $0.3 million decrease in pari-mutuel tax, purse, labor and facility costs, partially offset by an increase of $0.1 million in account wagering costs and expenses.

Food and beverage costs and expenses decreased $0.2 million or 5% to $3.8 million from $4.0 million, and is due to a decrease of $0.4 million at the truck stops, of which $0.2 million is the result of outsourcing the food and beverage operations at Springhill and Vivian in 2011, somewhat offset by increases of $0.1 million at The Lodge and $0.1 million at Gold Dust West-Elko.

Convenience store-fuel expenses increased $5.2 million or 21% to $30.4 million from $25.2 million. The increase was primarily due to an increase in the average cost of fuel to $3.50 per gallon in 2011 from $2.58 per gallon in 2010, somewhat offset by a decrease in volume as discussed in convenience store-fuel revenues above.

Other costs and expenses increased $0.6 million or 13% to $5.2 million from $4.6 million, and were primarily attributable to a $0.5 million increase in convenience store expenses at the truck stops, primarily due to increases in convenience store revenues and labor costs combined with a $0.1 million increase in hotel expenses at The Lodge.

Marketing, general and administrative expenses increased $0.2 million or 1% to $16.4 million from $16.2 million. This increase is primarily the result of increases of $0.3 million at the truck stops, $0.1 million at the Gilpin and $0.1 million at Gold Dust West-Elko. These increases are somewhat offset by decreases of $0.1 million at Colonial and $0.2 million at corporate primarily due to a reduction in campaign contributions, travel costs and professional accounting fees, somewhat offset by an increase in payroll costs.

We account for our investment in MTR Gaming Group, Inc. (“MTR”) under the fair value option, 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 second quarter of 2011 resulted in an unrealized gain on the change in fair value of investment in equity securities totaling $0.3 million. During the second quarter of 2010, we recorded an unrealized loss on the change in fair value of investment in equity securities totaling $0.3 million.

29

At Gold Dust West-Carson City, we recorded an impairment of long-lived assets totaling $10.1 million during the second quarter of 2011. No comparable transaction occurred during the same period of 2010. See Note 11 of the unaudited condensed consolidated financial statements.

Depreciation and amortization expense increased less than $0.1 million or 1% to $5.6 million.

Net interest expense decreased $0.3 million or 4% to $6.5 million from $6.8 million. The decrease is primarily attributable to a decrease in debt outstanding.

4. Comparison of our results of operations for the six months ended June 30, 2011 to the six months ended June 30, 2010.

The following table summarizes our consolidated results of operations for the six months ended June 30, 2011 and 2010 (dollars in thousands):

	Six Months Ended
	June 30,
	2011			2010 (As adjusted, see Note 7 of Financial Statements)			$ Change			% Variance
REVENUES
Gaming:
Casino	$	72,776		$	70,505		$	2,271			3.22	%
Truck stop		37,489			35,709			1,780			4.98	%
Pari-mutuel		14,161			14,629			(468	)		-3.20	%
Food and beverage		14,472			15,256			(784	)		-5.14	%
Convenience store – fuel		59,038			48,757			10,281			21.09	%
Other		11,696			11,815			(119	)		-1.01	%
Less: Promotional allowances		(18,594	)		(18,133	)		(461	)		2.54	%
Net revenues		191,038			178,538			12,500			7.00	%
COSTS AND EXPENSES
Gaming:
Casino		25,041			24,409			632			2.59	%
Truck stop		21,968			21,493			475			2.21	%
Pari-mutuel		11,054			11,151			(97	)		-0.87	%
Food and beverage		7,121			7,458			(337	)		-4.52	%
Convenience store – fuel		56,062			45,862			10,200			22.24	%
Other		9,707			8,844			863			9.76	%
Marketing, general and administrative		32,452			31,912			540			1.69	%
Unrealized gain on change in fair value of investment in equity securities		(813	)		(260	)		(553	)		n/a
Impairment of long-lived assets		10,065			—			10,065			n/a
Depreciation and amortization		11,234			11,167			67			0.60	%
Total costs and expenses		183,891			162,036			21,855			13.49	%
OPERATING INCOME		7,147			16,502			(9,355	)		-56.69	%
Interest expense, net		(13,269	)		(13,348	)		79			-0.59	%
Noncontrolling interest		—			3			(3	)		-100.00	%
NET (LOSS) INCOME ATTRIBUTABLE TO JEI	$	(6,122	)	$	3,157		$	(9,279	)		n/a

30

All comparisons below begin with the year-to-date 2011 results followed by the year-to-date 2010 results.

Casino revenues increased $2.3 million or 3% to $72.8 million from $70.5 million. The increase in casino revenues is due to increases at The Lodge of $1.3 million or 3%, at the Gilpin of $0.8 million or 7% and at Gold Dust West-Elko of $0.5 million or 11%, somewhat offset by a decrease at Gold Dust West-Carson City of $0.3 million or 7%. Revenues at The Lodge increased primarily due to increases in slots and table games revenues, somewhat offset by a decrease in player banked poker. The increase in revenues at the Gilpin was primarily due to an increase in slot coin-in attributable to a new marketing program, offset by a slight reduction in revenues attributable to the March 2010 closure of the poker room.

Truck stop video poker gaming revenues increased $1.8 million or 5% to $37.5 million from $35.7 million. The increase in revenues exceeded the statewide truck stop video gaming revenue increase of 2% resulting from the installation of new video gaming devices and the remodeling of certain locations.

Pari-mutuel revenues decreased $0.4 million or 3% to $14.2 million from $14.6 million. A $0.8 million decrease in wagering revenues at the off track wagering facilities primarily due to a decrease in attendance compared to the prior year, combined with a $0.3 million decrease at the racetrack due to 11 fewer race days, was somewhat offset by a $0.7 million increase in account wagering revenues.

Food and beverage revenues decreased $0.8 million or 5% to $14.5 million from $15.3 million. This decrease is attributable to decreases of $0.7 million at the truck stop facilities, of which $0.3 million is the result of outsourcing the food and beverage operations at Springhill and Vivian in 2011 and a decrease of $0.2 million at Colonial, somewhat offset by an increase of $0.1 million at Gold Dust West-Elko.

Convenience store-fuel revenues increased $10.3 million or 21% to $59.0 million from $48.7 million. The increase was primarily due to an increase in the average selling price of fuel to $3.54 per gallon in 2011 from $2.70 per gallon in 2010, somewhat offset by an 8% decrease in volume.

Other revenues decreased $0.1 million or 1% to $11.7 million from $11.8 million and were primarily attributable to a one-time oil and gas royalty received in April 2010 totaling $0.5 million and a $0.1 million combined decrease in hotel and other revenues at the casinos, somewhat offset by a $0.5 million increase in convenience store revenues at the truck stops.

Promotional allowances increased $0.5 million or 3% to $18.6 million from $18.1 million. Promotional allowances increased by $0.8 million at the Gilpin associated to a new marketing program and $0.2 million at the truck stops, somewhat offset by decreases of $0.2 million at The Lodge and $0.3 million at Gold Dust West-Carson City.

Casino expenses increased $0.6 million or 3% to $25.0 million from $24.4 million primarily due to increases of $0.3 million at The Lodge, $0.2 million at Gold Dust West-Elko and $0.1 million at Gold Dust West-Reno. The increases at The Lodge and Gold Dust West-Elko directly correspond to the increase in casino revenues.

Truck stop gaming expenses increased $0.5 million or 2% to $22.0 million from $21.5 million and is primarily due to direct costs associated with increased truck stop video poker gaming revenues.

Pari-mutuel costs and expenses decreased $0.1 million or 1% to $11.1 million from $11.2 million. The decrease is attributable to a $0.3 million decrease in pari-mutuel tax, purse, labor, simulcast and facility costs and expenses, partially offset by a $0.2 million increase in account wagering costs and expenses.

Food and beverage costs and expenses decreased $0.3 million or 5% to $7.1 million from $7.4 million, and is primarily due to a decrease of $0.6 million at the truck stops, of which $0.3 million is the result of outsourcing the food and beverage operations at Springhill and Vivian in 2011, somewhat offset by increases of $0.1 million at The Lodge, $0.1 million at Gold Dust West-Carson City and $0.1 million at Gold Dust West-Elko.

Convenience store-fuel expenses increased $10.2 million or 22% to $56.1 million from $45.9 million. The increase was primarily due to an increase in the average cost of fuel to $3.35 per gallon in 2011 from $2.55 per gallon in 2010, somewhat offset by a decrease in volume as discussed in convenience store-fuel revenues above. Additionally, in January 2010, we collected $0.4 million in accounts receivable that had been fully reserved in 2008.

Other costs and expenses increased $0.9 million or 10% to $9.7 million from $8.8 million, and were primarily attributable to a $0.8 million increase in convenience store expenses at the truck stops which correlates to the increase in convenience store revenues combined with an increase in labor costs.

31

Marketing, general and administrative expenses increased $0.5 million or 2% to $32.5 million from $31.9 million. This increase is primarily the result of increases of $0.6 million at the truck stops, $0.3 million at The Lodge, $0.1 million at the Gilpin and $0.2 million at Gold Dust West-Elko. These increases are somewhat offset by decreases of $0.3 million at Colonial and $0.4 million at corporate primarily due to a reduction in legal costs, campaign contributions and professional accounting fees, somewhat offset by an increase in payroll costs.

An increase in MTR’s stock price during the first six months of 2011 resulted in an unrealized gain on the change in fair value of investment in equity securities totaling $0.8 million compared to an unrealized gain totaling $0.3 million during the same period of 2010.

At Gold Dust West-Carson City, we recorded an impairment of long-lived assets totaling $10.1 million during 2011. No comparable transaction occurred during the same period of 2010. See Note 11 of the unaudited condensed consolidated financial statements.

Depreciation and amortization expense was unchanged at $11.2 million.

Net interest expense decreased by less than $0.1 million or 1% to $13.3 million and is attributable to a decrease in debt outstanding, somewhat offset by higher effective interest rates on our variable rate bank debt.

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.

32

The following is a summary of the net revenues, costs and expenses and EBITDA, for the three and six months ended June 30, 2011 and 2010 (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010 (As adjusted, see Note 7 of Financial Statements)			2011			2010 (As adjusted, see Note 7 of Financial Statements)
NET REVENUES
Colorado:
The Lodge	$	20,122		$	20,511		$	40,153		$	38,729
Gilpin		4,781			4,617			9,246			9,297
Total Colorado		24,903			25,128			49,399			48,026
Nevada:
Gold Dust West-Reno		4,452			4,447			8,992			8,923
Gold Dust West-Carson City		3,369			3,484			6,146			6,306
Gold Dust West-Elko		3,124			2,833			6,221			5,532
Total Nevada		10,945			10,764			21,359			20,761
Louisiana		54,439			48,308			104,376			93,035
Virginia		8,760			9,461			15,637			16,406
Corporate and other		162			158			267			310
Total Net Revenues		99,209			93,819			191,038			178,538
COSTS AND EXPENSES (excluding depreciation and amortization, net interest expense and income taxes)
Colorado:
The Lodge		13,025			13,166			26,066			25,303
Gilpin		3,496			3,366			6,902			6,888
Total Colorado		16,521			16,532			32,968			32,191
Nevada:
Gold Dust West-Reno		3,063			2,953			6,227			5,992
Gold Dust West-Carson City (1)		13,333			3,306			16,474			6,372
Gold Dust West-Elko		2,447			2,199			4,869			4,372
Total Nevada		18,843			8,458			27,570			16,736
Louisiana		48,852			42,906			92,857			81,364
Virginia		8,428			8,808			14,775			15,240
Corporate overhead and other (2)(3)		2,337			3,154			4,487			5,338
Total Costs and Expenses		94,981			79,858			172,657			150,869
EBITDA
Colorado:
The Lodge		7,097			7,345			14,087			13,426
Gilpin		1,285			1,251			2,344			2,409
Total Colorado		8,382			8,596			16,431			15,835
Nevada:
Gold Dust West-Reno		1,389			1,494			2,765			2,931
Gold Dust West-Carson City (1)		(9,964	)		178			(10,328	)		(66	)
Gold Dust West-Elko		677			634			1,352			1,160
Total Nevada		(7,898	)		2,306			(6,211	)		4,025
Louisiana		5,587			5,402			11,519			11,671
Virginia		332			653			862			1,166
Corporate overhead and other (2)(3)		(2,175	)		(2,996	)		(4,220	)		(5,028	)
Total EBITDA	$	4,228		$	13,961		$	18,381		$	27,669

See Notes on page 36.

33

General

See sections 3 and 4 above for comparisons of our results of operations for the three and six months ended June 30, 2011 to the three months and six months ended June 30, 2010, which provide explanations regarding the fluctuations in our revenues and costs and expenses by property and segment.

The Lodge

EBITDA at The Lodge decreased $0.2 million or 3% for the three months ended June 30, 2011 compared to the same period of 2010 but increased $0.7 million or 5% for the six months ended June 30, 2011 compared to the same period of 2010. For the second quarter, decreases in casino and food and beverage revenues were somewhat offset by decreased promotional allowances. For the six months, total revenues increased by $1.4 million, primarily in slots and table games revenues, somewhat offset by a decrease in player banked poker. Labor costs and gaming taxes were also higher as a result of the increase in revenues.

Gilpin

EBITDA at the Gilpin increased less than $0.1 million or 3% for the three months ended June 30, 2011 compared to the same period of 2010 but decreased less than $0.1 million or 3% for the six months ended June 30, 2011 compared to the same period of 2010. Slots and table games revenues increased during the three and six months primarily due to an increase in promotional allowances. For the six months, the Gilpin experienced a decrease in player banked poker due to the March 2010 closure of its poker room. Gaming taxes were also higher as a result of increased gaming revenues.

Gold Dust West-Reno

EBITDA at Gold Dust West-Reno decreased $0.1 million or 7% for the three months ended June 30, 2011 compared to the same period of 2010 and decreased $0.2 million or 6% for the six months ended June 30, 2011 compared to the same period of 2010. Labor costs were higher in 2011 than in 2010, somewhat offset by a decrease in promotional allowances.

Gold Dust West-Carson City

Excluding the impact of the 2011 impairment of long-lived assets totaling $10.1 million, EBITDA at Gold Dust West-Carson City decreased $0.1 million or 43% for the three months ended June 30, 2011 compared to the same period of 2010 and $0.2 million for the six months ended June 30, 2011 compared to the same period of 2010. For both the three and six months ended June 30, 2011 compared to the same periods in 2010, we experienced a decrease in slots and other revenues resulting from local economic conditions, somewhat offset by a decrease in promotional allowances. Labor costs were also higher in 2011 than in 2010.

Gold Dust West-Elko

EBITDA at Gold Dust West-Elko increased less than $0.1 million or 7% for the three months ended June 30, 2011 compared to the same period of 2010 and $0.2 million or 17% for the six months ended June 30, 2011 compared to the same period of 2010. Net revenues increased $0.3 million for the second quarter and $0.7 million year to date, while costs and expenses increased $0.2 million and $0.5 million, respectively. The increase in EBITDA was primarily due to an increase in slot revenues of 9% for the quarter and 10% year to date, combined with increases in food and beverage revenues, somewhat offset by increases in direct costs attributable to the increases in revenues.

Louisiana

EBITDA at the Louisiana truck stops increased $0.2 million or 3% for the second quarter but decreased $0.2 million or 1% for the six months ended June 30, 2011 compared to the same period of 2010. During the second quarter of 2010, we received a one-time oil and gas royalty totaling $0.5 million, and during the six months ended June 2010, we collected $0.4 million in accounts receivable that had been fully reserved in 2008. These decreases were somewhat offset by increases in video poker gaming revenues combined with an increase in fuel gross profit per gallon.

34

Virginia

EBITDA at our pari-mutuel operations in Virginia decreased $0.3 million or 49% for the three months ended June 30, 2011 compared to the same period of 2010 and decreased $0.3 million or 26% for the six months ended June 30, 2011 compared to the same period of 2010. The second quarter decrease is primarily attributable to a $0.7 million decrease in pari-mutuel and other revenues which were somewhat 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 $0.8 million, somewhat offset by decreased management, general and administrative costs combined with decreased pari-mutuel and food and beverage costs and expenses.

Corporate Overhead and Other

The EBITDA loss at corporate decreased by $0.8 million for the three months ended June 30, 2011 and by $0.8 million for the six months ended June 30, 2011 compared to the same periods of 2010 and is primarily due to: (1) increases in the stock price of our investment in MTR, (2) decreased political contributions and professional accounting fees and (3) $0.1 million and $0.5 million incurred during the second quarter and year to date in 2010, respectively, for one-time costs related to the March 31, 2010 amendment to our credit agreement, somewhat offset by an increase in payroll costs.

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 June 30, 2011	EBITDA			Depreciation and Amortization		Interest Expense, net		Net Income (Loss)
Colorado:
The Lodge	$	7,097		$	1,247	$	1,682	$	4,168
Gilpin		1,285			430		476		379
Total Colorado		8,382			1,677		2,158		4,547
Nevada:
Gold Dust West-Reno		1,389			408		654		327
Gold Dust West-Carson City (1)		(9,964	)		613		384		(10,961	)
Gold Dust West-Elko		677			652		236		(211	)
Total Nevada		(7,898	)		1,673		1,274		(10,845	)
Louisiana		5,587			1,502		1,103		2,982
Virginia		332			584		124		(376	)
Corporate overhead and other (2)		(2,175	)		196		1,850		(4,221	)
TOTAL	$	4,228		$	5,632	$	6,509	$	(7,913	)

Three months ended June 30, 2010 (As adjusted, see Note 7 of Financial Statements)	EBITDA			Depreciation and Amortization		Interest Expense, net		Noncontrolling Interest			Net Income (Loss)
Colorado:
The Lodge	$	7,345		$	1,263	$	1,691				$	4,391
Gilpin		1,251			435		476					340
Total Colorado		8,596			1,698		2,167					4,731
Nevada:
Gold Dust West-Reno		1,494			376		654					464
Gold Dust West-Carson City		178			562		384					(768	)
Gold Dust West-Elko		634			629		273					(268	)
Total Nevada		2,306			1,567		1,311					(572	)
Louisiana		5,402			1,518		1,359					2,525
Virginia		653			564		131					(42	)
Corporate overhead and other (3)		(2,996	)		223		1,823	$	(6	)		(5,048	)
TOTAL	$	13,961		$	5,570	$	6,791	$	(6	)	$	1,594

35

Six months ended June 30, 2011	EBITDA			Depreciation and Amortization		Interest Expense, net		Net Income (Loss)
Colorado:
The Lodge	$	14,087		$	2,457	$	3,363	$	8,267
Gilpin		2,344			868		952		524
Total Colorado		16,431			3,325		4,315		8,791
Nevada:
Gold Dust West-Reno		2,765			835		1,309		621
Gold Dust West-Carson City (1)		(10,328	)		1,227		767		(12,322	)
Gold Dust West-Elko		1,352			1,302		472		(422	)
Total Nevada		(6,211	)		3,364		2,548		(12,123	)
Louisiana		11,519			2,998		2,396		6,125
Virginia		862			1,151		245		(534	)
Corporate overhead and other (2)		(4,220	)		396		3,765		(8,381	)
TOTAL	$	18,381		$	11,234	$	13,269	$	(6,122	)

Six months ended June 30, 2010 (As adjusted, see Note 7 of Financial Statements)	EBITDA			Depreciation and Amortization		Interest Expense, net		Noncontrolling Interest		Net Income (Loss)
Colorado:
The Lodge	$	13,426		$	2,537	$	3,385			$	7,504
Gilpin		2,409			886		952				571
Total Colorado		15,835			3,423		4,337				8,075
Nevada:
Gold Dust West-Reno		2,931			752		1,309				870
Gold Dust West-Carson City		(66	)		1,111		767				(1,944	)
Gold Dust West-Elko		1,160			1,249		521				(610	)
Total Nevada		4,025			3,112		2,597				(1,684	)
Louisiana		11,671			3,048		2,659				5,964
Virginia		1,166			1,108		277				(219	)
Corporate overhead and other (3)		(5,028	)		476		3,478	$	3		(8,979	)
TOTAL	$	27,669		$	11,167	$	13,348	$	3	$	3,157

(1) Included in Gold Dust West-Carson City for the three and six months ended June 30, 2011 is an impairment charge of long-lived assets totaling $10.1 million.

(2) Included in corporate overhead and other for the three and six months ended June 30, 2011 is a $0.3 million gain and $0.8 million gain, respectively, on the change in fair value of investment in equity securities.

(3) Included in corporate overhead and other for the three and six months ended June 30, 2010 is a $0.3 million loss 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 $0.1 million and $0.5 million, respectively.

6. Liquidity and capital resources

As of June 30, 2011, we had cash and cash equivalents of $28.4 million compared to $24.7 million in cash and cash equivalents as of December 31, 2010. The increase of $3.7 million is the result of $12.4 million cash provided by operating activities, $10.4 million cash used in investing activities, and $1.7 million cash provided by 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 decreased $0.7 million for the six months ended June 30, 2011 compared to June 30, 2010 primarily due to greater increases in restricted cash, accounts receivable and routine fluctuations in accounts payable resulting from cash management activities, somewhat offset by a greater increase in accrued expenses and other noncurrent liabilities.

36

Cash used in investing activities during the six months ended June 30, 2011 and 2010 was the result of property and equipment and device rights additions totaling $9.3 million and $5.7 million, respectively, for ongoing capital investments at our existing properties, somewhat offset by $0.1 million and $0.1 million, respectively, of proceeds from the sale of equipment. In addition, cash used in investing activities during the six months ended June 30, 2010 included $1.2 million to acquire the noncontrolling interest of Nautica Phase 2.

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 provided by financing activities during the six months ended June 30, 2011 was the result of net borrowings on the revolving senior credit facility totaling $16.5 million, somewhat offset by payments on long-term debt totaling $0.4 million, and cash distributions to stockholder totaling $14.4 million, including $10.4 million for the purchase of Springhill and Vivian and $3.0 million for the purchase of Forest Gold.

As of June 30, 2011, we had $9.0 million available on our $40 million revolving senior credit facility (of which $3.0 million expired June 2011 and the remainder is due June 2012) for acquisitions, capital expenditure programs and working capital. As of June 30, 2011, our total debt approximates $298.3 million, of which $85.1 million is due within the next 12 months. We are evaluating refinance alternatives and anticipate having a new facility in place prior to the June 2012 maturity of the senior credit facility. 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 June 30, 2011, 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 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 2011, we anticipate spending approximately $15 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. Adverse national and local economic conditions could persist or worsen. 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 June 30, 2011.

(In Thousands)	Total		Less than  1 Year		1-3 Years		4-5 Years		After 5 Years
Long-term debt (1)	$	359,331	$	108,297	$	251,016	$	18	$	—
Capital lease obligations		6,934		474		948		1,526		3,986
Operating leases (2)		36,824		3,254		5,696		4,780		23,094
Purchase obligations (3)		295,331		86,309		172,618		36,404		—
Other long-term obligations (4)		20,999		2,199		3,585		2,890		12,325
Total contractual cash obligations	$	719,419	$	200,533	$	433,863	$	45,618	$	39,405

(1) Long-term debt includes principal and interest owing under the terms of our senior unsecured notes, our senior secured credit facility and capital leases. Interest on variable rate debt is computed based on rates outstanding at June 30, 2011.

(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 June 30, 2011 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
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 67% 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 the second quarter 2011, based on operating results, 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 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 not be able to recover the carrying cost of these assets, and therefore, Gold Dust West-Carson City recorded an impairment of long-lived assets totaling $10.1 million during the second quarter ended June 30, 2011. 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 additional 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 $48.7 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 June 30, 2011 are The Lodge ($4.2 million), Gilpin ($2.5 million), Gold Dust West-Reno ($8.8 million) and Louisiana ($33.2 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. As of September 30, 2010, prior to the acquisition by JEI, we determined the carrying value of the goodwill at Forest Gold was impaired. Market conditions in 2010 resulted in Forest Gold not meeting the financial performance expectations originally forecast at the time of acquisition. Consequently, Forest Gold recorded a goodwill impairment charge of $0.8 million during the third quarter of 2010. There has been no change in the carrying amount of goodwill during 2011.

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 expired June 2011 and the remainder is due June 2012, (ii) a $40 million six-year term loan facility due June 2012, and (iii) a $20 million six-year delayed draw term loan due June 2012. As of June 30, 2011, $28.0 million is outstanding on the senior secured revolving credit facility and $57.1 million is outstanding on our senior secured term loan debt, bearing interest at a blended variable rate approximating 3.35% at June 30, 2011. As of June 30, 2011, $9.0 million was available on the revolving credit facility. Outstanding borrowings on the senior secured credit facility are due within 12 months and are therefore classified as current portion of long-term debt at June 30, 2011.

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 $0.3 million annually for interest should market rates increase or decrease by 10% compared to interest rate levels at June 30, 2011.

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. 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 June 30, 2011.

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 June 30, 2011. 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.

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, 2010, filed March 29, 2011.

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

None

Item 3. Defaults Upon Senior Securities

None

Item 5. Other Information

None

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Item 6. Exhibits

(a) Exhibits

31.1	Certification of the Chief Executive Officer pursuant to Rule 15d – 14(a) under the Securities Exchange Act of 1934, filed under Exhibit 31 of Item 601 of Regulation S-K.
31.2	Certification of the Chief Financial Officer pursuant to Rule 15d – 14(a) under the Securities Exchange Act of 1934, filed under Exhibit 31 of Item 601 of Regulation S-K.
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of Item 601 of Regulation S-K.
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of Item 601 of Regulation S-K.
101	Financial statements for the Jacobs Entertainment, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL: (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations, (iii) the Unaudited Condensed Consolidated Statements of Stockholder’s Equity, (iv) the Unaudited Condensed Consolidated Statements of Cash Flows and (v) the Notes to Unaudited Condensed Consolidated Financial Statements.

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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: August 15, 2011	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.
101	Financial statements for the Jacobs Entertainment, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL: (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations, (iii) the Unaudited Condensed Consolidated Statements of Stockholder’s Equity, (iv) the Unaudited Condensed Consolidated Statements of Cash Flows and (v) the Notes to Unaudited Condensed Consolidated Financial Statements.

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