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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File No. 333-88242

JACOBS ENTERTAINMENT, INC.

(Exact name of Registrant as specified in its charter)

17301 West Colfax, Suite 250, Golden, Colorado 80401

(Address of principal executive offices) (Zip code)

(303) 215-5200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.  Yes  o  No  x

Indicate by check mark if the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes  x  No  o

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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  o  No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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.

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:  No market exists for the common stock of the registrant; as of March 30, 2010 all of its outstanding shares of common stock are held by its parent corporation.

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

DOCUMENTS INCORPORATED BY REFERENCE:  None

See the exhibit index which appears on page E-1.

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JACOBS ENTERTAINMENT, INC.

2009 ANNUAL REPORT ON FORM 10-K

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this report that relate to matters that are not historical facts that we refer to as “forward-looking statements” regarding, among other things, our business strategy, our prospects and our financial position. These statements may be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “should” or “anticipates” or the negative or other variation of these or similar words, or by discussion of strategy or risks and uncertainties. Forward-looking statements in this report include, among other things, statements concerning:

·                  projections of future results of operations or financial condition;

·                  expectations for our casino, truck plaza and horse racing properties; and

·                  expectations of the availability of capital resources.

Any forward-looking statement made by us necessarily is based upon a number of estimates and assumptions that, while considered reasonable by us, are inherently subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond our control, and are subject to change. Actual results of our operations may vary materially from any forward-looking statement made by us or on our behalf. Forward-looking statements should not be regarded as representations by us or any other person that the forward-looking statements will be achieved. Undue reliance should not be placed on any forward-looking statements. The contingencies and uncertainties to which any forward-looking statement contained herein is subject to include, but are not limited to, the following:

·                  Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our debt obligations.

·                  We will require a significant amount of cash to service our indebtedness. Our ability to generate cash depends on many factors beyond our control.

·                  Our indebtedness imposes restrictive covenants on us and our ability to refinance our debt in the foreseeable future is problematic given the recent and continuing turmoil in the credit markets.

·                  We may not be able to successfully integrate the operations of recent and future acquisitions into our business.

·                  We may experience a loss of market share due to intense competition and the possible introduction of slot machines at one or more Colorado racetracks.

·                  We face extensive regulation from gaming and other government authorities and the possibility that legislative changes may prohibit or limit our gaming activities.

·                  Changes to applicable tax laws could have a material adverse effect on our operations and financial condition.

·                  Our operations could continue to be adversely affected due to the adoption of anti-smoking regulations in Colorado and their possible adoption in Nevada and Louisiana.

·                  We depend upon our key employees and certain members of our management.

·                  The single member of our board of directors and his family trusts indirectly own or control the issued and outstanding shares of Jacobs Entertainment, Inc. and could have interests that conflict with yours.

·                  We rely on the maintenance of agreements with horsemen at our horse racing facility.

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·                  Our business relies heavily on certain markets and an economic downturn in these markets as has been experienced in 2008 and 2009 could have a material adverse effect on our future results of operations.

·                  Seasonality and weather conditions can adversely affect our results of operations.

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.

NON-GAAP FINANCIAL MEASURES

Consolidated and property level EBITDA and the related ratios presented in this report are supplemental measures of our performance that are not required by, or presented in accordance with, generally accepted accounting principles. EBITDA is not a measurement of our financial performance under generally accepted accounting principles and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with generally accepted accounting principles, or as an alternative to cash flow from operating activities as a measure of our liquidity.

EBITDA consists of net income (loss) plus depreciation and amortization, interest, net of capitalized interest, and income taxes. EBITDA is presented because it is used by our management as a supplemental performance measure to analyze the performance of our business and because it is frequently used by securities analysts, investors and others in their evaluation of companies in our industry, substantially all of which present EBITDA when reporting their results.

Our bank credit agreement and our indenture use EBITDA, subject to certain adjustments, to measure our compliance with debt covenants. We also use EBITDA to evaluate and price potential acquisition candidates. We believe EBITDA facilitates operating performance comparisons from period to period and company to company by removing potential differences caused by variations in capital structures (affecting relative interest expense), tax positions (such as the impact on periods or type of companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense).

EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under generally accepted accounting principles. Some of these limitations are:

·                  EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

·                  EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

·                  EBITDA does not reflect the cash requirements necessary to service interest or principal payments, on our debts;

·                  although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and

·                  other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.

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Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our results under generally accepted accounting principles and using EBITDA only supplementally. See our consolidated financial statements and the notes to those statements included elsewhere in this report.

INDUSTRY AND MARKET DATA

This report includes market and industry data that we obtained from our own research, studies conducted by third party sources that we believe to be reliable and industry and general publications by third parties and, in some cases, management estimates based on industry and other knowledge. We have not independently verified any of the data from third party sources, and we make no representation as to the accuracy of such information. While we believe internal company estimates are reliable and market definitions are appropriate, they have not been verified by any independent sources.  Actual results could differ from those estimates.

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PART I

Item 1.                    Business.

Introduction

Jacobs Entertainment, Inc. (“Jacobs Entertainment,” “JEI,” the “Company,” “us,” “our” or “we”) was formed as a Delaware corporation on April 17, 2001. We are a developer, owner and operator of gaming and pari-mutuel wagering facilities throughout the United States, with properties located in Colorado, Nevada, Louisiana and Virginia. We own and operate five land-based casinos, 18 video gaming truck plazas (five of which are leased) and a horse racing track with eight satellite wagering facilities (four of which are leased). In addition, we are party to an agreement that entitles us to a portion of the gaming revenue from an additional truck plaza video gaming facility.

All of our gaming facilities target local customers and emphasize revenues from slot machine play or video gaming, or both. For the year ended December 31, 2009, our net revenues and EBITDA were approximately $313.4 million and $48.4 million, respectively. See Note 15 to our consolidated financial statements for information concerning the operational performance of the segments of our business.

The following table sets forth certain information and property level EBITDA (excluding corporate overhead) of our properties:

(1)                    Property Level EBITDA excludes corporate overhead expense of $11.6 million.

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The following is a reconciliation of our property level EBITDA to our net income (in thousands):

Business Strategy and Competitive Strengths

Our business strategy is to continue to operate a broad, geographically diversified base of gaming and pari-mutuel wagering properties that seek to provide our customers with an enjoyable entertainment experience, and in turn, to generate significant customer loyalty and repeat business.  We believe that there are opportunities for growth and operational efficiencies in the markets in which we operate.

Black Hawk, Colorado was one of the fastest growing gaming markets in the country, having experienced a 26.3% compound annual growth in gaming revenue from 1998 through 2000. Revenues in 2001 through 2003 stabilized at approximately $500 million annually and rose to $524 million in 2004, $535 million in 2005, $554 million in 2006, and $581 million in 2007.  However, in 2008, revenues fell to $509 million due to a statewide smoking ban and a nationwide economic recession, combined with a pronounced slowdown in the gaming industry. In 2009, revenues rose to $530 million primarily due to the new gaming regulations allowed under Colorado Amendment 50 which became effective on July 2, 2009.

We may acquire or develop additional gaming properties in different jurisdictions catering to local gaming patrons in the future, further expanding our geographic diversity.

In November 2003 and 2004, referendums were passed in four localities in Virginia that allowed us to expand our off-track wagering facilities from four to nine such facilities and we now operate eight. Our strategy for our horse racing operations is to be a competitive participant in the industry by capitalizing on our unique dirt and turf track facilities for live racing, hosting marquee racing events, and expanding our off-track wagering facility network under appropriate circumstances.  Advanced deposit account wagering, primarily over the internet, is the fastest growing segment of the pari-mutuel wagering industry.  Colonial operates its own account wagering platform called EZ Horseplay.  Colonial is seeking to grow EZ Horseplay wagering handle with both traditional customers and customers in non-traditional venues using technology specifically developed for EZ Horseplay.  On January 11, 2008, we announced that we intend to sell our racetrack and offsite wagering facilities in Virginia.  At this point a sale is not probable and we are not actively seeking a buyer.

Our competitive strategies and strengths include:

Generate Repeat Business by Catering to Local Gaming Patrons. We focus on attracting and fostering repeat business from local gaming patrons at all of our properties. Our strategy for establishing a strong presence with local residents or patrons is to provide a user-friendly gaming environment featuring convenient locations, high quality food at affordable prices and promotional incentives that reward frequent play. In order to maximize exposure to the local and surrounding communities in the most cost-effective manner, we utilize computerized slot data tracking systems that allow us to track individual play and payouts and develop mailing lists for special events, contest play and promotions. We also participate in busing programs with unaffiliated transportation companies to bring patrons from the greater Denver metropolitan area and surrounding communities to our two properties located in Black Hawk, Colorado.

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Expand Louisiana Truck Plaza Business. Our strategy of expanding our presence in the Louisiana truck plaza market is driven by: (i) the consistent revenue each facility generates, (ii) the high return on investment associated with operating the truck plazas, and (iii) the relatively low capital expenditures necessary to maintain the facilities.

Enter Additional Locals-Oriented Markets. Our management team has a proven track record of successfully operating casinos that cater to local residents or day trip patrons who reside in close proximity to the properties. In an effort to leverage this operating experience and enter two additional locals-oriented markets, we acquired Piñon Plaza (subsequently renamed “Gold Dust West-Carson City”), located in Carson City, Nevada, in June 2006. This facility has 377 slot machines and six table games on its 12,000 square foot gaming floor. We opened a new casino in Elko, Nevada (“Gold Dust West-Elko”) on March 5, 2007 that features a 13,000 square-foot casino floor with 340 slot machines and six table games.

Broad Geographic and Asset Diversification. We believe that because of our geographic and asset diversification, we are less dependent on results at a specific property or in a specific market to generate our cash flow. This geographic diversity helps mitigate our susceptibility to regional economic downturns or weather conditions.

Strong Emphasis on Slot and Video Gaming Revenues. All of our gaming facilities emphasize slot machine or video gaming play, or both. We believe slot machine play to be the fastest growing, most consistently profitable and lowest risk segment of the gaming entertainment business. We offer a wide variety of games to attract customers and encourage them to play for longer periods of time, thereby promoting the stability of our gaming revenue. We intend to maximize slot and video gaming revenue by continuing to invest in state-of-the art equipment and systems and replacing older models with the most current product offerings in appropriate markets. In addition, we believe that the introduction of new table games, higher bet limits and 24-hour gaming in our Colorado casinos will enable us to maintain our competitive edge in that market.

Significant Barriers to Entry. There are significant regulatory and other barriers to entry in each of the markets in which we operate. The gaming industry in each of our markets is governed by a state gaming commission. In order to enter the gaming industry in any of our markets, a potential new entrant must work through a costly and lengthy regulatory process, which could last anywhere from 12 to 18 months depending on jurisdiction and type of gaming. Beyond the regulatory barriers, the need for significant investments of time and capital also restricts potential new entrants. The discussion that follows provides a sample of the specific barriers to entry in each of our markets.

In the Black Hawk, Colorado market, barriers to entry include: (i) the scarcity of land available for development within the approved gaming district, which is defined in the state constitution, the Gaming Commission’s regulations and the City of Black Hawk’s ordinances, and (ii) the high cost of acquiring land and constructing new gaming facilities.

There are stringent licensing requirements and substantial licensing and compliance expenses attendant to commencing and conducting gaming operations in Nevada.

In Louisiana, the barriers to entry include restrictions that require truck plaza video gaming facilities to meet specified minimum levels of diesel and total fuel sales, have a specified minimum site acreage and conduct restaurant operations not fewer than 12 hours per day and to keep a convenience store open 24 hours per day. These restrictions also prohibit the operation of more than 50 video gaming machines at any location and require truck plaza video gaming facilities to be located only in those parishes that voted to continue video gaming during a one-time statewide referendum in 1996. Additional barriers to entry are disclosed below in “Gaming Regulation and Licensing—Louisiana.”

In Virginia, in all but the county in which we operate and one additional county, any potential operator of any competing horse racing track would need to secure passage of a referendum in the locale in which the track is to be operated. In addition, an unlimited racetrack owner’s and operator’s license is required in order to have off-track wagering facilities. Off-track wagering facilities can be opened only in the current jurisdictions in which we operate without passage of additional referendums. The number of off-track wagering facilities is limited by statute to a statewide total of 10 and we currently operate eight, leaving only two potentially available. The high cost of building a new racetrack in Virginia presents an additional barrier in that state.

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Strong, Experienced Management Team. Our senior management team is an experienced group of industry veterans. Jeffrey P. Jacobs, our Chairman and Chief Executive Officer, has been Black Hawk Gaming’s Chief Executive Officer since November 1996 and the Chief Executive Officer of Colonial Holdings, Inc. (“Colonial”), our wholly owned subsidiary, since March 1997. Stephen R. Roark, our President, has been Black Hawk Gaming’s President since September 1995 and was its Chief Financial Officer from 1993 to 2006. Ian M. Stewart, our President of Pari-Mutuel Wagering Operations, has been President of Colonial since November 1998 and its Chief Financial Officer since June 1997. Michael T. Shubic, our Chief Operating Officer, has over 35 years of experience in the gaming industry. Brett A. Kramer, our Chief Financial Officer, has over 15 years experience with us in various financial capacities. Stanley Politano, our Executive Vice President, has 16 years of experience in the gaming industry. The five general managers of our casinos have numerous years of casino management experience and report to Mr. Shubic. The Vice President of Louisiana Operations oversees our truck plaza video gaming operations, has over 15 years of experience in the truck plaza video gaming business and also reports directly to Mr. Shubic. We believe the expertise and experience of our management team enables us to enhance the operation of our existing properties and any properties we may acquire in the future.

Our Properties and Operations

The Lodge Casino—Black Hawk, Colorado. The Lodge Casino in Black Hawk, Colorado, which commenced operations in June 1998, is one of 18 casinos located in the gaming district of Black Hawk. The Lodge serves the greater Denver metropolitan area, which is located 40 miles east of Black Hawk and has a population of approximately 2.4 million, as well as customers from nearby communities such as Boulder and Fort Collins, Colorado and Cheyenne, Wyoming. We believe that most of The Lodge’s customers are primarily day trip patrons who reside in the greater Denver metropolitan area. As of December 31, 2009, the Black Hawk market had approximately 9,100 slot machines and approximately 200 table games generating $530 million in revenues for the year then ended. The Lodge is one of the largest gaming facilities in the market.

The Lodge is located on a 2.5 acre site that abuts State Highway 119, with approximately 28,000 square feet of gaming space on three floors containing 975 slot machines and 35 table games (including 19 poker tables, 12 black jack tables, 2 roulette tables and 2 craps tables), 50 hotel rooms, three restaurants, three bars and on-site parking for approximately 600 vehicles. Our property includes The White Buffalo Grille, a buffet and a snack bar. Black Hawk now has significant lodging facilities. The Isle of Capri has a 402-room hotel at its Black Hawk casino, and Ameristar recently completed a 536-room hotel directly across from The Lodge Casino, which opened during the fourth quarter of 2009.

We utilize computerized slot data tracking systems that allow us to track individual play and payouts and develop mailing lists for special events, contest play and promotions. The Lodge participates in busing programs with unaffiliated transportation companies who transport patrons to Black Hawk/Central City from the market areas described above. Black Hawk Gaming has obtained an exemption as a common carrier from the Colorado Public Utilities Commission and may elect to operate its own busing program in the future.

During 2008, we provided financial support for a proposed constitutional amendment (“Colorado Amendment 50”) that would increase the types of table games, wagering limits and hours of operation at Colorado casinos.  For the year ended December 31, 2008, we funded a total of $1.4 million in support of this amendment.  Colorado residents approved the proposed constitutional amendment on November 4, 2008.  The amendment was subsequently voted upon and approved by the residents of each of the three gaming towns in Colorado (Black Hawk, Central City and Cripple Creek).  The new gaming regulation, which became effective on July 2, 2009 at Colorado casinos, allows for the introduction of craps and roulette, increases the maximum wager limit to one hundred dollars, allows 24-hour gaming operations, and set a maximum gaming tax rate of 20%.  For further discussion, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The Gilpin Casino—Black Hawk, Colorado. The Gilpin Casino, which commenced operations in October 1992, is located on a one-acre site in the central Black Hawk gaming district. We expanded our facility through the acquisition of an adjacent casino in early 1994 and we further expanded the casino in 2005. We were one of the first casinos opened in Colorado following the legalization of casino gaming in 1991. We offer 395 slot machines and 19 table games, including 14 poker tables where we provide both tournament and cash poker play, 3 black jack tables, 1 roulette table and 1 craps table. The Gilpin has a restaurant and two bars and a slot club and utilizes busing and other promotional programs, similar to those of The Lodge. We have available to our customers approximately 200 surface parking spaces in the heart of historic Black Hawk.

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Gold Dust West-Reno—Reno, Nevada. Gold Dust West-Reno, which we acquired in 2001, is located on 4.6 owned and leased acres in Reno’s central downtown gaming district and has been operating since 1978. Gold Dust West-Reno caters to residents of Reno and surrounding areas and has approximately 17,500 square feet of gaming space, which offers 479 slot machines. Gold Dust West-Reno also features the Wildwood Restaurant and has parking for 375 vehicles. The property currently offers 27 motel rooms.

Gold Dust West-Carson City—Carson City, Nevada. On June 25, 2006, we closed an agreement with Capital City Entertainment, Inc. (“CCI”), an unaffiliated party, under which we acquired all of the assets of Piñon Plaza, a division of CCI which we have now re-branded as Gold Dust West-Carson City. The assets included all of the personal property, buildings and improvements used by Piñon Plaza in the operation of its casino, hotel, bowling alley and RV park in Carson City, Nevada. The purchase price for the assets was $14.5 million.  Additionally, during 2006 and 2007, we spent approximately $5.0 million in total for property and equipment improvements.

Contemporaneously, we entered into a triple net ground lease covering land underlying the assets which began upon closing of the asset purchase agreement discussed above. The lessor is a family trust affiliated with CCI. The lease has a ten year term with two ten year extensions at our option. Rentals under the lease are $250,000 per year for years one through five, $300,000 per year for years six through ten, and a rate based on an MAI (Member of the Appraisal Institute) appraisal of the property during the first and second extension terms. We have the right to purchase the leased land at an MAI appraised value at the end of the first ten year term. We also have a right of first refusal should the lessor seek to sell the leased land to a third party.

Gold Dust West-Carson City, which commenced operations in 1995, is a 140,000 square foot facility located on approximately 18 acres covered by the land lease described above. Gold Dust West-Carson City offers 377 slot machines and six table games, two restaurants and two bars. It has a slot club and offers various promotional packages, many associated with its 32 bowling lanes. Gold Dust West-Carson City has 146 hotel rooms. It also owns and operates a 48 space RV park as part of the resort. There are approximately 875 parking spaces for Gold Dust West-Carson City’s casino patrons and hotel guests.

Gold Dust West-Elko—Elko, Nevada. On November 14, 2005, we entered into a triple net lease with an unaffiliated party for the lease of a 37,000 square foot building and approximately six acres of land in Elko, Nevada. The lease has a five-year term with three five-year renewals at our option. Rent under the lease was $225,000 for the first year, with $50,000 of the first year rent abated as an allowance for tenant improvements. The second year’s rent is $375,000 and for years three through five the annual rent is $450,000.

We have the right to buy the land and the building any time after the first 12 months through the 60th month for $5 million and from the 61st month through the 120th month for $5.4 million.

We renovated and upgraded the building and installed slot machines, table games and appropriate food and beverage offerings. Pre-opening and gaming device costs totaled approximately $21 million. We commenced renovation during the third quarter of 2006 and opened the casino on March 5, 2007. Gold Dust West-Elko has approximately 13,000 square feet of gaming space, and offers 340 slot machines and six table games. Gold Dust West-Elko also has two restaurants, one bar and has parking for 400 vehicles.

Louisiana Gaming Properties. Our truck plaza properties consist of 18 truck plaza video gaming facilities located in Louisiana (of which five are leased). We are also party to an agreement that entitles us to a portion of the gaming revenues from a 19th truck plaza (Cash’s Truck Plaza and Casino in Lobdell). Each truck plaza features a 24 hour per day convenience store, fueling operations, a restaurant operating not fewer than 12 hours per day, and up to 50 video gaming devices in the casino depending on the level of fuel sales and available space.  At December 31, 2009, our truck plaza video gaming facilities had a combined total of 943 video gaming devices.

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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 various 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.

The Louisiana video gaming industry consists of video gaming in 31 of Louisiana’s 64 parishes. The industry is highly regulated and video gaming machines can only be placed in qualifying bars, restaurants, hotels, satellite wagering facilities and truck plazas. In order to qualify for video gaming, a truck plaza must offer diesel fuel, gasoline, a convenience store, a restaurant and a place for truck drivers to shower and sleep. Our video gaming machines are located in a separate gaming room that is designed to provide a pleasant casino-like atmosphere. As of December 31, 2009, Louisiana had 193 licensed video gaming truck plazas.

The Louisiana truck plaza video gaming market caters primarily to local residents, whom we believe contribute to the vast majority of truck plaza gaming revenue. We believe that most of our video gaming customers live within a five-mile radius of our properties.

Colonial Downs—New Kent, Virginia. Colonial Downs, which opened in 1997, is a racetrack in New Kent, Virginia, which primarily conducts pari-mutuel wagering on thoroughbred and harness racing. The track facility was designed to provide patrons with a pleasant atmosphere to enjoy quality horse racing. The outside grandstand area, located on the first floor of the track facility, has an occupancy capacity of approximately 4,000 patrons. Also located on the first floor of the track facility are simulcast television seating areas, two covered patio areas, two bars, a large concession food court, gift shop, game room and wagering locations with approximately 72 tellers. The Jockey Club, which is in the main grandstand area located on the third floor of the track facility, includes a full-service dining area with a seating capacity of 548 patrons, two separate lounge areas, and additional wagering locations with 24 tellers. On the fourth floor is the Turf Club with seating for full service dining for 125 along with 10 luxury suites with skybox seating and a wagering location with eight tellers. In addition, there is a ballroom with seating for 250 patrons for special events. In 2005, we added outdoor seating for additional patrons along the track’s homestretch in an area called “the Green.”

The dirt track at Colonial Downs is one and one-quarter miles in length and is one of the largest tracks in the United States. Based on our knowledge of the industry, we believe the 180-foot wide turf track is the widest turf track in the country, thereby establishing the track as one of the major turf racing facilities in the Mid-Atlantic region.  In addition to our racetrack, we presently operate eight satellite wagering facilities in Virginia as described below.  We previously operated nine such facilities until we closed our Chesapeake Military Highway facility in November 2008 in order to consolidate operations with our Chesapeake Indian River Road facility.

Satellite Wagering Facilities, Virginia. In addition to our racetrack facility, we operate eight satellite wagering facilities in Virginia (four are leased). These facilities provide simulcast pari-mutuel wagering on thoroughbred and harness racing from our racetrack and selected other racetracks throughout the United States. Our satellite wagering facilities are located in Alberta, Chesapeake, Hampton, Martinsville, Weber City, Vinton, and two in Richmond. These facilities employ state-of-the-art audio/video technology for receiving quality import simulcast thoroughbred and harness racing from nationally known racetracks. The Virginia Racing Commission can grant licenses for two more satellite wagering facilities under existing legislation.

The facilities are structured to accommodate the needs of various patrons, from the seasoned handicapper to the novice wagerer, and provide patrons with a comfortable, upscale environment including a full bar and a range of restaurant services. In addition, self-serve automated wagering equipment is available to patrons in order to make wagering more user-friendly to the novice and more efficient for the expert. This equipment, with touch-screen interactive terminals and personalized portable wagering terminals, provides patrons with current odds information and enables them to place wagers and credit winning tickets to their accounts without waiting in line.

In 2003, the legislature of the Commonwealth of Virginia passed a statute authorizing the Virginia Racing Commission to grant licenses and thereafter regulate account wagering in Virginia. Each year, the Virginia Racing Commission licenses advance deposit account wagering providers, including Colonial Downs, to accept wagers over the telephone or through the internet via the provider’s advanced deposit wagering system. For 2010, five providers (including Colonial Downs) have been licensed. Colonial receives a share of source market fees for wagers placed

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by Virginians through these account wagering service providers. Effective January 1, 2010, the Virginia General Assembly amended the statutory provisions relating to account wagering to set the source market fee for wagers originating from Virginia at 10% of such wagers. Colonial shares the source market fee equally with the recognized majority horsemen’s groups.

The Nautica Properties. We have acquired from affiliated parties several options to lease and options to purchase six parcels of land and certain improvements on the west bank of the Cuyahoga River in Cleveland, Ohio. We refer to these properties, covering an aggregate of approximately 624,000 square feet of land (14.4 acres) and a building comprised of 47,380 square feet of net rentable space, as the Nautica Properties. The Nautica Properties currently require aggregate option payments totaling $200,000 per year.

During March 2008, we exercised our option to acquire one of these parcels referred to as “Lot D.”  On April 1, 2008, we purchased this parcel for $800,000.  The company that owned this parcel of land and parking lot business was wholly owned by our Chairman and Chief Executive Officer (“CEO”).  Additionally, on January 15, 2009, we exercised our option to acquire one of these parcels referred to as “Sugar Warehouse,” and on January 21, 2009, we purchased this parcel for $2,450,000 from the limited partnership that owned this building.  An affiliate of our CEO owned 82% of the general partner interests and 16.4% of the limited partner interests of the seller.  See Item 13 “Certain Relationships and Related Transactions, and Director Independence.”

The option agreements give us the right until July 2010 to purchase one of the remaining parcels and the right to purchase or enter into long-term leases on the remaining three parcels.  We expect to either exercise or extend these options prior to their expiration.  Our CEO owns varying interests in three of the four remaining parcels.

Although we may elect not to exercise all the options unless casino gaming opportunities arise, we nonetheless have the right to acquire all or part of the Nautica Properties for other purposes. If casino gaming is not legalized on the Nautica Properties but we decide to exercise our options, the aggregate purchase price would be approximately $3.0 million for one of the parcels and the aggregate annual lease payments on the remaining three parcels would be approximately $355,000. If all four remaining parcels are purchased and none leased, the total purchase price would be approximately $6.55 million, less any aggregate option payments previously made. The purchase price and rent payments would be increased based on independent appraisals of the land and improvement values if, in the future, casino gaming were to become legalized in Ohio and a casino is licensed on the Nautica Properties.

During 2009, we provided financial support to oppose a proposed constitutional amendment in Ohio (“Issue 3”) that would allow for one casino each at designated locations in Cincinnati, Cleveland, Columbus and Toledo and distribute to all Ohio counties a tax on the casinos.  None of the designated locations is owned by JEI or its affiliates.  For the year ended December 31, 2009, we provided financial support totaling $2.3 million to oppose Issue 3.  On November 3, 2009, Issue 3 was passed in Ohio which permits casino gaming at the locations designated in the amendment.  We are currently evaluating the impact Issue 3 might have on our development efforts on the Nautica Properties in Ohio.

Seasonality and Weather Conditions

Seasonality and weather conditions can affect our results of operations. Winter travel conditions can adversely affect patronage and revenues at our Colorado and Nevada casinos. Although casino business is not seasonal, levels of gaming activity increase significantly during weekends and holidays, especially holiday weekends. Hurricanes Katrina and Rita temporarily affected our truck plaza video gaming operations in late 2005, while Hurricanes Gustav and Ike temporarily affected our truck plaza video gaming operations in late 2008. Similar hurricanes could have a material adverse effect on our Louisiana operations in future years. Our pari-mutuel wagering revenues are higher during scheduled live racing than at other times of the year. Adverse weather conditions can cause cancellation of or curtail attendance at outdoor races, thereby reducing wagering and our revenues. Attendance and wagering at both outdoor races and satellite wagering facilities can be harmed by holidays and other competing seasonal activities.

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Competition

General. We face intense competition in each of the markets in which we operate. Our existing gaming facilities compete directly with other gaming properties and activities in and near Colorado, Nevada, Louisiana and Virginia. We expect this competition to increase as new gaming operators enter our markets, existing competitors expand their operations, gaming activities expand in existing jurisdictions and gaming is legalized in new jurisdictions. Several of our competitors have significantly better name recognition and more marketing and financial resources than we do. We cannot predict with any certainty the effects of existing and future competition on our operating results.

We compete with other forms of gaming and entertainment such as bingo, pull-tab games, card parlors, sports books, pari-mutuel or telephonic betting on horse racing and dog racing, state-sponsored lotteries, video lottery terminals, and video poker terminals. We may compete with gaming from other venues including internet gaming, although its legality is presently unclear.

We also compete with gaming operators in other gaming jurisdictions such as Las Vegas, Nevada, and Atlantic City, New Jersey. Our competition includes casinos located on Native American reservations throughout the United States, which have the advantage of being exempt from certain state and federal taxes. Some Native American tribes are either establishing or are considering the establishment of gaming at additional locations. Expansion of existing gaming jurisdictions and the development of new gaming jurisdictions and casinos on Native American-owned lands would increase competition for our existing and future operations. In addition, increased competition could limit new opportunities for us or result in the saturation of certain gaming markets. See Item 1A “Risk Factors—Competition” below.

Casino Properties. We believe the primary competitive factors in the Black Hawk, Colorado, market are location, availability and convenience of parking; number and types of slot machines and gaming tables; types and pricing of amenities, including food; name recognition; overall atmosphere; and customer service. We believe our Colorado casinos generally compete favorably based on these factors.

Our Colorado casinos are on opposite sides of Main Street in Black Hawk. Because of their proximity, our Black Hawk casinos compete for some of the same customers. Further, there were 16 other casinos operating in Black Hawk on December 31, 2009. There were approximately 9,300 total gaming devices (slot machines, poker, black jack, craps and roulette tables) in Black Hawk as of December 31, 2009.

Central City is located adjacent to Black Hawk and provides the most direct competition to the gaming establishments in Black Hawk. There were six casinos operating in Central City with approximately 2,100 total gaming devices as of December 31, 2009. Black Hawk has historically enjoyed a competitive advantage over Central City in large part because access by State Highway 119 (formerly the only major access to Black Hawk from the Denver metropolitan area and Interstate 70) requires customers to drive by and, in part, through Black Hawk to reach Central City. In late 2004, Central City constructed a road from I-70 directly into Central City, commonly referred to as the Central City Parkway. It is now possible for certain traffic that passed through Black Hawk to proceed directly to Central City from Interstate 70. Nonetheless, motorists driving from the Denver metropolitan area still have the option of choosing to go either to Black Hawk or Central City without having to drive through the other town.

Large, well-financed companies have entered the Black Hawk and other Colorado markets and others may enter through the purchase or expansion of existing facilities, which could have a material adverse effect on our results of operations and financial position. For example, on January 1, 2005, Ameristar Casinos, Inc. purchased a facility, formerly known as the Mountain High Casino, which is directly across the street from The Lodge, and completed construction of a 536 hotel room tower in the fourth quarter of 2009, a convention center, and other amenities. Under Ameristar’s ownership, this facility has been expanded to approximately 1,550 slot machines and 37 table games, and a parking garage accommodating 1,500 vehicles.  No other casinos are currently under construction in Black Hawk.  In 2003, the Isle of Capri Casinos, Inc. purchased Colorado Central Station, located diagonally across the street from its existing facility and subsequently completed a major renovation and expansion project physically linking the two properties.  The combined casinos are the largest in Black Hawk with approximately 1,850 slot machines, approximately 40 table games, 402 hotel rooms and 2,300 parking spaces. The Isle of Capri is noted for its aggressive marketing programs. The Mardi Gras casino, which is next to The Lodge, was purchased in 2005 and the owners have developed and implemented new marketing programs.

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Our Gold Dust West Casino-Reno encounters strong competition from large hotel and casino facilities and smaller casinos similar in size to our Gold Dust West-Reno in the Reno area, which includes Sparks, Nevada. There is also competition from gaming establishments in other towns and cities in Nevada and from Native American gaming facilities located near Sacramento, California. Our Gold Dust West-Carson City and Gold Dust West-Elko, Nevada casinos face competition from several casinos in those cities and many other venues in Nevada.

Truck Plaza Operations. Our Louisiana truck plaza operations face competition from land-based and riverboat casinos throughout Louisiana and on the Mississippi Gulf Coast, casinos on Native American lands and other non-casino gaming opportunities within Louisiana. The Louisiana Riverboat Economic Development and Gaming Control Act limits the number of gaming casinos in Louisiana to 15 riverboat casinos statewide and one land-based casino in New Orleans. All 15 available riverboat licenses are issued, however, only 13 are currently operational.

Our video gaming operations also face competition from other truck plaza video gaming facilities located in surrounding areas, as well as competition from Louisiana horse racing facilities, some of which have been authorized to operate video gaming machines, and restaurants and bars with video gaming machines. As of December 31, 2009, there were 193 truck plazas in Louisiana licensed to operate video gaming devices.

Horse Racing and Pari-Mutuel Wagering Operations. We compete with racetracks located outside Virginia (including several in Delaware, Maryland, New Jersey, New York, Pennsylvania, and West Virginia, some of which augment their purses with slot machine revenues) and other forms of gaming, such as land-based casinos, including those in Atlantic City, and statewide lotteries in Virginia and neighboring states. The possible legalization of other forms of gaming in Virginia, such as Native American or riverboat casinos, could have an adverse effect on our performance. Although bills for the creation of riverboat casinos have failed in the Virginia legislature, proponents of riverboat gaming and other forms of gaming in Virginia may continue to seek legislative approval, in particular to offset anticipated budget deficits. Additionally, certain Native American tribes are seeking federal recognition (through legislation currently pending in the U.S. Senate) which, if successful, could result in additional gaming venues. Similarly, the expansion of other forms of gaming in neighboring states, such as table games in West Virginia and slot machines in Maryland, could have an adverse effect on our performance.

We have competed and will compete for wagering dollars and simulcast fees with live racing and races simulcast from racetracks in other states, particularly racetracks in neighboring states such as Charles Town in West Virginia, Pimlico Race Course and Laurel Park in Maryland, and Delaware Park in Delaware. We believe that our existing agreements will continue to promote coordination of thoroughbred events between Maryland and Virginia. However, if the Virginia or Maryland Racing Commissions do not approve either party’s proposed racing days, or if the Virginia-Maryland thoroughbred racing circuit is otherwise unsuccessful, our track may have to compete directly with Pimlico Race Course and Laurel Park in Maryland.

We also compete for wagering dollars with account wagering companies operating both legally and illegally in Virginia. These companies take wagers from Virginians both over the phone and the internet. We believe legislation which went into effect January 1, 2010 will provide us with fair compensation for their activities. Unlicensed account wagering companies have lower costs than Colonial and thus are able to attract customers in Virginia with large wagering rebates.

Employees and Labor Relations

As of December 31, 2009, we had approximately 1,300 full-time and part-time employees at our facilities in Black Hawk, Colorado, and Reno, Carson City, and Elko, Nevada, 300 year-round and 400 seasonal employees at our facilities in Virginia and 500 employees at our facilities in Louisiana. Employees include cashiers, dealers, food and beverage service personnel, facilities maintenance, security, valet, accounting, marketing, and personnel services. We consider relations with our employees to be good.

None of our employees are presently represented by any union or other labor organization. See “Risk Factors” under Item 1A below.

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Regulation

Gaming Regulation and Licensing—Colorado

The State of Colorado created the Colorado Division of Gaming within the Department of Revenue to license, implement, regulate and supervise the conduct of limited stakes gaming. The Division, under the supervision of the Gaming Commission, has been granted broad power to ensure compliance with Colorado law and regulations adopted thereunder (collectively, the “Colorado Regulations”). The Division may inspect, without notice, premises where gaming is being conducted; may seize, impound or remove any gaming device; may examine and copy all of a licensee’s records; may investigate the background and conduct of licensees and their employees; and may bring disciplinary actions against licensees and their employees. The Division may also conduct detailed background checks of persons who lend money to or invest money in a licensee.

It is illegal to operate a gaming facility without a license issued by the Gaming Commission. The Gaming Commission is empowered to issue five types of gaming and gaming-related licenses. The licenses are revocable and nontransferable. Our failure or inability to obtain and maintain necessary gaming licenses would have a material adverse effect on its gaming operations.

The Colorado casinos were granted retail/operator licenses concurrently with their openings. The licenses are subject to continued satisfaction of suitability requirements and must be renewed biyearly. The current licenses for both Colorado casinos were renewed on April 16, 2009. There can be no assurance that the Colorado casinos can successfully renew their licenses in a timely manner every other year.

All persons employed by us in Colorado who are involved, directly or indirectly, in gaming operations in Colorado also are required to obtain various forms of gaming licenses. Key licenses are issued to “key employees,” which include any executive, employee or agent of a licensee having the power to exercise a significant influence over decisions concerning any part of the operations of a licensee. At least one key license holder must be on the premises of each Colorado casino at all times that a casino is open for business.

The Gaming Commission closely regulates the suitability of persons owning or seeking to renew an interest in a gaming license, and the suitability of a licensee can be adversely affected by persons associated with the licensee. Additionally, any person or entity having any direct interest in our subsidiary Black Hawk Gaming & Development Company, Inc. (“Black Hawk Gaming”) or any casino directly or indirectly owned by Black Hawk Gaming may be subject to administrative action, including personal history and background investigations. The actions of persons associated with Jacobs Entertainment, Inc., such as its shareholders, its officers, directors, management or employees, could jeopardize any licenses held by Black Hawk Gaming. All of Black Hawk Gaming’s directors are required to be found suitable as associated persons.

As a general rule, under the Colorado Regulations, it is a criminal violation for any person to have a legal, beneficial, voting or equitable interest, or right to receive profits in more than three retail/operator gaming licenses in Colorado. Black Hawk Gaming has an interest in two such licenses. Any expansion opportunities that we may have in Colorado are limited to one more license.

The Colorado Division of Gaming may require any person having an interest in a licensee or an applicant for a license to provide background information, information on sources of funding, and a sworn statement that the interested person or applicant is not holding that interest for another party. The Gaming Commission may, at its discretion, require any person having an interest in a licensee to undergo a full background investigation and to pay for that investigation in the same manner as an applicant for a license. A background investigation includes an examination of one’s personal history, financial associations, character, record, and reputation, as well as the people with whom a person has associated.

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The Gaming Commission has the right to request information from any person directly or indirectly interested in, or employed by, a licensee, and to investigate the moral character, honesty, integrity, prior activities, criminal record, reputation, habits and associations of (i) all persons licensed pursuant to the Colorado Limited Gaming Act, (ii) all officers, directors and stockholders of a licensed privately held corporation, (iii) all officers, directors and stockholders holding either a 5% or greater interest or a controlling interest in a licensed publicly traded corporation, (iv) any person who as agent, consultant, advisor or otherwise, exercises a significant influence upon the management or affairs of a publicly traded corporation, (v) all general partners and all limited partners of a licensed partnership, (vi) all persons that have a relationship similar to that of an officer, director or stockholder of a corporation (such as members and managers of a limited liability company), (vii) all persons supplying financing or lending money to any licensee connected with the establishment or operation of limited gaming, and (viii) all persons having a contract, lease or ongoing financial or business arrangement with any licensee, if such contract, lease or arrangement relates to limited gaming operations, equipment, devices or premises.

If the Gaming Commission determines that a person or entity is not suitable to own a direct or indirect voting interest in Black Hawk Gaming or Jacobs Entertainment, Black Hawk Gaming or Jacobs Entertainment may be sanctioned unless the person or entity disposes of its voting interest. Sanctions may include the loss of the casino licenses. In addition, the Colorado Regulations prohibit a licensee or any affiliate of a licensee from paying dividends, interest or other remuneration to any person found to be unsuitable, or recognizing the exercise of any voting rights by any person found to be unsuitable. The Colorado Regulations require an operating casino licensee to include in its corporate charter provisions that permit the repurchase of the voting interests of any person found to be unsuitable. Black Hawk Gaming’s Articles of Incorporation include the required provisions.

The Gaming Commission also has the power to require Black Hawk Gaming to suspend or dismiss its officers, directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or who are found to be unsuitable to act in such capacities. The Commission or the Director of the Division of Gaming may review a licensee’s gaming contracts, require changes in the contract before the licensee’s application is approved or participation in the contract is allowed, and require a licensee to terminate its participation in any gaming contract.

The Gaming Commission has enacted Rule 4.5, which imposes requirements on publicly traded corporations holding gaming licenses in Colorado and on gaming licenses owned directly or indirectly by a publicly traded corporation, whether through a subsidiary or intermediary company. The term “publicly traded corporation” includes corporations, firms, limited liability companies, trusts, partnerships and other forms of business organizations. Such requirements automatically apply to any ownership interest held by a publicly traded corporation, holding company or intermediary company thereof, when the ownership interest directly or indirectly is, or will be upon approval of the Gaming Commission, 5% or more of the entire licensee. In any event, if the Gaming Commission determines that a publicly traded corporation, or a subsidiary, intermediary company or holding company has the actual ability to exercise influence over a licensee, regardless of the percentage of ownership possessed by that entity, the Gaming Commission may require the entity to comply with the disclosure regulations contained in Rule 4.5.

Under Rule 4.5, gaming licensees, affiliated companies and controlling persons commencing a public offering of voting securities must notify the Gaming Commission no later than ten business days after the initial filing of a registration statement with the Securities and Exchange Commission. Licensed publicly traded corporations are also required to send proxy statements to the Division of Gaming within five days after their distribution. Licensees to whom Rule 4.5 applies must include in their charter documents provisions that: restrict the rights of the licensees to issue voting interests or securities except in accordance with the Colorado Gaming Act and the Colorado Regulations; void the transfer of voting securities or other voting interests issued in violation of the Colorado Gaming Act and the Colorado Regulations until the issuer ceases to be subject to the jurisdiction of the Gaming Commission or until the Gaming Commission, by affirmative act, validates the transfer; and provide that holders of voting interests or securities of licensees found unsuitable by the Gaming Commission may, within 60 days of such finding of unsuitability, be required to sell their interests or securities back to the issuer at the lesser of the cash equivalent of the holders’ investment or the market price as of the date of the finding of unsuitability. Alternatively, the holders may, within 60 days after the finding of unsuitability, transfer the voting interests or securities to a person suitable to the Gaming Commission. Until the voting interests or securities are held by suitable persons, the issuer may not pay dividends or interest, the securities may not be voted, they may not be included in

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the voting or securities of the issuer, and the issuer may not pay any remuneration in any form to the holders of the securities.

Notification must be given to the Division of Gaming of the acquisition of direct or indirect beneficial ownership of:

·                  5% or more of any class of voting securities of a publicly traded corporation that is required to include in its articles of organization the Rule 4.5 charter language provisions; or

·                  5% or more of the beneficial interest in a gaming licensee directly or indirectly through any class of voting securities of any holding company or intermediary company of a licensee, referred to as qualifying persons.

Owners of any such interests, whether owned individually or in association with others, are subject to a finding of suitability. Notification must be made by persons acquiring these interests. Such persons must submit all requested information to the Division of Gaming, are subject to a finding of suitability as required by the Division of Gaming or the Gaming Commission, and must be informed of these requirements by the licensee. A person other than an institutional investor whose interest equals 10% or more of a publicly traded corporation or a 10% beneficial interest in a gaming licensee must apply to the Gaming Commission for a finding of suitability within 45 days after acquiring such securities.

An institutional investor who, individually or in association with others, acquires, directly or indirectly, the beneficial ownership of 15% or more of any class of voting securities or 15% of the beneficial interest in a gaming licensee must apply to the Gaming Commission for a finding of suitability within 45 days after acquiring such interests.

Licensees must also notify any qualifying persons of these requirements. Whether or not so notified, qualifying persons are responsible for complying with these requirements.

The Colorado Regulations also provide for exemption from the requirements for a finding of suitability when the Gaming Commission finds such action to be consistent with the purposes of the Colorado Gaming Control Act. The Gaming Commission may determine that anyone with a material relationship to, or material involvement with, a licensee or an affiliated company must apply for a finding of suitability or must apply for a key employee license.

Pursuant to Rule 4.5, persons found unsuitable by the Gaming Commission must be removed from any position as an officer, director, or employee of a licensee, or of a holding or intermediary company. Such unsuitable persons also are prohibited from any beneficial ownership of the voting securities of any such entities. Licensees, or affiliated entities of licensees, are subject to sanctions for paying dividends or distributions to persons found unsuitable by the Gaming Commission, or for recognizing voting rights of, or paying a salary or any remuneration for services to, unsuitable persons. Licensees or their affiliated entities also may be sanctioned for failing to pursue efforts to require unsuitable persons to relinquish their interests. The Gaming Commission must provide prior approval of any sale, lease, purchase, conveyance, or acquisition of an interest in a casino licensee, except as provided in Rule 4.5 relating to publicly traded corporations.

Prior to July 2, 2009, Colorado casinos could operate only between 8:00 a.m. and 2:00 a.m. Slot machines, black jack, poker and other approved variations of those games and video poker were the only permitted games, with a maximum single wager of $5. On November 4, 2008, Colorado Amendment 50 was approved by Colorado voters and was subsequently voted upon and approved by each of the three gaming towns in Colorado (Black Hawk, Central City and Cripple Creek).  The new gaming rules, which became effective on July 2, 2009 at Colorado casinos, allowed for the introduction of craps and roulette, increased the maximum single wager limit to $100, allows 24-hour gaming operations, and prohibit changes in existing tax levels (currently, a series of graduated tax rates, with a maximum gaming tax rate of 20% on adjusted gross proceeds over $13 million) unless such changes are approved by a statewide vote.  For further discussion, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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The recent voter-approved amendment did not affect constitutional restrictions on the percentage of space a casino may use for gaming — 50% of any floor and 35% of the overall square footage of the building in which the casino is located.  Also, it did not change the age-related restrictions for casinos, namely, that only individuals who are 21 years or older may gamble or consume alcohol on the casino premises.  Finally, Colorado casinos may not extend credit to any gaming patrons.

Gaming Regulation and Licensing—Nevada

The ownership and operation of casino gaming facilities in Nevada, including the Nevada casino operated by Jacobs Entertainment’s direct and indirect subsidiaries Gold Dust West Casino, Inc. (“Gold Dust West”), Jacobs Piñon Plaza Entertainment, Inc. (“Piñon Plaza”) and Jacobs Elko Entertainment, Inc. (“Elko”) (collectively, the “Nevada Gaming Subsidiaries”), are subject to the Nevada Gaming Control Act and the regulations promulgated thereunder (the “Nevada Act”) and to the licensing and regulatory control of the Nevada Gaming Commission (the “Nevada Commission”), the Nevada State Gaming Control Board (the “Nevada Board”), and various local ordinances and regulations, including, without limitation, those of the cities of Reno, Carson City and Elko, Nevada (collectively, the “Nevada Gaming Authorities”).

The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and filing periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Change in such laws, regulations and procedures could have an adverse effect on Jacobs Entertainment’s Nevada gaming operations.

The Nevada Gaming Subsidiaries have been licensed by the Nevada Gaming Authorities as corporate licensees. Gaming licenses require the periodic payment of fees and taxes and are not transferable. Jacobs Entertainment’s parent company, Jacobs Investments, Inc. (“Jacobs Investments” or “JII”), has been registered by the Nevada Commission as a holding company and has been found suitable to own Jacobs Entertainment’s stock. Black Hawk Gaming has been registered by the Nevada Commission as an intermediary company and has been found suitable to own the stock of Gold Dust West. Jacobs Entertainment has been registered by the Nevada Commission as a publicly traded corporation (a “Registered Corporation”) and has been found suitable as the sole shareholder of Black Hawk Gaming, Piñon Plaza and Elko.  Registered Corporations, registered intermediary companies, and corporate licensees are required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. Substantially all material loans, leases, sales of securities and similar financing transactions by Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming, and the Nevada Gaming Subsidiaries must be reported to or approved by the Nevada Commission. No person may become a stockholder of, or holder of an interest in, or receive any percentage of profits from a corporate licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. The controlling shareholders, directors and certain officers of Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming, and the Nevada Gaming Subsidiaries have obtained from the Nevada Gaming Authorities the various registrations, findings of suitability, approvals, permits and licenses that are required in order to engage in gaming activities in Reno, Carson City and Elko, Nevada.

The Nevada Gaming Authorities may investigate any person who has a material relationship to, or material involvement with, Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming, or the Nevada Gaming Subsidiaries in order to determine whether that individual is suitable or should be licensed as a business associate of a gaming licensee. The officers, directors and shareholders of Jacobs Investments and Jacobs Entertainment must file applications with and be licensed or found suitable by the Nevada Gaming Authorities. The officers, directors and certain key employees of the Nevada Gaming Subsidiaries must file applications with and may be required to be licensed or found suitable by the Nevada Gaming Authorities. The officers, directors and key employees of Jacobs Investments, Jacobs Entertainment and Black Hawk Gaming who are actively and directly involved in the gaming activities of the Nevada Gaming Subsidiaries may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause that they

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deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming or the Nevada Gaming Subsidiaries, the companies involved would have to sever all relationships with that person. In addition, the Nevada Commission may require Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming or the Nevada Gaming Subsidiaries to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming and the Nevada Gaming Subsidiaries are required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. Substantially material loans, leases, sales of securities and similar financing transactions of Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming and the Nevada Gaming Subsidiaries must be reported to or approved by the Nevada Commission.

If it were determined that the Nevada Act was violated by Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming or the Nevada Gaming Subsidiaries, the registrations or gaming licenses that Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming and the Nevada Gaming Subsidiaries hold could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming, or the Nevada Gaming Subsidiaries and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate the casinos operated by the Nevada Gaming Subsidiaries and, under certain circumstances, earnings generated during the supervisor’s appointment (except for reasonable rental value of the casino) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of the gaming licenses of the Nevada Gaming Subsidiaries or the appointment of a supervisor could (and revocation of any gaming license would) have a material adverse effect on the gaming operations, financial condition and results of operations of Jacobs Entertainment.

The Nevada Act requires any person who acquires beneficial ownership of more than 5% of a Registered Corporation’s voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of a Registered Corporation’s voting securities apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Board mails the written notice requiring such filing. However, an “institutional investor,” as defined in the Nevada Act, that beneficially owns more than 10% but not more than 11% of a Registered Corporation’s voting securities as a result of a stock repurchase by the Registered Corporation may not be required to file such an application.  Further, an institutional investor that acquires more than 10% but not more than 25% of a Registered Corporation’s voting securities may apply to the Nevada Commission for a waiver of a finding of suitability if that institutional investor holds the voting securities for investment purposes only. An institutional investor that has obtained a waiver may hold more than 25% but not more than 29% of a Registered Corporation’s voting securities and maintain the waiver where the additional ownership results from a stock repurchase by the Registered Corporation. An institutional investor will not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the Registered Corporation’s board of directors, any change in the Registered Corporation’s corporate charter, bylaws, management, policies or operations, or of any of its gaming affiliates, or any other action that the Nevada Commission finds to be inconsistent with holding the Registered Corporation’s voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the

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beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information, including a list of beneficial owners. The applicant is required to pay all costs of investigation.

Any officer, director or stockholder of a licensed or registered company who fails or refuses to apply for a finding of suitability or a license within 30 days after being directed to do so by the Nevada Commission or the Chairman of the Nevada Board may be found unsuitable. The same restrictions apply to a record owner of stock if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable who holds, directly or indirectly, any beneficial ownership of the stock of a licensed or registered company beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. A Registered Corporation is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with the Registered Corporation, the Registered Corporation (i) pays that person any dividend or interest, (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pays remuneration in any form to that person for services rendered or otherwise, or (iv) fails to pursue all lawful efforts to require that unsuitable person to relinquish its voting securities including, if necessary, the immediate purchase of the voting securities for cash at fair market value. Additionally, the Cities of Reno, Carson City and Elko, Nevada have the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming licensee operating in those cities.

The Nevada Commission may, in its discretion, require the holder of any of the debt or similar securities of a Registered Corporation to file applications, be investigated and be found suitable to own such debt securities if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. If the Nevada Commission determines that a person is unsuitable to own those securities, then pursuant to the Nevada Act, a Registered Corporation can be sanctioned, including by revocation of its approvals and those of its affiliates, if without the prior approval of the Nevada Commission, the Registered Corporation (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by the unsuitable person in connection with the Registered Corporation’s securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction.

Jacobs Investments, Jacobs Entertainment, Black Hawk Gaming and the Nevada Gaming Subsidiaries are required to maintain current stock ledgers in Nevada that may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make the required disclosure may be grounds for finding the record holder unsuitable. Licensed and registered companies are also required to render maximum assistance in determining the identity of beneficial owners of their securities. The Nevada Commission has the power to require Jacobs Entertainment’s stock certificates to bear a legend indicating that the securities are subject to the Nevada Act. To date, the Nevada Commission has not imposed such a requirement.

Jacobs Investments, Jacobs Entertainment and Black Hawk Gaming may not make a public offering without the prior approval of the Nevada Commission if the proceeds from the offering are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for those purposes or for similar transactions. On September 17, 2009, the Nevada Commission granted Jacobs Entertainment prior approval to make public offerings for a period of two years, subject to certain conditions (the “Shelf Approval”). The Shelf Approval also applies to any affiliated company wholly owned by Jacobs Entertainment which is a publicly traded corporation or would become a publicly traded corporation pursuant to a public offering. The Shelf Approval may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada Board. The Shelf Approval does not constitute a finding, recommendation or approval by any of the Nevada Gaming Authorities as to the accuracy or adequacy of the offering memorandum or the investment merits of the securities. Any representation to the contrary is unlawful.

Changes in control of a Registered Corporation through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person by which it obtains control of a Registered Corporation, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission on a variety of

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stringent standards prior to assuming such control. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities, and corporate defense tactics affecting Nevada corporate gaming licensees may be injurious to stable and productive corporate gaming. Regulations of the Nevada Gaming Commission provide that control of a Registered Corporation cannot be acquired through a tender offer, merger, consolidation, acquisition of assets, management or consulting agreements or any form of takeover whatsoever without the prior approval of the Nevada Gaming Commission. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices on Nevada’s gaming industry and to further Nevada’s policy to: (i) assure the financial stability of corporate gaming licensees and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before a Registered Corporation can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by a Registered Corporation in response to a tender offer made directly to its stockholders for the purposes of acquiring control of the Registered Corporation.

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the Nevada Gaming Subsidiaries’ operations are conducted. Depending on the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based on either (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A live entertainment tax is also paid by gaming establishments where live entertainment is furnished in connection with an admission fee or the selling or serving of food, refreshments or merchandise.

Any person who is licensed, required to be licensed, registered, or required to be registered, or is under common control with any such person (collectively, “Licensees”), and who is or proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation by the Nevada Board for its participation in that foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, foreign Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. The Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities or enter into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ, contract with or associate with a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the grounds of personal unsuitability.

Gaming Regulation and Licensing—Louisiana

Video gaming in Louisiana is regulated by the Louisiana Gaming Control Board, which is part of the Department of Public Safety and Corrections. The enforcement arm thereof in charge of licensing and criminal investigations is the Video Gaming Division of the Louisiana State Police, likewise a part of the Department of Public Safety and Corrections. The Gaming Section of the Attorney General’s Office provides all legal counsel and representation with respect to all matters involving licensing actions and any other litigation issue relative to gaming and involving either the Louisiana Gaming Control Board (hereinafter the “Board”) or the Video Gaming Division of the Louisiana State Police (hereinafter the “Division”).

The Video Draw Poker Devices Control Law, which governs our operations in Louisiana, is contained within the Louisiana Revised Statutes at Title 27:301 et seq. (the “act”) with accompanying regulations being promulgated by the Board pursuant to the statutory authority contained within the act. The video draw poker regulations are in Title 42 of the Louisiana Administrative Code at Sections 2401 et seq.

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The act gives the Board broad authority and discretion in the licensing of persons for video draw poker operations within the State of Louisiana. Generally, a person may not be licensed for video draw poker if he has been convicted in any jurisdiction of any of the following offenses within ten years prior to the date of the application for a video draw poker license or less than ten years has elapsed between the date of application for a video draw poker license and the successful completion or service of any sentence, deferred adjudication, or period of probation or parole for any such offense: (i) any offense punishable by imprisonment for more than one year; (ii) theft or any crime involving false statements or declarations; or (iii) gambling, as defined by the laws or ordinances of any municipality, any parish, any state, or the United States. The act and its corresponding regulations further provide that an application for a video draw poker license may be denied if it contains any material omission of information. An applicant must also not be delinquent in state or federal income taxes, penalties or interest or delinquent in the payment of any sales taxes, penalties, or interest to either the state or any local governing authority of the parish or municipality in which the establishment is located.

There are several general suitability requirements for licensure. Specifically, the law requires that an applicant for a video draw poker license be: (i) a person of good character, honesty, and integrity; (ii) a person whose prior activities, arrest or criminal record if any, reputation, habits, and associations do not pose a threat to the public interest of Louisiana or to the effective regulation of video draw poker, and do not create or enhance the dangers of unsuitable, unfair, or illegal practices, methods, and operations in the activities authorized by the act and financial arrangements incidental thereto; and (iii) a person who is likely to conduct business as authorized by the act in complete compliance with the act.

The suitability standards must be met by every person who has or controls directly or indirectly more than a 5% ownership, income, or profit interest in an entity that has or applies for a license in accordance with the act, or who receives more than a 5% revenue interest in the form of a commission, finder’s fee, loan repayment, or any other business expense related to the gaming operation, or who has the ability, in the opinion of the Division, to exercise a significant influence over the activities of a licensee authorized or to be authorized by the act. For the purposes of the act, all gaming-related associations, outstanding loans, promissory notes, leases, or other financial indebtedness of an applicant or licensee must be revealed to the Division for the purposes of determining significant influence and suitability. While significant influence is determined on a case-by-case basis, it has generally been interpreted to include any person who is an officer or director of any juridical entity that is an applicant for a video draw poker license as well as the spouse of any person having more than a 5% ownership, income, or profit interest in an applicant as well as the spouse of any officer or director of any juridical entity applicant. As of the middle of 2007, the Louisiana State Police made a policy decision that generally removed spouses from the list of parties required to file suitability documentation related to video draw poker establishment licenses. However, the companion legislation was not approved nor sent to the governor for signature during the corresponding legislative session.

The suitability criteria law makes an exception for institutional investors. An institutional investor of any applicant otherwise required to be found suitable or qualified pursuant to the act is presumed suitable or qualified upon submitting documentation to the Board and the Division sufficient to establish qualifications as an institutional investor as described below, and upon certifying that: (i) it owns, holds, or controls publicly traded securities issued by a licensee or permittee or a holding, intermediate, or parent company of a licensee or permittee in the ordinary course of business for investment purposes only; (ii) it does not exercise influence over the affairs of the issuer of the securities or over any licensed or permitted subsidiary of the issuer of the securities; and (iii) it does not intend to exercise influence over the affairs of the issuer of the securities, or over any licensed or permitted subsidiary of the issuer of the securities, in the future, and that it agrees to notify the Board in writing within 30 days if that intent should change.

The exercise of voting privileges with regard to publicly traded securities is not deemed to constitute the exercise of influence over the affairs of a licensee. The act also provides that this exception is not to be construed to preclude the Board or the Division from investigating the suitability or qualifications of an institutional investor should the Board or Division become aware of facts or information which may result in such institutional investor being found unsuitable or disqualified.

An institutional investor is defined in the act as: (i) a plan or trust established and maintained by the United States Government, a state, or a political subdivision of a state for the benefit of their respective employees; (ii) an

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investment company that is registered under the Investment Company Act of 1940; (iii) a collective investment trust organized by a bank under Part Nine of the Rules of the Comptroller of the Currency; (iv) a closed end investment trust that is registered with the United States Securities and Exchange Commission; (v) a mutual fund; (vi) a life insurance company or property and casualty company; (vii) a federal or state bank; or (viii) an investment advisor registered under the Investment Advisers Act of 1940.

If any person required to be found qualified or suitable fails to provide all or part of the documents or information required by the Board or the Division, and if, as a result, any person holding a license issued pursuant to the act is not or may no longer be qualified or suitable, the Board will issue, under penalty of revocation of the license, a condition naming the person who failed to provide all or part of the documents or information required by the Board or the Division, and declaring that such person may not: (i) receive dividends or interest on securities of a corporation holding a license, if the person has or controls directly or indirectly more than a 5% ownership, income, or profit interest in such corporation; (ii) exercise directly, or through a trustee or nominee, a right conferred by securities of a corporation holding a license, if the person has or controls directly or indirectly more than a five percent ownership, income, or profit interest in such corporation; (iii) receive remuneration or other economic benefit from any person holding a license issued pursuant to the provisions of the act; (iv) exercise significant influence over the activities of a person holding a license issued pursuant to the provisions of the act; or (v) continue owning or holding a security of a corporation holding a license if the person has or controls directly or indirectly more than a 5% ownership, income, or profit interest in such corporation.

Operating video draw poker devices at truck plazas in Louisiana requires both an establishment license and a device owner license. The establishment license permits the placement by a licensed device owner of video draw poker devices on the licensed premises. A device owner license permits the licensed entity to place and operate video draw poker devices at licensed establishments. In many cases, an establishment licensed for the placement of video draw poker devices will contract with a licensed device owner for video draw poker device placement services for a percentage of the video draw poker revenues. A licensed establishment may also, however, be a licensed device owner. A licensed device owner entity must be majority-owned by a person or persons who have resided within the State of Louisiana for a period of two years.

Licensed establishments in Louisiana may be a restaurant, bar, motel or hotel, a Louisiana State Racing Commission licensed pari-mutuel wagering facility, a Louisiana State Racing Commission licensed satellite wagering facility, or a qualified truck stop facility. Generally, a licensed establishment pays to a device owner a percentage of the net device revenues generated by video draw poker devices placed at its business premises. There is no law that governs the minimum amount that a device owner must be compensated for its services.

Restaurants and bars may contain up to three video draw poker devices and a hotel or motel may have three video draw poker devices in each of its lounges and restaurants licensed to sell alcoholic beverages, up to a total of twelve for each hotel or motel. A pari-mutuel wagering facility and a licensed satellite wagering facility may have an unlimited number of video draw poker devices. A truck stop facility may have up to fifty video draw poker devices, with the number being determined by the amount of fuel sales of the truck stop facility.

A restaurant, bar, motel or hotel, pari-mutuel wagering facility, and satellite wagering facility pays an initial non-refundable licensing and processing fee of $1,100. A truck stop facility pays an initial licensing and processing fee of $10,100. A license must be renewed every five years but a renewal fee is required each year. The non-refundable annual renewal and processing fee for a restaurant, bar, motel or hotel, pari-mutuel wagering facility, and satellite wagering facility is $200. The non-refundable annual renewal and processing fee for a truck stop facility is $1,100.

In addition to the licensing fee, the device owner collects all funds deposited in each video draw poker device and is required to remit to the State of Louisiana on a bi-weekly basis a franchise payment in an amount equal to a percentage of the net device revenue derived from the operation of each video draw poker device owned by him. The amount of the percentage is based on the type of licensed establishment authorized by the Board for the placement of video draw poker devices, as follows: (i) a restaurant, bar, tavern, cocktail lounge, club, motel, or hotel—26%; (ii) a qualified truck stop facility—32.5%; and (iii) a pari-mutuel wagering facility or satellite wagering facility—22.5%.

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The number of video draw poker devices permissible in a qualified truck stop facility is based on average monthly fuel sales, as follows: (i) 100,000 gallons of fuel, of which at least 40,000 gallons are diesel—not more than 50 devices; (ii) 75,000 gallons of fuel, of which at least 30,000 gallons are diesel—not more than 40 devices; and (iii) 50,000 gallons of fuel, of which at least 10,000 are diesel—not more than 35 devices. Compliance with the foregoing thresholds is measured quarterly for the first year of operation and, thereafter, is measured annually. Once licensed, if a truck stop facility sells less than an average of 50,000 gallons per month but more than 25,000 gallons per month in any calendar year, the truck stop facility will not be permitted to operate any video draw poker devices in the following calendar year. A qualified truck stop facility that sells less than an average of 25,000 gallons per month in any calendar year will be subject to revocation of its video draw poker license. Bulk sales or transfers may not be used to calculate monthly averages. Fuel facilities may, however, offer fuel for sale at a lower price (a) when motor fuel is sold upon the final liquidation of a business; (b) when motor fuel is advertised, offered for sale, or sold by any fiduciary or other officer under the order or direction of any court; (c) when motor fuel is sold for promotional purposes limited to a grand opening, an annual anniversary, or an annual customer appreciation day sale, each of which does not exceed three consecutive days; and (d) when motor fuel is sold in a good faith effort to meet the legal price of a competitor. Louisiana law creates a presumption that a fuel facility will not violate the price requirement when it sells fuel below the required price to meet the price of a competitor if it makes a bona fide effort to determine the legality of the price of such competitor and determines in good faith that the competitor’s price is a legal price.

In addition, under the act, a qualified truck stop facility is required to have at least five developed contiguous acres and sell fuel, lubricating oil, and other vehicular merchandise, such as batteries, tires, or vehicle parts for eighteen-wheel tractor-trailers, and also meet all of the following criteria: (i) it must be located adjacent to a major state or interstate highway, as defined by the Board (within 2,000 feet of a major state highway or U.S. interstate highway); (ii) it must have an on-site restaurant with all of the following features: (a) provides seating for at least 50 patrons; (b) provides full table service for sit-down meals; (c) is open 12 hours a day; (d) offers a varied menu; and (e) operates a fully equipped kitchen which includes, but is not limited to, a range oven and refrigerated storage appliances used for the preparation of foods for on-premises or immediate consumption; (iii) it must have parking areas with each of the following: (a) a stable parking area for at least 50 18-wheel tractor-trailer motor vehicles, either paved or concrete (or otherwise certified and approved), to support 18-wheel tractor- trailer motor vehicles and their loads, constructed according to industry specifications, subject to approval by the Board and the Division; (b) parking of sufficient size is allowed for safe ingress and egress; and (c) parking areas for other vehicles around business entrance ways and exits shall not constitute parking areas for 18-wheel tractor-trailer motor vehicles; (iv) it must have diesel and gasoline fuel; (v) it must have on-site repair service facilities for 18-wheel tractor-trailer motor vehicles which facility may be in the form of a contract services business which regularly performs this type of service; (vi) it must have at least four of the following amenities: (a) a separate truckers’ television lounge; (b) a full service laundry facility located in a convenient area for truckers’ use; (c) private showers for men and women, not located in an area open to general public restroom facilities; (d) a travel store with items commonly referred to as truckers’ supplies (items commonly used only by commercial motor vehicles); (e) truck scales; (f) separate truckers’ telephones; and (g) permanent storage facilities for fuel; (vii) it must have an area separated for adult patronage only; and (viii) it must have, if available, a Class A—General retail permit or a Class A—Restaurant permit, as defined in Part II of Chapter 1 or Part II of Chapter 2 of Title 26 of the Louisiana Revised Statutes of 1950, to serve or sell alcoholic beverages for on-premises consumption and be owned and leased by a person who meets all personal qualifications for such permit. In light of Hurricane Katrina and other recent events, the Louisiana legislature has recently put in place exceptions to the amenities requirements and fuel requirements that allow qualified truck stop facility licensees to operate casinos with a previously approved number of gaming devices, notwithstanding certain non-compliance with the amenities or fuel requirements. The exceptions may apply, depending on the circumstances and as determined by the Division, if the non-compliance is caused by force majeure, expropriation by political subdivision, road construction or other non-commercial circumstances that directly affect compliance. An owner or lessor of a qualified truck stop facility may lease or sublease any restaurant, convenience store, fuel facility, or any other business operation located on the premises of the qualified truck stop facility to another person, provided that such person executes a written lease which contains a requirement that the lessee or sublessee comply with the laws and regulations which govern the operation of video draw poker devices. If such lease or sublease is granted, the owner or lessor of such qualified truck stop facility shall maintain ultimate supervision and control of that entire truck stop premises.

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Additionally, no license can be granted to any truck stop facility located, at the time application is made for a license to operate video draw poker devices, within five hundred feet of any property that is on the National Historic Registry, any public playground, or a building used exclusively as a church, synagogue, public library, or school. In addition, no license shall be issued for any truck stop facility unless previously applied for or licensed as of January 1, 2008, located, at the time application is made for a license to operate video draw poker devices, within two thousand five hundred feet of any property that is on the National Historic Registry, any public playground, or a building used exclusively as a church, synagogue, public library, or school unless the applicant for the license has applied prior to January 1, 2008, with the local governing authority of the parish where the truck stop is located for a certificate of compliance with applicable zoning ordinances and building codes and a statement of approval for the operation of video draw poker devices at a truck stop facility or has applied with the appropriate authority for a building permit prior to January 1, 2008.  Moreover, after June 1, 2010, no new truck plaza video gaming licenses will be issued for facilities located within 2,500 feet (almost one-half mile) from the nearest qualifying personal residence or residential district that has been in its present location for at least 60 days.

All suitability information and applications required to be submitted with respect to the 18 Louisiana truck plazas currently owned by us, as well as the truck stop in which we share in the revenue, have been submitted to the Board and the Division. All applications submitted have been approved and none are currently pending.  However, because the Board and the Division conduct a new suitability investigation in connection with each acquisition of a facility at which video gaming devices are to be operated, regardless of prior approvals, there can be no guarantee that a suitability approval will ultimately result with respect to the plazas that we propose to acquire.

Gaming Regulation and Licensing—Virginia

Colonial’s success is dependent upon continued government and public acceptance of horse racing as a form of legalized gaming. Although Colonial believes that pari-mutuel wagering on horse racing will continue to be legal in Virginia, gaming has come under increasing scrutiny nationally and locally.

Opposition to the Virginia Racing Act has been unsuccessfully introduced in the Virginia legislature in the past, but additional legislative opposition may arise in the future. Any repeal or material amendment of the Virginia Racing Act could have a material adverse effect on Colonial’s business of pari-mutuel wagering.

Under the Virginia Racing Act, the Virginia Racing Commission is vested with control over all aspects of horse racing with pari-mutuel wagering and the power to prescribe regulations and conditions under which such racing and wagering are conducted. The Virginia Racing Commission is responsible for, among other things, (i) conducting a review annually of Colonial’s track and satellite wagering facility licenses, (ii) annually approving Colonial’s proposed schedule of racing days, (iii) approving new or modified types of pari-mutuel wagering pools requested by Colonial, (iv) issuing permits to all officers, directors, racing officials, and other employees of Colonial, and (v) approving simulcast schedules at the track and at the satellite wagering facilities. The Virginia Racing Commission also has the authority to promulgate regulations pertaining to Colonial’s track facilities, equipment, safety and security measures, and controls the issuing of licenses and permits for participants in pari-mutuel racing, including Colonial employees at the track and at the satellite wagering facilities. In addition, the Virginia Racing Commission must approve any acquisition or continuing ownership of a 5% or greater interest in Colonial. Action by the Virginia Racing Commission that is inconsistent with the Colonial’s business plan could have a material adverse effect on Colonial.

During the 2000 session of the Virginia General Assembly, an amendment to the Racing Act was passed that requires Colonial to enter into contracts with each representative horsemen’s group and provides for it to contribute to the purse account of the respective breed a minimum of 5% of the first $75 million of simulcast amounts wagered (“handle”), 6% of the next $75 million and 7% of all handle over $150 million. The amendment also provides for the breakage generated by pari-mutuel wagering to be allocated 70% to capital expenditures and 30% to backstretch benevolent activities. Prior to this amendment, Colonial received all breakage. The Virginia Racing Act requires that, after July 1, 2000, we enter into contracts with each representative horsemen’s group that provide for us to contribute, by breed of horse, a minimum of 5% of the first $75 million of handle, 6% of the next $75 million of handle and 7% of all handle over $150 million to the purse account of the respective breed. Finally, the amendment empowers the Commission to summarily suspend Colonial’s licenses if it believes the Racing Act or the regulations have been violated. In addition, the Interstate Horse Racing Act also requires that we secure the

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consent of the Virginia Horsemen’s Benevolence and Protective Association (the “VaHBPA”) and the Virginia Harness Horse Association (“VHHA”) to the export simulcasting of races. These consents are usually contained in the agreement between each group and Colonial.

The licenses issued by the Virginia Racing Commission to Colonial for the racetrack and its satellite wagering facilities are for a period of not less than 20 years, but are subject to annual review by the Virginia Racing Commission. It is possible that such licenses will not be renewed or that such licenses could be suspended or revoked by the Virginia Racing Commission for violations of the Virginia Racing Act or Virginia Racing Commission rules. We also hold an advance deposit account wagering license that is renewable annually. Our current advance deposit account wagering license expires December 31, 2010.

We have an agreement with the VHHA that expires December 31, 2011.  Our agreement with the VaHBPA expired December 31, 2009.  We have entered into a new three-year agreement with the VaHBPA that expires December 31, 2012, which was approved by the Virginia Racing Commission on March 17, 2010.

Colonial, the track and the satellite wagering facilities are also subject to a variety of other laws and regulations, including zoning, construction, and land-use laws and the regulations of the Virginia Alcoholic Beverage Control Board. Such laws and regulations may affect the selection of satellite wagering facility sites because of parking, traffic flow, and other similar considerations. Any interruption or termination of Colonial’s ability, or that of its concessionaires, to serve alcoholic beverages could have a material adverse effect on Colonial.

Gaming Regulation—Federal

Colonial’s interstate simulcast operations are subject to the Federal Interstate Horse Racing Act, which regulates interstate satellite wagering. In order to conduct wagering on import simulcasting at the track or any racing center, the Interstate Horse Racing Act requires Colonial to obtain the consent of the Virginia Racing Commission, the consent of the racing commission of the state where the horse racing meet originates, and the consent of the representative horsemen groups in the origination state. To conduct export simulcasting, Colonial must obtain the consent of the Virginia Horseman’s Benevolent and Protective Association or the Virginia Harness Horse Association, and the Virginia Racing Commission. Also, in the case of satellite wagering to be conducted at any of Colonial’s satellite wagering facilities, the Interstate Horse Racing Act requires Colonial to obtain the approval of all currently operating horse racetracks within 60 miles of the satellite wagering facilities or if there are no currently operating tracks within 60 miles, the approval of the closest operating horse racetrack, if any, in an adjoining state. Significant delay in obtaining or failure to obtain these consents or approvals could have a material adverse effect on Colonial.

Liquor Regulation

The sale of alcoholic beverages in Colorado is subject to licensing, control and regulation by certain Colorado state and local agencies (the “Liquor Agencies”). Subject to certain exceptions, all persons who directly or indirectly own 5% or more of a company or its casino must file applications with and are subject to investigation by the Liquor Agencies. The Liquor Agencies also may investigate persons who, directly or indirectly, lend money to liquor licensees. All liquor licenses are renewable, are revocable and are not transferable. The Liquor Agencies have broad powers to limit, condition, suspend or revoke any liquor license. Any disciplinary action by the Liquor Agencies or any failure to renew or other revocation of any of our liquor licenses would have a material adverse effect on our operations and Black Hawk Gaming’s Colorado casinos.

Under Colorado law, it is a criminal violation for any person or entity to own a direct or indirect interest in more than one type of alcoholic beverage license or more than three gaming tavern liquor licenses. Black Hawk Gaming’s Colorado casinos have gaming tavern liquor licenses. Accordingly, our expansion and diversification opportunities in Colorado are limited by these licensing restrictions.

While gaming operations may now be conducted twenty-four hours a day, Colorado’s liquor laws still limit service of patrons to the hours of 7:00 a.m. to 2:00 a.m. This limitation is contained in Colorado statute and could be changed only by the state legislature with the approval of the governor.

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The sale of alcoholic beverages in the cities of Reno, Carson City and Elko, Nevada, is subject to licensing, control and regulation by those cities. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could (and revocation would) have a material adverse effect on the operations of one or more of our Gold Dust West casinos in Nevada.

Alcohol regulation within the State of Louisiana is performed primarily by the Office of Alcohol and Tobacco Control (the “Board”). The Commissioner of the Board is given broad discretion in the granting and denial of state alcohol permits. While permits are issued on a state level, the local municipality is also permitted to provide for concurrent local licensing. The state alcohol regulatory scheme is contained at Title 26:1 of the Louisiana Revised Statutes (hereinafter referred to as the “act”). Generally, no permit may be issued if the applicable premises is located three hundred feet or less, as fixed and determined by the local municipal ordinance, of a public playground or of a building used exclusively as a church or synagogue, public library, school, full-time daycare center or corrections facility housing inmates, including but not limited to, a halfway house. Louisiana parishes may enact ordinances extending the distance between the applicable premises and the property line of such locations to 500 feet. Local municipalities are also permitted to regulate the opening and closing hours of permitted businesses as well as to prohibit the sale of alcoholic beverages altogether by referendum vote of the people within the municipality. A local municipality may also regulate via zoning designations the permissibility or prohibition of the permitting of businesses that sell alcoholic beverages within that municipality. All of our video gaming truck plaza facilities are currently licensed by the applicable state and local alcohol licensing authorities.

The sale of alcoholic beverages in Virginia is subject to licensing, control and regulation by the Virginia Department of Alcoholic Beverage Control (the “Virginia ABC Board”), a Virginia state agency. The Virginia ABC Board issues licenses based upon the type of beverage, type of establishment or place of consumption. Virginia ABC laws include the responsibility of the licensee to maintain complete and accurate records, certain restrictions on advertising and certain food sale requirements.

Before receiving a Virginia ABC license, an applicant must satisfy several requirements. The Virginia ABC Board conducts an extensive background investigation (to include a criminal history review as well as contacts with the local governing body of each license application) and contacts local officials, residents and business people in the vicinity of the establishment to ascertain if any objections exist. The background investigation is completed for all principal owners of the proposed licensee. Administrative hearings are available to afford all interested parties the opportunity to present any concerns with respect to an application.

A licensee is required to maintain financial responsibility for its business, including timely payment of all taxes, creditor obligations and other bills, and must keep accurate records of all such transactions. Mixed beverage licensees must record sales and purchases of all mixed beverages, food and non-alcoholic beverages. Mixed beverage licensees must submit annual review reports to the Virginia ABC Board showing all purchases and sales of alcoholic beverages during the year as well as an accurate inventory. Finally, the Virginia ABC Board imposes certain restrictions and limitations on advertising, the use of advertising materials and promotions.

If Virginia ABC agents discover license violations, a disciplinary hearing will typically be conducted with a Virginia ABC hearing officer. Any aggrieved localities and members of the community may attend the hearing and present any additional or relevant objections or complaints concerning the license. The Virginia ABC Board has broad power to limit, condition, suspend or revoke any license granted on discovery of any violation. Any disciplinary action by the Virginia ABC Board or any failure to renew or any revocation of a liquor license would likely have a material adverse effect on the operation of Colonial’s track and satellite wagering facilities.

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Taxation

Gaming operators in Colorado are subject to state and local taxes and fees in addition to ordinary federal and state income taxes. The City of Black Hawk has imposed an annual license fee, currently $750, for each gaming device installed in a casino. In addition, Colorado has a tax on gross gaming revenue (also called “adjusted gross proceeds”) being generally defined as the total amount wagered less the total amount paid out in prizes as follows:

Both of JEI’s Colorado casinos are subject to the maximum rate. Neither the Colorado Constitution nor the gaming statutes require that gaming tax rates be graduated, as they currently are. However, with the passage of Colorado Amendment 50, the gaming tax rates were set in accordance with the table above and can only be increased with an amendment to the Colorado Constitution.

In Nevada, license fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada, Washoe, Carson City, and Elko Counties and the Cities of Reno, Carson City, and Elko. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A live entertainment tax is also paid by casino operations where entertainment is furnished in connection with an admissions charge or the selling or serving of food or refreshments or the selling of merchandise. Presently the state tax in Nevada on adjusted gross revenue from gaming is 6.75%.

Video gaming operators in truck plazas in Louisiana are subject to state and local taxes and fees in addition to ordinary federal and state income taxes. The state of Louisiana has imposed a “gaming franchise fee” of 32.5% of the net device revenue from each video gaming device located at a truck plaza. The net device revenue is the amount remaining after all winnings have been paid. This franchise fee is collected twice per month by the Louisiana state police based on the data that is provided directly to them from the devices. There is also an annual state establishment license fee of $1,000. In addition, the state imposes a device operation fee of $1,000 per year per device, which is paid quarterly, and each parish imposes an annual occupational license tax of approximately $50 per device.

Colonial is subject to a number of federal, state and local taxes and fees. These include fees to support the Virginia Breeders Fund, taxes payable to the Commonwealth of Virginia, taxes and admission charges payable to New Kent County, where the track is located, and taxes payable to localities in which satellite wagering facilities are located based upon attendance and the amount of monies wagered both at the track and at the satellite wagering facilities. Colonial believes that the public acceptance of pari-mutuel wagering on horse races, as well as other forms of gaming, is based, in part, on the governmental revenues it generates from taxes and fees on such activities. It is possible that gaming activities, including horse racing, may become a target for additional federal, state, or local taxes and fees. A significant increase in such taxes or fees or the creation of significant additional taxes or fees could have a material adverse effect on us.

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Item 1A.              Risk Factors.

To inform readers of our future plans and business strategies, this report contains statements concerning our future performance, intentions, objectives, plans and expectations that are or may be deemed to be “forward-looking statements.” Our ability to do this has been fostered by the Private Securities Litigation Reform Act of 1995, which provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those statements are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statements. All known material risk factors are disclosed. Such factors affecting us include, but are not limited to, the following:

Risks Related to Our Indebtedness

Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under our debt agreements.

We have a significant amount of indebtedness. As of December 31, 2009, we had total indebtedness of $291.9 million, excluding accounts payable, accrued expenses and other noncurrent liabilities, and total stockholder’s equity of $24.7 million. Our substantial indebtedness could have considerable consequences. For example, it could:

·                                          increase our vulnerability to general adverse economic and industry conditions;

·                                          require us to dedicate a substantial portion of our cash flow from operations to debt service, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, and other general corporate purposes;

·                                          limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

·                                          limit our ability to fund a required regulatory redemption or a change of control offer;

·                                          place us at a competitive disadvantage to our competitors that have less debt; and

·                                          limit, along with the financial and other restrictive covenants in our debt agreements, among other things, our ability to borrow additional funds. A failure to comply with those covenants could result in an event of default which, if not cured or waived, could have a significant adverse effect on us.

The occurrence of any one of these events 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.

Our debt agreements impose many restrictive covenants on us.

Our debt agreements contain covenants that, among other things, restrict our ability to:

·                                          incur more debt;

·                                          issue stock of subsidiaries;

·                                          make investments;

·                                          repurchase stock;

·                                          create liens;

·                                          enter into transactions with affiliates;

·                                          enter into sale-leaseback transactions;

·                                          merge or consolidate; and

·                                          transfer and sell assets.

In addition, our senior credit facility contains many restrictive covenants similar to the covenants of our indenture but the covenants in our senior credit facility are generally more restrictive than those contained in our indenture. Our senior credit facility also requires us to maintain specified consolidated financial ratios and satisfy certain consolidated financial tests. Our ability to meet those financial ratios and financial tests may be affected by

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events beyond our control, and we may not be able to continue to meet those tests. If we fail to meet those tests or breach any of the covenants, the lenders under our senior credit facility could declare all amounts outstanding thereunder, together with the accrued interest, to be immediately due and payable. Our assets may not be sufficient to repay in full such indebtedness or any other indebtedness, including $210 million of our senior unsecured notes issued under our indenture. Further, any other agreements we may enter into in the future governing our indebtedness may impose additional restrictions on us, any of which may adversely affect our ability to finance our future operations or capital needs or to pursue available business opportunities.  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.

Complying with these covenants could materially limit our financial and operating flexibility and could cause us to take actions that we otherwise would not take or cause us not to take actions that we otherwise would take.

Despite current indebtedness levels, we may still be able to incur substantially more debt, which could exacerbate the risks described above.

Subject to debt covenant restrictions, we and our subsidiaries may be able to incur substantial additional indebtedness in the future. The indenture governing our senior unsecured notes and our senior credit facility do not fully prohibit us or our subsidiaries from doing so. If new debt is added to our and our subsidiaries’ current debt levels, the related risks that we and they now face could intensify.

To service our indebtedness, we will require a significant amount of cash, the availability of which depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness and to fund our operations will depend on our ability to generate cash. This, to an extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Our business may not generate sufficient cash flow from operations and future borrowings may not be available to us in amounts sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. In addition, if we consummate significant acquisitions in the future, our cash requirements may increase significantly. If we are unable to generate sufficient cash flow and are unable to refinance or extend outstanding borrowings, we may have to:

·                                          reduce or delay planned expansion and capital expenditures;

·                                          sell assets;

·                                          restructure debt; or

·                                          raise additional capital.

Furthermore, we intend to refinance all of our debt on or before maturity. We cannot assure you that we will be able to refinance any of our debt on commercially reasonable terms or at all.

Our senior notes are not secured by any of our assets and senior noteholders’ rights to enforce remedies will be limited to the rights of holders of unsecured debt.

Our senior notes are not secured by any of our assets. Our obligations under our senior credit facility are secured by liens on substantially all of our assets. If we become insolvent or are liquidated, or if payments under our senior credit facility are accelerated, the lenders under our senior credit facility will be entitled to exercise the remedies available to a secured lender under applicable law and our senior credit facility. Accordingly, such lenders will have a prior claim with respect to our assets and there may not be sufficient assets remaining to pay amounts due on our senior unsecured notes then outstanding.

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We are a holding company and will depend on the business of our subsidiaries to satisfy our obligations under our indebtedness.

We are a holding company. Substantially all of the operations necessary to fund payment on our indebtedness are conducted by our subsidiaries. Our ability to make payments on our indebtedness will depend on our subsidiaries’ cash flow and their payment of funds to us. Our subsidiaries’ ability to make payments to us will depend on their earnings, the terms of their indebtedness, business and tax considerations, legal and regulatory restrictions and economic conditions.

We may not have the ability to raise the funds necessary to finance the change of control offer required by our indebtedness.

Upon the occurrence of certain change of control events, we will be required to offer to repurchase all outstanding senior unsecured notes at a purchase price equal to 101% of their principal amount. Moreover, a change of control constitutes a default under our senior credit facility. However, it is likely that we will not have sufficient funds at the time of such a change of control to make the required repurchase of our notes or repay the indebtedness under our senior credit facility. The change of control provisions may not protect you in a transaction in which we incur a large amount of debt, including a reorganization, restructuring, merger or other similar transaction, because that kind of transaction may not involve any shift in voting power or beneficial ownership, or may not involve a shift large enough to trigger a change of control as defined in our debt agreements.

Federal and state statutes allow courts, under specific circumstances, to void guarantees, subordinate claims in respect of indebtedness and require debt holders to return payments received from guarantors.

Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a court could void a guarantee of one or more of our subsidiaries or claims related to our senior unsecured notes or subordinate a subsidiary’s guarantee to all of our other debts or all other debts of the guarantor if, among other things, we or the guarantor, at the time we or it incurred the indebtedness evidenced by its guarantee:

·                                          received less than reasonably equivalent value or fair consideration for the incurrence of that indebtedness; and

·                                          we were or the guarantor was insolvent or rendered insolvent by reason of that incurrence;

·                                          we were or the guarantor was engaged in a business or transaction for which our or the guarantor’s remaining assets constituted unreasonably small capital; or

·                                          we or the guarantor intended to incur, or believed that we or it would incur, debts beyond our or its ability to pay those debts as they mature.

In addition, a court could void any payment by us or the guarantor pursuant to our senior unsecured notes or a guarantee and require that payment to be returned to us or the guarantor, or to a fund for the benefit of our creditors or the creditors of the guarantor.

The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if:

·                                          the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets,

·                                          the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature, or

·                                          it could not pay its debts as they become due.

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We believe that we and the guarantors have received reasonably equivalent value and fair consideration for the incurrence of the indebtedness and obligations represented by our senior unsecured notes and the guarantees. On the basis of historical financial information, recent operating history and other factors, we believe that we and each subsidiary guarantor, after giving effect to its guarantee of our senior unsecured notes, are not insolvent, do not have unreasonably small capital for the business in which we are or it is engaged and have not incurred debts beyond our or its ability to pay such debts as they mature. However, a court might disagree with any or all of our conclusions in this regard and it could apply different legal standards.

Holders of our senior unsecured notes may be required to comply with registration, licensing, qualification or other requirements under gaming laws or dispose of their securities.

The gaming authorities of any jurisdiction in which we currently or in the future conduct or propose to conduct gaming, either through our subsidiaries or a joint venture, may require that a holder or beneficial owner of our senior unsecured notes be registered, licensed, qualified or found suitable, or comply with any other requirement under applicable gaming laws. If you have an interest in our senior unsecured notes, by the terms of the indenture, you will be deemed to agree to comply with all of these requirements, including your agreement to register or apply for and maintain in full force and effect a license, qualification or a finding or suitability, or comply with any other requirement, within the required time period, as provided by the relevant gaming authority. If you fail to apply to be, or fail to become, registered, licensed or qualified or such registration, license or qualification is suspended or revoked or not maintained, or you are found unsuitable or fail to comply with any other requirement of a gaming authority, then we will have the right, at our option, to:

·                                          require you to sell your senior unsecured notes or beneficial interest in the senior unsecured notes in accordance with applicable gaming requirements within 30 days after you receive notice of our election, or by any earlier date that the relevant gaming authority may request or prescribe; or

·                                          redeem your senior unsecured notes (possibly within less than 30 days following the notice of redemption if requested or prescribed by the gaming authority) at a redemption price equal to the lesser of:

·                                          your cost;

·                                          100% of the principal amount of the senior unsecured notes, plus accrued and unpaid interest, if any, to the redemption date or the date of the first to occur of any (i) failure to become or continue to be registered, licensed or qualified, (ii) failure to be found or continue to be suitable, (iii) failure to comply with relevant gaming authority requirements or (iv) receipt of notice from the relevant gaming authority that you will not be registered, licensed or qualified; and

·                                          any other amount required by applicable law or by order of any gaming authority.

If we elect, in our sole discretion, to redeem your senior unsecured notes, we will notify the indenture trustee in writing of any redemption as soon as practicable. We will not be responsible for any costs or expenses you may incur in connection with your registration, application for a license, qualification or a finding of suitability, or your renewal or continuation of the foregoing or compliance with any other requirement of a gaming authority. The indenture also provides that as soon as you are required to sell your senior unsecured notes as a result of a gaming authority action, you will, to the extent required by the applicable gaming authority, have no further right:

·                                          to exercise, directly or indirectly, any right conferred by the senior unsecured notes; or

·                                          to receive from us any interest or any other distributions or payments, or any remuneration in any form, relating to the senior unsecured notes, except the redemption price we refer to above.

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Risks Related to Our Business

We face significant competition.

The gaming industry is characterized by a high degree of competition among a large number of participants, many of which have financial and other resources that are greater than our resources. Competitive gaming activities include casinos, pari-mutuel wagering, video lottery terminals and other gaming devices, and other forms of legalized gaming. New or expanded operations by other persons can be expected to increase competition for our gaming operations and could have a material adverse impact on us.

Casino Operations. Our casino operations are conducted in Black Hawk, Colorado, and Reno, Carson City, and Elko, Nevada. Competition in the Black Hawk gaming market, which is the primary gaming market in Colorado, is intense. In addition, large, well-financed companies have entered the Black Hawk and other Colorado markets through the purchase or expansion of existing facilities and others may continue to do so, all of which could materially harm our business, financial condition and results of operations. For example:

·                                          Ameristar Casinos, Inc. (“Ameristar”) purchased Mountain High Casino (formerly the Black Hawk Casino by Hyatt) in a bankruptcy sale. That casino is directly across highway 119 from The Lodge and Ameristar has expanded the casino area to accommodate approximately 1,600 total gaming devices with new slot product, expanded the parking garage and refurbished and rebranded its dining venues. Ameristar completed construction of a 33 story, 536-room hotel, a convention center and other amenities and facilities in the fourth quarter of 2009. In all respects, Ameristar is known to be a fierce competitor in gaming markets in which it operates;

·                                          Isle of Capri Casinos, Inc. owns Lady Luck Casino Black Hawk (previously operated as Colorado Central Station), across the street from its existing facility and in 2005 completed a major renovation and expansion project physically linking the two properties. The combined casinos are the largest in Black Hawk with approximately 1,900 total gaming devices, 402 hotel rooms and 2,300 parking spaces;

·                                          the Mardi Gras casino, next to our casino, The Lodge, was purchased in 2005 and the owners have continued to develop and implement new marketing programs and new slot product;

·                                          late in 2004, Central City, a gaming area about one mile from Black Hawk, completed the “Southern Access,” a road which directly connects Central City to Interstate 70. The new access road to Central City enables existing casinos and possible new casinos to pose a significant competitive threat to gaming activities in Black Hawk;

·                                          the continuing market deterioration at Colorado’s horse track and three dog tracks may reinvigorate efforts to authorize video lottery terminals, slot machines, so-called “instant racing machines” or other types of gaming at these venues and at the state’s off-track betting facilities.  A possible statewide initiative or legislation to expand slot machine gaming to the two Denver area racing facilities and potentially to one or both of its other tracks in the southern part of the state have been publicly discussed. In 2009, legislation to authorize instant racing machines (a form of slot machine) was defeated in the Colorado General Assembly. If this authorization is granted by the Colorado Lottery Division, the Colorado state legislature, or the voters, it would have a material adverse effect on gaming revenues in Black Hawk and at The Lodge and Gilpin casinos; and

·                                          in the recent past, the Cheyenne and Arapahoe Indian tribes have claimed significant treaty rights to land in Colorado have pursued a plan to exchange those rights for land east of the Denver metropolitan area on which to build and operate a large casino gaming facility. This project appears to be dormant at present. If it is renewed, or if another tribe seeks approval from the United States Department of Interior to secure other land in the state on which it does not now reside and to which it does not now have legal title, and if any such effort obtains all necessary federal, state, and local governmental approvals, it could have a material adverse effect on gaming revenues in Black Hawk and at The Lodge and Gilpin casinos.

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In addition to competing with other gaming facilities in Colorado as described above, we compete to a lesser degree, for both customers and potential future gaming sites, with gaming companies nationwide, including casinos in Nevada and several other states, and casinos on Native American lands in several states, many of which have substantially greater financial resources and experience in the gaming business. The expansion of legalized casino gaming to new jurisdictions throughout the United States may also affect competitive conditions.

The Gold Dust West casino in Reno, Nevada, encounters strong competition from large hotel and casino facilities and smaller casinos similar in size to the Gold Dust West casino in the Reno area, which includes Sparks, Nevada. There is also competition from gaming establishments in other towns and cities in Nevada and from Native American gaming facilities located near Sacramento, California. Our Carson City and Elko, Nevada Gold Dust West casinos face competition from several casinos in those cities and other venues in Nevada. Gold Dust West-Elko faces additional competitive and other risks associated with being a newly-opened casino.

In addition, we believe that the introduction of casino gaming, or the expansion of presently conducted gaming activities (particularly at Native American establishments) in areas in or close to Nevada, such as California, Oregon, Washington, Arizona and western Canada, could materially harm our operations at our Reno property.

Louisiana Truck Plaza Operations. Our Louisiana truck plaza operations compete with other truck plazas located in Louisiana and other forms of gaming, such as land-based, riverboat and Native American casinos, as well as slot machines located at horseracing tracks and video poker machines located in bars, restaurants, hotels, off-track wagering facilities and bingo parlors. There were 193 licensed video poker truck plazas in Louisiana at December 31, 2009, which is a 7% increase over December 31, 2008.

Pari-Mutuel Wagering Operations. We operate a racetrack in New Kent, Virginia, and off-track wagering facilities in Alberta, Chesapeake, Hampton, Martinsville, Weber City, Vinton, and Richmond (two), Virginia. Similarly, the expansion of other forms of gaming in neighboring states, such as table games in West Virginia and slot machines in Maryland, could have an adverse effect on our performance.

We compete with racetracks located outside Virginia (including several in Delaware, Maryland, New Jersey, New York, Pennsylvania, and West Virginia, some of which augment their purses with slot machine revenues) and other forms of gaming, such as land-based casinos, including those in Atlantic City, New Jersey, and statewide lotteries in Virginia and neighboring states. We also face competition from a wide range of entertainment options, including live and televised sporting events and other recreational activities such as theme parks (Kings Dominion to the northwest and Busch Gardens to the southeast).

We compete for wagering dollars and simulcast fees with live racing and races simulcast from racetracks in other states, particularly racetracks in neighboring states such as Charles Town in West Virginia, Pimlico Race Course and Laurel Park in Maryland, and Delaware Park in Delaware. We also compete for wagering dollars with account wagering companies operating both legally and illegally in Virginia. These companies take wagers from Virginians both over the phone and the internet. We believe legislation which went into effect January 1, 2010 will provide us with fair compensation for their activities. Unlicensed account wagering companies have lower costs than Colonial Downs and thus are able to attract customers in Virginia with large wagering rebates.

We face extensive regulation from gaming authorities.

Licensing Requirements. As owners and operators of gaming and pari-mutuel wagering facilities, we are subject to extensive state and local and some federal regulation. State and local authorities require us and our subsidiaries to demonstrate suitability to obtain and retain various licenses and require that we have registrations, permits and approvals to conduct gaming and wagering operations. Various regulatory authorities, including the Colorado Limited Gaming Control Commission, the Nevada Gaming Commission, the Nevada State Gaming Control Board, the Louisiana Gaming Control Board and the Virginia Racing Commission may, for any reason set forth in the applicable legislation, limit, condition, suspend or revoke a license or registration to conduct gaming or

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wagering operations or prevent us from owning the securities of any of our gaming or wagering subsidiaries. Like all gaming and wagering operators in the jurisdictions in which we operate, we will need to apply periodically to renew our licenses or registrations. We cannot assure you that we will be able to obtain such renewals. Regulatory authorities may also levy substantial fines against us or seize our assets or those of our subsidiaries or of the people involved in violating gaming laws or regulations. Any of these events could materially harm our business, financial condition and results of operations. Gaming authorities in the United Sates can generally require that any beneficial owner of our securities, including holders of our debt, file an application for a finding of suitability.

Potential Changes in Regulatory Environment. From time to time, legislators and special interest groups have proposed legislation that would expand, restrict or prevent gaming or wagering operations in the jurisdictions in which we operate. Any expansion of gaming or wagering or restriction on or prohibition of our gaming or wagering operations could materially harm our business, financial condition and results of operations. In particular in Colorado, there have been repeated attempts to expand gambling beyond Black Hawk, Central City and Cripple Creek to other towns, racetracks, bingo halls, and tribal gaming through legislation, ballot initiatives, and administrative action by state or local agencies and this is a continued competitive threat to us.  Periodic changes to the membership of the Colorado Limited Gaming Control Commission and turnover in the office of the governor of Colorado (the appointing authority for both the members of the Gaming Commission and the executive director of the Department of Revenue which oversees the Gaming Commission) in January 2011 could also affect our operations.

Taxation. We believe that the prospect of significant additional revenue is one of the primary reasons that jurisdictions permit legalized gaming and wagering. As a result, gaming and wagering companies are typically subject to significant taxes and fees in addition to normal federal, state, local and provincial income taxes, and such taxes and fees are subject to increase at any time. We pay substantial taxes and fees with respect to all of our operations. From time to time, federal, state and local legislators and officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming and wagering industry. It is not possible to predict the likelihood of changes in tax laws or in the administration of such laws. Similarly, special improvement districts, now in existence or those that may be formed in the future, may impose assessments in the form of additional taxes or fees that will finance infrastructure improvements that enhance the attractiveness or accessibility of casinos with which we compete and/or add to our costs of doing business, either of which can negatively affect the competitive position of our Lodge and Gilpin casinos. Such changes, if adopted, could materially harm our business, financial condition and results of operations.

Compliance with Other Laws. We are also subject to a variety of other rules and regulations, including zoning, environmental, construction and land-use laws and regulations governing the serving of alcoholic beverages.

We depend on our key personnel, particularly Jeffrey P. Jacobs.

We are highly dependent on the services of Jeffrey P. Jacobs (one of our indirect owners and our Chief Executive Officer) and other officers and key employees. The loss of the services of any of these individuals could materially harm our business, financial condition and results of operations. The loss of their experience and familiarity with our operations could have negative effects on management’s efficiency and could cause us to incur costs to find qualified replacements.

Our Chief Executive Officer and his family trusts own a controlling beneficial interest in our capital stock and may significantly influence our affairs or may pursue other activities that compete with us.

All of our equity securities are presently owned by Jacobs Investments, Inc. (“JII”). Jeffrey P. Jacobs, our Chairman and Chief Executive Officer, and his family trusts own all of JII’s equity securities. JII has the ability to significantly influence our affairs, including the election of our directors and transactions including mergers, consolidations or sales of assets. Although Mr. Jacobs has agreed not to pursue any U.S. casino or gaming activities except through us (excepting investments in publicly traded companies and his involvement therein), he is allowed to purchase and own additional truck plazas in Louisiana which we have the right to buy. Any such activities by him could be competitive with our operations in that state.

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We need to invest in capital expenditures to compete effectively.

Capital expenditures, amenity upgrades and new gaming equipment are necessary from time to time to preserve the competitiveness of our properties. The gaming industry is very competitive and is expected to become more competitive in the future. If cash from our operations is insufficient to provide for needed levels of capital expenditures, our competitive position could deteriorate if we are unable to borrow funds for such purposes.

Economic conditions, seasonality and weather conditions could affect our operations.

Our business, financial condition and results of operations may be harmed by general and local economic conditions. If the U.S. economy or the local economy in a market in which we operate suffers a downturn, our properties could be harmed as the disposable income of consumers or their willingness to patronize our operations declines, resulting in a decrease in the number of patrons at our properties or a decrease in the amount that patrons are willing to wager.

In addition, seasonality and weather conditions can affect our results of operations. Winter travel conditions can adversely affect patronage and revenues at our Colorado and Nevada casinos. Although casino business is not seasonal, levels of gaming activity increase significantly during weekends and holidays, especially holiday weekends. Hurricanes Katrina and Rita temporarily affected our truck plaza video gaming operations in late 2005, while Hurricanes Gustav and Ike temporarily affected our truck plaza video gaming operations in late 2008.  Similar hurricanes could have a material adverse effect on our Louisiana operations in future years. Our pari-mutuel wagering revenues are higher during scheduled live racing than at other times of the year. Adverse weather conditions can cause cancellation of or curtail attendance at outdoor races, thereby reducing wagering and our revenues. Attendance and wagering at both outdoor races and satellite wagering facilities can be harmed by holidays and other competing seasonal activities.

We depend on agreements with Colonial’s horsemen to operate our racing and wagering business.

The Federal Interstate Horseracing Act and the Virginia Racing Act require Colonial to have written agreements with representative Virginia horsemen’s groups in order to simulcast races.

We have an agreement with the VHHA that expires December 31, 2011. Our agreement with the VaHBPA expired December 31, 2009.  We have entered into a new three-year agreement with the VaHBPA that expires December 31, 2012, which was approved by the Virginia Racing Commission on March 17, 2010.

Energy price increases may adversely affect our costs and our revenues.

Our casino and horse racing and pari-mutuel wagering operations use significant amounts of electricity and other forms of energy. Any substantial increase in the cost of the forms of energy we use may negatively affect our results of operations. In addition, consumer energy or gasoline price increases may reduce the disposable income of our potential customers or their willingness to patronize our operations and correspondingly reduce our patronage and revenues. Furthermore, a fuel price increase may impact fuel sales in Louisiana, making it more difficult to meet minimum fuel sale requirements which in turn could limit (or eliminate entirely) the number of video gaming devices we can operate at any given truck plaza.

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Our business, financial condition, and results of operations may be harmed by union efforts to organize our employees.

Our employees are not covered by collective bargaining agreements. However, in January and February 2007, the United Food and Commercial Workers local union #7 conducted some initial organizing activities in Black Hawk by direct mail to casino employees, handouts at bus stops and personal solicitations. These efforts were directed to employees of all major casinos in Black Hawk. A small number of our employees, which we estimate to be about 22, signed up with the local as internal organizers in January and February 2007.  Since that time we have not been notified of any other employees being involved with organizing.  All union organization activity seems to have ceased in April 2007.  If this or any other union seeks to organize any of our employees, we could experience disruption in our business and incur significant costs, both of which could have a material adverse effect on our results of operation and financial condition. If a union were successful in organizing any of our employees, we could experience significant increases in our labor costs which could also have a material adverse effect on our business, financial condition, and results of operations.

We are subject to potential exposure to environmental liabilities.

Generally, we are subject to various federal, state and local governmental laws and regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. Failure to comply could result in the imposition of severe penalties or restrictions on our operations by governmental agencies or courts. We are not aware of any such exposure at our properties. Black Hawk, Colorado is located within a 400-square mile area that in 1983 was designated as the Clear Creek Central/City National Priorities List Site Study Area under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. Although our Colorado casinos are not within any of the specific areas currently identified for investigation or remediation under that statute, environmental problems may subsequently be discovered, including in connection with any future construction on our property. Furthermore, governmental authorities could broaden their investigations and identify areas of concern within the site, we could be identified as a “potentially responsible party” and any related liability could have a material adverse effect on us. We do not have insurance to cover environmental liabilities, if we incur any.

Failure to complete any future construction or development projects on budget and on time could adversely affect our financial condition.

Any future construction or expansion projects will be subject to significant risks, any of which could cause unanticipated cost increases and delays. These include, among others, the following:

·                                          shortages of material and skilled laborers;

·                                          labor disputes and work stoppages;

·                                          weather interference or delays;

·                                          engineering problems;

·                                          environmental problems;

·                                          regulatory problems;

·                                          changes to plans or specifications;

·                                          fire, earthquake, flood and other natural disasters; and

·                                          geological, construction, excavation and equipment problems.

Our expansion projects may not be completed within our budget, our construction activities may disrupt our operations and our new operations may not open on schedule. We have limited experience in developing properties and cannot predict all of the risks that any particular construction or remodeling project might face. In addition, we have experienced delays that adversely affected our business during similar remodeling and expansion projects. Failure to complete a construction or expansion project on time or within our budget may cause us to devote additional resources to the project, which could divert our time and attention away from the operation of our other businesses and could cause our business to suffer.

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If we are unable to finance our expansion and renovation projects as well as capital expenditures through cash flow, borrowings under our senior credit facility and additional financings, our expansion and renovation efforts will be jeopardized.

We intend to finance our current and future expansion and renovation projects primarily with cash flow from operations and borrowings under our senior credit facility. If we are unable to finance our current or future expansion projects, we will have to adopt one or more alternatives, such as reducing or delaying planned expansion, development and renovation projects as well as capital expenditures, selling assets, restructuring debt, or obtaining additional equity financing or joint venture partners, or modifying our senior credit facility. These sources of funds may not be sufficient to finance our expansion, and other financing may not be available on acceptable terms in a timely manner or at all. In addition, our existing indebtedness contains certain restrictions on our ability to incur additional indebtedness. If we are unable to secure additional financing, we could be forced to limit or suspend expansion, development and renovation projects, which may adversely affect our business, financial condition and results of operations.

The concentration and evolution of the slot machine manufacturing industry could impose additional costs on us.

A majority of our revenues are attributable to slot machines operated by us at our gaming facilities. It is important, for competitive reasons, that we offer the most popular and up to date slot machine games with the latest technology to our customers.

We believe that a substantial majority of the slot machines sold in the U.S. in 2009 were manufactured by a few select companies. In addition, we believe that one company in particular provided a majority of all slot machines sold in the U.S. in 2009.

In recent years, the prices of new slot machines have escalated faster than the rate of inflation. Furthermore, in recent years, slot machine manufacturers have frequently refused to sell slot machines featuring the most popular games, instead requiring participation lease arrangements in order to acquire the machines. Participation slot machine leasing arrangements typically require the payment of a fixed daily rental. Such agreements may also include a percentage payment of coin-in or net win. Generally, a participation lease is substantially more expensive over the long term than the cost to purchase a new machine.

For competitive reasons, we may be forced to purchase new slot machines or enter into participation lease arrangements that are more expensive than our current costs associated with the continued operation of our existing slot machines. If the new slot machines do not result in sufficient incremental revenues to offset the increased investment and participation lease costs, it could hurt our profitability.

Our operations could be adversely affected due to the adoption of certain anti-smoking regulations.

In November 2006, a ballot initiative listed as Question 5 and entitled the “Nevada Clean Indoor Air Act” (the “Question 5”) was approved by a majority of Nevada voters. Question 5 restricts smoking in all indoor public places of employment with certain exceptions. Among the exceptions are the gaming areas of casinos and “stand alone” bars, taverns and saloons that do not serve meals. If future ballot initiatives or anti-smoking legislation are passed in Nevada removing or restricting these exceptions to Question 5, there could be a resulting material adverse effect on our business.

The “Colorado Clean Indoor Act” (the “Indoor Act”) was adopted in the Colorado legislature in March 2006. It bans smoking in virtually all public places although certain portions of gaming casinos, including gaming areas, were exempt from the Indoor Act until January 1, 2008. Compliance with the Indoor Act, which now bans smoking in casinos, has, we believe, had an adverse effect on our business.

In 2009, a bill was introduced in the Louisiana state legislature that would ban smoking in bars, restaurants and casinos in Louisiana.  The bill failed by a large margin, however, it is expected that the same bill will be introduced in 2010 with a more organized effort.  If anti-smoking legislation is passed in Louisiana, there could be a resulting material adverse effect on our business.

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Virginia banned smoking in restaurants that do not have separate smoking and non-smoking facilities as of December 1, 2009.  Colonial has installed appropriate separate facilities in two of its satellite wagering facilities and is in the process of doing so for a third.  Colonial has no plans to install separate facilities in its other locations.  Colonial does not believe the restrictions placed on smoking in restaurants will have an adverse effect on our business.

Item 1B.                 Unresolved Staff Comments.

None.

Item 2.                    Properties.

See “Our Properties and Operations” in Item 1 above for a description of the location and general character of our principal properties. Each of our properties is subject to liens and encumbrances securing our senior credit facility. See Note 5 to our consolidated financial statements included elsewhere herein.

Item 3.                    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 4.                    Submission of Matters to a Vote of Security Holders.

There were no matters submitted to a vote of our security holders during the fourth quarter of the fiscal year covered by this report.

Item 5.                                                               Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Effective January 31, 2007, all of our outstanding common stock became held by Jacobs Investments, Inc., a private holding company and, accordingly, there is no established trading market for our common stock. We are a Qualified Subchapter S-Corporation Subsidiary under the Internal Revenue Code of 1986. Under those provisions, the owner of our common stock pays taxes on our taxable income. Our ability to make distributions to our stockholder is limited by the terms of the credit agreement and indenture related to our indebtedness.

We have no equity compensation, stock option or similar plans relating to our equity securities.

We made no repurchases of our equity securities during the fourth quarter of the fiscal year covered by this report.

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Item 6.                                                         Selected Financial Data.

The following selected consolidated financial data should be read in conjunction with our management’s discussion and analysis of financial condition and results of operations and our consolidated financial statements and related notes thereto appearing elsewhere in this report. The consolidated statements of operations data and the consolidated balance sheet data are derived from our consolidated financial statements. The selected financial data provided below is not necessarily indicative of our future results of operations or financial performance. The consolidated financial statements and the accompanying management’s discussion and analysis of financial condition and results of operations presented in this Form 10-K have been retroactively adjusted to include the operations of Sugar Warehouse from January 1, 2005.  See Note 4 of the consolidated financial statements.

(1)                                 See a discussion of our recent acquisition activities in Note 4 and our debt issuances in Note 5 to the consolidated financial statements.

(2)                                 The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. Earnings consist of income (loss) before income taxes and noncontrolling interest, plus fixed charges and amortization of capitalized interest, less interest capitalized during the period. Fixed charges consist of interest on indebtedness (whether expensed or capitalized), amortization of deferred financing costs, discounts and premiums and that portion of rental expense that we believe is representative of interest. For the years ended December 31, 2008, 2006 and 2005, we had a deficiency of $3,962, $10,146 and $3,514, respectively, in earnings to fixed charges.

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Item 7.                                                      Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This section discusses the results of our operations on a historical basis for the years indicated. You should read the following discussion and analysis in conjunction with the audited consolidated financial statements that are included elsewhere in this Form 10-K. 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 described elsewhere in this report.

Our historical information may not necessarily be meaningful when making year-to-year comparisons, as our cost structure, debt structure, capitalization, and the overall composition of our company following the transactions discussed herein have significantly changed. Further, the historical information should not necessarily be taken as a reliable indication of our future performance.

TABLE OF CONTENTS TO MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)

A.                                    Company background

We are a developer, owner and operator of gaming and pari-mutuel wagering facilities throughout the United States, with properties located in Colorado, Nevada, Louisiana and Virginia. As of December 31, 2009, we owned and operated two casinos in Colorado and three casinos in Nevada, 18 video gaming truck plazas in Louisiana and a horse racing track with eight satellite wagering facilities in Virginia. In addition, we are party to an agreement that entitles us to a portion of the gaming revenues from an additional truck plaza video gaming facility.

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. Under those provisions, the owner of our company pays income taxes on our taxable income. Jeffrey P. Jacobs, our Chief Executive Officer (“CEO”),  and his family trusts own 100% of JII’s outstanding Class A and Class B shares.

B.                                    Significant transactions occurring during the year ended December 31, 2009

Nautica Property Acquisition

During July 2006, we acquired from affiliated parties several options to lease and options to purchase six parcels of land and certain improvements on the west bank of the Cuyahoga River in Cleveland, Ohio.  We refer to these properties as the Nautica Properties.  On January 15, 2009, we exercised our option to acquire one parcel referred to as “Sugar Warehouse,” and on January 21, 2009, we purchased this parcel for $2.45 million from the limited partnership that owned this building.  An affiliate of our CEO owned 82% of the general partner interests and 16.4% of the limited partner interests of the seller. The acquisition of Sugar Warehouse and its related business was accounted for as a combination of entities under common control.  Therefore, the portion acquired from our affiliate has been recorded at the historical cost bases in the assets and liabilities transferred and the portion acquired from third parties has been recorded at fair value at the acquisition date using the acquisition method of accounting in accordance with FASB ASC Topic 805, Business Combinations (“ASC Topic 805”).  Accordingly, the consolidated financial statements and the accompanying management’s discussion and analysis of financial condition and results

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of operations presented in this Form 10-K have been retroactively adjusted to include the operations of Sugar Warehouse from January 1, 2007.  See Note 4 of the consolidated financial statements.

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

During 2008, we completed several land purchase transactions with owners of real estate along the Gulf Coast of Mississippi.  During January 2009, we completed one additional land purchase transaction at a total purchase price of $0.3 million.

During September 2008, we entered into two land purchase options totaling $0.2 million.  During the second quarter of 2009, these two land purchase options were extended to July 1, 2010 for $0.2 million. Each option agreement contains three additional one-year extensions at the option of JEI.  The total purchase price of all parcels under these two option agreements is $13 million.  During November 2008, we entered into a third land purchase option totaling $0.1 million, which expired in May 2009.

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

Amendment to Credit Agreement

At March 31, 2009, certain debt covenants under our senior secured credit facility were to become more restrictive.  We entered into an amendment to our credit agreement which became effective February 5, 2009.  The amendment increased the maximum permitted senior secured leverage ratio for the remaining test periods.

Ohio Constitutional Amendment

During 2009, we provided financial support to oppose a proposed constitutional amendment in Ohio (“Issue 3”) that would allow for one casino each at designated locations in Cincinnati, Cleveland, Columbus and Toledo and distribute to all Ohio counties a tax on the casinos.  None of the designated locations is owned by JEI or its affiliates.  For the year ended December 31, 2009, we provided financial support totaling $2.3 million to oppose Issue 3.  On November 3, 2009, Issue 3 was passed in Ohio which permits casino gaming at the locations designated in the amendment.  We are currently evaluating the impact Issue 3 might have on our development efforts on the Nautica Properties in Ohio.

C.                                    Overview and discussion of our operations

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

Our CEO is the chief operating decision maker. Our casino properties in Colorado (The Lodge and Gilpin casinos) and Nevada (the Gold Dust West-Reno, Gold Dust West-Carson City and Gold Dust West-Elko casinos) are managed by our Chief Operating Officer (“COO”) who is located in our Golden, Colorado corporate offices. Our 18 video poker truck plaza operations are also managed by our COO. Our COO reports to our President, who is also located in Golden, Colorado.  Our President reports directly to our CEO. Our Virginia racetrack and satellite wagering facilities are managed by our on-site President of Pari-Mutuel Operations, and he also reports directly to our CEO.

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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.

In addition to the above performance measurements, we pay particular attention to our monthly and annual cash flow. Our business is sensitive to shifts in volumes and levels of activity and we find it necessary to watch our cash closely. Every six months (June 15 and December 15) we have a cash interest payment due on our $210 million senior unsecured notes amounting to $10.2 million. Additionally, we currently have $58 million outstanding on our senior secured credit facility with interest due at varying intervals.  As of December 31, 2009, $19 million is outstanding on the $40 million senior secured revolving credit facility 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. We also have $1.9 million of outstanding letters of credit as of December 31, 2009. See also Section G, “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 December 31, 2009, there were approximately 9,100 slot machines in the city of Black Hawk.  We had 1,370 slot machines in this market (975 at The Lodge and 395 at the Gilpin), which represented approximately 15% of the total slot machines in Black Hawk. Additionally, there were 207 table games in the city of Black Hawk.  We had 54 table games in this market (35 at The Lodge and 19 at the Gilpin), which represented approximately 26% of the total table games in Black Hawk.

Our Colorado properties were affected by a number of events related to preparing our properties to take advantage of the higher limits, new games and extended hours that went into effect on July 2, 2009.  We reduced the slot machine count to accommodate the addition of table games.  Our casino floors at both The Lodge and Gilpin were disrupted during the second quarter to install new carpet, additional surveillance and new table games.  On September 9, 2009, we reduced the slot count at The Lodge as we made room to accommodate the construction project to expand our casino floor space at The Lodge.  The project was completed on November 16, 2009.

For the year ended December 31, 2009, our gross gaming revenues at The Lodge and the Gilpin totaled $102.0 million, which represented 19% of the total gaming revenues in Black Hawk.  The overall Black Hawk market gross gaming revenues increased by 4.2% in 2009 over 2008.  Total slot devices in Black Hawk decreased by 6% while table games increased by 43%.  We managed to generate 126% efficiencies (our percentage of the gross gaming revenues divided by our percentage of the gaming devices) within the market for 2009.  We follow our efficiency level very closely as we believe this is a useful measure of how well we are performing within the market.

We expect some of our previous and existing market share to be lost due to increased competition. As more properties continue to compete for their share of the market, our personnel costs, marketing costs, and other costs will likely increase as we attempt to keep our market share.

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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, with many casinos marketing themselves as “locals’ casinos,” partially due to added competition from Indian Gaming in California.

At December 31, 2009, Reno had approximately 12,200 gaming devices, of which Gold Dust West-Reno had 479 devices, or 3.9% of the market. For the year ended December 31, 2009, our gross gaming revenues were 4.2% of the Reno market, with an efficiency rate of 96%.

Since its acquisition in June 2006, Gold Dust West-Carson City (formerly Piñon Plaza Resort), has undergone major renovations and changes to the operations emerging January 24, 2007 as the “new” Gold Dust West-Carson City by way of an extensive rebranding program. The Carson City area (state capital) is 30 miles south of Reno and services the areas of Dayton, Gardnerville and Minden surrounding it with a total population base of 60,000 plus. The area had approximately 4,200 gaming devices of which Gold Dust West-Carson City had 383 (9% of total devices).  For the year ended December 31, 2009, our efficiency rate was 99%. This property is expected to substantially improve its efficiency through enhanced utilization of its many unique amenities.

At December 31, 2009, Gold Dust West-Elko had 346 gaming devices, representing approximately 11% of the total devices in the market.  For the year ended December 31, 2009, our gross gaming revenues were 12% of the Elko market, with an efficiency rate of 138%.

Louisiana

The Louisiana truck plaza video gaming facilities consist of 18 truck plazas located in Louisiana and a share in the gaming revenues of an additional truck plaza. Each truck plaza features a convenience store, fueling operations, a restaurant and up to 50 video gaming devices in the casino depending on the level of fuel sales and available space.  At December 31, 2009, our truck plaza video gaming facilities had a combined total of 943 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 assurance in this regard.

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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 on its live races; (iii) commissions from advance deposit account wagering by telephone and over the internet; (iv) admission fees, program and racing form sales, and certain other ancillary deposit account activities; and (v) net income from food and beverage sales and concessions.

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

On November 10, 2008, we closed one of our two satellite wagering facilities in Chesapeake, Virginia. We now operate eight satellite wagering facilities in Virginia.

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Summary of Consolidated Operating Results

Our results of operations reflect the consolidated operations of all our subsidiaries. A summary of our consolidated operating results for the years ended December 31, 2009, 2008 and 2007 is as follows:

D.                                   Comparison of our operations for the year ended December 31, 2009 to the year ended December 31, 2008

All comparisons below begin with the 2009 results followed by the 2008 results.

Casino revenues increased $0.3 million or less than 1% to $139.8 million from $139.5 million.  Increases in casino revenues at The Lodge of $2.3 million or 3%, Gold Dust West-Carson City of $0.1 million or 1% and Gold Dust West-Elko of $1.0 million or 10% were offset by decreases at the Gilpin of $1.1 million or 5% and Gold Dust

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West-Reno of $2.0 million or 10% .  Overall, the City of Black Hawk casino win increased 4% during 2009 compared to 2008, due to the improved July through December 2009 performance resulting from the new games, increased betting limits and expanded hours that began on July 2, 2009.  However, throughout 2009, revenues have been negatively impacted by general economic conditions, including higher unemployment and decreased disposable income.

Truck stop gaming revenues decreased $4.6 million or 7% to $63.0 million from $67.6 million primarily due to new competition at certain locations combined with general economic conditions, including higher unemployment and decreased disposable income.

Pari-mutuel revenues decreased $6.4 million or 17% to $32.3 million from $38.7 million.  The decrease in revenues is attributable to a $1.9 million decrease in the Chesapeake market partially resulting from the closure of our Chesapeake, Military Highway off track wagering facility in November 2008, combined with a $2.1 million decrease in the Richmond market resulting from fewer operating days in 2009 at our Broad Street and Hull Street off track wagering facilities. Revenues at the racetrack and other off track wagering facilities decreased $2.1 million and account wagering revenues decreased $0.3 million.

Food and beverage revenues decreased $0.9 million or 3% to $29.8 million from $30.7 million.  This decrease is primarily attributable to decreases of $1.2 million at the truck stops and $0.5 million at Colonial due to the lower level of gaming activity, somewhat offset by increases of $0.5 million at The Lodge, $0.1 million at the Gilpin, $0.1 million at Gold Dust West-Carson City and $0.1 million at Gold Dust West-Elko.

Convenience store-fuel revenues decreased $36.3 million or 37% to $60.7 million from $97.0 million.  The average selling price of fuel decreased to $2.26 per gallon in 2009 from $3.58 per gallon in 2008, while fuel volume was down 1% to 26.9 million gallons.

Other revenues decreased $1.2 million or 5% to $22.2 million from $23.4 million and were primarily attributable to a $0.3 million decrease in hotel and other revenues at Gold Dust West-Carson City, a $0.1 million decrease in hotel revenues at The Lodge, a $0.1 million decrease at the Gilpin, a $0.2 million decrease at Colonial, a $0.2 million decrease in Sugar Warehouse revenues and a $0.6 million decrease in convenience store and other revenues at the truck stops, somewhat offset by receipt of $0.3 million of insurance proceeds in excess of hurricane losses incurred during late 2008 at our truck stops.

Promotional allowances increased $0.6 million or 2% to $34.3 million from $33.7 million.  Increases in promotional allowances of $0.3 million at The Lodge, $0.3 million at the Gilpin, $0.3 million at Gold Dust West-Carson City and $0.5 million at Gold Dust West-Elko were somewhat offset by decreases of $0.5 million at Gold Dust West-Reno and $0.3 million at the truck stops.

Casino expenses increased $0.5 million or 1% to $47.3 million from $46.8 million, due to increases of $1.1 million at The Lodge and $0.1 million at Gold Dust West-Elko, offset by decreases of $0.2 million at the Gilpin, $0.4 million at Gold Dust West-Reno and $0.1 million at Gold Dust West-Carson City, which correspond to the changes in casino revenues at each location.

Truck stop gaming expenses decreased $2.2 million or 5% to $38.8 million from $41.0 million and is attributable to direct costs associated to the decrease in truck stop gaming revenues.

Pari-mutuel costs and expenses decreased $5.1 million or 16% to $26.1 million from $31.2 million.  The decrease is attributable to decreased direct costs resulting from decreased pari-mutuel revenues combined with decreased operating costs resulting from the closure of one of our off track wagering facilities in November 2008.

Food and beverage costs and expenses decreased $1.9 million or 12% to $13.5 million from $15.4 million, and is due to decreases of $1.0 million at the truck stops, $0.6 million at Colonial, $0.1 million at The Lodge and $0.2 million at Gold Dust West-Carson City.

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Convenience store-fuel expenses decreased $33.6 million or 37% to $57.1 million from $90.7 million. The average cost of fuel decreased to $2.13 per gallon in 2009 from $3.35 per gallon in 2008, while volume was down 1%.

Other costs and expenses decreased $2.2 million or 12% to $16.0 million from $18.2 million, and were primarily attributable to a $2.0 million decrease in convenience store expenses at the truck stops and a $0.2 million decrease in hotel expenses at Gold Dust West-Carson City.

Marketing, general and administrative expenses decreased $3.1 million or 5% to $65.8 million from $68.9 million.  This decrease is primarily the result of a $1.5 million decrease at Colonial due to decreases in marketing costs, Instant Racing lobbying costs, insurance costs, travel expenses and administrative salaries, combined with decreases of $0.2 million at The Lodge, $0.8 million at the Gilpin, $0.5 million at Gold Dust West-Reno, $1.2 million at Gold Dust West-Carson City and $0.3 million at the truck stops, somewhat offset by an increase of $1.1 million at corporate and $0.2 million at Sugar Warehouse.  The decreases at our operating units are the result of cost management efforts at all locations.  The increase in corporate overhead is primarily attributable to $2.3 million of Ohio campaign costs incurred during 2009 and an increase in professional accounting fees totaling $0.4 million, somewhat offset by a decrease in labor totaling $0.2 million and $1.4 million of Colorado Amendment 50 campaign costs incurred during 2008.  These 2009 and 2008 campaign costs are further discussed in Note 12 to the consolidated financial statements.

Beginning November 1, 2008, we began accounting for our investment in MTR Gaming Group, Inc. (“MTR”) as an equity security, in accordance with FASB ASC Topic 825, Financial Instruments (“ASC Topic 825”).  Decreases in the stock price resulted in an unrealized loss on the change in fair value of investment in equity securities totaling $0.3 million during the year ended December 31, 2009. During 2008, we recorded impairments totaling $6.6 million on the fair value of our investment in MTR.

A goodwill impairment totaling $0.2 million was recorded at Gold Dust West-Carson City during the year ended December 31, 2008.  No goodwill remained on this property after the impairment was recorded.

Abandonment costs totaling $0.8 million were recorded at Colonial during 2008 due to the closure of one of our two satellite wagering facilities in Chesapeake, Virginia.  No comparable transaction occurred during 2009.

Depreciation and amortization expense increased $1.4 million or 7% to $21.5 million from $20.1 million and was primarily attributable to increases of $1.1 million at the truck stop locations, $0.3 million at The Lodge and $0.1 million at Gold Dust West-Elko, somewhat offset by a $0.1 million decrease at Gold Dust West-Carson City.

Net interest expense decreased $2.1 million or 8% to $25.2 million from $27.3 million.  The decrease is attributable to lower effective interest rates on our variable rate bank debt, combined with a decrease in debt outstanding during the year ended December 31, 2009 compared to the year ended December 31, 2008.

E.                                   Comparison of our operations for the year ended December 31, 2008 to the year ended December 31, 2007

All comparisons below begin with the 2008 results followed by the 2007 results.

Casino revenues decreased $5.2 million or 4% to $139.5 million from $144.7 million.  The decrease in casino revenues is a result of decreased casino revenues at The Lodge of $2.2 million or 3%, the Gilpin of $3.4 million or 13%, Gold Dust West-Reno of $1.3 million or 6% and Gold Dust West-Carson City of $0.3 million or 3%.  These decreases were partially offset by an increase of $2.0 million at Gold Dust West-Elko, which opened on March 5, 2007.  Casino revenues at our two Colorado properties have been negatively affected due to the smoking ban which became effective on January 1, 2008.  Overall, the City of Black Hawk casino win declined 12.5% during 2008 compared to 2007.  The decreased revenues at our casinos in Black Hawk and Reno are also attributable to general economic conditions, higher gas prices during the summer months and decreased customer spend per visit.

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Truck stop gaming revenues increased $3.3 million or 5% to $67.6 million from $64.3 million.  Of this increase, $1.8 million is due to video gaming activity at the Silver Dollar location that began in September 2007, combined with a net increase totaling $1.5 million at all other truck stop locations.  The increase in gaming revenue is primarily attributable to the increased bet and jackpot limits that became effective in late 2007.

Pari-mutuel revenues decreased $2.7 million or 6% to $38.7 million from $41.3 million.  The decrease in revenues is primarily attributable to a $3.6 million decrease at the off track wagering facilities combined with a $0.2 million decrease at the racetrack, somewhat offset by a $1.1 million increase in account wagering revenues.

Food and beverage revenues increased $1.5 million or 5% to $30.7 million from $29.3 million.  This increase is attributable to increases of $1.0 million at The Lodge, $0.1 million at Gold Dust West-Reno, $0.4 million at Gold Dust West-Elko and $0.3 million at the truck stop facilities, primarily due to increased promotional activity, offset by decreases of $0.1 million at the Gilpin, $0.1 million at Gold Dust West-Carson City and $0.1 million at Colonial.

Convenience store-fuel revenues increased $15.7 million or 19% to $97.0 million from $81.3 million.  The average selling price of fuel increased to $3.58 per gallon in 2008 from $2.74 per gallon in 2007.  These increases in fuel revenues were somewhat offset by a decrease in volume to 27.1 million gallons from 29.7 million gallons.

Other revenues increased $2.0 million or 9% to $23.4 million from $21.4 million and were primarily attributable to an increase of $2.0 million in convenience store and other revenues at the truck stops, $0.1 million at Colonial due to an increase in Virginia Derby sponsorship revenue combined with a one-time lawsuit settlement with Youbet, an increase of $0.1 million at The Lodge, and an increase of $0.2 million at Sugar Warehouse, somewhat offset by a decrease of $0.4 million in hotel and other revenues at Gold Dust West-Carson City.

Promotional allowances increased $1.8 million or 6% to $33.7 million from $32.0 million.  The increase is attributable to an increase in promotional allowances of $1.1 million at The Lodge, $0.3 million at Gold Dust West-Reno, $0.6 million at Gold Dust West-Elko and $0.2 million at the truck stops, somewhat offset by a decrease of $0.4 million at the Gilpin.

Casino expenses decreased $1.6 million or 3% to $46.8 million from $48.4 million.  This decrease is primarily due to decreases of $0.4 million at The Lodge, $1.1 million at the Gilpin, $0.2 million at Gold Dust West-Reno and $0.3 million at Gold Dust West-Carson City, offset by an increase of $0.4 million at Gold Dust West-Elko. These variances are consistent with the changes in casino revenues by property as discussed above.

Truck stop gaming expenses increased $3.0 million or 8% to $41.0 million from $38.0 million.  Of this increase, $1.2 million is due to video gaming activity at the Silver Dollar location that began in September 2007, combined with a net increase totaling $1.8 million at all other truck stop locations.

Pari-mutuel costs and expenses decreased $1.8 million or 5% to $31.2 million from $33.0 million.  The decrease is primarily attributable to a $2.4 million decrease in pari-mutuel taxes, purses and other direct expenses associated with decreased pari-mutuel revenues at the racetrack and off track wagering facilities, partially offset by a $0.6 million increase in account wagering direct costs and expenses.

Food and beverage costs and expenses decreased $1.0 million or 6% to $15.4 million from $16.4 million due to decreases of $0.4 million at The Lodge, $0.1 million at the Gilpin, $0.5 million at Gold Dust West-Carson City and $0.2 million at Colonial, offset by an increase of $0.2 million at the truck stops.

Convenience store-fuel expenses increased $13.4 million or 17% to $90.7 million from $77.3 million.  The average cost of fuel increased to $3.35 per gallon in 2008 from $2.60 per gallon in 2007.  These increases in fuel expenses were somewhat offset by a decrease in volume.

Other costs and expenses increased $2.0 million or 12% to $18.3 million from $16.3 million, and were primarily attributable to an increase in convenience store expenses at the truck stops.

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Marketing, general and administrative expenses decreased $0.8 million or 1% to $68.9 million from $69.7 million.  This decrease is primarily the result of  decreases of $0.8 million at Colonial due to decreased lobbying costs associated with Instant Racing, and decreases of $0.4 million at The Lodge, $0.6 million at the Gilpin, $0.3 million at Gold Dust West-Reno, $0.1 million at Gold Dust West-Carson City and $0.1 million at Gold Dust West-Elko. These decreases were partially offset by an increase of $1.5 million at corporate, primarily due to political contributions totaling $1.4 million made for a Colorado campaign, which is further discussed in Note 12 to the financial statements.

During 2008, we recorded an impairment totaling $6.6 million on the change in fair value of our investment in equity securities of MTR Gaming Group, Inc., which is further discussed in Note 6 to the financial statements.  No comparable transaction occurred during 2007.

A goodwill impairment totaling $0.2 million was recorded at Gold Dust West-Carson City during 2008, which is further discussed in Note 3 to the financial statements.  No comparable transaction occurred during 2007.

Abandonment costs totaling $0.8 million were recorded during 2008 due to the closure one of our two satellite wagering facilities in Chesapeake, Virginia, which is further discussed in Note 13 to the financial statements.  No comparable transaction occurred during 2007.

Depreciation and amortization expense increased $1.8 million or 10% to $20.1 million from $18.3 million.  Of this increase, $0.4 million is attributable to Gold Dust West-Elko and $0.2 million is attributable to the Silver Dollar truck stop location. Additionally, The Lodge increased by $0.5 million, the Gilpin increased by $0.1 million, Gold Dust West-Reno increased by $0.1 million, Gold Dust West-Carson City increased by $0.3 million and the remaining truck stops combined increased by $0.2 million due to capital asset purchases.

Net interest expense decreased $0.8 million or 3% to $27.2 million from $28.1 million.  The decrease is attributable to lower effective interest rates on our variable rate bank debt, partially offset by an increase in debt outstanding during the year ended December 31, 2008 compared to the year ended December 31, 2007.

F.                                      Segment information for the three years ended December 31, 2009

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.

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The following is a summary of the net revenues, costs and expenses and EBITDA, for the three years ended December 31, 2009, 2008 and 2007 (dollars in thousands):

See Notes on page 49.

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General

See sections D and E above which provide explanations regarding the fluctuations in our revenues and costs and expenses by property and segment.

Throughout most of 2009 and 2008, net revenues at all of our properties have been negatively impacted by local and general economic conditions, including higher unemployment and decreased disposable income, combined with a decrease in fuel prices.  However, during the last six months of 2009, both of our Colorado properties benefited from the new games, higher limits and extended hours that began on July 2, 2009.  Costs and expenses are generally lower due to cost management efforts at all of our properties, combined with a decrease in direct costs associated to the decrease in net revenues.  Year-over-year, costs and expenses increased at The Lodge as a result of additional training, personnel and other expenses resulting from our preparations to take advantage of the new gaming legislation.

The Lodge

EBITDA at The Lodge increased 6% for the year ended December 31, 2009 compared to the same period of 2008 primarily due to the new gaming legislation that began on July 2, 2009, somewhat offset by the general economic conditions discussed in the “General” section above.  Additionally, we incurred costs and disruption during the second quarter of 2009 as a result of the preparation for the new gaming legislation, and during the fourth quarter of 2009, we experienced construction disruption during the expansion of our casino floor.  For the year ended December 31, 2008 compared to the year ended December 31, 2007, EBITDA fell 3%, primarily due to the smoking ban which became effective in Colorado on January 1, 2008.

Gilpin

EBITDA at the Gilpin decreased 5% for the year ended December 31, 2009 compared to the same period of 2008 primarily due to the general economic conditions discussed in the “General” section above, costs and disruption during the second quarter of 2009 as a result of the preparation for the new gaming legislation, somewhat offset by the new gaming legislation during the last half of 2009.  The Colorado smoking ban and economic conditions resulted in significantly lower revenues and a 20% decrease in EBITDA at the Gilpin for the year ended 2008 compared to 2007.

Gold Dust West-Reno

The Reno market has experienced significant slot revenue declines during 2009 and 2008 compared to 2007 revenue levels.  EBITDA at Gold Dust West-Reno decreased 8% for the year ended December 31, 2009 compared to the same period of 2008 and 13% for the year ended December 31, 2008 compared to 2007 primarily due to a decrease in slot revenues resulting from the local and general economic conditions discussed in the “General” section above.

Gold Dust West-Carson City

EBITDA at Gold Dust West-Carson City increased $1.3 million for the year ended December 31, 2009 compared to the same period of 2008 primarily due to reductions in labor, advertising and other operating costs and expenses.  EBITDA was flat for the year ended 2008 compared to 2007.  A goodwill impairment totaling $0.2 million was recorded at Gold Dust West-Carson City during the year ended December 31, 2008.  No goodwill impairment was recorded during 2009 or 2007.

Gold Dust West-Elko

EBITDA at Gold Dust West-Elko increased $0.5 million for the year ended December 31, 2009 compared to the same period of 2008 and increased $1.6 million for the year ended December 31, 2008 compared to the same period of 2007, primarily due to increases in slot revenues resulting from increases in promotional allowances.  Gold Dust West-Elko opened on March 5, 2007.

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Louisiana

EBITDA at the Louisiana truck stops decreased 14% for the year ended December 31, 2009 compared to the same period of 2008 primarily due to decreases during the third and fourth quarters of 2009 in gaming and non-gaming revenues resulting from the general economic conditions discussed in the “General” section above, combined with a decrease in fuel gross profit per gallon.  EBITDA increased 12% in 2008 compared to 2007, as a result of the increase in fuel gross profit per gallon and increased gaming revenue. During the third quarter of 2008, hurricanes Gustav and Ike struck certain of our Louisiana operations causing minimal damage to our properties but significant damage in the region.  All of our properties were operating within approximately two days, resulting in an increase in gaming and non-gaming revenues during the third and fourth quarters of 2008.

Virginia

EBITDA at our pari-mutuel operations in Virginia increased $0.9 million for the year ended December 31, 2009 compared to the same period of 2008 but decreased $0.8 million for the year ended December 31, 2008 compared to the same period of 2007. During 2008, Virginia recorded abandonment costs totaling $0.8 million for the closure of a satellite wagering facility. No similar charges were recorded during 2009 or 2007.

Corporate Overhead and Other

EBITDA at corporate decreased $4.7 million for the year ended December 31, 2009 compared to the same period of 2008 but increased $7.9 million for the year ended December 31, 2008 compared to the same period of 2007. These fluctuations are primarily due to decreases in the stock price of our investment in MTR totaling $0.3 million in 2009, $6.6 million in 2008 and $0 in 2007.  Additionally, we expended $2.3 million during 2009 for campaign costs in Ohio and $1.4 million during 2008 for campaign costs in Colorado.  After adjusting for these unusual items, EBITDA increased 7% in 2009 compared to 2008, primarily due to professional accounting fees, but was flat for 2008 compared to 2007.

Reconciliation of EBITDA to Net Income (Loss)