Exhibit 99.2

Virgin River Casino Corporation

Condensed Consolidated Balance Sheets
(in thousands)

		September 30,			December 31,
		2006			2005
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	6,668		$	9,421
Accounts receivable, net		1,904			1,241
Related party receivables		281			95
Related company receivables		5,188			395
Inventories		1,593			1,652
Property held for vacation interval sales		352			392
Prepaid expenses		3,408			3,194
Current portion of notes receivable		191			303
Total current assets		19,585			16,693
Property and equipment, net		119,799			123,092
Notes receivable, less current portion		1,151			1,821
Other assets		1,486			217
Deferred financing fees		7,272			8,337
Goodwill and other intangible assets, net		29,573			31,193
Total assets		$	178,866		$	181,353
Liabilities and Stockholder’s Deficit
Current liabilities:
Bank overdraft		$	—		$	548
Current portion of gaming equipment financing		2,989			2,528
Current portion of long-term debt		40			614
Accounts payable		2,301			2,784
Accrued liabilities		13,120			15,041
Related company payable		5,664			99
Total current liabilities		24,114			21,614
Gaming equipment financing, less current portion		1,214			3,306
Long-term debt, less current portion		174,737			172,333
Fair value of interest rate swaps		—			195
Minority interest		16,661			16,414
Commitments and contingencies
Stockholder’s deficit:
Common stock, no par value; authorized 2,500 shares, 100 shares issued and 88 shares outstanding					—
Additional paid-in capital		3,168			3,168
Deemed distribution		(21,003		)	(21,472		)
Accumulated deficit		(20,025		)	(14,205		)
Total stockholder’s deficit		(37,860		)	(32,509		)
Total liabilities and stockholder’s deficit		$	178,866		$	181,353

 

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

1

---

Virgin River Casino Corporation

Condensed Consolidated Statements of Operations (unaudited)
(in thousands)

		Three months ended						Nine months ended
		September 30,			September 30,			September 30,			September 30,
		2006			2005			2006			2005
Revenues
Casino		$	16,410		$	14,283		$	51,256		$	45,861
Food and beverage		7,543			7,104			23,629			22,994
Hotel		5,521			4,761			18,998			15,643
Related company rental income		1,575			1,575			4,725			4,725
Other		3,277			3,092			13,777			13,924
Total revenues		34,326			30,815			112,385			103,147
Less—promotional allowances		(6,386		)	(4,460		)	(19,520		)	(13,986		)
Net revenues		27,940			26,355			92,865			89,161
Operating expenses:
Casino		8,529			7,711			25,078			22,729
Food and beverage		4,243			4,542			13,529			14,413
Hotel		1,000			1,723			3,892			5,352
Other		2,657			2,513			8,565			9,110
General and administrative		9,630			8,262			26,390			23,361
Depreciation and amortization		2,936			2,465			9,419			7,270
Loss on sale and disposal of assets		—			79			248			729
Total operating expenses		28,995			27,295			87,121			82,964
Operating (loss) income		(1,055		)	(940		)	5,744			6,197
Other income (expense):
Interest expense		(4,362		)	(4,571		)	(13,177		)	(13,287		)
Change in fair value of interest rate swaps		—			366			195			1,102
Return on investment with MDW, LLC		264			(113		)	484			(288		)
Loss before cumulative effective of change in accounting principle and minority interest		(5,153		)	(5,258		)	(6,754		)	(6,276		)
Cumulative effect of change in accounting principle		—			—			(196		)	—
Loss before minority interest		(5,153		)	(5,258		)	(6,950		)	(6,276		)
Minority interest in loss (income) from RBG, LLC and Casablanca Resorts, LLC		222			248			(247		)	(254		)
Net loss		$	(4,931	)	$	(5,010	)	$	(7,197	)	$	(6,530	)

 

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

 

2

---

Virgin River Casino Corporation

Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)

		Nine months ended
		September 30,			September 30,
		2006			2005
Cash flows from operating activities:
Net loss		$	(7,197	)	$	(6,530	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		9,419			7,270
Minority interest in income from RBG, LLC and Casablanca Resorts, LLC		247			254
Change in fair value of interest rate swaps		(195		)	(1,102		)
Loss on sale and disposal of assets		248			729
Cumulative effect of change in accounting principle		196			—
Amortization of deferred financing fees		1,063			1,030
Accretion of senior subordinated notes		4,403			3,721
Interest expense on gaming equipment financing		52			232
Cost of vacation intervals sales		41			81
Change in operating assets and liabilities:
Accounts, related company and related party receivables, net		(4,265		)	1,395
Inventories		59			(1		)
Prepaid expenses		(214		)	(575		)
Notes receivable		586			304
Accounts payable, accrued liabilities and related company payables		3,689			3,019
Net cash provided by operating activities		8,132			9,827
Cash flows from investing activities:
Proceeds received from sale of assets		43			145
Purchase price adjustment		—			(1,218		)
Capital expenditures		(4,635		)	(9,197		)
Net cash used in investing activities		(4,592		)	(10,270		)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		5,000			1,666
Decrease in bank overdraft		(548		)	(1,480		)
Payment of long-term debt		(7,573		)	(1,306		)
Payment on gaming equipment financing		(1,879		)	(619		)
Payment of obligations under capital lease		—			(13		)
Payment of financing fees		—			(307		)
Tax distributions paid		—			(1,783		)
Change in other assets		(1,293		)	29
Net cash used in financing activities		(6,293		)	(3,813		)
Net decrease in cash and cash equivalents		(2,753		)	(4,256		)
Cash and cash equivalents at beginning of year		9,421			11,114
Cash and cash equivalents at end of period		$	6,668		$	6,858

 

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

3

---

 

		Nine months ended
		September 30,			September 30,
		2006			2005
Supplemental cash flow disclosure:
Cash paid for interest		$	5,488		$	5,889
Acquisition of assets with gaming equipment financing		$	215		$	5,202
Equity contribution		$	1,377		$	—

 

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

4

Virgin River Casino Corporation

Notes to Condensed Consolidated Financial Statements (unaudited)
September 30, 2006

1.             Basis of Presentation and Background

The accompanying are the condensed consolidated financial statements of Virgin River Casino Corporation, which includes the accounts of RBG, LLC (doing business as CasaBlanca Resort/Casino/Golf/Spa) and its wholly owned subsidiary Casablanca Resorts, LLC (doing business as Oasis Resort & Casino) (collectively the “Company”). Virgin River Casino Corporation (“VRCC”) owns 88.8% of RBG, LLC (“RBG”) and Casablanca Resorts, LLC (“Resorts LLC”). Robert R. Black, Sr. (“Mr. Black”) is the sole shareholder of VRCC and owns 9.28% of RBG individually and through another entity.  Mr. Black also is the sole shareholder of B & B B, Inc. (doing business as Virgin River Hotel/Casino/Bingo) (“B&BB”). The Company and B&BB are collectively referred to as the “Companies.” The Companies are operated under common management.  Significant intercompany items and transactions of the Company have been eliminated.

Interim Financial Statements — The accompanying unaudited condensed consolidated financial statements as of September 30, 2006 and for the three and nine-month periods ended September 30, 2006 and 2005 are unaudited.  In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the Company’s financial position and results of operations for such periods, have been included.  The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements filed on Form 10-K for the year ended December 31, 2005.  The results for the three and nine-month periods ended September 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006, or for any other period.

Reclassifications — Certain previously reported amounts in the condensed consolidated financial statements have been reclassified to conform to the current period’s presentation.

2.             Property and Equipment

Property and equipment consists of the following (in thousands):

 

As a result of the third party business valuation that was conducted in the fourth quarter of 2005, the Company has re-evaluated the useful lives of their slot machines (included in furniture, fixture and equipment above) and effective January 1, 2006, changed that estimate from seven years to five years.  For the three and nine months ended September 30, 2006, operating income of the Company decreased approximately $204,000 and $544,000, respectively, as a result of the change in the estimated lives.

5

---

Virgin River Casino Corporation

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

3.             Notes Receivable

Notes receivable consist of the following (in thousands):

 

Notes generated from the sale of vacation intervals generally bear interest at annual rates ranging from 12.75% to 14.75% and have terms of 5 to 7 years. The vacation interval notes receivable are collateralized by the right to use and deeds of trust on the vacation interval sold.

In January of 2006, the Company adopted the provisions of SFAS 152, “Accounting for Real Estate Time-Sharing Transactions.” SFAS 152 amends existing accounting guidance to reference the financial accounting and reporting guidance for real estate time-sharing transactions provided in AICPA Statement of Position 04-02, “Accounting for Real Estate Time-Sharing Transactions.” In determining the allowance for possible credit losses, the Company, in accordance with SFAS 152, uses a technique referred to as static pool analysis, which tracks uncollectible notes receivable based on each year’s sales over the entire life of those notes.  The Company considers whether the historical economic conditions are comparable to current economic conditions.  If current economic conditions differ from the economic conditions in effect when the historical experience was generated, the Company adjusts the allowance for possible credit losses to reflect the expected effects of current economic conditions on uncollectibility.  The Company groups all notes receivables in one pool for analytical purposes based on historical collectibility and customer demographics.  As a result of the change in accounting for the allowance for possible credit losses, the Company has recorded in the accompanying statement of operations for the nine-months ended September 30, 2006, a cumulative effect of a change in accounting principle of $196,000 to increase the allowance for possible credit losses.

4.             Long-term Debt

Long-term debt consists of the following (in thousands):

 

6

---

Virgin River Casino Corporation

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

4.             Long-term Debt (cont’d)

Foothill Facility

The Wells Fargo Foothill, Inc. credit facility (“Foothill Facility”) is secured by substantially all the assets of the Companies. During the life of the Foothill Facility, the Companies may borrow up to the lesser of (1) $15.0 million less the Letter of Credit Usage, as defined, less the Bank Product Reserve, as defined, or (2) the Borrowing Base, as defined, less the Letter of Credit Usage.  At September 30, 2006, no amounts were drawn under the Foothill Facility.  Accordingly, the availability under the Foothill Facility at September 30, 2006 was $15.0 million.

Under the terms of the Foothill Facility, interest accrues on the outstanding principal balance at LIBOR plus the LIBOR Rate Margin, which is 3.5%, or the Base Rate, as defined, plus the Base Rate Margin, which is 2%.  LIBOR was approximately 5.32% at September 30, 2006.  The Foothill Facility also contains certain financial and other covenants.  These include a minimum trailing twelve-month Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of $15,000,000 for the Companies and limitations on other indebtedness and capital expenditures, as defined.  The Companies were in compliance with these covenants at September 30, 2006 and December 31, 2005.  The outstanding balance on the Foothill Facility is a joint and several obligation of the Companies.

Senior Secured and Senior Subordinated Notes

In December 2004, as part of an ownership buyout (the “Buyout”), VRCC, RBG and B&BB (the “Issuers”) issued $125.0 million of 9% senior secured notes (“Senior Notes”) due on January 15, 2012 and $39.9 million in gross proceeds of 12¾% senior subordinated notes (“Senior Sub Notes”) due January 15, 2013 (collectively the “Notes”).  The Notes are joint and several obligations of the Issuers and all current and future subsidiaries of the Issuers.  Although the Notes are joint and several obligations of the Issuers, the allocation of the balance of the Notes to the individual balance sheets of B&BB, VRCC and RBG was according to the flow of funds at the date of the Buyout with the proceeds of the Senior Notes necessary to purchase the interests of B&BB recorded on the balance sheet of B&BB and the remaining proceeds of the Senior Notes and Senior Sub Notes recorded on the consolidated balance sheet of VRCC.  The

7

---

Virgin River Casino Corporation

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

4.             Long-term Debt (cont’d)

condensed consolidated balance sheet of the Company reflects the full obligation of the Notes at September 30, 2006, with the amount recorded on the balance sheet of B&BB recognized as a deemed distribution to reflect the net obligation of the Notes recorded on the condensed consolidated balance sheet of the Company at September 30, 2006. At September 30, 2006, the net amount of the Notes recorded on the Company’s condensed consolidated balance sheet was $154.1 million. The Senior Notes pay interest semiannually while the Senior Sub Notes accrue interest in the form of increased accreted value until January 15, 2009, when the carrying book value of the Senior Sub Notes will be $66.0 million.  At that point the Senior Sub Notes will pay interest semiannually on the same dates as the Senior Notes.

The indentures (the “Indentures”) governing the Issuers’ Notes contain certain customary financial and other covenants, which limit the Issuers’ ability to incur additional debt.  The Indentures provide that the Issuers may not incur additional indebtedness, other than specified types of indebtedness, unless the Consolidated Coverage Ratio, as defined, on a pro-forma basis after the incurrence of the additional indebtedness is at least 2.00 to 1.00. As of September 30, 2006, the Issuers have incurred $0 of additional indebtedness as defined.

The Indentures also contain other covenants which limit the ability of the Issuers and Guarantors, as defined, under the Indentures to pay dividends, redeem stock, or make other distributions, make investments, create certain liens, enter into certain transactions with affiliates, utilize proceeds from asset sales, transfer or sell assets, issue or sell equity interests of subsidiaries and enter into certain mergers and consolidations, as defined in the Indentures.  There are no restrictions related to the transfer of funds between the Issuers, Guarantors and their respective subsidiaries.  The Issuers were in compliance with these covenants at September 30, 2006 and December 31, 2005.

The Senior Notes are secured by substantially all existing and future assets of the Issuers and the Guarantors, as defined, as well as the equity interest of the Guarantors, the equity interests of Mr. Black and his affiliate in the Issuers.  The Guarantors are all the wholly owned subsidiaries of the Issuers.

The Senior Notes are subordinated to the security interests of the Foothill Facility.  The Senior Sub Notes are subordinate to the Senior Notes and all other indebtedness of the Companies.

Interest Rate Swaps

The Companies interest rate swaps terminated effective June 30, 2006.

5.             Gaming Equipment Financing

The Company from time to time enters into agreements with gaming manufacturers to finance the purchase of gaming equipment.  Contractual terms of the agreements with the gaming manufacturers consist of payment terms of less than one year to up to three years without interest.  In the event that an agreement with a gaming manufacturer extends past a year, the Company will impute interest at a rate of 8%.

8

---

Virgin River Casino Corporation

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

5.             Gaming Equipment Financing (cont’d)

Gaming equipment financing consists of the following (in thousands):

		September 30,			December 31,
		2006			2005
		(unaudited)
Gaming equipment financing to purchase 205 games, no payments for one year and monthly payments of $106 for 24 months beginning February 2006		$	1,625		$	2,320
Gaming equipment financing to purchase 68 games, no payments for one year and monthly payments of $43 for 24 months beginning January 2006		651			945
Gaming equipment financing to purchase 70 games, no payments for one year and monthly payments of $39 for 24 months beginning March 2006		654			838
Gaming equipment financing to purchase 60 games, monthly payments of $20 for 36 months beginning April 2005		353			513
Gaming equipment financing to purchase 64 games, no payments for one year and monthly payments of $26 for 24 months beginning February 2006		398			577
Gaming equipment financing to purchase 38 games, monthly payments of $13 for 36 months beginning April 2005		210			312
Gaming equipment financing to purchase 20 games, no payments for one year and monthly payments of $8 for 24 months beginning January 2006		112			174
Gaming equipment financing, monthly payments of $3 for 36 months beginning January 2005		33			59
Gaming equipment financing to purchase 6 games, no payments for one year and monthly payments of $6 for 24 months beginning February 2007		65			—
Gaming equipment financing, monthly payments of $1 for 36 months beginning July 2006		32			—
Gaming equipment financing with terms of less than 12 months		70			96
		4,203			5,834
Less current portion		(2,989		)	(2,528		)
Gaming equipment financing, long-term portion		$	1,214		$	3,306

 

9

---

Virgin River Casino Corporation

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

6.             Related Party Transactions

MJB Development is a real estate construction company owned by a former shareholder of the Companies which provides storages services associated with hotel facilities of the Company.  Total charges for leasing of storage containers totaled $0, $0, $0 and $70,000 during the three and nine-months ended September 30, 2006 and 2005, respectively, and are included in the accompanying consolidated statements of operations.

Virgin River Foodmart, Inc., a Nevada corporation, (“Foodmart”) is owned by Mr. Black and his siblings.  Participants in the Company’s slot club program are able to redeem their points for gasoline at the Foodmart.  Foodmart charges the Company the retail amount of gas purchased with player points.  Charges associated with the point redemption for gasoline at the Foodmart were $0, $1,000, $30,000 and $106,000 for the three and nine-months ended September 30, 2006 and 2005, respectively.

Black, LoBello & Pitegoff is a law firm managed by the daughter of Mr. Black. The Company retains Black, LoBello & Pitegoff as outside legal counsel, and has paid legal fees for legal services in the amount of $47,000, $115,000, $68,000 and $112,000 for the three and nine-months ended September 30, 2006 and 2005, respectively.

Pursuant to the Indentures, Mr. Black is entitled to a management fee for his management of the Company business of up to 5% of EBITDA, as defined.  The Company expensed $222,000, $661,000, $192,000 and $576,000 during the three and nine-months ended September 30, 2006 and 2005, respectively, associated with this management fee.

During the three and nine months ended September 30, 2006, it was determined upon completion of the Companies’ income tax returns that $1,377,000 was overpaid by the Companies to Mr. Black for tax distributions during the year ended December 31, 2005.  As a result, the Companies offset that overpayment against earned and unpaid management fees during the three and nine months ended September 30, 2006 which resulted in an equity contribution of $1,377,000 to the Company.

Gaming Research is a consulting firm retained to perform marketing research for the Company.  The principal of Gaming Research is the father of the Company’s chief operating officer.  Gaming Research received consulting fees of $32,000, $80,000, $0 and $0 for the three and nine-months ended September 30, 2006 and 2005, respectively.

Resorts LLC provided management and other services to two related parties that manage and operate the home owners associations of the vacation intervals sold at the property.  Included in the accompanying condensed consolidated balance sheet at September 30, 2006 and December 31, 2005 is a receivable for $281,000 and $95,000, respectively, related to amounts owed for those services.

MDW, LLC (“MDW”) is a Nevada limited-liability company in which Mr. Black has an interest.  On December 15, 2004, pursuant to a termination agreement, the Company terminated its lease with MDW and entered into an arrangement with MDW to sell condominiums.  During the three and nine months ended September 30, 2006, the Company recorded approximately $0.3 million and $0.5 million in other income, respectively, and during the three and nine months ended September 30, 2005, recorded $0.1 million and $0.3 million in other expense, respectively, related to the Company’s investment with MDW.

10

---

Virgin River Casino Corporation

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

7.             Commitments and Contingencies

In January 2006, Oasis Interval Ownership, LLC entered into an agreement with Global Exchange Development Corp. to sell substantially all of the unsold time share intervals at the Oasis Hotel and Casino.  The sale is expected to close in three separate closings each involving approximately one-third of the unsold time share intervals at the Oasis Hotel and Casino. Each close is expected to occur within 6 months of the preceding close.    The first closing occurred in January 2006 for $280,000.  As part of the close, Global Exchange Development Corp. executed a note payable to Oasis Interval Ownership, LLC in the amount of $224,000 due January 2007 at an interest rate of 4.38%.  The note was fully paid in April of 2006.  The second closing occurred in June 2006 for $288,000 in cash.

8.             Subsequent Events

As part of the acquisition of the Oasis Hotel and Casino in July 2001, WSR, Inc, (“WSR”) the former owners of the property, retained rights that enabled them to have certain land owned by the Oasis Hotel and Casino in Arizona re-conveyed to them if any of the following events were to occur: 1) WSR is able to purchase the land, currently leased to the Oasis Hotel and Casino, from the State of Arizona and sell the portion of the land used in the operation of the Palms Golf Course back to the Oasis Hotel and Casino; or 2) The Oasis Hotel and Casino is not able to renegotiate a long-term extension to the current lease with the State of Arizona that expires in April 2008 and is required to develop existing land to replace the leased land for the golf course operation.  In August 2006, the Companies purchased those rights for approximately $1.1 million which are included in other assets in the accompanying condensed consolidated balance sheet.

In conjunction with the purchase of those rights, in October 2006, the Companies began efforts to market and sell the 350 acres of land the Companies own in Arizona.  The Companies are utilizing a Las Vegas real estate firm, Diversified Interests, which is owned 100% by Mr. Black, to market the property.  The Companies currently expect to sell the land within the next year.  As a result of the Companies’ decision, at September 30, 2006, the Companies had approximately $325,000 in current assets, $258,000 in current liabilities and $8.9 million in non-current assets that subsequent to September 30, 2006, upon meeting all requirements of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, will be recorded as held for sale in the accompanying consolidated balance sheet.

In October 2006, the Companies adopted the Black Gaming Long Term Incentive Plan (“LTIP”).  LTIP is a long-term formula based compensation plan utilizing EBITDA, as defined, Long-term Debt, as defined, cash and a fixed multiple to compensate senior executives for increasing the operating performance and financial condition of the Companies in the event the executive remains with the Companies.  Future compensation, commencing in the fourth quarter of the year ended December 31, 2006, recognized in accordance with LTIP will be accounted for using the intrinsic value method allowed for nonpublic entities as defined and prescribed by SFAS 123(R) “Share Based Payment”.

The Companies have commenced action to reorganize (the “Proposed Reorganization”) the entities, Virgin River Casino Corporation, RBG, LLC, and B & B B, Inc. under a single holding company, Black Gaming, LLC, a Nevada limited-liability company (“Black Gaming”). The Companies are currently seeking the necessary approvals and licenses from appropriate parties, including but not limited to appropriate gaming authorities. While the Companies hope the Proposed Reorganization will be effective prior to January 1, 2007, no assurance can be given that the Proposed Reorganization will be effective by that date, if ever. As currently proposed, when the Proposed Reorganization is completed, Black Gaming will guarantee payment of the Companies’ 9% senior secured notes and 12 3/4% senior subordinated notes.

 

 

11