10-Q 1 windsor6302004.txt FORM 10-Q (6-30-2004) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _____________________ Commission File Number: 0-31737 WINDSOR WOODMONT BLACK HAWK RESORT CORP. ---------------------------------------- (Exact name of registrant as specified in its charter) Colorado 75-2740870 -------- ---------- (State of incorporation) (I.R.S. Employer Identification No.) 111 Richman St., Black Hawk, Colorado 80422 ------------------------------------------- (Address of principal executive offices) (Zip Code) (303)582-3600 ------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date - 1,000,000 shares common stock outstanding August 13, 2004. -------------------------------------------------------------------------------- Windsor Woodmont Black Hawk Resort Corp. Form 10-Q Index Part I -- FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets, June 30, 2004 (unaudited) and December 31, 2003 2 Condensed Statements of Operations for the three months and six months ended June 30, 2004 and 2003 (unaudited) 3 Condensed Statements of Cash Flows for the three months and six months ended June 30, 2004 and 2003 (unaudited) 4 Notes to Condensed Financial Statements 5 - 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 - 15 Item 3. Quantitative and Qualitative Disclosures about Market Risk 15 Item 4. Controls and Procedures 16 Part II - OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Changes in Securities and Use of Proceeds 17 Item 3. Defaults Upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 18 1

WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND ORGANIZATION Basis of Presentation: Windsor Woodmont Black Hawk Resort Corp., a Colorado corporation (the "Company" or "Resort Corp.") was incorporated on January 9, 1998. Windsor Woodmont, LLC (the "LLC") was formed as a limited liability company, under the laws of the State of Colorado, on July 17, 1997. These companies were formed for the purpose of developing an integrated limited stakes gaming casino, entertainment and parking facility in Black Hawk, Colorado (the "Project"), which opened December 20, 2001. Prior to December 20, 2001, the Company and the LLC were development stage enterprises. The Company was a wholly owned shell company subsidiary of the LLC with no significant assets, liabilities or operating activity. In connection with a private placement and other financing transactions, the LLC contributed all of its assets and liabilities to the Company in exchange for stock of the Company and the contribution has been accounted for as a recapitalization of entities under common control whereby the assets and liabilities are recorded at the historical cost basis of the LLC. The Company completed the development of the Project, and operated the Project under a management agreement (the "Hyatt Management Agreement") with Hyatt Gaming Management, Inc. ("Hyatt Gaming") until assuming management of the Project in May, 2003. The LLC's ownership in the Company was subsequently reduced through the refinancing of the LLC's debt by conversion into the Company's common stock and the issuance of additional common stock for cash. Bankruptcy Proceedings: On November 7, 2002 (the "Petition Date"), we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"), in the United States Bankruptcy Court for the District of Colorado (the "Bankruptcy Court") as Case No. 02-28089-ABC (the "Chapter 11 Case") in order to facilitate the restructuring of the Company's debt, trade liabilities and other obligations. The Company is currently operating as a debtor-in-possession under the supervision of the Bankruptcy Court. The bankruptcy petition was filed in order to preserve cash and to give the Company the opportunity to restructure its obligations. On December 13, 2002, we filed a motion for court approval of the rejection of the Hyatt Management Agreement. The rejection of the Hyatt Management Agreement eliminates the payment of the Hyatt Gaming Management fee, thereby reducing operating costs and increasing net revenue. On April 10, 2003, we entered into a settlement agreement with Hyatt Gaming where they will not contest the rejection of the Hyatt Management Agreement (the "Hyatt Settlement and Release Agreement"). On April 25, 2003, the Bankruptcy Court entered an order approving the Hyatt Settlement and Release Agreement. On May 14, 2003, we assumed management of the casino and the casino name was changed to the Mountain High Casino. Pursuant to the Hyatt Settlement and Release Agreement, Hyatt Gaming holds an allowed unsecured claim in the Chapter 11 Case in the aggregate amount of $18,413,244 (the amount of $18,318,369 set forth in the Hyatt Settlement and Release Agreement plus an additional $94,875 in incentive management fees from the Petition Date through May 13, 2003); provided, however, that in the event that the value of the Company's assets exceed the value of the liens senior to the Second Mortgage Note (including the liens of the Black Hawk B.I.D., PCL Construction Services, Inc., the FF&E Lender and the First Mortgage Noteholders), Hyatt Gaming's claim based on the Second Mortgage Note will be secured to such extent. The unsecured claim is recorded in the financial statements as of June 30, 2004 and December 31, 2003, through a $5,000,000 contract rejection claim in current portion of long-term debt, second mortgage notes of $9,840,233 in current portion of long-term debt, and the balance of the unpaid claims is included in trade accounts payable and accrued expenses. On July 23, 2004, we entered into a Hyatt Settlement Agreement, which provides for the compromise and resolution of all of the disputes between the Company and Hyatt and the treatment of Hyatt's claims under the Plan of Reorganization. Pursuant to this agreement, Hyatt will be allowed to retain certain of the Company funds it holds and be paid $778,530 in cash within 10 days after the effective date of a Plan of Reorganization. The treatment of Hyatt Gaming's allowed claim is reflected in the Plan of Reorganization (as defined below). On or about February 19, 2003, we entered into a stipulation with David R. Belding, our furniture, fixture and equipment lender (the "FF&E Lender") pursuant to which all issues between the Company and the FF&E Lender concerning the amount and priority of the FF&E Lender's claim and the treatment of such claim under a plan of reorganization were resolved. On February 19, 2003, the 5 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS Company filed its Motion to Approve Stipulation Regarding (1) Allowance and Payment of Secured Claim of David R. Belding; and (2) Mutual Release of Claims Relating to Disputes Over Funds in Wells Fargo Bank Account (the "FF&E Stipulation"). Thereafter, objections to the FF&E Stipulation were filed by the First Mortgage Noteholders and PCL (as defined below), and SunTrust and the Unsecured Creditors Committee filed joinders to the objection filed by the First Mortgage Noteholders (PCL later withdrew its objection to the FF&E Stipulation). The objections asserted, among other things, that the initiation of an adversary proceeding may be required to obtain the relief sought in the FF&E Stipulation. The Company, the FF&E Lender, and the objecting parties agreed to proceed with the issues raised in connection with the FF&E Stipulation and the objections thereto by way of an adversary proceeding and such matter was converted to an adversary proceeding. Thereafter, the parties reached an agreement whereby the adversary proceeding on the FF&E Stipulation was held in abeyance and the issues relating to the FF&E Stipulation were resolved or reserved for a later date. On June 24, 2003, the Company filed an Amended Stipulation Regarding (1) Allowance and Payment of Secured Claim of David R. Belding; and (2) Mutual Release of Claims Relating to Disputes Over Funds in Wells Fargo Bank Account (the "FF&E Settlement Agreement"), which was approved by the Bankruptcy Court by order entered June 30, 2003. The FF&E Settlement Agreement provides, among other things, that the FF&E Lender will receive payments of up to $500,000 per month during the Chapter 11 Case and will be paid certain amounts on the effective date of a plan of reorganization. After the approval of the FF&E Settlement Agreement, the Company and the FF&E Lender agreed to more favorable treatment to the Company, including a reduction in the required effective date payment to the FF&E Lender and a one-year extension on the repayment of the amounts due to the FF&E Lender, which treatment is reflected in the Plan of Reorganization (as defined below). On May 28, 2004, the Company and the FF&E Lender entered into a revised FF&E Settlement Agreement dated as of May 28, 2004 (the "Revised FF&E Settlement Agreement"). This agreement provides that the Company will continue to pay the amount of $500,000 per month to the FF&E Lender until the effective date of a Plan of Reorganization and on the effective date of the Plan of Reorganization, the Company will pay the FF&E Lender an amount equal to $11,000,000 less any monthly payments made to the FF&E Lender during the time the Company was in bankruptcy that are in excess of the $5,000,000 paid to the FF&E Lender as of May 1, 2004. The Revised FF&E Settlement Agreement is conditioned on, among other things, confirmation of the Plan of Reorganization. On August 11, 2004, we filed a Plan of Reorganization and a related disclosure statement with the Bankruptcy Court. See Note 7 - Plan of Reorganization. Because of the ongoing nature of the reorganization case, the outcome of which is not presently determinable, the financial statements contained herein are subject to material uncertainties and may not be indicative of the results of the Company's future operations or financial position. No assurance can be given that the Company will be successful in reorganizing its affairs within the Chapter 11 bankruptcy proceedings. The financial statements contained herein have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern, and do not purport to reflect or to provide for all of the possible consequences of the ongoing Chapter 11 reorganization case. Specifically, the financial statements do not present the amount which will ultimately be paid to settle liabilities and contingencies which may be required in the Chapter 11 reorganization case or the effect of any changes which may be made in connection with the Company's capitalization or operations resulting from a plan of reorganization. As a result of the items discussed above, there is substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon, but not limited to, formulation, approval, and confirmation of a plan of reorganization, adequate sources of capital, customer and employee retention, the ability to provide a high quality gaming experience and the ability to sustain positive results of operations and cash flows sufficient to continue to operate. The financial statements do not include any adjustments to the recorded amounts or classification of assets or liabilities or reflect any amounts that may ultimately be paid to settle liabilities and contingencies which may be required in the Chapter 11 reorganization or the effect of any changes which may be made in connection with the Company's capitalization or operations resulting from a plan of reorganization. 6 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS Accounting under Bankruptcy: The financial statements have been prepared in accordance with AICPA Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" (SOP 90-7). Pursuant to SOP 90-7, an objective of financial statements issued by an entity in Chapter 11 is to reflect its financial evolution during the proceeding. For that purpose, the financial statements for periods including and subsequent to filing the Chapter 11 Case should distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Expenses and other items not directly related to ongoing operations are reflected separately in the statement of operations as reorganization items. See Note 4 - Reorganization Items. The filing of the Chapter 11 Case (i) automatically stayed actions by creditors and other parties in interest to recover any claim that arose prior to the commencement of the Chapter 11 Case, and (ii) served to accelerate, for purposes of allowance, all pre-petition liabilities of the Company, whether or not those liabilities were liquidated or contingent as of the Petition Date. Warrants Issued On Common Stock: Warrants issued in connection with the Company's various financing transactions contain a "put option" permitting the warrant holder to redeem the warrant for cash. Due to the cash based put option features of the warrants, the total warrant value has been recorded as a liability in the accompanying condensed balance sheet and recorded at fair value each reporting period. As of June 30, 2004 the liability for the fair value of the warrants was written down to $0 in the accompanying condensed balance sheet with the corresponding non-operating income resulting from the reduction in fair market value at June 30, 2004 in the amount of $713,720 recorded in the accompanying condensed statement of operations for the three months and six months ended June 30, 2004. The fair value was written down to $0 based on management's assessment of the value. Additionally, the warrants are valued at $0 in the Plan of Reorganization filed on August 11, 2004. See Note 7 - Plan of Reorganization. Accounting Policies: The financial information at June 30, 2004, and for the three and six months ended June 30, 2004 and 2003 is unaudited. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2004 are not necessarily indicative of the results that will be achieved for the entire year. These financial statements should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended December 31, 2003. Basic earnings (loss) per share is computed by dividing net income (loss) applicable to common stock by the weighted average common shares outstanding during the period. Diluted earnings (loss) per share is based on the weighted average number of common shares outstanding during the respective periods, plus the common equivalent shares, if dilutive, that would result from the exercise of stock options. Stock options and warrants for 768,720 shares of common stock at June 30, 2004 and December 31, 2003, were excluded from the diluted earnings (loss) per share calculation because their effects would have been anti-dilutive. The Company has reviewed all recently issued accounting pronouncements and does not believe that any of the pronouncements will have a material impact on its financial statements. 2. GOING CONCERN CONSIDERATIONS The Company is currently operating under the jurisdiction of Chapter 11 of the Bankruptcy Code and the Court, and the continuation of the Company as a going concern is contingent upon, among other things, its ability to restructure successfully, including refinancing its debts, and the ability of the Company to generate sufficient cash to fund future operations. There can be no assurance in this regard. 7 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS The Company intends to utilize the Chapter 11 process to reorganize its financial and operational affairs with the goal of preserving and enhancing the assets of the Company for the benefit of creditors and shareholders. The Company expects the business to operate as usual, our valued employees to be retained, and for our post-bankruptcy obligations to be satisfied. The Company's objective is to achieve the highest possible recoveries for all creditors and shareholders, consistent with the Company's ability to pay and to continue the operation of the Company's business. However, there can be no assurance that the Company will be able to attain these objectives or to achieve a successful reorganization. Further, there can be no assurance that the liabilities of the Company will not be found to exceed the fair value of its assets. This could result in claims being paid at less than 100% of their face value and the equity of the Company's shareholders being diluted or cancelled. Under the Bankruptcy Code, the rights of, and ultimate payments to pre-Petition Date creditors and shareholders may be substantially altered from their contractual terms. At this time, it is not possible to predict the outcome of the Chapter 11 Case, in general, or the effect of the Chapter 11 Case on the business of the Company or on the interests of creditors and shareholders. The Company anticipates that substantially all liabilities of the Company as of the Petition Date will be resolved under a plan of reorganization in accordance with the provisions of the Code. On August 11, 2004 we filed a Plan of Reorganization, however, there can be no assurance that the Plan will be confirmed by the Bankruptcy Court and consummated. See Note 7 - Plan of Reorganization. The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, as a result of the filing of the Chapter 11 Case, such realization of assets and liquidation of liabilities are subject to a significant number of uncertainties. 3. LONG -TERM DEBT Long-term debt consisted of the following at June 30, 2004 and December 31, 2003:

All of the Company's long-term debt became immediately due and payable as a result of the commencement of the Chapter 11 Case, accordingly, long-term debt balances have been reclassified to current maturities. The Company is only paying interest on the Black Hawk Business Improvement District Bonds and the FF&E Note because they are the only fully secured creditors under the Bankruptcy Plan. The other notes are not fully secured and, in accordance with SOP 90-7, no interest is paid or accrued on those notes. Substantially all of the Company's assets are pledged as collateral for long-term debt. On October 15, 2002, the Company failed to make the interest payments initially due on September 15, 2002, that it had elected to defer until October 15, 2002 on the First Mortgage Notes and Second Mortgage Notes. The Company's failure to pay the interest constituted an "Event of Default" under the applicable agreements. On November 7, 2002, the Company filed a voluntary 8 petition for relief under Chapter 11 of the Bankruptcy Code. As a result of the failure to make required interest payments, and the filing of the bankruptcy petition, the Company was not in compliance with all of its debt covenants. 4. REORGANIZATION ITEMS Reorganization related items of $243,072 and $6,441,806 were incurred during the three months ended June 30, 2004 and 2003, respectively, and $594,179 and $7,352,219 during the six months ended June 30, 2004 and 2003, respectively. These include costs incurred for legal, financial advisor services received in connection with our debt restructuring efforts, and other costs directly related to our debt restructuring efforts. The amounts for the three months and six months ended June 30, 2003 also include the $5 million dollar damage claim incurred with the rejection of the Hyatt contract, costs incurred to re-brand the casino to the Mountain High Casino, and the write off of the cost of Hyatt branded merchandise and operating supplies. 5. COMMITMENTS AND CONTINGENCIES Gaming Regulation Licensing The Company's ability to conduct gaming operations in the State of Colorado is subject to the licensability and qualifications of the Company and its common stockholders. The Colorado Gaming Commission approved the issuance of the appropriate and necessary gaming licenses for operation of the Casino to us and Hyatt Gaming on September 20, 2001. The licenses were physically issued to us immediately prior to opening of our casino on December 20, 2001. Additionally, upon receipt of a gaming license, such licensing and qualifications are reviewed periodically by the gaming authorities in Colorado and there are no guarantees such licenses will be renewed. In September 2003, the Company received the required gaming license renewals, which expire September 20, 2004. The Company has applied for license renewals upon their expiration on September 20, 2004. Legal Proceedings The Company is involved in certain legal proceedings, claims and litigation, including those described below. The results of legal proceedings cannot be predicted with certainty. Management does not believe that the Company has potential liability related to any current legal proceedings and claims that would have a material adverse effect on the Company's financial condition, liquidity or results of operations. We are involved in certain legal proceedings, claims and litigation, including those described below. Further, we may become involved in other such proceedings in the future. The results of legal proceedings cannot be predicted with certainty. Except as otherwise indicated below, management does not believe that we have potential liability related to any current legal proceedings and claims that would have material adverse effect on our financial condition, liquidity or results of operations. As of the result of the Chapter 11 Case, except where noted, legal proceedings are stayed. First Place LLC filed a lawsuit against the Company generally asserting that it has an ownership interest in a small sliver of property upon which the Company has built and is operating the Black Hawk Casino by Hyatt. The property which First Place contends it has an ownership in consists of approximately 6,000 square feet. The Company timely referred the issue to its title insurance company, First American Title. The Company has a $33.5 million owner's title insurance policy with First American. First American has advised the Company that the claim will be covered by the Company's title insurance and the title insurance company has been and is vigorously defending the claim. After a trial in June, 2002, the trial court determined that First Place does have an ownership interest in a strip of property containing approximately 3,000 square feet which the Company believed it owned. Certain post trial motions had been granted and were pending final determination by the Court at the time of the Chapter 11 filing. On August 7, 2003, the Bankruptcy Court entered an order lifting the automatic stay, thus allowing this case to proceed to conclusion in the state courts. On September 12, 2003, the state trial court liquidated the First Place claim, based upon application of the "relative hardship" doctrine, in the amount of $73,500 and decreed that upon payment of that amount the Company would own the 3,000 square feet. First Place has appealed this case to the Colorado Court of Appeals and it is anticipated the appeal will be concluded in late 2004 or early 2005. We do not anticipate that there will be any financial exposure to the Company with respect to this claim, and fully expects that this claim will be resolved by and at the expense of First American Title. 9 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS PCL Construction Services, Inc. acted as the general contractor for the Company in the construction of the Black Hawk Casino by Hyatt project. The Substantial Completion Date for the project was originally to have been October 29, 2001 and was subsequently amended by Change Order to November 15, 2001. In fact, construction of the casino was not at a point where the casino could open for business until December 20, 2001 and certain components of the project were not completed until early 2002. In early 2002, PCL and its subcontractors claimed to be owed an aggregate of approximately $7,200,000 on the project, recorded mechanic's liens and filed mechanic's lien foreclosure and breach of contract litigation against the Company. The Company filed litigation against PCL for PCL's misrepresentations and contractual breaches concerning completion of the project. This litigation was not at issue with all parties as of the date of the Chapter 11 filing and has been stayed. The Company and PCL engaged in extensive settlement discussions starting in January, 2003 and entered into a settlement agreement in May 2003. The Bankruptcy Court approved the agreement on July 7, 2003. Under the agreement, the Company agreed to pay PCL and its subcontractors a total of $4.5 million, $2.3 million of which was paid July 28, 2003, $1.4 million of which was paid in January 2004, $400,000 to be paid in October 2004, and $400,000 to be paid in April 2005. Paul Steelman was the project architect for the Black Hawk Casino by Hyatt project. Paul Steelman claims that it is owed an additional approximately $200,000 for architectural work performed at the project. The Company believes that it does not owe Paul Steelman the $200,000 and further believes that Paul Steelman owes the Company approximately $2,000,000 for Paul Steelman's failure to properly prepare and complete architectural plans and specifications for the project in a timely fashion. Prior to the Chapter 11 filing, the Company and Steelman had entered into a Dispute Resolution Agreement providing for mediation, to be followed by binding arbitration, if necessary. The Company and Steelman filed a stipulated motion lifting the stay from this dispute and allowing its determination by Dispute Resolution Agreement, and an order approving the motion was entered in May 2003. Mediation between the Company and Steelman did not result in a resolution of these claims and a binding arbitration of the claims is scheduled for December, 2004. NOTE 6. ASSET PURCHASE AGREEMENT On May 28, 2004, the Company entered into an Asset Purchase Agreement with Ameristar Casinos, Inc. to sell certain specified assets and liabilities of the Company. The specified assets (the "Acquired Assets") include substantially all of the assets of the Company required to operate the Mountain High Casino. Excluded assets include the corporate charter, cash (except for all casino cash), any shares of capital stock in the Company, the Hyatt and various other claims, and the Company's director and officer insurance policy and all prepaid premiums associated therewith. The liabilities to be assumed include all Casino liabilities existing on the closing date, all liabilities of the Company relating to the Black Hawk Business Improvement District Bonds, certain liabilities for unused vacation, sick pay, holiday pay and paid time off obligations as of the closing date for all employees hired by Ameristar, and all liabilities of the Company under the WARN Act incurred in connection with this agreement (the "Assumed Liabilities"). The terms of the Asset Purchase Agreement with Ameristar Casinos, Inc. is incorporated in the Plan of Reorganiztion which was filed on August 11, 2004. The consideration for the Acquired Assets is $117,000,000 in cash, subject to certain adjustments, $2,500,000 worth of common stock of Ameristar Casinos, Inc., plus the Assumed Liabilities. NOTE 7. PLAN OF REORGANIZATION On August 6, 2003, we filed a Plan of Reorganization the "Original Plan" and a related disclosure statement with the Bankruptcy Court. On November 20, 2003, the Company filed its first amended Plan of Reorganization and its first amended Disclosure Statement. Facing opposition to the Original Plan, as amended on November 20, 2003, the Company, in good faith, negotiated with the various creditors with respect to potential alternatives to the Original Plan, including a potential sale of the Company's assets. As a result of extensive negotiations with several potential buyers, the Company accepted the bid received from Ameristar Casino, Inc. and executed the Asset Purchase Agreement (as described in Note 6) on May 28, 2004, and amended the agreement on August 3, 2004. On August 11, 2004, we filed a Plan of Reorganization (the "Plan") and a related disclosure statement (the "Disclosure Statement") with the Bankruptcy Court. The Disclosure Statement is filed to provide information of a kind and in sufficient detail to enable a typical holder of claims or interests in a class impaired under the Plan to make an informed judgment about the Plan. To approve the form of disclosure statement, the Bankruptcy Court must determine that the 10 Disclosure Statement contains "adequate information" to make an informed judgment in voting to accept or reject the Plan. Upon the Bankruptcy Court's findings that the Disclosure Statement contains "adequate information," we will be authorized to transmit the Plan and Disclosure Statement to holders of impaired claims in connection with the solicitation of votes under the Plan. Bankruptcy Court approval of the Disclosure Statement does not constitute a determination by the Bankruptcy Court as to the merits of the Plan or an indication that the Bankruptcy Court will confirm the Plan. If the Plan is confirmed by the Bankruptcy Court, substantially all pre-petition liabilities will be subject to restructuring. The Plan is a liquidating plan and does not contemplate the continuation of the Company's business. The Plan provides for the sale of substantially all of its assets to Ameristar Casinos, Inc. Any remaining assets after the Ameristar sale will be liquidated or otherwise converted to cash for use in settlement of the various claims by creditors. Any plan of reorganization is voted upon by creditors and equity holders and is subject to the approval of the Bankruptcy Court. A plan of reorganization must be confirmed by the Bankruptcy Court upon certain findings being made by the Bankruptcy Court as required by the Bankruptcy Code. The Bankruptcy Court may confirm a plan or liquidation notwithstanding the non-acceptance of the plan by an impaired class of creditors or equity security holders if certain requirements of the Bankruptcy Code are met. There can be no assurance that the Plan will be confirmed by the Bankruptcy Court, or that any such plan will be consummated. Until the Plan is confirmed by the Bankruptcy Court the recoveries of holders of pre-petition claims are subject to change. The Disclosure Statement includes detailed information about the Plan, financial estimates regarding our reorganized business enterprise value including support for the "best interest" requirements for the Plan under the Bankruptcy Code; and events leading up to our Chapter 11 Case. The Plan and the transactions contemplated thereunder are more fully described in the Disclosure Statement, a copy of which is available to the public at the office of the clerk of the Bankruptcy Court, copies of each are attached hereto as Exhibits 2.1 and 2.2, respectively. During the Chapter 11 Case, we continue to operate our business in the ordinary course without interruption and without material impact on our employees, customers and suppliers. At this time it is not possible to predict the effect of the Chapter 11 Case on our business, various creditors and equity security holders or when we will be able to conclude our Chapter 11 Case. Our future results are dependent upon, among other things, the confirmation and implementation of a plan of reorganization or liquidation. 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS Statements made in this Form 10-Q ("Quarterly Report") that are not historical or current facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, we may from time to time make written or oral forward-looking statements. Written forward-looking statements may appear in documents filed with the Securities and Exchange Commission (the "Commission"), in press releases and in reports to shareholders. The forward-looking statements included in this Quarterly Report are based on current expectations that involve a number of risks and uncertainties. These forward-looking statements are based on the following assumptions: a plan of reorganization consistent with the Plan of Reorganization recently filed by us will be approved by the Bankruptcy Court, competitive and market conditions affecting the Casino will not change materially or adversely, that we will retain key management personnel, that our forecasts will accurately anticipate market demand and that there will be no further material adverse change in our operations or business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although management believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking information will be realized. 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 addition, our business and operations are subject to substantial risks, which increase the uncertainty inherent in such forward-looking statements. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. The Private Securities Litigation Reform Act of 1995 contains a safe harbor for forward-looking statements on which we rely in making such disclosures. In connection with this safe harbor we are hereby identifying important factors that could cause actual results to differ materially from those contained in any forward-looking statements made by or on our behalf. Any such statement is qualified by reference to the cautionary statements included in this Quarterly Report. Overview On November 7, 2002, we filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. Under Chapter 11, we are operating our business as a debtor-in-possession. Under the Bankruptcy Code, actions to collect pre-petition indebtedness or enforce pre-petition contractual obligations, as well as most other pending actions against us or property of our estate, are stayed. On April 10, 2003, we entered into the Hyatt Settlement and Release Agreement with Hyatt Gaming whereby Hyatt Gaming will hold certain allowed pre-petition unsecured claims in the Chapter 11 Case and the Hyatt Management Agreement was deemed rejected. On May 14, 2003, we assumed management of the casino and the casino's name was changed to the Mountain High Casino. The Colorado Department of Transportation ("CDOT") has announced that Highway 119 between Golden and Black Hawk, Colorado will be closed for 30 days in September, 2004, for bridge and tunnel repairs. CDOT has indicated that construction will take place 24 hours a day and 7 days a week. This road is one of the two major access ways for our customers to reach Black Hawk, and accordingly, this could have a material negative effect on our September 2004 operations. The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed financial statements of Windsor Woodmont Black Hawk Resort Corp., including the respective notes thereto and other financial information included elsewhere in this report. The following discussion should also be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended December 31, 2003. Results of Operations The following table sets forth certain summarized operating data for the periods indicated. 12

* Earnings Before Interest, Taxes, Depreciation and Amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is not considered a measure of performance recognized as an accounting principle generally accepted in the United States of America. Management believes that EBITDA is a valuable measure of performance of the Casino's operations. The gaming industry commonly uses EBITDA as a method of arriving at the economic value of a casino's operations. It is also used by lending institutions to gauge operating performance. Management uses EBITDA to compare the relative operating performance of the Casino by eliminating interest income, interest expense, income tax expense, and depreciation and amortization expense associated with the varying levels of capital expenditures for infrastructure required to generate revenue, and the often times high cost of acquiring existing operations. Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003: Total operating revenues for the quarter ended June 30, 2004 was $16,712,457 ($15,687,993 net of promotional allowances). This included $14,867,091 in casino revenue, $1,651,664 in food and beverage revenue, and $193,702 of other revenue. This compares to total operating revenues for the quarter ended June 30, 2003 of $14,836,311 ($13,931,228 net of promotional allowances) and represented an increase of 12.6% of total revenues (12.6% net of promotional allowances). This included $13,153,527 in casino revenue, $1,450,802 in food and beverage revenue, and $231,982 of other revenue. Casino operating expenses for the quarter ended June 30, 2004 totaled $8,257,930, including $2,939,721 in state and local gaming taxes and device fees. This compares to casino operating expenses for the quarter ended June 30, 2003 totaling $7,896,500, including $2,723,974 in state and local gaming taxes and device fees. This represents an increase of 4.6% in casino operating expenses. In addition to the increase in state and local gaming taxes and devices fees, the increase is primarily due to increased marketing costs (principally in radio and television advertising and increased cost of promotional prizes, offset by reduced costs in coupon redemptions, newspaper and outdoor billboard advertising costs). Other casino operating expenses consist principally of salaries, wages and benefits, marketing costs, rental expense associated with slot games operated under fee participation agreements, and other operating expenses of the casino. Food and beverage expenses for the quarter ended June 30, 2004 totaled $1,338,084, including $894,416 in cost of goods sold. This compares to food and beverage expenses for the quarter ended June 30, 2003 totaling $1,400,957, including $813,520 in cost of goods sold, representing a decrease of 4.5% in food and beverage expenses. The decrease is primarily due to reduced payroll and benefit costs. Other food and beverage expenses consist principally of salaries, wages and benefits, and other operating expenses of the food and beverage operations. 13 Other operating expenses for the quarter ended June 30, 2004 totaled $154,603 versus $275,072 for the quarter ended June 30, 2003, and consist of salaries, wages and benefits, contract entertainment expense, and other operating expenses. This represents a decrease of approximately 43.8% and is primarily due to reduced payroll and benefit costs and reduced expenditures related to gift shop operations and to contract entertainment management. General and administrative expenses for the quarter ended June 30, 2004 totaled $2,446,743 versus $2,528,278 for the quarter ended June 30, 2003, and consist of salaries, wages and benefits, utilities, insurance, property taxes, contract services, maintenance and repairs, cleaning supplies, and other operating expenses. Depreciation and amortization expense for the quarter ended June 30, 2004 totaled $2,130,068 versus $2,070,207 for the quarter ended June 30, 2003. These expenses relate to property and equipment in service and vary with the addition or replacement of new items of property and equipment. Interest expense for the quarter ended June 30, 2004 totaled $546,406, including $59,855 in amortization of debt issuance costs. This compares to interest expense for the quarter ended June 30, 2003, which totaled $611,307, including $59,248 in amortization of debt issuance costs. The net reduction represents a decrease of approximately 10.6% and is a result of principal payments on the FF&E Note and on the Black Hawk Business Improvement District Bonds. Reorganization items for the quarter ended June 30, 2004 totaled $243,072. This includes costs incurred for legal, financial advisor services received in connection with our debt restructuring efforts, and other costs directly related to our debt restructuring efforts. This compares to reorganization items for the quarter ended June 30, 2003, which totaled $6,441,806. The June 30, 2003 total included a $5,000,000 damage claim incurred with the rejection of the Hyatt contract, and it included the write off of Hyatt branded supplies, which can no longer be used in operations. There were no similar items in the quarter ended June 30, 2004. Future operating results will be subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond our control. While we believe that our casino will be able to attract a sufficient number of patrons and achieve the level of activity and revenues necessary to permit us to meet our payment obligations, we cannot assure you that we will achieve these results. Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003: Total operating revenues for the six months ended June 30, 2004 was $32,448,231 ($30,513,829 net of promotional allowances). This included $28,944,993 in casino revenue, $3,132,663 in food and beverage revenue, and $370,575 of other revenue. This compares to total operating revenues for the six months ended June 30, 2003 of $29,675,215 ($27,708,934 net of promotional allowances) and represented an increase of 9.3% of total revenues (10.1% net of promotional allowances). This included $26,118,361 in casino revenue, $3,081,125 in food and beverage revenue, and $475,729 of other revenue. Casino operating expenses for the six months ended June 30, 2004 totaled $16,061,605, including $5,732,609 in state and local gaming taxes and device fees. This compares to casino operating expenses for the six months ended June 30, 2003 totaling $15,941,721, including $5,450,431 in state and local gaming taxes and device fees. This represents an increase of 0.8% in casino operating expenses. The increase is primarily due to increased state and local gaming taxes and device fees, offset partially by reduced costs of salaries, wages and benefits. Other casino operating expenses consist principally of salaries, wages and benefits, marketing costs, rental expense associated with slot games operated under fee participation agreements, and other operating expenses of the casino. Food and beverage expenses for the six months ended June 30, 2004 totaled $2,591,808, including $1,697,877 in cost of goods sold. This compares to food and beverage expenses for the six months ended June 30, 2003 totaling $2,741,293, including $1,613,526 in cost of goods sold, representing a decrease of 5.5% in food and beverage expenses. The decrease is primarily due to reduced payroll and benefit costs, partially offset by the increased cost of goods sold. Other food and beverage expenses consist principally of salaries, wages and benefits, and other operating expenses of the food and beverage operations. Other operating expenses for the six months ended June 30, 2004 totaled $303,039 versus $579,607 for the six months ended June 30, 2003, and consist of salaries, wages and benefits, contract entertainment expense, and other operating expenses. This represents a decrease of approximately 47.7% and is 14 primarily due to reduced payroll and benefit costs and reduced expenditures related to gift shop operations and to contract entertainment management. General and administrative expenses for the six months ended June 30, 2004 totaled $4,937,595 versus $4,963,688 for the six months ended June 30, 2003, and consist of salaries, wages and benefits, utilities, insurance, property taxes, contract services, maintenance and repairs, cleaning supplies, and other operating expenses. Depreciation and amortization expense for the six months ended June 30, 2004 totaled $4,259,820 versus $4,156,648 for the six months ended June 30, 2003. These expenses relate to property and equipment in service and vary with the addition or replacement of new items of property and equipment. Interest expense for the six months ended June 30, 2004 totaled $1,117,990, including $119,561 in amortization of debt issuance costs. This compares to interest expense for the six months ended June 30, 2003, which totaled $1,232,960, including $118,345 in amortization of debt issuance costs. The net reduction represents a decrease of approximately 9.3% and is a result of principal payments on the FF&E Note and on the Black Hawk Business Improvement District Bonds. Reorganization items for the six months ended June 30, 2004 totaled $594,179. This includes costs incurred for legal, financial advisor services received in connection with our debt restructuring efforts, and other costs directly related to our debt restructuring efforts. This compares to reorganization items for the six months ended June 30, 2003, which totaled $7,352,219. The June 30, 2003 total included a $5,000,000 damage claim incurred with the rejection of the Hyatt contract, and it included the write off of Hyatt branded supplies, which can no longer be used in operations. Future operating results will be subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond our control. While we believe that our casino will be able to attract a sufficient number of patrons and achieve the level of activity and revenues necessary to permit us to meet our payment obligations, we cannot assure you that we will achieve these results. Liquidity and Capital Resources The Chapter 11 Case may have a material adverse effect on relationships with suppliers or vendors. While we have not experienced any significant disruption in our relationships with our suppliers or vendors, we may have difficulty maintaining existing or creating new relationships with suppliers or vendors as a result of the Chapter 11 Case. Suppliers and vendors could stop providing supplies or services or provide such supplies or services only on "cash on delivery," "cash on order," or other terms that could have an adverse impact on our short-term cash flows. The adequacy of our capital resources is limited and we have limited access to additional financing. In addition to the cash requirements necessary to fund ongoing operations, we currently are incurring and anticipate that we will incur significant professional fees and other restructuring costs in connection with the Chapter 11 Case and the restructuring of our operations. However, as a result of the uncertainty surrounding our current circumstances, it is difficult to predict our actual liquidity needs at this time. Although, based on current and anticipated levels of operations, and efforts to increase the number of gaming patrons and customers to the Casino, we believe that our cash flow from operations will be adequate to meet our anticipated cash requirements during the pendency of the Chapter 11 Case, ultimately such amounts may not be sufficient to fund operations until such time as a plan of reorganization receives the requisite acceptance by creditors and equity holders and is confirmed by the Bankruptcy Court. In the event that cash flows are insufficient to meet future cash requirements, we may be required to reduce planned capital expenditures or seek additional financing. We can provide no assurance that reductions in planned capital expenditures would be sufficient to cover shortfalls or that additional financing would be available or, if available, offered on acceptable terms. As a result of the Chapter 11 Case and the circumstances leading to the filing thereof, our access to additional financing is, and for the foreseeable future will likely continue to be limited. As the foregoing indicates, our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time, and ultimately cannot be determined until a plan of reorganization has been developed and is confirmed by the Bankruptcy Court in the Chapter 11 Case. Significant Accounting Policies We have not made any changes in our accounting policies during the six months ended June 30, 2004. 15 Item 3. Quantitative and Qualitative Disclosures about Market Risk Not Applicable. Item 4. Controls and Procedures An evaluation was conducted under the supervision and with the participation of the Company's management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of June 30, 2004. Based on that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Such officers also confirm that there was no change in the Company's internal control over financial reporting during the quarter ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings We are involved in certain legal proceedings, claims and litigation, including those described below. Further, we may become involved in other such proceedings in the future. The results of legal proceedings cannot be predicted with certainty. Except as otherwise indicated below, management does not believe that we have potential liability related to any current legal proceedings and claims that would have material adverse effect on our financial condition, liquidity or results of operations. As of the result of the Chapter 11 Case, except where noted, legal proceedings are stayed. First Place LLC filed a lawsuit against the Company generally asserting that it has an ownership interest in a small sliver of property upon which the Company has built and is operating the Black Hawk Casino by Hyatt. The property which First Place contends it has an ownership in consists of approximately 6,000 square feet. The Company timely referred the issue to its title insurance company, First American Title. The Company has a $33.5 million owner's title insurance policy with First American. First American has advised the Company that the claim will be covered by the Company's title insurance and the title insurance company has been and is vigorously defending the claim. After a trial in June, 2002, the trial court determined that First Place does have an ownership interest in a strip of property containing approximately 3,000 square feet which the Company believed it owned. Certain post trial motions had been granted and were pending final determination by the Court at the time of the Chapter 11 filing. On August 7, 2003, the Bankruptcy Court entered an order lifting the automatic stay, thus allowing this case to proceed to conclusion in the state courts. On September 12, 2003, the state trial court liquidated the First Place claim, based upon application of the "relative hardship" doctrine, in the amount of $73,500 and decreed that upon payment of that amount the Company would own the 3,000 square feet. First Place has appealed this case to the Colorado Court of Appeals and it is anticipated the appeal will be concluded in late 2004 or early 2005. We do not anticipate that there will be any financial exposure to the Company with respect to this claim, and fully expects that this claim will be resolved by and at the expense of First American Title. PCL Construction Services, Inc. acted as the general contractor for the Company in the construction of the Black Hawk Casino by Hyatt project. The Substantial Completion Date for the project was originally to have been October 29, 2001 and was subsequently amended by Change Order to November 15, 2001. In fact, construction of the casino was not at a point where the casino could open for business until December 20, 2001 and certain components of the project were not completed until early 2002. In early 2002, PCL and its subcontractors claimed to be owed an aggregate of approximately $7,200,000 on the project, recorded mechanic's liens and filed mechanic's lien foreclosure and breach of contract litigation against the Company. The Company filed litigation against PCL for PCL's misrepresentations and contractual breaches concerning completion of the project. This litigation was not at issue with all parties as of the date of the Chapter 11 filing and has been stayed. The Company and PCL engaged in extensive settlement discussions starting in January, 2003 and entered into a settlement agreement in May 2003. The Bankruptcy Court approved the agreement on July 7, 2003. Under the agreement, the Company agreed to pay PCL and its subcontractors a total of $4.5 million, $2.3 million of which was paid July 28, 2003, $1.4 million of which was paid in January 2004, $400,000 to be paid in October 2004, and $400,000 to be paid in April 2005. Paul Steelman was the project architect for the Black Hawk Casino by Hyatt project. Paul Steelman claims that it is owed an additional approximately $200,000 for architectural work performed at the project. The Company believes that it does not owe Paul Steelman the $200,000 and further believes that Paul Steelman owes the Company approximately $2,000,000 for Paul Steelman's failure to properly prepare and complete architectural plans and specifications for the project in a timely fashion. Prior to the Chapter 11 filing, the Company and Steelman had entered into a Dispute Resolution Agreement providing for mediation, to be followed by binding arbitration, if necessary. The Company and Steelman filed a stipulated motion lifting the stay from this dispute and allowing its determination by Dispute Resolution Agreement, and an order approving the motion was entered in May 2003. Mediation between the Company and Steelman did not result in a resolution of these claims and a binding arbitration of the claims is scheduled for December 1 through December 9, 2004. Item 2. Changes in Securities and Use of Proceeds Not Applicable. Item 3. Defaults Upon Senior Securities Not Applicable. 17 Item 4. Submission of Matters to a Vote of Security Holders On May 26, 2004, the annual meeting of shareholders of the Company was held at the Mountain High Casino. At the annual meeting the shareholders were submitted two proposals by the Company. The election the following four (4) persons to serve as directors of the company until the next annual meeting of shareholders and thereafter until their successors shall have been elected and qualified: Jerry L. Dauderman, Timothy G. Rose, Irving C. Deal and Garry Saunders and the ratification of the selection of Grant Thornton LLP as the independent public accountants of the company for the fiscal year ending December 31, 2004. Each shareholder share was worth one vote in the election of the proposals. The shareholders of the Company voted for the election of Mr. Dauderman, Mr. Rose, Mr. Deal and Mr. Saunders to serve on the Board of Directors for the 2004 fiscal year, with the following breakdown of votes: Name For Against ---- --- ------- Jerry L. Dauderman 628,673 29,500 Timothy G. Rose 628,673 29,500 Irving C. Deal 628,673 29,500 Garry Saunders 628,673 29,500 The shareholders of the Company voted 658,173 shares for the ratification of Grant Thornton LLP as the independent public accountants for the year ended December 31, 2004. Item 5. Other Information Not Applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 2.1 Plan of Reorganization dated August 11, 2004. 2.2 Disclosure Statement to Accompany Plan of Reorganization dated August 11, 2004. 31.1 Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a). 31.2 Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a). 32.1. Certification Pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Form 8-K May 28, 2004 - Item 5. Other Events. Disclosure of Asset Purchase Agreement, dated May 28, 2004, between Ameristar Casinos, Inc. and Windsor Woodmont Black Hawk Resort Corp. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 16, 2004 WINDSOR WOODMONT BLACK HAWK RESORT CORP. /s/ Jerry L. Dauderman --------------------------------------- Jerry L. Dauderman Chairman and Chief Executive Officer /s/ Michael L. Armstrong ---------------------------------------- Michael L. Armstrong Executive Vice President Chief Financial Officer, Treasurer and Secretary 19

WINDSOR WOODMONT BLACK HAWK RESORT CORP 10-Q