10-Q 1 windsor603.txt 10-Q 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, 2003 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from 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

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 the Private Placement and other financing transactions described in Note 3, 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 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 Management fee, thereby reducing operating costs and increasing net revenue. On April 10, 2003, we entered into a settlement agreement with Hyatt 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. On August 6, 2003, we filed a Plan of Reorganization a related disclosure statement with the Bankruptcy Court. See Note 6 - Subsequent Events. Because of the ongoing nature of the Chapter 11 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 Case. 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 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 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. 7 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS 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. 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 expenses (see note 4). 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. Accounting Policies: The financial information at June 30, 2003, and for the three months and six months ended June 30, 2003 and 2002 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 months and six months ended June 30, 2003 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, 2002. Basic loss per share is computed by dividing net loss applicable to common stock by the weighted average common shares outstanding during the period. Diluted 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 convertible into 768,720 and 863,720 shares of common stock at June 30, 2003 and December 31, 2002, respectively, were excluded from the diluted 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 Code and the Bankruptcy 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. 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. 8 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS 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. Under the 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 6, 2003 we filed a Plan of Reorganziation, however, there can be no assurance that the Plan will be confirmed by the Bankruptcy Court and consummated. The accompanying financial statements have been prepared assuming the Company will continue as a going concern basis, 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. NOTES PAYABLE Notes payable consisted of the following at June 30, 2003 and December 31, 2002:

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. 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 petition for relief under Chapter 11 of the 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 EXPENSES Reorganization related expenses of $6,441,806 and 7,352,219 were incurred during the three months and six months ended June 30, 2003, respectively. These include costs incurred for legal, financial advisor services received in connection with our debt restructuring efforts, travel related expenses and other costs directly related to our debt restructuring efforts. They 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. 9 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. 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 material adverse effect on the Company's financial condition, liquidity or results of operations. For a complete list of Legal Proceedings see Item 1, Part II. Environmental Issues The Project is located in a 400-square mile area that has been designated by the United States Environmental Protection Agency ("EPA") as the Clear Creek/Central City National Priorities List Superfund Site under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), as a result of hazardous substance contamination caused by historical mining activity in Black Hawk. This is a broad national priorities list site, within which the EPA has identified several priority areas of contamination from historical mining activities, including draining mines and mine dumps, for active investigation and/or remediation. To date, the EPA has not identified the Project site as being within a priority area nor has it identified contamination from the Project site to require remediation. The Company has been informed that the Superfund Division of the Colorado Department of Public Health and the Environment ("CDPHE"), working with the EPA, has sampled surface water in or near North Clear Creek near where a portion of the Project site called Silver Gulch discharges surface water into North Clear Creek. The Company has been informed that based on the results of those samples, the EPA and the Colorado Superfund Division have expressed preliminary concern that soil and rock associated with historic mining operations in Silver Gulch may be a source of contamination to North Clear Creek. Subsequent to these initial concerns the Company placed an impervious cap over mine tailings in Silver Gulch and continues to perform surface water monitoring. The Project site could be among properties suspected of being a source of contamination. If investigation or remediation of the Project site were required, the Company could incur substantial expense. NOTE 6. SUBSEQUENT EVENTS. On August 6, 2003, we filed a Plan of Reorganization (the "Plan of Reorganization" or 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 10 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS 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 Disclosure Statement contains "adequate information" to make an informed judgement 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 final plan of reorganization confirmed by the Bankruptcy Court is consistent with the Plan of Reorganization recently filed, it would result in the following: (i) payment of the secured claim of the Black Hawk Business Improvement District in accordance with the original terms of the pre-petition obligations to the Black Hawk Business Improvement District; (ii) payment of the allowed secured claim to PCL in accordance with the PCL settlement agreement; See Part II, Item 1. Legal Proceedings; (iii) payment of the allowed secured claim of the FF&E Lender in accordance with the FF&E settlement agreement and subsequent agreement with the FF&E Lender; (v) restructuring of the allowed secured claim of the First Mortgage Noteholders; (vi) payment in full in cash on the effective date of all allowed administrative claims, allowed administrative tax claims, allowed priority tax claims and allowed other priority claims (or otherwise in accordance with agreements with such claimants); (vii) payment of allowed unsecured claims in full plus interest over a period of not more than seven years; (viii) assumption of certain contracts and leases and rejection of other contracts and leases, including the warrants; and (ix) granting us the power to administer the estate and distribute cash, cash equivalents, or property to creditors. 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 performance projections over the 7-year Plan period, 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, U.S. Customs House, 721 19th Street, Denver, Colorado 80202-2508. The Plan and Disclosure Statement may also be available electronically for a fee through the Bankruptcy Court's website at www.cob.uscourts.gov. Upon Bankruptcy Court approval, we will file a complete copy of the Plan and Disclosure Statement on a Form 8-K. 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 and Section 21E of the Securities Exchange Act of 1934. 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 is 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. We have added a new management team which includes a new General Manager, Assistant General Manager, Director of Casino Operations and Director of Food & Beverage. Each new member of the Mountain High Casino management team has significant experience in the Black Hawk gaming market and our General Manager and Assistant General Manager have casino turnaround experience in the Black Hawk gaming market. The following list includes some of the major operational improvements that the new management team has implemented since taking over: o 200 slot machines converted to new programs of the city of Black Hawk market's most popular games o the slot hold % on approximately 600 slot machines was lowered to bring in line with the city of Black Hawk market average o reconfigured the slot floor layout to improve flow and visibility o created nine distinct themed slot areas o created a VIP Players lounge on the casino floor o introduced larger progressive jackpots to further attract higher denomination players o shifted focus of marketing programs to higher volume players o added two poker tables and one black jack table to accommodate increased number of players o eliminated subsidized bus programs o instituted in-town city shuttle service directly to the Casino for the first time 12 o in process of securing lodging for VIP players through arrangement with the Gold Dust Lodge (to be renamed the Mountain High Casino Inn) located approximately two miles from the Casino o instituted demand-based scheduling resulting in significant labor efficiencies o consolidated or eliminated various management positions that has improved communication, and along with other labor saving initiatives has allowed the Casino to reduce employee counts and related expenses o created a guest driven culture for management and front line employees After executing a smooth operational and regulatory transition from prior Hyatt management on May 13, the new Mountain High Casino management team executed a record breaking Grand Opening weekend May 24 - 25. These days generated the two highest daily totals of slot coin-in since the casino opened on December 20, 2001, and began the process of re-positioning and re-branding the Mountain High Casino from the Black Hawk Casino by Hyatt. The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated 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, 2002. Results of Operations The following table sets forth certain summarized operating data for the periods indicated.

(1) EBITDA consists of earnings before interest, income taxes, depreciation and amortization. EBITDA is presented solely as a supplemental disclosure because management believes that it is a widely used measure of operating performance in the gaming industry. EBITDA and EBITDA Margin are not determined in accordance with generally accepted accounting principles. EBITDA should not be construed as an alternative to operating income, as an indicator of the Company's operating performance, as an alternative to cash flows from operating activities, or as a measure of liquidity. The Company's definition of EBITDA may not be identical to other companies'. The above table reconciles EBITDA to operating income included in the financial statements presented in Item 1, Part 1. (2) EBITDA margin is EBITDA as a percentage of net revenues. 13 While the EBITDA margin for the three months ended June 30, 2003 was 11.7%, the EBITDA margin for the month ended June 30, 2003, the first full month of operations for the new management team, was 19.3% (compared to an EBITDA margin of 9.9% for the month ended June 30, 2002). Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002: Total revenue for the quarter ended June 30, 2003 was $14,836,311, $13,931,228 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. This compares to total revenue for the quarter ended June 30, 2002 of $17,360,017, $16,401,127 net of promotional allowances. This included $15,249,418 in casino revenue, $1,825,936 in food and beverage revenue, and $284,663 of other revenue. Casino operating expenses for the quarter ended June 30, 2003 totaled $7,896,500, including $2,723,973 in state and local gaming taxes and device fees. This compares to casino operating expenses for the quarter ended June 30, 2002 totaling $9,111,228, including $3,197,023 in state and local gaming taxes and device fees. The decrease is primarily due to reduced payroll and benefit costs, to reduced gaming taxes, and reduced rental expense associated with slot games operated under fee participation agreements. The gaming taxes were reduced due to reduced gaming revenue. Other casino operating expenses consist principally of salaries, wages and benefits, marketing costs, and other operating expenses of the casino. Food and beverage expenses for the quarter ended June 30, 2003 totaled $1,400,957, including $813,520 in cost of goods sold. This compares to Food and beverage expenses for the quarter ended June 30, 2002 totaling $2,018,258, including $1,240,448 in cost of goods sold. The decrease is primarily due to reduced payroll and benefit costs and reduced 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 quarter ended June 30, 2003 totaled $275,072 versus $511,464 for the quarter ended June 30, 2002, and consists of salaries, wages and benefits, contract entertainment expense, and other operating expenses. The decrease is primarily due to reduced payroll and benefit costs and reduced expenditures related to contract entertainment. General and administrative expenses for the quarter ended June 30, 2003 totaled $2,528,278 versus $2,741,917 for the quarter ended June 30, 2002, and consists of salaries, wages and benefits, utilities, insurance, property taxes, contract services, maintenance and repairs, cleaning supplies, and other operating expenses. The net reduction is due to decreases in payroll and benefit costs and in contract services costs, partially offset by increases in property taxes. Depreciation and amortization expense for the quarter ended June 30, 2003 totaled $2,070,207 versus $2,093,208 for the quarter ended June 30, 2002. 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, 2003 totaled $611,307, including $59,248 in amortization of debt issuance costs. This compares to interest expense for the quarter ended June 30, 2002, which totaled $4,775,818, including $416,845 in amortization of debt issuance costs. The reduction in interest expense is a result of interest not being accrued on the First and Second Mortgage Notes payable during the course of our bankruptcy proceedings, and the write-off at December 31, 2002 of unamortized debt discount and deferred financing costs related to the First and Second Mortgage Notes. Reorganization expenses for the quarter ended June 30, 2003 totaled $6,441,806. This includes costs incurred for legal, financial advisor services received in connection with our debt restructuring efforts, travel related expenses and other costs directly related to our debt restructuring efforts. It also includes the $5,000,000 damage claim incurred with the rejection of the Hyatt contract, and it includes the write off of Hyatt branded supplies, which can no longer be used in operations. There were no similar costs during the quarter ended June 30, 2002. 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. 14 Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002: Total revenue for the six months ended June 30, 2003 was $29,675,215, $27,708,934 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. This compares to total revenue for the six months ended June 30, 2002 of $35,043,353, $33,341,782 net of promotional allowances. This included $31,081,029 in casino revenue, $3,482,834 in food and beverage revenue, and $479,490 of other revenue. Casino operating expenses for the six months ended June 30, 2003 totaled $15,941,721, including $5,450,430 in state and local gaming taxes and device fees. This compares to casino operating expenses for the six months ended June 30, 2002 totaling $18,423,177, including $6,580,990 in state and local gaming taxes and device fees. The decrease is primarily due to reduced payroll and benefit costs, reduced gaming taxes, and reduced rental expense associated with slot games operated under fee participation agreements. The gaming taxes were reduced due to reduced gaming revenue. Other casino operating expenses consist principally of salaries, wages and benefits, marketing costs, and other operating expenses of the casino. Food and beverage expenses for the six months ended June 30, 2003 totaled $2,741,293, including $1,613,526 in cost of goods sold. This compares to Food and beverage expenses for the six months ended June 30, 2002 totaling $3,748,369, including $2,224,373 in cost of goods sold. The decrease is primarily due to reduced payroll and benefit costs and reduced 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, 2003 totaled $579,607 versus $994,397 for the six months ended June 30, 2002, and consists of salaries, wages and benefits, contract entertainment expense, and other operating expenses. The decrease is primarily due to reduced payroll and benefit costs and reduced expenditures related to contract entertainment. General and administrative expenses for the six months ended June 30, 2003 totaled $4,963,688 versus $5,589,584 for the six months ended June 30, 2002, and consists of salaries, wages and benefits, utilities, insurance, property taxes, contract services, maintenance and repairs, cleaning supplies, and other operating expenses. The net reduction is due to decreases in payroll and benefit costs and in contract services costs, partially offset by increases in property taxes. Depreciation and amortization expense for the six months ended June 30, 2003 totaled $4,156,648 versus $4,153,453 for the six months ended June 30, 2002. 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, 2003 totaled $1,232,960, including $118,345 in amortization of debt issuance costs. This compares to interest expense for the six months ended June 30, 2002, which totaled $9,594,411, including $830,850 in amortization of debt issuance costs. The reduction in interest expense is a result of interest not being accrued on the First and Second Mortgage Notes payable during the course of our bankruptcy proceedings, and the write-off at December 31, 2002 of unamortized debt discount and deferred financing costs related to the First and Second Mortgage Notes. Reorganization expenses for the six months ended June 30, 2003 totaled $7,352,219. This includes costs incurred for legal, financial advisor services received in connection with our debt restructuring efforts, travel related expenses and other costs directly related to our debt restructuring efforts. It also includes the $5,000,000 damage claim incurred with the rejection of the Hyatt contract. There were no similar costs during the quarter ended June 30, 2002. 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 15 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. After a plan of reorganization is confirmed by the Bankruptcy Court, we estimate that cash flow from operations will be sufficient to sustain our operations during the next fiscal year. We cannot assure you that any financing, if necessary to meet liquidity requirements, will be available to us in the future, or that, if available, any such financing will be on favorable terms. We cannot assure you that our reasonably foreseeable liquidity needs are or will be accurate or that new business developments or other unforeseen events will not occur, resulting in the need to raise additional funds. We expect that the adequacy of our operating cash flow will depend, among other things, upon our ability to reorganize, the general state of the economy, both local and national, our ability to manage the Casino, the continued development of the Black Hawk market as a gaming destination, the intensity of the competition, the efficiency of operations, depth of customer demand, and the effectiveness of our marketing and promotional efforts. Item 3. Qualitative 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, 2003. 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, 2003 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, all legal proceedings are stayed. Paul, Hastings, Janofsky & Walker claim for legal fees. Paul, Hastings, Janofsky & Walker (Paul Hastings) is the Los Angeles and New York based law firm which acted as issuer's counsel for the Company in securing financing for the Company's casino project in Black Hawk, Colorado. The approximately $110 million in financing closed in March, 2000. The Company paid Paul Hastings a total of $800,000 in legal fees and costs in conjunction with providing services as issuer's counsel, including $700,000 disbursed to Paul Hastings from the closing of the financing in March, 2000. After March, 2000, Paul Hastings submitted additional billing statements to the Company, made several threatening communications to the Company, and ultimately filed litigation against the Company in California state courts in Los Angeles County in June, 2001. Paul Hastings claimed that it was owed an additional approximately $470,000 in fees for legal services, approximately one-half of which is allegedly based upon services rendered on an hourly fee basis, and the other half of which constitutes "bonus" which Paul Hastings alleges is due as a result of the closing of the financing. The Company believed that it overpaid Paul Hastings for the services rendered. The matter was scheduled for trial in October, 2002 in Los Angeles, but was settled at a mediation in Denver in May, 2002. The Company agreed to pay Paul Hastings an additional $150,000, $50,000 of which was paid in May, 2002 with the balance of $100,000 due in December, 2002. The $100,000 payment has not been made and Paul Hastings will be treated as an unsecured creditor in the Chapter 11 proceeding. 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. We do not anticipate that there will be any financial exposure to the Company with respect to this claim, however, similarly situate claimants have raised issues in the past with other property owners in the Black Hawk area which have had the effect of temporarily clouding title and have resulted in property owner's and/or title insurance company's entering into financial settlements with the claimant in order to eliminate the alleged "clouds" on title. The Company fully expects that this claim will be resolved by and at the expense of First American Title. The Colorado Limited Gaming Control Commission (the Commission) approved the issuance of the appropriate and necessary gaming licenses for operation of the Black Hawk Casino by Hyatt to the Company and Hyatt Gaming Management, Inc. on September 20, 2001. The licenses were physically issued to the Company and Hyatt immediately prior to opening of the casino on December 20, 2001. In the meantime, in October 2001, GF Gaming, a gaming company operating a casino in Central City, Colorado, filed an appeal with the Commission challenging the issuance of the licenses to the Company and Hyatt, ostensibly on the grounds that the Commission had failed to consider whether the casino facility met the historic architectural intent of the Colorado gaming laws. The Company and Hyatt requested that the appeal be dismissed for several reasons, including that GF Gaming lacked standing and that the Commission lacked jurisdiction over architectural compliance issues (those issues being within the exclusive province of the municipalities in which limited gaming is permitted). In December, 2001, the Commission dismissed the appeal based upon lack of standing and lack of jurisdiction. In February, 2002, GF Gaming filed a notice of appeal continuing its challenge with the Colorado Court of Appeals. All parties have filed all required briefs with the Court of Appeals, but a decision by the Court of Appeals was stayed by the Chapter 11 filing. All parties to this case filed a stipulated motion with the bankruptcy court to lift the automatic stay on this proceeding and to allow its final adjudication by the state court system, and the Bankruptcy Court entered an order lifting the automatic stay in April 2003. On August 14, 2003, the Colorado Court of Appeals issued its written opinion affirming the Order of the Colorado Limited Gaming Control Commission and denying the challenge to the Company's gaming license. There is the possibility that GF Gaming may attempt to further appeal this matter to the Colorado Supreme Court. 17 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 to 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 dispute resolution process contemplated by this Agreement has been stayed. 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. A mediation between the Company and Steelman has been set for September 22, 2003. Item 2. Changes in Securities and Use of Proceeds Not Applicable. Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable. Item 5. Other Information Not Applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 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 None. 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 14, 2003 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