10-Q 1 d10684e10vq.txt FORM 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 September 30, 2003 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 of each of the issuers classes of common stock as of the latest practicable date - 1,000,000 shares common stock outstanding November 14, 2003. WINDSOR WOODMONT BLACK HAWK RESORT CORP. FORM 10-Q INDEX Part I -- FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets, September 30, 2003 (unaudited) and December 31, 2002 2 Condensed Statements of Operations for the three months and nine months ended September 30, 2003 and 2002 (unaudited) 3 Condensed Statements of Comprehensive Loss for the three months and nine months ended September 30, 2003 and 2002 (unaudited) 4 Condensed Statement of Redeemable Preferred Stock and Stockholders' Equity for the period from December 31, 1999 through September 30, 2003 (unaudited) 5 Condensed Statements of Cash Flows for the three months and nine months ended September 30, 2003 and 2002 (unaudited) 6 Notes to Condensed Consolidated Financial Statements 7 - 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 16 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) CONDENSED BALANCE SHEETS

SEE NOTES TO CONDENSED FINANCIAL STATEMENTS 2 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

SEE NOTES TO CONDENSED FINANCIAL STATEMENTS 3 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) CONDENSED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

SEE NOTES TO CONDENSED FINANCIAL STATEMENTS 4 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) CONDENSED STATEMENT OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

SEE NOTES TO CONDENSED FINANCIAL STATEMENTS 5 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

SEE NOTES TO CONDENSED FINANCIAL STATEMENTS 6 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 and a related disclosure statement with the Bankruptcy Court. See Note 6 - Reorganization Plan. 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. 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, 7 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS 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 - Reorganization Expenses. 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 September 30, 2003, and for the three months and nine months ended September 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 nine months ended September 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 exercisable into 768,720 and 863,720 shares of common stock at September 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 8 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS 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. 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 Reorganization, however, there can be no assurance that the Plan will be confirmed by the Bankruptcy Court and consummated. See Note 6 - Reorganization Plan. 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 September 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 $734,093 and $8,086,312 were incurred during the three months and nine months ended September 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 $5,000,000 damage claim incurred with the rejection of the Hyatt 9 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS 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 at which time we will apply for license renewals. 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. NOTE 6. PLAN OF REORGANIZATION. 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. We intend to file an amended Disclosure Statement in the near future to address comments received from the Bankruptcy Court trustee pertaining to the Plan. 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 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 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 10 WINDSOR WOODMONT BLACK HAWK RESORT CORP. (DEBTOR-IN-POSSESSION AS OF NOVEMBER 7, 2002) NOTES TO CONDENSED FINANCIAL STATEMENTS 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 and upon filing the amended Disclosure Statement may also be available electronically for a fee through the Bankruptcy Court's website at www.cob.uscourts.gov. NOTE 7. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT Effective July 1, 2003 the Company adopted SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity, including mandatorily redeemable preferred stock. Adoption of SFAS No. 150 had no effect on the Company's financial statements. 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 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. 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, 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. (3) Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002: Total operating revenue for the quarter ended September 30, 2003 was $15,919,794 ($14,963,103 net of promotional allowances). This included $14,091,863 in casino revenue, $1,606,594 in food and beverage revenue, and $221,337 of other revenue. This compares to total operating revenue for the quarter ended September 30, 2002 of $19,552,967 ($18,347,586 net of promotional allowances). This included $17,004,014 in casino revenue, $2,221,838 in food and beverage revenue, and $297,115 of other revenue. Casino operating expenses for the quarter ended September 30, 2003 totaled $7,838,155, including $2,782,498 in state and local gaming taxes and device fees. This compares to casino operating expenses for the quarter ended September 30, 2002 totaling $9,997,442, including $2,910,766 in state and local gaming taxes and device fees. The decrease is primarily due to reduced payroll and benefit costs, to reduced gaming taxes, to reduced marketing costs (principally in direct mail coin coupon redemption), and to 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 September 30, 2003 totaled $1,439,981, including $923,436 in cost of goods sold. This compares to food and beverage expenses for the quarter ended September 30, 2002 totaling $2,030,628, including $1,242,235 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 September 30, 2003 totaled $228,960 versus $503,789 for the quarter ended September 30, 2002, and consist 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 September 30, 2003 totaled $2,454,552 versus $2,543,924 for the quarter ended September 30, 2002, and consist of salaries, wages and benefits, utilities, insurance, 13 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 utilities and property taxes. Depreciation and amortization expense for the quarter ended September 30, 2003 totaled $2,083,055 versus $2,111,700 for the quarter ended September 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 September 30, 2003 totaled $581,033, including $59,400 in amortization of debt issuance costs. This compares to interest expense for the quarter ended September 30, 2002, which totaled $4,766,332, including $416,757 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 September 30, 2003 totaled $734,093. 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. This compares to reorganization expense for the quarter ended September 30, 2002, which totaled $209,111. 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. Nine months Ended September 30, 2003 Compared to Nine months Ended September 30, 2002: Total operating revenue for the nine months ended September 30, 2003 was $45,595,009 ($42,672,037 net of promotional allowances). This included $40,210,224 in casino revenue, $4,687,719 in food and beverage revenue, and $679,066 of other revenue. This compares to total revenue for the nine months ended September 30, 2002 of $54,566,320 ($51,689,368 net of promotional allowances). This included $48,085,043 in casino revenue, $5,704,672 in food and beverage revenue, and $776,605 of other revenue. Casino operating expenses for the nine months ended September 30, 2003 totaled $23,779,876, including $8,232,928 in state and local gaming taxes and device fees. This compares to casino operating expenses for the nine months ended September 30, 2002 totaling $28,420,619, including $9,491,756 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 nine months ended September 30, 2003 totaled $4,181,274, including $2,536,961 in cost of goods sold. This compares to food and beverage expenses for the nine months ended September 30, 2002 totaling $5,778,997, including $3,466,608 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 nine months ended September 30, 2003 totaled $808,567 versus $1,498,186 for the nine months ended September 30, 2002, and consist 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 nine months ended September 30, 2003 totaled $7,418,240 versus $8,133,508 for the nine months ended September 30, 2002, and consist 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 utilities and property taxes. 14 Depreciation and amortization expense for the nine months ended September 30, 2003 totaled $6,239,703 versus $6,265,153 for the nine months ended September 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 nine months ended September 30, 2003 totaled $1,813,993, including $177,746 in amortization of debt issuance costs. This compares to interest expense for the nine months ended September 30, 2002, which totaled $14,360,743, including $1,247,607 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 nine months ended September 30, 2003 totaled $8,086,312. 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. This compares to reorganization expense for the nine months ended September 30, 2002, which totaled $209,111. 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. 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 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 September 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 September 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. 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 Mountain High Casino. 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. The Company anticipates that First Place will appeal this case to the Colorado Court of Appeals. 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 to be 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 occurred on September 22, 2003, and is currently scheduled to be continued on December 19, 2003. 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 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 Form 8-K dated August 20, 2003 - Item 5. Other Items and Regulation FD Disclosure of August 20, 2003 letter to holders of its common stock. 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: November 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