3.

VARIABLE INTEREST ENTITIES

GED. The Company’s investment in unconsolidated joint venture is comprised of a 50% ownership interest in GED, a joint venture between the Company and Harrington Raceway Inc. (“HRI”). GED had a management agreement thru August 31, 2011 with Harrington Raceway and Casino (“Harrington”) (formerly known as Midway Slots and Simulcast), which is located in Harrington, Delaware. Under the terms of the joint venture agreement, as restructured in 2007, the Company received the greater of 50% of GED’s member distribution as prescribed under the joint venture agreement, or a 5% growth rate in its 50% share of GED’s prior year member distribution through the expiration of the GED management contract on August 31, 2011. GED is a variable interest entity due to the fact that the Company has limited exposure to risk of loss. Therefore, the Company does not consolidate, but accounts for, its investment using the equity method.

As of the balance sheet dates presented, the Company’s assets and liabilities related to its investment in GED consisted of an amount due from HRI included in receivables of $0.2 million as of September 30, 2011, and an accounts receivable of $0.7 million as of December 31, 2010 as part of the Management Reorganization Agreement’s guaranteed payments for the three months ending September 30, 2011 and December 31, 2010, respectively. The GED management contract expired in August 2011. The receivable of $0.2 million represents the remainder of the final true up, based on the terms of the agreement, which was paid in full in October 2011. The investment in GED was $0 as of September 30, 2011, and $0.2 million as of December 31, 2010, included in other assets.

GED has no non-operating income or expenses, is treated as a partnership for income tax reporting purposes and consequently recognizes no federal or state income tax provision. As a result, income from operations for GED is equal to its net income for each period presented, and there are no material differences between GED’s income for financial and tax reporting purposes. An unaudited summary for GED’s operations follows:

GED CONDENSED BALANCE SHEET INFORMATION

		September 30,				December 31,
		2011				2010
Total assets		$	—			$	426,449
Total liabilities			—				41,487
Members’ capital			—				384,962

GED CONDENSED STATEMENT OF INCOME INFORMATION

		Three Months Ended:								Nine Months Ended:
		September 30,				September 30,				September 30,				September 30,
		2011				2010				2011				2010
Revenues		$	5,207,935			$	8,473,977			$	21,291,578			$	21,351,040
Net income			752,797				1,639,915				3,507,322				4,974,987

GEM. The Company directs the day to day operational activities of GEM that significantly impact GEM’s economic performance and therefore is the primary beneficiary pursuant to the relevant portions of FASB ASC Topic 810 “Consolidation” [ASC 810-10-25 Recognition of Variable Interest Entities, paragraphs 38-39]. As such, the joint venture is a variable interest entity that is consolidated in our financial statements.

Management believes the maximum exposure to loss from the Company’s investment in GEM is $8.5 million (before tax impact), which is composed of the Company’s share of contract rights and the Company’s equity investment that is eliminated in consolidation. GEM has no debt or long-term liabilities. GEM’s current assets include the FireKeepers management fee receivable for both dates presented. Long-term assets include $8.3 million and $9.6 million in contract rights as of September 30, 2011 and December 31, 2010, respectively.

An unaudited summary of GEM’s operations follows:

GEM CONDENSED BALANCE SHEET INFORMATION

		September 30,				December 31,
		2011				2010
Current assets		$	2,430,967			$	1,985,419
Long-term assets			8,333,143				9,626,458
Current liabilities			104,960				446,825

GEM CONDENSED STATEMENT OF INCOME INFORMATION

		Three Months Ended:								Nine Months Ended:
		September 30,				September 30,				September 30,				September 30,
		2011				2010				2011				2010
Revenues		$	6,001,093			$	6,518,898			$	18,277,769			$	18,699,602
Net income			5,246,502				5,447,039				15,873,502				15,615,503