PRESIDENT CASINOS INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

/ X / Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended February 28, 2005
or
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Commission File Number: 0-20840

PRESIDENT CASINOS, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0341200
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

802 North First Street, St. Louis, Missouri 63102
Address of principal executive offices

314-622-3000
Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.06 par value
Preferred Stock Purchase Rights

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Registration S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
amendment to this Form 10-K. /X/

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.) Yes / / No /X/

As of August 31, 2004, the aggregate market value of the voting stock held
by non-affiliates of the Registrant was approximately $314,389.*

As of May 31, 2005, the number of shares outstanding of the Registrant's
Common Stock was approximately 5,033,161.

* Calculated by excluding all shares that may be deemed to be beneficially
owned by executive officers and directors of the Registrant, without conceding
that all such persons are "affiliates" of the Registrant for purposes of the
federal securities laws.

DOCUMENTS INCORPORATED BY REFERENCE - None.
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PART I

Item 1. and Item 2. Business and Properties.

General

President Casinos, Inc. owns and operates dockside gaming casinos through
its subsidiaries (collectively, the "Company"). The Company's current gaming
facilities and operations in St. Louis, Missouri are summarized as follows:

Operating entity - President Riverboat Casino-
Missouri, Inc.
Vessel - "Admiral"
Slots - 1,354
Gaming tables - 33
Opening of casino without slots - May 27, 1994
Opening of casino with slots - December 9, 1994

The Company owned and operated gaming facilities in Biloxi, Mississippi,
through the date of the sale of the assets on April 15, 2005. The operations
are summarized as following:

Operating entity - The President Riverboat Casino-
Mississippi, Inc.
Vessel - "President Casino-Broadwater"
Slots - 860
Gaming tables - 41
Opening of casino - August 13, 1992
Opening of current facility - June 30, 1995

In addition to its Biloxi gaming operations, the Company owned and managed
certain hotel and ancillary facilities associated with its casino operations
in Biloxi, which were included in the sale of the Biloxi assets.

The Company was incorporated in the State of Delaware in June 1992 and
completed the initial public offering of its Common Stock in December 1992.
The Company is the successor to businesses operated in St. Louis, Missouri
since 1985 and Biloxi, Mississippi since August 1992. The Company's principal
executive offices are located in an approximately 36,000 square foot building
owned by the Company at 802 North First Street, St. Louis, Missouri 63102, of
which the Company occupies approximately 30,800 square feet and leases the
remainder to an unrelated party. The building is subject to a sale contract
for a purchase price of $1.8 million, subject to closing adjustments. The
Company's telephone number is (314) 622-3000. Copies of the Company's filings
with the Securities and Exchange Commission and other important information
regarding the Company is available free of charge on the Company's web page
www.presidentcasino.com.

Substantial Indebtedness; Bankruptcy Proceedings

- --Overview

As used herein, the term "Company" refers to President Casinos, Inc., its
wholly-owned subsidiaries, a 95%-owned limited partnership and a limited
liability company in which a wholly-owned subsidiary of President Casinos,

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Inc. owns a Class A ownership interest and in which an entity wholly-owned by
the Chairman of President Casinos, Inc. owns a Class B unit and has a
preferred right to certain cash flows. As described below, President Casinos,
Inc. and certain of its subsidiaries are currently in bankruptcy proceedings.

As a result of the Company's relatively high degree of leverage and the need
for significant capital expenditures at its St. Louis property, the Company
was unable to pay the regularly scheduled interest payments of $6.375 million
which were each due and payable March 15, and September 15, 2000. Under the
indentures pursuant to which the $75.0 million 13% Senior Exchange Notes (the
"Senior Exchange Notes") and $25.0 million 12% Secured Notes (the "Secured
Notes" and, collectively with the Senior Exchange Notes, the "Notes") were
issued, an Event of Default occurred on April 15, 2000, and is continuing as
of the date hereof. Additionally, PCI was unable to pay the $25.0 million
principal payment due September 15, 2000 on the Senior Exchange Notes. The
holders of at least 25% of the Senior Exchange Notes and the Secured Notes
were notified of the defaults and instructed the Indenture Trustee to
accelerate the Notes and on August 11, 2000, the holders declared the unpaid
principal and interest to be due and payable. As of February 28, 2005, the
outstanding principal consists of $56.25 million of Senior Exchange Notes and
$18.75 million of Secured Notes.

On June 20, 2002, President Casinos, Inc. and its subsidiary, President
Riverboat Casino-Missouri, Inc. ("President Missouri"), which owns and
operates the St. Louis operations, filed voluntary petitions for
reorganization under Chapter 11 of Title 11, United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of Mississippi (the "Mississippi Bankruptcy Court"). On July 9,
2002, President Casinos, Inc.'s subsidiary The President Riverboat Casino-
Mississippi, Inc. ("President Mississippi") filed a voluntary reorganization
petition in the same Court. On July 11, 2002, substantially all of President
Casinos, Inc.'s other operating subsidiaries filed voluntary reorganization
petitions under Chapter 11 in the same Mississippi Bankruptcy Court.
Subsequently, orders were entered by the Mississippi Bankruptcy Court
transferring venue of all of the bankruptcy cases, except President Riverboat
Casino-New York, Inc. ("President New York") and President Broadwater Hotel,
LLC, to the United States Bankruptcy Court for the Eastern District of
Missouri (the "Missouri Bankruptcy Court," and together with the Mississippi
Bankruptcy Court, the "Bankruptcy Courts,") where the latter proceeding is now
pending and being administered.

The Company and its operating subsidiaries, except President Broadwater
Hotel, LLC and President New York, each continue in possession and use of
their assets as debtors-in-possession. The Company and its operating
subsidiaries have had their Missouri Bankruptcy Chapter 11 cases
administratively consolidated under the President Casinos, Inc. case.

Prior to any of the cases being transferred to the Missouri Bankruptcy
Court, the Mississippi Bankruptcy Court established "bar dates," all of which
have expired, by which all claimants were required to submit and characterize
claims against the Company. As part of the Company's Chapter 11
reorganization process, the Company has attempted to notify all known or
potential creditors of the filings for the purpose of identifying certain pre-
petition claims. In the Company's Chapter 11 cases, substantially all of the
Company's liabilities as of the filing date are subject to adjustment under a
plan of reorganization. Generally, actions to enforce or otherwise effect

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repayment of all pre-petition liabilities as well as all pending litigation
against the Company are stayed while the Company continues its business
operations as debtors-in-possession. Schedules have been filed by the Company
with the Bankruptcy Courts setting forth the assets and liabilities of the
debtors as of the filing dates as reflected in the Company's accounting
records. Differences between amounts reflected in such schedules and claims
filed by creditors will be investigated and amicably resolved or adjudicated
before the Bankruptcy Court. The ultimate amount and settlement terms for
such liabilities are subject to a plan of reorganization. Under the
Bankruptcy Code, the Company may elect to assume or reject real estate leases,
employment contracts, personal property leases, service contracts and other
executory pre-petition contracts and unexpired leases, subject to Bankruptcy
Court review.

The consummation of a plan of reorganization (a "Plan") is the principal
objective of the Company's Chapter 11 filings. A Plan would, among other
things, set forth the means for satisfying claims against and interests in the
Company, including setting forth the potential distributions on account of
such claims and interests, if any. Confirmation of a Plan is subject to
certain statutory findings by the Bankruptcy Court. Before a Plan may be
distributed for balloting the Court must approve a Disclosure Statement by
determining that the Disclosure Statement adequately describes the Plan.
Subject to certain exceptions as set forth in the Bankruptcy Code,
confirmation of a Plan requires, among other things, a vote on the Plan by
certain classes of creditors whose rights or interests are impaired under the
Plan. If any impaired class of creditors does not vote to accept the Plan,
but all of the other requirements of the Bankruptcy Code are met, the
proponent of the Plan may seek confirmation of the Plan pursuant to the "cram
down" provisions of the Bankruptcy Code. Under these provisions, the
Bankruptcy Court may still confirm a Plan notwithstanding the non-acceptance
of the Plan by an impaired class, if, among other things, no claim or interest
receives or retains any property under the Plan until each holder of a claim
senior to such claim or interest has been paid in full. There can be no
assurance that a Plan will be confirmed by the Bankruptcy Court, or that any
such Plan will be consummated.

On April 15, 2005, the Company sold its Biloxi operations for approximately
$82.0 million. In addition, the Company has an agreement to sell its St.
Louis operations for $57.0 million. If the sale of the Company's St. Louis
operations is consummated under the agreed upon terms, the Company would not
have any current ongoing business operations. At this time management is
unable to predict with certainty whether the sale of its St. Louis operations
will be consummated and whether the Company will be able to continue as a
going concern or will be liquidated.

In light of the sale of the Company's Biloxi assets and leasing operations
assets, and the pending contract for sale of the St. Louis operations, the
Company has one reportable segment from continuing operations consisting of
corporate administration. See Note 18 of the accompanying financial
statements. The descriptions of the Company's business, financial condition
and prospects contained in this Annual Report on Form 10-K are qualified in
their entirety by the foregoing description of the significant risks
associated with the Company's bankruptcy proceedings.

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- -- Biloxi Casino and Hotel Operations

President Mississippi, Vegas, Vegas, Inc. ("Vegas, Vegas") and President
Broadwater Hotel, L.L.C. ("PBLLC") (collectively, the "Mississippi
Affiliates") agreed, with the prior approval of the Bankruptcy Court, to sell
substantially all of the real and personal property associated with the
Company's Biloxi, Mississippi operations (the "Mississippi Properties") to
Broadwater Development, LLP, a Mississippi limited liability partnership (or
the assignee or designee thereof) for $82.0 million, and otherwise on the
terms and conditions of a certain Sale and Purchase Agreement dated November
15, 2004 and executed by and among Broadwater Properties, LLC, as purchaser,
and the Mississippi Affiliates, as sellers, as amended by an Amendment to Sale
and Purchase Agreement dated as of November 29, 2004, assigned on or about
January 13, 2005 by Broadwater Properties to Broadwater Development, LLP
("BDLLP", and together with any assignees or designees thereof, the
"Mississippi Purchaser"), further modified by a certain Second Amendment to
Sale and Purchase Agreement dated January 20, 2005 (as modified and amended,
the "Mississippi Asset Sale Agreement"). The Mississippi Asset Sale Agreement
further provides that the Mississippi Affiliates shall retain certain excluded
assets as therein defined (the "Mississippi Excluded Assets"), consisting
primarily of cash in bank accounts. Pursuant to a separate Agreement
Concerning Assignment dated March 30, 2005 ("Agreement Concerning Assignment")
made by and between the Mississippi Affiliates, BDLLP and Silver Slipper
Casino Venture, LLC, it was agreed, with the approval of the Bankruptcy Court,
that the assets associated with the Company's Mississippi casino would be
transferred at the closing of the transaction to Silver Slipper on certain
terms and conditions therein stated.

The sale of the Mississippi Properties closed effective April 15, 2005 and
on May 27, 2005 the Missouri Bankruptcy Court confirmed a Plan of Liquidation
(the "Mississippi Plan of Liquidation") for the Mississippi Affiliates that
was jointly developed by the Company and its creditors SunAmerica Inc. and
McKay Shields LLC in the Company's bankruptcy case. The Mississippi Plan of
Liquidation became final on June 7, 2005. Pursuant to the Mississippi Plan of
Liquidation, the proceeds of the sale of the Mississippi Properties, following
adjustments required under the Mississippi Asset Sale Agreement, together with
the proceeds of the liquidation of the Mississippi Excluded Assets, are being
allocated and distributed to the creditors of the Mississippi Affiliates,
including the holders of the Company's Senior Exchange Notes and Secured Notes
in the aggregate outstanding principal amount of $75.0 million (the
"Noteholders") and to J. Edward Connelly Associates, Inc. ("JECA") and certain
assignees of JECA. JECA, an entity controlled by John E. Connelly, the
Company's Chairman and Chief Executive Officer, holds a Class B membership
interest in PBLLC. The Company anticipates that under the Mississippi Plan of
Liquidation, creditors of the Mississippi Affiliates, with the exception of
the Noteholders, will be paid in full. While final distributions under the
Mississippi Plan of Liquidation are subject to final determination and
settlement of claims and expenses, the Company currently estimates that the
proceeds of the sale of the Mississippi Properties and the anticipated sale of
the Company's St. Louis operations (if completed in accordance with its
present terms) will be sufficient to repay the Noteholders the outstanding
indebtedness under the Notes and, in addition, to satisfy JECA's liquidation
preference of its Class B membership interest in PBLLC.

JECA has entered into an agreement (the "JECA Proceeds Distribution
Agreement") with John S. Aylsworth, President, Chief Operating Officer and

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Director of the Company, Terrence L. Wirginis, Vice Chairman of the Board and
Ralph J. Vaclavik, the Chief Financial Officer of the Company, pursuant to
which upon receipt of funds by JECA toward payment of the liquidation
preference of its Class B membership interest in PBLLC, JECA will use its best
efforts to pay a percentage of such funds to Messrs. Aylsworth, Wirginis and
Vaclavik based on the total sales proceeds to JECA. While the amount of final
distributions to JECA under the Mississippi Plan of Liquidation is subject to
final determination and settlement of claims and expenses, in the event the
proceeds of the sale of the Mississippi Properties and the anticipated sale of
the Company's St. Louis operations (if completed in accordance with its
present terms) will be sufficient to repay the Noteholders the outstanding
indebtedness under the Notes and, in addition, to satisfy JECA's liquidation
preference of its Class B membership interest in PBLLC, Messrs. Aylsworth,
Wirginis and Vaclavik would be entitled to receive approximately $4.8 million,
$4.8 million and $0.3 million, respectively, pursuant to the JECA Proceeds
Distribution Agreement.

- --St. Louis Casino Operations

On September 25, 2003, the Company entered into an agreement with Isle of
Capri Casinos, Inc. to sell the assets of its St. Louis operations for
approximately $50.0 million. On May 4, 2004, the Company and Isle of Capri
Casinos, Inc. announced they had mutually agreed to terminate the agreement.

On August 9, 2004, the Company entered into an agreement with Penn National
Gaming, Inc. for the purchase of its St. Louis operations. The agreement was
submitted to the Missouri Bankruptcy Court for review and was amended on
September 17, 2004. Under the terms of the agreement, the stock of President
Missouri was to be sold for approximately $28.0 million, subject to working
capital adjustments and subject to higher and better offers. On October 7,
2004, an auction was held in accordance with Section 363 of the Bankruptcy
Code. Pursuant to an agreement submitted September 30, 2004, Columbia Sussex,
Inc. ("Columbia Sussex") was the winning over-bidder for the St. Louis casino
operations for a purchase price of approximately $57.0 million, subject to
closing adjustments. The Company and Columbia Sussex have entered into a
Riverboat Casino Sale and Purchase Agreement dated as of September 30, 2004
(as amended, the "President Missouri Sale Agreement"). On October 13, 2004,
the Missouri Bankruptcy Court entered an order approving the sale of the stock
of President Missouri to Columbia Sussex pursuant to the President Missouri
Sale Agreement. The closing of the transaction is contingent upon approval by
the Missouri Gaming Commission and other closing conditions. As more
particularly described in the President Missouri Sale Agreement, certain
assets of President Missouri are excluded from the transaction, including,
among other things, an office building located in Laclede's Landing in the
City of St. Louis, Missouri, and certain specified causes of action, cash on
hand, tax refunds, insurance coverages and receivables, and certain inventory
(the "Missouri Excluded Assets"). The President Missouri Sale Agreement calls
for the sale to be closed on or before August 1, 2005, and any extension of
such date will require the consent of both parties.

The sale of the stock of President Missouri is subject to, among other
things, the confirmation by the Missouri Bankruptcy Court of a Plan of
Reorganization of President Missouri under Chapter 11 of the Bankruptcy Code.
On May 25, 2005, the Company filed with the Missouri Bankruptcy Court a
disclosure statement (the "Disclosure Statement") setting forth the terms of a
Plan of Reorganization (the "Missouri Plan of Reorganization") that was

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jointly developed by the Company, its creditors SunAmerica Inc. and McKay
Shields LLC, and the Official Unsecured Creditors' Committee in the Company's
bankruptcy case. The Missouri Bankruptcy Court has scheduled a hearing on the
sufficiency of the Disclosure Statement for June 16, 2005. If the Disclosure
Statement is approved, then the Missouri Bankruptcy Court will schedule a date
for a hearing on confirmation of the Missouri Plan of Reorganization. Once
confirmed, the Missouri Plan of Reorganization will not become effective
unless and until all the other conditions to the closing of the sale to
Columbia Sussex are satisfied, including, without limitation, approval of the
Missouri Gaming Commission.

Management estimates that the proceeds from the sale of the stock of
President Missouri and the Missouri Excluded Assets would, if the sale is
consummated on its present terms, provide sufficient funds to discharge all of
the Company's remaining indebtedness, including the remaining balance due to
the Noteholders. In the event the sale agreement is consummated on its terms
and proceeds are sufficient to discharge the Company's indebtedness, the Board
of Directors will determine whether to liquidate the Company or engage in
further business activities, including activities other than gaming. At this
time it is not possible to predict whether the sale of the St. Louis
operations will be consummated or whether the Company will liquidate or
continue business operations in some form.

- --President Broadwater Hotel, LLC Bankruptcy Proceedings

President Broadwater Hotel, LLC ("PBLLC"), a limited liability company in
which Broadwater Hotel, Inc., a wholly-owned subsidiary of the Company
("BHI"), has a Class A ownership interest, was in default under a $30.0
million promissory note and associated $7.0 million loan fee incurred in
connection with the July 1997 purchase by PBLLC of the real estate and
improvements utilized in the Company's operations in Biloxi, Mississippi.
JECA, an entity controlled by John E. Connelly, the Company's Chairman and
Chief Executive Officer, holds a Class B membership interest in PBLLC. On
April 19, 2001, PBLLC filed a voluntary petition for reorganization under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for
the Southern District of Mississippi. PBLLC continued in possession and use
of its assets as a debtor-in-possession and had an agreement with its secured
lender and largest creditor, approved by the Mississippi Bankruptcy Court,
which allowed PBLLC's use of its cash collateral.

On October 16, 2001, PBLLC filed its plan of reorganization which would
permit PBLLC to restructure its debt obligations in a manner which was
designed to permit it to continue as a going concern. Subsequently, on
February 28, 2003, PBLLC filed Modifications to Debtor's Plan of
Reorganization (together with the reorganization plan, the "Modified Plan").
On May 14, 2003, the Mississippi Bankruptcy Court entered the confirmation
order confirming the Modified Plan. The Modified Plan became effective on May
28, 2003 and the Company initiated consummation of the Modified Plan at that
time. The Modified Plan provides that the unsecured creditors of PBLLC will
receive 100% of their claims. Under the Modified Plan, the obligations to the
secured lender were modified with respect to the debt amount, the interest
rate and the due date. On April 15, 2005, the Modified Indebtedness and
accrued interest thereon were fully satisfied by PBLLC from the proceeds of
the sale of the Company's Biloxi assets.

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Discontinued Operations

Prior to the decision and the Bankruptcy Court approval to sell the business
discussed in the preceding section, management previously viewed its
operations in three operating segments: Biloxi Operations, St. Louis
Operations and, to a much lesser extent, Corporate Leasing Operations, each of
which is discussed more fully below. Prior to the sale of the Company's
Davenport properties in fiscal 2001, Davenport operations were considered to
be a fourth operating segment. Revenues, results of operations and
identifiable assets of each of the Company's discontinued operations can be
found in Note 10 of the accompanying consolidated financial statements.

--St. Louis, Missouri Segment

In May 1994, the Missouri Gaming Commission licensed the Company to conduct
dockside gaming operations on the Company-owned vessel, "Admiral," in St.
Louis through its wholly-owned subsidiary, President Missouri. The Company's
initial license was subsequently renewed and was last renewed in May 2004 for
a period of two years.

The "Admiral" is approximately 400 feet long, continuously docked north of
the base of the Gateway Arch in Laclede's Landing, at a mooring site subleased
by the Company from the City of St. Louis Port Commission (the "Port
Commission").

During July 1998, the Company and the City of St. Louis reached an agreement
for the relocation of the "Admiral" approximately 1,000 feet north from its
former location on the Mississippi River. The new location provides guests
with improved parking and valet service, and better ingress/egress including
improved access from major highways into St. Louis. This site is also less
susceptible to the negative economic impact of high water than the previous
mooring site.

The aggregate cost to relocate the "Admiral" and construct ancillary
facilities was approximately $8.7 million. Under the terms of the agreement,
the City funded $3.0 million of the relocation costs, $2.4 million of which
amount was financed through bank debt. The Company paid for the remaining
$5.7 million of relocation costs. The Company guaranteed repayment of the
bank debt if the City fails to pay the obligation. On August 2, 2004 the City
paid the remaining outstanding obligation and the Company's guarantee was
concluded.

Rent under the terms of the mooring site lease consists of base rent plus a
percent of adjusted gross receipts. The base rent was $27,000 annually
through December 31, 2003 and is subject to rate change every five years based
on the recommendation of the Port Commission. Effective January 1, 2004, the
annual base rent was adjusted to $29,250. The percentage rent is 2% of
adjusted gross receipts for any lease year equal to or less than $80.0
million, plus 3% of that portion of adjusted gross receipts for such lease
year which exceed $80.0 million but which are equal to or less than $100.0
million, plus 4% of that portion of adjusted gross receipts for such lease
year, if any, which exceed $100.0 million.

Competition is intense in the St. Louis market area. There are presently
four other casino companies operating five casinos in the market area. Many
of these competitors have significantly greater name recognition and financial

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and marketing resources than the Company. Two of these are Illinois casino
companies operating single casino vessels on the Mississippi River, one across
the Mississippi River from the "Admiral" and the second 20 miles upriver.
There are two Missouri casino companies, each of which operates casino vessels
approximately 20 miles west of St. Louis on the Missouri River. One company
operates two casinos in Maryland Heights, Missouri and the other company
operates one casino in the City of St. Charles, Missouri. The operator of the
St. Charles casino replaced its facility and reopened with nearly double its
prior gaming positions in August 2002.

The Missouri Gaming Commission announced that it would consider licensing
additional casinos in the St. Louis market. In September 2003, the City of
St. Louis and St. Louis County, which are separate political and
geographic subdivisions, announced that they were both issuing requests for
proposals for a new casino in each jurisdiction.

A project proposed by Pinnacle Entertainment, Inc. was selected and approved
by the City of St. Louis as its recommendation before the Missouri Gaming
Commission. Its proposal includes a casino two blocks from the "Admiral."
The St. Louis County Council approved a separate Pinnacle Entertainment, Inc.
project in Lemay, Missouri. Various other gaming companies filed proposals.
On September 1, 2004, the Missouri Gaming Commission approved Pinnacle
Entertainment, Inc. for formal license investigations for both the St. Louis
City and St. Louis County projects. Each of the proposals submitted requires
significant construction of new infrastructure for the casino and
entertainment complexes. Management believes that the licensing of a new
casino or casinos in metropolitan St. Louis, would have a material adverse
effect on the Company's financial condition and results of operations.

Missouri regulations limit the loss per simulated cruise per passenger by
limiting the amount of chips or tokens a guest may purchase during each two-
hour gaming session to five hundred dollars. The company that operates
adjacent casinos in Missouri is able to offer guests who reach the two-hour
loss limit the ability to move to the adjacent casino and continue to play.
The lack of a statutory loss limit on Illinois casinos allows them to attract
higher stake players and guests who do not want to be burdened with the
administrative requirements related to the loss limits.

--Biloxi, Mississippi Operations

See "Substantial Indebtedness; Bankruptcy Proceedings--Biloxi Operations"
regarding the sale of the Biloxi operations.

The Company managed its Biloxi gaming operations through its wholly-owned
subsidiary, President Mississippi. Biloxi is located on the Gulf of Mexico 75
miles east of New Orleans. The Mississippi Gulf Coast area has a population
of approximately 364,000.

The Company began dockside gaming operations in Biloxi on August 13, 1992.
Prior to July 1997, the Company was party to an operating lease with BH
Acquisition Corporation ("BHAC") for its Biloxi mooring site, parking
facilities, offices and a warehouse. BHAC was a wholly owned entity of Mr.
Connelly. In July 1997, President Broadwater Hotel, LLC ("PBLLC"), a limited
liability company in which the Company has a Class A ownership interest, and a
wholly-owned entity of Mr. Connelly which has a Class B ownership interest and
certain preferred rights to certain cash flows, acquired the real estate and

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improvements from BHAC for $40.5 million. The property was comprised of
approximately 260 acres and included a 111-slip marina which contained the
mooring site of the barge "President Casino-Broadwater," two hotels with
approximately 500 rooms and an adjacent 18-hole golf course.

--Leasing Operations

In addition to the vessels currently owned and utilized in its gaming
operations, the Company owned the M/V "President Casino-Mississippi." The M/V
"President Casino-Mississippi" was previously utilized at the Company's Biloxi
and Davenport operations.

The vessel and various equipment aboard the M/V "President Casino-
Mississippi" collateralized a term note payable which was also personally
guaranteed by Mr. Connelly. The Company continued to make the quarterly
principal and interest payments on the note prior to the Company's bankruptcy
filing. Under the terms of the note agreement, $2.1 million principal became
due and payable in August 2002 together with interest and costs (the "Note").
In November 2002, the lender brought an action against Mr. Connelly for breach
of contract under his personal guarantee. In December 2003, Mr. Connelly
satisfied his personal guarantee paying the lender $1.2 million. In January
2003, the Mississippi Bankruptcy Court granted a motion to relieve the lender
from the automatic stay in order to enforce its rights under the Preferred
Fleet Ship Mortgage, including but not limited to the right of the lender to
seize and sell the vessel. In May 2003, the lender filed a motion with the
United States District Court for the Southern District of Illinois for an
order directing the Clerk of Court to issue a warrant for the arrest of the
M/V "President Casino-Mississippi" pursuant to rules of admiralty and maritime
claims. On May 20, 2003, the Court executed the warrant, which allowed the
vessel to be seized and sold. On April 7, 2004, the vessel was auctioned and
the lender offered the highest bid of $0.5 million. The Company, President
Mississippi, Mr. Connelly and the lender entered into an agreement whereby the
Company would satisfy its obligations under the indebtedness, and related
costs, for $0.8 million. Additionally, Mr. Connelly agreed to forego his
rights and assignments. The terms are incorporated in the Plan of Liquidation
for the Company's Biloxi assets, which was confirmed May 27, 2005, and became
effective on June 7, 2005, at which time the Company paid the lender $0.8
million in satisfaction for its obligations. Pursuant to the terms of the
agreement between the Company and other parties involved, the Company wrote
down the outstanding obligation by $2.6 million during the fourth quarter of
2005.

On March 29, 2001, the Company executed an installment sale agreement for
the M/V "Surfside Princess" (formerly, the "New Yorker"). Under the terms of
the agreement, the Company would receive an aggregate of $9.0 million
principal installment payments over a period of thirty months commencing on
March 29, 2001, which included a final principal balloon payment of $4.4
million due October 2003. The note bore an annual interest rate of 10.5%. On
October 3, 2001, the Company terminated the installment sale agreement and
repossessed the M/V "Surfside Princess," due to the inability of the
purchasing party to meet the terms of the agreement.

During the fourth quarter of fiscal 2003, the Company held a sealed bid
auction of the "Surfside Princess" in accordance with Section 363 of the
United States Bankruptcy Code. In February 2003, the auction closed and the
winning bid was $1.5 million. On May 2, 2003, the purchase agreement on the
vessel was consummated, at which time the liens against the vessel attached to
the proceeds from the sale.

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Former Operations

On October 10, 2000, the Company sold the assets of its former Davenport,
Iowa casino and hotel operations for aggregate consideration of $58.2 million
in cash. The Company recognized a gain of approximately $34.5 million on the
transaction. The Davenport casino operations were managed by the Company's
wholly-owned subsidiary, President Riverboat Casino-Iowa, Inc. ("PRC Iowa"),
which is the general partner of the 95% Company-owned operating partnership,
The Connelly Group, L.P. ("TCG"). The Blackhawk Hotel operations in
Davenport, which were also sold in the transaction, were managed by a wholly-
owned subsidiary of the Company.

On April 30, 2001, the Company executed an agreement to sell the assets of
Gateway Riverboat Cruises, the Company's non-gaming cruise operations which
provided dinner cruise, excursion and sightseeing on two riverboats on the
Mississippi River. The transaction was consummated on July 17, 2001. The
Company recognized a gain of $0.8 million on the sale of these assets.

Marketing and Sales

The Company targets its marketing efforts at middle income, recreational
gaming customers. The Company relies on a mix of billboards, television,
radio and print advertisements in both the local and regional markets to
attain a high recognition level. The Company also has preferred slot player
programs, together with electronic slot player tracking, a table player
tracking and rating system, hosts, gaming tournaments, special events, direct
mailing, telemarketing and other casino marketing techniques to identify,
recognize and cultivate frequent and better casino customers. This effort is
supported by direct marketing, a targeted trade advertising schedule and
attendance at industry trade shows and sales gatherings. The Company also
utilizes its web site at www.presidentcasino.com to enhance its marketing
programs.

Regulatory Matters

--Gaming Regulations

General. The ownership and operation of gaming facilities are subject to
extensive state and local regulation. The Company's former Biloxi gaming
operations were regulated by the Mississippi Gaming Commission and its St.
Louis gaming operations are regulated by the Missouri Gaming Commission. As a
condition to obtaining and maintaining a gaming license, the Company must pay
fees and taxes, observe stringent regulations on operations, submit and update
comprehensive applications and submit detailed financial, operating and other
reports to each such Commission. Each such Commission has broad powers to
suspend or revoke licenses in which event operations would be terminated or
suspended. In addition, substantially all of the Company's material
transactions are subject to prior notice to review, and in some instances,
approval by such Commission. Any person acquiring 5% or more of the Common
Stock or equity securities of any gaming entity must be found suitable by the
appropriate regulatory body.

Various license fees and taxes are payable to the jurisdictions in which the
Company conducts or conducted gaming operations. These taxes are calculated
in various ways, and may be based upon (i) a percentage of the gross gaming
revenues received by the casino operation, (ii) the number of slot machines

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operated by the casino, (iii) the number of table games operated by the casino
and/or (iv) passenger counts. A casino entertainment tax may also be paid by
the licensee where entertainment is furnished in connection with the selling
of food or refreshments. In addition, certain other fees are imposed.

The Company, its subsidiaries, its employees and other individuals or
entities having material relationships with the Company are required to obtain
and hold various licenses and approvals in Missouri. If a gaming authority
were to find a director, officer or key employee unsuitable for licensing or
unsuitable to continue to have a relationship with the Company, the Company
would have to suspend or dismiss such person. The failure of the Company, or
any of its key personnel, to obtain or retain a license in any jurisdiction
could have a material adverse effect on the Company and its prospects or its
ability to obtain or retain licenses in other jurisdictions. Generally,
regulatory authorities have broad discretion in granting, renewing and
revoking licenses.

The Company may be subject to substantial fines for each violation of a
gaming law or regulation. In addition, a violation of a gaming law or
regulation may subject a license to suspension or revocation. Limitation,
conditioning or suspension of a gaming license could (and revocation of any
gaming license would) materially adversely affect the financial position and
results of operations of the Company.

Missouri Gaming Regulations. Gaming on the Missouri and Mississippi Rivers
in the State of Missouri was originally authorized pursuant to a statewide
referendum on November 3, 1992. On April 29, 1993, Missouri enacted revised
legislation (as amended, the "Missouri Gaming Law") which amended the existing
legislation. The Missouri Gaming Law also established the Missouri Gaming
Commission (the "Missouri Commission"), which is responsible for the licensing
and regulation, and enforcement with respect to some aspects of gaming in
Missouri.

Opponents of gaming in Missouri have brought several legal challenges to
gaming in the past and may possibly bring similar challenges in the future.
On November 25, 1997, the Missouri Supreme Court overturned a state lower
court and held that a portion of the Missouri Gaming Law that authorized
excursion gaming facilities in "artificial basins" up to 1,000 feet from the
Mississippi or Missouri rivers was unconstitutional. This ruling created
uncertainty as to the legal status of several excursion gaming riverboat
facilities in the state; however, as President Missouri facilities were fully
on the Mississippi River, they did not appear to be affected. On November 3,
1998, a statewide referendum was held, whereby the voters amended the
constitution to allow "artificial basins" for existing facilities, effectively
overturning the above Missouri Supreme Court decision. There can be no
assurances that any future challenges, if brought, would not further interfere
with full-scale gaming operations in Missouri, including the operations of
President Missouri.

Under the Missouri Gaming Law, the ownership and operation of riverboat
gaming facilities are subject to extensive state and local regulation. The
Company, its parent, subsidiaries and certain of its officers and employees
are subject to various regulations.

President Missouri must be licensed by the Missouri Commission in order to
conduct its operations. Licenses issued by the Missouri Commission to conduct

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gaming operations are subject to two year renewals and may not be transferred
or pledged as collateral. In addition to the information required of the
operator, the operator's directors, officers and other key persons (which
include individuals and related companies designated by the Missouri
Commission) must submit applications which include detailed personal and
financial information and are subject to thorough investigations and
licensing. Also, all gaming employees must obtain an occupational license
issued by the Missouri Commission. Each applicant has an ongoing duty to
update the information provided to the Missouri Commission in the application.
Applications filed with the Missouri Commission are continuously "pending" and
any issue may be reopened at any time. President Missouri was re-licensed by
the Missouri Commission in May 2002. The license was renewed in May 2004 on a
temporary basis and was renewed again in July 2004 for a period through May
2006.

The Missouri Gaming Law regulations impose restrictions on the use and
transfer of the gaming licenses as well as limitations on transactions engaged
in by licensees. The Missouri Gaming Law regulations bar a licensee from
taking any of the following actions without prior notice to, and approval by,
the Missouri Commission: any transfer or issuance of an ownership interest of
five percent or more of the issued and outstanding ownership interest, any
private incurrence of debt by the licensee or any holding company of $1.0
million or more, any public issuance of debt by a licensee or its holding
company, and certain defined "significant related party transactions." In
addition, the licensee must notify the Missouri Commission of other
transactions, including the transfer of five percent or more of an ownership
interest in the licensee or holding company, and any transaction of at least
$1.0 million. The restrictions on transfer of ownership apply to the parent
as well as the direct licensee, President Missouri. Gaming equipment and
corporate stock of some licensees may not be pledged except in narrow
circumstances and subject to regulatory conditions.

The Missouri Gaming Law imposes operational requirements on riverboat
operators, including a charge of two dollars per gaming customer per excursion
that licensees must pay to the Missouri Commission, a 20% tax on adjusted
gross receipts (in addition to other state taxes and license fees),
requirements regarding minimum payouts, prohibitions against providing credit
to gaming customers (except for the use of credit cards and cashing checks)
and a requirement that each licensee reimburse the Missouri Commission for all
costs of all Missouri Commission staff, including Missouri Highway Patrol
Officers, necessary to protect the public on the licensee's riverboat.

Licensees must also submit monthly, quarterly and annual reports of
financial and statistical data and quarterly and annual audited financial
information and compliance reports to the Missouri Commission and pay the
associated auditing fees.

Other areas of operation which are subject to regulation under the Missouri
Gaming Law rules are the color, denomination and handling of chips and tokens;
the surveillance methods and computer monitoring of electronic games;
accounting and audit methods and procedures; and approval of an extensive
internal control system. The internal operating procedures and controls of
each facility are subject to the approval of the Missouri Commission. The
purchase and sale of slot machines and other gaming equipment are subject to
regulation, and must be purchased from a licensed supplier. The Missouri
Commission requires comprehensive safety inspections and compliance with local

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ordinances and federal safety requirements. The Missouri Commission regulates
security and surveillance, and the control of cash and chips. Liquor licenses
are issued and regulated by the Missouri Commission, rather than local or
other state agencies.

The Missouri Commission has the authority to investigate any potential
violation of the Missouri Gaming Law. In addition, the Missouri Commission
may take enforcement action against a licensee for the failure of that
licensee to comply with any other law.

The Missouri Commission has the power and broad discretion in exercising
this power to revoke or suspend gaming or occupational licenses and impose
other penalties for violation of the Missouri Gaming Law and the rules and
regulations promulgated thereunder. These penalties may include forfeiture of
all gaming equipment used for improper gaming and fines of up to three times a
licensee's highest daily gross receipts during the preceding twelve months.

Although the Missouri Gaming Law does not limit the amount of riverboat
space that may be used for gaming, the Missouri Commission is empowered to
impose such space limitations through the adoption of rules and regulations.
The Missouri Gaming Law provides for a loss limit of five hundred dollars per
person per each two-hour gaming session. In order to establish an excursion
schedule which allows patrons to enter and exit the gaming floor at any time
during the excursion, the licensee must prove to the Missouri Commission that
it can enforce the five hundred dollar loss limit.

Mississippi Gaming Regulations. Gaming was authorized in Mississippi in
June 1990 but gaming operations did not commence until August 1992. The
ownership and operation of casino gaming facilities in Mississippi are subject
to extensive state and local regulation. Prior to the sale of the Biloxi
operations, the Company was registered as a publicly traded corporation under
the Mississippi Gaming Control Act and its gaming operations were subject to
the licensing and regulatory control of the Mississippi Gaming Commission (the
"Mississippi Commission") and various local, city and county regulatory
agencies.

Non-Gaming Regulations

The Company is subject to certain federal, state and local safety and health
laws, regulations and ordinances that apply to non-gaming businesses
generally, such as the Americans with Disabilities Act, the Clean Air Act,
Clean Water Act, Occupational Safety and Health Act, Resource and Conservation
Recovery Act and the Comprehensive Environmental Response, Compensation and
Liability Act. The Company has not made material expenditures with respect to
such laws and regulations. However, the coverage and attendant compliance
costs associated with such laws, regulations and ordinances may result in
future additional costs to the Company's operations. For example, in 1990 the
U.S. Congress enacted the Oil Pollution Act to consolidate and rationalize
mechanisms under various oil spill response laws. The Department of
Transportation has proposed regulations requiring owners and operators of
certain vessels to establish through the U.S. Coast Guard evidence of
financial responsibility in the amount of $5.5 million for clean-up of oil
pollution. This requirement would be satisfied by either proof of adequate
insurance (including self-insurance) or the posting of a surety bond or
guaranty.

13 15
Employees

As of February 28, 2005, the Company had approximately 1,500 employees.

In April 1999, certain gaming, service and maintenance employees of
President Missouri ratified a three-year collective bargaining agreement
setting out wages, benefits and other terms and conditions of employment. The
labor agreement was renegotiated and ratified for a one year period effective
April 2002. The April 2003 labor agreement was in effect until October 2004.
A new labor agreement was renegotiated and ratified and is effective until
October 2005. The labor agreement covers approximately 250 of the Company's
650 St. Louis employees.

Item 3. Legal Proceedings.

Pending Bankruptcy Proceedings

For information regarding the Company's bankruptcy proceedings, see the
disclosures under "Item 1 and Item 2. Business and Properties Substantial
Indebtedness; Bankruptcy Proceedings."

Other Litigation

--Poulos, McElmore and Shreier, et al. v. Caesar's World, Inc. et al.

In 1994, William H. Poulos filed a class-action lawsuit in the United States
District Court for the Middle District of Florida against over thirty-eight
(38) casino operators, including the Company, and certain suppliers and
distributors of video poker and electronic slot machines. This lawsuit was
followed by several additional lawsuits of the same nature against the same
and as well as additional defendants, all of which were consolidated into a
single class-action in the United States District Court for the District of
Nevada. The complaint alleges that the defendants fraudulently marketed and
operated casino video poker machines and electronic slot machines, and asserts
common law fraud and deceit, unjust enrichment and negligent
misrepresentation. On March 23, 2005, the Company was dismissed from this
lawsuit with prejudice by stipulation of the parties and order of the Court.

The Company is from time to time a party to litigation, which may or may not
be covered by insurance, arising in the ordinary course of its business. The
Company does not believe that the outcome of any such litigation will have a
material adverse effect on the Company's financial condition or results of
operations, or which would have any material adverse impact upon the gaming
licenses of the Company's subsidiaries.

General

The ownership and operation of casino gaming facilities are subject to
extensive state and local regulation. As a condition to obtaining and
maintaining a gaming license, the Company must submit detailed financial,
operating and other reports to state gaming commissions, all of which have
broad powers to suspend or revoke licenses. In addition, substantially all of
the Company's material transactions are subject to review and/or approval by
the various regulatory bodies. Any person acquiring 5% or more of the Common
Stock or of the equity securities of any gaming entity must be found suitable
by the appropriate regulatory body. The St. Louis license was last renewed
in May 2004 on a temporary basis due to the Gaming Commission's schedule and
was renewed in July 2004 for a period through May 2006.

14 16
Item 4. Submission of Matters to a Vote of Security Holders.

There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 2005.

PART II

Item 5. Market for the Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.

The Company's Common Stock trades on the OTC Bulletin Board under the symbol
"PREZQ.OB." The following table sets forth, for the fiscal quarters
indicated, the high and low sale or bid prices for the Common Stock, as
reported by the OTC Bulletin Board:

High Low
------ -----

Fiscal 2005
First Quarter................ $ 0.20 $ 0.07
Second Quarter............... $ 0.14 $ 0.09
Third Quarter................ $ 0.40 $ 0.10
Fourth Quarter............... $ 0.30 $ 0.15

Fiscal 2004
First Quarter................ $ 0.40 $ 0.25
Second Quarter............... $ 0.45 $ 0.31
Third Quarter................ $ 0.51 $ 0.17
Fourth Quarter............... $ 0.22 $ 0.11

The market bid quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commission and may not necessarily represent actual
transactions. Bid quotations are derived from Commodity Systems, Inc. through
Yahoo.com Historical Quotes.

On June 13, 2005, there were approximately 1,077 holders of record of the
Company's Common Stock.

The Company has never paid any dividends on its Common Stock. Currently,
all earnings, if any, are used for the repayment of debt and the operation of
its business. The payment of dividends by the Company is restricted under the
terms of the indenture governing the Company's Senior Exchange Notes and the
Company's pending bankruptcy reorganization proceedings. See "Management's
Discussion and Analysis of Financial Position and Results of Operations."

15 17
Item 6. Selected Consolidated Financial Data.

The following selected financial data of the Company is qualified by
reference to and should be read in conjunction with "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and notes thereto included elsewhere
herein. The selected consolidated statement of operations and balance sheet
data are derived from the Company's consolidated financial statements which
are included elsewhere herein.

Years Ended February 28/29,
2005 2004 2003 2002 2001
------ ------ ------ ------ ------
(in thousands, except share data)

Consolidated Statement of Operations Data:

Total operating revenues (1).............. $ -- $ -- $ -- $ -- $ 41,703

Operating income (loss)................... $ (2,644) $ (2,904) $ (3,248) $ (4,506) $ 1,206

Gain on disposal of property
and equipment (2)....................... $ -- $ -- $ -- $ -- $ 34,465

Income (loss) from
continuing operations................... $ (5,742) $ (4,535) $ (8,580) $(15,493) $ 19,547

Income (loss) from discontinued
operations (3).......................... $ 15,934 $ 1,800 $ (499) $ (5,255) $(19,753)

Net income (loss)......................... $ 10,192 $ (2,735) $ (9,079) $ (20,748) $ (206)

Basic and dilutive income (loss) per share
from continuing operations............... $ (1.14) $ (0.90) $ (1.70) $ (3.08) $ 3.88
Basic and dilutive loss per share
from discontinued operations............. $ 3.17 $ 0.36 $ (0.10) $ (1.04) $ (3.92)
-------- -------- -------- -------- --------
Basic and diluted net income
(loss) per share......................... $ 2.03 $ (0.54) $ (1.80) $ (4.12) $ (0.04)
======== ======== ======== ======== ========

Consolidated Balance Sheet Data:

Cash and cash equivalents................. $ 20,706 $ 18,362 $ 11,720 $ 5,710 $ 4,159
Restricted cash and short-term investments 2,584 2,672 5,404 7,717 10,342
Assets of discontinued operations......... 93,237 95,568 102,734 106,752 119,366
Total assets.............................. 116,705 116,818 120,834 120,450 135,744
Current liabilities....................... 47,992 14,096 58,429 145,237 141,657
Long-term debt............................ -- 45,429 -- -- --
Minority interest (4)..................... 19,020 17,653 679 15,102 13,874
Liabilities subject to compromise......... 91,850 91,989 111,340 646 --
Stockholders' deficit..................... (45,157) (52,349) (49,614) (40,535) (19,787)

(1) Fiscal 2001 revenue is that of the Davenport operations, which were
subsequently sold. See item (3) regarding discontinued operations.

(2) On October 10, 2000, the assets of the Company's Davenport hotel and
casino operations were sold. A gain of $34,465 was recognized on
the transaction.

(3) On April 15, 2005, the Biloxi operations were sold for approximately
$82,000 pursuant to an auction and sale approved by the United States
Bankruptcy Court for the Eastern District of Missouri.

On August 9, 2004, the Company entered into an agreement with Penn

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National Gaming, Inc. for the purchase of its St. Louis Operations.
The agreement was submitted to the Missouri Bankruptcy Court for review
and was amended on September 17, 2004. Under the terms of the
agreements, the stock of the St. Louis operations was to be sold for
approximately $28,000, subject to working capital adjustments and
subject to a potential overbid. On October 7, 2004, an auction was
held in accordance with Section 363 of the Bankruptcy Code. Columbia
Sussex, Inc. was the winning over-bidder for the St. Louis casino
operations for a purchase price of approximately $57,000, subject to
closing adjustments. On October 13, 2004, the Missouri Bankruptcy
Court approved the terms of the agreement. The closing of the
transaction, which is contingent upon licensing by the Missouri Gaming
Commission and other typical closing conditions, is anticipated to occur
not earlier than the late summer of 2005.

The Company sold one of two vessels accounted for in its leasing
segment during May 2003 and the second vessel was foreclosed on by the
lender which holds a Preferred First Fleet Mortgage collateralizing debt
owed to them. Management's evaluation of the net realizable value of
its assets, based on their intended future use and current market
conditions, resulted in impairments of long-lived assets of $288,
$1,167, $7,068 and $12,709, respectively, during fiscal years 2004,
2003, 2002 and 2001, on the two casino vessels accounted for in the
leasing segment.

In accordance with Statement of Financial Accounting Standard No. 144
"Accounting for the Impairment and Disposal of Long-Lived
Assets," the St. Louis and Biloxi operations and leasing segment are
accounted for as discontinued operations. The results for fiscal 2001,
2002, 2003 and 2004 have been revised to reflect these
reclassifications.

(4) As of February 28, 2003, $15,669 of minority interest related to
J. Edward Connelly Associates, Inc.'s Class B Unit of PBLLC was
classified as liabilities subject to comprise.

Gaming operations commenced in Davenport, Iowa on April 1, 1991, in Biloxi,
Mississippi on August 13, 1992 and in St. Louis, Missouri on May 27, 1994.
Hotel operations commenced in Davenport, Iowa on October 30, 1990 and in
Biloxi, Mississippi on July 27, 1997. The assets of the Davenport operations
were sold on October 10, 2000. The assets of Gateway Riverboat Cruises, the
Company's non-gaming cruise operations in St. Louis, were sold on July 17,
2001. The assets of the Biloxi operations were sold April 15, 2005.

17 19
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.

The following discussion, which covers fiscal years 2003 through 2005,
should be read in conjunction with the consolidated financial statements of
the Company and the notes thereto included elsewhere in this report.

President Casinos, Inc., President Riverboat Casino-Missouri, Inc., The
President Riverboat Casino-Mississippi, Inc., Broadwater Hotel, Inc., PRC
Management, Inc., PRC Holdings Corporation, TCG/Blackhawk, Inc. and Vegas
Vegas, Inc. have each filed voluntary petitions for reorganization under
Chapter 11 of the Bankruptcy Code. See "Note 1. Bankruptcy Proceedings" of
the Notes to Condensed Consolidated Financial Statements included in Part I of
this report.

The Company entered into agreements to sell its St. Louis, Missouri and
Biloxi, Mississippi gaming operations. The agreement to sell the Biloxi
operations was consummated on April 15, 2005. If the St. Louis agreement is
consummated under the current terms, the Company would not have any current
ongoing business operations. The sale of the St. Louis operation is subject
to numerous closing conditions, including approvals of gaming regulatory
authorities. As a result of the foregoing, at this time the Company is unable
to predict with certainty whether the sale of St. Louis operations will be
consummated, the amount of sale proceeds to be realized by the Company or
whether such sale proceeds will be sufficient to discharge the Company's
existing indebtedness, and the Company's future ability to continue as a going
concern.

As a result of the Company's relatively high degree of leverage and the need
for significant capital expenditures at its St. Louis property, the Company
was unable to pay the regularly scheduled interest payments of $6.4 million
that were each due and payable March 15, and September 15, 2000. Under the
indentures pursuant to which the $75.0 million 13.0% Senior Exchange Notes
(the "Senior Exchange Notes") and the $25.0 million 12% Secured Notes (the
"Secured Notes" and collectively with the Senior Exchange Notes, the "Notes")
were issued, an Event of Default occurred on April 15, 2000, and is continuing
as of the date hereof. Additionally, the Company was unable to pay the $25.0
million principal payment due September 15, 2000 on the Senior Exchange Notes.
The holders of at least 25% of the Senior Exchange Notes and the Secured Notes
were notified of the defaults and instructed the Indenture Trustee to
accelerate the Notes and on August 11, 2000, the holders declared the unpaid
principal and interest to be due and payable.

On October 10, 2000, the Company sold the assets of its Davenport, Iowa
operations for aggregate consideration of $58.2 million in cash. On November
22, 2000, the Company entered into an agreement with a majority of the holders
of the Senior Exchange Notes and a majority of the holders of the Secured
Notes. The agreement provided for a proposed restructuring of the Company's
debt obligations under the Notes and the application of certain of the
proceeds received by the Company from the sale of the Company's Davenport
assets. Approximately $43.0 million of the proceeds from the sale were
deposited with a trustee. Of this amount, $12.8 million was used to pay
missed interest payments due March 15, 2000 and September 15, 2000 on the
Notes; $25.0 million was used to partially redeem the Notes; and $5.2 million
was used to pay interest due March 15, 2001 on the Notes.

Subsequently, the Company was unable to make the principal and interest
payments due September 15, 2001 and has not made any subsequent principal or
interest payments on the Notes. As of February 28, 2005, principal due on the
Senior and Secured Notes was $56.2 million and $18.8 million, respectively.

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Due to certain debt covenants and cross default provisions associated with
other debt agreements, the Company was also in default under its M/V
"President Casino-Mississippi" note. See Liquidity and Capital Resources.

On May 2, 2003, the Company consummated the sale of the M/V "Surfside
Princess" under the terms of a Section 363 sale of the Bankruptcy Code for
$1.5 million. Liens on the vessel were transferred to the proceeds from the
sale, which were distributed after the settlement of certain litigation.

Pursuant to the term sheet provisions and the agreement of the Company, the
Committee and the Bondholders, on September 25, 2003, the Company entered into
an agreement with Isle of Capri Casinos, Inc. to sell the assets of its St.
Louis operations for approximately $50.0 million. The agreement was
terminated by mutual consent on May 4, 2004.

On August 9, 2004, the Company entered into an agreement with Penn National
Gaming, Inc. for the purchase of its St. Louis operations. The agreement was
submitted to the Missouri Bankruptcy Court for review and was amended on
September 17, 2004. Under the terms of the agreement, the stock of the
Company was to be sold for approximately $28.0 million, subject to working
capital adjustments and subject to higher and better offers. On October 7,
2004, an auction was held in accordance with Section 363 of the Bankruptcy
Code. Pursuant to an agreement submitted September 30, 2004, Columbia Sussex,
Inc. was the winning over-bidder for the purchase of all of the Company's
outstanding stock for a purchase price of approximately $57.0 million, subject
to closing adjustments. On October 13, 2004, the Missouri Bankruptcy Court
entered an order approving the sale of the stock of the Company to Columbia
Sussex. The closing of the transaction, is contingent upon approval by the
Missouri Gaming Commission and other closing conditions. The sale agreement
contract calls for the sale to be closed on or before August 1, 2005, and any
extension of such date will require the consent of both parties.

The purchase of the stock of President Missouri is also subject to the
confirmation by the Missouri Bankruptcy Court of a plan of reorganization of
the Company under Chapter 11 of the Bankruptcy Code (a "Plan of
Reorganization"). On May 25, 2005, the Company filed with the Missouri
Bankruptcy Court a disclosure statement (the "Disclosure Statement") setting
forth the terms of a Plan of Reorganization that was jointly developed by the
Company, its creditors SunAmerica Inc. and McKay Shields LLC, and the Official
Unsecured Creditors' Committee in the Company's bankruptcy case. The Missouri
Bankruptcy Court has scheduled a hearing on the sufficiency of the Disclosure
Statement for June 16, 2005. If the Disclosure Statement is approved, then
the Missouri Bankruptcy Court would set a date for a hearing on confirmation
of the Plan of Reorganization. Once confirmed, the Plan of Reorganization
will not become effective unless and until all the other conditions to the
closing of the sale to Columbia Sussex are satisfied, including, without
limitation, approval of the Missouri Gaming Commission.

On April 15, 2005, the Company consummated the sale of its Biloxi,
Mississippi operations to Broadwater Properties, LLP for approximately $82.0
million, subject to certain post-closing adjustments. The sale was pursuant to
an auction and sale process approved by the Missouri Bankruptcy Court. From
the proceeds, the Company paid $37.1 million to the lender of the PBLLC debt,
to satisfy the outstanding principal and interest in full. The Company
invested $45.7 million in certificates of deposit pending approval of the Plan
of Reorganization by the Bankruptcy Court.

On March 16, 2004, the Company sold the 179-room Broadwater Tower Hotel for
$6.5 million to Ocean Beach Club at Biloxi, LLC. The Company's other hotel,
the 333-room President Broadwater Resort, was not included in this

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transaction. The net proceeds of the transaction were used to reduce the debt
of the Company's subsidiary, PBLLC. In connection with the transaction the
Company also entered into an initial lease through September 15, 2004, with
the new owners whereby the Company would continue to operate the Broadwater
Tower Hotel with options for additional extensions. The Company renewed its
option through the date of the aforementioned sale.

Management believes the Company's liquidity and capital resources will be
sufficient to maintain its current operations until the St. Louis operations
are sold. However, costs previously incurred and which will be incurred in
the future in connection with restructuring the Company's debt obligations and
the bankruptcy proceedings have been and will continue to be substantial and,
in any event, there can be no assurance that the Company will be able to
restructure successfully its indebtedness or that its liquidity and capital
resources will be sufficient to maintain its normal operations during the
restructuring period.

Management estimates that the sale agreement for the St. Louis operations
would, if consummated on its present terms, provide sufficient funds to
discharge the Company's indebtedness. In the event the sale agreement is
consummated on its terms and proceeds are sufficient to discharge the
Company's indebtedness, the Board of Directors will determine whether to
liquidate the Company or engage in further business activities, including
activities other than gaming. At this time it is not possible to predict
whether the sale of the St. Louis operations will be consummated or whether
the Company will liquidate or continue business operations in some form.

Overview

The Company's operating results are affected by a number of factors,
including competitive pressures, changes in regulations governing the
Company's activities, the economic environment and general weather conditions.
Consequently, the Company's operating results may fluctuate from period to
period and the results for any period may not be indicative of results for
future periods. The Company's operations are not significantly affected by
seasonality.

As a result of the sale of the Biloxi operations in April 2005 and the
pending sale agreement for the St. Louis operations, discussed above the, the
results of operations for these segments are classified in discontinued
operations.

--Competition

Competition is intense in the St. Louis market area. There are presently
four other casino companies operating five casinos in the market area. Many
of these competitors have significantly greater name recognition and financial
and marketing resources than the Company. Two of these are Illinois casino
companies operating single casino vessels docked on the Mississippi River, one
across the Mississippi River from the "Admiral" and the second 20 miles
upriver. There are two Missouri casino companies, each of which operates
casino vessels approximately 20 miles west of St. Louis on the Missouri River.
One company operates two casinos in Maryland Heights, Missouri and the other
company operates one casino in the City of St. Charles, Missouri. The
operator of the St. Charles casino replaced its facility and reopened with
nearly double its prior gaming positions in August 2002.

The Missouri Gaming Commission announced that it would consider licensing
additional casinos in the St. Louis market. In September 2003, the City of

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St. Louis and St. Louis County, which are separate political and
geographic subdivisions, announced that they were both issuing requests for
proposals for a new casino in each jurisdiction.

A project proposed by Pinnacle Entertainment, Inc. was selected and approved
by the City of St. Louis as its recommendation before the Missouri Gaming
Commission. Its proposal includes a casino two blocks from the "Admiral."
The St. Louis County Council approved a separate Pinnacle Entertainment, Inc.
project in Lemay, Missouri. Various other gaming companies filed proposals.
On September 1, 2004, the Missouri Gaming Commission approved Pinnacle
Entertainment, Inc. for formal license investigations for both the St. Louis
City and St. Louis County projects. Each of the proposals submitted requires
significant construction of new infrastructure for the casino and
entertainment complexes. Management believes that the licensing of a new
casino or casinos in metropolitan St. Louis, would have a material adverse
effect on the Company's financial condition and results of operations.

--Regulatory Matters

The Company's Missouri gaming license was renewed on July 8, 2004 for a
period through May 2006. Missouri regulations limit the loss per "simulated"
cruise per passenger by limiting the amount of chips or tokens a guest may
purchase during each two-hour gaming session to $500 (the "loss limit"). The
company that operates adjacent casinos is able to offer guests who reach the
two-hour loss limit the ability to move to the adjacent casino and continue to
play. The lack of a statutory loss limit on Illinois casinos allows them to
attract higher stake players. Additionally, their guests are not burdened
with the administrative requirements related to the loss limits, which
includes the presentation of government issued identification. Any easing of
the loss limits in Missouri would be expected to have a positive impact on the
Company's St. Louis operations.

--Economic Environment

The Company's business involves leisure and entertainment. During periods
of recession or economic downturn, consumers may reduce or eliminate spending
on leisure and entertainment activities. In the event that any of the
Company's demographic markets suffer adverse economic conditions, the
Company's revenues may be materially adversely affected.

--Weather Conditions

The Company's operating results are susceptible to the effects of floods,
hurricanes and adverse weather conditions. Historically, the Company has
temporarily suspended operations on various occasions as a result of such
adversities. Under less severe conditions, high river levels in St. Louis
cause reduced parking and a general public perception of diminished access to
the casino resulting in decreased revenues. Management believes the
relocation of the "Admiral" in December 2000 diminished the negative effects
of high water on its St. Louis operations.

The Company's Biloxi operations were temporarily closed from noon on
September 14 until 7:00 a.m. on September 17, 2004, due to Hurricane Ivan.
The Company's Biloxi properties received no significant damage. However,
damage caused by Hurricane Ivan to areas east of Biloxi, representing a
significant portion of Biloxi's feeder market, was significant. As a result
of the temporary closure and the damage in areas east of Biloxi, Biloxi's
September 2004 gaming revenue decreased 20% compared to September 2003.

21 23
Results of Operations

The results of continuing operations for the years ended February 28, 2005,
February 29, 2004 and February 28,2003 include only those expenses resulting
from corporate administration. The gaming results for the Company's
operations in Biloxi, Mississippi and to a lesser significance, the hotel
operations in Biloxi (the Broadwater Property) are classified as discontinued
operations as a result of the sale of the assets in April 2005. The pending
sale of the St. Louis casino requires the Company to classify the St. Louis
operations in discontinued operations. Also included in discontinued
operations is the Company's former leasing operations.

The following table highlights the results of the Company's operations
during the periods presented.

Twelve Months Ended February 28/29,
2005 2004 2003
------ ------ ------
(in millions)

Continuing Operations

Corporate Administration
and Development
operating loss $ (2.6) $ (2.9) $ (3.2)

Discontinued Operations

St. Louis, Missouri Segment
Operating revenues 69.8 70.8 73.9
Operating income 7.9 5.6 4.9

Biloxi, Mississippi Segment
Operating revenues 43.2 48.5 49.8
Operating income 1.2 3.0 2.9

Leasing Segment
Operating loss (0.1) (1.6) (2.8)

St. Louis operating margin 11.3% 7.9% 6.6%
Biloxi operating margin 2.8% 6.2% 5.8%

The following table highlights cash flows of the Company's operations.

Twelve Months Ended February 28/29,
2005 2004 2003
------ ------ ------
(in millions)

Cash flows provided by
operating activities $ 6.4 $ 7.8 $ 10.1
Cash flows provided by (used in)
investing activities 2.3 2.4 (3.9)
Cash flows used in
financing activities (6.4) (3.6) (0.3)
Cash paid for interest 2.9 3.0 0.1

22 24
Fiscal 2005 Compared to Fiscal 2004

Operating revenues from continuing operations. As of February 28, 2005, the
Company had entered into purchase agreements for the sale of the Company's St.
Louis and Biloxi operations which were each approved by the Bankruptcy Court.
As such, all revenues are classified in discontinued operations.

Operating costs and expenses of continuing operations. The Company's
consolidated selling, general and administrative expenses were $2.6 million
during the year ended February 28, 2005 compared to $2.9 million for the year
ended February 29, 2004. Corporate overhead decreased $0.3 million primarily
as the result of a decrease in payroll and payroll benefits.

Operating income. As a result of the foregoing items, the Company had an
operating loss of $2.6 million during fiscal 2005, compared to an operating
loss of $2.9 million during fiscal 2004.

Reorganization items. The Company incurred reorganization items of $1.7
million during the year ended February 28, 2005, compared to $0.3 million
during the year ended February 29, 2004. Reorganization expense is largely
attributable to legal fees associated with the Company's bankruptcy
proceedings. The increase in reorganization costs is a result of the costs
resulting from legal representation of the noteholders.

Minority interest expense. The Company incurred $1.4 million in minority
interest expense during the year ended February 28, 2005, compared to $1.3
million during the year ended February 29, 2004. During both periods the
minority interest arises from Mr. Connelly's Class B Unit of the Broadwater
Property.

Net loss from continuing operations. As a result of foregoing items, the
Company incurred a net loss from continuing operations of $5.7 during fiscal
year 2005 compared to a net loss from continuing operations of $4.5 million
during fiscal year 2004.

Discontinued operations. Discontinued operations consists of the Company's
St. Louis segment, Biloxi segment and the former vessel leasing segment.

St. Louis segment. On August 9, 2004, the Company entered into an agreement
with Penn National Gaming, Inc. for the purchase of its St. Louis operations.
The agreement was submitted to the Missouri Bankruptcy Court for review and
was amended on September 17, 2004. Under the terms of the agreements, the
stock of the St. Louis operations was to be sold for approximately $28.0
million, subject to working capital adjustments and subject to a potential
overbid. On October 7, 2004, an auction was held in accordance with Section
363 of the Bankruptcy Code. Columbia Sussex, Inc. was the winning over-bidder
for the St. Louis casino operations for a purchase price of approximately
$57.0 million, subject to closing adjustments. On October 13, 2004, the
Missouri Bankruptcy Court approved the terms of the agreement. The closing of
the transaction, which is contingent upon licensing by the Missouri Gaming
Commission and other typical closing conditions, is anticipated to occur not
earlier than the late summer of 2005.

The Company's St. Louis operating segment had operating income of $7.9
million, consisting of revenues of $69.8 million and operating expenses of
$61.9 million, during the year ended February 28, 2005, compared to operating
income of $5.6 million, consisting of revenues of $70.8 million and operating
expenses of $65.2 million, during the year ended February 29, 2004. Net
revenues decreased $1.0 million primarily as a result in increased promotional
allowances in response to the competitive environment. Operating expenses,

23

25
other than depreciation, decreased $0.5 million. The decrease is primarily
the result of a decrease in payroll and benefits and admissions taxes due to a
decrease in volume, and decreased gaming taxes as a result of a decrease in
revenue. Depreciation expense decreased $2.6 million as a result of ceasing
to depreciate assets, in accordance with SFAS 144, effective with the
Bankruptcy Court's approval of the sale agreement. The St. Louis segment had
net income of $7.1 million for the year ended February 28, 2005, compared to
net income of $4.6 million for the year ended February 29, 2004.

Biloxi segment. On April 15, 2005, the Company consummated the sale of
substantially all of the assets utilized in its Biloxi operations to
Broadwater Development, LLP (the "Purchaser"). The sale was consummated
pursuant to the terms and conditions of a Sale and Purchase Agreement, dated
as of November 15, 2004, by and between President Mississippi, Vegas Vegas,
Inc., PBLLC, (collectively, with President Mississippi and Vegas Vegas, the
"Sellers") and Purchaser, as amended by the Amendment to Sale and Purchase
Agreement dated as of November 19, 2004, and the Second Amendment to Sale and
Purchase Agreement dated as of November 29, 2004 (collectively, the "Sale
Agreement"). Pursuant to the Sale Agreement, the Purchaser acquired from the
Sellers substantially all of the real and personal property associated with
the Company's Biloxi, Mississippi operations. Under the terms of the Sale
Agreement, the purchase price was approximately $82.0 million, subject to
certain post-closing adjustments. Approximately $6.8 million of the purchase
price was paid by Silver Slipper Casino Venture LLC, which acquired the right
to purchase the gaming casino assets under a separate transaction with the
Purchaser.

The Company's Biloxi operating segment had operating income of $1.2 million,
consisting of revenues of $43.2 million and operating expenses of $42.0
million during the year ended February 28, 2005, compared to operating income
of $3.0 million, consisting of revenues of $48.5 million and operating
expenses of $45.5 million during the year ended February 29, 2004. The
Company's Biloxi operations were closed from noon on September 14, 2004 until
7:00 a.m. on September 17, 2004 due to Hurricane Ivan. The Company's Biloxi
properties received no significant damage. However, damage caused by
Hurricane Ivan to areas east of Biloxi, principally Alabama and Florida,
representing a significant portion of Biloxi's feeder market, was significant.
As a result of the temporary closure and the damage in areas east of Biloxi,
Biloxi's patron count decreased, resulting in a decline in revenues.
Operating expenses, other than depreciation, decreased $3.0 million as a
result of decreased payroll and benefits due to a decrease in number of guests
and decreased gaming taxes as a result of a decrease in revenue. Depreciation
expense decreased $0.5 million as a result of ceasing to depreciate assets, in
accordance with SFAS 144, effective with the Bankruptcy Court's approval of
the sale agreement. The Biloxi segment had net income of $6.4 million for the
year ended February 28, 2005, compared to a net loss of $0.4 million for the
year ended February 29, 2004. Included in fiscal year 2005 net income is a
$2.4 million gain resulting from the write down of the PBLLC debt to net
realizable value due to the Court approved Mississippi Plan of Liquidation.
As a result of the sale of the Company's Biloxi operations on April 15, 2005,
and the gain that resulted from the transaction, the Company recorded a
reduction of the income tax valuation allowance resulting in a $5.7 million
tax benefit during fiscal year 2005.

Leasing segment. The leasing segment was operated by President Riverboat
Casino-New York, Inc., a wholly-owned subsidiary of the Company. Of the two
vessels owned by this segment, the "Surfside Princess" was sold in May 2003.
On June 11, 2003, as a result of the Company's default on the debt that the
vessel collateralized, the United States Marshall's office served a warrant on
the "President Riverboat Casino-Mississippi," the second vessel owned by the

24

26
leasing segment. On April 7, 2004, the vessel was auctioned and the lender
offered the highest bid.

The Company incurred a net loss of $0.1 million, before a gain on
restructuring debt of $2.6 million, from the leasing segment during the year
ended February 28, 2005, compared to a net loss of $2.4 million during the
year ended February 29, 2004. On October 17, 2003, the Mississippi Bankruptcy
Court issued an order dismissing President Riverboat Casino-New York, Inc.'s
Chapter 11 bankruptcy case. As a result of the segment no longer operating
under the protection of Chapter 11, the Company accrued certain contractual
obligations under the terms of the debt agreement collateralized by the M/V
"President Riverboat Casino-Mississippi." Such amounts consist of $0.7
million of default interest arising since the inception of the bankruptcy
filing, $0.5 million in contractual legal fees and $0.1 million in penalties.
Additionally, the Company recognized a $0.3 million valuation allowance on the
vessel. The sales proceeds did not cover the debt obligation. Subsequent to
February 28, 2005, the Company and lender reached an agreement whereby the
parties mutually agreed that all obligations related to the indebtedness and
penalties for default thereon would be satisfied for $0.8 million. As a
result of this agreement, the Company recognized a gain of $2.6 million on
restructuring of debt.

Net loss. The Company generated net income of $4.5 million during the year
ended February 28, 2005, compared to a net loss of $2.7 million during the
year ended February 28, 2004.

Fiscal 2004 Compared to Fiscal 2003

Operating revenues from continuing operations. As of February 28, 2005, the
Company had entered into purchase agreements for the sale of the Company's St.
Louis and Biloxi operations which were each approved by the Bankruptcy Court.
As such, revenues are classified in discontinued operations.

Operating costs and expenses of continuing operations. The Company's
consolidated selling, general and administrative expenses were $2.9 million
during the year ended February 29, 2004 compared to $3.2 million for the year
ended February 28, 2003. Corporate overhead decreased $0.3 million primarily
as the result of a severance agreement with a former executive accrued during
fiscal year 2003 of $0.3 million.

Operating income. As a result of the foregoing items, the Company had an
operating loss of $2.9 million during fiscal 2004, compared to an operating
loss of $3.2 million during fiscal 2003.

Interest expense, net. The Company incurred net interest expense of $17,000
during fiscal 2004, compared to $3.3 million during fiscal 2003. The decrease
is the result of $3.3 million decrease in interest expense resulting from June
20, 2002 voluntary petition under Chapter 11 of the Bankruptcy Code, whereby
the Noteholders of the Senior Exchange Notes and the Secured Notes were deemed
by management to be under-secured and as a result, interest ceased to accrue
as of the date thereof.

Reorganization items. The Company incurred reorganization items of $0.3
million during the year ended February 29, 2004, compared to $0.8 million
during the year ended February 28, 2003. Reorganization expense is largely
attributable to legal fees associated with the Company's bankruptcy
proceedings. The decrease in reorganization costs is a result of the costs
associated with the process of selling assets of the Company which were
directly attributable to each of the discontinued operations.

25
27
Minority interest expense. The Company incurred $1.3 million in minority
interest expense during both fiscal years 2004 and 2003. During both periods
the minority interest relates to Mr. Connelly's Class B Unit of the Broadwater
Property.

Net loss from continuing operations. As a result of foregoing items, the
Company incurred a net loss from continuing operations of $4.5 during fiscal
year 2004 compared to a net loss from continuing operations of $8.6 million
during fiscal year 2003.

Discontinued operations. Discontinued operations consists of the Company's
St. Louis segment, Mississippi segment and the former vessel leasing segment.

St. Louis segment. On August 9, 2004, the Company entered into an agreement
with Penn National Gaming, Inc. for the purchase of its St. Louis Operations.
The agreement was submitted to the Missouri Bankruptcy Court for review and
was amended on September 17, 2004. Under the terms of the agreements, the
stock of the St. Louis operations was to be sold for approximately $28.0
million, subject to working capital adjustments and subject to a potential
overbid. On October 7, 2004, an auction was held in accordance with Section
363 of the Bankruptcy Code. Columbia Sussex, Inc. was the winning over-bidder
for the St. Louis casino operations for a purchase price of approximately
$57.0 million, subject to closing adjustments. On October 13, 2004, the
Missouri Bankruptcy Court approved the terms of the agreement. The closing of
the transaction, which is contingent upon licensing by the Missouri Gaming
Commission and other typical closing conditions, is anticipated to occur not
earlier than the late summer of 2005.

The Company's St. Louis operating segment had operating income of $5.6
million, consisting of revenues of $70.8 million and operating expenses of
$65.2 million during the year ended February 29, 2004, compared to operating
income of $4.9 million, consisting of revenues of $73.9 million and operating
expenses of $69.0 million during the year ended February 28, 2003. Net
revenues decreased $3.1 million primarily as a result in increased promotional
allowances in response to the competitive environment. Operating expenses,
other than depreciation, decreased $1.3 million as a result of decreased
payroll and benefits as a result of a decrease in number of guests and
decreased gaming taxes as a result of a decrease in revenue. The St. Louis
segment had net income of $4.6 million for both years ended February 29, 2004,
and February 28, 2003.

Biloxi segment. On April 15, 2005, the Company announced that it had
consummated the sale of substantially all of the assets utilized in its Biloxi
operations to Broadwater Development, LLP (the "Purchaser"). The sale was
consummated pursuant to the terms and conditions of a Sale and Purchase
Agreement, dated as of November 15, 2004, by and between President
Mississippi, Vegas Vegas, Inc., PBLLC, (collectively, with President
Mississippi and Vegas Vegas, the "Sellers") and Purchaser, as amended by that
certain Amendment to Sale and Purchase Agreement dated as of November 19,
2004, and that certain Amendment to Sale and Purchase Agreement dated as of
November 29, 2004 (collectively, the "Sale Agreement"). Pursuant to the Sale
Agreement, the Purchaser acquired from the Sellers substantially all of the
real and personal property associated with the Company's Biloxi, Mississippi
operations. Under the terms of the Sale Agreement, the purchase price for the
was approximately $82.0 million, subject to certain post-closing adjustments.
Approximately $6.8 million of the purchase price was paid by Silver Slipper
Casino Venture LLC, which acquired the right to purchase the gaming casino
assets under a separate transaction with the Purchaser.

26
28
The Company's Biloxi operating segment had operating income of $3.0 million,
consisting of revenues of $48.5 million and operating expenses of $45.5
million during the year ended February 29, 2004, compared to operating income
of $2.9 million, consisting of revenues of $49.8 million and operating
expenses of $46.9 million during the year ended February 28, 2003. Operating
expenses decreased $1.2 million as a result of decreased payroll and benefits
as a result of a decrease in number of guests and decreased gaming taxes as a
result of a decrease in revenue. The Biloxi segment had a net loss of $0.4
million for the year ended February 28, 2004, compared to a net loss of $2.1
million for the year ended February 28, 2003.

Leasing segment. The leasing segment was operated by President Riverboat
Casino-New York, Inc., a wholly-owned subsidiary of the Company. Of the two
vessels owned by this segment, the "Surfside Princess" was sold in May 2003.
On June 11, 2003, as a result of the Company's default on the debt that the
vessel collateralized, the United States Marshall's office served a warrant on
the "President Riverboat Casino-Mississippi," the second vessel owned by the
leasing segment. On April 7, 2004, the vessel was auctioned and the lender
offered the highest bid.

The Company incurred a net loss of $2.4 million from the leasing segment
during the year ended February 29, 2004, compared to a net loss of $2.9
million during the year ended February 28, 2003. On October 17, 2003, the
Mississippi Bankruptcy Court issued an order dismissing President Riverboat
Casino-New York, Inc.'s Chapter 11 bankruptcy case. As a result of the
segment no longer operating under the protection of Chapter 11, the Company
accrued certain contractual obligations under the terms of the debt agreement
collateralized by the M/V "President Riverboat Casino-Mississippi." Such
amounts consist of $0.7 million of default interest arising since the
inception of the bankruptcy filing, $0.5 million in contractual legal fees and
$0.1 million in penalties. Additionally, the Company recognized a $0.3
million valuation allowance on the vessel. During fiscal 2003, the Company
recognized a $1.2 million asset impairment, $0.6 million of depreciation
expense and $1.0 million of selling, general and administrative expense
related to the cost of maintaining the two vessels it then owned.

Net loss. The Company incurred a net loss of $2.7 million during fiscal
2004, compared to a net loss of $9.1 million during fiscal 2003.

Liquidity and Capital Resources

The Company meets its working capital requirements from a combination of
internally generated sources including cash from operations and the sale of
assets.

As discussed above, the Company and its operating subsidiaries, with the
exception of PBLLC and President Riverboat Casino-New York, Inc., are
operating their businesses as debtors-in-possession under Chapter 11 of the
Bankruptcy Code. In addition to the cash requirements necessary to fund
ongoing operations, the Company anticipates that it will continue to incur
significant professional fees and other restructuring costs in connection with
the reorganization. As a result of the uncertainty surrounding the Company's
current circumstances, it is difficult to predict the Company's actual
liquidity needs and sources at this time. However, based upon current and
anticipated levels of operations, during the pendency of the bankruptcy,
management believes that its liquidity and capital resources will be
sufficient to maintain its St. Louis operations at current levels until the

27

29
pending sale of the property. Costs previously incurred and to be incurred in
the future in connection with the reorganization have been and will continue
to be substantial and, in any event, there can be no assurance that the
Company will be able to reorganize its indebtedness or that its liquidity and
capital resources will be sufficient to maintain its normal operations during
the reorganization period. The Company's access to additional financing is,
and for the foreseeable future will likely continue to be, very limited.
Additionally, any significant interruption or decrease in the revenues derived
by the Company from its operations would have a material adverse effect on the
Company's liquidity and the ability to maintain the Company's operations as
presently conducted.

As a result of the Company's high degree of leverage and the need for
significant capital expenditures at its St. Louis property, the Company was
unable to make the regularly scheduled interest payments of $6.4 million that
were each due and payable March 15 and September 15, 2000. Under the
Indentures pursuant to which the Senior Exchange Notes and Secured Notes were
issued, an Event of Default occurred on April 15, 2000, and is continuing as
of the date hereof. Additionally the Company did not pay the $25.0 million
principal payment due September 15, 2000 on the Senior Exchange Notes. The
holders of at least 25% of the Senior Exchange Notes and Secured Notes were
notified and instructed the Indenture Trustee to accelerate the Senior
Exchange Notes and Secured Notes and on August 11, 2000, the holders declared
the unpaid principal and interest to be due and payable. As of February 28,
2005, principal due on the Senior and Secured Notes was $56.2 million and
$18.8 million, respectively.

The Company's St. Louis operations require approximately $3.5 million to
fund daily operations. As of February 28, 2005, the St. Louis operations had
$21.9 million of non-restricted cash of which $3.0 million is included in
"Assets of Discontinued Operations."

The Company is heavily dependent on cash generated from operations to
continue to operate as planned in its existing jurisdiction and to make
capital expenditures. Management anticipates that its existing available cash
and cash equivalents and its anticipated cash generated from operations will
be sufficient to fund all of its ongoing operations. The debt obligations
will be stayed during the bankruptcy proceedings. To the extent cash
generated from operations is less than anticipated, the Company may be
required to curtail certain planned expenditures or seek other sources of
financing.

The Company had $0.4 million in restricted short-term investments as of
February 28, 2005, consisting of certificates of deposit guaranteeing a
certain performance obligation required by the Mississippi Gaming Commission.

The Company generated $6.4 million of cash from operating activities during
the year ended February 28, 2005, compared to $7.8 million for the year ended
February 29, 2004.

Investing activities of the Company generated $2.3 million of cash during
the year ended February 28, 2005, primarily as a result of proceeds from the
sale of the Broadwater Tower of $6.4 million offset by expenditures for
property and equipment of $4.3 million.

In conjunction with the purchase of the Broadwater Property, PBLLC borrowed

28

30
the sum of $30.0 million from a third party lender, evidenced by a non-
recourse promissory note (the "Indebtedness"). PBLLC was obligated under the
Indebtedness to make monthly payments of interest accruing under the
Indebtedness, and was obligated to repay the Indebtedness in full on July 22,
2000. In addition, PBLLC was obligated to pay to the lender a loan fee in the
amount of $7.0 million which was fully earned and non-refundable when the
Indebtedness became due. PBLLC continued to make the monthly interest
payments accruing on the $30.0 million principal through April 19, 2001, when
the Company announced that PBLLC had filed for reorganization under Chapter 11
of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of Mississippi.

On October 16, 2001, PBLLC filed its plan of reorganization which would
permit PBLLC to restructure its debt obligations in a manner which was
designed to permit it to continue as a going concern. Subsequently, on
February 28, 2003, PBLLC filed Modifications to Debtor's Plan of
Reorganization (together with the reorganization plan, the "Modified Plan").
On May 14, 2003, the Mississippi Bankruptcy Court entered the confirmation
order confirming the Modified Plan. The Modified Plan became effective on May
28, 2003 and the Company consummated the Modified Plan at that time. The
Modified Plan provides that the unsecured creditors of PBLLC receive 100% of
their claims. Under the Modified Plan, the obligations to the secured lender
were modified with respect to the debt amount, the interest rate and the due
date. On April 15, 2005, the Modified Indebtedness and accrued interest
thereon were paid in full with the proceeds from the sale of the Broadwater
Property.

The sale of the Company's Biloxi operations closed effective April 15, 2005
and on May 27, 2005 the Missouri Bankruptcy Court confirmed a Plan of
Liquidation (the "Mississippi Plan of Liquidation") for President Mississippi,
Vegas, Vegas and PBLLC (the "Mississippi Affiliates") that was jointly
developed by the Company and its creditors SunAmerica Inc. and McKay Shields
LLC in the Company's bankruptcy case. The Mississippi Plan of Liquidation
became final on June 7, 2005. Pursuant to the Mississippi Plan of
Liquidation, the proceeds of the sale of the Mississippi Properties, following
adjustments required under the Mississippi Asset Sale Agreement, are being
allocated and distributed to the creditors of the Mississippi Affiliates,
including the holders of the Company's Senior Exchange Notes and Secured Notes
in the aggregate outstanding principal amount of $75.0 million (the
"Noteholders") and to J. Edward Connelly Associates, Inc. ("JECA") and certain
assignees of JECA. JECA, an entity controlled by John E. Connelly, the
Company's Chairman and Chief Executive Officer, holds a Class B membership
interest in PBLLC. The Company anticipates that under the Mississippi Plan of
Liquidation, creditors of the Mississippi Affiliates, with the exception of
the Noteholders, will be paid in full. While final distributions under the
Mississippi Plan of Liquidation are subject to final determination and
settlement of claims and expenses, the Company currently estimates that (i)
approximately $27.9 million of the indebtedness due the Noteholders could be
paid, (ii) in respect of the liquidation preference of its Class B membership
interest in PBLLC, JECA could receive approximately $16.6 million of the
proceeds from the sale of the Mississippi Properties plus accrued interest,
and approximately an additional $2.8 million of the proceeds of the sale of
the Company's St. Louis operations (assuming the sale of the St. Louis
operations is consummated in accordance with its present terms as described
below and the Noteholders are paid in full).

29 31
The Company defaulted under the terms of its "M/V "President Casino-
Mississippi" note. The M/V "President Casino-Mississippi" is the vessel
previously operated as a casino in Biloxi, Mississippi and Davenport, Iowa.
The vessel and various equipment aboard the M/V "President Casino-Mississippi"
collateralize a term note payable which was also personally guaranteed by John
E. Connelly, Chairman and Chief Executive Officer of the Company. The Company
continued to make the quarterly principal and interest payments on the note
prior to the Company's bankruptcy filing. Under the terms of the note
agreement, $2.1 million principal became due and payable in August 2002
together with interest and costs (the "Note"). In November 2002, the lender
brought an action against Mr. Connelly for breach of contract under his
personal guarantee. In December 2003, Mr. Connelly satisfied his personal
guarantee paying the lender $1.2 million. In January 2003, the Mississippi
Bankruptcy Court granted a motion to relieve the lender from the automatic
stay in order to enforce its rights under the Preferred Fleet Ship Mortgage,
including but not limited to the right of the lender to seize and sell the
vessel. In May 2003, the lender filed a motion with the United States
District Court for the Southern District of Illinois for an order directing
the Clerk of Court to issue a warrant for the arrest of the M/V "President
Casino-Mississippi" pursuant to rules of admiralty and maritime claims. On
May 20, 2003, the Court executed the warrant, which allowed the vessel to be
seized and sold. On April 7, 2004, the vessel was auctioned and the lender
offered the highest bid of $0.5 million.

Because the Note was also guaranteed by the Company and President
Mississippi, the payment of the personal guarantee triggered a right of
contribution to Mr. Connelly from both the Company and the President
Mississippi. In addition, Mr. Connelly became partially jointly subrogated to
the lender's right under the Note to collect the payment by him from the
Company's subsidiary that issued the Note. The Note remained outstanding at
year end. The Company, President Mississippi, Mr. Connelly and the lender
entered into an agreement whereby the Company would satisfy its obligations
under the indebtedness, and related costs, for $0.8 million. Additionally,
Mr. Connelly agreed to forego his rights and assignments. The terms are
incorporated in the Plan of Reorganization for President Mississippi, which
was confirmed on May 27, 2005, and became effective on June 7, 2005, at which
time the Company paid the lender $0.8 million in satisfaction of its
obligations. Pursuant to the agreement between the Company and other parties
involved, the Company wrote down its obligations related to the M/V "President
Casino-Mississippi" by $2.6 million in the fourth quarter of fiscal 2005,
which is included in discontinued operations.

Critical Accounting Policies

--Significant Accounting Policies and Estimates

The Company prepares the consolidated financial statements in conformity
with accounting principles generally accepted in the United States. Certain
of the Company's accounting policies, including the determination of bad debt
reserves, the estimated useful lives assigned to property, plant and
equipment, asset impairment, insurance reserves and player point liability
require that management apply significant judgment in defining the appropriate
assumptions for calculating financial estimates. By their nature, these
judgments are subject to an inherent degree of uncertainty. Management's
judgments are based on historical experience, terms of existing contracts,
observance of trends in the gaming industry and information available from

30

32
other outside sources. There can be no assurance that actual results will not
differ from the Company's estimates. To provide an understanding of the
methodology applied, significant accounting policies and basis of presentation
are discussed where appropriate in this discussion and analysis and in the
notes of the consolidated financial statements.

The carrying values of the Company's assets are reviewed when events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Asset impairment is determined to exist if estimated future
cash flows, undiscounted and without interest charges, are less than the
carrying amount. If it is determined that an impairment loss has occurred,
then an impairment loss is recognized in the statement of operations. The
resulting impairment loss is measured as the amount by which the carrying
amount of the asset exceeds its fair value, estimated using quoted market
prices, if available, or other acceptable valuation methodologies, including
discounted cash flows or comparable sales.

Recently Issued Accounting Standards

In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based
Payment ("SFAS 123R"). SFAS 123R replaced SFAS No. 123, Accounting for Stock-
Based Compensation ("SFAS 123"), and superseded Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25").
Statement 123R requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the consolidated
financial statements based on their fair values and eliminates the alternative
method of accounting for employee share-based payments previously available
under APB 25. Historically, the Company has elected to follow the guidance of
APB 25 which allowed the Company to use the intrinsic value method of
accounting to value its share-based payment transactions with employees.
Based on this method, the Company did not recognize compensation expense in
its consolidated financial statements as the stock options granted had an
exercise price equal to the fair market value of the underlying common stock
on the date of the grant. SFAS 123R requires measurement of the cost of
share-based payment transactions to employees at the fair value of the award
on the grant date and recognition of expense over the required service or
vesting period. The provisions of SFAS 123R are required to be adopted by the
Company beginning March 1, 2006. The Company does not expect adoption of this
standard to have a material impact, if any, on the Company's results of
operations and such impact is contingent upon the number of future options
granted, the selected transition method and the selection between acceptable
valuation methodologies for valuing options.

Forward Looking Statements

This Annual Report on Form 10-K and certain information provided
periodically in writing and orally by the Company's designated officers and
agents contain certain statements which constitute "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.
The terms "Company," "we," "our" and "us" refer to President Casinos, Inc.
The words "expect," "believe," "goal," "plan," "intend," "estimate," and
similar expressions and variations thereof are intended to specifically
identify forward-looking statements. Those statements appear in this Annual
Report on Form 10-K and the documents incorporated herein by reference,

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33
particularly "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and include statements regarding the intent, belief or
current expectations of the Company, its directors or its officers with
respect to, among other things: (i) our financial prospects and operations;
(ii) our financing plans and our ability to meet our obligations under our
debt obligations and obtain satisfactory operating and working capital; (iii)
our operating and restructuring strategy; and (iv) the effect of competition
and regulatory developments on our current and expected future revenues. You
are cautioned that any such forward looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual
results may differ materially from those projected in the forward looking
statements as a result of various factors. The factors that might cause such
differences include, among others, the following: (i) continuation of future
operating and net losses by the Company; (ii) the inability of the Company to
restructure its debt obligations; (iii) the inability of the Company to obtain
sufficient cash from its operations and other resources to fund ongoing
obligations and continue as a going concern; (iv) the ability of the Company
to develop, prosecute, confirm and consummate one or more plans of
reorganization with respect to the Chapter 11 cases; (v) risks associated with
third parties proposing and obtaining confirmation of one or more plans of
reorganization, or seeking and obtaining approval for the appointment of a
Chapter 11 trustee or converting the cases to Chapter 7 cases; (vi) the
ability of the Company to obtain trade credit, and shipments and terms with
vendors and service providers; (vii) the Company's ability to maintain
contracts that are critical to its operations; (viii) potential adverse
developments with respect to the Company's liquidity and results of
operations; (ix) developments or new initiatives by our competitors in the
markets in which we compete; (x) our stock price; (xi) adverse governmental or
regulatory changes or actions which could negatively impact our operations;
and (xii) other factors including those identified in the Company's filings
made from time-to-time with the Securities and Exchange Commission. The
Company undertakes no obligation to publicly update or revise forward looking
statements to reflect events or circumstances after the date of this Annual
Report on Form 10-K or to reflect the occurrence of unanticipated events.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

As of February 28, 2005, the Company had $112.4 million of debt. Of this
amount $75.0 million bears contractual interest at fixed rates and is
classified as liabilities subject to compromise and $0.8 million bears
contractual interest at a fixed rate and is classified as liabilities of
discontinued operations. The remaining $36.6 million bears contractual
interest at a variable rate. The $36.6 million Broadwater Property note bears
interest at a stipulated variable rate at the greater of (i) 7.75% or (ii)
4.0% plus the LIBOR 30-day rate. As of February 28, 2005, the interest rate
applicable to the debt carried a variable rate of 7.75%. An increase of one
percentage point in the average interest rate applicable to the variable rate
debt outstanding as of February 28, 2005, would increase the Company's annual
contractual interest costs by approximately $0.4 million. The $39.0 million
Broadwater Property note was paid in full during April 2005. The Company
continues to monitor interest rate markets, but has not engaged in any hedging
transactions with respect to such risks.

As of February 28, 2005, the Company is obligated to pay under the Class B
Unit of Mr. Connelly in PBLLC a priority return based on a percentage per
annum equal to the greater of (i) 7.75% or (ii) 4.0% plus LIBOR, as defined by

32

34
the terms of the agreement, for PBLLC. As of February 28, 2005, the minority
interest on the balance sheet is comprised of $19.0 million, related to its
obligation to redeem the Class B Unit for $10.0 million, plus any priority
return accrued but not paid. As of February 28, 2005, the interest rate
applicable to the debt carried a variable rate of 7.75%. An increase of one
percentage point in the average interest rate applicable to the variable rate
debt outstanding as of February 28, 2005, would increase the Company's annual
contractual interest costs by approximately $0.2 million.

Although the Company manages its short-term cash assets to maximize return
with minimal risk, the Company does not invest in market rate sensitive
instruments for trading or other purposes and the Company is not exposed to
foreign currency exchange risks or commodity price risks in its transactions.

Item 8. Financial Statements and Supplementary Data.

Reference is made to the Index to Financial Statements and Schedules on page
F-1.

Item 9. Changes in and Disagreements with Independent Registered Public
Accounting Firm on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the Company's
disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) of the Securities and Exchange Act of 1934. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures as of February
28, 2005 were effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission's rules and forms.

There were no changes in the Company's internal control over financial
reporting that occurred during the quarter ended February 28, 2005 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

33 35
Part III

Item 10. Directors and Executive Officers of the Registrant.

As of the date hereof, the directors and executive officers of the Company,
together with certain information about them, are set forth below.

Name Age Director Since Positions with the Company
---- --- -------------- --------------------------
John E. Connelly 79 1992 Chairman of the Board and
Chief Executive Officer
(Class III)
John S. Aylsworth 54 1995 President, Chief Operating
Officer and Director
(Class III)
Terrence L. Wirginis 53 1993 Vice Chairman of the Board,
Vice President-Marine and
Development and Director
(Class II)
Ralph J. Vaclavik 50 -- Senior Vice President and
Chief Financial Officer
Karl G. Andren 58 1993 Director (Class I)
Royal P. Walker, Jr. 45 1996 Director (Class I)

The Company has a classified Board of Directors consisting of three classes.
At each annual meeting of stockholders, the bylaws provide that directors are
elected for a term of three years to succeed those directors whose terms are
expiring. No annual meeting of stockholders has been held since August 2001
and none is scheduled for 2005. Each director will continue in office until
his successor is duly elected and qualified.

Mr. Connelly has served as Chairman and a director of the Company and its
predecessors since their inception. Mr. Connelly has also served as Chief
Executive Officer of the Company from its inception until March 1995 and from
July 1995 to the present. Mr. Connelly served as President of the Company
from July 1995 until July 1997. Entities controlled by Mr. Connelly have
owned and operated the Gateway Clipper Fleet in Pittsburgh from its inception
in 1958 through 1996, the Station Square Sheraton Hotel in Pittsburgh from
1981 to 1998 and the Broadwater Beach Resort from 1992 until such time as the
purchase of the property by a limited liability company in which the Company
and Mr. Connelly have interests. In 1984, Mr. Connelly founded World Yacht
Enterprises, a fleet of dinner cruise, sightseeing and excursion boats in New
York City. In 1985, he started Gateway Riverboat Cruises in St. Louis, a
predecessor to the Company. Mr. Connelly is also the founder, owner and Chief
Executive Officer of J. Edward Connelly Associates, Inc., a marketing firm
based in Pittsburgh, Pennsylvania.

Mr. Aylsworth has been President and Chief Operating Officer since July
1997, and a director of the Company since July 1995. Mr. Aylsworth served as
Executive Vice President and Chief Operating Officer of the Company from March
1995 to July 1997. Prior to joining the Company, Mr. Aylsworth served as an
executive officer for Davis Companies, located in Los Angeles, California.
From January 1992 through October 1994, Mr. Aylsworth was Chief Executive
Officer of The Sports Club Company, a company which operates premier health
and fitness facilities in Los Angeles and Irvine, California.

34
36
Mr. Wirginis has served as Vice Chairman of the Board since July 1997. Mr.
Wirginis has served as Vice President, Marine and Development since August
1995 and as a director since 1993. Prior to his employment with the Company,
Mr. Wirginis provided consulting services to the Company with respect to the
Company's marine operations and the development and improvement of the
Company's facilities. The Company has been advised that Mr. Wirginis devotes
an insubstantial amount of his time to Gateway Clipper Fleet, a company in
which he has an ownership interest. Mr. Wirginis is the grandson of Mr.
Connelly.

Mr. Vaclavik has been Senior Vice President and Chief Financial Officer of
the Company since September 2002. Mr. Vaclavik served as Vice President of
Finance of the Company since its inception in June 1992.

Mr. Andren has been Chairman of Circle-Line Sightseeing Yachts, Inc., a
subsidiary of New York Cruise Lines, Inc. ("NYCL"), which operates the leading
sightseeing cruise line in New York City, since 1981. In addition, NYCL owns
World Yacht, Inc., a fleet of luxury dinner cruise, sightseeing and excursion
boats in New York City. Mr. Andren is a principal stockholder in NYCL. Mr.
Andren is a member of the Company's Audit and Compensation Committees.

Mr. Walker became a member of the Company's Board of Directors on June 4,
1996. Mr. Walker holds a J.D. from Texas Southern University in Houston,
Texas, and since June 1, 1992 has served on the staff of The Institute for
Disability Studies at the University of Southern Mississippi. From June 1991
through May 1992 he served as the first Executive Director of the Mississippi
Gaming Commission. Mr. Walker is a member of the Company's Audit and
Compensation Committees.

The Company's board of directors has a standing Audit Committee which is
comprised of non-employee directors. Messrs. Andren and Walker comprise the
Audit Committee. The Audit Committee acts pursuant to a written charter. The
Audit Committee met four times during fiscal 2005. Each member of the
Company's Audit Committee meets the independence requirement of the Securities
Exchange Act of 1934, as amended, and is financially literate, knowledgeable
and qualified to review financial statements. The Audit Committee does not
have a financial expert designated by the board of directors. Messrs. Andren
and Walker, who are the sole independent board members, are not financial
experts by definition of Regulation S-K. Due to the bankruptcy proceedings
and financial uncertainties of the Company, it has not been possible to
recruit additional independent board members.

The Company has adopted a Code of Ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer
and controller, or persons performing similar functions. A copy of the Code
of Ethics is available from the Company at no charge.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers ("Reporting Persons") to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock of the Company. The Company has
designated an officer who is available to the Company's Reporting Persons to
assist them in filing the required reports. To the Company's knowledge, based
solely on its review of the copies of such reports furnished to the Company

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37
and written representations that no other reports were required, during the
year ended February 28, 2005 all Section 16(a) filing requirements applicable
to the Reporting Persons were complied with.

Item 11. Executive Compensation.

The following table sets forth certain information with respect to
compensation paid by the Company during the three fiscal years ended February
28, 2005 and February 29, 2004 and February 28, 2003, respectively, to each of
the named executive officers of the Company.

___________________

(1) Consists of contributions made to the Company's 401(k) plan for the
account of the named executive.

36
38
The following table sets forth information regarding the number and value of
options held by each of the Company's executive officers named in the Summary
Compensation Table during fiscal 2005. None of the named executive officers
exercised any stock options during fiscal 2005.

(1) As of February 28, 2005, no options were in the money.

Employment Arrangements

In June 1998, the Company entered into separate Amended and Restated
Employment Agreements with each of Messrs. Connelly, Aylsworth and Wirginis.
The agreements with each of Messrs. Connelly, Aylsworth and Wirginis provide
for a term of employment through June 1, 2003. The agreements are
automatically renewable thereafter for successive two-year terms unless
terminated by either party. The term of each of the contracts has been
extended by the Company to June 30, 2005. Each of the employment agreements
is an executory contract which has neither been accepted or rejected in the
Company's bankruptcy proceedings.

In March 2002, the Company entered into an Employment Agreement with Mr.
Vaclavik for an employment term through June 1, 2004. The agreement is
renewable thereafter for successive two-year terms unless terminated by either
party within 90 days of its expiration.

The agreements provide for minimum annual base salaries of $200,000 for Mr.
Connelly and $180,000 for Mr. Vaclavik. In March 1999, the Amended and
Restated Employment Agreements of Messrs. Aylsworth and Wirginis were further
amended by letter agreements whereby Mr. Aylsworth's minimum annual base
salary is $450,000 and Mr. Wirginis's minimum annual base salary is $205,000.
Such minimum annual base salaries are subject to increases at the discretion
of the Compensation Committee. Each such executive officer may also receive
incentive bonuses provided through any incentive compensation plan of the
Company.

Each employment agreement provides that if the Company terminates the
employment of the executive without Cause or if the executive terminates his
employment for Good Reason prior to a Change in Control of the Company, the
Company will be required to pay such executive officer severance benefits
including the continuation of the executive's then-current annual salary for a
maximum of two years (except for Mr. Vaclavik's agreement, which provides for
salary continuation for a one-year period), and the continuation of certain
employment benefits to which he otherwise would have been entitled. "Cause" is
generally defined as (i) any breach or failure to perform duties or follow
instructions of the Board of Directors, (ii) commission of fraud,

37

39
misappropriation, embezzlement or other acts of dishonesty, alcoholism, drug
addiction or dependency or conviction of a felony or gross misdemeanor if the
Board of Directors determines such conduct is materially adverse to Company,
(iii) breach of the employment agreement by the executive, or (iv) the refusal
by any gaming commission with jurisdiction over the Company's facilities to
grant a license to the executive or any suspension or revocation of a license
previously granted to the executive. "Good Reason" is generally defined as
(i) a significant and adverse change in the nature or scope of the executive's
position, authority, duties or responsibility, (ii) a failure to continue the
executive officer's then-current participation in benefits or compensation,
(iii) within a period of one year following a Change in Control (as defined),
resignation by the executive in his sole and absolute discretion, or (iv) any
material breach of the agreement by the Company.

The employment agreements additionally provide that each such executive
officer will be paid severance benefits in the event that his employment with
the Company is terminated by the Company without Cause or by the executive for
Good Reason within two years of a Change in Control of the Company. The
Change in Control provisions would require, in addition to any other benefits
to which the executive is entitled, a lump-sum cash payment in an amount equal
to 2.99 times the executive officer's average annual base compensation, as
determined pursuant to the employment agreement, for Messrs. Connelly,
Aylsworth and Wirginis and in an amount equal to 1.5 times for Mr. Vaclavik.

If payment of the foregoing amounts and any other benefits received or
receivable upon termination after a Change in Control would subject such
executive officer to the payment of a federal excise tax, the total amount
payable by the Company to such executive officer would be increased by an
amount sufficient to provide such executive officer (after satisfaction of all
excise taxes and federal income taxes attributable to such increased payment)
with a net amount equal to the amount receivable prior to the federal excise
tax and federal income tax owed by the executive officer.

Change in Control is generally defined as (i) the acquisition by any person
of beneficial ownership of 20% or more of the combined voting power of the
Company's then outstanding securities, (ii) a change in the composition of the
Company's Board of Directors such that during any two consecutive years the
incumbent directors and their nominees do not constitute a majority of the
Board, (iii) a merger or consolidation of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which the holders
of the Common Stock prior to such event do not have the same proportionate
ownership of the common stock of the surviving corporation, (iv) a merger or
consolidation of the Company in which the Company is the continuing or
surviving corporation in which the holders of the Company's Common Stock
immediately prior to such event do not own 50% or more of the outstanding
stock of the surviving corporation, or (v) approval by the stockholders of the
Company of a complete liquidation or dissolution of the Company or the sale of
substantially all of the assets of the Company. A transfer by Mr. Connelly
and certain related persons and entities which would otherwise be sufficient
to constitute a Change of Control would not constitute a Change of Control for
the purpose of triggering a payment to Mr. Connelly, but would constitute a
change in control for each of the other executives.

On April 27, 2003, the Missouri Bankruptcy Court granted a motion for
approval of a key employee retention plan for certain parent company and
Missouri operating company employees. The motion does not affect any pre-
petition employment agreements as to assumption or rejection of pre-petition
executory contracts, with the exception that any claim asserted by a key
employee on account of a pre-petition employment agreement shall be reduced
dollar for dollar by the amounts paid or payable under the retention plan.

38

40
Under the terms of the plan, Mr. Vaclavik will receive $180,000 of
compensation on the date he is discharged from employment. If at any time
prior thereto Mr. Vaclavik's salary is reduced or he is required to move his
residence from the St. Louis, Missouri metropolitan area, he will also receive
such payment.

In May 2005, the Compensation Committee of the Board of Directors approved
replacement employment agreements for Mr. Connelly, Mr. Aylsworth and Mr.
Wirginis. The replacement employment agreements would have a six-month term
beginning June 1, 2005, and would include a salary equal to each executive's
current salary. The replacement employment agreements would also contain
terms and conditions substantially similar to the current employment
contracts; provided, however, that the replacement employment agreements do
not contain a change in control clause. The Compensation Committee has
recommended that each of the executives receive a bonus equal to three months
of salary if the executive remains employed at the closing of the sale of the
St. Louis operations. The Company has filed a motion with the Missouri
Bankruptcy Court seeking approval of the replacement contracts, but such
motion has not yet been heard or ruled upon. At this time, it is not possible
to predict whether the replacement employment agreements will be approved in
the form presented.

Compensation of Directors

During fiscal 2005, directors who were not employees of the Company received
annual director's fees of $36,000. Directors who are employees of the Company
do not receive director's fees. Directors of the Company are entitled to
receive discretionary grants of stock options. No such grants were made in
fiscal 2005. In addition, under the Company's existing stock option plan,
each non-employee director elected to the Board of Directors receives a grant
of non-qualified stock options to purchase 5,000 shares of Common Stock at the
fair market value of the Company's Common Stock on the date of grant. These
stock options are exercisable immediately with respect to one-half of the
shares and become exercisable with respect to the remainder of the shares in
two equal annual installments.

Item 12. Security Ownership of Certain Beneficial Owners and Management
And Related Stockholder Matters.

The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of the June 14, 2005: (i) by each person
known to the Company to own beneficially more than 5% of the outstanding
shares of the Company's Common Stock; (ii) by each of the Company's directors;
(iii) by each of the executive officers of the Company listed in the Summary
Compensation Table, and (iv) by all of directors and executive officers of the
Company as a group.

Name of Beneficial Owner No. of Shares (1) % of Class (1)
------------------------ ------------------ -------------
John E. Connelly 615,235 (2) 12.2%
John S. Aylsworth 492,318 (3) 9.1%
Terrence L. Wirginis 1,250,603 (4) 24.3%
Karl G. Andren 69,500 (5) 1.4%
Royal J. Walker, Jr. 36,000 (6) *
Ralph J. Vaclavik 29,114 (7) *
All executive officers and
directors as a group (6 persons) 2,492,770 (8) 44.3%
________________________
* Less than 1%
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41
(1) Except as otherwise noted in the footnotes to this table, to the
Company's knowledge each of the persons named in the table has sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. The percentage calculations are
based upon 5,033,161 shares of Company Common Stock issued and
outstanding and, for each director or executive officer or the group, the
number of shares subject to options exercisable by such director or
executive or the group.

(2) Consists of an aggregate of 615,235 shares owned of record by an entity
controlled by Mr. Connelly. Mr. Connelly's address is 2180 Noblestown
Road, Pittsburgh, PA 15205.

(3) Includes 370,000 shares issuable pursuant to stock options which are
currently exercisable. Mr. Aylsworth's address is 802 North First
Street, St. Louis, MO 63102.

(4) Includes 107,000 shares issuable pursuant to stock options which are
currently exercisable. Mr. Wirginis's address is 350 West Station
Square Drive, Pittsburgh, PA 15219.

(5) Consists of 12,500 shares owned by New York Cruise Lines, Inc., of which
Mr. Andren is Chairman and a principal stockholder and 57,000 shares
issuable pursuant to stock options which are currently exercisable.

(6) Consists solely of shares issuable pursuant to stock options which are
currently exercisable.

(7) Includes 23,500 shares issuable pursuant to stock options which are
currently exercisable.

(8) Includes 593,500 shares issuable pursuant to stock options which are
currently exercisable.

The following table reflects information about the Company's equity
compensation plans as of February 28, 2005.

Number of securities
Number of securities remaining available for
to be issued upon Weighted average exercise future issuance under
exercise of price of outstanding equity compensation
Plan category outstanding options options plans
- ------------- ------------------ ------------------ ------------------

Equity compensation
plans approved by
shareholders 688,609 $ 0.87 134,725

Equity compensation
plans not approved
by shareholders -- -- --

Item 13. Certain Relationships and Related Transactions

J. Edward Connelly and Associates, Inc. ("JECA"), an entity controlled by
John E. Connelly, the Company's Chairman and Chief Executive Officer, holds a

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42
Class B membership interest in PBLLC. Under the operating agreement of PBLLC,
such Class B interest is entitled to certain redemption rights and preferred
returns on cash flows. In April 2001, PBLLC filed a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code. As part of the plan of
reorganization filed by PBLLC in the bankruptcy proceedings, JECA will retain
its membership interest but any payments by PBLLC to JECA shall be restricted
until such time as all outstanding obligations to its lender and other
interests receiving funds under the plan of reorganization are discharged.

The M/V "President Casino-Mississippi" and various equipment aboard the M/V
"President Casino-Mississippi" collateralized a term note payable which was
also personally guaranteed by Mr. Connelly and his affiliates. Under the
terms of the note agreement, $2.1 million principal became due and payable in
August 2002 together with interest and costs (the "Note"). The highest
aggregate sum guaranteed on the Note in fiscal 2005 was $2.1 million. In
November 2002, the lender brought an action against Mr. Connelly for breach of
contract under his personal guarantee. In December 2003, Mr. Connelly
satisfied his personal guarantee paying the lender $1.2 million. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Liquidity and Capital Resources."

In connection with the resolution of various bankruptcy issues with respect
to the Company's Biloxi operations, JECA entered into an agreement (the "JECA
Proceeds Distribution Agreement") with John S. Aylsworth, President, Chief
Operating Officer and Director of the Company, Terrence L. Wirginis, Vice
Chairman of the Board and Ralph J. Vaclavik, the Chief Financial Officer of
the Company, pursuant to which upon receipt of funds by JECA toward payment of
the liquidation preference of its Class B membership interest in PBLLC, JECA
will use its best efforts to pay a percentage of such funds to Messrs.
Aylsworth, Wirginis and Vaclavik based on the total sales proceeds to JECA.
While final distributions under the Mississippi Plan of Liquidation are
subject to final determination and settlement of claims and expenses, the
Company currently estimates that the proceeds of the sale of the Mississippi
Properties and the anticipated sale of the Company's St. Louis operations (if
completed in accordance with its present terms) will be sufficient to repay
the Noteholders the outstanding indebtedness under the Notes and, in addition,
to satisfy JECA's liquidation preference of its Class B membership interest in
PBLLC, Messrs. Aylsworth, Wirginis and Vaclavik would be entitled to receive
approximately $4.8 million, $4.8 million and $0.3 million, respectively,
pursuant to the JECA Proceeds Distribution Agreement.

41 43
PART IV

Item 14. Principal Accountant Fees and Services.

The Audit Committee has appointed Deloitte & Touche LLP to serve as the
Company's independent registered public accounting firm for 2005 and 2004.

The following table presents fees for professional audit services rendered
by Deloitte & Touche LLP for the audit of our the Company's financial
statements, and fees billed for other services rendered by Deloitte & Touche
LLP for the fiscal years shown.

Year Ended February 28/29,
2005 2004
------ ------

Audit Fees (1)...................... $ 228 $ 228
Audit-Related Fees (2).............. 131 131
Tax Fees (3)........................ 163 15
--------- --------
Total $ 522 $ 374
========= ========

(1) Audit Fees consist of fees rendered for professional services rendered
for the audit of our financial statements included in our Forms 10-K and
10-Q's during the 2005 and 2004 fiscal years and services that are normally
provided by Deloitte & Touche LLP in connection with statutory and regulatory
filings or engagement.

(2) Audit Related Fees consist of fees rendered for assurance and related
services that are reasonably related to the performance of the audit or review
of our financial statements and are not reported under "Audit Fees." This
category includes fees related primarily to compliance audits required by the
Missouri and Mississippi Gaming Commissions.

(3) Tax Fees consist of fees rendered for professional services rendered for
tax compliance, tax advice and tax planning. These services include
assistance regarding federal and state tax compliance, tax planning,
divestiture and reorganization.

The Audit Committee has established a policy requiring the approval of all
audit engagement fees and terms and the pre-approval of all non-audit services
provided to the Company by Deloitte & Touche LLP. The policy prohibits the
Audit Committee from delegating to management the committee's responsibility
to pre-approve permitted services of the independent registered public
accounting firm.

During 2005, the Audit Committee pre-approved non-audit services related to
tax compliance and gaming compliance. The Audit Committee pre-approved 100%
of the fees for services covered under the captions "Audit Related Fees" and
"Tax Fees," for fiscal years 2005 and 2004.

Prior to retaining Deloitte & Touche LLP to provide any non-audit services,
the Audit Committee considered whether Deloitte & Touche LLP's provision of
all these services was compatible with maintaining the independence of
Deloitte & Touche LLP and determined that the provision of these services

42

44
would not interfere with Deloitte & Touche LLP's independence.

Item 15. Exhibits and Financial Statement Schedules.

(a) 1. Financial Statements.

See the Index to Financial Statements and Schedules on page F-1.

2. Financial Statement Schedules.

See the Index to Financial Statements and Schedules on page F-1.

3. Exhibits.

See Exhibit Index on page F-52.

43 55
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

I. PRESIDENT CASINOS, INC. (Debtors-in-Possession)
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm...........F-2
Consolidated Balance Sheets as of February 28, 2005 and
February 29, 2004...............................................F-3
Consolidated Statements of Operations for the Years
Ended February 28, 2005, February 29, 2004 and
February 28, 2003...............................................F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the
Years Ended February 28, 2005 and February 29, 2004
and February 28, 2003...........................................F-5
Consolidated Statements of Cash Flows for the Years
Ended February 28, 2005 and February 29, 2004 and
February 28, 2003...............................................F-6
Notes to Consolidated Financial Statements........................F-7
Financial Statement Schedule:
Schedule II--Valuation and Qualifying Accounts...................F-42
All other schedules are omitted as the required information is
inapplicable or is presented in the Company's Consolidated
Financial Statements or Notes thereto.

II. THE CONNELLY GROUP, L.P.
Financial Statements:
Report of Independent Registered Public Accounting Firm..........F-43
Balance Sheets as of February 28, 2005 and February 29, 2004.....F-44
Statements of Operations for the Years Ended February 28, 2005,
February 29, 2004 and February 28, 2003..........................F-45
Statements of Partners' Preferred Redeemable Capital and
General Capital for the Years Ended February 28, 2005,
February 29, 2004 and February 28, 2003........................F-46
Statements of Cash Flows for the Years Ended
February 28, 2005, February 29, 2004 and February 28, 2003.....F-47
Notes to Financial Statements....................................F-48
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts..................F-50
All other schedules are omitted as the required information is
inapplicable or is presented in the Company's Financial Statements
or Notes thereto.

F-1
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Members of the Board of Directors of
President Casinos, Inc.:

We have audited the accompanying consolidated balance sheets of President
Casinos, Inc. (debtors-in-possession), (the "Company") as of February 28, 2005
and February 29, 2004, and the related consolidated statements of operations,
stockholder's equity (deficit), and cash flows for each of the three years in
the period ended February 28, 2005. Our audits also include the financial
statement schedule listed in the Index at Item 15(a)2. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of February 28,
2005 and February 29, 2004, and the results of their operations and their cash
flows for each of the three years in the period ended February 28, 2005 in
conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

As discussed in Note 1, the Company has filed for reorganization under Chapter
11 of the United States Bankruptcy Code. The accompanying consolidated
financial statements do not purport to reflect or provide for the consequences
of the bankruptcy proceedings. In particular, such financial statements do not
purport to show (a) as to assets, their realizable value on a liquidation
basis or their availability to satisfy liabilities; (b) as to pre-petition
liabilities, the amounts that may be allocated for claims or contingencies, or
the status and priority thereof; (c) as to shareholder accounts, the effect of
any changes that may be made in the capitalization of the Company; or (d) as
to operations, the effect of any changes that may be made in the business.

The accompanying consolidated financial statements have been prepared assuming
that the Company, will continue as a going concern. As discussed in Notes 1
and 2, the Company has suffered recurring losses from operations, generated
negative cash flows from operations and has a net stockholders' deficit.
Management's plans in regard to these matters are also described in Notes 1
and 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

As discussed in Note 1, the Company has entered into agreements to sell the
St. Louis casino operations and the Biloxi, Mississippi operations.

/s/ Deloitte & Touch LLP
St. Louis, Missouri
May 27, 2005
F-2
48

PRESIDENT CASINOS, INC.
(DEBTORS-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

February 28/29,
2005 2004
-------- --------

ASSETS

Current Assets:
Cash and cash equivalents............................................. $ 20,706 $ 18,362
Restricted cash and cash equivalents.................................. 2,234 2,322
Restricted short-term investments..................................... 350 350
Assets of discontinued operations..................................... 93,237 95,568
Prepaid expenses and other current assets............................. 173 209
--------- ---------
Total current assets.............................................. 116,700 116,811

Property and Equipment, net............................................. 5 7
--------- ---------
$116,705 $116,818
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities Not Subject to Compromise:
Accounts payable...................................................... $ 641 $ 102
Accrued payroll and benefits.......................................... 339 577
Other accrued liabilities............................................. 1,045 580
Liabilities of discontinued operations................................ 9,346 12,837
Current maturities of long-term debt.................................. 36,621 --
--------- ---------
Total current liabilities......................................... 47,992 14,096

Long-Term Debt.......................................................... -- 45,429
Minority Interest....................................................... 19,020 17,653
--------- ---------
Total liabilities not subject to compromise....................... 67,012 77,178

Liabilities Subject to Compromise....................................... 91,850 91,989
--------- ---------
Total liabilities.............................................. 158,862 169,167
--------- ---------
Commitments and Contingent Liabilities.................................. -- --
Stockholders' Deficit:
Preferred Stock, $.01 par value per share; 150,000 shares
authorized; none issued and outstanding............................. -- --
Common Stock, $.06 par value per share; 14,000,000 shares
authorized; 5,033,161 shares issued and outstanding................. 302 302
Additional paid-in capital............................................ 101,729 101,729
Accumulated deficit................................................... (144,188) (154,380)
--------- ---------
Total stockholders' deficit....................................... (42,157) (52,349)
--------- ---------
$116,705 $116,818
========= =========
See Notes to Consolidated Financial Statements.

F-3
49

PRESIDENT CASINOS, INC.
(DEBTORS-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

Years Ended February 28/29,
2005 2004 2003
------ ------ ------

OPERATING REVENUES......................... $ -- $ -- $ --
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative........ 2,640 2,899 3,232
Depreciation and amortization.............. 4 5 11
Development................................ -- -- 5
--------- --------- ---------
Total operating costs and expenses....... 2,644 2,904 3,248
--------- --------- ---------

OPERATING LOSS............................. (2,644) (2,904) (3,248)
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (contractual interest of
$13,310, $12,335 and $11,000 for the
years ended February 28/29, 2005,
2004 and 2003).......................... -- (1) (3,300)
Interest income............................ 8 18 43
Reorganization items, net.................. (1,738) (342) (756)
--------- --------- ---------
Total other income (expense), net.......... (1,730) (325) (4,013)
--------- --------- ---------
LOSS BEFORE MINORITY INTEREST
AND DISCONTINUED OPERATIONS............... (4,374) (3,229) (7,261)
Minority interest.......................... 1,368 1,306 1,319
--------- --------- ---------
LOSS FROM CONTINUING OPERATIONS............ (5,742) (4,535) (8,580)
--------- --------- ---------
Income (loss) from discontinued operations. 15,934 1,800 (499)
--------- --------- ---------
NET INCOME (LOSS).......................... $ 10,192 $ (2,735) $ (9,079)
========= ========= =========

Basic and diluted net loss per share
from continuing operations.............. $ (1.14) $ (0.90) $ (1.70)
Basic and diluted net income (loss) per
share from discontinued operations...... 3.17 0.36 (0.10)
-------- -------- --------
Basic and diluted net income (loss)
per share............................... $ 2.03 $ (0.54) $ (1.80)
======== ======== ========
Weighted average common and dilutive
potential common shares outstanding....... 5,033 5,033 5,033
======= ======= =======

See Notes to Consolidated Financial Statements.

F-4
50

PRESIDENT CASINOS, INC.
(DEBTORS-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)

Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
----- ------- -------- -----

Years Ended February 28, 2003,
February 29, 2004 and
February 28, 2005:

Balance as of March 1, 2002....... $ 302 $ 101,729 $(142,566) $ (40,535)
Net loss.......................... -- -- (9,079) (9,079)
---------- ---------- ---------- ----------
Balance as of February 28, 2003... 302 101,729 (151,645) (49,614)
Net loss.......................... -- -- (2,735) (2,735)
---------- ---------- ---------- ----------
Balance as of February 29, 2004... 302 101,729 (154,380) (52,349)
Net income........................ -- -- 10,192 10,192
---------- ---------- ---------- ----------
Balance as of February 28, 2005... $ 302 $ 101,729 $(144,188) $ (42,157)
========== ========== ========== ==========

See Notes to Consolidated Financial Statements.

F-5
51

PRESIDENT CASINOS, INC.
(DEBTORS-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Years Ended February 28/29,
2005 2004 2003
------ ------ ------

Cash flows from operating activities:
Net income (loss)................................... $ 10,192 $ (2,735) $ (9,079)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................... 4,934 8,114 8,923
Gain on disposal of assets...................... 8 150 117
Impairment of long-lived assets................. -- 288 1,167
Minority interest............................... 1,368 1,306 1,319
Reorganization items............................ (5,059) -- --
Deferred income taxes........................... (5,707) -- --
Net change in working capital accounts.......... 703 633 7,659
--------- --------- ---------
Net cash provided by operating activities..... 6,439 7,756 10,106
--------- --------- ---------
Cash flows from investing activities:
Expenditures for property and equipment........... (4,344) (2,464) (5,592)
Proceeds from the sale of property
and equipment.................................. 6,554 1,560 12
Changes in restricted cash........................ 87 2,982 1,638
Purchase of short-term investments................ -- -- (12)
Maturity of short-term investments................ -- 322 75
--------- --------- ---------
Net cash provided by (used in)
investing activities....................... 2,297 2,400 (3,879)
--------- --------- ---------
Cash flows from financing activities:
Payments on notes payable......................... (6,392) (3,551) (105)
Payment of minority interest...................... -- (2) (73)
--------- --------- ---------
Net cash used in financing activities......... (6,392) (3,553) (178)
--------- --------- ---------
Net increase in cash and cash equivalents........... 2,344 6,603 6,049

Cash and cash equivalents at beginning of year...... 22,762 16,159 10,110
--------- --------- ---------
Cash and cash equivalents at end of year............ $ 25,106 $ 22,762 $ 16,159
========= ========= =========

See Notes to Consolidated Financial Statements.

F-6
52
PRESIDENT CASINOS, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data and unless otherwise stated)

1. BANKRUPTCY PROCEEDINGS

- --Overview

As used herein, the term "Company" refers to President Casinos, Inc., its
wholly-owned subsidiaries, a 95%-owned limited partnership and a limited
liability company in which a wholly-owned subsidiary of President Casinos,
Inc. owns a Class A ownership interest and in which an entity wholly-owned by
the Chairman of President Casinos, Inc. owns a Class B unit and has a
preferred right to certain cash flows. As described below, President Casinos,
Inc. and certain of its subsidiaries are currently in bankruptcy proceedings.

As a result of the Company's relatively high degree of leverage and the need
for significant capital expenditures at its St. Louis property, the Company
was unable to pay the regularly scheduled interest payments of $6,375 which
were each due and payable March 15, and September 15, 2000. Under the
indentures pursuant to which the $75,000 13% Senior Exchange Notes (the
"Senior Exchange Notes") and $25,000 12% Secured Notes (the "Secured Notes"
and, collectively with the Senior Exchange Notes, the "Notes") were issued, an
Event of Default occurred on April 15, 2000, and is continuing as of the date
hereof. Additionally, PCI was unable to pay the $25,000 principal payment due
September 15, 2000 on the Senior Exchange Notes. The holders of at least 25%
of the Senior Exchange Notes and the Secured Notes were notified of the
defaults and instructed the Indenture Trustee to accelerate the Notes and on
August 11, 2000, the holders declared the unpaid principal and interest to be
due and payable. As of February 28, 2005, the outstanding principal consists
of $56,250 of Senior Exchange Notes and $18,750 of Secured Notes.

On June 20, 2002, President Casinos, Inc. and its subsidiary, President
Riverboat Casino-Missouri, Inc. ("President Missouri"), which owns and
operates the St. Louis operations, filed voluntary petitions for
reorganization under Chapter 11 of Title 11, United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of Mississippi (the "Mississippi Bankruptcy Court"). On July 9,
2002, President Casinos, Inc.'s subsidiary The President Riverboat Casino-
Mississippi, Inc. ("President Mississippi") filed a voluntary reorganization
petition in the same Court. On July 11, 2002, substantially all of President
Casinos, Inc.'s other operating subsidiaries filed voluntary reorganization
petitions under Chapter 11 in the same Mississippi Bankruptcy Court.
Subsequently, orders were entered by the Mississippi Bankruptcy Court
transferring venue of all of the bankruptcy cases, except President Riverboat
Casino-New York, Inc. ("President New York") and President Broadwater Hotel,
LLC, to the United States Bankruptcy Court for the Eastern District of
Missouri (the "Missouri Bankruptcy Court," and together with the Mississippi
Bankruptcy Court, the "Bankruptcy Courts,") where the latter proceeding is now
pending and being administered.

The Company and its operating subsidiaries, except President Broadwater
Hotel, LLC and President New York, each continue in possession and use of
their assets as debtors-in-possession. The Company and its operating
subsidiaries have had their Missouri Bankruptcy Chapter 11 cases
administratively consolidated under the President Casinos, Inc. case.

Prior to any of the cases being transferred to the Missouri Bankruptcy
Court, the Mississippi Bankruptcy Court established "bar dates," all of which

F-7

53
have expired, by which all claimants were required to submit and characterize
claims against the Company. As part of the Company's Chapter 11
reorganization process, the Company has attempted to notify all known or
potential creditors of the filings for the purpose of identifying certain pre-
petition claims. In the Company's Chapter 11 cases, substantially all of the
Company's liabilities as of the filing date are subject to adjustment under a
plan of reorganization. Generally, actions to enforce or otherwise effect
repayment of all pre-petition liabilities as well as all pending litigation
against the Company are stayed while the Company continues its business
operations as debtors-in-possession. Schedules have been filed by the Company
with the Bankruptcy Courts setting forth the assets and liabilities of the
debtors as of the filing dates as reflected in the Company's accounting
records. Differences between amounts reflected in such schedules and claims
filed by creditors will be investigated and amicably resolved or adjudicated
before the Bankruptcy Court. The ultimate amount and settlement terms for
such liabilities are subject to a plan of reorganization. Under the
Bankruptcy Code, the Company may elect to assume or reject real estate leases,
employment contracts, personal property leases, service contracts and other
executory pre-petition contracts and unexpired leases, subject to Bankruptcy
Court review.

The consummation of a plan of reorganization (a "Plan") is the principal
objective of the Company's Chapter 11 filings. A Plan would, among other
things, set forth the means for satisfying claims against and interests in the
Company, including setting forth the potential distributions on account of
such claims and interests, if any. Confirmation of a Plan is subject to
certain statutory findings by the Bankruptcy Court. Before a Plan may be
distributed for balloting the Court must approve a Disclosure Statement by
determining that the Disclosure Statement adequately describes the Plan.
Subject to certain exceptions as set forth in the Bankruptcy Code,
confirmation of a Plan requires, among other things, a vote on the Plan by
certain classes of creditors whose rights or interests are impaired under the
Plan. If any impaired class of creditors does not vote to accept the Plan,
but all of the other requirements of the Bankruptcy Code are met, the
proponent of the Plan may seek confirmation of the Plan pursuant to the "cram
down" provisions of the Bankruptcy Code. Under these provisions, the
Bankruptcy Court may still confirm a Plan notwithstanding the non-acceptance
of the Plan by an impaired class, if, among other things, no claim or interest
receives or retains any property under the Plan until each holder of a claim
senior to such claim or interest has been paid in full. There can be no
assurance that a Plan will be confirmed by the Bankruptcy Court, or that any
such Plan will be consummated.

On April 15, 2005, the Company sold its Biloxi operations for approximately
$82,000. In addition, the Company has an agreement to sell its St. Louis
operations for $57,000. If the sale of the Company's St. Louis operations is
consummated under the agreed upon terms, the Company would not have any
current ongoing business operations. At this time management is unable to
predict with certainty whether the sale of its St. Louis operations will be
consummated and whether the Company will be able to continue as a going
concern or be liquidated.

In light of the sale of the Company's Biloxi assets and leasing operations
assets, and the pending contract for sale of the St. Louis operations, the
Company has one reportable segment from continuing operations consisting of
corporate administration.

F-8
54
- -- Biloxi Casino and Hotel Operations

President Mississippi, Vegas, Vegas, Inc. ("Vegas, Vegas") and President
Broadwater Hotel, L.L.C. ("PBLLC") (collectively, the "Mississippi
Affiliates") agreed, with the prior approval of the Bankruptcy Court, to sell
substantially all of the real and personal property associated with the
Company's Biloxi, Mississippi operations (the "Mississippi Properties") to
Broadwater Development, LLP, a Mississippi limited liability partnership (or
the assignee or designee thereof) for $82,000, and otherwise on the terms and
conditions of a certain Sale and Purchase Agreement dated November 15, 2004
and executed by and among Broadwater Properties, LLC, as purchaser, and the
Mississippi Affiliates, as sellers, as amended by an Amendment to Sale and
Purchase Agreement dated as of November 29, 2004, assigned on or about January
13, 2005 by Broadwater Properties to Broadwater Development, LLP ("BDLLP", and
together with any assignees or designees thereof, the "Mississippi
Purchaser"), further modified by a certain Second Amendment to Sale and
Purchase Agreement dated January 20, 2005 (as modified and amended, the
"Mississippi Asset Sale Agreement"). The Mississippi Asset Sale Agreement
further provides that the Mississippi Affiliates shall retain certain excluded
assets as therein defined (the "Mississippi Excluded Assets", consisting
primarily of cash in bank accounts. Pursuant to a separate Agreement
Concerning Assignment dated March 30, 2005 ("Agreement Concerning Assignment")
made by and between the Mississippi Affiliates, BDLLP and Silver Slipper
Casino Venture, LLC, it was agreed, with the approval of the Bankruptcy Court,
that the assets associated with the Company's Mississippi casino would be
transferred at the closing of the transaction to Silver Slipper on certain
terms and conditions therein stated.

The sale of the Mississippi Properties closed effective April 15, 2005 and
on May 27, 2005 the Missouri Bankruptcy Court confirmed a Plan of Liquidation
(the "Mississippi Plan of Liquidation") for the Mississippi Affiliates that
was jointly developed by the Company and its creditors SunAmerica Inc. and
McKay Shields LLC in the Company's bankruptcy case. The Mississippi Plan of
Liquidation became final on June 7, 2005. Pursuant to the Mississippi Plan of
Liquidation, the proceeds of the sale of the Mississippi Properties, following
adjustments required under the Mississippi Asset Sale Agreement, together eith
the proceeds from the liquidation of the Mississippi Excluded Assets, are
being allocated and are being distributed to the creditors of the Mississippi
Affiliates, including the holders of the Company's Senior Exchange Notes and
Secured Notes in the aggregate outstanding principal amount of $75,000 (the
"Noteholders") and to J. Edward Connelly Associates, Inc. ("JECA") and certain
assignees of JECA. JECA, an entity controlled by John E. Connelly, the
Company's Chairman and Chief Executive Officer, holds a Class B membership
interest in PBLLC. The Company anticipates that under the Mississippi Plan of
Liquidation, creditors of the Mississippi Affiliates, with the exception of
the Noteholders, will be paid in full. While final distributions under the
Mississippi Plan of Liquidation are subject to final determination and
settlement of claims and expenses, the Company currently estimates that (i)
approximately $27,900 of the indebtedness due the Noteholders could be paid,
(ii) in respect of the liquidation preference of its Class B membership
interest in PBLLC, JECA could receive approximately $16,600 of the proceeds of
the sale of the Mississippi Properties plus accrued interest, and
approximately an additional $2,800 of the proceeds of the sale of the
Company's St. Louis operations (assuming the sale of the St. Louis operations
is consummated in accordance with its present terms as described below and the
Noteholders are paid in full).

JECA has entered into an agreement (the "JECA Proceeds Distribution
Agreement") with John S. Aylsworth, President, Chief Operating Officer and

F-9

55
Director of the Company, Terrence L. Wirginis, Vice Chairman of the Board and
Ralph J. Vaclavik, the Chief Financial Officer of the Company, pursuant to
which upon receipt of funds by JECA toward payment of the liquidation
preference of its Class B membership interest in PBLLC, JECA will use its best
efforts to pay a percentage of such funds to Messrs. Aylsworth, Wirginis and
Vaclavik based on the total sales proceeds to JECA. While final distributions
under the Mississippi Plan of Liquidation are subject to final determination
and settlement of claims and expenses, the Company currently estimates that
the proceeds of the sale of the Mississippi Properties and the anticipated
sale of the Company's St. Louis operations (if completed in accordance with
its present terms) will be sufficient to repay the Noteholders the outstanding
indebtedness under the Notes and, in addition, to satisfy JECA's liquidation
preference of its Class B membership interest in PBLLC, Messrs. Aylsworth,
Wirginis and Vaclavik would be entitled to receive approximately $4,800,
$4,800 and $300, respectively, pursuant to the JECA Proceeds Distribution
Agreement.

- --St. Louis Casino Operations

On September 25, 2003, the Company entered into an agreement with Isle of
Capri Casinos, Inc. to sell the assets of its St. Louis operations for
approximately $50,000. On May 4, 2004, the Company and Isle of Capri Casinos,
Inc. announced they had mutually agreed to terminate the agreement.

On August 9, 2004, the Company entered into an agreement with Penn National
Gaming, Inc. for the purchase of its St. Louis operations. The agreement was
submitted to the Missouri Bankruptcy Court for review and was amended on
September 17, 2004. Under the terms of the agreement, the stock of President
Missouri was to be sold for approximately $28,000, subject to working capital
adjustments and subject to higher and better offers. On October 7, 2004, an
auction was held in accordance with Section 363 of the Bankruptcy Code.
Pursuant to an agreement submitted September 30, 2004, Columbia Sussex, Inc.
("Columbia Sussex") was the winning over-bidder for the St. Louis casino
operations for a purchase price of approximately $57,000, subject to closing
adjustments. The Company and Columbia Sussex have entered into a Riverboat
Casino Sale and Purchase Agreement dated as of September 30, 2004 (as amended,
the "President Missouri Sale Agreement"). On October 13, 2004, the Missouri
Bankruptcy Court entered an order approving the sale of the stock of President
Missouri to Columbia Sussex pursuant to the President Missouri Sale Agreement.
The closing of the transaction is contingent upon approval by the Missouri
Gaming Commission and other closing conditions. As more particularly
described in the President Missouri Sale Agreement, certain assets of
President Missouri are excluded from the transaction, including, among other
things, an office building located in Laclede's Landing in the City of St.
Louis, Missouri, and certain specified causes of action, cash on hand, tax
refunds, insurance coverages and receivables, and certain inventory (the
"Missouri Excluded Assets"). The President Missouri Sale Agreement calls for
the sale to be closed on or before August 1, 2005, and any extension of such
date will require the consent of both parties.

The sale of the stock of President Missouri is subject to, among other
things, the confirmation by the Missouri Bankruptcy Court of a Plan of
Reorganization of President Missouri under Chapter 11 of the Bankruptcy Code.
On May 25, 2005, the Company filed with the Missouri Bankruptcy Court a
disclosure statement (the "Disclosure Statement") setting forth the terms of a
Plan of Reorganization (the "Missouri Plan of Reorganization") that was
jointly developed by the Company, its creditors SunAmerica Inc. and McKay
Shields LLC, and the Official Unsecured Creditors' Committee in the Company's
bankruptcy case. The Missouri Bankruptcy Court has scheduled a hearing on the
sufficiency of the Disclosure Statement for June 16, 2005. If the Disclosure

F-10

56
Statement is approved, then the Missouri Bankruptcy Court will schedule a date
for a hearing on confirmation of the Missouri Plan of Reorganization. Once
confirmed, the Missouri Plan of Reorganization will not become effective
unless and until all the other conditions to the closing of the sale to
Columbia Sussex are satisfied, including, without limitation, approval of the
Missouri Gaming Commission.

Management estimates that the proceeds from the sale of the stock of
President Missouri and the Missouri Excluded Assets would, if the sale is
consummated on its present terms, provide sufficient funds to discharge all of
the Company's remaining indebtedness, including the remaining balance due to
the Noteholders. In the event the sale agreement is consummated on its terms
and proceeds are sufficient to discharge the Company's indebtedness, the Board
of Directors will determine whether to liquidate the Company or engage in
further business activities, including activities other than gaming. At this
time it is not possible to predict whether the sale of the St. Louis
operations will be consummated or whether the Company will liquidate or
continue business operations in some form.

- --President Broadwater Hotel, LLC Bankruptcy Proceedings

President Broadwater Hotel, LLC ("PBLLC"), a limited liability company in
which Broadwater Hotel, Inc., a wholly-owned subsidiary of the Company
("BHI"), has a Class A ownership interest, was in default under a $30,000
promissory note and associated $7,000 loan fee incurred in connection with the
July 1997 purchase by PBLLC of the real estate and improvements utilized in
the Company's operations in Biloxi, Mississippi. On April 19, 2001, PBLLC
filed a voluntary petition for reorganization under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of Mississippi. PBLLC continued in possession and use of its assets
as a debtor-in-possession and had an agreement with its secured lender and
largest creditor, approved by the Mississippi Bankruptcy Court, which allowed
PBLLC's use of its cash collateral.

On October 16, 2001, PBLLC filed its plan of reorganization which would
permit PBLLC to restructure its debt obligations in a manner which was
designed to permit it to continue as a going concern. Subsequently, on
February 28, 2003, PBLLC filed Modifications to Debtor's Plan of
Reorganization (together with the reorganization plan, the "Modified Plan").
On May 14, 2003, the Mississippi Bankruptcy Court entered the confirmation
order confirming the Modified Plan. The Modified Plan became effective on May
28, 2003 and the Company initiated consummation of the Modified Plan at that
time. The Modified Plan provides that the unsecured creditors of PBLLC will
receive 100% of their claims. Under the Modified Plan, the obligations to the
secured lender were modified with respect to the debt amount, the interest
rate and the due date. On April 15, 2005, the Modified Indebtedness and
accrued interest thereon were fully satisfied by PBLLC from the proceeds of
the sale of the Company's Biloxi assets.

--Other

The Company's ability to continue as a going concern is dependent on its
ability to restructure successfully, including refinancing its debts, selling
assets on a timely basis under acceptable terms and conditions, and the
ability of the Company to generate sufficient cash to fund future operations.
There can be no assurance in this regard.

The descriptions of the Company's business, financial condition and
prospects contained in this Annual Report on Form 10-K are qualified in their
entirety by the foregoing description of the significant risks associated with

F-11

57
the Company's bankruptcy proceedings.

As of February 28, 2005, the Company had $20,706 of unrestricted cash and
cash equivalents. The Company also had $4,400 held in discontinued
operations, representing cash to be retained by the purchasers upon the sale
of the properties. Of these amounts, the Company requires a minimum of
approximately $4,000 for the St. Louis operations and $2,500 for the Biloxi
operations as working capital. The Company is heavily dependant on cash
generated from operations to continue to operate as planned and to make
capital expenditures in St. Louis. Management anticipates that its existing
available cash and cash equivalents and its anticipated cash generated from
operations will be sufficient to fund its ongoing St. Louis operations during
the bankruptcy proceedings. Payments under the Company's defaulted debt
obligations generally will be stayed during the bankruptcy proceedings. Costs
previously incurred and which will be incurred in the future in connection
with the reorganizations have been and will continue to be substantial and, in
any event, there can be no assurance that the Company will be able to
restructure its indebtedness or that its liquidity and capital resources will
be sufficient to maintain its normal operations during the reorganization
period. To the extent cash generated from operations is less than
anticipated, the Company may be required to curtail certain planned
expenditures and/or seek additional financing.

2. BASIS OF PRESENTATION

The consolidated financial statements set forth herein include the accounts
and operations of President Casinos, Inc., its wholly-owned subsidiaries, a
95%-owned limited partnership and a limited liability company in which a
wholly-owned subsidiary of the Company has a Class A ownership interest and in
which an entity wholly-owned by the Chairman of the Board of the Company owns
a Class B Unit and has preferred rights to certain cash flows. All material
intercompany balances and transactions have been eliminated.

The accompanying consolidated financial statements are presented in
accordance with American Institute of Certified Public Accountants Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code," assuming that the Company will continue as a going concern.
The Company is currently operating under the jurisdiction of Chapter 11 of the
Bankruptcy Code and the Bankruptcy Courts, and continuation of the Company as
a going concern is contingent upon, among other things, its ability to
formulate a reorganization which will gain approval of the requisite parties
under the Bankruptcy Code and confirmation by the Bankruptcy Courts, its
ability to return to profitability, generate sufficient cash flows from
operations, and obtain financing sources to meet future obligations. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. The accompanying consolidated financial statements do not
include any adjustments relating to the outcome of these uncertainties.

The accompanying consolidated balance sheets as of February 28, 2005 and
February 29, 2004, segregate liabilities subject to compromise, such as
unsecured claims, from liabilities not subject to compromise, such as fully
secured liabilities and liabilities arising subsequent to filing bankruptcy
petitions. A plan of reorganization could materially change the amounts
currently recorded in the consolidated financial statements. The consolidated
statements that might result from the outcome of this uncertainty may be
materially different than those presented herein.

Reorganization items represent expenses incurred by the Company as a result
of the bankruptcy filings and proceedings which are required to be expensed as
incurred.

F-12

58
3. NATURE OF OPERATIONS

The Company owns and operates dockside gaming casinos through its
subsidiaries. The Company conducts dockside gaming operations in Biloxi,
Mississippi through its wholly-owned subsidiary President Mississippi and in
St. Louis, Missouri north of the Gateway Arch through its wholly-owned
subsidiary, President Missouri. In addition, the Company owns and manages
certain hotel and ancillary facilities associated with its gaming operations.
President Broadwater Hotel, LLC, a limited liability company ("PBLLC") in
which Broadwater Hotel, Inc. ("BHI") has a Class A ownership interest, owns
approximately 240 acres in Biloxi, Mississippi, which includes a 111-slip
marina which contains the mooring site of "President Casino-Broadwater", a
hotel with approximately 333 rooms and an adjacent 18-hole golf course
(collectively, the "Broadwater Property"). BHI is a wholly-owned subsidiary
of the Company. The St. Louis gaming operations and Biloxi operations are
classified as discontinued operations due to their pending sales as of
February 28, 2005. As discussed in "Note 1. Bankruptcy Proceedings," the
sale of the Biloxi gaming operations and the Broadwater Property was
consummated on April 15, 2005.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments, primarily
certificates of deposit, with maturities of ninety days or less at date of
purchase.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents consists of cash and cash equivalents
which are held in segregated accounts to fund potential obligations required
by third parties. See "Note 5. Restricted Cash and Cash Equivalents and
Restricted Short-Term Investments."

Restricted Short-Term Investments

To fulfill certain regulatory and other obligations, the Company invests in
certificates of deposit with maturities greater than ninety days and not in
excess on one year at date of purchase. Short-term investments are stated at
cost, which approximates fair value. See "Note 5."

Inventories

Inventories, consisting principally of food, beverage, retail items and
operating supplies, are stated at the lower of first-in, first-out cost or
market.

F-13 59
Property and Equipment

Property and equipment are recorded at cost and capitalized lease assets are
recorded at their fair market value at the inception of the lease. Repairs
and maintenance are charged to expense as incurred. Improvements that extend
the useful life or increase the productivity of the asset are capitalized.
Depreciation and amortization, except on property held for sale or development
in which no depreciation or amortization is taken, are computed on a
straight-line basis over the following estimated useful lives:

Land and marina improvements 3-20 years
Buildings and improvements 10-40 years
Riverboats, barges and improvements 5-20 years
Leasehold improvements 3-25 years
Furnishings and equipment 5-10 years

Leasehold improvements estimated useful lives do not exceed the terms of the
lease agreement.

Gaming Revenues and Promotional Allowances

In accordance with industry practice, the Company recognizes gaming revenues
as the net win from gaming activities, which is the difference between gaming
wins and losses. All other revenues are recognized by reference to the
service provided. Revenues include the retail value of food and beverage,
rooms and other items provided on a complimentary basis to customers. The
estimated departmental costs of providing such promotional allowances are
included in gaming costs and expenses and consist of the following:

2005 2004 2003
------ ------ ------
Food and beverage...... $ 4,355 $ 4,051 $ 4,012
Hotel.................. 1,047 1,098 963
Other.................. 171 257 341
-------- -------- --------
$ 5,573 $ 5,406 $ 5,316
======== ======== ========

All such revenues and promotional allowances are included in "Loss from
Discontinued Operations."

Reorganization Items, Net

Reorganization items, net, represent professional fees and U.S. Bankruptcy
Trustee fees, net of forgiveness of certain pre-petition claims by certain
professionals, incurred by the Company as a direct result of the Chapter 11
proceedings which are required to be expensed as incurred.

Minority Interest

The Company recognizes net income (loss) in TCG, in which the Company has a
95% ownership interest, and PBLLC, in which BHI has 100% interest in the Class
A Unit. In addition, the Company accrues minority interest at 5% of net
income for TCG and recognizes a priority return based on a percentage per
annum equal to the greater of (i) 7.75% or (ii) 4.0% plus LIBOR, as defined by
the terms of the agreement, for PBLLC. As of February 28, 2005 and February
29, 2004, the minority interest on the balance sheet is comprised of $19,020
and $17,653, respectively, related to its obligation to redeem the Class B
Unit for $10,000, plus any priority return accrued but not paid. See "Note
16. Minority Interest."

F-14

60
Stock-Based Compensation

As of February 28, 2005, the Company has stock Option Plans, which are
described more fully in "Note 17. Stock Option Plans." The Company applies
Accounting Principles Board Opinion No. 25 and related interpretations in
accounting for its stock-based compensation plans using the intrinsic value
method. Accordingly, no compensation expense is reflected in net income for
stock options, as all options granted had an exercise price equal to the
market value of the underlying common stock on the date of grant.
Substantially all of the Company's stock options were vested as of February
28, 2005. Had compensation cost for the Company's Stock Option Plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of Statement of Financial Accounting
Standards ("SFAS") No. 123 "Accounting for Stock-Based Compensation," the
Company's net loss and net loss per share would have been the same as the pro
forma amounts.

Basic and Diluted Loss Per Share Information

Loss per share information is computed using the weighted average number of
shares of Common Stock outstanding and common stock equivalent shares from
diluted stock options from date of grant, using the treasury stock method.
There is no difference between loss per share under the basic and diluted
methods due to the anti-dilutive effect of the stock options, since the
Company has either had losses or the exercise price of the stock options is in
excess of the market value of the stock. See "Note 17. Stock Option Plans."

Fair Value of Financial Instruments

The Company calculates the fair value of financial instruments and includes
this additional information in the Notes to the Consolidated Financial
Statements. The Company uses quoted market prices whenever available to
calculate these fair values. When quoted market prices are not available, the
Company uses valuation methodologies which take into account the present value
of estimated future cash flows to determine fair value.

Recoverability of Long-Lived Assets

The carrying values of the Company's assets are reviewed when events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Asset impairment is determined to exist if estimated future
cash flows, undiscounted and without interest charges, are less than the
carrying amount. If it is determined that an impairment loss has occurred,
then an impairment loss is recognized in the statement of operations. The
resulting impairment loss is measured as the amount by which the carrying
amount of the asset exceeds its fair value, estimated using quoted market
prices, if available, or other acceptable valuation methodologies, including
discounted cash flows or comparable sales.

Use of Management Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the amounts of
revenues and expenses during the reporting period. Actual results may differ
from those estimates.

F-15 61
Recently Issued Accounting Standards

In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based
Payment ("SFAS 123R"). SFAS 123R replaced SFAS No. 123, Accounting for Stock-
Based Compensation ("SFAS 123"), and superseded Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25").
Statement 123R requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the consolidated
financial statements based on their fair values and eliminates the alternative
method of accounting for employee share-based payments previously available
under APB 25. Historically, the Company has elected to follow the guidance of
APB 25 which allowed the Company to use the intrinsic value method of
accounting to value its share-based payment transactions with employees.
Based on this method, the Company did not recognize compensation expense in
its consolidated financial statements as the stock options granted had an
exercise price equal to the fair market value of the underlying common stock
on the date of the grant. SFAS 123R requires measurement of the cost of
share-based payment transactions to employees at the fair value of the award
on the grant date and recognition of expense over the required service or
vesting period. The provisions of SFAS 123R are required to be adopted by the
Company beginning March 1, 2006. The Company does not expect adoption of this
standard to have a material impact, if any, on the Company's results of
operations and such impact is contingent upon the number of future options
granted, the selected transition method and the selection between acceptable
valuation methodologies for valuing options.

Reclassifications

Certain amounts have been reclassified to conform with fiscal 2005 financial
statement presentation resulting from discontinued operations.

5. RESTRICTED CASH AND CASH EQUIVALENTS AND RESTRICTED SHORT-TERM INVESTMENTS

Restricted cash and cash equivalents consist of the cash of PBLLC. PBLLC
deposits revenues into lockboxes that are controlled by its lender.
Expenditures from the lockboxes are limited to the operating expenses, capital
improvements and debt service of the Broadwater Property as defined by certain
agreements. The lender controls the capital improvements lockbox. PBLLC
currently operates under a cash collateral stipulation and agreement, which
allows PBLLC to use its cash collateral for normal operations in accordance
with certain terms as defined by the cash collateral agreement.

The Company is required to collateralize certain performance bonds. To
fulfill these requirements, the Company invests in certificates of deposit
with maturities greater than ninety days and which do not exceed one year at
date of purchase. Such amounts are classified as restricted short-term
investments.

6. PROPERTY AND EQUIPMENT

On January 20, 2005, an auction was held under the terms of Section 363 of
the United States Bankruptcy Code for the Company's Biloxi operations.
Broadwater Development, LLP. was the winning over-bidder for the Biloxi
operations. On February 7, 2005, the Missouri Bankruptcy Court approved the
terms of the agreement. As such, property and equipment of the Biloxi
operations have been classified as "Assets of Discontinued Operations" as of
February 28, 2005 and February 29, 2004. See "Note 10. Discontinued
Operations."

F-16
62
On October 7, 2004, an auction was held in accordance with Section 363 of
the Bankruptcy Code for the Company's St. Louis operations. Columbia Sussex,
Inc. was the winning over-bidder for the common stock of the St. Louis casino
operations. On October 13, 2004, the Missouri Bankruptcy Court approved the
terms of the agreement. As such, property and equipment of the St. Louis
operations has been reclassified to "Assets of Discontinued Operations" as of
February 28, 2005 and February 29, 2004. See "Note 10. Discontinued
Operations."

The Company has entered into an agreement to sell its 36,000 square foot
office building in St. Louis for $1,825, which is subject to the approval of
the Bankruptcy Court. The building houses the Company's executive offices
and other administrative staff. Upon closing, certain areas of the building
will be leased back.

On March 16, 2004, the Company sold the 179-room Broadwater Tower Hotel for
$6,500 to Ocean Beach Club at Biloxi, LLC. The Company's other hotel, the
333-room President Broadwater Resort, was not included in this transaction.
The net proceeds of the transaction were used to reduce the debt of the
Company's subsidiary, PBLLC. In connection with the transaction the Company
also entered into an initial lease through September 15, 2004, with the new
owners whereby the Company will continue to operate the Broadwater Tower Hotel
with options for additional extensions. The Company exercised its option to
lease the hotel for an option period through January 15, 2005. Following
January 15, 2005, the lease was extended under the same terms on a month-to-
month basis with termination requiring 30 day notice by either of the parties.
The options were extended on a month to month basis and remained in effect
through the date on which the Biloxi operations were sold. No gain or loss
was recorded on the sale of the Broadwater Tower during fiscal year 2005.

During the fourth quarter of fiscal 2003, the Company held a sealed bid
auction of the "Surfside Princess" in accordance with Section 363 of the
United States Bankruptcy Code. In February, 2003, the auction closed and the
winning bid was $1,500. The purchase agreement was consummated on May 2,
2003. The Company recognized a $1,167 asset impairment on the vessel in
February 2003 to reduce the net book value to the bid price. The Company
recorded a $36 loss on the sale of the vessel during the first quarter of
fiscal 2004. See "Note 10. Discontinued Operations."

In May 2003, the lender of the M/V "President Casino-Mississippi" filed a
motion with the United States District Court for the Southern District of
Illinois for an order directing the Clerk of Court to issue a warrant for the
arrest of the M/V "President Casino-Mississippi" pursuant to rules of
admiralty and maritime claims. On May 20, 2003, the Court executed the
warrant, which allowed the vessel to be seized and sold. On April 7, 2004,
the vessel was auctioned and the lender offered the highest bid of $500. See
"Note 10. Discontinued Operations."

7. LONG-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT

As of February 28, 2005, and February 29, 2004, the Company's $75,000
noteholder debt is classified as liabilities subject to compromise. The M/V
"President Casino-Mississippi" note is classified as liabilities of
discontinued operations. See "Note 8. Liabilities Subject to Compromise and
Reorganization Items, Net" and "Note 10. Discontinued Operations."

Broadwater Hotel Note

In conjunction with the purchase of the Broadwater Property, PBLLC borrowed

F-17

63
the sum of $30,000 from a third party lender (the "Original Indebtedness").
Except as set forth in the promissory note and related security documents,
PBLLC's obligations under the Indebtedness were nonrecourse and secured by the
Broadwater Property, its improvements and leases thereon. The Original
Indebtedness bears interest at a stipulated variable rate per annum equal to
the greater of (i) 8.75% or (ii) 4% plus the LIBOR 30-day rate.

PBLLC was obligated under the Original Indebtedness to make monthly payments
of interest accruing under the Indebtedness, and was obligated to repay the
Indebtedness in full on July 22, 2000. In addition, PBLLC was obligated to
pay to the lender a loan fee in the amount of $7,000 which was fully earned
and non-refundable when the Original Indebtedness was due. Neither the
Original Indebtedness nor the loan fee payments were made on the due date and
the Original Indebtedness was in default through the effective date of the
Modified Plan discussed below. PBLLC continued to make monthly interest
payments accruing on the $30,000 principal through April 19, 2001, when the
Company announced that PBLLC had filed for reorganization under Chapter 11 in
the Mississippi Bankruptcy Court.

On October 16, 2001, PBLLC filed its plan of reorganization. Subsequently,
on February 28, 2003, PBLLC filed Modifications to Debtor's Plan of
Reorganization (together with the reorganization plan, the "Modified Plan").
On May 14, 2003, the Mississippi Bankruptcy Court entered the confirmation
order confirming the Modified Plan. The Modified Plan became effective on May
28, 2003 and the Company consummated the Modified Plan at that time. The
Modified Plan provides that the unsecured creditors of PBLLC will receive 100%
of their claims. Under the Modified Plan, the obligations to the lender were
modified with respect to the debt amount, the interest rate and the due date,
and was re-documented substantially along the lines of the Original
Indebtedness, including the non-recourse provision, (the "Modified
Indebtedness"). On May 28, 2003, the Company paid the lender $3,551 pursuant
to the Modified Plan. In March 2004, the Company paid $6,392 of principal
from the proceeds of the sale of the Broadwater Tower. As of February 28,
2005, the principal amount of the Modified Indebtedness was $39,037, prior to
adjustment for liquidation of PBLLC. The principal amount of the Modified
Indebtedness earned interest at a rate of 12.75% per annum until the
obligation was satisfied. The maturity date of the Modified Indebtedness was
June 1, 2005. Interest was payable during the term of the Modified
Indebtedness on the adjusted loan obligation amount. As of February 29, 2004,
the adjusted loan obligation amount was $43,013. PBLLC was required to pay
interest earned on the adjusted loan obligation monthly from May 28, 2003 at a
rate of the greater of 7.75% per annum or LIBOR plus 4% per annum floating
through the term of the Modified Indebtedness.

On April 15, 2005, the Modified Indebedness and interest thereon were fully
satisfied from the proceeds on the sale of the Broadwater property. The
Company recognized a gain of $2,416 as of February 28, 2005 to write the
principal amount down to the subsequent liquidated payment amount. This
adjustment was recorded in discontinued operations.

The Modified Plan contains an express waiver of rights by PBLLC to seek
future bankruptcy protection. J. Edward Connelly Associates, Inc. ("JECA"),
the holder of a Class B interest in PBLLC, retained its membership interest,
but any payments by PBLLC to JECA were restricted until such time as all
outstanding obligations to Lehman and other creditors receiving funds under
the Modified Plan are discharged.

F-18
64
8. LIABILITIES SUBJECT TO COMPROMISE AND REORGANIZATION ITEMS, NET

The components of liabilities subject to compromise are as follows:

2005 2004
------ ------

Senior Exchange Notes, 13%...................... $ 56,250 $ 56,250
Secured Notes, 12%,............................. 18,750 18,750
Accrued interest................................ 13,146 13,027
Accounts payable and other accrued expenses..... 3,704 3,961
--------- ---------
Total liabilities subject to compromise...... $ 91,850 $ 91,989
========= =========

Senior Exchange Notes and Secured Notes

The Senior Exchange Notes rank equal in right of payment to all present and
future senior debt, as defined in the indenture governing the Senior Exchange
Notes (the "Note Indenture"), of the Company and its subsidiaries are
currently due and payable. In addition, the Senior Exchange Notes are
unconditionally guaranteed, jointly and severally on a senior basis, by all of
the Company's restricted subsidiaries (the "Guarantors"), and, under certain
circumstances, the Company's future subsidiaries, although the subsidiary
guarantee from The Connelly Group, LP ("TCG") is limited in amount and was
zero as of February 28, 2005 and February 29, 2004. As security for the
obligations of the Company and the Guarantors under the Senior Exchange Notes,
the Company and the Guarantors have pledged their equity interests in each
Guarantor and certain indebtedness from, and certain investments in, certain
gaming ventures. The Note Indenture contains certain restrictive covenants
which, among other things, limit the Company's Guarantors' ability to pay
dividends, incur additional indebtedness (exclusive of $15,000 of senior
debt), issue preferred stock, create liens on certain assets, merge or
consolidate with another company and sell or otherwise dispose of all or
substantially all of its properties or assets.

On December 3, 1998, the Company repurchased $25,000 of its Senior Exchange
Notes. The repurchased notes were used to satisfy the $25,000 principal
payment due September 15, 1999 on the Company's $100,000 Senior Exchange
Notes. The repurchase was funded by the issuance of $25,000 of new 12% notes
due September 15, 2001 (the "Secured Notes"). The Secured Notes have no
mandatory redemption obligation and are secured by a mortgage on the "Admiral"
as well as subsidiary guarantees.

See "Note 1. Bankruptcy Proceedings" regarding default of the Senior
Exchange Notes and Secured Notes.

In light of the current financial condition of the Company and the fact that
the Notes have not been actively trading, management believes it is
impracticable to determine the current value of the Senior Exchange Notes and
Secured Notes.

9. OPERATING LEASES

In January 2000, in conjunction with the anticipated move of the "Admiral,"

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65
the Company entered into a sublease agreement with the Port Authority of the
City of St. Louis for a mooring site on the St. Louis river front
approximately 1,000 feet north of the then current location of the "Admiral."
The term of the lease is 25 years commencing on the day the "Admiral" moved to
the new mooring site. At such time the lease for the former mooring site of
the "Admiral" was surrendered and terminated.

Rent under the terms of the new lease consists of base rent plus a percent
of adjusted gross receipts. The base rent was $27 annually through December
31, 2003 and is subject to rate change every five years based on the
recommendation of the Port Commission. Effective January 1, 2004, the rent
was adjusted to $29 annually. The percentage rent is 2% of adjusted gross
receipts for any lease year equal to or less than $80,000, plus 3% of that
portion of adjusted gross receipts for such lease year which exceed $80,000
but which are equal to or less than $100,000, plus 4% of that portion of
adjusted gross receipts for such lease year, if any, which exceed $100,000.
Rent expense for the mooring sites for the years ended February 28, 2005,
February 29, 2004 and February 28, 2003 was $1,459, $1,475 and $1,508,
respectively.

The marina where the Company conducts its Biloxi gaming operations has been
determined by the Secretary of State of Mississippi to constitute both
"tidelands" and "fast lands" under the Mississippi Trust Tidelands Act (the
"Tidelands Act"). The tidelands lease was for an initial period of ten years
commencing August 1, 1992. During August 2002, the Company exercised its
option to extend the lease for a term of five years under the same terms and
provisions, and renegotiated the annual rental. The current rent is $672
annually. The fast lands lease is for a period of 40 years commencing
December 31, 1996 for annual rent of $21, adjustable every five years as
defined in the lease agreement.

Rental expense incurred under operating leases was $4,245, $4,710 and $5,270
for the years ended February 28, 2005, February 29, 2004 and February 28,
2003, respectively.

Future minimum lease commitments under non-cancelable long-term operating
leases as of February 28, 2005, are as follows:

Non-cancelable
Operating
Leases
------------

Years ending February 28/29:
2006........................ $ 734
2007........................ 320
2008........................ 196
2009........................ 162
2010........................ 29
Thereafter.................. 461
---------
$ 1,902
=========

The future minimum lease commitments under non-cancellable operating leases
consist of 44 days of commitments for the Biloxi property, after which time

F-20

66
the property was sold and the commitments were assumed by the purchasers, and
the commitments of President Missouri. Thereafter, commitments are those of
President Missouri only.

10. DISCONTINUED OPERATIONS

Following an auction held on January 20, 2005, under the terms of Section
363 of the United States Bankruptcy Code, three subsidiaries of President
Casinos, Inc., namely President Mississippi, Vegas Vegas, Inc., and PBLLC
(collectively, "Sellers"), on the one hand, and Broadwater Development, LLP
("Purchaser") on the other, entered into a Second Amendment to Sale and
Purchase Agreement (the "Second Amendment") pursuant to which the Purchaser
agreed to acquire from the Sellers substantially all of the real and personal
property associated with the Company's Biloxi operations for $82,000, subject
to certain closing adjustments. Prior to the auction, on January 13, 2005,
the Purchaser received an assignment of all the right, title and interest of
Broadwater Properties, LLC in and to that certain Sale and Purchase Agreement
dated as of November 15, 2004, as amended by the Amendment to Sale and
Purchase Agreement dated as of November 29, 2004 (as amended, the "Purchase
Agreement") which had been previously executed by the Sellers with respect to
the sale of the Company's Biloxi operations. A hearing to approve the auction
results and sale to the Purchaser was held before the United States Bankruptcy
Court for the Eastern District of Missouri on January 26, 2005, and the court
issued an order approving the auction results and the sale on February 7,
2005. On April 15, 2005, the Company completed the sale, subject to certain
post-closing adjustments, and is expected to generate a gain of approximately
$33,700.

On August 9, 2004, the Company entered into an agreement with Penn National
Gaming, Inc. for the purchase of its St. Louis operations. The agreement was
submitted to the Missouri Bankruptcy Court for review and was amended on
September 17, 2004. Under the terms of the agreement, the stock of President
Missouri was to be sold for approximately $28,000, subject to working capital
adjustments and subject to higher and better offers. On October 7, 2004, an
auction was held in accordance with Section 363 of the Bankruptcy Code.
Pursuant to an agreement submitted September 30, 2004, Columbia Sussex, Inc.
("Columbia Sussex") was the winning over-bidder for the St. Louis casino
operations for a purchase price of approximately $57,000, subject to closing
adjustments. The Company and Columbia Sussex have entered into a Riverboat
Casino Sale and Purchase Agreement dated as of September 30, 2004 (as amended,
the "President Missouri Sale Agreement"). On October 13, 2004, the Missouri
Bankruptcy Court entered an order approving the sale of the stock of the
Company to Columbia Sussex pursuant to the President Missouri Sale Agreement.
The closing of the transaction is contingent upon approval by the Missouri
Gaming Commission and other closing conditions. As more particularly
described in the President Missouri Sale Agreement, certain assets of
President Missouri are excluded from the transaction, including, among other
things, an office building located at Laclede's Landing in the City of St.
Louis, Missouri, and certain specified causes of action, cash on hand, tax
refunds, insurance coverages and receivables, and certain inventory (the
"Missouri Excluded Assets"). The President Missouri Sale Agreement calls for
the sale to be closed on or before August 1, 2005, and any extension of such
date will require the consent of both parties.

The Company sold one of two vessels accounted for in its leasing segment
during May 2003 and the second vessel was foreclosed on by the lender which

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67
held a Preferred First Fleet Mortgage collateralizing debt owed to them.

In accordance with the Financial Accounting Standards Board SFAS No. 144
"Accounting for the Impairment and Disposal of Long-Lived Assets," ("SFAS
144")the St. Louis and Biloxi operations and leasing segment are accounted for
as discontinued operations, as follows:

Feb. 28, Feb. 29,
2005 2004
------ ------

ASSETS
Cash and cash equivalents.................. $ 4,400 $ 4,400
Receivables................................ 784 666
Inventories................................ 947 940
Prepaid expenses........................... 2,591 3,204
Deferred tax asset......................... 5,707 --
Property and equipment..................... 78,808 86,358
--------- ---------
$ 93,237 $ 95,568
========= =========
LIABILITIES
M/V "President Casino-Mississippi"
note payable............................. $ 750 $ 2,100
Accounts payable........................... 1,729 1,282
Accrued payroll and benefits............... 2,741 3,848
Accrued interest payable................... 221 989
Other accrued liabilities.................. 3,905 4,618
--------- ---------
$ 9,346 $ 12,837
========= =========

Feb. 28, Feb. 29,
2005 2004
------ ------

ASSETS
St. Louis operations....................... $ 37,082 $ 37,873
Biloxi operations.......................... 56,155 57,295
New York leasing operations................ -- 400
--------- ---------
$ 93,237 $ 95,568
========= =========
LIABILITIES
St. Louis operations....................... $ 5,246 $ 5,089
Biloxi operations.......................... 3,350 4,102
New York leasing operations................ 750 3,646
--------- ---------
$ 9,346 $ 12,837
========= =========

The Company's St. Louis segment had operating income of $7,901 consisting of
revenues of $69,811 and operating expenses of $61,910 during the year ended
February 28, 2005, compared to operating income of $5,652, consisting of
revenues of $70,819 and operating expenses of $65,167 during the year ended
February 28, 2004. The St. Louis segment had operating income of $4,870
consisting of revenues of $73,909 and operating expenses of $69,039 during the
year ended February 28, 2003. Operating expenses of the St. Louis segment for
the year ended February 28, 2005, include depreciation through October 2004,

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68
at which time depreciation of the related long-lived assets was suspended in
accordance with SFAS 144.

The Company's Biloxi segment had operating income of $1,173, consisting of
revenues of $43,195 and operating expenses of $42,022 during the year ended
February 28, 2005, compared to operating income of $2,984, consisting of
revenues of $48,477 and operating expenses of $45,493 during the year ended
February 29, 2004. The Biloxi segment had operating income of $2,802
consisting of revenues of $49,812 and operating expenses of $47,010 during the
year ended February 28, 2003. The sale of the Biloxi property was completed
April 15, 2005.

M/V "President Casino-Mississippi" Note

The Company defaulted under the terms of its M/V "President
Casino-Mississippi" note. The M/V "President Casino-Mississippi" was
previously operated by the Company as a casino in Biloxi, Mississippi. The
vessel and various equipment aboard the M/V "President Casino-Mississippi"
collateralize a term note payable which was also personally guaranteed by Mr.
Connelly. The Company continued to make the quarterly principal and interest
payments on the note prior to the Company's bankruptcy filing. Under the
terms of the note agreement, $2,100 principal became due and payable in August
2002 together with interest and costs (the "Note"). In November 2002, the
lender brought an action against Mr. Connelly for breach of contract under his
personal guarantee. In December 2003, Mr. Connelly satisfied his personal
guarantee paying the lender $1,200. In January 2003, the Mississippi
Bankruptcy Court granted a motion to relieve the lender from the automatic
stay in order to enforce its rights under the Preferred Fleet Ship Mortgage,
including but not limited to the right of the lender to seize and sell the
vessel. In May 2003, the lender filed a motion with the United States
District Court for the Southern District of Illinois for an order directing
the Clerk of Court to issue a warrant for the arrest of the M/V "President
Casino-Mississippi" pursuant to rules of admiralty and maritime claims. On
May 20, 2003, the Court executed the warrant, which allowed the vessel to be
seized and sold. On April 7, 2004, the vessel was auctioned and the lender
offered the highest bid of $500.

The Company, President Mississippi, Mr. Connelly and the lender entered into
an agreement whereby the Company would satisfy its obligations under the
indebtedness, and related costs, for $750. Additionally, Mr. Connelly agreed
to forego his rights and assignments. The terms are incorporated in the Plan
of Reorganization for President Mississippi, which was confirmed on May 27,
2005, and became effective on June 7, 2005, at which time the Company paid the
lender $750. Pursuant to the agreement between the Company and other parties
involved, the Company wrote down its obligations related to the M/V "President
Casino-Mississippi" by $2,643 in the fourth quarter of fiscal 2005 to reflect
the resolution of the previously recorded contingent loss related to this
obligation. Such amount is included in income from discontinued operations.

11. INCOME TAXES

The Company recognizes deferred tax assets, net of applicable reserves,
related to net operating loss carryforwards and certain temporary differences.
Recognition of future tax benefits is based on the extent the realization of
such benefit is "more likely than not." As such, the realization of the
deferred tax benefit is dependent on the Company's ability to generate future

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69
taxable income. Given the level of operations, the increased competition and
the overall uncertainty as to the timing of the Company's ability to return to
profitability, management determined that the tax benefit did not satisfy the
recognition criteria through the period ended February 29, 2004. Accordingly,
a 100% valuation allowance was maintained against the Company's deferred tax
assets through that time. During the year ended February 28, 2005, the
valuation allowance decreased by $5,707 due primarily to the sale and
subsequent closure of the Biloxi, Mississippi operations. The sale is
expected to generate a gain which makes it more likely than not that a portion
of the net operating loss carryforward will be realized. The reversal of this
valuation allowance was recognized in discontinued operations.

The components of the net deferred tax asset are as follows:

2005 2004
------ ------

Deferred tax assets:
Net operating loss carryforward....... $ 74,022 $ 72,754
Pre-opening costs and intangible
assets.............................. 1,669 2,136
Accounting reserves and liabilities... (543) 2,735
Tax credits........................... 280 280
Other................................. 55 109
--------- ---------
75,483 78,014
Less: Valuation allowance............. (61,379) (69,911)
--------- ---------
14,104 8,103
Deferred tax liabilities:
Property.............................. 8,397 8,103
--------- ---------
Net deferred tax asset............. $ 5,707 $ --
========= =========

As of February 28, 2005, the Company had Federal, Missouri and Mississippi
net operating loss carryforwards of $181,943, $209,088 and $54,671,
respectively. These tax benefits will expire between 2008 and 2025 unless
first offset against taxable income. The availability of the loss
carryforwards may be limited in the event of a significant change in ownership
of the company or its subsidiaries.

There are numerous and complex tax issues associated with the Company's
filing for protection under Chapter 11 of the Bankruptcy Code and the future
reorganization, such as discharge of indebtedness, sale of property or
potential abandonment of assets. The impact of these tax issues will affect
the amount of tax attribute carryforwards and deferred taxes; however, such
impact cannot be determined at this time.

12. COMMITMENTS AND CONTINGENT LIABILITIES

Bankruptcy Actions

On June 20, 2002, the Company together with its subsidiary, President
Missouri, which owns and operates the St. Louis operations, filed voluntary
petitions for reorganization under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Southern District of Mississippi. On
July 9, 2002, the Company's subsidiary President Mississippi filed a voluntary

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70
reorganization petition in the same Court. On July 11, 2002, substantially
all of the Company's other operating subsidiaries filed voluntary
reorganization petitions under Chapter 11 in the same Court. Subsequently,
orders were entered by the Mississippi Bankruptcy Court transferring venue of
all of the Chapter 11 cases, except President Riverboat Casino-New York, Inc.
and PBLLC, to the United States Bankruptcy Court for the Eastern District of
Missouri, where they are now pending and being administered. President
Riverboat Casino-New York, Inc. subsequently had its Chapter 11 case dismissed
and PBLLC subsequently emerged from Chapter 11. The Company and its
subsidiaries each continue in possession and use of their assets as debtors-
in-possession. See "Note 1. Bankruptcy Proceedings."

On April 27, 2003, the Missouri Bankruptcy Court granted a motion for
approval of a key employee retention plan for certain corporate and Missouri
casino employees (the "Retention Plans"). The motion does not affect any pre-
petition employment agreements as to assumption or rejection of pre-petition
executory contracts, with the exception that any claim asserted by a key
employee on account of a pre-petition employment agreement shall be reduced
dollar for dollar by the amounts paid or payable under the retention plan.
Under the terms of the Retention Plans for certain Missouri key casino
employees, certain key employees will receive 50% of their then salary which
will be due and payable on the earlier of the following dates: (i) the date on
which all or substantially all of President Missouri's assets are sold or (ii)
the date on which the Company terminates substantially all of its ordinary
Missouri business operations. Under the terms of the Retention Plans for
corporate employees, the Chief Financial Officer will receive one year of his
then salary on the date he is discharged from employment and the other named
key employees will receive 50% of their then salary. If at any time prior
thereto the corporate key employees' salaries are reduced or he or she is
required to move his or her residence from the St. Louis, Missouri
metropolitan area, he or she will also receive such payment. In the event of
the sale of the Missouri assets, an amount shall be set aside to fund such
payments. The aggregate amount of the Missouri retention agreements,
including corporate, is $505.

On April 1, 2004, the Missouri Bankruptcy Court granted a motion for
approval of a key employee retention plan for certain Mississippi casino
employees. The terms and conditions are the same as the Missouri key casino
employee Retention Plan except the assets and operations refer to those of
Mississippi and one key employee receiving his then twelve month salary rather
than 50%. The aggregate amount of the Mississippi retention agreements was
$322. Such amount was paid on April 15, 2005, upon consummation of the sale.

Litigation

--Poulos, McElmore and Shreier, et al. v. Caesar's World, Inc. et al.

In 1994, William H. Poulos filed a class-action lawsuit in the United States
District Court for the Middle District of Florida against over thirty-eight
(38) casino operators, including the Company, and certain suppliers and
distributors of video poker and electronic slot machines. This lawsuit was
followed by several additional lawsuits of the same nature against the same
and as well as additional defendants, all of which were consolidated into a
single class-action in the United States District Court for the District of
Nevada. The complaint alleges that the defendants fraudulently marketed and
operated casino video poker machines and electronic slot machines, and asserts
common law fraud and deceit, unjust enrichment and negligent

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71
misrepresentation. On March 23, 2005, the Company was dismissed from the
lawsuit with prejudice by stipulation of the parties and order of the Court.

--Other

The Company is from time to time a party to litigation, which may or may not
be covered by insurance, arising in the ordinary course of its business.
Management of the Company does not believe that the outcome of any such
litigation will have a material adverse effect on the Company's financial
condition or results of operations, or which would have any material adverse
impact upon the gaming licenses of the Company's subsidiaries.

General

The ownership and operation of casino gaming facilities are subject to
extensive state and local regulation. As a condition to obtaining and
maintaining a gaming license, the Company must submit detailed financial,
operating and other reports to state gaming commissions, all of which have
broad powers to suspend or revoke licenses. In addition, substantially all of
the Company's material transactions are subject to review and/or approval by
the various regulatory bodies. Any person acquiring 5% or more of the Common
Stock or of the equity securities of any gaming entity must be found suitable
by the appropriate regulatory body. The President Missouri license was
approved by the Missouri Gaming Commission in July 2004 and expires in May
2006.

13. GUARANTEE OF CITY OBLIGATION

During 1998, the Company and the City of St. Louis reached an agreement for
the relocation of the "Admiral" approximately 1,000 feet north from its former
location on the Mississippi River. Under the terms of an agreement, the City
funded $3,000 of the relocation costs, $2,400 of which was financed through
bank debt. The City repaid the debt from annual allocations of $600 from the
City's annual home dock city public safety fund that is funded by admission
taxes from the "Admiral." The Company guaranteed repayment of the bank debt
if the City failed to pay the obligation. On August 2, 2004, the City paid
the remaining outstanding obligation and the Company's guarantee was
concluded.

14. RISKS AND UNCERTAINTIES

--Insurance Risk

The Company was partially self-insured for employee health and workers
compensation claims and third party liability costs through April 1999.
Effective May 1999, the Company became fully insured for workers compensation
claims. The Company continues to be partially self-insured for employee
health and third party liability claims. The self-insurance claim liability
is based on claims reported and claims incurred but not reported using the
Company's historic experience with such matters.

The Company carries business interruption insurance with exclusions for
windstorm and flood for its casino operations.

F-26
72
--Concentration of Credit Risk

The Company maintains cash balances at certain financial institutions in
excess of amounts insured by federal agencies. In addition, the Company
maintains significant cash balances on hand at its gaming facilities.

--Cyclical Nature of Business

The Company's business involves leisure and entertainment. During periods
of recession or economic downturn, consumers may reduce or eliminate spending
on leisure and entertainment activities. In the event that any of the
Company's demographic markets suffer adverse economic conditions, the
Company's revenues may be materially adversely affected.

15. MINORITY INTEREST

The Connelly Group, LP

The assets of the Company's Davenport casino operations were sold in October
2000. The Davenport casino operations were managed by the Company's wholly-
owned subsidiary, PRC Iowa, which is the general partner of the 95% Company-
owned operating partnership, TCG. The partnership agreement provides for the
allocation of income between the general partner and limited partner at 95%
and 5%, respectively.

President Broadwater Hotel, LLC

To effectuate the acquisition of the Broadwater Property, the Company
entered into a Redemption Agreement dated as of July 22, 1997 (the "Redemption
Agreement") by and among J. Edward Connelly Associates, Inc., a company
controlled by Mr. Connelly ("JECA"), Broadwater Hotel, Inc., a wholly-owned
subsidiary of the Company ("BHI"), and PBLLC, a limited liability company
formed by JECA and BHI for purposes of the transaction.

BH Acquisition Corporation ("BHAC"), a company wholly-owned by Mr. Connelly,
was the sole owner of the Broadwater Property. Prior to the closing of the
transactions, JECA, the successor by merger to BHAC became the sole owner of
the Broadwater Property. In connection with the formation of PBLLC, JECA
transferred its interest in the Broadwater Property to PBLLC as a capital
contribution in exchange for the sole outstanding membership interest in
PBLLC. Pursuant to the Redemption Agreement, BHI made a capital contribution
of $5,000 to PBLLC in exchange for the Class A Unit of PBLLC as described in
the Amended and Restated Limited Liability Company Operating Agreement of
PBLLC (the "Amended Operating Agreement"). Simultaneously with BHI's
acquisition of the Class A Unit, PBLLC redeemed JECA's existing membership
interest in PBLLC in exchange for (i) the cash payment by PBLLC to JECA of
$28,484, (ii) redemption of the $2,016 debt owed by BHAC to the Company and
(iii) the issuance by PBLLC to JECA of the Class B Unit of PBLLC as described
in the Amended Operating Agreement.

PBLLC is obligated to redeem the Class B Unit from JECA for a redemption
price of $10,000 on the date on which the indebtedness (as defined in "Note
10. Discontinued Operations") is fully and finally discharged and the mortgage
securing the Indebtedness is released. On June 7, 2005, the effective date of
the Mississippi Plan of Liquidation, $14,437 of the Class B Unit was redeemed
from the proceeds on the sale of the Biloxi assets. In addition, the Class B

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73
Unit entitles JECA to a priority return based on a percentage per annum equal
to the greater of (i) 7.75% or (ii) 4.0% plus LIBOR, as defined by the
Redemption Agreement.

16. EMPLOYEE BENEFIT PLANS

The Company maintains an employee savings plan which covers all eligible
employees as defined by the plan. Pursuant to this savings plan,
participating employees may contribute (defer) a percentage of eligible
compensation. Employee contributions to the savings plan, up to certain
limits, are partially matched by the Company. The expense applicable for the
Company's contribution to the savings plan, net of forfeitures, was $200, $228
and $199 for the years ended February 28, 2005, February 29, 2004 and February
28, 2003, respectively.

17. STOCK OPTION PLANS

The Company has adopted non-qualified and incentive stock option plans which
provide for the granting of stock options to eligible directors, officers and
employees. In addition, the plans authorize the issuance of tandem stock
appreciation rights in connection with the issuance of certain options. Stock
appreciation rights may only be issued in connection with a non-qualified
stock option. This right will entitle the holder to receive in cash or stock
an amount equal to the excess of the fair market value on the date of exercise
over the exercise price of the tandem stock option. The maximum value of any
stock appreciation right will be limited to the exercise price of the tandem
stock option. A stock appreciation right may be exercisable only at the same
time and to the same extent as the tandem stock option.

The plans are administered by the Compensation Committee of the Board of
Directors (the "Committee"), whose members determine to whom options will be
granted and the terms of each option. The exercise price of stock options
granted under the plans are established by the Committee, but the exercise
price may not be less than the market price of the Company's Common Stock on
the date the option is granted. Each option granted is exercisable in full at
any time or from time to time as determined by the Committee and provided in
the option agreement, provided that no option may have a term exceeding ten
years. In July 1997 and June 1999, the stockholders of the Company approved
the Company's 1997 and 1999 stock option plans which increased the number of
shares available for grant by 500,000 shares and 300,000 shares, respectively.

On June 19, 1996 and August 22, 1997, the Committee approved amendments to
certain of the outstanding stock option agreements. Pursuant to such
amendments, options to purchase an aggregate of 276,340 shares of Common Stock
at exercise prices ranging from $54.00 to $5.625, per share were repriced to
an exercise price of $11.625 and $2.625, respectively, per share, the market
value of the Common Stock on the date of the repricings. In addition, the
trading price at which certain options granted to an executive officer with
respect to 16,667 shares of Common Stock would vest was amended from $84.00 to
$5.50 per share. Except for such amendments, the other terms of the stock
options repricing were not changed.

On August 28, 2001, the Committee approved further amendments to certain of
the outstanding stock option agreements. Pursuant to such amendments, options
to purchase an aggregate of 811,618 shares of Common Stock at exercise prices
ranging from $1.875 to $4.000, per share were repriced at an exercise price of

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74
$0.87 per share. Except for such amendments, the other terms of the stock
options were not changed. The Over the Counter fair market value of the
Common Stock on August 28, 2001, was $0.87. Pursuant to the guidance of APB
25, "Accounting for Stock Issued to Employees" and related interpretations,
the amendments to certain of the outstanding option agreements modified the
options from being fixed stock option awards to variable stock option awards.
As such, the Company recognizes compensation cost for increases or decreases
in the intrinsic value of the modified award in periods subsequent to the
modification until the award is exercised, forfeited or expires unexercised.
However, compensation cost is not adjusted below the intrinsic value, if any,
of the modified stock option at the date of modification unless the award is
forfeited because the employee fails to fulfill an obligation. The Over the
Counter closing market value of the Common Stock on February 28, 2005, was
$0.15, therefore, as of February 28, 2005, no compensation cost has been
recognized.

The Committee believes that the modifications were necessary and appropriate
in light of competitive conditions in the gaming industry and in order to
provide a meaningful long-term incentive compensation opportunity in light of
recent trading prices of the Common Stock to the management team whose efforts
are essential to the Company's success.

The Company applies SFAS No. 123, "Accounting for Stock-Based Compensation"
to account for stock compensation arrangements. SFAS No. 123 provides, among
other things, that companies may elect to account for employee stock options
using a fair value-based method or continue to apply the intrinsic value-based
method prescribed by APB No. 25. As permitted, the Company has elected to
continue to apply the intrinsic value-based method for stock options.
Accordingly, no compensation cost has been recognized.

Under the Company's plans, the Company is authorized to grant options up to
an aggregate of 1,325,000 shares to management team members and directors. Of
this amount, 341,660 shares have expired. As of February 28, 2005, 100,000
options have been exercised and 194,731 are available for grant. Options
under the plans are generally granted at market value at the date of the grant
and expire ten years from the date of grant. The outstanding options that
have been granted under the plan generally vest either at (i) a rate of 20%
each anniversary date or (ii) 20% on date of grant and 20% on each anniversary
date thereafter. The Company has also granted stock options to external board
members under a non-qualified plan. These options are granted at market value
at the date of the grant; and generally vest at 50% on date of grant and 25%
each anniversary date thereafter or 20% at the date of grant, 20% on the first
anniversary and 60% on the second anniversary; and expire 10 years from date
of grant.

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A summary of the status of the Company's stock option plans as of February
28, 2005, February 29, 2004 and February 28, 2003, and changes during the
years ending on those dates is presented below:

2005 2004 2003
------------------------- ------------------------- --------------------------
Variable Weighted-Average Weighted-Average Weighted-Average
Options Shares Exercise Price Shares Exercise Price Shares Exercise Price
- -------------------------------------------------------------------------------------------------

Outstanding at
beginning
of year 674,526 $ 0.87 787,293 $ 0.87 989,621 $ 7.26
- -------------------------------------------------------------------------------------------------
Granted -- -- -- -- -- --
Forfeited (500) 0.87 (90,183) 0.87 (184,828) 35.11
Expired (2,084) 0.87 (5,917) 0.87 (17,500) 0.87
- -------------------------------------------------------------------------------------------------
Outstanding
at end
of year 688,609 0.87 691,193 0.87 787,293 0.87
- -------------------------------------------------------------------------------------------------
Options
exercisable
at year-end 671,942 674,526 770,626
Weighted-
average fair
value of options
granted during
the year n/a n/a n/a
- -------------------------------------------------------------------------------------------------

The following table summarizes information about variable stock options
outstanding at February 28, 2005:

- -------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------ ----------------------------
Range of Number Weighted-Average Weighted- Number Weighted-
Exercise Outstanding Remaining Average Exercisable Average
Prices at 02/28/05 Contractual Life Exercise Price at 02/28/05 Exercise Price
- -------------------------------------------------------------------------------------------------

$ 0.00 - 1.00 688,609 3.42 years 0.87 671,942 0.87
- -------------------------------------------------------------------------------------------------

18. SEGMENT INFORMATION

The Company has one reportable segment from continuing operations consisting
of corporate administration. All expenses, assets and additions to property
and equipment consist of corporate items. See "Note 10. Discontinued
Operations" for the results of the Company's discontinued operations.

The Company has no inter-segment sales and accounts for transfers of
property and inventory at its net book value at the time of such transfer.

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19. RELATED PARTY TRANSACTIONS

M/V "President Casino-Mississippi" Note

The Company defaulted under the terms of its $2,100 M/V "President
Casino-Mississippi" note. The vessel and various equipment aboard the M/V
"President Casino-Mississippi" collateralized a term note payable which was
also personally guaranteed by Mr. Connelly. The Company continued to make the
quarterly principal and interest payments on the note prior to the Company's
bankruptcy filing. Under the terms of the note agreement, $2,100 principal
became due and payable in August 2002 together with interest and costs (the
"Note"). In November 2002, the lender brought an action against Mr. Connelly
for breach of contract under his personal guarantee. In December 2003, Mr.
Connelly satisfied his personal guarantee paying the lender $1,200. In
January 2003, the Mississippi Bankruptcy Court granted a motion to relieve the
lender from the automatic stay in order to enforce its rights under the
Preferred Fleet Ship Mortgage, including but not limited to the right of the
lender to seize and sell the vessel. In May 2003, the lender filed a motion
with the United States District Court for the Southern District of Illinois
for an order directing the Clerk of Court to issue a warrant for the arrest of
the M/V "President Casino-Mississippi" pursuant to rules of admiralty and
maritime claims. On May 20, 2003, the Court executed the warrant, which
allowed the vessel to be seized and sold. On April 7, 2004, the vessel was
auctioned and the lender offered the highest bid of $500.

Because the Note was also guaranteed by the Company and President
Mississippi, the payment of the personal guarantee triggered a right of
contribution to Mr. Connelly from both the Company and the President
Mississippi. In addition, Mr. Connelly became subrogated to the lender's
right under the Note to collect the payment by him from the Company's
subsidiary that issued the Note. The Note remained outstanding as of February
28, 2005.

The Company, President Mississippi, Mr. Connelly and the lender entered into
an agreement whereby the Company would satisfy its obligations under the
indebtedness, and related costs, for $750. Additionally, Mr. Connelly agreed
to forego certain rights and assignments. The terms are incorporated in the
Mississippi Plan of Liquidation, which was confirmed May 27, 2005, and became
effective on June 7, 2005. The Company subsequently paid its agreed upon
obligation.

Mississippi Plan of Liquidation

In connection with the resolution of various bankruptcy issues with respect
to the Company's Biloxi operations, JECA entered into an agreement (the "JECA
Proceeds Distribution Agreement") with John S. Aylsworth, President, Chief
Operating Officer and Director of the Company, Terrence L. Wirginis, Vice
Chairman of the Board and Ralph J. Vaclavik, the Chief Financial Officer of
the Company, pursuant to which upon receipt of funds by JECA toward payment of
the liquidation preference of its Class B membership interest in PBLLC, JECA
will use its best efforts to pay a percentage of such funds to Messrs.
Aylsworth, Wirginis and Vaclavik based on the total sales proceeds to JECA.
While final distributions under the Mississippi Plan of Liquidation are
subject to final determination and settlement of claims and expenses, the
Company currently estimates that the proceeds of the sale of the Mississippi
Properties and the anticipated sale of the Company's St. Louis operations (if

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77
completed in accordance with its present terms) will be sufficient to repay
the Noteholders the outstanding indebtedness under the Notes and, in addition,
to satisfy JECA's liquidation preference of its Class B membership interest in
PBLLC, Messrs. Aylsworth, Wirginis and Vaclavik would be entitled to receive
approximately $4,800, $4,800 and $300, respectively, pursuant to the JECA
Proceeds Distribution Agreement. See "Note 1. Bankruptcy Proceedings."

20. SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES

The components of net change in working capital accounts are as follows:

2005 2004 2003
------ ------ ------

Changes in working capital accounts:
Receivables, net........................... $ (118) $ (7) $ 164
Prepaid expenses and other current assets.. 643 (349) (828)
Accounts payable........................... 885 (643) 1,360
Accrued payroll and benefits............... (1,345) 687 (1,317)
Other accrued expenses..................... 638 945 8,280
-------- -------- --------
$ 703 $ 633 $ 7,659
======== ======== ========

During fiscal year 2005, the Company paid $19 in income taxes. During
fiscal years 2004 and 2003, the Company paid no income taxes. Interest paid
by the Company was $2,946, $2,977 and $88 for the years ended February 28,
2005, February 29, 2004 and February 28, 2003, respectively.

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21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table sets forth consolidated income statement data for the
periods indicated. The quarterly information is unaudited, but in
management's opinion reflects all adjustments necessary for a fair
presentation of the information for the periods presented.

Fiscal 2005 Quarters Ended
May 31 Aug. 31 Nov. 30 Feb. 28
-------- --------- --------- ---------

Revenues.......................... $ -- $ -- $ -- $ --

Operating loss.................... (636) (606) (676) (725)

Loss before income tax,
minority interest and
discontinued operations......... (814) (955) (967) (1,638)

Income (loss) from
continuing operations........... (1,144) (1,293) (1,318) (1,985)

Income from discontinued
operations...................... 594 548 550 14,240

Net income (loss)................. (550) (745) (768) 12,255
========= ========= ========= =========
Basic and diluted loss per
share from continuing operations $ (0.23) $ (0.26) $ (0.26) $ (0.39)
Basic and diluted income
per share from discontinued
operations...................... .12 0.11 0.11 2.83
-------- -------- -------- --------
Basic and diluted net income
(loss) per share................ $ (0.11) $ (0.15) $ (0.15) $ 2.44
======== ======== ======== ========

Income from discontinued operations for the fourth quarter of 2005 includes
a $2,416 adjustment to the PBLLC debt, discussed in "Note 7. Long-Term Debt
and Current Portion of Long-Term Debt," and a $2,643 adjustment to the
obligation related to the M/V "President Casino-Mississippi," discussed in
"Note 10. Discontinued Operations," resulting from the Court approved
Mississippi Plan of Liquidation, and the $5,707 reduction of the income tax
valuation allowance, discussed in "Note 11. Income Taxes." During the fourth
quarter of 2005, discontinued operations also benefitted from the suspension
of depreciation in accordance with SFAS 144. These unusual items contributed
to the increase in income from discontinued operations during the fourth
quarter of 2005.

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79

Fiscal 2004 Quarters Ended
May 31 Aug. 31 Nov. 30 Feb. 29
-------- --------- --------- ---------

Revenues.......................... $ -- $ -- $ -- $ --

Operating loss.................... (753) (731) (611) (809)

Loss before income tax,
minority interest and
discontinued operations......... (671) (901) (788) (869)

Loss from continuing operations... (1,012) (1,213) (1,111) (1,199)

Income (loss) from discontinued
operations...................... 1,372 1,255 (1,484) 657

Net income (loss)................. 360 42 (2,595) (542)
========= ========= ========= =========
Basic and diluted loss per
share from continuing operations $ (0.20) $ (0.24) $ (0.22) $ (0.22)
Basic and diluted income (loss)
per share from discontinued
operations...................... .27 0.25 (0.30) 0.13
-------- -------- -------- --------
Basic and diluted net income
(loss) per share................ $ 0.07 $ 0.01 $ (0.52) $ (0.11)
======== ======== ======== ========

22. SUMMARIZED AND CONDENSED FINANCIAL INFORMATION OF THE COMPANY

The following summarized and condensed financial information presents the
separate financial information of the parent company, the combined financial
information of the Non-Guarantors and the combined financial information of
the Guarantors of the Company's Senior Exchange Notes and Secured Notes as of
the dates presented. See "Note 7. Long-Term Debt and Current Portion of
Long-Term Debt."

The Company has incorporated a wholly-owned subsidiary which is a Non-
Guarantor, BHI, and a limited liability company which is a Non-Guarantor,
PBLLC. See "Note 15. Minority Interest."

All of the Guarantors (other than TCG) are wholly-owned subsidiaries of the
Company and are full joint and several guarantors of the Senior Exchange Notes
(limited only to the extent necessary to insure that it does not constitute a
fraudulent conveyance under applicable law). The guarantee of TCG, which is a
95% Company-owned partnership, is limited to the amount owed from time to time
by TCG to PRC Holdings ($0 as of February 28, 2005 and February 29, 2004). As
security for the obligations of the Company and the Guarantors under the
Senior Exchange Notes and the Secured Notes, the Company and the Guarantors
have pledged their equity interests in each Guarantor and all of their rights
in certain management agreements with, certain indebtedness from, and certain
investments in, certain gaming ventures. Separate financial information for
TCG is presented elsewhere herein.

F-34
80

SUMMARIZED AND CONDENSED CONSOLIDATING BALANCE SHEET
FEBRUARY 28, 2005
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantors Entries Consolidated
--------- --------- ---------- --------- ---------

ASSETS

CURRENT ASSETS:
Cash and cash equivalents......... $ 54 $ 20,520 $ 132 $ -- $ 20,706
Restricted cash and short-term
investments..................... -- 350 2,234 -- 2,584
Related party notes receivable.... 75,000 504,159 1,250 (580,409) --
Assets of discontinued operations. -- 51,664 42,342 (769) 93,237
Other current assets.............. 13,145 173 -- (13,145) 173
---------- ---------- ---------- ---------- ----------
Total current assets............ 88,199 576,866 45,958 (594,323) 116,700
---------- ---------- ---------- ---------- ----------

PROPERTY AND EQUIPMENT, NET......... -- 5 -- -- 5
INVESTMENT IN SUBSIDIARIES.......... 6,778 -- -- (6,778) --
---------- ---------- ---------- ---------- ----------
$ 94,977 $ 576,871 $ 45,958 $(601,101) $ 116,705
========== ========== ========== ========== ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES NOT SUBJECT
TO COMPROMISE:
Accounts payable.................. $ -- $ 520 $ 121 $ -- $ 641
Other current liabilities......... 507 877 -- -- 1,384
Due to related parties............ -- 24 101 (125) --
Liabilities of discontinued
operations...................... -- 13,796 1,110 (5,560) 9,346
Current maturities of
long-term debt.................. -- -- 36,621 -- 36,621
---------- ---------- ---------- ---------- ----------
Total current liabilities....... 507 15,217 37,953 (5,685) 47,992
Long-term liabilities from
discontinued operations......... -- 155,019 -- (155,019) --
Due to related parties............ -- 121,168 -- (121,168) --
Minority interest................. 19,020 -- -- -- 19,020
---------- ---------- ---------- ---------- ----------
Total liabilities not subject
to compromise................. 19,527 291,404 37,953 (281,872) 67,012
LIABILITIES SUBJECT TO COMPROMISE... 117,607 304,427 11,713 (341,897) 91,850
---------- ---------- ---------- ---------- ----------
Total liabilities............... 137,134 595,831 49,666 (623,769) 158,862
---------- ---------- ---------- ---------- ----------
STOCKHOLDERS' DEFICIT............... (42,157) (18,960) (3,708) 22,668 (42,157)
---------- ---------- ---------- ---------- ----------
$ 94,977 $ 576,871 $ 45,958 $(601,101) $ 116,705
========== ========== ========== ========== ==========

F-35
81

SUMMARIZED AND CONDENSED CONSOLIDATING BALANCE SHEET
FEBRUARY 29, 2004
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantors Entries Consolidated
--------- --------- ---------- --------- ---------

ASSETS

CURRENT ASSETS:
Cash and cash equivalents......... $ 94 $ 16,527 $ 1,741 $ -- $ 18,362
Restricted cash and short-term
investments..................... -- 350 2,322 -- 2,672
Related party notes receivable.... 75,000 503,522 5 (578,527) --
Assets of discontinued operations. -- 53,332 43,117 (881) 95,568
Other current assets.............. 13,027 209 -- (13,027) 209
---------- ---------- ---------- ---------- ----------
Total current assets............ 88,121 573,940 47,185 (592,435) 116,811
---------- ---------- ---------- ---------- ----------

PROPERTY AND EQUIPMENT, NET......... -- 7 -- -- 7
---------- ---------- ---------- ---------- ----------
$ 88,121 $ 573,947 $ 47,185 $(592,435) $ 116,818
========== ========== ========== ========== ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES NOT SUBJECT
TO COMPROMISE:
Accounts payable.................. $ -- $ 102 $ -- $ -- $ 102
Other current liabilities......... 42 1,115 -- -- 1,157
Due to related parties............ -- 10 11 (21) --
Investments in subsidiaries....... 5,286 -- -- (5,286) --
Liabilities of discontinued
operations...................... -- 15,275 1,455 (3,893) 12,837
---------- ---------- ---------- ---------- ----------
Total current liabilities....... 5,328 16,502 1,466 (9,200) 14,096

Long-term debt.................... -- -- 45,429 -- 45,429
Long-term liabilities from
discontinued operations......... -- 155,019 -- (155,019) --
Due to related parties............ -- 33,023 -- (33,023) --
Minority interest................. 17,653 -- -- -- 17,653
---------- ---------- ---------- ---------- ----------
Total liabilities not subject
to compromise................. 22,981 205,544 46,895 (197,242) 77,178
LIABILITIES SUBJECT TO COMPROMISE... 117,489 392,713 11,713 (429,926) 91,989
---------- ---------- ---------- ---------- ----------
Total liabilities............... 140,470 597,257 58,608 (627,168) 169,167
---------- ---------- ---------- ---------- ----------
STOCKHOLDERS' DEFICIT............... (52,349) (23,310) (11,423) 34,733 (52,349)
---------- ---------- ---------- ---------- ----------
$ 88,121 $ 573,947 $ 47,185 $(592,435) $ 116,818
========== ========== ========== ========== ==========

F-36
82

SUMMARIZED AND CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantors Entries Consolidated
--------- --------- --------- ---------- ---------

Year Ended February 28, 2005:
Operating revenues................. $ -- $ -- $ -- $ -- $ --
Operating costs and expenses....... 61 2,576 7 -- 2,644
---------- ---------- ---------- ---------- ----------
Operating income (loss).......... (61) (2,576) (7) -- (2,644)
Equity loss in consolidated
subsidiaries..................... (3,751) -- -- 3,751 --
Other income (expense):
Interest income.................. -- 2 6 -- 8
Reorganization items, net........ (562) (601) (575) -- (1,738)
---------- ---------- ---------- ---------- ----------
Other expense.................. (4,313) (599) (569) 3,751 (1,730)
---------- ---------- ---------- ---------- ----------
Income (loss) before minority
interest and discontinued
operations...................... (4,374) (3,175) (576) 3,751 (4,374)
Minority interest.................. (1,368) -- -- -- (1,368)
---------- ---------- ---------- ---------- ----------
Loss from continuing operations.... (5,742) (3,175) (576) 3,751 (5,742)
---------- ---------- ---------- ---------- ----------
Income from discontinued operations 15,934 10,965 4,969 (15,934) 15,934
---------- ---------- ---------- ---------- ----------
Net income..................... $ 10,192 $ 7,790 $ 4,393 $ (12,183) $ 10,192
========== ========== ========== ========== ==========

Year Ended February 29, 2004:
Operating revenues................. $ -- $ -- $ -- $ -- $ --
Operating costs and expenses....... 28 2,872 4 -- 2,904
---------- ---------- ---------- ---------- ----------
Operating loss................... (28) (2,872) (4) -- (2,904)
Equity loss in consolidated
subsidiaries..................... (3,200) -- -- 3,200 --
Other income (expense):
Interest income, net............. -- 2 15 -- 17
Reorganization items, net........ (1) (340) (1) -- (342)
---------- ---------- ---------- ---------- ----------
Other expense.................. (3,201) (338) 14 3,200 (325)
---------- ---------- ---------- ---------- ----------
Income (loss) before minority
interest and discontinued
operations...................... (3,229) (3,210) 10 3,200 (3,229)
Minority interest.................. (1,306) -- -- -- (1,306)
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations...................... (4,535) (3,210) 10 3,200 (4,535)
---------- ---------- ---------- ---------- ----------
Income from discontinued
operations...................... 1,800 1,288 512 (1,800) 1,800
---------- ---------- ---------- ---------- ----------
Net income (loss).............. $ (2,735) $ (1,922) $ 522 $ 1,400 $ (2,735)
========== ========== ========== ========== ==========

F-37
83

SUMMARIZED AND CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)

Year Ended February 28, 2003:
Operating revenues................. $ -- $ -- $ -- $ -- $ --
Operating costs and expenses....... 52 3,164 32 -- 3,248
---------- ---------- ---------- ---------- ----------
Operating loss................... (52) (3,164) (32) -- (3,248)
Equity loss in consolidated
subsidiaries..................... (7,208) -- -- 7,208 --
Other income (expense):
Interest expense, net............ -- (3,281) 24 -- (3,257)
Reorganization items, net........ (1) (755) -- -- (756)
---------- ---------- ---------- ---------- ----------
Other expense.................. (7,209) (4,036) 24 7,208 (4,013)
---------- ---------- ---------- ---------- ----------
Loss before minority interest
and discontinued operations..... (7,261) (7,200) (8) 7,208 (7,261)
Minority interest.................. (1,319) -- -- -- (1,319)
---------- ---------- ---------- ---------- ----------
Loss from continuing
operations...................... (8,580) (7,200) (8) 7,208 (8,580)
---------- ---------- ---------- ---------- ----------
Income (loss) from discontinued
operations...................... (499) 1,980 (2,479) 499 (499)
---------- ---------- ---------- ---------- ----------
Net loss....................... $ (9,079) $ (5,220) $ (2,487) $ 7,707 $ (9,079)
========== ========== ========== ========== ==========

F-38
84

SUMMARIZED AND CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED FEBRUARY 28, 2005
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantors Entries Consolidated
--------- --------- ---------- ---------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $ 10,192 $ 4,467 $ 7,716 $(12,183) $ 10,192
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation and amortization...... -- 4,769 165 -- 4,934
Gain on sale of fixed assets....... -- 8 -- -- 8
Deferred tax benefit............... -- -- (5,707) -- (5,707)
Equity income in consolidated
subsidiaries..................... (12,183) - -- 12,183 --
Minority interest.................. 1,368 -- -- -- 1,368
Reorganization items, net.......... -- (2,643) (2,416) -- (5,059)
Net change in working
capital accounts................. 583 400 (280) -- 703
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities........... (40) 7,001 (522) -- 6,439
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property
and equipment..................... -- (4,140) (204) -- (4,344)
Proceeds from the sale of property. -- 119 6,435 -- 6,554
Changes in restricted cash......... -- -- 87 -- 87
--------- --------- --------- --------- ---------
Net provided by (cash used) in
investing activities........... -- (4,021) 6,318 - 2,297
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable......... -- -- (6,392) -- (6,392)
Change in intercompany accounts.... -- 1,013 (1,013) - -
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities........... -- 1,013 (7,405) - (6,392)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............... (40) 3,993 (1,609) -- 2,344

CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR............... 93 20,928 1,741 -- 22,762
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR..................... $ 53 $ 24,921 $ 132 $ -- $ 25,106
========= ========= ========= ========= =========

F-39
85

SUMMARIZED AND CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED FEBRUARY 29, 2004
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantors Entries Consolidated
--------- --------- ---------- ---------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $ (2,735) $ (1,922) $ 522 $ 1,400 $ (2,735)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation and amortization...... -- 7,793 321 -- 8,114
(Gain) loss on disposal of assets.. -- 150 -- -- 150
Impairment of long-lived assets.... -- 288 -- -- 288
Equity loss in consolidated
subsidiaries..................... 1,400 - -- (1,400) --
Minority interest.................. 1,306 -- -- -- 1,306
Net change in working
capital accounts................. (648) 953 328 -- 633
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities........... (677) 7,262 1,171 -- 7,756
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property
and equipment..................... -- (2,347) (117) -- (2,464)
Proceeds from the sale of property. -- 1,560 -- -- 1,560
Changes in restricted cash......... -- -- 2,982 -- 2,982
Maturity of short-term investments. - 322 - - 322
--------- --------- --------- --------- ---------
Net provided by
investing activities........... -- (465) 2,865 - 2,400
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable......... -- -- (3,551) -- (3,551)
Payment of minority interest....... (2) -- -- -- (2)
Change in intercompany accounts.... 674 (204) (470) -- -
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities........... 672 (204) (4,021) -- (3,553)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............... (5) 6,593 15 -- 6,603

CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR............... 98 14,335 1,726 -- 16,159
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR..................... $ 93 $ 20,928 $ 1,741 $ -- $ 22,762
========= ========= ========= ========= =========

F-40
86

SUMMARIZED AND CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED FEBRUARY 28, 2003
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantors Entries Consolidated
--------- --------- ---------- ---------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $ (9,079) $ (5,220) $ (2,487) $ 7,707 $ (9,079)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation and amortization...... -- 8,451 472 -- 8,923
Gain on sale of fixed assets....... -- 117 -- -- 117
Impairment of long-lived assets.... - 1,167 - - 1,167
Equity loss in consolidated
subsidiaries..................... 7,707 - -- (7,707) --
Minority interest.................. 1,319 -- -- -- 1,319
Net change in working
capital accounts................. 3,367 (506) 4,798 -- 7,659
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities........... 3,314 4,009 (1,058) -- 10,106
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property
and equipment..................... -- (4,978) (614) -- (5,592)
Proceeds from the sale of property. -- 10 2 -- 12
Changes in restricted cash......... -- 2,152 (514) -- 1,638
Purchase of short-term investments. -- (12) -- -- (12)
Maturity of short-term investments. - 75 - - 75
--------- --------- --------- --------- ---------
Net cash used in
investing activities........... -- (2,753) (1,126) - (3,879)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable......... -- (105) -- -- (105)
Payment of minority interest....... (73) -- -- -- (73)
Change in intercompany accounts.... (3,144) 3,075 69 - -
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities........... (3,217) 2,970 69 - (178)
--------- --------- --------- --------- ---------
NET INCREASE IN CASH
AND CASH EQUIVALENTS............... 97 4,226 1,726 -- 6,049

CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR............... 1 10,109 - -- 10,110
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR..................... $ 98 $ 14,335 $ 1,726 $ -- $ 16,159
========= ========= ========= ========= =========

F-41
87

PRESIDENT CASINOS, INC.
(DEBTORS-IN-POSSESSION)
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended February 29/28, 2005, 2004 and 2003
(in thousands)

Additions
Balance at Charged to
Beginning Costs and Balance at
Description of Year Expenses Deductions End of Year
----------- --------- ---------- --------- ---------

Allowance for Doubtful Accounts Receivable:

Year ended February 28, 2005............... $ 119 $ 62 $ (133)(a) $ 48

Year ended February 29, 2004............... 189 135 (205)(a) 119

Year ended February 28, 2003............... 180 270 (261)(a) 189

Allowance for Deferred Income Tax
Asset Valuation:

Year ended February 28, 2005............... 69,911 (8,532)(b) -- 61,379

Year ended February 29, 2004............... 70,179 (268)(c) -- 69,911

Year ended February 28, 2003............... 67,345 2,834 (d) -- 70,179

(a) Write-offs of uncollectible accounts receivable, net of recoveries.

(b) The decrease in the reserve is due to a decrease in net deferred tax
assets of $2,825 and a decrease in the valuation allowance of $5,707
for that portion of the net operating loss carryforward which more
likely than not will be realized. See "Note 11. Income Taxes."

(c) The decrease in the reserve is the result of a decrease in net deferred
tax assets.

(d) Recognition criteria under SFAS No. 109 not satisfied.

F-42
88

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of
The Connelly Group, L.P.:

We have audited the accompanying balance sheets of The Connelly Group, L.P., a
limited partnership, (the "Partnership") as of February 28, 2005 and
February 29, 2004 and the related statements of operations, partners'
preferred redeemable capital and general capital, and cash flows for each of
the three years in the period ended February 28, 2005. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Partnership is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Partnership's internal
control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of February 28, 2005
and February 29, 2004, and the results of its operations and its cash flows
for each of the three years in the period ended February 28, 2005 in
conformity with accounting principles generally accepted in the United States
of America.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Financial Statement Schedule II
listed in the Index to Financial Statements and Schedules on page F-1 is
presented for the purpose of additional analysis and is not a required part of
the basic financial statements. Financial Statement Schedule II is the
responsibility of the Partnership's management. This schedule has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects when considered in relation to the basic financial statements taken
as a whole.

/s/ Deloitte & Touche LLP
St. Louis, Missouri
May 27, 2005
F-43

89

THE CONNELLY GROUP, L.P.
BALANCE SHEETS
(in thousands)

Feb. 28, Feb. 29,
2005 2004
------ ------

ASSETS

Cash and cash equivalents...................... $ 67 $ 71
--------- ---------
$ 67 $ 71
========= =========

LIABILITIES, PARTNERS' PREFERRED REDEEMABLE
CAPITAL AND GENERAL CAPITAL

Accrued liabilities............................ 11 15

Commitments and contingent liabilities......... -- --

Partners' general capital...................... 56 56
--------- ---------
$ 67 $ 71
========= =========

See Notes to Financial Statements.

F-44
90

THE CONNELLY GROUP, L.P.
STATEMENTS OF OPERATIONS
(in thousands)

Years Ended February 28/29,
2005 2004 2003
------ ------ ------

Operating revenues..................... $ -- $ -- $ --
--------- --------- ---------
Total operating revenues............. -- -- --
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative.... 1 (87) (65)
--------- --------- ---------
Total operating costs and expenses... 1 (87) (65)
--------- --------- ---------

OPERATING INCOME (LOSS)................ (1) 87 65
--------- --------- ---------
OTHER INCOME:
Interest income........................ 1 1 7
--------- --------- ---------
Total other income................... 1 1 7
--------- --------- ---------
NET INCOME............................. $ -- $ 88 $ 72
========= ========= =========

See Notes to Financial Statements.

F-45
91

THE CONNELLY GROUP, L.P.
STATEMENTS OF PARTNERS' PREFERRED REDEEMABLE CAPITAL
AND GENERAL CAPITAL
(in thousands)

Partners' General Capital
---------------------------------------
Partner's Limited General Total
Preferred Partner's Partner's Partners'
Redeemable General General General
Capital Capital Capital Capital
--------- --------- --------- ---------

Years Ended February 28, 2003,
February 29, 2004 and
February 28, 2005:

Balance as of March 1, 2002........... $ -- $ 72 $ 1,315 $ 1,387
Capital distributions................. -- (73) (1,383) (1,456)
Prior years allocation true-up........ -- (3) 3 --
Net income allocated.................. -- 4 68 72
--------- --------- --------- ---------
Balance as of February 28, 2003....... -- -- 3 3
Capital distributions................. -- (2) (33) (35)
Net income allocated................. -- 4 84 88
--------- --------- --------- ---------
Balance as of February 29, 2004....... -- 2 54 56
Net income allocated.................. -- -- -- --
--------- --------- --------- ---------
Balance as of February 28, 2005....... $ -- $ 2 $ 54 $ 56
========= ========= ========= =========

See Notes to Financial Statements.

F-46
92

THE CONNELLY GROUP, L.P.
STATEMENTS OF CASH FLOWS
(in thousands)

Years Ended February 28/29,
2005 2004 2003
------ ------ ------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $ -- $ 88 $ 72
Adjustments to reconcile net income
to net cash provided by
operating activities:
Changes in assets and liabilities:
Accrued liabilities................. (4) (106) (144)
Due to related parties.............. -- -- (24)
--------- --------- ---------
Net cash used in operating activities..... (4) (18) (96)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:

Change in restricted cash............... -- -- 1,500
--------- --------- ---------
Net cash provided by investing activities. -- -- 1,500
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital distributions................... -- (35) (1,456)
--------- --------- ---------
Net cash used in financing activities..... -- (35) (1,456)
--------- --------- ---------
NET DECREASE IN CASH AND
CASH EQUIVALENTS........................ (4) (53) (52)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR...................... 71 124 176
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.. $ 67 $ 71 $ 124
========= ========= =========

See Notes to Financial Statements.

F-47

93
THE CONNELLY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands unless otherwise stated)

1. BASIS OF PRESENTATION

The Connelly Group, L.P. (the "Partnership") is a Delaware limited
partnership which was organized in January 1990. The Partnership was formed
to own, manage and operate the President Riverboat Casino, a riverboat gaming
operation, and ancillary facilities in Davenport, Iowa.

In December 1992, all preferred and general capital interests, except a
limited partner's general capital interest of 5%, were contributed by the
general partners to a newly formed corporation, President Casinos, Inc.
("PCI") in exchange for common stock of PCI. PCI subsequently transferred its
ownership interest in the Partnership to a wholly-owned subsidiary, President
Riverboat Casino-Iowa, Inc. ("PRC-Iowa"). PCI and its affiliates are engaged
in the business of owning, operating, managing and developing entertainment
oriented operations with its primary focus on gaming.

On October 10, 2000, the Partnership sold the assets of its Davenport casino
operations to Isle of Capri Casinos, Inc. and ceased gaming operations at that
time.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents -- Cash and cash equivalents include interest
earning deposits with maturities of ninety days or less at date of purchase.

Income Taxes -- The Partnership is not subject to federal and state income
taxes. Taxable income and losses of the Partnership are reportable on the
income tax returns of the respective partners.

Use of Management Estimates -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the amounts of revenues and expenses during the reporting period. Actual
results may differ from those estimates.

3. PARTNER'S PREFERRED REDEEMABLE CAPITAL

The preferred redeemable capital was originally recorded at the historical
cost of assets and advances contributed by the partners which were entities
under common control and such carrying value was less than the stated value of
the preferred capital as set forth in the partnership agreement. The
Partnership accrued the difference between the recorded value and stated value
each year to the extent of available net income. The preferred redeemable
capital had cumulative distribution rights of 13% on the stated value which
were accrued as of February 28, 1998. During fiscal year 1999, the
Partnership fully redeemed the partner's preferred capital.

4. PARTNERS' GENERAL CAPITAL

The partnership agreement provides for the allocation of income (losses)

F-48

84
between the general partner and limited partner at 95% and 5%, respectively,
after preferred capital accounts are allocated their cumulative preferred
return and any difference between the carrying value and stated value of
preferred capital is accrued. The limited partner's capital account cannot be
reduced below zero.

5. RELATED PARTY TRANSACTIONS

The Partnership is related to other entities through common ownership by its
partners or principal officers. The Partnership entered into a management
advisory agreement with the general partner for advisory services related to
gaming and riverboat operations. The agreement provides for management fees
based on a percentage of revenues. There were no transactions with related
parties in fiscal years 2005, 2004 or 2003.

6. COMMITMENTS AND CONTINGENT LIABILITIES

The Partnership was a party to legal proceedings arising in the normal
conduct of business. Management believes that there will not be a material
adverse effect upon the Partnership's financial position as a result of any
further matters.

7. SUPPLEMENTAL CASH FLOWS DISCLOSURES

There were no noncash investing and financing activities during fiscal years
2005, 2004 and 2003.

No interest was paid by the Partnership during fiscal years 2005, 2004 and
2003.

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95
THE CONNELLY GROUP, L.P.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended February 28/29, 2005, 2004 and 2003
(in thousands)

Additions
Balance at Charged to
Beginning Costs and Balance at
Description of Year Expenses Deductions End of Year
----------- --------- ---------- ---------- -----------

Allowance for Doubtful Accounts Receivable:

Year ended February 28, 2005............... $ -- $ -- $ -- $ --

Year ended February 29, 2004............... 45 -- (45)(a) --

Year ended February 28, 2003............... 54 -- (9)(a) 45

(a) Write-offs of uncollectible accounts receivable, net of recoveries.

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96

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto
duly authorized.

PRESIDENT CASINOS, INC.

By: /s/ Ralph J. Vaclavik
---------------------------
Name: Ralph J. Vaclavik
Title: Senior Vice President
and Chief Financial Officer

Date: June 14, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed on this 14th day of June, 2005 by the following persons on behalf of the registrant in the
capacities indicated.

Signature Capacity
- ---------- --------

/s/ John E. Connelly Chief Executive Officer, Chairman
- -------------------------- and Director
John E. Connelly

/s/ John S. Aylsworth President, Chief Operating Officer
- -------------------------- and Director
John S. Aylsworth

/s/ Karl G. Andren Director
- --------------------------
Karl G. Andren

/s/ Royal P. Walker, Jr. Director
- --------------------------
Royal P. Walker, Jr.

/s/ Terrence L. Wirginis Vice Chairman, Vice President and Director
- --------------------------
Terrence L. Wirginis

/s/ Ralph J. Vaclavik Senior Vice President and
- -------------------------- Chief Financial Officer
Ralph J. Vaclavik

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97
PRESIDENT CASINOS, INC.
EXHIBIT INDEX
Exhibits
2.1 Asset Sale Agreement, dated as of July 19, 2000, by and among
The Connelly Group, L.P. ("TCG"), TCG/Blackhawk, Inc.
("Blackhawk") (collectively, the "Sellers"), and IOC-Davenport,
Inc. and Isle of Capri Casinos, Inc. ("Purchasers"). (23)
2.2 Riverboat Casino Sale and Purchase Agreement entered into as of
30th day of September, 2004, by and among President Casinos, Inc.
debtor and debtor-in-possession in a Chapter 11 bankruptcy case,
Case No. 02-53005 pending in the United States Bankruptcy Court
for the Eastern District of Missouri, President Riverboat
Casino-Missouri, Inc. and Columbia Sussex, Inc. (33)
2.3 Sale and Purchase Agreement, dated as of November 15,2004, by
and between The President Riverboat Casino-Mississippi, Inc.,
Vegas, Vegas, Inc. (each a debtor in Case No. 02-53005-172
pending in the United States Bankruptcy Court for the Eastern
District of Missouri), President Broadwater Hotel, LLC, on the
one hand, and Broadwater Properties, LLC, on the other hand. (34)
2.4 Amendment to Sale and Purchase Agreement, dated as of November
29, 2004, by and between The President Riverboat Casino-
Mississippi, Inc., Vegas, Vegas, Inc. (each a debtor in Case No.
02-53005-172 pending in the United States Bankruptcy Court for
the Eastern District of Missouri), President Broadwater Hotel,
LLC, on the one hand, and Broadwater Properties, LLC, on the
other hand. (35)
2.5 Second Amendment to Sale and Purchase Agreement executed and
delivered the 20th day of January, 2005, by Broadwater
Development, LLP to President Riverboat Casino-Mississippi,
Inc., Vegas Vegas, Inc. (each a debtor in Case No. 02-53005-172
pending in the United States Bankruptcy Court for the Eastern
District of Missouri, and President Broadwater Hotel, LLC. (36)
3.1 Restated Articles of Incorporation of the Company. (26)
3.2 By-Laws of the Company, as amended. (13)
4.1 Indenture dated as of August 26, 1994, by and among the Company,
the Guarantors and United States Trust Company of New York
("U.S. Trust"). (6)
4.1.1 Form of Senior Exchange Note issued pursuant to Indenture. (5)
4.1.2 Warrant Agreement dated as of September 23, 1993, by and between
the Company and U.S. Trust, as Warrant agent. (4)
4.1.3 Warrant Agreement dated as of August 26, 1994, by and between
the Company and U.S. Trust. (6)
4.1.4 Subsidiary Stock Pledge and Collateral Assignment Agreement
dated as of August 26, 1994, by the Company and Subsidiary
Pledgors in favor of U.S. Trust, as collateral agent. (6)
4.2 Rights Agreement, dated as of November 20, 1997, between the
Company and ChaseMellon Shareholder Services, LLC. (16)
4.3 Agreement to Exchange Securities, dated December 3, 1998 by and
among the Company, President Riverboat Casino-Iowa, Inc.
("President Iowa"), President Riverboat Casino-Missouri, Inc.
("President Missouri"), The President Riverboat Casino-
Mississippi, Inc. ("President Mississippi"), Blackhawk, P.R.C.-
Louisiana, Inc., President Riverboat Casino-New York, Inc.
("President New York"), President Casino New Yorker, Inc., PRC
Holdings Corporation, PRC Management, Inc. ("PRC Management"),
PRCX Corporation, President Riverboat Casino-Philadelphia, Inc.

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98
("President Philadelphia"), Vegas, Vegas, Inc., and TCG and each
holder of the Company's 13% Senior Exchange Notes due 2001. (18)
4.3.1 Indenture dated as of December 3, 1998, among The Company,
President Iowa, President Missouri, President Mississippi,
Blackhawk, P.R.C.-Louisiana, Inc., President New York, President
Casino New Yorker, Inc., PRC Holdings Corporation, PRC
Management, PRCX Corporation, President Philadelphia, Vegas,
Vegas, Inc. and TCG and U.S. Trust Company of Texas, N.A. (18)
4.4.2 President Casinos, Inc. Supplemental Indenture with respect to
$25,000,000 12% Notes due September 15, 2001. (24)
4.4.3 President Casinos, Inc. Supplemental Indenture with respect to
$75,000,000 13% Senior Notes due September 15, 2001. (24)
10.1 Amended and Restated Agreement of Limited Partnership of TCG.
(1)
10.2 Agreement between the Company and John E. Connelly. (2)
10.3 Employment Agreement dated November 4, 1992, between the Company
and Mr. Connelly. (2)
10.3.1 Amendment No. 1 to Employment Agreement dated December 15, 1994,
between the Company and Mr. Connelly. (7)
10.3.2 Amended and Restated Employment Agreement, dated June 26, 1998,
by and between the Company and Mr. Connelly. (17)
* 10.4 The Company's 1992 Stock Option Plan, as amended. (5)
* 10.4.1 The Company's 1996 Amended and Restated Stock Option Plan. (11)
* 10.4.2 The Company's 1997 Stock Option Plan. (15)
* 10.4.3 The Company's 1999 Incentive Stock Plan. (21)
10.5 Management Advisory Agreement for TCG. (1)
10.6 Lease Agreement dated August 7, 1986, between the City of St.
Louis and St. Louis River Cruise Lines, Inc. (the "'Belle'
Lease"). (1)
10.6.1 Amended Lease Agreement dated July 16, 1990, amending the
"Belle" Lease. (1)
10.6.2 Second Amendment to Lease Agreement, effective June 19, 1992,
amending the "Belle" Lease. (1)
10.7 Lease Agreement dated December 20, 1983 between the City of St.
Louis and S.S. Admiral Partners (the "'Admiral' Lease"). (1)
10.7.1 Amendment and Assignment of Mooring Lease dated December 12,
1990, amending the "Admiral" Lease. (1)
10.7.2 Second Amendment to Lease Agreement effective June 19, 1992,
amending the "Admiral" Lease. (1)
10.8 Promissory Note (Vessel-Term) dated July 8, 1992, from President
Mississippi to Caterpillar. (3)
10.8.1 Loan Agreement dated July 31, 1992, between President
Mississippi and Caterpillar. (1)
10.8.2 Preferred Fleet Mortgage dated July 8, 1992, between President
Mississippi and Caterpillar. (1)
10.9 Form of Indemnification Agreement for Directors and Officers.
(1)
10.10 Employment Agreement dated March 13, 1995, by and between the
Company and John S. Aylsworth. (7)
10.10.1 Option Agreement dated March 13, 1995, by and between Mr.
Aylsworth and the Company. (9)
10.10.2 Amended and Restated Employment Agreement, dated June 26, 1998
by and between the Company and Mr. Aylsworth. (17)
10.11 Promissory Note dated February 17, 1995, from BH Acquisition
Corp. ("BHAC") to PRC Management. (9)
10.11.1 Surety Agreement dated February 13, 1995, between Mr. Connelly

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99
and PRC Management. (9)
10.11.2 Amended and Restated Promissory Note dated February 15, 1996,
from BHAC to PRC Management. (10)
10.11.3 Promissory Note dated February 15, 1996, from BHAC to PRC
Management. (10)
10.11.4 Amended and Restated Surety Agreement dated February 15, 1996,
between Mr. Connelly and PRC Management. (10)
10.11.5 Collateral Pledge Agreement dated February 15, 1996, between
Connelly Hotel Associates, Inc. and PRC Management. (10)
10.12 Employment Agreement dated November 1, 1995, by and between the
Company and James A. Zweifel. (8)
10.12.1 Amended and Restated Employment Agreement, dated June 26, 1998
by and between the Company and Mr. Zweifel. (17)
10.13 Independent Contractor Consulting Agreement dated May 15, 1996,
by and between the Company and Mr. Wirginis. (10)
10.13.1 Employment Agreement dated May 1, 1996, by and between the
Company and Mr. Wirginis. (10)
10.13.2 Amended and Restated Employment Agreement, dated June 26, 1998
by and between the Company and Mr. Wirginis. (17)
* 10.14 1998 Fiscal Year Management Incentive Plan Participant Form.
(13)
10.15 Promissory Note dated July 22, 1997, by and between President
Broadwater Hotel, L.L.C. (Broadwater LLC) and Lehman Brothers
Holdings Inc. ("Lehman"). (12)
10.15.1 Redemption Agreement dated July 22, 1997, by and among J. Edward
Connelly Associates, Inc. ("JECA") and Broadwater LLC and
Broadwater Hotel, Inc. (12)
10.15.2 Indemnity Agreement dated July 22, 1997, by Broadwater LLC, the
Company and President Mississippi, jointly and severally, in
favor of Lehman. (12)
10.15.3 Indemnity and Guaranty Agreement dated July 22, 1997, by the
Company and President Mississippi in favor of Lehman. (15)
10.15.4 Unconditional Guaranty of Lease Obligations dated July 22, 1997,
by the Company. (12)
10.15.5 Amended and Restated Limited Liability Company Operating
Agreement, dated as of July 22, 1997, by and between JECA and
President Broadwater Hotel, Inc. (12)
10.16 Public Trust Tidelands Lease Agreement dated August 6, 1992, by
and between the Secretary of State, with the approval of the
Governor, for and on behalf of the State of Mississippi, and
BHAC. (19)
10.16.1 Amendment to Public Trust Tidelands Lease Agreement dated
November 10, 1993, by and between the Secretary of State, with
the approval of the Governor, for and on behalf of the State of
Mississippi, and BHAC. (19)
10.16.2 Amendment No. 1 to the Lessee's Assignment of Public Trust
Tidelands Lease dated July 22, 1997, between JECA, successor by
merger to BHAC, and President Broadwater Hotel, LLC. (19)
10.17 Public Trust Tidelands Lease of Fast Lands dated December 31,
1996, by and between the Secretary of State, with approval of
the Governor, for and on behalf of the State of Mississippi, and
BHAC. (19)
10.17.1 Amendment No. 1 to the Lessee's Assignment of Fast Lands Lease
dated July 22, 1997, between JECA, successor by merger to BHAC
and President Broadwater Hotel, Inc. (19)
10.18 Sale and Purchase of Real Estate Agreement dated March 30, 1999,

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100
by and among R. David Sanders, James W. Sanders, Julia Sheila
Sanders and June Sanders Clement and President Casinos, Inc.
(20)
10.18.1 Deer Island Agreement dated March 30, 1999, by and between Eric
Clark and President Casinos, Inc. (20)
10.19 Relocation Funding Agreement entered into January 18, 2000, by
and among the City of St. Louis, Missouri, the Port Authority of
the City of St. Louis, President Missouri and Mercantile Bank
National Association. (22)
10.19.1 Lease and Sublease Agreement entered into January 18, 2000,
among the City of St. Louis, the Port Authority of the City of
St. Louis and President Missouri. (22)
10.19.2 Escrow Agreement made as of January 18, 2000, by and among
Mercantile Bank, President Missouri and U.S. Title Guaranty
Company, Inc. (22)
10.19.3 Escrow Agreement made as of January 18, 2000, by and among the
Port Authority of the City of St. Louis, President Missouri and
U.S. Title Guaranty Company, Inc. (22)
10.20 Agreement, dated as of October 10, 2000, entered into by and
among the Company, PRC Holdings Corporation, PRC Management,
PRCX, Inc., President Philadelphia, P.R.C. Louisiana, Inc.,
Vegas Vegas, Inc., President New York, President Mississippi
Charter Corp., President Missouri, President Mississippi,
Broadwater Hotel, Inc., President Iowa, Blackhawk, President
Casino New Yorker, Inc., TCG, and President Broadwater Hotel,
LLC, and each of the undersigned holders of the US $100.0
million 13% Senior Notes, due September 15, 2001 issued pursuant
to that certain indenture dated as of August 26, 1994 by and
between the Company and United States Trust Company of New York,
as trustee, of which US $75.0 million in principal amount is
outstanding, and holders of the US $25.0 million 12% Notes, due
September 15, 2001 issued pursuant to that certain indenture
dated as of December 3, 1998, by and between the Company and
U.S. Trust Company of Texas, N.A., as trustee. (23)
10.21 Bareboat charter and purchase agreement, dated March, 29, 2001,
by and between President New York and Southern Gaming, LLC. (25)
10.22 Purchase agreement, dated April 30, 2001, by and between
President Missouri and the Bi-State Development Agency of the
Missouri-Illinois Metropolitan District. (25)
10.23 Amended and Restated Promissory Note dated as of May 28, 2003 by
and between President Broadwater Hotel, LLC and Lehman Brothers
Holdings Inc. (27)
10.23.1 Amended and Restated Deed of Trust, Security Agreement and
Fixture Filing made as of the 28th day of May, 2003, by
President Broadwater Hotel, LLC for the benefit of Lehman
Brothers Holdings Inc. (27)
10.23.2 Amended and Restated Security Agreement and Lockbox Agreement
dated as of May 28,2003 by and among President Broadwater Hotel,
LLC, Lehman Brothers Holdings Inc. and Trimont Real Estate
Advisors. (27)
10.23.3 Amended and Restated Security Agreement and Assignment of
Contractual Agreements Affecting Real Estate made as of May 28,
2003, by President Broadwater Hotel, LLC in favor of Lehman
Brothers Holdings Inc. (27)
10.24 Riverboat Casino Sale and Purchase Agreement entered into as of
25th day of September, 2003, by and between President Missouri,

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101
debtor-in-possession in Case No. 02-53404-SEG pending in the
United States Bankruptcy Court for the Eastern District of
Missouri, and STLP, L.L.C. (28)
10.24.1 Eighth Amendment to Riverboat Casino Sale and Purchase Agreement
entered into as of the 2nd day of December, 2003, by and between
President Missouri, debtor-in-possession in Case No. 02-53404-
SEG pending in the United States Bankruptcy Court for the
Eastern District of Missouri, and IOC-City of St. Louis, LLC,
f/k/a STLP, L.L.C. (31)
10.25 Agreement for Sale and Purchase of Real and Personal Property,
Dated June 2, 2003, between President Broadwater Hotel, LLC and
A.D. Julden Enterprises, LLC. (29)
10.25.1 Amendment to Agreement for Sale and Purchase of Real and
Personal Property, dated August 29, 2003, between President
Broadwater Hotel, LLC and A.D. Julden Enterprises, LLC. (29)
10.25.2 Second Amendment to Agreement for Sale and Purchase of Real and
Personal Property, dated October 8, 2003, between President
Broadwater Hotel, LLC and A.D. Julden Enterprises, LLC. (29)
10.25.3 Third Amendment to Agreement for Sale and Purchase of Real and
Personal Property, effective October 23, 2003, by and between
President Broadwater Hotel, LLC and A. D. Juldan Enterprises,
LLC. (30)
10.26 Agreement for Purchase and Sale of President Broadwater Tower
by and between President Broadwater Hotel, LLC and Site Realty
Inc., a subsidiary of Morgan Niko, Inc. (32)
21 Schedule of subsidiaries of the Company.
23.1 Consent of Deloitte & Touche, L.L.P. with respect to the
Company's Registration Statements on Form S-8, as filed on June
8, 1994, January 8, 1998 and October 10, 2001.
31.1 Certification of Chief Executive Officer Pursuant to 18 Rule
131-14(a) under the Securities Exchange Act of 1934, as amended.
31.2 Certification of Chief Financial Officer Pursuant to 18 Rule
131-14(a) under the Securities Exchange Act of 1934, as amended.
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

__________________

(1) Incorporated by reference from the Company's Registration Statement on
Form S-1 (File No. 33-48446) filed on June 5, 1992.
(2) Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 33-63174), filed on May 21, 1993.
(3) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year Ended February 28, 1993 filed on June 1, 1993.
(4) Incorporated by reference from the Company's Registration Statement on
Form S-4 (File No. 33-71332) filed November 5, 1993.
(5) Incorporated by reference from the Company's Registration Statement on
Form S-8 dated June 8, 1994.
(6) Incorporated by reference from the Company's Registration Statement on
Form S-4 (File No. 33-86386) filed November 15, 1994.
(7) Incorporated by reference from the Company's Report on Form 8-K dated
March 16, 1995.

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102
(8) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended November 30, 1995 filed January 12,
1996.
(9) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year Ended February 28, 1995 filed on May 30, 1995.
(10) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year Ended February 29, 1996 filed on May 30, 1996.
(11) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended November 30, 1996 filed January 14,
1997.
(12) Incorporated by reference from the Company's Report on Form 8-K dated
July 24, 1997.
(13) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended August 31, 1997 filed October 10,
1997.
(14) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended November 30, 1997 filed January 14,
1998.
(15) Incorporated by reference from the Company's Definitive Proxy Statement
for the 1997 Annual Meeting of Stockholders.
(16) Incorporated by reference from the Company's Registration Statement on
Form 8-A dated December 5, 1997.
(17) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended August 31, 1998 filed October 15,
1998.
(18) Incorporated by reference from the Company's Report on Form 8-K
dated December 15, 1998.
(19) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year Ended February 28, 1999 filed on May 28, 1999.
(20) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended May 31, 1999 filed July 12, 1999.
(21) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended August 31, 1999 filed October 15,
1999.
(22) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year Ended February 29, 2000 on May 30, 2000.
(23) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended August 31, 2000 filed October 19,
2000.
(24) Incorporated by reference from the Company's Report on Form 8-K dated
November 22, 2000.
(25) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year Ended February 28, 2001 on May 29, 2001.
(26) Incorporated by reference from the Company's Registration Statement on
Form S-8 dated October 10, 2001.
(27) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended May 31, 2003 filed July 14, 2003.
(28) Incorporated by reference from the Company's Report on Form 8-K dated
September 25, 2003.
(29) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended August 31, 2003 filed October 10,
2003.
(30) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended November 30, 2003 filed January 14,
2004.
(31) Incorporated by reference from the Company's Report on Form 8-K dated

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103
December 30, 2003.
(32) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended May 31, 2004 filed July 14, 2004.
(33) Incorporated by reference from the Company's Quarterly Report on Form
10-Q dated August 31, 2004.
(34) Incorporated by reference from the Company's Report on Form 8-K dated
November 15, 2004.
(35) Incorporated by reference from the Company's Report on Form 8-K dated
November 29, 2004.
(36) Incorporated by reference from the Company's Report on Form 8-K dated
January 20, 2005.

* Compensatory plan filed as an exhibit pursuant to Item 14(c) of this
report.

F-58