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UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
      (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal period ended
    December 31,
    2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number
    000-51064
      GREAT WOLF RESORTS,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

51-0510250(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)525 Junction Rd. Suite 6000 South
    Madison, Wisconsin 53717

53717(Zip Code)(Address of principal executive
    offices)   Registrants
    telephone number, including area code
    608
    662-4700
    Securities registered pursuant to Section 12(b) of the
    Act:
    None
  Securities registered pursuant to Section 12(g) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share

NASDAQ Global Market   o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





Great
    Wolf Resorts, Inc.
    Annual Report on
    Form 10-K
    For the Year Ended December 31, 2010
    INDEX
  PageNo.PART IItem 1.

Business


2Item 1A.

Risk Factors


24Item 1B.

Unresolved Staff Comments


43Item 2.

Properties


44Item 3.

Legal Proceedings


45Item 4.

[Removed and Reserved]PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


46Item 6.

Selected Financial Data


48Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


50Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


73Item 8.

Financial Statements and Supplementary Data


75Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


118Item 9A.

Controls and Procedures


118Item 9B.

Other Information


122PART IIIItem 10.

Directors, Executive Officer and Corporate
    Governance


122Item 11.

Executive Compensation


122Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


122Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


122Item 14.

Principal Accountant Fees and Services


122PART IVItem 15.

Exhibits and Financial Statement Schedules


122Signatures


123EX-12.1EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   1




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PART I  ITEM 1.
    BUSINESS  Overview
    and Development
  ® Form 10-K
  ® tm licensing-and-management
          Properties 
    Overview
  on-site
 2




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##### Table of Contents



Same Store 2010 Operating StatisticsTotalType

Locations

Description

Occupancy


ADR


RevPAR


RevPORGeneration I

Wisconsin Dells, WI Sandusky , OH Traverse City, MI Kansas City
    , KS

Approximately 300 or fewer rooms, smaller waterparks and fewer
    and smaller other amenities


52.7
%

$
198.56


$
104.70


$
300.42Generation II

Williamsburg, VA Pocono Mountains, PA Niagara Falls, ONT Mason,
    OH Grapevine, TX Grand Mound, WA Concord, NC

Approximately 400 rooms or more and a wider range of amenities


63.9
%

$
271.86


$
173.76


$
419.92          3




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##### Table of Contents



and/or and/or and/or
  Number of

IndoorOwnership



Number of

Condominium

EntertainmentPercentage

Opened

Guest Suites

Units(1)

Area(2)(Approx. sq. ft)Wisconsin Dells, WI(3)






1997



308



77



102,000Sandusky, OH(3)






2001



271







41,000Traverse City, MI


100
%


2003



280







57,000Kansas City, KS


100
%


2003



281







57,000Sheboygan, WI


100
%


2004



182



64



54,000Williamsburg, VA(4)


100
%


2005



405







87,000Pocono Mountains, PA(4)


100
%


2005



401







101,000Niagara Falls, ONT(5)






2006



406







104,000Mason, OH(4)


100
%


2006



401







105,000Grapevine, TX(4)


100
%


2007



605







110,000Grand Mound, WA(6)


49
%


2008



398







74,000Concord, NC(4)


100
%


2009



402







97,000     (1)
    
    Condominium units are individually owned by third parties and
    are managed by us.(2)
    
    Our indoor entertainment areas generally include our indoor
    waterpark, game arcade, childrens activity room, family
    tech center,
    MagiQuest®

    (an interactive game attraction) and fitness room, as well as
    our spa in the resorts that have such amenities.(3)
    
    These properties are owned by CNL Lifestyle Properties, Inc.
    (CNL), a real estate investment trust focused on leisure and
    lifestyle properties. We currently manage both properties and
    license the Great Wolf Lodge brand to these resorts.(4)
    
    Five of our properties (Great Wolf Lodge resorts in
    Williamsburg, VA; Pocono Mountains, PA; Mason, OH; Grapevine, TX
    and Concord, NC) each had a book value of fixed assets equal to
    ten percent or more of our total assets as of December 31,
    2010 and each had total revenues equal to ten percent or more of
    our total revenues for the year ended December 31, 2010.(5)
    
    An affiliate of Ripley Entertainment, Inc. (Ripley), our
    licensee, owns this resort. We have granted Ripley a license to
    use the Great Wolf Lodge name for this resort through April 2016.(6)
    
    This property is owned by a joint venture. The Confederated
    Tribes of the Chehalis Reservation (Chehalis) owns a 51%
    interest in the joint venture, and we own a 49% interest. We
    manage the property and license the Great Wolf Lodge brand to
    the joint venture under long-term agreements through April 2057,
    subject to earlier termination in certain situations. The joint
    venture leases the land for the resort from the
    United States Department of the Interior, which is trustee
    for Chehalis.  Northwoods Lodge Theme.
 4




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Guest Suites. ® tm tm tm tm pay-per-view pay-per-play
  Indoor Waterparks.
         5




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Amenities.
  
    Themed Restaurants.  Our resorts feature one or
    more full-service, themed restaurants and a themed bar and
    grille that serves alcoholic beverages and sandwiches. Our
    themed restaurants include the Gitchigoomie
    Grilltm,

    with a life-sized sea plane suspended over the dining area;
    Lumber Jacks Cook
    Shantytm;

    the Loose Moose Bar &
    Grilltm;

    and the Camp Critter Bar &
    Grilletm,

    which features a two-story realistic tree with a canopy of
    leaves and canvas-topped booths with hanging lanterns, giving
    guests the impression that they are dining in a Northwoods
    forest campsite. Our Blue Harbor Resort features our On the
    Rocks Bar &
    Grilletm

    and Rusty
    Anchortm

    Buffet.
    Ice Cream Shop and Confectionery.  Each of our
    Great Wolf Lodge resorts has a Bear Claw
    Cafétm

    or Bear Paw Sweets &
    Eatstm

    ice cream shop and confectionery that provides sandwiches,
    coffee, pastries, ice cream, candies, home-made fudge and other
    snacks that families can share together. Our Blue Harbor Resort
    has a Sweetshop Landing confectionery.
    Coffee Shop.  Some of our resorts have a
    separate coffee shop that offers
    Starbucks®

    or Dunkin
    Donuts®

    coffee, as well as other pastry items provided by those brands.
    Snack Bar.  Each of our waterparks has a snack
    bar that offers a variety of sandwiches, pizzas and similar
    foods with ample seating so that our guests do not have to leave
    the warmth and comfort of the waterpark.
    Gift Shop.  Each of our resorts has a Buckhorn
    Exchangetm

    or Precious
    Cargotm

    gift shop that provides distinctive themed gifts, including
    Great Wolf Lodge or Blue Harbor Resort logo merchandise,
    souvenirs, collectibles and stuffed animals. The gift shop also
    offers resort toys, swimwear and personal necessities. Our
    resorts also have a Bear
    Essentialstm

    or Washed
    Ashoretm

    gift shop located in the waterpark.
    Full-Service Spa.  Each of our resorts, with
    the exception of our Sandusky resort, has an
    Elementstm

    Spa and Salon that provides a relaxing
    get-a-way
    with a full complement of massages, facials, manicures,
    pedicures and other spa treatments and a wide selection of
    Aveda®

    products. Each of our spas also includes our
    Scooops®

    Kid Spa. The furnishings for the kid-friendly spa have the look
    of a modern ice cream parlor, with chocolate-colored walls,
    retro swivel stools and a pedicure sofa that looks like an
    oversized ice cream sundae. While enjoying their treatments,
    kids can listen to music with a provided CD player and speakers
    or with their own digital music player.
    Game Arcade.  Our Youkon Jacks Game
    Parlortm

    or Northern Lights
    Arcadetm

    range in size from approximately 3,900 to 7,000 square
    feet, generally feature over 70 games and are divided into
    distinct areas with video and skill games that appeal to
    children of different ages. Tickets won from the skill games may
    be exchanged for a wide selection of merchandise that appeals to
    our younger guests.
    Cub
    Club®.  Our

    Cub Club rooms are professionally staffed childrens
    activity rooms with programmed activities, including arts and
    crafts, games and nature hikes. Our Blue Harbor Resort features
    a
    Crew Clubtm

    activity room with activities that are similar to our Cub Club.
    Animated Clock Tower.  Each of our Great Wolf
    Lodge resorts has a two-story animated Clock Tower located in
    the resorts main atrium lobby. The Clock Tower provides
    daily theatrical entertainment through talking and singing
    trees, animals and Northwoods figures. Our Blue Harbor Resort
    features a 6




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2,000-gallon water fountain featuring a hand-blown glass
    sculpture and a music and light show located in its main atrium
    lobby.  
    Outdoor Water Amenities.  Outdoor water
    amenities complement our indoor waterpark facilities and allow
    our guests to take advantage of favorable weather conditions.
    Our outdoor water amenities include activity pools and a large
    deck or patio area and are generally open from May until
    September, longer if the weather is favorable. Our Wisconsin
    Dells and Grapevine resorts also have outdoor waterslides.
    Fitness Room.  Our fitness rooms contain
    aerobic exercise equipment, weight-lifting machines, and
    numerous televisions for active viewing.
    Meeting Space.  Our resorts offer meeting space
    ranging from approximately 3,000 to over 7,000 square feet
    that are available for guest meetings, including a 99-seat,
    state-of-the-art,
    symposium-style room at our Traverse City and Niagara Falls
    resorts.
    Conference Facility.  Many of our resorts
    feature conference facility space. Our Traverse City, Sheboygan,
    Williamsburg, Mason, Grapevine, Grand Mound and Concord resorts
    feature conference facilities that range in size from
    10,000  40,000 square feet. Each of these
    conference facilities also feature some, if not all, of the
    following additional aspects to their conference facilities:
    Grand Ballroom, flexible meeting spaces, executive boardroom,
    audio visual systems, and multiple pre-function concourses
    including an outdoor patio.
    MagiQuest®.  Nine

    of our resorts feature a MagiQuest attraction. MagiQuest is an
    interactive, live-action, fantasy adventure game that guests can
    play throughout the resort.
    Miniature Golf.  Five of our resorts feature a
    custom-designed, outdoor 18-hole miniature golf course.
    gr8_space®.

    Five of our resorts feature an approximately 1,000 square
    foot interactive family tech center, gr8_space, which features
    multiple computer stations offering Internet access, docking
    stations for digital music players, as well as multiple gaming
    stations. gr8_space also features family events, like rock star
    karaoke and family challenge games. In the evening, gr8_space
    features dedicated teen time and activities for fun on their
    terms.  Business
    and Growth Strategies
    
    Leveraging Our Competitive Advantages and Increasing Domestic
    Geographic Diversification through a Licensing-Based Resort
    Business Model and Joint Venture Resort Investments in Target
    Markets.  We are seeking to grow our business and
    diversify our domestic resort geographic brand footprint in a
    capital-efficient manner primarily through a licensing-based
    business model. This business model is designed to further
    exploit our competitive advantages of being the first-mover in
    the indoor waterpark resort business, our strong brand equity
    and our waterpark resort management expertise by seeking
    opportunities to earn fees through licensing our brand and
    managing new resorts that are constructed and developed
    primarily by third-party owners. We may also seek to make
    minority investments in joint ventures that own most of the
    licensed resorts in order to share in any equity appreciation
    and profits of those resorts. Our proposed transactions to
    license and manage new Great Wolf Lodge resorts near the
    Galleria at Pittsburgh Mills and in Garden Grove, California,
    are examples of transactions under this strategy. We believe
    this business model will allow us to deploy our capital
    resources more efficiently, reduce our overall leverage and
    diversify our operations geographically, since we will not be
    fully responsible for the construction and ownership of the
    licensed resorts, and will generally not be required to incur
    associated mortgage or construction debt. In addition, this
    business model is designed to allow us to more quickly expand
    domestically, reducing our sensitivity to economic conditions
    affecting any single region. 7




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
    Expanding Our Brand Footprint
    Internationally.  We also plan to use our
    licensing-based business model to efficiently expand our
    business internationally. Similar to our arrangement with
    Ripleys in Niagara Falls, Ontario, we seek to enter into
    license
    and/or
    management agreements with reputable companies that have local
    market knowledge in order to increase revenues and expand the
    international footprint of our Great Wolf Lodge brand. We may
    also seek to make strategic minority joint venture investments
    in the licensed resorts in order to share in the profits and
    equity appreciation of the resorts. We believe this model is the
    most efficient strategy for international expansion, since it
    enables us to leverage the local expertise of joint venture
    partners while minimizing our capital investment.
    Selective Sales/Dispositions of Ownership Interests/Recycling
    of Capital.  We will selectively consider
    opportunities to sell partial or whole interests in one or more
    of our owned and operated properties, as we did in our former
    CNL joint venture. In addition, in situations where the market
    value of one of our owned resorts is less than the principal
    amount of the loan secured by that resort, we may address such
    an overleveraged situation by seeking a modification of the
    loan; in situations where we cannot achieve a satisfactory
    modification of such a loan, we may choose to transfer the
    property to the lender in satisfaction of the loan balance. We
    intend to continue to manage
    and/or
    license our Great Wolf Lodge branded resorts, and we will
    consider transactions that allow us to maintain our
    management/licensing agreement at a resort while realizing value
    through our selective sales or other dispositions. In those
    situations where we sell partial or whole ownership interests,
    we expect to recycle capital generated by such transactions for
    investment in future growth opportunities.
    Expanding and Enhancing Existing Resorts.  We
    will seek to continue to focus on growth opportunities at our
    existing resorts by adding revenue-enhancing features that drive
    ancillary vacation spending and meet our target returns,
    including non-water based attractions and food and beverage
    outlets. We also intend to continue to evaluate incremental
    revenue-generating opportunities, such as expanding the number
    of rooms at certain of our resorts.
    Continuing to Innovate.  We intend to leverage
    our in-house expertise, in conjunction with the knowledge and
    experience of our third-party suppliers and designers, to
    develop and implement the latest innovations in family
    entertainment activities and amenities, including waterpark
    attractions. We have received numerous industry awards for our
    guests experiences, our operations, innovative
    development, sales and marketing initiatives and materials, and
    employee retention. We are currently exploring several new
    concepts that, we believe, will allow us to generate additional
    revenue without requiring significant capital investment. Among
    these concepts is an adaptive re-use model, pursuant to which we
    would license the right to use entertainment features currently
    used in Great Wolf resorts to existing, full-service hotels,
    featuring family-oriented activities. While these concepts are
    still in the initial stages of development, we are seeking to
    innovatively extend our brand and to take these concepts to
    market.
    Maximizing Total Resort Revenues.  We will
    continue to employ aggressive yield management techniques and
    sales and marketing efforts designed to maximize occupancy and
    room rates at both our owned and managed resorts. During
    off-peak times (generally in May and September, and during the
    middle of weeks when schools are in session), we will seek to
    maintain higher occupancy by holding special events and
    targeting group sales and conferences. We will also seek to
    maximize other
    on-site
    revenue, such as food and beverage, entertainment and
    merchandise revenue through themed restaurants, ice cream shops,
    snack shops, adult and kids spas, gift shops, game arcades,
    MagiQuest, mini-golf and teen-themed areas. We have also entered
    into a number of co-marketing agreements with strategic partners
    and expect to enter into additional co-marketing agreements in
    the future in order to increase other revenue.
    Minimizing Total Resort Costs.  We will seek to
    reduce operating costs by leveraging our purchasing power with
    respect to operating supplies, food and beverage, insurance and
    employee benefits. By centralizing certain of our services, we
    also seek to reduce our
    per-unit
    costs, increasing our control over those services in order to
    deliver a greater quality of service to our customers. Our
    centralized reservations system is scalable and, together with
    our web-based reservations system, enables us to 8




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efficiently handle high reservation volumes and which we expect
    to require only limited additional incremental costs over the
    next several years as we increase our portfolio of resorts.  
    Building Upon Our Existing Brand Awareness and
    Loyalty.  Our Great Wolf Lodge brand is
    recognizable by our customers because of our distinctive and
    easily identifiable theming, from our signature treehouse water
    fort, to our mascots and distinctive logos and merchandise. We
    believe we have fostered strong customer and brand loyalty,
    which is evidenced by our high levels of repeat and referral
    guests. We will continue to focus on ensuring that each of our
    guests associates the Great Wolf Lodge brand with a memorable
    and consistent family vacation experience.
    Expanding Operations of Creative Kingdoms We
    will seek to work with the management of Creative Kingdoms to
    expand that companys operations and capitalize on their
    significant experience in developing experiential, family-based
    entertainment products. We believe that Creative Kingdoms
    current and potential future products have potential uses in
    venues other than our indoor waterpark resorts, and we expect to
    support Creative Kingdoms in their sales and marketing efforts
    as they look to expand the number of locations using their
    MagiQuest and other experiential gaming products.  Our
    Competitive Strengths
    Significant barriers to entry with an established first mover
    advantage.
  Strong brand name awareness.
  Resilient business model. three-hour
 9




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Positioned for economic recovery.
  Extensive customer database through a centralized service
    center drives repeat and referral business.
  per-unit
  Expected growth from select resort expansions and
    openings.
  Strategic transition to a license and management
    model.
  Several development projects under letter of
    intent.
  Significant portfolio of product offerings that increase
    ancillary
    on-site
    revenues. on-site
 10




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tm
  International growth opportunities. and/or
  Continual innovation.
  Strong management team with skilled resort level
    staff.
  Focus on Safety. state-of-the-art best-in-class
  Property
    Descriptions
  and/or
  Great
    Wolf Lodge  Wisconsin Dells, Wisconsin
   11




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one-hour two-hour three-hour five-hour
  six-acre
  Great
    Wolf Lodge  Sandusky, Ohio
    one-hour two-hour three-hour
    Great
    Wolf Lodge  Traverse City, Michigan
  two-hour three-hour four-hour
  10,000 square-feet.
 12




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Great
    Wolf Lodge  Kansas City, Kansas
  one-hour three-hour four-hour
    Blue
    Harbor Resort  Sheboygan, Wisconsin
  12-acre one-hour two-hour three-hour four-hour
      Great
    Wolf Lodge  Williamsburg, Virginia
  83-acre one-hour three-hour five-hour
 13




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10,000 square-feet.
  Great
    Wolf Lodge  Pocono Mountains, Pennsylvania
  95-acre one-hour two-hour five-hour
    Great
    Wolf Lodge  Niagara Falls, Ontario
     14




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Great
    Wolf Lodge  Mason, Ohio
  39-acre one-hour two-hour
  state-of-the-art
  Great
    Wolf Lodge  Grapevine, Texas
  51-acre one-hour 60-mile three-hour
    Great
    Wolf Lodge  Grand Mound, Washington
  39-acre one-hour three-hour four-hour
 15




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##### Table of Contents



five-hour
    Great
    Wolf Lodge  Concord, North Carolina
  37-acre one-hour two-hour
    Our
    History
      Industry
    Overview
   16




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Resort
    Operations
        Training
    and Development
   17




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Sales and
    Marketing
        Maintenance
    and Inspections
  On-site build-up,
    Development
    Criteria
    
    Large target customer base.  We select or
    suggest development sites that generally have a minimum of five
    million target customers within a convenient driving distance.
    Because we offer an affordable vacation experience, we appeal to
    families in a variety of income ranges.
    Recognized tourist destination.  We generally
    focus on drive-to destinations that attract a large number of
    tourists, including both emerging and traditional family
    vacation markets. We believe we can charge premium rates in
    these markets due to the high quality of our resorts and our
    family-oriented amenities and activities. In addition, the
    indoor nature of many of our amenities and activities allows us
    to reduce the impact of seasonality that may negatively affect
    other attractions in these areas. These areas also often have
    active and effective local visitors and convention bureaus that
    complement our marketing and advertising efforts at little or no
    cost to us. 18




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
    Highly visible and large sites.  We generally
    develop or suggest developing resorts in highly visible
    locations along major roadways. Visibility from highways
    enhances easy drive-to access, provides marketing benefits due
    to high volumes of traffic and often produces synergies from
    adjacent land uses or complementary developments. We generally
    choose or suggest sites that have enough acreage to allow for
    potential expansions and future sales of out-lots.      Competition
      and/or
   19




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Governmental
    Regulation
        time-to-time,
   20




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Environmental
    Matters
          and/or
 21




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clean-up clean-up, clean-up
    Insurance
      Intellectual
    Property
      Employees
   22




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Offices
    
    Approximately 18,000 square feet of office space for our
    corporate headquarters office in Madison, Wisconsin;
    Approximately 9,800 square feet of office space for our
    central reservations call center operations in Madison,
    Wisconsin;
    Approximately 1,400 square feet of office space in
    Woodbridge, Virginia;
    Approximately 2,700 square feet of office space in Lorain,
    Ohio;
    Approximately 2,700 square feet of retail space in
    Bloomington, Minnesota;
    Approximately 20,000 square feet of office and warehouse
    space in Tillamook, Oregon; and
    Approximately 19,000 square feet of retail space in Myrtle
    Beach, South Carolina.    Domestic
    and Foreign Operations
    Code
    of Business Conduct and Ethics
  www.greatwolf.com.
  Available
    Information
  www.greatwolf.com. Form 10-K, Form 10-Q, Form 8-K www.sec.gov.
  Legal
    Proceedings
   23




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##### Table of Contents



ITEM 1A.
    RISK
    FACTORS  Risks
    Related to Our Business Activities
    Current
    economic conditions, including recent disruptions in the
    financial markets, may adversely affect our industry, business
    and results of operations, our ability to obtain financing on
    acceptable terms and the market price of our common
    stock.
      
    severe turbulence in the banking and lending sectors, which has
    led to a general lessening of the availability of credit to
    consumers;
    relatively high unemployment rates and limited job creation;
    a continuing decline in the national average of home prices and
    an increase in national foreclosure rates; and
    high volatility in the stock market that led to substantial
    declines in stock values and aggregate household savings from
    2007 to 2010.     24




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We may
    not be able, by ourselves or with others, to develop new resorts
    or further develop existing resorts on a timely or cost
    efficient basis, which would adversely affect our growth
    strategy.
    
    development costs may exceed budgeted or contracted amounts or
    may exceed available capital;
    increases in the costs of materials or supplies used in
    construction of our resorts;
    changes in applicable building codes, construction materials,
    labor costs or construction methodologies may increase
    development costs;
    delays in architectural or other design-related services, or in
    the commencement or completion of construction;
    failure to obtain all necessary zoning, land use, occupancy,
    construction, operating and other required governmental permits
    and authorizations;
    changes in real estate, zoning, land use, environmental and tax
    laws;
    unavailability to us and other investors
    and/or
    developers of financing on favorable or any terms;
    failure of developed properties to achieve desired revenue or
    profitability levels once opened;
    negative changes in the local markets, the local competitive
    environment or in local economic conditions that occur between
    the commencement of development and the completion of the resort;
    scarcity of suitable development sites, due to existing
    development, physical limitation or competition for sites from
    competitors that may have greater financial resources or risk
    tolerance than we do or other factors; and
    incurrence of substantial costs in the event a development
    project is abandoned or modified prior to completion.    We
    compete with other family vacation travel destinations and
    resorts.
   25




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
    location,
    room rates,
    name recognition,
    reputation,
    the uniqueness and perceived quality of the attractions and
    amenities,
    the atmosphere and cleanliness of the attractions and amenities,
    the quality and perceived value of the lodging accommodations,
    the quality and perceived value of the food and beverage service,
    convenience,
    service levels and
    reservation systems.    We
    have a history of losses and we may not be able to achieve or
    sustain profitability.
    We may
    not be able to achieve or manage our expected growth, which
    could adversely affect our operating results.
  and/or
 26




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We
    currently have one resort located outside of the United States,
    and international expansion may cause the proportion of our
    international business to expand. Many factors affecting
    business activities outside the United States could adversely
    impact this business.
  and/or
    
    instability or changes in social, political
    and/or
    economic conditions that could disrupt the trade activity in the
    countries where our resorts are located;
    the imposition of additional duties, taxes and other charges on
    imports and exports;
    changes in foreign laws and regulations;
    any inability to enforce contracts or intellectual property
    protections under the laws of the relevant jurisdiction;
    the availability of qualified labor and other resources in the
    relevant region;
    potential and actual international terrorism and hostilities;
    the adoption or expansion of trade sanctions or other similar
    restrictions;
    tax laws and other regulations that may impede our ability to
    receive revenues from international resorts;
    recessions in foreign economies or changes in local economic
    conditions; and
    changes in currency valuations in specific countries or markets.    Accidents
    or injuries at our resorts, particularly in our waterparks, may
    subject us to liability, and accidents or injuries at our
    resorts or at competing resorts with waterparks could adversely
    affect our safety reputation and ability to attract customers,
    which would harm our business, financial condition and results
    of operations.
     27




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##### Table of Contents



Our
    business is seasonal and largely dependent upon family vacation
    patterns, which may cause fluctuations in our
    revenues.
    We may
    not be able to attract a significant number of customers from
    our key target markets, which would adversely affect our
    business, financial condition and results of
    operations.
    Because
    we concentrate in a single industry segment, we may be adversely
    affected by a downturn in that industry segment.
    Adverse
    changes in consumer spending habits may affect our growth,
    financial condition and results of operations.
   28




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Increases
    in operating costs and other expense items could reduce our
    operating margins and adversely affect our growth, financial
    condition and results of operations.
            Uninsured
    losses or losses in excess of our insurance coverage could
    adversely affect our financial condition and our cash flow, and
    there are a limited number of insurers that will underwrite
    coverage for resorts with indoor waterparks.
   29




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##### Table of Contents



We or
    the principal owners of our licensed and managed resorts will be
    required to make certain capital expenditures to maintain the
    quality of our resorts, and the failure to make such
    expenditures could materially and adversely affect our brand
    equity as well as our business, our financial condition and
    results of operations.
    We may
    not be able to adequately protect our intellectual property,
    which could harm the value of our brands and adversely affect
    our business.
         30




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Our
    operations may be adversely affected by extreme weather
    conditions and the impact of disasters.
    A
    significant decline in real estate values may have an adverse
    impact on our financial condition.
    If we
    fail to maintain effective internal control over financial
    reporting or remediate any future material weakness in our
    internal control over financial reporting, we may be unable to
    accurately report our financial results or prevent fraud, which
    could have a material adverse effect on our financial
    results.
      Sustained
    increases in costs of medical and other employee health and
    welfare benefits may reduce our profitability.
    A
    failure to maintain good relationships with third-party property
    owners and licensees could have a material, adverse effect on
    our growth strategies and our business, financial condition and
    results of operations.
  and/or
 31




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We are
    dependent on the owners of the resorts we manage and license for
    third-party owners to fund certain operational expenditures
    related to those resorts, and if such funds are untimely or not
    paid, we are required to bear the cost.
    Investing
    through partnerships or joint ventures may decrease our ability
    to manage risk. Additionally, our license fee and management fee
    revenue streams, as well as any joint venture equity
    investments, are subject to property-level indebtedness and
    other risks.
     32




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Because
    the land used by two of our resorts are subject to ground
    leases, termination of these leases by the lessors could cause
    us to lose the ability to operate these resorts altogether and
    incur substantial costs in restoring the premises.
      We are
    subject to the risks of brand concentration.
    A
    failure to keep pace with developments in technology could
    impair our operations or competitive position.
  and/or
  An
    increase in the use of third-party Internet reservation services
    could adversely impact our revenues.
  ® ® ®
 33




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##### Table of Contents



The
    illiquidity of real estate may make it difficult for us to
    dispose of one or more of our resorts.
    We
    depend on a seasonal workforce.
    A
    regional, national or global outbreak of influenza or other
    disease, such as the recent international outbreak of influenza
    A (H1N1), could adversely affect our business and results of
    operations.
    Our
    future financial results could be adversely impacted by asset
    impairments or other charges.
       34




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Risks
    Related to Regulation
  Compliance
    with the Americans with Disabilities Act and other governmental
    regulations and changes in governmental rules and regulations
    may adversely affect our financial condition and results of
    operations.
      We
    face possible liability for environmental cleanup costs and
    damages for contamination related to our properties, which could
    adversely affect our business, financial condition and results
    of operations.
  out-of-compliance out-of-compliance
   35




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##### Table of Contents



and/or clean-up clean-up, clean-up
    Regulation
    of the marketing and sale of condominiums could adversely affect
    our business.
   36




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Failure
    to maintain the integrity of internal or customer data could
    result in faulty business decisions, damage of reputation and/or
    subject us to costs, fines or lawsuits.
    Changes
    in privacy law could adversely affect our ability to market our
    products effectively.
    Risks
    Related to Our Capital Structure
  We may
    issue partnership units in the future that may be dilutive to,
    and may have preferential rights over, our common
    stockholders.
    Our
    stock price has been volatile in the past and may be volatile in
    the future.
   37




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##### Table of Contents




    variations in our quarterly operating results;
    changes in market valuations of companies in the hospitality or
    entertainment industries, generally, and the family
    entertainment resort segment, specifically;
    fluctuations in stock market prices and volumes;
    additions or dispositions to our portfolio of owned, managed
    and/or
    license properties;
    issuances of common stock or other securities in the future;
    the addition or departure of key personnel;
    announcements by us or our competitors of new properties,
    acquisitions or joint ventures, or our failure to announce new
    properties, acquisitions or joint ventures of a type or in a
    quantity deemed desirable by participants in the public
    market; and
    expectations about macroeconomic condition.    Provisions
    in our certificate of incorporation, bylaws, employment
    agreements and Delaware law have anti-takeover effects that
    could prevent a change in control that could be beneficial to
    our stockholders, which could depress the market price of our
    common stock.
    
    authorize our board of directors to issue blank
    check preferred stock and determine the powers,
    preferences and privileges of those shares without prior
    stockholder approval;
    prohibit the ability of our stockholders to act by written
    consent;
    limit the calling of special meetings of stockholders;
    impose a requirement that holders of 50% of the outstanding
    shares of common stock are required to amend the provisions
    relating to actions by written consent of stockholders and the
    limitations of calling special meetings; and
    provide for payments to certain of our executive officers upon
    termination of employment within certain time periods before or
    after a change of control.  Our
    organizational documents contain no limitations on the amount of
    debt we may incur, so we may become too highly
    leveraged.
   38




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We and
    the owners and developers of our licensed and managed resorts
    may not be able to obtain additional financing on favorable
    terms, if at all.
    
    general capital market conditions;
    capital providers perception of our growth potential and
    growth potential in the real estate sector in general;
    our then-current debt levels;
    our then-current and expected future earnings;
    our cash flow; and
    the market price per share of our common stock.      The
    covenants under the indenture governing our first mortgage notes
    and our mortgage loan agreements include restrictive covenants
    that may limit our operating and financial
    flexibility.
    
    incur additional indebtedness;
    make any restricted payments, such as dividends or distributions
    on, or redeem or repurchase, capital stock;
    prepay, redeem or repurchase specified indebtedness;
    merge, consolidate or sell assets or enter into other business
    combination transactions;
    make acquisitions, capital expenditure investments or other
    investments;
    enter into transactions with affiliates;
    incur certain liens;
    use proceeds from sale of assets;
    permit limitations on the ability of our subsidiaries to make
    payments to us and our restricted subsidiaries;
    impair the collateral; and 39




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
    change our business.  and/or
  
    the distribution of cash or the payment of dividends by our
    subsidiaries to us;
    incurring or guaranteeing additional indebtedness;
    transferring or selling assets currently held by us;
    transferring ownership interests in certain of our
    subsidiaries; and
    reducing our tangible net worth below specified levels.           40




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Issues
    affecting financial institutions could adversely affect
    financial markets generally as well as our ability to raise
    capital or access liquidity.
    Because
    we have guaranteed certain mortgage-related obligations of our
    subsidiaries, if one or more of our subsidiaries fail to meet
    its obligations under the mortgage, we may be required to
    satisfy such obligations and such an undertaking could have an
    adverse affect on our financial condition.
  25-year
    We may
    be unable to generate sufficient cash, and may not have access
    to the cash flow and other assets of our subsidiaries to service
    all of our indebtedness, including our first mortgage notes, and
    we may be forced to take other actions to satisfy its
    obligations under such indebtedness, which actions may not be
    successful.
   41




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
    the mortgage loans secured by our Kansas City, Traverse City and
    Poconos resorts require us to meet certain debt service
    covenants in order to make distributions, which in the case of
    the Kansas City/Traverse City loan we do not currently meet.
    because of that non-compliance, on September 13, 2010 the
    lenders of our Kansas City/Traverse City loan have elected to
    exercise their right to implement a lock-box cash management
    arrangement, which requires substantially all cash receipts for
    the two resorts to be moved each day to a reserve bank account
    and all excess cash to be deposited in a lender-controlled
    account. As a result our ability to distribute cash from the
    resorts to us will be significantly limited for the period
    during which the lock-box arrangement is in effect.
    the Concord loan documents require a partial payment of that
    loan in certain instances, all of which may reduce the amount of
    funds available to pay the notes.  Because
    we have guaranteed certain minimum payments related to our
    Sheboygan resort, if that resort does not generate sufficient
    cash flow to satisfy the minimum required payments, we may be
    required to satisfy such obligations and such an undertaking
    could have an adverse effect on our financial
    condition.
    1 2
  14-year 1 2
 42




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Forward-Looking
    Statements
  Form 10-K,
    Form 10-K
  ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS   43




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ITEM 2.
    PROPERTIES    
    resort ownership/operation, and
    resort third-party management/licensing.    
    Great Wolf Lodge of Traverse City is located on 48 acres in
    Traverse City, Michigan, of which 27 acres have been
    developed and 21 acres remain undeveloped.
    Great Wolf Lodge of Kansas City is located on 17 acres in
    Kansas City, Kansas, all of which have been developed.
    Blue Harbor Resort of Sheboygan is located on 12 leased acres in
    Sheboygan, Wisconsin, all of which have been developed.
    Great Wolf Lodge of Williamsburg is located on 84 acres in
    Williamsburg, Virginia, of which 48 acres have been
    developed (2 of which are leased to another entity) and
    36 acres remain undeveloped.
    Great Wolf Lodge of the Pocono Mountains is located on
    95 acres in Pocono Township, near Stroudsburg,
    Pennsylvania, of which 45 acres are developed and
    50 acres remain undeveloped.
    Great Wolf Lodge of Mason is located on 39 acres in Mason,
    Ohio. All 39 acres of this property are developed.
    Great Wolf Lodge of Grapevine is located on 51 acres in
    Grapevine, Texas, of which 30 acres are developed and
    21 acres remain undeveloped.
    Great Wolf Lodge of Concord is located on 37 acres in
    Concord, North Carolina, of which 34 acres are developed
    and 3 acres may be subdivided and developed separately.    
    Great Wolf Lodge of Grand Mound is located on 39 leased acres in
    Grand Mound, Washington, of which 22 acres are developed
    and 17 acres remain undeveloped. This property is owned by
    a joint venture of which we have a 49% minority interest and The
    Confederated Tribes of the Chehalis Reservation has a 51%
    majority interest.      
    Approximately 18,000 square feet of office space for our
    corporate headquarters office in Madison, Wisconsin;
    Approximately 9,800 square feet of office space for our
    central reservations call center operations in Madison,
    Wisconsin;
    Approximately 1,400 square feet of office space in
    Woodbridge, Virginia;
    Approximately 2,700 square feet of office space in Lorain,
    Ohio;
    Approximately 2,700 square feet of retail space in
    Bloomington, Minnesota; 44




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##### Table of Contents




    Approximately 20,000 square feet of office and warehouse
    space in Tillamook, Oregon; and
    Approximately 19,000 square feet of retail space in Myrtle
    Beach, South Carolina.    ITEM 3.
    LEGAL
    PROCEEDINGS   45




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Stock PriceHigh


LowFiscal 2009:First Quarter

$
3.05


$
1.26Second Quarter

$
3.80


$
1.93Third Quarter

$
3.95


$
2.04Fourth Quarter

$
3.88


$
2.27Fiscal 2010:First Quarter

$
3.75


$
2.09Second Quarter

$
3.37


$
2.01Third Quarter

$
2.34


$
1.78Fourth Quarter

$
2.79


$
1.90Fiscal 2011:First Quarter through February 24, 2011

$
3.35


$
2.51   Dividend
    Policy
   46




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Performance
    Graph
      
 47




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K.
    
    our subsidiary that provides resort development and
    management/licensing services;
    our wholly-owned resorts;
    beginning in June 2010, our CK subsidiary which is a developer
    of experiential gaming products, less our noncontrolling
    interest; and
    our equity interests in the Wisconsin Dells and Sandusky resorts
    through August 2009, when we sold our minority ownership
    interests in those resorts, and our equity interest in the Grand
    Mound resort in which we have a minority ownership interest but
    which we do not consolidate.  Year Ended


Year Ended


Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,


December 31,


December 31,2010


2009


2008


2007


2006(Dollars in thousands, except per share amounts)Statement of Operations and Comprehensive Loss:Revenues:Rooms

$
163,708


$
154,751


$
143,395


$
112,261


$
87,775Food, beverage and other


91,186



81,020



74,173



56,673



43,137Management and other fees


2,646



1,990



2,798



2,855



2,087Management and other fees-affiliates


4,594



4,973



5,346



4,314



3,729Other revenue from managed properties  affiliates(1)


10,989



17,132



19,826



11,477



11,920Other revenue from managed properties(1)


11,083



4,166











Total revenues


284,206



264,032



245,538



187,580



148,648Operating expenses by department:Rooms


24,218



22,449



20,134



15,716



11,914Food, beverage and other


69,817



65,341



59,949



48,300



35,923Other operating expenses:Selling, general and administrative


67,471



60,986



51,902



47,915



41,421Property operating costs


34,663



37,788



37,086



30,555



23,217Depreciation and amortization


58,467



56,378



46,081



36,372



25,903Impairment loss on investment in affiliates










18,777







Goodwill impairment










17,430







50,975Asset impairment loss


18,741



24,000











Loss on disposition of property


18



255



19



128



1,066Other expenses from managed properties  affiliates(1)


10,989



17,132



19,826



11,477



11,920Other expenses from managed properties(1)


11,083



4,166











Total operating expenses


295,467



288,495



271,204



190,463



202,339Net operating loss


(11,261
)


(24,463
)


(25,666
)


(2,883
)


(53,691
)Gain on sales of unconsolidated affiliate






(962
)










Investment income  affiliates


(1,088
)


(1,330
)


(2,187
)


(667
)


Interest income


(549
)


(642
)


(1,424
)


(2,758
)


(3,105
)Interest expense


46,270



34,072



27,277



14,887



7,169Loss before income taxes and equity in unconsolidated affiliates


(55,894
)


(55,601
)


(49,332
)


(14,345
)


(57,755
)Income tax expense (benefit)


(5,452
)


440



(11,956
)


(5,859
)


(8,764
)Equity in unconsolidated affiliates, net of tax


576



2,435



3,349



1,547



761Net loss


(51,018
)


(58,476
)


(40,725
)


(10,033
)


(49,752
)Net loss attributable to non controlling interest


(9
)










(452
)


(502
)Net loss attributable to Great Wolf Resorts, Inc.

$
(51,009
)

$
(58,476
)

$
(40,725
)

$
(9,581
)

$
(49,250
)Basic loss per common share

$
(1.65
)

$
(1.90
)

$
(1.32
)

$
(0.31
)

$
(1.63
)Diluted loss per common share

$
(1.65
)

$
(1.90
)

$
(1.32
)

$
(0.31
)

$
(1.63
)Weighted average common shares outstanding  Basic(2)


30,987,818



30,749,318



30,827,860



30,533,249



30,299,647 48




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##### Table of Contents



Year Ended


Year Ended


Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,


December 31,


December 31,2010


2009


2008


2007


2006(Dollars in thousands, except per share amounts)Diluted(2)


30,987,818



30,749,318



30,827,860



30,533,249



30,299,647Other comprehensive loss, net of tax:Net loss

$
(51,018
)

$
(58,476
)

$
(40,725
)

$
(10,033
)

$
(49,752
)Unrealized (gain) loss on interest rate swaps










(387
)


387



Comprehensive loss

$
(51,018
)

$
(58,476
)

$
(40,338
)

$
(10,420
)

$
(49,752
)Comprehensive loss attributable to noncontrolling interest














(452
)


(502
)Comprehensive loss attributable to Great Wolf Resorts, Inc.

$
(51,018
)

$
(58,476
)

$
(40,338
)

$
(9,968
)

$
(49,250
)Cash Flows:Cash flows from:Operating activities

$
29,112


$
12,215


$
33,534


$
29,751


$
29,723Investing activities


(4,478
)


(36,659
)


(144,612
)


(206,967
)


(107,123
)Financing activities


(8,559
)


31,126



106,712



99,035



119,396Balance Sheet Data (end of period):Total assets

$
771,238


$
805,744


$
840,061


$
770,805


$
683,439Total debt


552,298



550,071



507,051



396,302



289,389Non-GAAP financial Measures:EBITDA(3)

$
47,666


$
31,791


$
18,181


$
32,305


$
(28,221
)     (1)
    
    Reflects reimbursement of payroll, benefits and costs related to
    the operations of properties managed by us.(2)
    
    Included in the total shares outstanding of our common stock are
    11,765 shares (in
    2008-2010)
    and 129,412 shares (in
    2006-2007)
    held in a trust that holds the assets to pay obligations under
    our deferred compensation plan. Under applicable accounting
    rules, the shares of common stock held in that trust are treated
    as treasury stock for purposes of our earnings per share
    computations and are therefore excluded from the basic and
    diluted earnings per share calculations.(3)
    
    EBITDA is a non-GAAP performance measure. We define EBITDA as
    net income (loss) attributable to Great Wolf Resorts, Inc. on a
    consolidated basis, adjusted to exclude the following items:  
    interest expense, net of interest income,
    income tax expense or benefit, and
    depreciation and amortization.     49




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##### Table of Contents



Year Ended December 31,2010


2009


2008


2007


2006Net loss attributable to Great Wolf Resorts, Inc.

$
(51,009
)

$
(58,476
)

$
(40,725
)

$
(9,581
)

$
(49,250
)Interest expense, net of interest income


45,721



33,430



25,853



12,129



4,064Income tax (benefit) expense


(5,513
)


459



(13,028
)


(6,615
)


(8,938
)Depreciation and amortization


58,467



56,378



46,081



36,372



25,903EBITDA

$
47,666


$
31,791


$
18,181


$
32,305


$
(28,221
)   ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  This Managements Discussion and Analysis of
    Financial Condition and Results of Operations of Great
    Wolf Resorts Inc. is a discussion of our financial condition,
    results of operations and liquidity and capital resources for
    the fiscal years ended December 31, 2010, 2009 and 2008 and
    should be read in conjunction with the consolidated financial
    statements and the related notes that appear elsewhere herein.
    Certain statements we make under this section constitute
    forward-looking statements under the Private
    Securities Litigation Reform Act of 1995. See
    Forward-Looking Statements included elsewhere in
    this report. You should consider our forward-looking statements
    in light of the risks discussed under the heading Risk
    Factors above as well as our consolidated financial
    statements, related notes, and other financial information
    appearing elsewhere in this report.
  All dollar amounts in this discussion, except for per share
    data and operating statistics, are in thousands.
  Overview
    Business. ® tm licensing-and-management
   50




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and/or and/or
 51




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and/or
  IndoorNumber of

Number of

EntertainmentOwnership Percentage

Opened

Guest Suites

Condominium Units(1)

Area(2)(Approx. sq. ft.)Wisconsin Dells, WI(3)






1997



308



77



102,000Sandusky, OH(3)






2001



271







41,000Traverse City, MI


100
%


2003



280







57,000Kansas City, KS


100
%


2003



281







57,000Sheboygan, WI


100
%


2004



182



64



54,000Williamsburg, VA(4)


100
%


2005



405







87,000Pocono Mountains, PA(4)


100
%


2005



401







101,000Niagara Falls, ONT(5)






2006



406







104,000Mason, OH(4)


100
%


2006



401







105,000Grapevine, TX(4)


100
%


2007



605







110,000Grand Mound, WA(6)


49
%


2008



398







74,000Concord, NC(4)


100
%


2009



402







97,000     (1)
    
    Condominium units are individually owned by third parties and
    are managed by us.(2)
    
    Our indoor entertainment areas generally include our indoor
    waterpark, game arcade, childrens activity room, family
    tech center,
    MagiQuest®

    (an interactive game attraction) and fitness room, as well as
    our spa in the resorts that have such amenities.(3)
    
    These properties are owned by CNL Lifestyle Properties, Inc.
    (CNL), a real estate investment trust focused on leisure and
    lifestyle properties. We currently manage both properties and
    license the Great Wolf Lodge brand to these resorts.(4)
    
    Five of our properties (Great Wolf Lodge resorts in
    Williamsburg, VA; Pocono Mountains, PA; Mason, OH; Grapevine, TX
    and Concord, NC) each had a book value of fixed assets equal to
    ten percent or more of our total assets as of December 31,
    2010 and each had total revenues equal to ten percent or more of
    our total revenues for the year ended December 31, 2010.(5)
    
    An affiliate of Ripley Entertainment, Inc. (Ripley), our
    licensee, owns this resort. We have granted Ripley a license to
    use the Great Wolf Lodge name for this resort through April 2016.(6)
    
    This property is owned by a joint venture. The Confederated
    Tribes of the Chehalis Reservation (Chehalis) owns a 51%
    interest in the joint venture, and we own a 49% interest. We
    manage the property and license the Great Wolf Lodge brand to
    the joint venture under long-term agreements through April 2057,
    subject to earlier termination in certain situations. The joint
    venture leases the land for the resort from the United States
    Department of the Interior, which is trustee for Chehalis.  Industry Trends.
   52




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Outlook.
  and/or
    
    Leveraging our competitive advantages and increasing domestic
    geographic diversification through a license-based business
    model and joint venture investments in target markets,
    Expanding our brand footprint internationally,
    Selective sales/dispositions of ownership interests/recycling of
    capital,
    Expanding and enhancing existing resorts,
    Continuing to innovate,
    Maximizing total resort revenues,
    Minimizing total resort costs,
    Building upon our existing brand awareness and loyalty, and
    Expanding operations of our majority-owned subsidiary, Creative
    Kingdoms.     53




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
    continued turbulence in the banking and lending sectors, which
    has led to a general lessening of the availability of credit to
    consumers;
    a high national unemployment rate;
    a continuing decline in the national average of home prices and
    an increase in the national home foreclosure rate; and
    high volatility in the stock market that led to substantial
    declines in stock values and aggregate household savings from
    2007 to 2010.      
    We believe that our Traverse City and Sandusky resorts have been
    and will continue to be affected by especially adverse general
    economic circumstances in the Michigan/Northern Ohio region
    (such as bankruptcies of several major companies
    and/or large
    announced layoffs by major employers) and increased competition
    that has occurred in these markets over the past few years. The
    Michigan/Northern Ohio region includes cities that have
    historically been the Traverse City and Sandusky resorts
    largest source of customers. We believe the adverse general
    economic circumstances in the region have negatively impacted
    overall discretionary consumer spending in that region over the
    past few years and may continue to do so going forward. Although
    we have taken steps to reduce our operating costs at these
    resorts, we believe the general regional economic downturn has
    and may continue to have an impact on the operating performance
    of our Traverse City and Sandusky resorts.
    In September 2010, the loan servicer for our loan that is
    secured by our Traverse City and Kansas City resorts implemented
    a lock-box cash management arrangement. At our request, in
    October 2010 the loan was transferred to its special servicer.
    As described under Critical Accounting Policies and
    Estimates  Investments in Property and
    Equipment, we recorded a $18,741 impairment charge in 2010
    relating to our Traverse City and Kansas City resorts.
    Our Wisconsin Dells property has been significantly impacted by
    the abundance of competing indoor waterpark resorts in that
    market. The Wisconsin Dells market has approximately 16 indoor
    waterpark resorts that compete with us. We believe this large
    number of competing properties in a relatively small tourist
    destination location has and will likely continue to have an
    adverse impact on the operating performance of our Wisconsin
    Dells resort.
    We have experienced much lower than expected occupancy and lower
    than expected average daily room rates at our Sheboygan,
    Wisconsin property since its opening in 2004. We believe this
    operating weakness has been primarily attributable to the fact
    that the overall development of Sheboygan as a tourist
    destination continues to lag materially behind our initial
    expectations. We believe this has materially impacted and will
    likely continue to impact the consumer demand for our indoor
    waterpark resort in that market and the operations of the
    resort. As described under Critical Accounting Policies
    and Estimates  Investments in Property and
    Equipment, we recorded a $24,000 impairment charge in 2009
    relating to our Sheboygan resort. In May 2010, we listed the
    resort for sale. 54




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
    developing additional indoor waterpark resorts,
    converting existing indoor waterpark resorts to our brands (in
    conjunction with joint venture partners), or by
    licensing our intellectual property and proprietary management
    systems to others.  and/or and/or
  Revenue and Key Performance Indicators.
  
    Monitoring our historical trends for occupancy and estimating
    our high occupancy nights,
    Offering the highest discounts to previous guests in off-peak
    periods to build customer loyalty and enhance our ability to
    charge higher rates in peak periods,
    Structuring rates to allow us to offer our previous guests the
    best rate while simultaneously working with a promotional
    partner or offering internet specials,
    Monitoring sales of room types daily to evaluate the
    effectiveness of offered discounts, and
    Offering specials on standard suites and yielding better rates
    on larger suites when standard suites sell out.  on-site
    
    Occupancy;
    Average daily room rate, or ADR;
    Revenue per available room, or RevPAR;
    Total revenue per occupied room, or Total RevPOR;
    Total revenue per available room, or Total RevPAR;
    Non-rooms revenue per occupied room; and
    Earnings before interest, taxes, depreciation and amortization,
    or EBITDA. 55




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##### Table of Contents




    Occupancy is calculated by dividing total occupied rooms by
    total available rooms.
    ADR is calculated by dividing total rooms revenue by total
    occupied rooms.
    RevPAR is the product of occupancy and ADR.    
    Total RevPOR is calculated by dividing total revenue by total
    occupied rooms.
    Total RevPAR is calculated by dividing total revenue by total
    available rooms.
    Non-rooms revenue per occupied room is calculated by taking the
    difference between Total RevPOR and ADR.        Critical
    Accounting Policies and Estimates
    Acquisition Accounting 
 56




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Investments in Property and Equipment.
    Buildings and improvements


20-40 yearsFixtures and equipment, including waterpark equipment


3-15 years          57




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##### Table of Contents



Intangible Assets 
  Investments in Affiliates 
      Accounting for Income Taxes.
   58




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##### Table of Contents



New
    Accounting Pronouncements
           59




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##### Table of Contents



Non-GAAP Financial
    Measures
        
    a significant portion of our assets consists of property and
    equipment that are depreciated over their remaining useful lives
    in accordance with GAAP. Because depreciation and amortization
    are non-cash items, we believe that presentation of EBITDA is a
    useful measure of our operating performance;
    it is widely used in the hospitality and entertainment
    industries to measure operating performance without regard to
    items such as depreciation and amortization; and
    we believe it helps investors meaningfully evaluate and compare
    the results of our operations from period to period by removing
    the impact of items directly resulting from our asset base,
    primarily depreciation and amortization, from our operating
    results.    
    as a measurement of operating performance because it assists us
    in comparing our operating performance on a consistent basis as
    it removes the impact of items directly resulting from our asset
    base, primarily depreciation and amortization, from our
    operating results;
    for planning purposes, including the preparation of our annual
    operating budget;
    as a valuation measure for evaluating our operating performance
    and our capacity to incur and service debt, fund capital
    expenditures and expand our business; and
    as one measure in determining the value of other acquisitions
    and dispositions.    
    it does not reflect every cash expenditure, future requirements
    for capital expenditures or contractual commitment;
    it does not reflect the significant interest expense or the cash
    requirements necessary to service interest or principal payments
    on our debt; 60




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
    although depreciation and amortization are non-cash charges, the
    assets being depreciated and amortized will often have to be
    replaced or require improvements in the future, and our
    EBITDA-based measures do not reflect any cash requirements for
    such replacements or improvements;
    it is not adjusted for all non-cash income or expense items that
    are reflected in our statements of cash flows;
    it does not reflect limitations on our costs related to
    transferring earnings from our subsidiaries to us; and
    other companies in our industry may calculate these measures
    differently than we do, limiting their usefulness as competitive
    measures.        Year Ended December 31,2010


2009


2008Net loss attributable to Great Wolf Resorts, Inc.

$
(51,009
)

$
(58,476
)

$
(40,725
)Interest expense, net of interest income


45,721



33,430



25,853Income tax (benefit) expense


(5,513
)


459



(13,028
)Depreciation and amortization


58,467



56,378



46,081EBITDA

$
47,666


$
31,791


$
18,181   Results
    of Operations
  General
    
    our subsidiary entity that provides resort development and
    management/licensing services;
    our wholly-owned resorts;
    beginning in June 2010, our CK subsidiary which is a developer
    of experiential gaming products, less our noncontrolling
    interest; and
    our equity interests in the Wisconsin Dells and Sandusky resorts
    through August 2009, when we sold our minority ownership
    interests in those resorts, and our equity interest in Grand
    Mound resort in which we have a minority ownership interest but
    which we do not consolidate. 61




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Revenues.
  
    lodging revenue, which includes rooms, food and beverage, and
    other department revenues from our resorts;
    revenue from our CK subsidiary, which includes product sales,
    admission fees and retail revenues;
    management fee and other revenue from resorts, which includes
    fees received under our management, license, development and
    construction management agreements; and
    other revenue from managed properties. We employ the staff at
    our managed properties. Under our management agreements, the
    resort owners reimburse us for payroll, benefits and certain
    other costs related to the operations of the managed properties.
    We include the reimbursement of payroll, benefits and costs is
    recorded as revenue on our statements of operations, with a
    corresponding expense recorded as other expenses from
    managed properties.  Operating Expenses.
    
    selling, general and administrative expenses, which are
    associated with the operations and management of resorts and our
    CK subsidiary (beginning in June 2010) and which consist
    primarily of expenses such as corporate payroll and related
    benefits, operations management, sales and marketing, finance,
    legal, information technology support, human resources and other
    support services, as well as general corporate expenses;
    property operation and maintenance expenses, such as utility
    costs and property taxes;
    depreciation and amortization; and
    other expenses from managed properties.  Year
    Ended December 31, 2010 compared with Year Ended
    December 31, 2009
    All Properties(a)

Same Store Comparison(b)Increase2010

2010

2009

$

%Occupancy


59.1
%


59.8
%


59.5
%


N/A



0.5
%ADR

$
249.32


$
249.22


$
241.75


$
7.47



3.1
%RevPAR

$
147.27


$
149.02


$
143.74


$
5.28



3.7
%Total RevPOR

$
384.30


$
384.46


$
373.68


$
10.78



2.9
%Total RevPAR

$
227.00


$
229.89


$
222.18


$
7.71



3.5
%Non-rooms revenue per occupied room

$
134.98


$
135.24


$
131.93


$
3.31



2.5
%     (a)
    
    Includes results for properties that were open for any portion
    of the period, for all owned, managed and/or licensed resorts.  (b)
    
    Same store comparison includes properties that were open for the
    full periods and with comparable number of rooms in 2010 and
    2009.   62




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Increase2010

2009

(Decrease)Revenues

$
284,206


$
264,032


$
20,174Operating expenses:Departmental operating expenses


94,035



87,790



6,245Selling, general and administrative


67,471



60,986



6,485Property operating costs


34,663



37,788



(3,125
)Depreciation and amortization


58,467



56,378



2,089Asset impairment loss


18,741



24,000



(5,259
)Net operating loss


(11,261
)


(24,463
)


13,202Gain on sale of unconsolidated affiliate






(962
)


962Interest expense, net of interest income


45,721



33,430



12,291Income tax (benefit) expense


(5,452
)


440



(5,892
)Net loss attributable to Great Wolf Resorts, Inc.


(51,009
)


(58,476
)


7,467   Revenues.
  
    An increase in revenue from our Concord resort, which opened in
    March 2009.
    More stable national economic conditions with corresponding
    strengthening in consumer confidence and discretionary spending,
    which positively affected our business.
    The inclusion of CK as a consolidated subsidiary following our
    acquisition of a 62.4% equity interest in June 2010. We had no
    similar revenues from CK for the year ended December 31,
    2009.  Operating expenses.
  
    Departmental expenses increased by $6,245 for the year ended
    December 31, 2010, as compared to the year ended
    December 31, 2009, due primarily to the opening of our
    Concord resort in March 2009 as well as the acquisition of CK,
    which we completed in June 2010. There were no similar CK
    expenses for the year ended December 31, 2009.
    Total selling, general and administrative expenses increased by
    $6,485 in the year ended December 31, 2010, as compared to
    the year ended December 31, 2009, due primarily to the
    opening of our Concord and the acquisition of CK. These
    increases are partially offset by a settlement received at our
    Poconos resort related to wastewater treatment litigation during
    the year ended December 31, 2010.
    Opening-related costs (included in total property operating
    costs) related to our resort were $5,599 for the year ended
    December 31, 2009, due primarily to the opening of an
    expansion to our Grapevine resort in January 2009 and the
    opening of our Concord resort in March 2009. We had $156 of
    opening-related costs related to the opening of our stand-alone
    Scooops kid spa during the year ended December 31, 2010.
    Total depreciation and amortization increased for the year ended
    December 31, 2010, as compared to the year ended
    December 31, 2009, primarily due to the expansion of our
    Grapevine property in January 2009, the opening of our Concord
    resort in March 2009, the acquisition of CK in June 2010, and
    the expensing of $3,500 of unamortized loan fees related to our
    Williamsburg, Mason and Grapevine loans that were repaid with
    the net proceeds of the first mortgage notes issued in April
    2010. This increase was partially offset by a decrease in
    depreciation on our Sheboygan resort due to the asset impairment
    loss recorded in 2009.
    For the year ended December 31, 2010 we recorded a $18,741
    impairment loss related to our Traverse City and Kansas City
    resorts. We recorded an impairment on our resort in Sheboygan
    for the year ended December 31, 2009 in the amount of
    $24,000. 63




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Net operating loss.
  Net loss attributable to Great Wolf Resorts,
    Inc.
  
    An increase in net interest expense of $12,291, mainly due to
    interest expense on first mortgage notes issued in April
    2010; and
    The gain on sale of unconsolidated affiliates in the amount of
    $962 recorded in the year ended December 31, 2009. We had
    no similar gain in the year ended December 31, 2010.    
    A decrease in net operating loss of $13,202; and
    A decrease in income taxes expense of $5,892 recorded in the
    year ended December 31, 2010 as compared to the year ended
    December 31, 2009.  Year
    Ended December 31, 2009 compared with Year Ended
    December 31, 2008
    All Properties(a)

Same Store Comparison(b)Increase(Decrease)2009

2009

2008

$

%Occupancy


59.0
%


58.9
%


61.9
%


N/A



(4.8
)%ADR

$
242.07


$
235.14


$
243.81


$
(8.67
)


(3.6
)%RevPAR

$
142.79


$
138.59


$
151.02


$
(12.43
)


(8.2
)%Total RevPOR

$
374.21


$
359.79


$
369.61


$
(9.82
)


(2.7
)%Total RevPAR

$
220.74


$
212.07


$
228.95


$
(16.88
)


(7.4
)%Non-rooms revenue per occupied room

$
132.14


$
124.65


$
125.80


$
(1.15
)


(0.9
)%     (a)
    
    Includes results for properties that were open for any portion
    of the period, for all owned, managed and/or licensed resorts.  (b)
    
    Same store comparison includes properties (other than properties
    that had significant expansions) that were open for the full
    periods in 2009 and 2008 (that is, our Wisconsin Dells,
    Sandusky, Traverse City, Kansas City, Sheboygan, Williamsburg,
    Pocono Mountains, Niagara Falls, and Mason resorts).   64




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Increase2009

2008

(Decrease)Revenues

$
264,032


$
245,538


$
18,494Operating expenses:Departmental operating expenses


87,790



80,083



7,707Selling, general and administrative


60,986



51,902



9,084Depreciation and amortization


56,378



46,081



10,297Impairment loss on investment in affiliates






18,777



(18,777
)Goodwill impairment






17,430



(17,430
)Asset impairment loss


24,000







24,000Net operating loss


(24,463
)


(25,666
)


1,203Gain on sale of unconsolidated affiliate


(962
)






(962
)Interest expense, net of interest income


33,430



25,853



7,577Income tax expense (benefit)


440



(11,956
)


12,396Net loss attributable to Great Wolf Resorts, Inc.


(58,476
)


(40,725
)


(17,751
)   Revenues.
  
    An increase in revenue from our Grapevine resort, due primarily
    to the completion of its expansion in early 2009; and
    An increase in revenue from our Concord resort, which opened in
    March 2009.  on-site
  Operating expenses.
  
    Departmental expenses increased by $7,707 for the year ended
    December 31, 2009, as compared to the year ended
    December 31, 2008, due primarily to the opening of our
    Concord resort.
    Total selling, general and administrative expenses increased by
    $9,084 in the year ended December 31, 2009, as compared to
    the year ended December 31, 2008, due primarily to the
    opening of our Concord resort in March 2009, the expansion at
    our Grapevine resort, which was completed in January 2009, and
    lower labor and overhead expenses allocated to properties under
    development during the year ended December 31, 2009 than in
    the year ended December 31, 2008 due to fewer properties
    under development.
    Total depreciation and amortization increased for the year ended
    December 31, 2009, as compared to the year ended
    December 31, 2008, primarily due to the expansion of our
    Grapevine resort as well as the opening of our Concord resort.
    Also, loan fees incurred during the year ended December 31,
    2009 were higher than in the year ended December 31, 2008
    due to fees incurred in connection with the extensions of our
    Mason and Grapevine mortgage loans.
    For the year ended December 31, 2008, we recorded an
    aggregate $18,777 impairment loss related to our 30.26% interest
    in the joint venture that owned Wisconsin Dells and Sandusky
    resorts. There was no similar charge recorded in the year ended
    December 31, 2009.
    For the year ended December 31, 2008, we recorded a
    goodwill impairment charge of $17,430 related to our Kansas City
    and Mason resorts. We had no similar charge in the year ended
    December 31, 2009. 65




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##### Table of Contents




    We recorded a $24,000 asset impairment loss related to our
    resort in Sheboygan during the year ended December 31,
    2009. We had no similar loss in the year ended December 31,
    2008.  Net operating loss.
  Net loss attributable to Great Wolf Resorts,
    Inc.
  
    An increase in net interest expense of $7,577, mainly due to
    interest expense on our Concord loan, and less interest being
    capitalized to development properties in 2009 as compared to
    2008; and
    A decrease in income tax benefit mainly due to $23,008 income
    tax expense related to our net operating loss valuation
    allowance.    Segments
    
    Resort ownership/operation  revenues derived from our
    consolidated owned resorts; and
    Resort third-party management/licensing  revenues
    derived from management, license and other related fees from
    unconsolidated managed resorts;    Year Ended December 31,

Increase (Decrease)2010

2009

2008

2010 - 2009

2009 - 2008Resort Ownership/OperationRevenues

$
248,592


$
235,771


$
217,568


$
12,821


$
18,203EBITDA


40,561



3,350



33,756



37,211



(30,406
)Resort Third-Party Management/LicensingRevenues


29,312



28,261



27,970



1,051



291EBITDA


7,241



6,963



8,144



278



(1,181
)OtherRevenues


6,302











6,302



EBITDA


(135
)


21,478



(23,719
)


(21,613
)


45,197      66




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##### Table of Contents



Liquidity
    and Capital Resources
    Long-Term Debt:Traverse City/Kansas City mortgage loan

$
67,236Pocono Mountains mortgage loan


94,274Concord mortgage loan


78,147First mortgage notes (net of discount of $9,578)


220,422Junior subordinated debentures


80,545Other Debt:City of Sheboygan bonds


8,573City of Sheboygan loan


3,054Other


47$
552,298   Traverse City/Kansas City Mortgage Loan 25-year
         67




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##### Table of Contents



Mason Mortgage Loan
  Pocono Mountains Mortgage Loan  30-year
      Williamsburg Mortgage Loan 
  Grapevine Mortgage Loan
  Concord Mortgage Loan 25-year
 68




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##### Table of Contents



First Mortgage Notes
      Junior Subordinated Debentures
  30-year
    10-year
     69




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##### Table of Contents



City of Sheboygan Bonds
  City of Sheboygan Loan
  Future Maturities
  2011

$
4,4922012


80,2442013


3,6752014


3,9662015


62,072Thereafter


407,427Total

$
561,876     Short-Term
    Liquidity Requirements
    
    recurring maintenance, repairs and other operating expenses
    necessary to properly maintain and operate our resorts;
    recurring capital expenditures we make at our resorts;
    debt maturities within the next year;
    property taxes and insurance expenses;
    interest expense and scheduled principal payments on outstanding
    indebtedness;
    general and administrative expenses; and
    income taxes.   70




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##### Table of Contents



Long-Term
    Liquidity Requirements
    
    scheduled debt maturities;
    costs associated with the development of new resorts;
    renovations, expansions and other non-recurring capital
    expenditures that need to be made periodically to our
    resorts; and
    capital contributions and loans to unconsolidated joint ventures.    
    existing working capital,
    cash provided by operations,
    proceeds from investing activities, including sales of partial
    or whole ownership interests in certain of our resorts; and
    proceeds from financing activities, including mortgage financing
    on properties being developed, additional or replacement
    borrowings under future credit facilities, contributions from
    joint venture partners, and the issuance of equity instruments,
    including common stock, or additional or replacement debt,
    including debt securities, as market conditions permit.      and/or
  Off
    Balance Sheet Arrangements
   71




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##### Table of Contents



39-acre
    Contractual
    Obligations
    Payment TermsLess Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 YearsDebt obligations(1)

$
770,683


$
40,021


$
154,407


$
131,759


$
444,496Operating lease obligations


4,248



969



1,693



1,056



530Reserve on unrecognized tax benefits


1,298















1,298Total

$
776,229


$
40,990


$
156,100


$
132,815


$
446,324     (1)
    
    Amounts include interest (for fixed rate debt) and principal.
    They also include $8,573 of fixed rate debt recognized as a
    liability related to certain bonds issued by the City of
    Sheboygan and $3,054 of fixed rate debt recognized as a
    liability related to a loan from the City of Sheboygan. These
    liabilities will be satisfied by certain future minimum
    guaranteed amounts of real and personal property tax payments
    and room tax payments to be made by our Sheboygan resort.    Working
    Capital
    
    An increase in accruals related to the issuance of our first
    mortgage notes that closed in April 2010, and
    The classification of our Traverse City/Kansas City mortgage
    loan (principal balance of $67,236) as a currently liability due
    to the lenders implementation of the traditional lock-box
    arrangement for the two properties, as discussed above.   72




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Cash
    Flows
  Comparison
    of Year Ended December 31, 2010 to Year Ended
    December 31, 2009
  Year Ended December 31,

Increase2010

2009

(Decrease)Net cash provided by operating activities

$
29,112


$
12,215


$
16,897Net cash used in investing activities


(4,478
)


(36,659
)


32,181Net cash provided by (used in) financing activities


(8,559
)


31,126



(39,685
)   Operating Activities.
  Investing Activities.
  Financing Activities.
  Comparison
    of Year Ended December 31, 2009 to Year Ended
    December 31, 2008
  Year Ended December 31,

Increase2009

2008

(Decrease)Net cash provided by operating activities

$
12,215


$
33,534


$
(21,319
)Net cash used in investing activities


(36,659
)


(144,612
)


107,953Net cash provided by financing activities


31,126



106,712



(75,586
)   Operating Activities.
  Investing Activities.
  Financing Activities.
  Inflation
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   73




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##### Table of Contents




    $67,236 of fixed rate debt secured by two of our resorts. This
    debt bears interest at 6.96%.
    $94,274 of fixed rate debt secured by one of our resorts. This
    debt bears interest at 6.10%.
    $78,147 of variable rate debt secured by one of our resorts.
    This debt bears interest at a floating annual rate of LIBOR plus
    a spread of 310 basis points, with a minimum rate of 6.50%
    per annum. The effective rate was 6.50% at December 31,
    2010.
    $220,422 (net of discount of $9,578) of first mortgage notes
    that are secured by first priority liens on three of our
    resorts. This debt bears interest at 10.875%. The notes are due
    April 2017.
    $51,550 of subordinated debentures that bear interest at a fixed
    rate of 7.80% through March 2015 and then at a floating rate of
    LIBOR plus 310 basis points thereafter. The securities
    mature in March 2035.
    $28,995 of subordinated debentures that bear interest at a fixed
    rate of 7.90% through June 2012 and then at a floating rate of
    LIBOR plus 300 basis points thereafter. The securities
    mature in June 2017.
    $8,573 of fixed rate debt (effective interest rate of 10.67%)
    recognized as a liability related to certain bonds issued by the
    City of Sheboygan and $3,054 of noninterest bearing debt
    recognized as a liability related to a loan from the City of
    Sheboygan. These liabilities will be satisfied by certain future
    minimum guaranteed amounts of real and personal property tax
    payments and room tax payments to be made by the Sheboygan
    resort.
    $47 related to a capital lease that was entered into in June
    2009. The lease matures in May 2012.     74




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ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Form 10-K:
  PageNo.Consolidated Financial Statements of Great Wolf Resorts, Inc.
    and Subsidiaries:Report of Independent Registered Public
    Accounting Firm


76Consolidated Balance Sheets as of
    December 31, 2010 and 2009


77Consolidated Statements of Operations and
    Comprehensive Loss for the years ended December 31, 2010,
    2009 and 2008


78Consolidated Statements of Equity for the years
    ended December 31, 2010, 2009 and 2008


79Consolidated Statements of Cash Flows for the
    years ended December 31, 2010, 2009 and 2008


80Notes to Consolidated Financial Statements


81  75




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Internal Control  Integrated Framework
  
    76




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2010


2009(dollars in thousands,except per share data)ASSETSCurrent assets:Cash and cash equivalents

$
36,988


$
20,913Escrows


1,283



5,938Accounts receivable, net of allowance for doubtful accounts of
    $13 and $101


3,278



2,192Accounts receivable  affiliates


3,764



2,614Inventory


6,871



4,791Other current assets


4,619



4,252Total current assets


56,803



40,700Property and equipment, net


623,958



676,405Investment in and advances to affiliates


25,131



27,484Notes receivable






8,268Other assets


38,649



29,058Intangible assets


26,697



23,829Total assets

$
771,238


$
805,744LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt

$
70,083


$
16,126Accounts payable


8,499



5,078Accounts payable  affiliates


4



Accrued expenses


28,519



21,970Advance deposits


7,472



7,114Other current liabilities


7,416



5,946Total current liabilities


121,993



56,234Mortgage debt


390,289



441,724Other long-term debt


91,926



92,221Deferred compensation liability


1,260



809Total liabilities


605,468



590,988Commitments and contingenciesGreat Wolf Resorts stockholders equity:Common stock, $0.01 par value, 250,000,000 shares
    authorized, 32,339,125 and 31,278,889 shares issued and
    outstanding at December 31, 2010 and 2009


323



313Preferred stock, $0.01 par value, 10,000,000 shares
    authorized, no shares issued or outstanding at December 31,
    2010 and 2009






Additional paid-in capital


402,952



400,930Accumulated deficit


(237,296
)


(186,287
)Deferred compensation


(200
)


(200
)Total Great Wolf Resorts stockholders equity


165,779



214,756Noncontrolling interest


(9
)


Total equity


165,770



214,756Total liabilities and stockholders equity

$
771,238


$
805,744    77




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF
    OPERATIONS
    AND COMPREHENSIVE LOSS 
    (dollars in thousands, except per share data)
  Year Ended December 31,2010


2009


2008Revenues:Rooms

$
163,708


$
154,751


$
143,395Food and beverage


45,869



42,643



38,808Other hotel operations


45,317



38,377



35,365Management and other fees


2,646



1,990



2,798Management and other fees  affiliates


4,594



4,973



5,346262,134



242,734



225,712Other revenue from managed properties-affiliates


10,989



17,132



19,826Other revenue from managed properties


11,083



4,166



Total revenues


284,206



264,032



245,538Operating expenses by department:Rooms


24,218



22,449



20,134Food and beverage


34,436



33,217



30,990Other


35,381



32,124



28,959Other operating expenses:Selling, general and administrative


67,471



60,986



51,902Property operating costs


34,663



37,788



37,086Depreciation and amortization


58,467



56,378



46,081Impairment loss on investment in affiliates










18,777Goodwill impairment










17,430Asset impairment loss


18,741



24,000



Loss on disposition of property


18



255



19273,395



267,197



251,378Other expenses from managed properties-affiliates


10,989



17,132



19,826Other expenses from managed properties


11,083



4,166



Total operating expenses


295,467



288,495



271,204Net operating loss


(11,261
)


(24,463
)


(25,666
)Gain on sale of unconsolidated affiliate






(962
)


Investment income  affiliates


(1,088
)


(1,330
)


(2,187
)Interest income


(549
)


(642
)


(1,424
)Interest expense


46,270



34,072



27,277Loss before income taxes and equity in unconsolidated affiliates


(55,894
)


(55,601
)


(49,332
)Income tax (benefit) expense


(5,452
)


440



(11,956
)Equity in unconsolidated affiliates, net of tax


576



2,435



3,349Net loss


(51,018
)


(58,476
)


(40,725
)Net loss attributable to noncontrolling interest, net of tax


(9
)






Net loss attributable to Great Wolf Resorts, Inc.

$
(51,009
)

$
(58,476
)

$
(40,725
)Basic loss per common share

$
(1.65
)

$
(1.90
)

$
(1.32
)Diluted loss per common share

$
(1.65
)

$
(1.90
)

$
(1.32
)Weighted average common shares outstanding:Basic


30,987,818



30,749,318



30,827,860Diluted


30,987,818



30,749,318



30,827,860Other comprehensive loss, net of tax:Net loss

$
(51,018
)

$
(58,476
)

$
(40,725
)Unrealized gain on interest rate swap










(387
)Comprehensive loss


(51,018
)


(58,476
)


(40,338
)Comprehensive loss attributable to noncontrolling interest










Comprehensive loss attributable to Great Wolf Resorts, Inc.

$
(51,018
)

$
(58,476
)

$
(40,338
)    78




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF EQUITY
 (dollars
    in thousands, except per share data)
   AdditionalCommon


Common


Paid- in


Accumulated


Deferred


Accumulated Other


Noncontrolling


TotalShares


Stock


Capital


Deficit


Compensation


Comprehensive Loss


Interest


EquityBalance, January 1, 2008


30,698,683


$
307


$
399,759


$
(87,086
)

$
(2,200
)

$
(387
)

$



$
310,393Issuance of equity shares under the stock-based compensation plan


283,963



3























3Sale of common stock  deferred compensation plan










(2,000
)






2,000











Stock-based compensation










1,882



















1,882Unrealized gain on interest rate swap, net of tax






















387







387Net loss attributable to Great Wolf Resorts, Inc.














(40,725
)














(40,725
)Balance, December 31, 2008


30,982,646



310



399,641



(127,811
)


(200
)










271,940Issuance of equity shares under the stock-based compensation plan


296,243



3























3Stock-based compensation










1,289



















1,289Net loss attributable to Great Wolf Resorts, Inc.














(58,476
)














(58,476
)Balance, December 31, 2009


31,278,889



313



400,930



(186,287
)


(200
)










214,756Issuance of equity shares under the stock-based compensation plan


1,060,236



10























10Stock-based compensation










2,022



















2,022Net loss














(51,009
)










(9
)


(51,018
)Balance, December 31, 2010


32,339,125


$
323


$
402,952


$
(237,296
)

$
(200
)

$



$
(9
)

$
165,770    79




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (dollars
    in thousands)
  Year Ended December 31,2010


2009


2008Operating activities:Net loss

$
(51,018
)

$
(58,476
)

$
(40,725
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Depreciation and amortization


58,467



56,378



46,081Bad debt expense


226



680



1,305Impairment loss on investment in affiliates










18,777Goodwill impairment










17,430Asset impairment loss


18,741



24,000



Non-cash employee and director compensation


2,664



1,138



250Loss on disposition of property


18



255



19Gain on sale of unconsolidated affiliate






(962
)


Equity in losses of unconsolidated affiliates


639



2,416



4,421Deferred tax expense (benefit)


(6,408
)


131



(14,072
)Changes in operating assets and liabilities:Accounts receivable and other assets


(1,138
)


(8,865
)


(1,916
)Accounts payable, accrued expenses and other liabilities


6,921



(4,480
)


1,964Net cash provided by operating activities


29,112



12,215



33,534Investing activities:Capital expenditures for property and equipment


(8,683
)


(49,258
)


(134,967
)Loan repayment from unconsolidated affiliate


1,715



9,225



3,168Investment in unconsolidated affiliates






(303
)


(10,430
)Proceeds from sale of interest in unconsolidated affiliate






6,000



Investment in development


(517
)


834



(2,255
)Proceeds from sale of assets


19



66



Cash acquired in acquisition of Creative Kingdoms, LLC


324







(Increase) decrease in restricted cash


(1,991
)


160



55Decrease (increase) in escrows


4,655



(3,383
)


(183
)Net cash used in investing activities


(4,478
)


(36,659
)


(144,612
)Financing activities:Principal payments on long-term debt


(217,110
)


(8,031
)


(57,294
)Proceeds from issuance of long-term debt


219,337



51,051



168,042Payment of loan costs


(10,786
)


(11,894
)


(4,036
)Net cash (used in) provided by financing activities


(8,559
)


31,126



106,712Net increase (decrease) in cash and cash equivalents


16,075



6,682



(4,366
)Cash and cash equivalents, beginning of year


20,913



14,231



18,597Cash and cash equivalents, end of year

$
36,988


$
20,913


$
14,231Supplemental cash flow information:Cash paid for interest, net of capitalized interest

$
40,904


$
33,458


$
26,749Cash paid for income taxes, net of refunds

$
549


$
411


$
597Non-cash items:Construction in process accruals

$



$
20


$
6,969Loan cost accruals

$
679


$



$
Conversion of note receivable and accrued interest to equity
    investment

$
9,963


$



$
    80




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except per share amounts)
  1.
    ORGANIZATION  ®
  Business
    Summary
  ® tm licensing-and-management
    and/or and/or and/or
  Number of

IndoorOwnership



Number of

Condominium

EntertainmentPercentage

Opened

Guest Suites

Units(1)

Area(2)(Approx. sq. ft.)Wisconsin Dells, WI(3)






1997



308



77



102,000Sandusky, OH(3)






2001



271







41,000Traverse City, MI


100
%


2003



280







57,000Kansas City, KS


100
%


2003



281







57,000Sheboygan, WI


100
%


2004



182



64



54,000Williamsburg, VA(4)


100
%


2005



405







87,000Pocono Mountains, PA(4)


100
%


2005



401







101,000Niagara Falls, ONT(5)






2006



406







104,000Mason, OH(4)


100
%


2006



401







105,000Grapevine, TX(4)


100
%


2007



605







110,000Grand Mound, WA(6)


49
%


2008



398







74,000Concord, NC


100
%


2009



402







97,000  81




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (1)
    
    Condominium units are individually owned by third parties and
    are managed by us.(2)
    
    Our indoor entertainment areas generally include our indoor
    waterpark, game arcade, childrens activity room, family
    tech center,
    MagiQuest®

    (an interactive game attraction) and fitness room, as well as
    our spa in the resorts that have such amenities.(3)
    
    These properties are owned by CNL Lifestyle Properties, Inc.
    (CNL), a real estate investment trust focused on leisure and
    lifestyle properties. We currently manage both properties and
    license the Great Wolf Lodge brand to these resorts.(4)
    
    Five of our properties (Great Wolf Lodge resorts in
    Williamsburg, VA; Pocono Mountains, PA; Mason, OH; Grapevine, TX
    and Concord, NC) each had a book value of fixed assets equal to
    ten percent or more of our total assets as of December 31,
    2010 and each had total revenues equal to ten percent or more of
    our total revenues for the year ended December 31, 2010.(5)
    
    An affiliate of Ripley Entertainment, Inc. (Ripley), our
    licensee, owns this resort. We have granted Ripley a license to
    use the Great Wolf Lodge name for this resort through April 2016.(6)
    
    This property is owned by a joint venture. The Confederated
    Tribes of the Chehalis Reservation (Chehalis) owns a 51%
    interest in the joint venture, and we own a 49% interest. We
    manage the property and license the Great Wolf Lodge brand to
    the joint venture under long-term agreements through April 2057,
    subject to earlier termination in certain situations. The joint
    venture leases the land for the resort from the United States
    Department of the Interior, which is trustee for Chehalis.  2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Principles of Consolidation 
  Cash and Cash Equivalents
  Accounts Receivable
  Inventory
  Property and Equipment
  Buildings and improvements


20-40 yearsFixtures and equipment, including waterpark equipment


3-15 years    82




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Loan Fees
  Acquisition Accounting 
  Partially-Owned Entities
  Investments In and Advances to Unconsolidated
    Affiliates
  Intangible Assets
 83




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Goodwill
    2010


2009Balance as of January 1Goodwill

$



$
130,496Accumulated impairment losses






(68,405
)Goodwill related to sale of affiliate






(62,091
)Goodwill related to the acquisition of the majority interest in
    CK


1,366



1,366



Balance as of December 31Goodwill






130,496Accumulated impairment losses






(68,405
)Goodwill related to sale of affiliate






(62,091
)$
1,366


$
   Impairment of Long-Lived Assets
   84




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Revenue Recognition contract-to-date
  Other Revenue and Other Expenses From Managed
    Properties
  Noncontrolling Interests 
  Income Taxes
   85




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Earnings per share
  Derivatives
  Share-based compensation
  Advertising
  Comprehensive Income
 86




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Segments
  
    Resort ownership/operation  revenues derived from our
    consolidated owned resorts; and
    Resort third-party management/licensing  revenues
    derived from management, license and other related fees from
    unconsolidated managed resorts.    Resort Third-Resort


Party





Totals perOwnership/


Management/





FinancialOperation


Licensing


Other


StatementsYear Ended December 31, 2010Revenues

$
248,592


$
29,312


$
6,302


$
284,206Depreciation and amortization


(55,589
)






(2,878
)

$
(58,467
)Asset impairment loss


(18,741
)









$
(18,741
)Net operating income (loss)


(15,028
)


7,240



(3,473
)

$
(11,261
)Investment income  affiliates














(1,088
)Interest income














(549
)Interest expense














46,270Loss before income taxes and equity in unconsolidated affiliates













$
(55,894
)Additions to long-lived assets


7,463







1,220


$
8,683Total assets


646,578



1,778



122,882


$
771,238   Resort Third-Resort


Party





Totals perOwnership/


Management/





FinancialOperation


Licensing


Other


StatementsYear Ended December 31, 2009Revenues

$
235,771


$
28,261


$



$
264,032Depreciation and amortization


(55,596
)






(782
)

$
(56,378
)Asset impairment loss


(24,000
)









$
(24,000
)Net operating income (loss)


(52,246
)


6,963



20,820


$
(24,463
)Gain on sale of unconsolidated affiliate










(962
)


(962
)Investment income  affiliates














(1,330
)Interest income














(642
)Interest expense














34,072Loss before income taxes and equity in unconsolidated affiliates













$
(55,601
)Additions to long-lived assets


48,768







490


$
49,258Total assets


707,472



2,942



95,330


$
805,744   87




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Resort Third-Resort


Party





Totals perOwnership/


Management/





FinancialOperation


Licensing


Other


StatementsYear Ended December 31, 2008Revenues

$
217,568


$
27,970


$



$
245,538Depreciation and amortization


(45,042
)






(1,039
)

$
(46,081
)Impairment loss on investment in affiliates










(18,777
)

$
(18,777
)Goodwill impairment


(16,021
)






(1,409
)

$
(17,430
)Net operating income (loss)


(11,286
)


8,144



(22,524
)

$
(25,666
)Investment income  affiliates














(2,187
)Interest income














(1,424
)Interest expense














27,277Loss before income taxes and equity in unconsolidated affiliates













$
(49,332
)Additions to long-lived assets


134,167







800


$
134,967Total assets


738,119



2,314



99,628


$
840,061     Use of Estimates
  New Accounting Pronouncements
   88




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            3.
    INVESTMENT
    IN AFFILIATES  CNL
    Joint Venture
   89




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Period January 1throughAugust 5,Operating data:

2009Revenue

$
19,750Operating expenses

$
(24,213
)Net loss

$
(4,463
)   Grand
    Mound Joint Venture
  39-acre
    2010


2009Balance sheet data:Total assets

$
142,329


$
145,247Total liabilities

$
112,307


$
114,129Operating data:Revenue

$
41,669


$
39,645Operating expenses

$
37,707


$
36,353Net loss

$
(1,096
)

$
(2,461
)     4.
    VARIABLE
    INTEREST ENTITIES      
    We have equity investments in and a loan to the joint venture
    that owns the Great Wolf Lodge resort Grand Mound, Washington.
    We manage that resort and we have concluded that the joint
    venture is a variable interest entity because the management
    fees we receive represent a variable interest. The management
    contract, however, does not provide us with power over the
    activities that most 90




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  significantly impact the economic performance of the joint
    venture. As we lack the ability to direct the activities that
    most significantly affect the resorts performance, we are
    not the primary beneficiary of the joint venture and, therefore,
    we do not consolidate this entity at December 31, 2010.
    During the year ended December 31, 2010 and 2009, we did
    not provide any support to this entity that we were not
    contractually obligated to do so. Our maximum exposure to loss
    related to our involvement with this entity as of
    December 31, 2010 is limited to the carrying value of our
    equity investments in and loans to the joint venture as of that
    date. The total carrying values of those items on our balance
    sheet as of December 31, 2010 is $25,131.  
    We have equity investments in two subsidiaries which are
    Delaware statutory trusts, both of which were used to issue
    trust preferred securities through private offerings. We have
    concluded that both of these trusts are variable interest
    entities. As we lack the ability to direct the activities that
    most significantly impact the trusts performance, however,
    we are not the primary beneficiary and therefore, we do not
    consolidate these entities at September 30, 2010. During
    the year ended December 31, 2010 and 2009, we did not
    provide any support to these entities that we were not
    contractually obligated to do so. Our maximum exposure to loss
    related to our involvement with these entities as of
    December 31, 2010 is limited to the carrying value of our
    equity investments in the entities as of that date. The total
    carrying values of those items on our balance sheet as of
    December 31, 2010 is $2,420.  5.
    ACQUISTION
    OF CREATIVE KINGDOMS  ®
    6.
    PROPERTY
    AND EQUIPMENT    December 31,2010


2009Land and improvements

$
57,665


$
60,718Building and improvements


420,316



427,602Furniture, fixtures and equipment


341,741



341,529Construction in process


623



327820,345



830,176Less accumulated depreciation


(196,387
)


(153,771
)Property and equipment, net

$
623,958


$
676,405  91




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    7.
    LONG-TERM
    DEBT    December 31,2010


2009Long-Term Debt:Traverse City/Kansas City mortgage loan

$
67,236


$
68,773Mason mortgage loan






73,800Pocono Mountains mortgage loan


94,274



95,458Williamsburg mortgage loan






63,125Grapevine mortgage loan






77,909Concord mortgage loan


78,147



78,549First mortgage notes (net of discount of $9,578)


220,422



Junior subordinated debentures


80,545



80,545Other Debt:City of Sheboygan bonds


8,573



8,544City of Sheboygan loan


3,054



3,290Other


47



78552,298



550,071Less current portion of long-term debt


(70,083
)


(16,126
)Total long-term debt

$
482,215


$
533,945   Traverse City/Kansas City Mortgage Loan 25-year
     92




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Mason Mortgage Loan
  Pocono Mountains Mortgage Loan  30-year
   93




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Williamsburg Mortgage Loan 
  Grapevine Mortgage Loan
  Concord Mortgage Loan 25-year
    First Mortgage Notes
      Junior Subordinated Debentures
   94




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  30-year
    10-year
      City of Sheboygan Bonds
  City of Sheboygan Loan
  Future Maturities
  2011

$
4,4922012


80,2442013


3,6752014


3,9662015


62,072Thereafter


407,427Total

$
561,876  95




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    8.
    FAIR
    VALUE OF FINANCIAL INSTRUMENTS      
    Level 1 inputs are unadjusted quoted prices in active
    markets for identical assets or liabilities that we have the
    ability to access at the measurement date.
    Level 2 inputs include quoted prices for similar assets and
    liabilities in active markets, quoted prices for identical or
    similar assets or liabilities in markets that are not active,
    inputs other than quoted prices that are observable for the
    asset or liability (that is, interest rates, yield curves,
    etc.), and inputs that are derived principally from or
    corroborated by observable market data by correlation or other
    means (market corroborated inputs).
    Level 3 includes unobservable inputs that reflect our
    assumptions about the assumptions that market participants would
    use in pricing the asset or liability. We develop these inputs
    based on the best information available, including our own data.    December 31, 2009

Level 1

Level 2

Level 3

TotalInterest rate caps

$

$133

$

$133         December 31, 2010

Level 1

Level 2

Level 3

TotalProperty and equipment

$

$

$49,775

$49,775   December 31, 2009

Level 1

Level 2

Level 3

TotalProperty and equipment

$

$

$5,771

$5,771    96




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        9.
    INCOME
    TAXES  Income Tax Expense 
  Current


Deferred


TotalYear ended December 31, 2010Federal

$



$
(5,789
)

$
(5,789
)State and local


813



(619
)


194Foreign


82







82$
895


$
(6,408
)

$
(5,513
)Year ended December 31, 2009Federal

$



$
86


$
86State and local


248



45



293Foreign


80







80$
328


$
131


$
459Year ended December 31, 2008Federal

$



$
(12,499
)

$
(12,499
)State and local


955



(1,573
)


(618
)Foreign


89







89$
1,044


$
(14,072
)

$
(13,028
)  97




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2010


2009


2008Income tax expense (benefit)

$
(5,452
)

$
440


$
(11,956
)Net loss attributable to noncontrolling interest


1







Equity in unconsolidated affiliates, net of tax


(62
)


19



(1,072
)Total income tax expense (benefit)

$
(5,513
)

$
459


$
(13,028
)     2010


2009


2008Federal statutory income tax benefit


(35.0
)%


(35.0
)%


(35.0
)%State income taxes, net of federal income taxes


(3.7
)%


(3.5
)%


(0.6
)%Nondeductible goodwill










11.5
%Nondeductible compensation expense


3.0
%






Investment in affiliates


2.2
%






Change in valuation allowance


22.1
%


39.7
%


Other


1.6
%


(0.4
)%


(0.1
)%(9.8
)%


0.8
%


(24.2
)%   Deferred Tax Assets and Liabilities
  2010


2009Deferred tax assets:Net operating loss carryforwards

$
44,710


$
31,032Intangibles


11,625



14,222Investment in affiliates


1,279



2,200Salaries and wages


1,760



2,901Other


2,819



1,329Total deferred tax assets


62,193



51,684Deferred tax liabilities:Property and equipment


(12,967
)


(22,522
)Prepaid expenses


(1,046
)


(856
)Total deferred tax liabilities


(14,013
)


(23,378
)Valuation allowance


(35,564
)


(23,008
)Net deferred tax asset

$
12,616


$
5,298    98




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Net Operating Loss Carryforwards
    Other
    Unrecognized tax benefit  December 31, 2009

$
1,298Gross increases  tax positions in current period


Unrecognized tax benefit  December 31, 2010

$
1,298   10.
    RELATED-PARTY
    TRANSACTIONS   99




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2010

2009

2008Management and other fees

$
4,594


$
4,973


$
5,346Other revenue from managed properties


10,989



17,132



19,826Other expenses from managed properties


10,989



17,132



19,826Investment income


1,088



1,330



2,187Accounts receivable


3,764



2,614



925Accounts payable


4







Accrued expenses










1,806   11.
    COMMITMENTS
    AND CONTINGENCIES  Legal Matters
  Letters of Credit
  Guarantees
      1 2
     100




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Commitments
  2011

$
9692012


9382013


7562014


6962015


360Thereafter


529Total

$
4,248     12.
    RETIREMENT
    PLAN    13.
    EQUITY  Deferred Compensation
  Earnings per Share
    Year Ended December 31,2010

2009

2008Net loss attributable to common shares

$
(51,009
)

$
(58,476
)

$
(40,725
)Weighted average common shares outstanding  basic and
    diluted


30,987,818



30,749,318



30,827,860Net loss per share  basic and diluted

$
(1.65
)

$
(1.90
)

$
(1.32
)    101




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
  14.
    SHARE-BASED
    COMPENSATION          Stock
    Options
     102




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    WeightedWeighted


AverageAverage


RemainingExercise


ContractualShares


Price


LifeNumber of shares under option:Outstanding at January 1, 2008


987,000


$
17.29



7.03 yearsGranted


Exercised


Forfeited


(512,000
)

$
17.01Outstanding at December 31, 2008


475,000


$
17.59



6.09 yearsGranted


Exercised


Forfeited


(34,000
)

$
18.41Outstanding at December 31, 2009


441,000


$
17.53



5.09 yearsGranted


Exercised


Forfeited


(405,000
)

$
17.39Outstanding at December 31, 2010


36,000


$
19.03



4.15 yearsExercisable at December 31, 2010


36,000


$
19.03



4.15 years     Market
    Condition Share Awards
        
    333,060 were based on our common stocks performance in
    2010 relative to a stock index, as designated by the
    Compensation Committee of the Board of Directors. These shares
    vest ratably over a three-year period,
    2010-2012.
    The per share fair value of these market condition shares was
    $2.43 as of the grant date. 103




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Dividend yield


Weighted average, risk free interest rate


0.26
%Expected stock price volatility


108.06
%Expected stock price volatility (small-cap stock index)


40.92
%   9-month
    
    91,463 were based on our common stocks absolute
    performance during the three-year period
    2010-2012.
    For shares that are earned, half of the shares vest on
    December 31, 2012, and the other half vest on
    December 31, 2013. The per share fair value of these market
    condition shares was $2.53 as of the grant date.    Dividend yield


Weighted average, risk free interest rate


1.27
%Expected stock price volatility


95.21
%     
    91,463 were based on our common stocks performance in
    2010-2012
    relative to a stock index, as designated by the Compensation
    Committee of the Board of Directors. For shares that are earned,
    half of the shares vest on December 31, 2012, and the other
    half vest on December 31, 2013. The per share fair value of
    these market condition shares was $2.61 as of the grant date.    Dividend yield


Weighted average, risk free interest rate


1.27
%Expected stock price volatility


95.21
%Expected stock price volatility (small-cap stock index)


37.51
%    104




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    541,863 were based on our common stocks performance in
    2009 relative to a stock index, as designated by the
    Compensation Committee of the Board of Directors. These shares
    vest ratably over a three-year period,
    2009-2011.
    The per share fair value of these market condition shares was
    $1.26 as of the grant date.    Dividend yield


Weighted average, risk free interest rate


0.62
%Expected stock price volatility


96.51
%Expected stock price volatility (small-cap stock index)


37.89
%         
    84,748 were based on our common stocks performance in 2008
    relative to a stock index, as designated by the Compensation
    Committee of the Board of directors. These shares vest ratably
    over a three-year period,
    2008-2010.
    The per share fair value of these market condition shares was
    $1.63.    Dividend yield


Weighted average, risk free interest rate


2.05
%Expected stock price volatility


34.98
%Expected stock price volatility (small-cap stock index)


20.08
%         
    81,293 were based on our common stocks absolute
    performance during the three-year period
    2007-2009.
    Half of these shares vested on December 31, 2009, and the
    other half vest on December 31, 2010. The per share fair
    value of these market condition shares was $6.65. 105




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Dividend yield


Weighted average, risk free interest rate


4.73
%Expected stock price volatility


42.13
%     2007-2009,
  
    81,293 were based on our common stocks performance in
    2007-2009
    relative to a stock index, as designated by the Compensation
    Committee of the Board of directors. Half of these shares vested
    December 31, 2009, and the other half vest on
    December 31, 2010. The per share fair value of these market
    condition shares was $8.24.    Dividend yield


Weighted average, risk free interest rate


4.73
%Expected stock price volatility


42.13
%Expected stock price volatility (small-cap stock index)


16.64
%     2007-2009,
  Performance
    Share Awards
  2010-2012; 2009-2011; 2008-2010.
 106




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      
    Employees earned and were issued 162,559 performance shares in
    March 2010 related to the 2009 grants,
    Employees earned and were issued 18,084 performance shares in
    February 2009 related to the 2008 grants, and
    Employees earned and were issued 20,843 performance shares in
    February 2008 related to the 2007 grants.  Deferred
    Compensation Awards
    paid-in-capital.
  Non-vested
    Shares
    
    We have granted non-vested shares to certain employees and our
    directors. These shares vest over time periods between three and
    five years. We valued these non-vested shares at the closing
    market value of our common stock on the date of grant.
    We have granted non-vested shares to certain employees for
    shares earned under the Market Condition Share Awards as
    described above. These shares vest ratably over a three-year
    period. We valued the non-vested shares related to Market
    Condition Shares using a Monte Carlo simulation as described
    above.
    We have granted non-vested shares to certain employees for
    shares earned under the Performance Share Awards as described
    above. These shares vest ratably over a three-year period. We
    valued the non-vested shares related to Performance Share Awards
    at the closing market value of our common stock on the date of
    grant of the Performance Share Awards. 107




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     WeightedAverageGrant DateShares


Fair ValueNon-vested shares balance at January 1, 2008


333,111


$
12.37Granted


210,799


$
6.78Forfeited


(162,008
)

$
10.91Vested


(81,653
)

$
12.14Non-vested shares balance at December 31, 2008


300,249


$
9.29Granted


331,179


$
2.75Forfeited


(61,809
)

$
4.73Vested


(86,151
)

$
10.79Non-vested shares balance at December 31, 2009


483,468


$
5.13Granted


1,306,653


$
2.10Forfeited


(11,400
)

$
4.47Vested


(615,342
)

$
2.52Non-vested shares balance at December 31, 2010


1,163,379


$
3.12       Vested
    Shares
    
    In connection with the elections related to 2008 bonus amounts,
    we issued 17,532 shares in February 2009. We valued these
    shares at $32 based on the closing market value of our common
    stock on the date of the grant.
    There were no shares issued during the year ended
    December 31, 2010 related to 2009 bonus amounts.   108




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  15.
    SUPPLEMENTAL
    GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS      Regulation S-X Rule 3-10, Financial statements of guarantors and issuers of guaranteed
    securities registered or being registered
 109




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONSOLIDATING
    BALANCE SHEET
  December 31,
    2010
 (dollars
    in thousands)
  Subsidiary


Non Guarantor


ConsolidatingParent


Issuers


Guarantors


Subsidiaries


Adjustments


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
10,047


$
24,168


$
(328
)

$
3,101


$



$
36,988Escrows














1,283







1,283Accounts receivable


88







1,615



1,575







3,278Accounts receivable  affiliates










1,369



2,395







3,764Accounts receivable  consolidating entities


12,747



462,941



304,775



151,770



(932,233
)


Inventory










2,593



4,278







6,871Other current assets


192







1,512



2,915







4,619Total current assets


23,074



487,109



311,536



167,317



(932,233
)


56,803Property and equipment, net










352,689



271,269







623,958Investment in consolidating entities


210,356



257,151











(467,507
)


Investment in and advances to affiliates














25,131







25,131Other assets


17,274



7,948



7,070



6,357







38,649Intangible assets


1,365







4,668



20,664







26,697Total assets

$
252,069


$
752,208


$
675,963


$
490,738


$
(1,399,740
)

$
771,238LIABILITIES AND EQUITYCurrent liabilities:Current portion of long-term debt

$



$



$
33


$
70,050


$



$
70,083Accounts payable


151







5,543



2,805







8,499Accounts payable  affiliates










1



3







4Accounts payable  consolidating entities


423



314,488



510,186



107,136



(932,233
)


Accrued expenses


1,010



6,942



11,534



9,033







28,519Advance deposits










2,522



4,950







7,472Other current liabilities


4,161







1,111



2,144







7,416Total current liabilities


5,745



321,430



530,930



196,121



(932,233
)


121,993Mortgage debt






220,422







169,867







390,289Other long-term debt


80,545







14



11,367







91,926Deferred compensation liability










1,260











1,260Total liabilities


86,290



541,852



532,204



377,355



(932,233
)


605,468Commitments and contingenciesGreat Wolf Resorts stockholders equity:Common stock


323



















323Preferred stock






















Additional
    paid-in-capital


402,952



456,693



163,514



293,179



(913,386
)


402,952Accumulated deficit


(237,296
)


(246,337
)


(19,755
)


(179,787
)


445,879



(237,296
)Deferred compensation


(200
)


















(200
)Total Great Wolf Resorts stockholders equity


165,779



210,356



143,759



113,392



(467,507
)


165,779Noncontrolling interest














(9
)






(9
)Total equity


165,779



210,356



143,759



113,383



(467,507
)


165,770Total liabilities and equity

$
252,069


$
752,208


$
675,963


$
490,738


$
(1,399,740
)

$
771,238  110




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONSOLIDATING
    BALANCE SHEET
  December 31,
    2009
 (dollars
    in thousands)
  Subsidiary


Non Guarantor


ConsolidatingParent


Issuers


Guarantors


Subsidiaries


Adjustments


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
5,023


$
14,538


$
(1,590
)

$
2,942


$



$
20,913Escrows










4,430



1,508







5,938Accounts receivable


33







1,177



982







2,192Accounts receivable  affiliates










1,079



1,535







2,614Accounts receivable  consolidating entities


23,800



459,146



183,648



151,521



(818,115
)


Inventory










2,230



2,561







4,791Other current assets


792







1,991



1,469







4,252Total current assets


29,648



473,684



192,965



162,518



(818,115
)


40,700Property and equipment, net










373,879



302,526







676,405Investment in consolidating entities


251,217



277,475











(528,692
)


Investment in and advances to affiliates














27,484







27,484Notes receivable


8,268



















8,268Other assets


10,965







9,333



8,760







29,058Intangible assets










4,668



19,161







23,829Total assets

$
300,098


$
751,159


$
580,845


$
520,449


$
(1,346,807
)

$
805,744LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt

$



$



$
12,731


$
3,395


$



$
16,126Accounts payable










3,132



1,946







5,078Accounts payable  consolidating entities






499,931



205,954



112,230



(818,115
)


Accrued expenses


1,498



11



13,351



7,110







21,970Advance deposits










2,457



4,657







7,114Gift certificates payable


3,299







830



1,817







5,946Total current liabilities


4,797



499,942



238,455



131,155



(818,115
)


56,234Mortgage debt










202,103



239,621







441,724Other long-term debt


80,545







78



11,598







92,221Deferred compensation liability










809











809Total liabilities


85,342



499,942



441,445



382,374



(818,115
)


590,988Commitments and contingenciesStockholders Equity:Common stock


313



















313Preferred stock






















Additional
    paid-in-capital


400,930



448,562



163,514



285,048



(897,124
)


400,930Accumulated deficit


(186,287
)


(197,345
)


(24,114
)


(146,973
)


368,432



(186,287
)Deferred compensation


(200
)


















(200
)Total stockholders equity


214,756



251,217



139,400



138,075



(528,692
)


214,756Total liabilities and stockholders equity

$
300,098


$
751,159


$
580,845


$
520,449


$
(1,346,807
)

$
805,744  111




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATING STATEMENT OF OPERATIONS
  Year
    ended December 31, 2010
 (dollars
    in thousands)
  Subsidiary


Non Guarantor


ConsolidatingParent


Issuers


Guarantors


Subsidiaries


Adjustments


ConsolidatedRevenues:Rooms

$



$



$
80,021


$
83,687


$




163,708Food and beverage










23,484



22,385







45,869Other










19,051



26,266







45,317Management and other fees


451







21,777



66



(19,648
)


2,646Management and other fees  affiliates










4,594











4,594451







148,927



132,404



(19,648
)


262,134Other revenue from managed properties  affiliates










10,989











10,989Other revenue from managed properties










11,083











11,083Total revenues


451







170,999



132,404



(19,648
)


284,206Operating expenses by department:Rooms










13,574



13,834



(3,190
)


24,218Food and beverage










17,603



16,833







34,436Other










15,865



19,516







35,381Other operating expenses:Selling, general and administrative


2,850



144



46,538



34,397



(16,458
)


67,471Property operating costs










16,208



18,455







34,663Depreciation and amortization


153



940



30,356



27,018







58,467Asset impairment loss














18,741







18,741Loss on disposition of property










9



9







183,003



1,084



140,153



148,803



(19,648
)


273,395Other expenses from managed properties  affiliates










10,989











10,989Other expenses from managed properties










11,083











11,083Total operating expenses


3,003



1,084



162,225



148,803



(19,648
)


295,467Net operating (loss) income


(2,552
)


(1,084
)


8,774



(16,399
)






(11,261
)Investment income  affiliates














(1,088
)






(1,088
)Interest income


(531
)


(13
)


(2
)


(3
)






(549
)Interest expense


6,343



19,466



3,860



16,601







46,270(Loss) income before income taxes and equity in affiliates


(8,364
)


(20,537
)


4,916



(31,909
)






(55,894
)Income tax (benefit) expense


(6,347
)






557



338







(5,452
)Equity in loss of affiliates, net of tax


48,992



28,455







576



(77,447
)


576Net (loss) income


(51,009
)


(48,992
)


4,359



(32,823
)


77,447



(51,018
)Net loss attributable to noncontrolling interest, net of tax














(9
)






(9
)Net (loss) income attributable to Great Wolf Resorts, Inc.

$
(51,009
)

$
(48,992
)

$
4,359


$
(32,814
)

$
77,447


$
(51,009
)  112




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONSOLIDATING
    STATEMENT OF OPERATIONS
  Year
    ended December 31, 2009
 (dollars
    in thousands)
  Subsidiary


Non Guarantor


ConsolidatingParent


Issuers


Guarantors


Subsidiaries


Adjustments


ConsolidatedRevenues:Rooms

$



$



$
78,347


$
76,404


$



$
154,751Food and beverage










22,633



20,010







42,643Other hotel operations










19,350



19,027







38,377Management and other fees


697







18,343



77



(17,127
)


1,990Management and other fees  affiliates










4,973











4,973697







143,646



115,518



(17,127
)


242,734Other revenue from managed properties  affiliates










17,132











17,132Other revenue from managed properties










4,166











4,166Total revenues


697







164,944



115,518



(17,127
)


264,032Operating expenses by department:Rooms










12,720



12,751



(3,022
)


22,449Food and beverage










17,340



15,877







33,217Other










15,740



16,384







32,124Other operating expenses:Selling, general and administrative


2,908



141



42,065



29,977



(14,105
)


60,986Property operating costs










16,651



21,137







37,788Depreciation and amortization


155







29,871



26,352







56,378Asset impairment loss














24,000







24,000Loss on disposition of property










191



64







2553,063



141



134,578



146,542



(17,127
)


267,197Other expenses from managed properties  affiliates










17,132











17,132Other expenses from managed properties










4,166











4,166Total operating expenses


3,063



141



155,876



146,542



(17,127
)


288,495Net operating (loss) income


(2,366
)


(141
)


9,068



(31,024
)






(24,463
)Gain on sale of unconsolidated affiliate














(962
)






(962
)Investment income  affiliates














(1,330
)






(1,330
)Interest income


(605
)


(17
)


(13
)


(7
)






(642
)Interest expense


6,123







12,923



15,026







34,072Loss before income taxes and equity in affiliates


(7,884
)


(124
)


(3,842
)


(43,751
)






(55,601
)Income tax expense (benefit)


192







330



(82
)






440Equity in affiliates, net of tax


50,400



50,276







2,435



(100,676
)


2,435Net loss

$
(58,476
)

$
(50,400
)

$
(4,172
)

$
(46,104
)

$
100,676


$
(58,476
)  113




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONSOLIDATING
    STATEMENT OF OPERATIONS
  Year
    ended December 31, 2008
 (dollars
    in thousands)
  Subsidiary


Non Guarantor


ConsolidatingParent


Issuers


Guarantors


Subsidiaries


Adjustments


ConsolidatedRevenues:Rooms

$



$



$
74,725


$
68,670


$



$
143,395Food and beverage










21,192



17,616







38,808Other hotel operations










18,594



16,771







35,365Management and other fees


1,604







16,893



83



(15,782
)


2,798Management and other fees  affiliates










4,982



364







5,3461,604







136,386



103,504



(15,782
)


225,712Other revenue from managed properties  affiliates










19,826











19,826Total revenues


1,604







156,212



103,504



(15,782
)


245,538Operating expenses by department:Rooms










12,043



10,854



(2,763
)


20,134Food and beverage










17,001



13,989







30,990Other










15,087



13,872







28,959Other operating expenses:Selling, general and administrative


3,174



142



37,091



24,514



(13,019
)


51,902Property operating costs










20,214



16,872







37,086Depreciation and amortization


154







25,136



20,791







46,081Impairment loss on investment in affiliates










630



18,147







18,777Goodwill impairment






1,410







16,020







17,430Loss on disposition of property














19







193,328



1,552



127,202



135,078



(15,782
)


251,378Other expenses from managed properties  affiliates










19,826











19,826Total operating expenses


3,328



1,552



147,028



135,078



(15,782
)


271,204Net operating (loss) income


(1,724
)


(1,552
)


9,184



(31,574
)






(25,666
)Investment income  affiliates














(2,187
)






(2,187
)Interest income


(786
)


(605
)


(9
)


(24
)






(1,424
)Interest expense


5,554







11,521



10,202







27,277Loss before income taxes and equity in affiliates


(6,492
)


(947
)


(2,328
)


(39,565
)






(49,332
)Income tax (benefit) expense


(12,911
)






331



624







(11,956
)Equity in affiliates, net of tax


47,144



46,197







3,349



(93,341
)


3,349Net loss

$
(40,725
)

$
(47,144
)

$
(2,659
)

$
(43,538
)

$
93,341


$
(40,725
)Other comprehensive loss, net of tax:Net loss

$
(40,725
)

$
(47,144
)

$
(2,659
)

$
(43,538
)

$
93,341


$
(40,725
)Unrealized gain on interest rate swap










(387
)










(387
)Comprehensive loss

$
(40,725
)

$
(47,144
)

$
(2,272
)

$
(43,538
)

$
93,341


$
(40,338
)  114




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONSOLIDATING
    STATEMENT OF CASH FLOWS
  Year
    ended December 31, 2010
 (dollars
    in thousands)
  Subsidiary


Non Guarantor


ConsolidatingParent


Issuers


Guarantors


Subsidiaries


Adjustments


ConsolidatedOperating activities:Net (loss) income

$
(51,009
)

$
(48,992
)

$
4,359


$
(32,823
)

$
77,447


$
(51,018
)Adjustment to reconcile net (loss) income to net cash (used)
    provided by operating activities:Depreciation and amortization


153



940



30,356



27,018







58,467Bad debt expense










145



81







226Asset impairment loss














18,741







18,741Non-cash employee and director compensation










2,664











2,664Loss on disposition of property










9



9







18Equity in losses (income) of affiliates


48,992



28,455







576



(77,384
)


639Deferred tax benefit


(6,408
)


















(6,408
)Changes in operating assets and liabilities


1,771



6,930



(2,446
)


(409
)


(63
)


5,783Net cash (used) provided by operating activities


(6,501
)


(12,667
)


35,087



13,193







29,112Investing activities:Capital expenditures for property and equipment










(4,142
)


(4,541
)






(8,683
)Loan repayment from unconsolidated affiliate














1,715







1,715Investment in development










(517
)










(517
)Proceeds from sale of assets














19







19Cash acquired in acquisition of Creative Kingdoms, LLC














324







324Increase in restricted cash














(1,991
)






(1,991
)Decrease in escrows










4,430



225







4,655Net cash provided (used) in investing activities










(229
)


(4,249
)






(4,478
)Financing activities:Principal payments on long-term debt






1,124



(214,865
)


(3,369
)






(217,110
)Proceeds from issuance of long-term debt






219,298







39







219,337Payment of loan costs


49



(8,887
)


(1,836
)


(112
)






(10,786
)Advances from consolidating entities, net


11,476



(189,238
)


183,105



(5,343
)






Net cash provided (used) by financing activities


11,525



22,297



(33,596
)


(8,785
)






(8,559
)Net increase in cash and cash equivalents


5,024



9,630



1,262



159







16,075Cash and cash equivalents, beginning of period


5,023



14,538



(1,590
)


2,942







20,913Cash and cash equivalents, end of period

$
10,047


$
24,168


$
(328
)

$
3,101


$



$
36,988  115




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONSOLIDATING
    STATEMENT OF CASH FLOWS
  Year
    ended December 31, 2009
 (dollars
    in thousands)
  Subsidiary


Non Guarantor


ConsolidatingParent


Issuers


Guarantors


Subsidiaries


Adjustments


ConsolidatedOperating activities:Net loss

$
(58,476
)

$
(50,400
)

$
(4,172
)

$
(46,104
)

$
100,676


$
(58,476
)Adjustment to reconcile net loss to net cash (used) provided by
    operating activities:Depreciation and amortization


155







29,871



26,352







56,378Bad debt expense










617



63







680Non-cash employee and director compensation










1,138











1,138Loss on disposition of property










191



64







255Asset impairment loss














24,000







24,000Gain on sale of unconsolidated affiliates














(962
)






(962
)Equity in losses (income) of affiliates


50,400



50,276







2,416



(100,676
)


2,416Deferred tax expense


131



















131Changes in operating assets and liabilities


3,283



(2
)


(7,070
)


(2,668
)


(6,888
)


(13,345
)Net cash (used) provided by operating activities


(4,507
)


(126
)


20,575



3,161



(6,888
)


12,215Investing activities:Capital expenditures for property and equipment










(8,573
)


(40,685
)






(49,258
)Loan repayment from unconsolidated affiliate














9,225







9,225Investment in unconsolidated affiliates














(303
)






(303
)Proceeds from sale of interest in unconsolidated affiliate














6,000







6,000Investment in development










834











834Proceeds from sale of assets














66







66Decrease in restricted cash


159











1







160(Increase) decrease in escrows










(3,507
)


124







(3,383
)Net cash provided (used) in investing activities


159







(11,246
)


(25,572
)






(36,659
)Financing activities:Principal payments on long-term debt










(5,317
)


(2,714
)






(8,031
)Proceeds from issuance of long-term debt










95



44,068



6,888



51,051Payment of loan costs


(218
)






(5,149
)


(6,527
)






(11,894
)Advances from consolidating entities, net


4,827



8,385



(1,275
)


(11,937
)






Net cash provided (used) by financing activities


4,609



8,385



(11,646
)


22,890



6,888



31,126Net increase (decrease) in cash and cash equivalents


261



8,259



(2,317
)


479







6,682Cash and cash equivalents, beginning of period


4,762



6,279



727



2,463







14,231Cash and cash equivalents, end of period

$
5,023


$
14,538


$
(1,590
)

$
2,942


$



$
20,913  116




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONSOLIDATING
    STATEMENT OF CASH FLOWS
  Year
    ended December 31, 2008
 (Dollars
    in thousands)
  Subsidiary


Non Guarantor


ConsolidatingParent


Issuers


Guarantors


Subsidiaries


Adjustments


ConsolidatedOperating activities:Net loss

$
(40,725
)

$
(47,144
)

$
(2,659
)

$
(43,538
)

$
93,341


$
(40,725
)Adjustment to reconcile net loss to net cash (used) provided by
    operating activities:Depreciation and amortization


154







25,136



20,791







46,081Bad debt expense










1,240



65







1,305Impairment loss on investment in affiliates










630



18,147







18,777Goodwill impairment






1,410







16,020







17,430Non-cash employee compensation expense










250











250Loss on disposition of property














19







19Equity in losses (income) of affiliates


47,144



46,197







4,421



(93,341
)


4,421Deferred tax benefit


(14,072
)


















(14,072
)Changes in operating assets and liabilities


(2,715
)


(40
)


491



(4,576
)


6,888



48Net cash (used) provided by operating activities


(10,214
)


423



25,088



11,349



6,888



33,534Investing activities:Capital expenditures for property and equipment










(55,303
)


(79,664
)






(134,967
)Loan repayment from unconsolidated affiliate














3,168







3,168Investment in affiliates


(1,180
)


(53,430
)






(9,250
)


53,430



(10,430
)Investment in development










(2,255
)










(2,255
)Decrease (increase) in restricted cash


1







55



(1
)






55(Increase) decrease in escrows










(724
)


541







(183
)Net cash (used) provided in investing activities


(1,179
)


(53,430
)


(58,227
)


(85,206
)


53,430



(144,612
)Financing activities:Principal payments on long-term debt










(55,375
)


(1,919
)






(57,294
)Proceeds from issuance of long-term debt










140,449



34,481



(6,888
)


168,042Payment of loan costs


(12
)






(2,686
)


(1,338
)






(4,036
)Advances from consolidating entities, net


10,050



50,614



(49,387
)


(11,277
)






Equity contributions














53,430



(53,430
)


Net cash provided (used) by financing activities


10,038



50,614



33,001



73,377



(60,318
)


106,712Net (decrease) increase in cash and cash equivalents


(1,355
)


(2,393
)


(138
)


(480
)






(4,366
)Cash and cash equivalents, beginning of period


6,117



8,672



865



2,943







18,597Cash and cash equivalents, end of period

$
4,762


$
6,279


$
727


$
2,463


$



$
14,231  117




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  16.
    QUARTERLY
    FINANCIAL DATA (UNAUDITED)    First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2010:Total Revenues

$
70,679


$
68,428


$
81,118


$
63,981Net operating income (loss)


539



(318
)


10,931



(22,413
)Net loss attributable to Great Wolf Resorts, Inc.


(8,065
)


(12,760
)


(993
)


(29,191
)Basic loss per common share

$
(0.26
)

$
(0.41
)

$
(0.03
)

$
(0.95
)Diluted loss per common share

$
(0.26
)

$
(0.41
)

$
(0.03
)

$
(0.95
)     First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2009:Total Revenues

$
62,307


$
68,625


$
76,827


$
56,273Net operating income (loss)


(2,450
)


(581
)


(15,491
)


(5,941
)Net (loss) income attributable to Great Wolf Resorts, Inc.


(5,645
)


(5,706
)


(36,923
)


(10,202
)Basic (loss) earnings per share

$
(0.18
)

$
(0.18
)

$
(1.18
)

$
(0.33
)Diluted (loss) earnings per share

$
(0.18
)

$
(0.18
)

$
(1.18
)

$
(0.33
)     ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
   118




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Changes
    in Internal Control
    Managements
    Report on Internal Control over Financial Reporting
    
    Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the Company;
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with U.S. generally accepted accounting
    principles, and that receipts and expenditures of the Company
    are being made only in accordance with authorizations of our
    management and directors; and
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.      Remediation
    of Material Weakness
  Form 10-K
 119




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Conclusion
     120




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control 
    Integrated Framework
        Internal Control  Integrated Framework
    
  
  121




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICER AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Financial Statements
  Form 10-K
  Financial Statement Schedules
    Exhibits
   122




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##### Table of Contents



SIGNATURES      
         Signature

Title

Date/s/  Kimberly
    K. SchaeferKimberly
    K. Schaefer

Chief Executive Officer (Principal Executive Officer) and
    Director

February 25, 2011/s/  James
    A. CalderJames
    A. Calder

Chief Financial Officer (Principal Financial and Accounting
    Officer)

February 25, 2011/s/  Joseph
    V. VittoriaJoseph
    V. Vittoria

Chairman of the Board and Director

February 25, 2011/s/  Elan
    BlutingerElan
    Blutinger

Director

February 25, 2011/s/  Randy
    L. ChurcheyRandy
    L. Churchey

Director

February 25, 2011/s/  Edward
    H. RensiEdward
    H. Rensi

Director

February 25, 2011/s/  Howard
    A. SilverHoward
    A. Silver

Director

February 25, 2011  123




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##### Table of Contents



INDEX TO
    EXHIBITS
  Form 10-K.
  ExhibitNumber

Description10
.27

Note Purchase Agreement dated as of March 30, 2010, by and
    among (i) GWR Operating Partnership, L.L.L.P., a
    Delaware limited liability limited partnership (GWR
    OP), and Great Wolf Finance Corp., a Delaware corporation,
    (ii) Mason Family Resorts, LLC, Great Wolf Lodge of
    Grapevine, LLC and Great Wolf Williamsburg SPE, LLC,
    (iii) Great Wolf Resorts, Inc. and GWR OP General Partner,
    LLC, a Delaware limited liability company and certain other
    direct and indirect subsidiaries of GWR OP; and
    (iv) Deutsche Bank Securities, Inc., Banc of America
    Securities, LLC, Wells Fargo Securities, LLC and Credit Agricole
    Securities (USA) Inc. (incorporated herein by reference to the
    registrants Quarterly Report on
    Form 10-Q,
    filed May 5, 2010).10
.28

Indenture dated as of April 7, 2010, by and
    among (i) GWR Operating Partnership, L.L.L.P., a
    Delaware limited liability limited partnership (GWR
    OP), and Great Wolf Finance Corp., a Delaware corporation,
    (ii) Mason Family Resorts, LLC, Great Wolf Lodge of
    Grapevine, LLC and Great Wolf Williamsburg SPE, LLC,
    (iii) Great Wolf Resorts, Inc. and GWR OP General Partner,
    LLC, a Delaware limited liability company and certain other
    direct and indirect subsidiaries of GWR OP and (iv) U.S.
    Bank National Association, as trustee (incorporated herein by
    reference to the registrants Quarterly Report on
    Form 10-Q,
    filed May 5, 2010).12
.1*

Statement of Computation of Ratios of Earnings of Fixed Charges.21
.1*

List of Subsidiaries23
.1*

Consent of Grant Thornton LLP31
.1*

Certification of Chief Executive Officer of Periodic Report
    Pursuant to Rule 13a  14(a) and
    Rule 15d  14(a)31
.2*

Certification of Chief Financial Officer of Periodic Report
    Pursuant to Rule 13a  14(a) and
    Rule 15d  14(a)32
.1*

Certification of Chief Executive Officer Pursuant to
    18 U.S.C. Section 135032
.2*

Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350     *
    
    Filed herewith.