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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, 2007ORo

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.)122 West Washington Avenue
    Madison, Wisconsin 53703

53703(Zip Code)(Address of principal executive
    offices)     Registrants
    telephone number, including area code
    608
    661-4700
    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. o
    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, 2007
    INDEX
   
 PageNo.PART IItem 1.


Business


2Item 1A.


Risk Factors


21Item 1B.


Unresolved Staff Comments


35Item 2.


Properties


35Item 3.


Legal Proceedings


36Item 4.


Submission of Matters to a Vote of Security
    Holders


36PART IIItem 5.


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


37Item 6.


Selected Financial Data


39Item 7.


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


41Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


60Item 8.


Financial Statements and Supplementary Data


62Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


90Item 9A.


Controls and Procedures


90Item 9B.


Other Information


93PART IIIItem 10.


Directors and Executive Officers of the
    Registrant


93Item 11.


Executive Compensation


93Item 12.


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


93Item 13.


Certain Relationships and Related Transactions


93Item 14.


Principal Accountant Fees and Services


93PART IVItem 15.


Exhibits and Financial Statement Schedules


93SignaturesList of SubsidiariesConsent of Deloitte & Touche LLPCertificationCertificationCertificationCertification   1




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PART I  ITEM 1.
    BUSINESS  Overview
    and Development
  ® ® Form 10-K
  ® tm
        Form 10-K
   2




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Properties 
    Overview
    IndoorOwnership

Opened/

Number of


Number of


EntertainmentPercentage

Opening

Guest Suites


Condo Units(1)


Area(2)(Approx.
    ft2)Existing Resorts:Wisconsin Dells, WI(3)

30.32%

1997


308



77



102,000Sandusky, OH(3)

30.32%

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

100%

2005


405







87,000Pocono Mountains, PA

100%

2005


401







101,000Niagara Falls, ONT(4)



2006


406







104,000Mason, OH(5)

100%

2006


401







105,000Grapevine, TX(6)

100%

December 2007


402







110,000Resorts Under Construction:Grand Mound, WA(7)

49%

March 2008


398







74,000Concord, NC(8)

100%

Spring 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 and fitness room, as well as our
    Aveda®
    spa in the resorts that have such amenities.(3)
    
    These properties are owned by a joint venture. CNL Income
    Properties, Inc. (CNL), a real estate investment trust focused
    on leisure and lifestyle properties, owns a 69.68% interest in
    the joint venture, and we own a 30.32% interest. We operate the
    properties and license the Great Wolf Lodge brand to the joint
    venture under long-term agreements through October 2020, subject
    to earlier termination in certain situations.(4)
    
    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. We manage the resort on behalf of Ripley and also provide
    central reservation services.(5)
    
    We initially entered into a joint venture agreement with a
    subsidiary of CBS Corporation (CBS) to build this resort and
    attached conference center. In June 2007 we purchased CBSs
    minority equity interest in this joint venture, and we now own
    100% of the resort.(6)
    
    Construction on this resort began in June 2006 and it was
    completed in December 2007. In late 2007, we began construction
    on an additional 203 suites and 20,000 square feet of
    meeting space as an expansion of this resort. Expected
    completion of the expansion is early 2009.(7)
    
    We have entered into a joint venture agreement with The
    Confederated Tribes of the Chehalis Reservation (Chehalis) to
    build this resort. We will operate the resort under our Great
    Wolf Lodge brand. Chehalis has leased the land needed for the
    resort to the joint venture, and they have a majority equity
    interest in the joint venture. Construction on the 398-suite
    resort began in October 2006 with expected completion in March
    2008.(8)
    
    We have announced plans to develop a Great Wolf Lodge resort in
    Concord, North Carolina. The Northwoods-themed, approximately
    402-suite resort will provide a comprehensive package of
    first-class 3




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destination lodging amenities and activities. Construction on
    the resort began in October 2007 with expected completion in
    Spring 2009.  Northwoods Lodge Theme.
  Guest Suites. ® tm tm tm tm pay-per-view pay-per-play
  Indoor Waterparks.
     4




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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 & Grille and Rusty Anchor Buffet.
    Ice Cream Shop and Confectionery.  Each of our
    Great Wolf Lodge resorts, with the exception of our Sandusky
    resort, has a Bear Claw Café ice cream shop and
    confectionery that provides sandwiches,
    Starbucks®
    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.
    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 Cargo gift shop that provides unique themed gifts,
    including Great Wolf Lodge 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 Ashore gift shop located in the waterpark.
    Full-Service Spa.  Each of our resorts, with
    the exception of our Sandusky resort, has an
    Elementstm
    Spa,
    Elementstm
    Spa and Salon or a Cameo Spa and
    Salontm
    that provides a relaxing
    get-a-way
    with a full complement of massages, facials, manicures,
    pedicures and other spa treatments, as well as yoga classes 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 5




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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
    Clubtm
    rooms are professionally staffed childrens activity rooms
    with programmed activities, including arts and crafts, games and
    nature hikes. Cub Club is also a membership program for our
    younger guests. Cub Club membership is open to all children who
    have stayed at one of our resorts and includes a periodic
    newsletter, exclusive offers, rewards for each stay and a free
    meal and dessert when members visit during their birthday month.
    We currently have approximately 52,000 Cub Club members. Our
    Blue Harbor Resort features a Crew
    Clubtm
    program and 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 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 if favorable. Our Wisconsin
    Dells and Grapevine resorts also have outdoor waterslides.
    Fitness Room.  Our fitness rooms contain
    aerobic exercise equipment and weight-lifting machines with
    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, Niagara,
    Williamsburg, and Pocono Mountains resorts.
    Conference Facility.  Our Mason resort features
    a
    state-of-the-art
    40,000 square-foot conference center, which includes an
    expansive Grand Ballroom, flexible meeting spaces, an executive
    boardroom, audio visual systems, and multiple pre-function
    concourses including an outdoor patio. Our Traverse City and
    Williamsburg resorts each added approximately 10,000 square
    feet of conference facilities in 2007. When our expansion is
    complete at our Grapevine resort, it will offer
    27,000 square feet of meeting space, a Grand Ballroom,
    flexible meeting rooms, two executive board rooms, pre-function
    space, and outdoor event areas. Our Blue Harbor Resort features
    an approximately 21,000 square-foot attached conference
    facility that provides spaces ranging from approximately
    1,000 square feet to 10,000 square feet for a number
    of different types of conferences and conventions.
    Wileys Woods.  Wileys Woods is an
    interactive indoor live video game in a four-story,
    approximately 16,000 square-foot structure located at our
    Wisconsin Dells resort. Children ages three and older wear
    electronic wrist bands and gain points by navigating slides,
    bridges, nets and mazes and performing a variety of tasks on
    over 60 machines and gadgets. Admission to Wileys Woods is
    free for all resort guests and is open to the public for a fee.
    MagiQuest.  Our Traverse City, Kansas City,
    Williamsburg, Pocono Mountains, Mason and Grapevine resorts
    feature a
    MagiQuesttm
    attraction. MagiQuest is an interactive, live-action, fantasy
    adventure game that guests can play throughout the resort.
    Minigolf.  Our Traverse City, Kansas City,
    Williamsburg, Niagara and Grapevine resorts feature a
    custom-designed, outdoor 18-hole miniature golf course. We are
    evaluating the desirability of adding this attraction to some of
    our other resorts.
    gr8_space.  Our Grapevine resort features our
    approximately, 1,000 square foot interactive family tech
    center. gr8_space 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 6




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Operating
    Properties
    Great
    Wolf Lodge of Wisconsin Dells, Wisconsin
    one-hour two-hour
  six-acre
    Great
    Wolf Lodge of Sandusky, Ohio
  ®
  one-hour two-hour three-hour
   7




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Great
    Wolf Lodge of Traverse City, Michigan
  three-hour four-hour
  10,000 square-feet.
  Great
    Wolf Lodge of Kansas City, Kansas
  one-hour three-hour
    Blue
    Harbor Resort of Sheboygan, Wisconsin
  12-acre one-hour two-hour three-hour four-hour
   8




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Great
    Wolf Lodge of Williamsburg, Virginia
  83-acre one-hour three-hour
    10,000 square-feet.
  Great
    Wolf Lodge of the Pocono Mountains
  95-acre four-hour
    Great
    Wolf Lodge of Niagara Falls, Ontario
   9




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Great
    Wolf Lodge of Mason, Ohio
  39-acre
  state-of-the-art
  Great
    Wolf Lodge of Grapevine, Texas
  51-acre 60-mile
   10




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Properties
    Under Construction
  Great
    Wolf Lodge of Grand Mound, Washington
  39-acre
    Great
    Wolf Lodge of Concord, North Carolina
  37-acre
    Business
    and Growth Strategies
    
    Increase Total Resort Revenue.  We intend to
    increase total resort revenue by increasing:  
    Average Room Rate:  We plan to increase
    our average room rate over time by driving demand for our
    resorts and focusing on yield management techniques. We intend
    to increase demand through intelligent sales, marketing and
    public relations efforts, by increasing our visibility and by
    enhancing our brand image. We plan to employ our yield
    management techniques to project demand in order to effectively
    direct our sales and marketing efforts and selectively increase
    room rates. We believe that our focus on optimizing the
    relationship between room rates and occupancies will allow us to
    maximize profitability.
    Average Occupancy:  We intend to maintain high
    occupancy levels during peak times and also focus on increasing
    our off-peak occupancies. Our off-peak occupancy levels
    generally occur in May, September and during the middle of the
    week. Our occupancy levels are affected by school calendars,
    with the summer months, weekends, spring break period and other
    school holidays achieving the 11




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
    Other Revenue:  We provide our guests with a
    self-contained vacation experience and attempt to capture a
    significant portion of their spending on food and beverage,
    entertainment and merchandise. Each of our resorts generally
    contains at least one themed restaurant, an ice cream shop and
    confectionery, snack shop, an full-service adult spa, kids spa,
    gift shop, game arcade, MagiQuest, minigolf and gr8_space. The
    average non-room revenue, including the revenue from these
    amenities, was approximately $127 per occupied room night for
    the year ended December 31, 2007. By providing these
    additional revenue-generating amenities, we seek to maximize the
    amount of time and money spent
    on-site by
    our guests. 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.  
    Leverage Our Economies of Scale.  We intend to
    take advantage of the following economies of scale:  
    Increased Purchasing Power:  We intend to
    capitalize on our increasing purchasing power with respect to
    operating supplies, food and beverage, insurance and employee
    benefits. As the number of resorts we own and operate increases,
    we expect to be able to leverage our increased buying volume and
    power to obtain more advantageous and predictable pricing on
    commodity goods and services. We have entered into an
    arrangement with a nationally recognized hospitality procurement
    company to further leverage our buying power. In addition, we
    intend to continue to manage increases and fluctuations in the
    cost of electricity, water and natural gas for our resorts by
    entering into volume-based contracts where we are able to do so.
    Centralized Services:  By centralizing certain
    of our services, we focus on decreasing our
    per-unit
    costs, increasing our control over those services and being in a
    position to deliver a greater quality of service to our
    customers. For example, our central reservations call center
    operates every day of the year, has approximately 120 full- and
    part-time employees and accepts reservations for our resorts.
    The call center also has the capacity to efficiently handle high
    call volumes and should require only limited additional
    incremental costs over the next several years as we increase our
    portfolio of resorts. In addition, as we have grown we have
    focused on increasing the functionality of our web-based online
    reservations system. We expect this centralized function to
    allow us to further efficiently handle an increasing volume of
    guest reservations with limited incremental costs.
    Build Upon Our Existing Brand Awareness and
    Loyalty.  Our Great Wolf Lodge brand is symbolized
    by our distinctive and easily identifiable theming, from our
    signature treehouse waterfort, to our mascots and recognizable
    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.    
    Capitalize on First-Mover Advantage.  We intend
    to be the first to develop and operate family entertainment
    resorts featuring indoor waterparks in our selected target
    markets. We intend to continue to leverage our development
    expertise, existing platform and model and our access to capital
    to take advantage of the significant barriers to entry
    associated with the development of large family entertainment
    resorts with indoor waterparks like our Great Wolf Lodge
    resorts. We seek to set the standard for quality, build on
    visible sites and capitalize on the opportunity to be located
    near other popular local attractions that draw our target
    customers. We believe that the combination of our first mover
    advantage and the significant barriers to entry in our target
    markets provide us with a competitive advantage. 12




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
    Focus on Development and Strategic Growth
    Opportunities.  Family entertainment resorts
    featuring indoor waterparks are a relatively new concept and a
    growing segment of the resort and entertainment industries. We
    intend to focus on this growth opportunity by:  
    Building in Target Markets:  We intend to
    develop additional resorts, including resorts in major domestic
    markets with us as the sole or majority owner, as well as
    licensed or minority-owned resorts in secondary
    U.S. and/or
    international markets. A new resort, from market selection to
    opening, can take over four years to develop and build. We
    believe that our experience will enable us to more efficiently
    develop and build new resorts in our target markets. We
    currently have personnel exclusively dedicated for our potential
    international markets.
    Selective Sales 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 CNL joint
    venture. We intend to continue to manage all of our branded
    Great Wolf Lodge resorts, and we will consider transactions that
    allow us to maintain our management/licensing position at a
    resort while realizing value created through our development
    expertise. In those situations, we expect then to recycle
    capital generated by such transactions for investment in future
    growth opportunities.
    Licensing Our Resort Concept
    Internationally:  We plan to selectively seek
    licensing and management opportunities internationally. Similar
    to our arrangement with Ripleys in Niagara Falls, Ontario,
    we intend to enter into license and management agreements with
    reputable companies that have local market knowledge in order to
    increase revenues and expand the reach of our Great Wolf Lodge
    brand.
    Forming Strategic Partnerships:  We will
    consider strategic partnerships on a selective basis. For
    example, we have entered into resort ownership joint ventures
    with CNL Income Properties and The Confederated Tribes of the
    Chehalis Reservation and we are actively exploring other
    possible joint venture arrangements for future properties.
    Expanding and Enhancing Existing Resorts:  We
    intend to continue to focus on growth opportunities at our
    existing resorts by adding revenue-enhancing features that drive
    ancillary vacation spending at certain of our resorts and meet
    our target returns, including non-water based attractions. We
    also intend to continue to evaluate incremental
    revenue-generating opportunities, such as expanding the number
    of rooms and adding condominium units at certain of our resorts.
    In addition, we will consider adding conference centers at
    existing resorts to capture convention and other business travel
    revenue.  
    Continue 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.  Our
    Competitive Strengths
    
    Unforgettable Family Resort Experience.  Each
    of our resorts provides a welcome opportunity for families to
    spend quality time together, relax and reconnect. In addition to
    our indoor waterparks, our resorts provide other activities and
    amenities that the entire family can enjoy together. Our family
    amenities and activities include themed restaurants, a game
    arcade, ice cream shop and confectionery, gift shop, snack shop,
    animated Clock Tower and fireside bedtime stories. We also have
    amenities and activities tailored to each member of the family,
    including our full-service Aveda spa, Scooops Kids Spa, Cub
    Club, MagiQuest, minigolf, gr8_space and fitness room. Our
    resorts also offer special events, including seasonal and
    holiday activities, wild animal and nature educational programs
    and 13




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
    Value, Comfort and Convenience.  Guest rooms at
    each of our resorts are spacious and comfortable suites that
    generally range in size from approximately 385 square feet
    to 1,970 square feet and include a wet bar, microwave,
    refrigerator and dining and sitting area. Many of the suites
    have specific themes that are geared toward enhancing our
    younger guests experience, including our KidCabin and Wolf
    Den Suites, which have a partitioned room with bunk beds
    designed as log cabins and Northwoods forest dens, respectively.
    All of our resorts are within a convenient driving distance of
    our large target customer bases. Because our indoor waterparks
    and our other amenities generally are not impacted by weather
    conditions, we offer our guests a reliable experience. On
    average, a two-night stay at our resorts costs a family of four
    approximately $700, making it an affordable family vacation
    option.
    Favorable Market Trends.  We believe recent
    vacation trends favor our Great Wolf Lodge concept as the number
    of families choosing to take shorter, more frequent vacations
    that they can drive to have increased in recent years. We
    believe that these trends will continue and that we are well
    positioned to take advantage of them. We believe our resorts are
    less affected by changes in economic cycles, as drive-to
    destinations are generally less expensive and more convenient
    than destinations that require air travel. In addition, we have
    identified over 50 markets in the United States that, according
    to Third Wave Research, each has a population in excess of five
    million people located within a convenient driving distance.
    Market Presence and Barriers to Entry.  We are
    the largest owner and operator of family entertainment resorts
    with indoor waterparks in North America based on the number of
    resorts in operation. We believe this market presence gives us a
    significant competitive advantage in attracting guests and
    efficiently developing additional resorts. In addition, we
    believe the significant barriers to entry present in our
    industry segment; including operational complexity, substantial
    capital requirements, availability of suitable sites in
    desirable markets and a difficult, multi-year permitting
    process, discourage other companies in the lodging and
    entertainment industries from developing similar family
    entertainment resorts. A new Great Wolf Lodge resort typically
    takes from one to three years to develop, which includes market
    selection, site selection and permitting, an additional
    18 months or more to build and costs in excess of $120,000.
    Focus on Safety.  We invest heavily in safety
    measures in the design and operation of our resorts. For
    example, we specifically design our waterparks with attention to
    sightlines and safety precautions and use one of the most
    respected training methods in the water safety industry to train
    each of our lifeguards. We design and construct our indoor
    waterparks with
    state-of-the-art
    air quality and water treatment systems. We also maintain and
    periodically upgrade our facilities to ensure that we provide
    our guests with
    best-in-class
    safety measures and systems.
    Experienced Management Team and Committed and Motivated
    Staff.  Our senior management team has significant
    experience in the hospitality, family entertainment and real
    estate development industries and has significant expertise in
    operating complex, themed, family entertainment resorts
    featuring indoor waterparks. In addition, we have a team of
    skilled, loyal and committed employees at each of our resorts.
    We offer our resort employees a number of benefits, including
    what we believe is a pleasant and rewarding work environment,
    career-oriented training, the ability to obtain consistent
    year-round work, which is uncommon in the resort industry, and
    career growth opportunities. As a result, we believe our
    employees are committed to delivering a superb customer
    experience and helping to assure that our guests fully enjoy
    their family vacation. 14




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Industry
    Overview
        Resort
    Operations
       15




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Training
    and Development
    Sales and
    Marketing
          Maintenance
    and Inspections
  On-site build-up,
 16




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Development
    Criteria
    
    Large target customer base.  We select
    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 negatively affects
    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.
    Highly visible and large sites.  We generally
    develop 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 sites that have
    enough acreage to allow for potential expansions and future
    sales of out-lots.      Competition
     17




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##### Table of Contents



and/or
      Governmental
    Regulation
       18




---



##### Table of Contents



time-to-time,
    Environmental
    Matters
       19




---



##### Table of Contents



and/or clean-up clean-up, clean-up
    Insurance
      Intellectual
    Property
   20




---



##### Table of Contents



Employees
    Offices
    Domestic
    and Foreign Operations
    Code
    of Business Conduct and Ethics
  greatwolf.com
  Available
    Information
  greatwolf.com Form 10-K, Form 10-Q, Form 8-K sec.gov
  ITEM 1A.
    RISK
    FACTORS   21




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##### Table of Contents



Risks
    Related to Our Business
  We may
    not be able 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 of financing on favorable or any terms;
    failure of developed properties to achieve desired revenue or
    profitability levels once opened;
    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.
    
    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, 22




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##### Table of Contents




    convenience,
    service levels and
    reservation systems.    We may
    not be able to achieve or manage our expected growth, which
    could adversely affect our operating results.
  and/or
  Accidents
    or injuries in 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 attendance, which would harm
    our business, financial condition and results of
    operations.
     23




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##### Table of Contents



We
    have a history of losses and we may not be able to achieve or
    sustain profitability.
    Our
    business is 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.
    Changes
    in consumer spending habits may affect our growth, financial
    condition and results of operations.
   24




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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.
    We
    will be required to make certain capital expenditures to
    maintain the quality of our resorts, which could adversely
    affect our financial condition and results of
    operations.
   25




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We may
    not be able to adequately protect our intellectual property,
    which could harm the value of our brands and adversely affect
    our business.
          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.
   26




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If we
    fail to maintain effective internal controls 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
    and our stock price.
      Sustained
    increases in costs of medical and other employee health and
    welfare benefits may reduce our profitability.
    We may
    have disputes with our joint venture partners owning majority
    interests in three resorts that we manage and
    license.
    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.
     27




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##### Table of Contents



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.
  ® ® ®
  The
    illiquidity of real estate may make it difficult for us to
    dispose of one or more of our resorts.
    We may
    have assumed unknown liabilities in connection with the
    Formation Transactions.
   28




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##### Table of Contents



We
    depend on Native American laws in the operation of a portion of
    our business.
    We
    depend on a seasonal workforce.
    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.
   29




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out-of-compliance out-of-compliance
        and/or clean-up clean-up, clean-up
 30




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Regulation
    of the marketing and sale of condominiums, including a prior
    offer of condominiums at our Blue Harbor Resort, could adversely
    affect our business.
        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.
   31




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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.
    
    variations in our quarterly operating results;
    changes in market valuations of companies in the resort or
    entertainment industries, generally, and the family
    entertainment resort segment, specifically;
    fluctuations in stock market prices and volumes;
    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 of a type or in a quantity deemed desirable by
    participants in the public market; and
    expectations about macroeconomic condition.   32




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##### Table of Contents



The
    sale of a substantial number of shares of our common stock may
    cause the market price of our common stock to
    decline.
    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 right 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.
    We 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;
    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. 33




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Investing
    through partnerships or joint ventures decreases our ability to
    manage risk.
    The
    covenants in our mortgage loan agreements impose significant
    restrictions on 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.    We may
    not be able to perform on our debt guarantees.
    Certain
    of our insiders exercise considerable influence over the
    company.
  Form 10-K,
  Forward-Looking
    Statements
  Form 10-K
 34




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##### Table of Contents



ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    
    resort ownership/operation, and
    resort third-party management, and
    condominium sales-revenues.      
    Great Wolf Lodge of Wisconsin Dells is located on 16 acres
    in Wisconsin Dells, Wisconsin, all of which have been developed.
    This property is owned by a joint venture of which we have a
    30.32% minority interest and CNL Income Properties, Inc. has a
    69.68% majority interest. This property is included in our
    Resort Third-Party Management segment.
    Great Wolf Lodge of Sandusky is located on 15 acres in
    Sandusky, Ohio, all of which have been developed. This property
    is owned by a joint venture of which we have a 30.32% minority
    interest and CNL Income Properties, Inc. has a 69.68% majority
    interest. This property is included in our Resort Third-Party
    Management segment. 35




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##### Table of Contents




    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. This property is
    included in our Resort Ownership/Operation segment.
    Great Wolf Lodge of Kansas City is located on 17 acres in
    Kansas City, Kansas, all of which have been developed. This
    property is included in our Resort Ownership/Operation segment.
    Blue Harbor Resort of Sheboygan is located on 12 leased acres in
    Sheboygan, Wisconsin, all of which have been developed. This
    property is included in our Resort Ownership/Operation segment.
    Great Wolf Lodge of Williamsburg is located on 83 acres in
    Williamsburg, Virginia, of which 36 acres have been
    developed or are under development and 47 acres remain
    undeveloped. This property is included in our Resort
    Ownership/Operation segment.
    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. This property is included in
    our Resort Ownership/Operation segment.
    Great Wolf Lodge of Mason is located on 39 acres in Mason,
    Ohio. All 39 acres of this property are developed. This
    property is included in our Resort Ownership/Operation segment.
    Great Wolf Lodge of Grapevine is located on 51 acres in
    Grapevine, Texas, of which 30 acres are developed and
    21 acres remain undeveloped. This property is included in
    our Resort Ownership/Operation segment.
    Great Wolf Lodge of Grand Mound, which is under construction, is
    located on 39 leased acres in Grand Mound, Washington. 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. This property is
    included in our Resort Third-Party Management segment.
    Great Wolf Lodge of Concord, which is under construction, is
    located on 37 acres in Concord, North Carolina, of
    which 34 acres are being developed and 3 acres may be
    subdivided and developed separately. This property is included
    in our Resort Ownership/Operation segment.      ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   36




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##### Table of Contents



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


LowFiscal 2006:First Quarter

$
11.68


$
9.80Second Quarter

$
12.72


$
10.70Third Quarter

$
12.71


$
10.16Fourth Quarter

$
14.22


$
11.54Fiscal 2007:First Quarter

$
14.73


$
12.91Second Quarter

$
15.16


$
12.15Third Quarter

$
15.85


$
12.27Fourth Quarter

$
13.46


$
9.51Fiscal 2008:First Quarter through March 4, 2008

$
9.94


$
6.78     30-year
  10-year
   37




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##### Table of Contents



Dividend
    Policy
    Performance
    Graph
      
  Securities
    Authorized for Issuance Under Equity Compensation
    Plans
   38




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA    Great
    Wolf Resorts Financial Information
    
    our corporate entity that provides resort development and
    management services;
    our Traverse City, Kansas City, Sheboygan, Williamsburg, Pocono
    Mountains, Mason and Grapevine operating resorts;
    for all periods prior to October 2005, the Wisconsin Dells and
    Sandusky resorts;
    equity interests in resorts in which we have ownership interests
    but which we do not consolidate; and
    our resorts that are under construction which we will
    consolidate.  Great
    Lakes Predecessor Financial Information
    
    The Great Lakes Companies, Inc. (GLC) and its consolidated
    subsidiaries, including development of, ownership interests in,
    and management contracts with respect to, resorts and certain
    non-resort hotels and multifamily housing development and
    management assets;
    the entities that owned our Traverse City, Kansas City and
    Sheboygan operating resorts; and
    the entities that owned our Williamsburg and Pocono Mountains
    resorts that were under construction.     39




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##### Table of Contents



Form 10-K.
  December 21,Year Ended


Year Ended


Year Ended


2004-



January 1,December 31,


December 31,


December 31,


December 31,



2004-


Year Ended2007


2006


2005


2004



December 20,


December 31,Great Wolf


Great Wolf


Great Wolf


Great Wolf



2004


2003Resorts, Inc.


Resorts, Inc.


Resorts, Inc.


Resorts, Inc.



Predecessor


Predecessor(Dollars in thousands, except per share amounts)Statement of Operations:Revenues:Rooms

$
112,261


$
87,775


$
73,207


$
3,261



$
31,438


$
18,801Food, beverage and other


56,673



43,137



36,846



1,289




16,110



9,439Sales of condominiums










25,862












Management and other fees


2,855



2,087



494



79




3,157



3,109Management and other fees-related parties


4,314



3,729



482












Other revenue from managed properties(1)


11,477



11,920



2,524








14,553



14,904Total revenues


187,580



148,648



139,415



4,629




65,258



46,253Operating expenses by department:Rooms


15,716



11,914



10,944



298




4,917



3,265Food, beverage and other


48,300



35,923



31,407



958




13,678



8,580Other operating expenses:Selling, general and administrative


47,915



41,421



26,894



7,372




18,613



11,376Property operating costs


30,555



23,217



24,798



295




8,810



5,283Depreciation and amortization


36,372



25,903



26,248



1,897




12,925



7,744Costs of sales of condominiums










16,780












Goodwill impairment






50,975
















Loss on disposition of property


128



1,066



26,161












Other expenses from managed properties(1)


11,477



11,920



2,524








14,553



14,904Total operating expenses


190,463



202,339



165,756



10,820




73,496



51,152Net operating loss


(2,883
)


(53,691
)


(26,341
)


(6,191
)



(8,238
)


(4,899
)Investment income


(667
)



















Interest income


(2,758
)


(3,105
)


(1,623
)


(66
)



(224
)


(55
)Interest expense


14,887



7,169



6,728



280




6,748



4,413Gain on sale of investments and securities



















(1,653
)


Interest on mandatorily redeemable shares



















1,761



(3,136
)Loss before income taxes, minority interest, and equity in
    unconsolidated related parties


(14,345
)


(57,755
)


(31,446
)


(6,405
)



(14,870
)


(6,121
)Income tax benefit


(5,859
)


(8,764
)


(7,199
)


(2,563
)







Minority interests, net of tax


(452
)


(502
)


(4
)











Equity in unconsolidated related parties, net of tax


1,547



761



170












Loss from continuing operations


(9,581
)


(49,250
)


(24,413
)


(3,842
)



(14,870
)


(6,121
)Income from discontinued operations



















1,928



1,118Loss before cumulative effect of change in accounting principle


(9,581
)


(49,250
)


(24,413
)


(3,842
)



(12,942
)


(5,003
)Cumulative effect of change in accounting principle























460Net loss

$
(9,581
)

$
(49,250
)

$
(24,413
)

$
(3,842
)


$
(12,942
)

$
(4,543
)Other comprehensive loss, net of tax:Unrealized loss on interest rate swaps


(387
)



















Comprehensive loss

$
(9,968
)

$
(49,250
)

$
(24,413
)

$
(3,842
)


$
(12,942
)

$
(4,543
)Basic loss per share

$
(0.31
)

$
(1.63
)

$
(0.81
)

$
(0.13
)Diluted loss per share

$
(0.31
)

$
(1.63
)

$
(0.81
)

$
(0.13
)Weighted average common shares outstanding  Basic


30,533,249
(2)


30,299,647
(2)


30,134,146
(2)


30,132,896
(2)Diluted


30,533,249
(2)


30,299,647
(2)


30,134,146
(2)


30,132,896
(2) 40




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##### Table of Contents



December 21,Year Ended


Year Ended


Year Ended


2004-



January 1,December 31,


December 31,


December 31,


December 31,



2004-


Year Ended2007


2006


2005


2004



December 20,


December 31,Great Wolf


Great Wolf


Great Wolf


Great Wolf



2004


2003Resorts, Inc.


Resorts, Inc.


Resorts, Inc.


Resorts, Inc.



Predecessor


Predecessor(Dollars in thousands, except per share amounts)Cash Flows:Cash flows from:Operating activities

$
29,751


$
29,723


$
17,788


$
762



$
3,637


$
8,126Investing activities


(213,867
)


(107,123
)


(65,496
)


(97,583
)



(64,472
)


(64,280
)Financing activities


105,935



119,396



23,081



172,151




61,424



54,854Balance Sheet Data (end of period):Total assets

$
770,805


$
683,439


$
605,526


$
622,025







$
173,494Total long-term debt


396,302



289,389



168,328



142,665








93,733Long-term debt secured by assets of spun-off entities























12,108Long-term debt secured by assets held for sale























14,220Non-GAAP financial Measures:EBITDA

$
32,305
(3)

$
(28,221
)(3)

$
(369
)(3)

$
(4,294
)


$
6,507


$
7,559     (1)
    
    Reflects reimbursement of payroll, benefits and costs related to
    the operations of properties managed by us in
    2005-2007
    and the Predecessor in
    2003-2004.(2)
    
    Included in the total shares outstanding of our common stock are
    129,412 shares 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)
    
    See reconciliation to net loss in Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation  Non-GAAP Financial Measures.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion should be read in conjunction with
    the financial statements and notes thereto appearing elsewhere
    in this report. Where appropriate, the following discussion
    includes analysis of the effects of our IPO, the Formation
    Transactions and related refinancing transactions and certain
    other transactions. We make statements in this section that are
    forward-looking statements within the meaning of the federal
    securities laws. For a complete discussion of forward-looking
    statements, see the section in Item 1A of this Annual
    Report on
    Form 10-K
    report entitled Forward-Looking Statements. Certain
    risk factors may cause our actual results, performance or
    achievements to differ materially from those expressed or
    implied by the following discussion. For a discussion of such
    risk factors, see the sections in Item 1A of this Annual
    Report on
    Form 10-K
    report entitled Risk Factors and
    Forward-Looking Statements. All dollar amounts in
    this discussion, except for per share data and operating
    statistics, are in thousands.
  Overview
    Business.
 41




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##### Table of Contents



IndoorOpened/

Number of

Number of

EntertainmentOwnership Percentage

Opening

Guest Suites

Condo Units(1)

Area(2)(Approx.
    ft2)Existing Resorts:Wisconsin Dells, WI(3)


30.32
%

1997


308



77



102,000Sandusky, OH(3)


30.32
%

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


100
%

2005


405







87,000Pocono Mountains, PA


100
%

2005


401







101,000Niagara Falls, ONT(4)





2006


406







104,000Mason, OH(5)


100
%

2006


401







105,000Grapevine, TX(6)


100
%

December 2007


402







110,000Resorts Under Construction:Grand Mound, WA(7)


49
%

March 2008


398







74,000Concord, NC(8)


100
%

Spring 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 and fitness room, as well as our
    Aveda®
    spa in the resorts that have such amenities.(3)
    
    These properties are owned by a joint venture. CNL Income
    Properties, Inc. (CNL), a real estate investment trust focused
    on leisure and lifestyle properties, owns a 69.68% interest in
    the joint venture, and we own a 30.32% interest. We operate the
    properties and license the Great Wolf Lodge brand to the joint
    venture under long-term agreements through October 2020, subject
    to earlier termination in certain situations.(4)
    
    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. We manage the resort on behalf of Ripley and also provide
    central reservation services.(5)
    
    We initially entered into a joint venture agreement with a
    subsidiary of CBS Corporation (CBS) to build this resort and
    attached conference center. In June 2007 we purchased CBSs
    minority equity interest in this joint venture, and we now own
    100% of the resort.(6)
    
    Construction on the resort began in June 2006 and it was
    completed in December 2007. In late 2007, we began construction
    on an additional 203 suites and 20,000 square feet of
    meeting space as an expansion of this resort. Expected
    completion of the expansion is early 2009. 42




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##### Table of Contents



(7)
    
    We have entered into a joint venture agreement with The
    Confederated Tribes of the Chehalis Reservation (Chehalis) to
    build this resort. We will operate the resort under our Great
    Wolf Lodge brand. Chehalis has leased the land needed for the
    resort to the joint venture, and they have a majority equity
    interest in the joint venture. Construction on the 398-suite
    resort began in October 2006 with expected completion in March
    2008.(8)
    
    We have announced plans to develop a Great Wolf Lodge resort in
    Concord, North Carolina. The Northwoods-themed, approximately
    402-suite resort will provide a comprehensive package of
    first-class destination lodging amenities and activities.
    Construction on the resort began in October 2007 with expected
    completion in Spring 2009.  Industry Trends.
        Outlook.
   43




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##### Table of Contents



and/or ramp-up
    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 44




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##### Table of Contents




    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 available room, or Total RevPAR;
    Total revenue per occupied room, or Total RevPOR; and
    Earnings before interest, taxes, depreciation and amortization,
    or EBITDA.    
    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 RevPAR is calculated by dividing total revenue by total
    available rooms.
    Total RevPOR is calculated by dividing total revenue by total
    occupied rooms.       45




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##### Table of Contents



Critical
    Accounting Policies and Estimates
    Investments in Property and Equipment.
    Buildings and improvements


20-40 yearsFixtures and equipment, including waterpark equipment


5-15 years       Carrying Values of Goodwill, Intangible Assets and Investment
    in Related Parties.
   46




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##### Table of Contents



Accounting for income taxes.
      New
    Accounting Pronouncements
   47




---



##### Table of Contents



48




---



##### 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.      Year Ended December 31,2007


2006


2005Net loss

$
(9,581
)

$
(49,250
)

$
(24,413
)Adjustments:Interest expense, net


12,129



4,064



5,105Income tax benefit


(6,615
)


(8,938
)


(7,309
)Depreciation and amortization


36,372



25,903



26,248EBITDA

$
32,305


$
(28,221
)

$
(369
)  49




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##### Table of Contents



Results
    of Operations
  General
    Great
    Wolf Resorts Financial Information
    
    our subsidiary entity that provides resort development and
    management/licensing services;
    our Traverse City, Kansas City, Sheboygan, Williamsburg, Pocono
    Mountains, Mason and Grapevine operating resorts;
    equity interests in resorts in which we have ownership interests
    but which we do not consolidate; and
    our resorts that are under construction which we will
    consolidate.  Revenues.
  
    lodging revenue, which includes rooms, food and beverage, and
    other department revenues from our resorts;
    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 (except for the Niagara Falls resort).
    Under our management agreements, the resort owners reimburse us
    for payroll, benefits and certain other costs related to the
    operations of the managed properties. Emerging Issues Task
    Force, or EITF, Issue No.
    01-14,
    Income Statement Characteristics of Reimbursements for
    Out-of-Pocket Expenses
    (EITF 01-14),
    establishes standards for accounting for reimbursable expenses
    in our statements of operations. Under this pronouncement, the
    reimbursement of payroll, benefits and costs is recorded as
    other revenue from managed properties 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
    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, which are recorded as an
    expense in accordance with
    EITF 01-14. 50




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##### Table of Contents



Year
    Ended December 31, 2007 compared with Year Ended
    December 31, 2006
    All Properties(a)


Same Store Comparison(b)Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,


Increase (Decrease)2007


2007


2006


$


%Occupancy


61.5
%


62.5
%


64.1
%


N/A



(2.5
)%ADR

$
244.16


$
241.56


$
234.21


$
7.35



3.1
%RevPAR

$
150.16


$
150.92


$
150.24


$
0.68



0.5
%Total RevPOR

$
370.77


$
363.65


$
351.34


$
12.31



3.5
%Total RevPAR

$
228.02


$
227.20


$
225.37


$
1.83



0.8
%     (a)
    
    Includes results for properties that were open for any portion
    of the period, for all owned and/or managed resorts.(b)
    
    Same store comparison includes properties that were open for the
    full periods in 2007 and 2006 (that is, our Wisconsin Dells,
    Sandusky, Traverse City, Kansas City, Sheboygan, Williamsburg,
    Poconos, and Niagara Falls resorts).      Increase2007


2006


(Decrease)Revenues

$
187,580


$
148,648


$
38,932Departmental operating expenses


64,016



47,837



16,179Selling, general and administrative


47,915



41,421



6,494Property operating costs


30,555



23,217



7,338Depreciation and amortization


36,372



25,903



10,469Goodwill impairment






50,975



(50,975
)Loss on disposition of property


128



1,066



(938
)Net operating loss


(2,883
)


(53,691
)


50,808Net interest expense


12,129



4,064



8,065Income tax benefit


(5,859
)


(8,764
)


2,905Net loss


(9,581
)


(49,250
)


39,669   Revenues.
  Operating expenses.
  
    Departmental expenses increased for the Williamsburg, Pocono
    Mountains, Mason and Grapevine resorts by $16,814 for the year
    ended December 31, 2007, as compared to the year ended
    December 31, 51




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##### Table of Contents




    Total selling, general and administrative expenses increased by
    $6,494 due primarily to the opening of our Grapevine and Mason
    resorts, the expansion of our Williamsburg resort and increased
    marketing efforts at our Pocono Mountains resort.
    Total property operating costs (exclusive of opening costs)
    increased $5,349 for the year ended December 31, 2007, as
    compared to the year ended December 31, 2006, due primarily
    to the opening of our Grapevine and Mason resorts, as well as
    increased repairs and maintenance expense and increased
    utilities expense related to the expansion of our Williamsburg
    resort and amenity additions to several of our other resorts.
    Opening costs related to our resorts were $9,384 for the year
    ended December 31, 2007, as compared to $7,395 for the year
    ended December 31, 2006.
    Total depreciation and amortization increased mainly due to the
    opening of our Grapevine and Mason resorts and the expansion at
    our Williamsburg resort. The total increase in depreciation and
    amortization at these three resorts was $9,331 during the year
    ended December 31, 2007 as compared to the year ended
    December 31, 2006.
    For the year ended December 31, 2006 we recorded a goodwill
    impairment charge of $50,975 related to our Traverse City and
    Sheboygan resorts, as the implied fair value of the goodwill was
    deemed less than the carrying value. There was no similar charge
    recorded in the year ended December 31, 2007.
    Loss on disposition of property of $1,066 during the year ended
    December 31, 2006 primarily relates to finalization of the
    accounting for the sale of 70% of our equity interests in the
    Wisconsin Dells and Sandusky resorts in October 2005.  Net operating loss.
  Net loss.
    
    An increase in net interest expense of $8,065 mainly due to
    mortgage debt related our Pocono Mountains and Mason
    resorts, and
    A decrease of $2,905 in income tax benefit recorded for the year
    ended December 31, 2007 as compared to the year ended
    December 31, 2006. Our effective tax rate in 2007 was
    (40.8)% as compared to 2006 of (15.4)% primarily due to the
    impact of the goodwill impairment charge in 2006.  Year
    Ended December 31, 2006 compared with Year Ended
    December 31, 2005
   52




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##### Table of Contents



Increase2006


2005


(Decrease)Revenues

$
148,648


$
139,415


$
9,233Departmental operating expenses


47,837



42,351



5,486Selling, general and administrative


41,421



26,894



14,527Property operating costs


23,217



24,798



(1,581
)Depreciation and amortization


25,903



26,248



(345
)Goodwill impairment


50,975







50,975Cost of sales of condominiums






16,780



(16,780
)Loss on disposition of property


1,066



26,161



(25,095
)Net operating loss


(53,691
)


(26,341
)


(27,350
)Net interest expense


4,064



5,105



(1,041
)Income tax benefit


(8,764
)


(7,199
)


(1,565
)Net loss


(49,250
)


(24,413
)


(24,837
)   Revenues.
  
    Total revenues for the Williamsburg, Pocono Mountains and Mason
    resorts were $79,020 and $26,242 for the years ended
    December 31, 2006 and 2005, respectively.
    Total management and other fees related to our joint ventures
    were $3,729 and $482 for the years ended December 31, 2006
    and 2005, respectively.
    Other revenue from managed properties was $11,920 and $2,524 for
    the years ended December 31, 2006 and 2005, respectively.
    Revenue from sales of condominiums at our Wisconsin Dells resort
    was $25,862 for the year ended December 31, 2005. We had no
    similar revenue during the year ended December 31, 2006.
    Total revenues for the Wisconsin Dells and Sandusky resorts were
    $30,212 for the year ended December 31, 2005.  Operating expenses.
  
    Total departmental operating expenses for the Williamsburg,
    Pocono Mountains and Mason resorts were $28,853 and $11,330 for
    the years ended December 31, 2006 and 2005, respectively.
    Total departmental expenses for the Wisconsin Dells and Sandusky
    resorts were $11,169 for the year ended December 31, 2005.
    Total selling, general and administrative expenses for the
    Williamsburg, Pocono Mountains, and Mason resorts were $18,247
    and $5,097 for the years ended December 31, 2006 and 2005,
    respectively. Total selling, general and administrative expenses
    for the Wisconsin Dells and Sandusky resorts were $7,133 53




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##### Table of Contents



for the year ended December 31, 2005. During the year ended
    December 31, 2006 our corporate selling, general and
    administrative expenses included increases over that of the year
    ended December 31, 2005 related to share based compensation
    of $5,113, compensation-related expenses of $1,499 due to
    increased staffing at our corporate office and $1,663 related to
    professional fees.  
    Total property operating costs (exclusive of opening costs) for
    the Williamsburg, Pocono Mountains, and Mason resorts were
    $7,509 for the year ended December 31, 2006 as compared to
    $6,371 for the year ended December 31, 2005. Total property
    operating costs (exclusive of opening costs) for the resorts in
    Wisconsin Dells and Sandusky were $3,822 for the year ended
    December 31, 2005. Opening costs related primarily to our
    Pocono Mountains, Mason, Grapevine and Grand Mound resorts and
    the resort in Niagara Falls were $7,297 for the year ended
    December 31, 2006, as compared to $5,309 for the year ended
    December 31, 2005 related to our resorts in Williamsburg
    and the Pocono Mountains and the condominiums in Wisconsin Dells.
    Total depreciation and amortization for the Williamsburg, Pocono
    Mountains and Mason resorts was $13,707 and $8,059 for the years
    ended December 31, 2006 and 2005, respectively. Total
    depreciation and amortization for the Wisconsin Dells and
    Sandusky resorts was $5,769 for the year ended December 31,
    2005.
    For the year ended December 31, 2006 we recorded a goodwill
    impairment charge of $50,975 related to our Traverse City and
    Sheboygan resorts, as the implied fair value of the goodwill was
    deemed less than the carrying value.
    Cost of sales of condominiums of $16,780 relates to the
    condominiums sold at our Wisconsin Dells resort during the year
    ended December 31, 2005. We did not incur a similar charge
    during the year ended December 31, 2006.
    Loss on disposition of property of $1,066 during the year ended
    December 31, 2006 primarily relates to finalization of the
    accounting for the sale of 70% of our equity interests in the
    Wisconsin Dells and Sandusky resorts in October 2005 as compared
    to the loss on disposition of real estate of $26,161 recorded in
    2005 related to the 70% interest sold in our Wisconsin Dells and
    Sandusky resorts.  Net operating loss.
  Net loss.
  
    A increase in net operating loss from $(26,341) for 2005 to
    $(53,691) for 2006.
    A decrease in net interest expense of $1,041 mainly due to
    higher interest income for 2006 as compared to 2005.
    A increase of an income tax benefit of $1,565 for 2006 as
    compared to 2005.  Segments
    
    resort ownership/operation-revenues derived from our
    consolidated owned resorts; and
    resort third-party management-revenues derived from management,
    license and other related fees from unconsolidated managed
    resorts; and
    condominium sales-revenues derived from sales of condominium
    units to third-party owners.    54




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##### Table of Contents



Year Ended December 31,Increase2007


2006


(Decrease)Resort Ownership/OperationRevenues

$
168,934


$
130,912


$
38,022EBITDA, excluding certain items


32,179



26,729



5,450Resort Third-Party ManagementRevenues


18,646



17,736



910EBITDA, excluding certain items


7,169



5,817



1,352Condominium SalesRevenues










EBITDA, excluding certain items


(682
)


(370
)


(312
)OtherRevenues










EBITDA, excluding certain items


(5,177
)


(8,989
)


3,812     Liquidity
    and Capital Resources
    Long-Term Debt:Traverse City/Kansas City mortgage loan

$
71,542Mason mortgage loan


76,800Pocono Mountains mortgage loan


97,000Grapevine construction loan


58,260Junior subordinated debentures


80,545Other Debt:City of Sheboygan bonds


8,465City of Sheboygan loan


3,690$
396,302   Traverse City/Kansas City Mortgage Loan 25-year
  Mason Mortgage Loan 30-day 25-year
 55




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##### Table of Contents



Pocono Mountains Mortgage Loan  18-month 30-year
  Grapevine Construction Loan 30-day 25-year
    Junior Subordinated Debentures
  30-year
     56




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##### Table of Contents



10-year
      City of Sheboygan Bonds No. 91-10,
  City of Sheboygan Loan
  Williamsburg Mortgage Loan
  Future Maturities
  2008

$
78,7522009


3,1642010


4,1572011


59,8242012


3,378Thereafter


247,027Total

$
396,302   Short-Term
    Liquidity Requirements
    
    recurring maintenance, repairs and other operating expenses
    necessary to properly maintain and operate our resorts;
    property taxes and insurance expenses;
    interest expense and scheduled principal payments on outstanding
    indebtedness;
    general and administrative expenses; and
    income taxes. 57




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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.          Off
    Balance Sheet Arrangements
    
    Our joint venture with CNL Income Properties, Inc. (CNL) owns
    two resorts, Great Wolf Lodge-Wisconsin Dells, Wisconsin and
    Great Wolf Lodge-Sandusky, Ohio. We are a limited partner with a
    30.32% ownership interest in the CNL joint venture. At
    December 31, 2007, the joint venture had aggregate
    outstanding indebtedness to third parties of $63,000. This loan
    is a mortgage loan that is non-recourse to us.
    We have entered into our joint venture with The Confederated
    Tribes of the Chehalis Reservation to develop a Great Wolf Lodge
    resort and conference center on a
    39-acre land
    parcel in Grand Mound, 58




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##### Table of Contents



Contractual
    Obligations
    Payment TermsLess Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 YearsDebt obligations(1)

$
396,302


$
78,752


$
7,321


$
63,202


$
247,027Operating lease obligations


1,644



548



673



359



64Construction contracts


117,412



92,380



25,032







Related party guarantee(2)


1,180



457



723







Reserve on unrecognized tax benefits


1,298











1,298



Total

$
517,836


$
172,137


$
33,749


$
64,859


$
247,091     (1)
    
    Includes $8,465 of fixed rate debt recognized as a liability
    related to certain bonds issued by the City of Sheboygan and
    $3,690 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.(2)
    
    We have provided a partial guarantee on mortgage debt obtained
    by one of our joint ventures.    Working
    Capital
    
    the use of cash for capital expenditures and investments in and
    advances to related parties, for our properties under
    development,
    less proceeds from issuances of long-term debt, and
    the classification of our Mason mortgage loan maturing in
    December 2008 as a current liability as of December 31,
    2007. 59




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##### Table of Contents



Cash
    Flows
  Comparison
    of Year Ended December 31, 2007 to Year Ended
    December 31, 2006
  Year Ended December 31,


Increase2007


2006


(Decrease)Net cash provided by operating activities

$
29,751


$
29,723


$
28Net cash used in investing activities


(213,867
)


(107,123
)


(106,744
)Net cash provided by financing activities


105,935



119,396



(13,461
)   Investing Activities.
  Financing Activities.
  Comparison
    of Year Ended December 31, 2006 to Year Ended
    December 31, 2005
  Year Ended December 31,


Increase2006


2005


(Decrease)Net cash provided by operating activities

$
29,723


$
17,788


$
11,935Net cash used in investing activities


(107,123
)


(65,496
)


(41,627
)Net cash provided by financing activities


119,396



23,081



96,315   Operating Activities.
  Investing Activities.
  Financing Activities.
  Inflation
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     60




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##### Table of Contents




    $71,542 of fixed rate debt secured by two of our resorts. This
    debt bears interest at 6.96% annualy.
    $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.
    $97,000 of fixed rate debt secured by one of our resorts.
    This debt bears interest at 6.10%.
    $76,800 of variable rate debt secured by one of our resorts.
    This debt bears interest at a floating rate of
    30-day LIBOR
    plus a spread of 265 basis points. The total effective rate
    was 7.64% at December 31, 2007. Of the total $76,800 debt
    amount, $71,000 is effectively fixed at a rate of 7.65% due to
    the interest rate swap described above.
    $58,260 of variable rate debt secured by one of our resorts.
    This debt bears interest at a floating rate of
    30-day LIBOR
    plus a spread of 260 basis points. The total rate was 7.45%
    at December 31, 2007.
    $8,465 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 $3,690 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; and     61




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##### Table of Contents



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


63Consolidated Balance Sheets for Great Wolf
    Resorts, Inc. and subsidiaries as of December 31, 2007 and
    2006


64Consolidated Statements of Operations for Great
    Wolf Resorts, Inc. and subsidiaries for the years ended
    December 31, 2007, 2006 and 2005


65Consolidated Statements of Equity for Great Wolf
    Resorts, Inc. and subsidiaries for the years ended
    December 31, 2007, 2006 and 2005


66Consolidated Statements of Cash Flows for Great
    Wolf Resorts, Inc. and subsidiaries for the years ended
    December 31, 2007, 2006 and 2005


67Notes to Consolidated Financial Statements


68   62




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            Share-Based Payment.
  Internal Control  Integrated Framework
      63




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES



CONSOLIDATED
    BALANCE SHEETS   December 31,2007


2006(Dollars in thousands, except per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
18,597


$
96,778Accounts receivable, net of allowance for doubtful accounts of
    $113 and $205


2,373



2,680Accounts receivable  unconsolidated related parties


3,973



2,223Inventory


4,632



2,825Other current assets


2,869



4,638Total current assets


32,444



109,144Property and equipment, net


617,697



489,968Investment in and advances to unconsolidated related parties


59,148



25,028Other assets


20,257



19,450Other intangible assets


23,829



23,829Goodwill


17,430



16,020Total assets

$
770,805


$
683,439LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS
    EQUITYCurrent liabilities:Current portion of long-term debt

$
78,752


$
1,432Accounts payable


18,471



25,882Accrued payroll


3,644



2,768Accrued expenses


17,132



12,740Accrued expenses  unconsolidated related parties


124



443Advance deposits


8,211



7,165Gift certificates payable


4,670



3,349Total current liabilities


131,004



53,779Mortgage debt


225,042



275,711Other long-term debt


92,508



12,246Other long-term liabilities


2,232



391Deferred tax liability


7,597



15,846Deferred compensation liability


2,029



2,200Total liabilities


460,412



360,173Minority interests






5,757Commitments and contingenciesStockholders Equity:Common stock, $0.01 par value, 250,000,000 shares
    authorized, 30,698,683 and 30,509,320 shares issued and
    outstanding at December 31, 2007 and 2006, respectively


307



305Additional paid-in capital


399,759



396,909Preferred stock, $0.01 par value, 10,000,000 shares
    authorized, no shares issued or outstanding at December 31,
    2007 and 2006






Accumulated deficit


(87,086
)


(77,505
)Deferred compensation


(2,200
)


(2,200
)Accumulated other comprehensive loss, net of tax


(387
)


Total stockholders equity


310,393



317,509Total liabilities, minority interests and stockholders
    equity

$
770,805


$
683,439    64




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF OPERATIONS
    AND COMPREHENSIVE LOSS
    (dollars in thousands, except per share data)  Year Ended December 31,2007


2006


2005Revenues:Rooms

$
112,261


$
87,775


$
73,207Food and beverage


29,588



21,930



18,897Other hotel operations


27,085



21,207



17,949Sales of condominiums










25,862Management and other fees


2,855



2,087



494Management and other fees  related parties


4,314



3,729



482176,103



136,728



136,891Other revenue from managed properties-related parties


11,477



11,920



2,524Total revenues


187,580



148,648



139,415Operating expenses by department:Rooms


15,716



11,914



10,944Food and beverage


25,196



18,806



16,532Other


23,104



17,117



14,875Other operating expenses:Selling, general and administrative


47,915



41,421



26,894Property operating costs


30,555



23,217



24,798Depreciation and amortization


36,372



25,903



26,248Cost of sales of condominiums










16,780Goodwill impairment






50,975



Loss on disposition of property


128



1,066



26,161178,986



190,419



163,232Other expenses from managed properties-related parties


11,477



11,920



2,524Total operating expenses


190,463



202,339



165,756Net operating loss


(2,883
)


(53,691
)


(26,341
)Investment income  related parties


(667
)






Interest income


(2,758
)


(3,105
)


(1,623
)Interest expense


14,887



7,169



6,728Loss before income taxes, minority interests, and equity in
    unconsolidated related parties


(14,345
)


(57,755
)


(31,446
)Income tax benefit


(5,859
)


(8,764
)


(7,199
)Minority interests, net of tax


(452
)


(502
)


(4
)Equity in unconsolidated related parties, net of tax


1,547



761



170Net loss

$
(9,581
)

$
(49,250
)

$
(24,413
)Other comprehensive loss, net of tax:Unrealized loss on interest rate swap


(387
)






Comprehensive loss

$
(9,968
)

$
(49,250
)

$
(24,413
)Basic loss per share

$
(0.31
)

$
(1.63
)

$
(0.81
)Diluted loss per share

$
(0.31
)

$
(1.63
)

$
(0.81
)Weighted average common shares outstanding:Basic


30,533,249



30,299,647



30,134,146Diluted


30,533,249



30,299,647



30,134,146    65




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF EQUITY  AdditionalCommon


Common


Paid- in


Accumulated


Deferred


Accumulated Other


TotalShares


Stock


Capital


Deficit


Compensation


Comprehensive Loss


Equity(Dollars in thousands)Balance, January 1, 2005


30,262,308


$
303


$
394,060


$
(3,842
)

$
(2,200
)

$



$
388,321Issuance of non-vested equity shares


15,000







152







(152
)






Amortization of non-vested equity shares


















3







3Net loss














(24,413
)










(24,413
)Balance, December 31, 2005


30,277,308



303



394,212



(28,255
)


(2,349
)






363,911Issuance of non-vested equity shares


232,012



2



















2Reclassification of unearned compensation to additional paid-in
    capital upon the adoption of Financial Accounting Standards
    No. 123(R)










(149
)






149







Stock-based compensation










3,052















3,052Share issuance costs










(206
)














(206
)Net loss














(49,250
)










(49,250
)Balance, December 31, 2006


30,509,320



305



396,909



(77,505
)


(2,200
)






317,509Issuance of non-vested equity shares


189,363



2



















2Stock-based compensation










2,850















2,850Unrealized loss on interest rate swap, net of tax






















(387
)


(387
)Net loss














(9,581
)










(9,581
)Balance, December 31, 2007


30,698,683


$
307


$
399,759


$
(87,086
)

$
(2,200
)

$
(387
)

$
310,393    66




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF CASH FLOWS

(dollars
    in thousands)  Year Ended December 31,2007


2006


2005Operating activities:Net loss

$
(9,581
)

$
(49,250
)

$
(24,413
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Depreciation and amortization


36,372



25,903



26,248Goodwill impairment






50,975



Non-cash employee compensation expenses


5,080



3,559



(1,554
)Loss on disposition of property


128



1,066



26,161Equity in losses of unconsolidated related parties


2,616



1,269



282Minority interests


(764
)


(836
)


(7
)Deferred tax benefit


(7,105
)


(9,500
)


(7,504
)Changes in operating assets and liabilities:Accounts receivable and other assets


(4,245
)


4,107



1,349Accounts payable, accrued expenses and other liabilities


7,250



2,430



(2,774
)Net cash provided by operating activities


29,751



29,723



17,788Investing activities:Capital expenditures for property and equipment


(171,884
)


(120,523
)


(124,905
)Cash distributions from unconsolidated related parties






18,902



Investment in unconsolidated related parties


(24,058
)


(523
)


(1,519
)Investment in development


(10,276
)


(4,626
)


Purchase of minority interest


(6,900
)






Issuance of notes receivable


(3,263
)






Proceeds from sale of assets






2,101



59,948Decrease (increase) in restricted cash


2,289



(1,282
)


(1,305
)Decrease (increase) in escrow


225



(1,172
)


2,285Net cash used in investing activities


(213,867
)


(107,123
)


(65,496
)Financing activities:Principal payments on long-term debt


(1,350
)


(31,978
)


(50,049
)Proceeds from issuance of long-term debt


108,263



153,039



75,712Payment of loan costs


(978
)


(1,665
)


(2,582
)Net cash provided by financing activities


105,935



119,396



23,081Net (decrease) increase in cash and cash equivalents


(78,181
)


41,996



(24,627
)Cash and cash equivalents, beginning of period


96,778



54,782



79,409Cash and cash equivalents, end of period

$
18,597


$
96,778


$
54,782Supplemental Cash Flow Information Cash paid for interest, net
    of capitalized interest

$
13,404


$
6,036


$
3,605Cash paid for income taxes, net of refunds

$
(312
)

$
(471
)

$
1,128Non-cash items:Land contributed for minority interest

$



$



$
6,600Construction in process accruals

$
9,728


$
10,101


$
8,648Escrow funds receivable

$



$



$
12,825Guarantee on loan for unconsolidated related party

$
1,180


$



$
    67




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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
      Number of

IndoorOwnership

Opened/

Number of

Condo

EntertainmentPercentage

Opening

Guest Suites

Units(1)

Area(2)(Approx.
    ft2)Existing Resorts:Wisconsin Dells, WI(3)

30.32%

1997

308

77

102,000Sandusky, OH(3)

30.32%

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

100%

2005

405



87,000Pocono Mountains, PA

100%

2005

401



101,000Niagara Falls, ONT(4)



2006

406



104,000Mason, OH(5)

100%

2006

401



105,000Grapevine, TX(6)

100%

December 2007

402



110,000Resorts Under Construction:Grand Mound, WA(7)

49%

March 2008

398



74,000Concord, NC(8)

100%

Spring 2009

402



97,000     (1)
    
    Condominium units are individually owned by third parties and
    are managed by us. 68




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   (2)
    
    Our indoor entertainment areas generally include our indoor
    waterpark, game arcade, childrens activity room, family
    tech center, MagiQuest and fitness room, as well as our
    Aveda®
    spa in the resorts that have such amenities.(3)
    
    These properties are owned by a joint venture. CNL Income
    Properties, Inc. (CNL), a real estate investment trust focused
    on leisure and lifestyle properties, owns a 69.68% interest in
    the joint venture, and we own a 30.32% interest. We operate the
    properties and license the Great Wolf Lodge brand to the joint
    venture under long-term agreements through October 2020, subject
    to earlier termination in certain situations.(4)
    
    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. We manage the resort on behalf of Ripley and also provide
    central reservation services.(5)
    
    We initially entered into a joint venture agreement with a
    subsidiary of CBS Corporation (CBS) to build this resort and
    attached conference center. In June 2007 we purchased CBSs
    minority equity interest in this joint venture, and we now own
    100% of the resort.(6)
    
    Construction on the resort began in June 2006 and it was
    completed in December 2007. In late 2007, we began construction
    on an additional 203 suites and 20,000 square feet of
    meeting space as an expansion of this resort. Expected
    completion of the expansion is early 2009.(7)
    
    We have entered into a joint venture agreement with The
    Confederated Tribes of the Chehalis Reservation (Chehalis) to
    build this resort. We will operate the resort under our Great
    Wolf Lodge brand. Chehalis has leased the land needed for the
    resort to the joint venture, and they have a majority equity
    interest in the joint venture. Construction on the 398-suite
    resort began in October 2006 with expected completion in March
    2008.(8)
    
    We have announced plans to develop a Great Wolf Lodge resort in
    Concord, North Carolina. The Northwoods-themed, approximately
    402-suite resort will provide a comprehensive package of
    first-class destination lodging amenities and activities.
    Construction on the resort began in October 2007 with expected
    completion in Spring 2009.  2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Principles of Consolidation
  Cash and Cash Equivalents
  Allowance for Doubtful Accounts
  Inventory
 69




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Property and Equipment
  Buildings and improvements


20-40 yearsFixtures and equipment, including waterpark equipment


5-15 years       Loan Fees
  Partially-Owned Entities 78-9, 96-16, EITF 04-5,
  Investments In and Advances to Unconsolidated Related
    Parties
  Other Intangible Assets
 70




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Goodwill
  Impairment of Long-Lived Assets
  Revenue Recognition
    Sales of Real Estate Assets
  Other Revenue and Other Expenses From Managed
    Properties EITF 01-14
 71




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Minority Interests 
  Income Taxes
        Derivatives
 72




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##### Table of Contents



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


Resort Third-








Totals perOwnership/


Party


Condominium





FinancialOperation


Management


Sales


Other


StatementsYear ended December 31, 2007Revenues

$
168,934


$
18,646


$



$



$
187,580EBITDA, excluding certain items


32,179



7,169



(682
)


(5,177
)

$
33,489Depreciation and amortization


(35,767
)










(605
)


(36,372
)Investment income


















667Interest expense, net


















(12,129
)Loss before income taxes, minority interests, and equity in
    earnings of unconsolidated related parties

















$
(14,345
)Additions to long-lived assets


171,197











687


$
171,884Total assets


653,367



4,384







113,054


$
770,805   73




---



##### Table of Contents



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


Resort Third-








Totals perOwnership/


Party


Condominium





FinancialOperation


Management


Sales


Other


StatementsYear ended December 31, 2006Revenues

$
130,912


$
17,736


$



$



$
148,648EBITDA, excluding certain items


26,729



5,817



(370
)


(8,989
)

$
23,187Depreciation and amortization


(25,390
)










(513
)


(25,903
)Goodwill impairment


(50,975
)














(50,975
)Interest expense, net


















(4,064
)Loss before income taxes, minority interests, and equity in
    earnings of unconsolidated related parties

















$
(57,755
)Additions to long-lived assets


119,692











831


$
120,523Total assets


524,820



3,120







155,499


$
683,439     Use of Estimates
  New Accounting Pronouncements 
       74




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    3.
    INVESTMENT
    IN RELATED PARTIES  CNL
    Joint Venture
  25-year
        2007


2006Balance sheet data:Total assets

$
111,982


$
118,180Total liabilities

$
71,058


$
70,804Operating data:Revenue

$
34,597


$
37,428Operating expenses

$
(41,341
)

$
(37,049
)Net loss

$
(6,703
)

$
(2,673
)    75




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Grand
    Mount Joint Venture
  39-acre
      2007Balance sheet data:Total assets

$
122,975Total liabilities

$
80,659Operating data:Revenue

$
Operating expenses

$
Net loss

$
(2,369
)   4.
    PROPERTY
    AND EQUIPMENT    December 31,2007


2006Land and improvements

$
51,398


$
38,058Building and improvements


289,768



178,464Furniture, fixtures and equipment


334,836



243,991Construction in process


19,737



71,848695,739



532,361Less accumulated depreciation


(78,042
)


(42,393
)Property and equipment, net

$
617,697


$
489,968    76




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  5.
    LONG-TERM
    DEBT    December 31,2007


2006Long-Term Debt:Traverse City/Kansas City mortgage loan

$
71,542


$
72,801Mason mortgage loan


76,800



55,792Pocono Mountains mortgage loan


97,000



97,000Grapevine construction loan


58,260



Junior subordinated debentures


80,545



51,550Other Debt:City of Sheboygan bonds


8,465



8,383City of Sheboygan loan


3,690



3,863396,302



289,389Less current portion of long-term debt


(78,752
)


(1,432
)Total long-term debt

$
317,550


$
287,957   Traverse City/Kansas City Mortgage Loan 25-year
  Mason Mortgage Loan 30-day 25-year
    Pocono Mountains Mortgage Loan 
 77




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  18-month 30-year
  Grapevine Construction Loan 30-day 25-year
    Junior Subordinated Debentures
  30-year
    10-year
   78




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    City of Sheboygan Bonds No. 91-10,
  City of Sheboygan Loan
  Future Maturities
  2008

$
78,7522009


3,1642010


4,1572011


59,8242012


3,378Thereafter


247,027Total

$
396,302   6.
    FAIR
    VALUE OF FINANCIAL INSTRUMENTS      7.
    INCOME
    TAXES   79




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Unrecognized tax benefit  January 1, 2007

$
978Gross increases  tax positions in current period


320Unrecognized tax benefit  December 31, 2007

$
1,298Income tax expense (benefit) consists of:   Current


Deferred


TotalYear ended December 31, 2007Federal

$



$
(5,723
)

$
(5,723
)State and local


398



(1,382
)


(984
)Non-U.S


92







92$
490


$
(7,105
)

$
(6,615
)Year ended December 31, 2006Federal

$



$
(8,768
)

$
(8,768
)State and local


506



(732
)


(226
)Non-U.S.


56







56$
562


$
(9,500
)

$
(8,938
)Year ended December 31, 2005Federal

$
55


$
(6,566
)

$
(6,511
)State and local


140



(938
)


(798
)$
195


$
(7,504
)

$
(7,309
)     2007


2006


2005Federal statutory income tax benefit


(35.0
)%


(35.0
)%


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


(6.1
)%


(0.7
)%


(2.6
)%Nondeductible goodwill






19.9
%


13.9
%Other


0.3
%


0.4
%


0.7
%(40.8
)%


(15.4
)%


(23.0
)%  80




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2007


2006Deferred tax assets (liabilities):Property and equipment

$
(33,598
)

$
(34,342
)Intangibles


9,630



8,740Investment in related parties


(1,629
)


(1,314
)Salaries and wages


4,140



2,346Prepaid expenses


(741
)


(717
)Interest rate swap


273



Other


623



441Net operating loss carryforwards


13,228



8,546Net deferred tax liability

$
(8,074
)

$
(16,300
)           8.
    RELATED-PARTY
    TRANSACTIONS    
    We and the Predecessor previously used an aircraft owned by an
    entity owned by several of our former members of senior
    management. This relationship ended in 2005. Payments of $43
    were made in the year ended December 31, 2005, for the
    lease of the aircraft for company business.
    A member of our senior management owned a 25% interest in the
    entity that leased the space at the Great Wolf Lodge in
    Wisconsin Dells and operated the spa located within that resort.
    In 2005, the 81




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  member of our senior management divested their ownership
    interest in this entity. That entity made payments of $38 to the
    resort for the year ended December 31, 2005.  
    We provided administrative services for a non-resort hotel
    entity and a multifamily housing entity owned by certain current
    and former members of our senior management. This relationship
    ended in 2005. Amounts charged to these entities in 2005 were
    $645.
    We provided administrative services for a development project
    owned by certain current and former members of our senior
    management. This relationship ended in 2005. Amounts charged to
    this entity in 2005 were $18.  9.
    COMMITMENTS
    AND CONTINGENCIES  Legal Matters
  Letters of Credit
  Guarantees
  
    In connection with the construction of our Sheboygan, Wisconsin
    resort, we entered into agreements with the City of Sheboygan
    and The Redevelopment Authority of the City of Sheboygan,
    Wisconsin (collectively, the City) whereby the City funded
    certain costs of construction. The City funded $4,000 toward the
    construction of the resort and related public improvements and
    $8,200 toward construction of a convention center connected to
    the resort.    1 2 5-year
    
    In connection with the construction of the resort in Grand
    Mound, Washington by our joint venture, we have provided a
    partial guarantee for up to $49,980 of the joint ventures
    mortgage debt. Based on our assessment of the likelihood of
    having to possibly perform on this guarantee, we have recorded
    $1,370 as the estimated fair value of this guarantee at its
    inception, as an increase in our investment in the
    unconsolidated joint venture and a liability on our consolidated
    balance sheet. 82




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Commitments
  2008

$
5482009


5012010


1722011


1882012


171Thereafter


64Total

$
1,644       10.
    RETIREMENT
    PLAN    11.
    EQUITY  Deferred Compensation
  Earnings per Share
  No. 97-14,
  Year Ended December 31,2007


2006


2005Net loss attributable to common shares

$
(9,581
)

$
(49,250
)

$
(24,413
)Weighted average common shares outstanding  basic and
    diluted


30,533,249



30,299,647



30,134,146Net loss per share  basic and diluted

$
(0.31
)

$
(1.63
)

$
(0.81
)  83




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  and/or
  12.
    SHARE-BASED
    COMPENSATION  Share-Based Payment Accounting for Stock Issued to Employees.
        Stock
    Options
      Year EndedDecember 31,2006


2005Dividend yield






Weighted average, risk free interest rate


4.33
%


3.65
%Weighted average, expected life of option


6.0 years



6.0 yearsExpected stock price volatility


39.83
%


40.00
%  84




---



##### 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, 2005


1,656,300


$
17.00Granted


184,000


$
21.40Forfeited


(368,466
)

$
17.42Outstanding at December 31, 2005


1,471,834


$
17.45Granted


15,000


$
13.18Exercised


Forfeited


(422,334
)

$
17.03Outstanding at December 31, 2006


1,064,500


$
17.55



8.05 yearsGranted


Exercised


(167
)

$
12.40Forfeited


(77,333
)

$
20.87Outstanding at December 31, 2007


987,000


$
17.29



7.03 yearsExercisable at December 31, 2007


952,339


$
17.22



7.00 years     Market
    Condition Share Awards
        
    53,006 are based on our common stocks performance in 2007
    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,
    2007-2009.
    The per share fair value of these market condition shares was
    $7.25. 85




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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


5.05
%Expected stock price volatility


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


16.64
%       
    81,293 are based on our common stocks absolute performance
    during the three-year period
    2007-2009.
    Half of these shares vest 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.    Dividend yield


Weighted average, risk free interest rate


4.73
%Expected stock price volatility


42.13
%     
    81,293 are 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 vest
    on 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
%    86




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     
    81,820 were based on our common stocks performance in 2006
    relative to a stock index, as designated by the Compensation
    Committee of the Board of Directors. The per share fair value of
    these market condition shares was $5.76.    Dividend yield


Weighted average, risk free interest rate


4.12
%Expected stock price volatility (peer group of companies)


31.00
%Expected stock price volatility (small-cap stock index)


17.50
%       Performance
    Share Awards
  2007-2009;
    Deferred
    Compensation Awards
  No. 97-14, No. 97-14,
 87




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Non-vested
    Shares
      WeightedAverage


AggregateGrant Date


IntrinsicShares


Fair Value


ValueNon-vested shares balance at January 1, 2005


Granted


15,000


$
10.09Forfeited


Vested


Non-vested shares balance at December 31, 2005


15,000



10.09Granted


236,000


$
11.60Forfeited


(3,000
)

$
11.77Vested


(3,000
)

$
10.09Non-vested shares balance at December 31, 2006


245,000


$
11.08Granted


143,711


$
13.47Forfeited


(5,000
)

$
10.79Vested


(50,600
)

$
11.53Non-vested shares balance at December 31, 2007


333,111


$
12.37     Vested
    Shares
   88




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Prior
    Year Pro Forma Expense
  Accounting for Stock-Based
    Compensation
  Year EndedDecember 31,2005Net loss, as reported

$
(24,413
)Compensation expense, SFAS 123 fair value method, net of tax


(1,364
)Pro forma net loss

$
(25,777
)Pro forma net loss per share  basic

$
(0.86
)Pro forma net loss per share  diluted

$
(0.86
)Actual net loss per share  basic

$
(0.81
)Actual net loss per share  diluted

$
(0.81
)   13.
    QUARTERLY
    FINANCIAL DATA (UNAUDITED)    First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2007:Total Revenues

$
48,459


$
46,292


$
50,898


$
41,931Operating income (loss)


(745
)


811



5,637



(8,586
)Net income (loss)


(2,005
)


(1,656
)


1,761



(7,681
)Basic earnings (loss) per share

$
(0.07
)

$
(0.05
)

$
0.06


$
(0.25
)Diluted earnings (loss) per share

$
(0.07
)

$
(0.05
)

$
0.06


$
(0.25
)   First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2006:Total Revenues

$
37,836


$
35,827


$
40,779


$
34,206Operating income (loss)


(544
)


(370
)


3,787



(56,564
)Net income (loss)


(945
)


(1,402
)


2,088



(48,991
)Basic earnings (loss) per share

$
(0.03
)

$
(0.05
)

$
0.07


$
(1.61
)Diluted earnings (loss) per share

$
(0.03
)

$
(0.05
)

$
0.07


$
(1.61
)   14.
    SUBSEQUENT
    EVENTS   89




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##### Table of Contents



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)
    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.   90




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##### Table of Contents



Changes
    In Internal Control
   91




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control-Integrated Framework
        Internal Control-Integrated Framework
       92




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##### 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
   93




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##### Table of Contents



SIGNATURES      /s/  JOHN
    EMERY         Signature

Title

Date/s/  John
    EmeryJohn
    Emery

Chief Executive Officer (Principal Executive Officer) and
    Director

March 5, 2008/s/  James
    A. CalderJames
    A. Calder

Chief Financial Officer (Principal Financial and Accounting
    Officer)

March 5, 2008/s/  Joseph
    V. VittoriaJoseph
    V. Vittoria

Chairman of the Board and Director

March 5, 2008/s/  Elan
    BlutingerElan
    Blutinger

Director

March 5, 2008/s/  Randy
    L. ChurcheyRandy
    L. Churchey

Director

March 5, 2008/s/  Michael
    M. KnetterMichael
    M. Knetter

Director

March 5, 2008/s/  Edward
    H. RensiEdward
    H. Rensi

Director

March 5, 2008/s/  Howard
    A. SilverHoward
    A. Silver

Director

March 5, 2008  94




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##### Table of Contents



INDEX TO EXHIBITS
  ExhibitNumber
    
    Description2.1
    
    Form of Merger Agreement (Delaware) (incorporated herein by reference to Exhibit 2.1 to the Companys
Registration Statement on Form S-1 filed August 12, 2004)2.2
    
    Form of Merger Agreement (Wisconsin) (incorporated herein by reference to Exhibit 2.2 to the Companys
Registration Statement on Form S-1 filed August 12, 2004)3.1
    
    Form of Amended and Restated Certificate of Incorporation for Great Wolf Resorts, Inc. dated December 9,
2004 (incorporated herein by reference to Exhibit 3.1 to the Companys Registration Statement on Form
S-1 filed August 12, 2004)3.2
    
    Form of Amended and Restated Bylaws of Great Wolf Resorts, Inc. effective September 12, 2007
(incorporated herein by reference to Exhibit 4.1 to the Companys Current Report on Form S-1 filed
September 18, 2007)4.1
    
    Form of the Common Stock Certificate of Great Wolf Resorts, Inc. (incorporated herein by reference to
Exhibit 4.1 to the Companys Registration Statement on Form S-1 filed October 21, 2004)4.2
    
    Junior Subordinated Indenture, dated as of March 15, 2005, between Great Wolf Resorts, Inc. and JPMorgan
Chase Bank, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed March 18, 2005)4.3
    
    Amended and Restated Trust Agreement, dated as of March 15, 2005, by and among Chase Manhattan Bank USA,
National Association, as Delaware trustee; JPMorgan Chase Bank, National Association, as property
trustee; Great Wolf Resorts, Inc., as depositor; and James A. Calder, Alex G. Lombardo and J. Michael
Schroeder, as administrative trustees (incorporated herein by reference to Exhibit 4.2 to the Companys
Current Report on Form 8-K filed March 18, 2005)10.1
    
    License Agreement, dated January 30, 2004, by and between The Great Lakes Companies, Inc. and Jim
Pattison Entertainment Ltd. (incorporated herein by reference to Exhibit 10.1 to the Companys
Registration Statement on Form S-1 filed September 23, 2004)10.2
    
    Development Agreement, dated as of July 30, 2003, among the City of Sheboygan, Wisconsin, the
Redevelopment Authority of the City of Sheboygan, Wisconsin, The Great Lakes Companies, Inc., Blue
Harbor Resort Sheboygan, LLC, and Blue Harbor Resort Condominium, LLC (incorporated herein by reference
to Exhibit 10.2 to the Companys Registration Statement on Form S-1 filed August 12, 2004)10.3
    
    First Amendment to the Development Agreement, dated June 25, 2004, by and among the City of Sheboygan,
Wisconsin, the Redevelopment Authority of the City of Sheboygan, Wisconsin, The Great Lakes Companies,
Inc., Blue Harbor Resort Sheboygan, LLC, and Blue Harbor Resort Condominium, LLC (incorporated herein by
reference to Exhibit 10.3 to the Companys Registration Statement on Form S-1 filed August 12, 2004)10.4
    
    Tall Pines Exclusive License and Royalty Agreement, dated July 25, 2004, between Tall Pines Development
Corporation and The Great Lakes Companies, Inc. (incorporated herein by reference to Exhibit 10.4 to the
Companys Registration Statement on Form S-1 filed December 7, 2004)10.5+
    
    Form of Employment Agreement (incorporated herein by reference to Exhibit 10.5 to the Companys
Registration Statement on Form S-1 filed December 7, 2004)10.6
    
    Registration Statement on Form S-1 filed January 21, 2005) Form of Noncompete Agreement, Trade Secret
and Confidentiality Agreement (incorporated herein by reference to Exhibit 10.6 to the Companys
Registration Statement on Form S-1 filed January 21, 2005)10.7
    
    Form of Officers and Directors Indemnification Agreement (incorporated herein by reference to Exhibit
10.7 to the Companys Registration Statement on Form S-1 filed August 12, 2004)




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##### Table of Contents



ExhibitNumber
    
    Description10.8
    
    Form of Indemnity Agreement (incorporated herein by reference to Exhibit 10.8 to the Companys
Registration Statement on Form S-1 filed September 23, 2004)10.9+
    
    Form of Great Wolf Resorts, Inc. Employee Stock Purchase Plan (incorporated herein by reference to
Exhibit 10.9 to the Companys Registration Statement on Form S-1 filed August 12, 2004)10.10+
    
    Form of Great Wolf Resorts, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit
10.10 to the Companys Registration Statement on Form S-1 filed November 26, 2004)10.11+
    
    Form of Great Wolf Resorts, Inc. Deferred Compensation Plan (incorporated herein by reference to Exhibit
10.11 to the Companys Registration Statement on Form S-1 filed August 12, 2004)10.12
    
    Loan Agreement by and among Great Wolf Resorts, Inc., Citigroup Global Markets Realty Corp. and The
Travelers Insurance Company (incorporated herein by reference to Exhibit 10.16 to Companys Registration
Statement on Form S-1 filed January 21, 2005)10.13
    
    Purchase Agreement, dated as of March 15, 2005, among Great Wolf Resorts, Inc., Great Wolf Capital Trust
I, Taberna Preferred Funding I, Ltd and Merrill Lynch International (incorporated herein by reference to
Exhibit 1.1 to the Companys Current Report on Form 8-K filed March 18, 2005)10.14
    
    Venture formation and Contribution Agreement dated October 3, 2005, among Great Wolf Resorts, Inc.,
Great Bear Lodge of Wisconsin Dells, LLC, Great Bear Lodge of Sandusky, LLC, and CNL Income Partners, LP
(incorporated herein by reference to Exhibit 10.1 to the Companys current Report on Form 8-K filed
October 7, 2005).10.15
    
    Loan Agreement dated March 1, 2007, among CNL Income GW WI-Del, LP and CNL Income GW Sandusky, LP, as
borrowers, and NSPL, Inc., as lender (incorporated herein by reference to Exhibit 1.1 to the Companys
Current Report on Form 8-K filed March 2, 2007).10.16
    
    Loan Agreement dated July 28, 2007, among Great Wolf Lodge of Grapevine, LLC, as borrower, and Merrill
Lynch Capital and HSH Nordbank, as lenders (incorporated herein by reference to Exhibit 1.1 to the
Companys Current Report on Form 8-K filed July 31, 2007).10.17
    
    Loan Agreement dated December 6, 2007, between Great Wolf Lodge of the Poconos, LLC, as borrower, and
Citigroup Global Markets Realty Corp., as lender (incorporated herein by reference to Exhibit 1.1 to the
Companys Current Report on Form 8-K filed December 13, 2007).21.1*
    
    List of Subsidiaries23.1*
    
    Consent of Deloitte & Touche 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.+
    
    Indicated management contract or compensatory plan or arrangement required to be filed as an
exhibit pursuant to Item 15(a) of Form 10-K.