**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

** **

**Form 10-K**

** **
| **x**      | ** ** | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                        |
|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | **For  the fiscal year ended September 30, 2006**

**OR**                                                                                                                                                                                                                                             |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE   SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                  |
| ** ** | ** ** | **For the transition period from                       to                        ** |
| ** ** | ** ** | **Commission file number 333-117633**                                                                                                                                                                                                                                                                      |

** **

**SENECA GAMING CORPORATION**

(Exact name of registrant as specified in its charter)

 

| **Not Applicable**        |   | **54-2122988**                        |
|---------------------------|--------|---------------------------------------|
| (State of  Incorporation) |   | (I.R.S. Employer  Identification No.) |

 

**310 Fourth Street**

**Niagara Falls, New York(Seneca Nation Territory) 14303**

**(716) 299-1100**

(Address, including zip code, and telephone number,

including area code, of registrant’s principalexecutive offices)

 

Securities Registered Pursuant toSection 12(b) of the Act:

**None**

** **

Securities Registered Pursuant toSection 12(g) of the Act:

**None**

** **

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.

Yes  o  No  x

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or 15(d) of the Act.

Yes  x  No  o

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

Yes  x  No  o

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in any definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.   x

Indicate by check mark whether the registrant is a largeaccelerated filer, an accelerated filer or a non-accelerated filer (as definedin Rule 12b-2 of the act).

Large accerated filer  o        Acceleratedfiler  o        Non-acceleratedfiler  x

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act.

Yes  o No  x

Theregistrant is a wholly-owned governmental instrumentality of the Seneca Nationof Indians.

**DOCUMENTS INCORPORATED BYREFERENCE:     None**

 

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**SENECA GAMING CORPORATION**

**Form 10-K**

**TABLE OFCONTENTS**
| **PART I**   |       |                                                                                                               |   | 3      |
|-------------------|------------|--------------------------------------------------------------------------------------------------------------------|--------|--------|
|              |       |                                                                                                               |   |   |
| Item 1.           |       | Business                                                                                                           |   | 3      |
| Item  1A.         |       | Risk  Factors                                                                                                      |   | 21     |
| Item 1B.          |       | Unresolved Staff Comments                                                                                          |   | 33     |
| Item 2.           |       | Properties                                                                                                         |   | 33     |
| Item  3.          |       | Legal  Proceedings                                                                                                 |   | 34     |
| Item 4.           |       | Submission of Matters to a Vote of Security Holders                                                                |   | 36     |
|              |       |                                                                                                               |   |   |
| **PART II**  |       |                                                                                                               |   | 36     |
|              |       |                                                                                                               |   |   |
| Item 5.           |       | Market for Registrant’s Common Equity, Related Stockholder  Matters and Issuer Purchases of Equity Securities |   | 36     |
| Item 6.           |       | Selected Financial Data                                                                                            |   | 36     |
| Item 7.           |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operation                         |   | 39     |
| Item 7A.          |       | Quantitative and Qualitative Disclosures About Market  Risk                                                        |   | 50     |
| Item 8.           |       | Financial Statements and Supplementary Data                                                                        |   | 50     |
| Item 9.           |       | Changes in and Disagreements with Accountants on  Accounting and Financial Disclosure                              |   | 50     |
| Item 9A.          |       | Controls and Procedures                                                                                            |   | 50     |
| Item  9B.         |       | Other  Information                                                                                                 |   | 51     |
|              |       |                                                                                                               |   |   |
| **PART III** | ** ** |                                                                                                               |   | 51     |
|              |       |                                                                                                               |   |   |
| Item 10.          |       | Directors and Executive Officers of the Registrant                                                                 |   | 51     |
| Item 11.          |       | Executive Compensation                                                                                             |   | 55     |
| Item 12.          |       | Security Ownership of Certain Beneficial Owners and  Management and Related Stockholder Matters                    |   | 58     |
| Item 13.          |       | Certain Relationships and Related Transactions                                                                     |   | 58     |
| Item 14.          |       | Principal Accountant Fees and Services                                                                             |   | 60     |
|              |       |                                                                                                               |   |   |
| **PART IV**  |       |                                                                                                               |   | 60     |
|              |       |                                                                                                               |   |   |
| Item 15.          |       | Exhibits and Financial Statement Schedules                                                                         |   | 60     |
|              |       | Signatures                                                                                                         |   | 64     |

 

**FORWARD-LOOKING STATEMENTS**

ThisAnnual Report on Form 10-K contains forward-looking statements intended toqualify for the safe harbor from liability established by the PrivateSecurities Litigation Reform Act of 1995. The words “believe”, “anticipate”, “expect”, “estimate”, “intend”, “plan”,“project”, “will be”, “will continue”, “will likely result”, and similarexpressions, as they relate to us or our management, indicate forward-lookingstatements.  Similarly, statements thatdescribe our plans, business, strategy or goals are all forward-lookingstatements.  These forward-lookingstatements are subject to numerous risks, uncertainties and other factors thatcould cause actual results, performance or achievements to differ materiallyfrom those expressed in or implied by these forward-looking statements.

Factorsthat could cause actual results, performance or achievements to differmaterially from those expressed or implied by these forward-looking statementsinclude, but are not limited to, the risk factors set forth in Item 1A. of thisAnnual Report on Form 10-K and the risks discussed in our other filings withthe Securities and Exchange Commission.  Readers are cautioned not to place undue reliance on theseforward-looking statements which speak only as of the date of this filing.

Weassume no obligation to update these forward-looking statements.

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**AVAILABLEINFORMATION**

**We makeavailable, free of charge, through our internet website,www.senecagamingcorporation.com, our Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, ifapplicable, amendments to those reports filed or furnished pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934 as soon asreasonably practicable after they are electronically filed with, or furnishedto, the SEC.  We are not including theinformation contained on our website as a part of, or incorporating it byreference into, this Annual Report on Form 10-K.**

**PART I**

**Item 1.            Business**

Except as otherwise indicated by the context,in this Annual Report on Form 10-K, or this Annual Report, we refer to(1) Seneca Gaming Corporation as “SGC” or “the Company,” (2) SenecaNiagara Falls Gaming Corporation, a wholly owned subsidiary of SGC, as “SNFGC,”(3) Seneca Territory Gaming Corporation, a wholly owned subsidiary of SGC,as “STGC,” (4) Seneca Erie Gaming Corporation, a wholly owned subsidiaryof SGC, as “SEGC,” (5) the Seneca Nation of Indians of New York, as “Nation”,“Seneca Nation” or “Seneca Nation of Indians,” (6) the Nation-State GamingCompact between the Seneca Nation of Indians and New York State, dated August18, 2002, as the “Compact”, and (7) SGC, SNFGC, STGC, and SEGC,collectively, as “we,” “our,” “ours” and “us.” SNFGC, STGC and SEGC are sometimes collectively referred to as the “Guarantors”,based on their respective guarantees of SGC’s obligations under the seniornotes.  Our fiscal year ends on September30.  “Fiscal 2006” is defined as thefiscal year ended September 30, 2006, “Fiscal 2005” is defined as the fiscalyear ended September 30, 2005, and fiscal years prior to 2005 are definedsimilarly within the context of this annual report on Form 10-K.

**Overview**

SGC iswholly owned by the Nation and chartered to develop, manage and direct all ofthe Nation’s Class III gaming operations on the Nation’s territories inWestern New York. SGC was chartered by the Nation in August 2002.  In August 2002, the Nation entered intothe Compact with New York State that provides the Nation with the right toestablish and operate three Class III gaming facilities in Western NewYork.  We currently operate two Class IIIgaming facilities in Western New York—Seneca Niagara Casino and Hotel, which is located in the City of Niagara Falls,New York (Niagara Territory) and operated by SNFGC, approximately 20 milesnorth of Buffalo, New York, and Seneca Allegany Casino, which is located in theCity of Salamanca, New York (Allegany Territory) and operated by STGC,approximately 75 miles northeast of Erie, Pennsylvania. Seneca Niagara Casinoand Hotel opened on December 31, 2002 (initially, as the Seneca NiagaraCasino), and Seneca Allegany Casino opened on May 1, 2004.  Our two casinos are located on land held inrestricted fee by the United States, which, together with the rights under theCompact, allows us to conduct Class III gaming operations in New YorkState and are the only gaming facilities in New York State to offer bothClass III slot machines and table games.

Underthe Compact, the Nation has the exclusive right (subject to certain limitedexceptions) to establish and operate a third Class III gaming facility to belocated in Erie County, New York.  OnOctober 3, 2005, the Nation acquired approximately nine acres of land in theinner harbor district of Buffalo (Buffalo Creek Territory).  We commenced construction of the SenecaBuffalo Creek Casino on those nine acres on December 8, 2005.  The exclusive right, under the Compact, toestablish and operate a third Class III gaming facility in Western New York mayterminate if the Nation or SEGC fails to commence Class III gaming operationsin Erie County by December 9, 2007.  Weexpect to open a temporary Class III gaming facility by May 31, 2007, whichwill fulfill the Nation’s Compact obligations for the third Class III gamingfacility to be located in Erie County. See our discussions below in “Seneca Buffalo Creek Casino” and “Item 3.--- Legal Proceedings” for information regarding our plans for the temporaryand permanent Seneca Buffalo Creek Casino and litigation related to thiscasino.

As ofSeptember 30, 2006, Seneca Niagara Casino and Hotel featured over 147,000square feet of gaming space, with 4,289 slot machines and 99 table games andSeneca Allegany Casino featured over 55,000 square feet of gaming space with2,003 slot machines and 24 table games. As of September 30, 2006, we had approximately 1.2 million membersin the Seneca Link Player’s Card database with an average of approximately21,000 new members joining per month for the prior twelve months.  As of September 30, 2006, approximately26% of the Seneca Link Player’s Card members lived in the Buffalo-Niagara area,and approximately 19%, 19% and 21% lived in Pennsylvania, Ohio and other areasof New York, respectively. For Fiscal 2006, we generated consolidated netrevenue of $522.5 million.

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Factorscontributing to our success include:

·    since their openings, our ability tosuccessfully market Seneca Niagara Casino and Hotel and Seneca Allegany Casinoto our primary and secondary target markets;

·    with theaddition of our luxury hotel in Niagara Falls, the ability to increase patroncount, length of stay and attract higher-end gaming guests from a broadergeographic area;

·    ourability to enroll approximately 1.2 million patrons in our cross-propertySeneca Link Player’s Card program, which has increased our ability to use effectivedirect mail and targeted marketing programs to establish patron loyalty to theSeneca brand at a profitable level;

·    ourentertainment options, offering varied quality acts to our patrons;

·    our mixof slot machines, which we believe is superior to our competition and includesthe latest product introductions by leading United States and internationalslot manufacturers;

·    our useof current information technology, including “ticket-in/ticket-out” slotmachines, automated jackpot payment machines, ticket redemption units,electronic slot bonusing and database programs to increase operatingefficiencies;

·    ourability to operate at a high margin, which we achieve through the carefulmonitoring and control of labor costs and the effective use of our marketingand advertising expenditures;

·    ourcontinued expansion at and reinvestment in Seneca Niagara Casino and Hotel andSeneca Allegany Casino; and

·    ourexperienced senior management team, which has over 100 years of combined gamingexperience.

Underthe Compact, the Nation has the exclusive right to establish and operate athird Class III gaming facility in Erie County, New York.  For further discussion of the Erie Countygaming facility, see “Seneca Buffalo Creek Casino” discussion, below, and “Item2.—Properties.”

Ourprincipal executive offices are located at Seneca Niagara Casino and Hotel, 310Fourth Street, Niagara Falls, New York (Nation Territory) 14303, and ourtelephone number is (716) 299-1100.  Ourwebsite is *www.senecagamingcorporation.com*.  The websites for our Seneca Niagara Casinoand Hotel and Seneca Allegany Casino are located at *www.snfgc.com*and *www.senecaalleganycasino.com*,respectively. The Nation also furnishes information about Seneca Niagara Casinoand Hotel and Seneca Allegany Casino at *www.sni.org. * The information on these websites is not partof this Annual Report.

SenecaNiagara Casino and logo, Bear’s Den, Eight Clans, Seneca Link and logo, TheWestern Door, Thunder Mountain Buffet and logo and Turtle Island logos areregistered trademarks in the U.S.  Allother trademarks, trade names and service marks appearing in this Annual Reportare the property of their respective holders.

**SenecaNiagara Casino and Hotel**

SenecaNiagara Casino and Hotel is located on approximately 24 acres on the Nation’sTerritory in the City of Niagara Falls, New York, and offers gaming,entertainment and related amenities, with over 147,000 square feet of gamingspace.  Seneca Niagara Casino and Hotelis open 24 hours per day, seven days per week and is our flagship gamingfacility.  We opened our original NiagaraFalls gaming facility on December 31, 2002 after 100 days of extensiveremodeling and renovation of the former Niagara Falls Convention and CivicCenter.  The initial capital invested toopen was approximately $95.2 million. Since then, we have continued to investin facilities and equipment at this property. On December 15, 2005, we opened our expanded gaming floor, which addedapproximately 950 slot machines and 20 table games.  On December 30, 2005, we officially openedthe first ten of 26 floors of rooms at our luxury hotel, along with several newrestaurants.  On March 31, 2006, wecompletely opened all rooms at our luxury hotel, along with all otheramenities, as described below.  Totalcost of constructing and equipping our luxury hotel and expansion project was$234.0 million.   Since opening onDecember 30, 2005, Seneca Niagara Casino and Hotel has achieved strongfinancial and operating results.  ForFiscal 2006, Seneca Niagara Casino and Hotel generated net revenue of $365.8million.

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As ofSeptember 30, 2006, Seneca Niagara Casino and Hotel featured:

·    over147,000 square feet of Class III gaming space with 4,289 slot machines, 99table games, including blackjack, craps and roulette, and keno;

·   604 hotel rooms, including 118 suites ofvarious sizes;

·   a full-service luxury spa and salon;

·   the Thunder Falls Buffet, a 400-seatinternational buffet;

·   Western Door, a steakhouse with approximately160 dining seats and a 36-seat bar and lounge area;

·   La Cascata, a 120-seat Italian fine diningrestaurant, which opened on December 27, 2005;

·   Three Sisters Café, a 24-hour casual diningrestaurant with seating for more than 200, which opened on December 23, 2005;

·   Koi, a 70-seat fine dining restaurantfeaturing a Pan-Asian menu, which opened on January 28, 2006;

·   Morrie’s Express, a walk-up delicatessen withseating for 30, which opened on December 15, 2005;

·   Five retail stores, three of which opened inDecember 2005;

·   the Seneca Events Center, a 25,200square-foot multi-purpose entertainment/event facility, which can seat up to2,200 (for entertainment events) and which opened on December 31, 2005;

·   8,000 square feet of conference and banquetspace, which opened on December 31, 2005;

·    a2,300-space parking garage, with 11 bus bays;

·    additionalsurface parking for over 1,400 vehicles;

·    the Bear’sDen, a 468-seat theater; and

·    a snackbar.

Webelieve several competitive factors contribute to our current success,including:

·    anunderserved local market with limited gaming and entertainment options;

·    afavorable demographic mix;

·    limitedcompetition; and

·    easyaccess by major interstate highways.

*Accommodations.    * Seneca Niagara Casinoand Hotel partially opened its 604-room luxury hotel tower on December 30,2005, with the full opening occurring on March 31, 2006. Located adjacent to,and connected to our original gaming facility, the hotel currently features 486well-appointed rooms, 86 corner suites, 22 one-bedroom suites, and 10 penthousesuites. The third floor at Seneca Niagara Casino and Hotel features afull-service spa and salon, fitness room and swimming pool. The addition of theluxury hotel has allowed us to market Seneca Niagara Casino & Hotel topatrons with higher gaming budgets, patrons from further distances that willstay overnight, and additional patrons from within our immediate market area.

*Food andBeverage Facilities * SenecaNiagara Casino and Hotel features five restaurants, three bars, a walk-up deli,a nightclub and one snack bar. The Western Door is a steakhouse which seatsapproximately 160 patrons in the dining room, with seating for an additional 36patrons in the bar and lounge. La Cascata is a fine dining Italian restaurantwhich provides dining and seats for approximately 120 patrons, while Koi,located adjacent to La Cascata, offers Pan-Asian cuisine with seating forapproximately 70 patrons. Three Sisters Café is open 24 hours per day, sevendays per week, and offers seating for 

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200 patrons, withcounter seating for an additional 8 patrons. Thunder Falls Buffet offers anexpansive international selection at a buffet style restaurant with seating forapproximately 400 patrons.

Seneca Niagara Casino andHotel has an upscale nightclub, Hush, and four bars: Club 101, located at thecenter of the original gaming floor; The Lobby Bar, located in the hotel lobby;Aces Bar, located in the expanded gaming floor; and the Keno bar, locatedadjacent to our Keno lounge.

ForFiscal 2006, food and beverage sales accounted for approximately 8.8% of ourgross revenue at Seneca Niagara Casino and Hotel.

*EntertainmentFacilities* With theopening of the luxury hotel tower, Seneca Niagara Casino and Hotel added a newentertainment venue, the Seneca Events Center. Located on the luxury hotel’ssecond floor, the Seneca Events Center opened on December 31, 2005 and can seatup to 2,200 for performances, and can also be used for banquets, dinner performancesand gatherings of many sizes. Since opening on December 31, 2005, the SenecaEvents Center has hosted numerous well-known performers and acts, includingAretha Franklin, Brooks & Dunn, Bill Cosby, Duran Duran and Jewel.  In addition to entertainment, themulti-purpose room can hold up to 150 trade show booths.

The 468-seat Bear’s Den Showroom provides patrons with the opportunityto see quality entertainment in an intimate setting. The Bear’s Den has hostedsuch headliners as the Charlie Daniels Band, 10,000 Maniacs, Natalie Cole,Gregg Allman and David Sanborn.

In addition to the SenecaEvents Center and The Bear’s Den Showroom, Seneca Niagara Casino and Hotelfeatures live entertainment at Club 101 every weekend.

*Retail.*  Seneca Niagara Casino and Hotel’s five retailshops offer a wide variety of merchandise. The Men’s Logo Shop offers officialSeneca Niagara Casino and Hotel merchandise for men. The Newsstand offers avariety of reading material, snacks and soft drinks, as well as other personalitems for our patrons. Sky Boutique features official Seneca Niagara Casino andHotel merchandise for women and a wide selection of high-end merchandise,including jewelry, purses and jeweled accessories. The Eight Clans Gift Shopfeatures authentic Native American items, including Native American jewelry,Native American style blankets and bags, soapstone sculptures and sweet grassbaskets. The Players Club Store offers an inventory of products and merchandiseat various price ranges, including state-of-the-art and high-end merchandisesuch as electronics, golf clubs, cameras and diamond jewelry. It is primarilyused to support our Seneca Players Club Card rewards program.

*Full-ServiceLuxury Spa.    *Seneca Niagara Casino andHotel also incorporates an 18,000 square foot full-service luxury spa.  The luxury spa offers a wide range ofservices, including massage treatments, facials and wraps, as well as saunas, aswimming pool, an exercise room and a salon.

*Parkingand Transportation Facilities*.  Since most of Seneca Niagara Casino and Hotel’spatrons arrive by automobile, we endeavor to provide ample space for parking.We have approximately 3,700 available parking spaces, including a 2,300-spaceparking garage. Seneca Niagara Casino & Hotel offers all valet andself-parking services free of charge. We believe our parking facilities areadequate to service the parking needs of our patrons.   Seneca Niagara Casino and Hotel also has 11bus bays and a bus program that has accounted for approximately 400 patrons perday to Seneca Niagara Casino during Fiscal 2006.

* *

*NiagaraFalls Real Estate Acquisitions*

We continue to move forward with the acquisition ofthe remaining acreage of the approximately 50-acre footprint in the City ofNiagara Falls, New York, designated by New York State under the Compact forownership by the Nation.

Acquisitionshave increased our total acquired land in Niagara Falls to approximately 44acres.  In December 2005, we acquired,for $7.9 million, approximately 2 acres of land and a hotel property, which wehave since demolished in preparation for anticipated future development.  In July 2006, we acquired approximately 18acres of land, along with related fixtures for an aggregate initial advanced paymentof $18.0 million.

InNiagara Falls, the appraised value of the land and fixtures that have beenacquired by us through the condemnation process is subject to challenge underNew York state law. If a court determines that the value for the land andfixtures is higher than the appraised value we paid to a condemnee, then we maybe liable to the condemnee for the difference and potentially also responsiblefor certain additional costs and payments to the condemnee, such as attorneys’fees.

InJuly 2006, the Nation agreed to waive its right to acquire approximately twoacres of land described in the Compact. The parcels are owned by End Time Handmaidens, Inc., a religiousorganization.  In return for the waiver,the Nation obtained a right of first negotiation and refusal with respect tothe future sale of the parcels.  As aresult of the Nation’s waiver, the total acreage of the Niagara Territory uponcompletion of the condemnation process is anticipated to be approximately 48acres.

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We havecommenced a master planning process with respect to development and utilizationof the full 48-acre Niagara Territory footprint described above and integrationof the Niagara Falls facilities with those on or planned for the Allegany and BuffaloCreek Territories.  As we develop ourfacilities, we intend to have them complement each other, offering diversehotel, entertainment and gaming options to our guests.

**SenecaAllegany Casino**

SenecaAllegany Casino, our second Class III gaming facility occupyingapproximately 120,460 square feet in total in a temporary building, opened onMay 1, 2004. Seneca Allegany Casino is located on the Nation’s Territoryin the City of Salamanca, New York. Seneca Allegany Casino offers Class III gaming, entertainment andrelated amenities.  Seneca AlleganyCasino caters primarily to middle-market, drive-in patrons from its primary andsecondary markets and is open 24 hours per day, seven days per week.  For Fiscal 2006, Seneca Allegany Casinogenerated net revenue of $156.7 million.

Thecost to develop and open the 120,460 square-foot temporary Seneca AlleganyCasino was funded entirely from Seneca Niagara Casino and Hotel’s free cashflow in the form of inter-company loans from SGC.

As of September 30, 2006, Seneca Allegany Casinofeatured:

·    over55,000 square feet of gaming space with approximately 2,000 slot machines and24 table games, including blackjack, craps and roulette;

·    aparking garage for approximately 1,850 vehicles;

·    surfaceparking for approximately 1,830 vehicles;

·    theThunder Mountain Buffet, an international buffet; and

·    a snackbar, retail store and bar and lounge.

**SenecaAllegany Casino Expansion**

InJuly 2005, we opened our 1,850-space parking garage, which cost $32.2million, and we are constructing a 212-room hotel and permanent casino at theSeneca Allegany Territory, pursuant to a construction management agreement withthe Seneca Construction Management Corporation (SCMC), a wholly owned entity ofthe Seneca Nation.  We expect to open thepermanent casino area of the hotel by the end of December 2006, which willprovide us with approximately 92,000 square feet of gaming space with anadditional 200 slot machines and 16 table games.  We expect to open the hotel, two fine diningrestaurants, retail and all related amenities by late March 2007.  We currently expect the total cost tocomplete the hotel, including the cost of furniture, fixtures and equipment forthe hotel and permanent gaming floor, will be from $156.0 million to$167.0 million.  After transitioningthe existing gaming space from the temporary facility to the newly constructedhotel gaming area, we expect to convert the temporary facility into an eventcenter with a capacity for 1,700 people, along with additional administrativeand support space.  By adding the1,850-space covered parking structure with an enclosed connector into thefacility, the 212-room hotel and casino and the event center, we expect tocreate a first-class gaming experience for our customers and maintain a strongcompetitive position against potential future competition from Pennsylvaniaoperators.  We expect to fund thisexpansion project primarily from cash flow of Seneca Allegany Casino and thebalance from intercompany loans from SGC. As of September 30, 2006, we have capitalized approximately $98.9million of costs on this expansion.

**SenecaBuffalo Creek Casino**

Inaddition to Seneca Niagara Casino and Hotel and Seneca Allegany Casino, theNation has the exclusive right to construct our third Class III gamingfacility in Erie County, New York. This new Class III gaming facility isreferred to as Seneca Buffalo Creek Casino. On October 3, 2005 the Nation acquired approximately nine acres ofland in the inner-harbor district of downtown Buffalo, which constitutes theNation’s Buffalo Creek Territory. Initially, the nine acre parcel was bisected by a two block section of astreet owned  by the City of Buffalo (FultonStreet).  In November 2006, we acquiredthe two block section of Fulton Street from the City of Buffalo for a purchaseprice of $631,600.  Reference is made tothe discussion below “Material Agreements - Buffalo Creek Agreement” foradditional information regarding the Fulton Street purchase and sale.

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OnDecember 8, 2005, we commenced construction of our Erie County, New York gamingfacility on the Nation’s Buffalo Creek Territory. The Nation’s exclusive rightunder the Compact with New York State to establish and operate a Class IIIgaming facility in Erie County, New York, could have terminated if the Nationhad failed to commence construction of a Class III gaming facility in ErieCounty by December 9, 2005  and mayterminate if the Nation fails to commence Class III gaming operations inErie County by December 9, 2007.  Inorder to meet the requirements of the Compact, we began construction of atemporary Class III gaming facility on the Seneca Buffalo Creek Territory.  This temporary facility is expected to beapproximately 6,000 square feet, and will feature approximately 125 slotmachines and a snack bar.  We expect toopen the temporary Seneca Buffalo Creek Casino in May 2007, but no later thanthe December 9, 2007 Compact deadline.

In addition,we continue to finalize our plans for a permanent casino on the Seneca BuffaloCreek Territory.  The timing of theopening of both the temporary and permanent Seneca Buffalo Creek Casinos willdepend on various factors.  See “Item 3 -Legal Proceedings” for a discussion of existing legal challenges regarding ourSeneca Buffalo Creek Casino.  In theevent that we are able to open a casino in Erie County, this casino will beowned and operated by SEGC.

Thepermanent Seneca Buffalo Creek Casino is expected, at a minimum, to initiallyfeature:

·    1,900 to2,200 slot machines;

·    30 to 50table games;

·    aspecialty restaurant;

·    a buffetrestaurant;

·    amulti-function room

·    a retailstore; and

·    a2,500-space parking garage.

Weintend to operate the permanent Seneca Buffalo Creek Casino in a manner thatwill complement both Seneca Niagara Casino and Hotel and Seneca AlleganyCasino.

**Status ofFormer Class II Operations**

As ofJanuary 1, 2005, we transferred all Class II gaming operations to theNation, which included our poker operations at the Seneca Niagara Casino andSeneca Allegany Casino.   The Nation,through its wholly owned business enterprise, Seneca Gaming &Entertainment, currently operates two Class II gaming facilities locatedon the Nation’s Territory in the City of Salamanca and Irving, New York,respectively, and the Class II poker operations at Seneca Niagara Casinoand Hotel and Seneca Allegany Casino. The transfer of the Class II operations as of January 1, 2005was consistent with our understanding of the Nation’s Council’s (the Nation’slegislative body) intent that we manage and operate the Nation’s Class IIIoperations and that Council directly manage and operate the Nation’sClass II operations.

**Lewiston,NY Golf Course Development**

In March2006, we acquired 257 acres of land with the intent to design and build achampionship level golf course in Lewiston, New York, approximately eight milesfrom Seneca Niagara Casino and Hotel.  Wehave selected the Robert Trent Jones II firm to design the golf course.  This land and the development project isintended to be sold to Seneca Management Development Corporation (SMDC), anentity wholly owned and organized by the Nation for the purpose of pursuingownership, development, operation and management of the Lewiston, NY golfcourse development project and other Nation economic development projects.  The purchase of the land and developmentrights is expected to be financed by SMDC through a loan provided by SGC.  We anticipate construction of the golf courseto commence in April 2007, with an anticipated opening in May 2009.

**Businessand Marketing Strategy**

Ourbusiness strategy is to complete the development of three premier Class IIIgaming facilities in Western New York. By March 31, 2006, we had completed and fully opened our 604-room luxurytower at our Seneca Niagara Casino and Hotel. We are presently constructing our permanent casino in a 212-room resorthotel tower at Seneca Allegany Territory, which we plan to fully open by March31, 2007.  In May 2007, we intend to openour temporary gaming facility on the Nation’s Buffalo Creek Territory 

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whilewe construct a permanent Class III casino on the Nation’s Buffalo CreekTerritory.  We believe this strategy willenable us to maintain our position as the premier gaming operator in the WesternNew York region, including areas in northern Pennsylvania and Ohio within ourprimary and secondary markets.  We intendfor all of our gaming facilities to provide a high-quality and diverse gamingexperience that we believe will add to our patron base and strengthen patronloyalty in each segment of the gaming market. In order to maximize our income from operations, we will coordinate ouradvertising, promotions, entertainment and special events to minimizecompetition among our gaming facilities, and integrate our administrative andinformation technology functions.  As ourslot play currently represents approximately 87% of our consolidated grossgaming revenues, we also strive to offer the most current selection of slotmachines in order to provide cutting-edge options for our guests, and todifferentiate ourselves from the regional competition.  We will continue to brand the Seneca namethrough advertising and promotion of our Seneca Link Player’s Card, which isaccepted at all of our facilities.

Thekey components of our integrated marketing plan include the following:

·    *Promote the Seneca Brand Name.*     Thesuccessful operation of Seneca Niagara Casino and Hotel and Seneca AlleganyCasino has established Seneca as a leading gaming brand in the region.  We plan to capitalize on this brandrecognition by prominently incorporating the Seneca name at all of our gamingand entertainment facilities.

·    *Incorporate the Seneca Link Player’s Card.*    We encourage guests to sign up for a Seneca Link Player’s Card (“Card”), and touse the Card at their game of choice. Guests accumulate points at our facilities and may redeem them at any ofour casinos.  Our player’s club cardprogram enables us to understand our guest preferences by providing us withvaluable information about our patrons’ gaming activity and use of ourfacilities’ various non-gaming amenities. As of September 30, 2006, we had approximately 1.2 million members inthe Seneca Link Player’s Card database with an average of approximately 21,000new members joining per month for Fiscal 2006.

·    *Expand Target Markets and Patron Base.*    Thecompletion of our luxury hotel at our Seneca Niagara Casino and Hotel hasenabled us to expand our marketing efforts to higher-value gaming patrons froma wider geographic area.  We believe thecompletion of our resort hotel at our Seneca Allegany Casino will providesimilar opportunities to aggressively expand our marketing efforts.  We continue to evaluate our marketingprograms and have increased our efforts to attract more guests from the region,including New York, Pennsylvania and Ohio, as well as higher value patrons fromConnecticut, Massachusetts and Toronto, Canada. We intend to market to these areas by offering various promotions,including special events for preferred gaming patrons, use of commissioned,independent representatives or splinter arrangements, air charters, motor coachtours and organized package group visits. We have recently hired a player development staff to attract higher-endgaming guests.  In addition, with theopening of our Seneca Events Center at our Seneca Niagara Casino and Hotel, wehave expanded our entertainment offerings to further brand our properties andto attract repeat visits, encourage loyalty and attract higher-end gamingguests.

·    *Offer Diversified Gaming Experience to Broadest Customer Base.*    Weintend to operate each of our gaming facilities in a manner that will becomplementary. Seneca Niagara Casino and Hotel is our flagship resort propertycatering to mid to high value gaming guests looking for a full service gamingresort destination. Seneca Allegany Casino currently targets mid-level gamingpatrons with frequent visits.  With theplanned opening of the permanent casino and the 212-room resort hotel at thisfacility, we will expand our marketing efforts to attract guests with highergaming budgets.  Upon the opening of ourpermanent Seneca Buffalo Creek Casino, we intend to integrate the marketing ofthis facility, as explained below, to guests of our Niagara and Alleganycasinos.  This will offer our guests avariety of gaming and entertainment options.

·    *Utilize an Integrated Marketing Strategy*.    Ourmarketing strategy relies on the high quality of our facilities, the personalservice level of our employees, and an integrated approach of targeted directmail, radio, print and outdoor advertising, promotions, slot and tabletournaments, special events, bussing, entertainment and player development staff,to attract and retain our patrons and to brand the Seneca name as the premiergaming and entertainment experience in Western New York. We coordinate ourmarketing events and the amenities of our facilities to maximize the qualityand length of stay of patron visits and, currently and in the future, tominimize competition among our gaming facilities. Our patron tracking systemthrough the Seneca Link Player’s Card is sophisticated and scaleable andprovides us with the ability to analyze our guests’ gaming preferences.  In addition, we have redesigned the levels ofplayer club options, each based on the level of each guest’s gaming activity,to ensure each level is properly recognized based upon their gamingactivity.  Starting in May 2004, webegan using a “promotional credit” program that provides slot credits to ourpatrons based on the amount of  theirgaming at our facilities. These credits are available on the patron’s SenecaLink Player’s Card when they return for visits. These credits must be playedand cannot be redeemed for cash, which we believe will encourage repeatbusiness.

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·    *Reinvest in and Expand our Gaming Facilities.*    Webelieve our commitment to develop and reinvest in each of our gaming facilitiesis critical to our continued success and future growth. We intend to reinvestin and expand our gaming facilities to ensure their attractiveness to ourpatrons. To achieve maximum profitability we intend to continue to upgrade ourslot machines with the most popular products in order to create a more excitinggaming experience for our patrons. We have also invested in technology,including slot machine “ticket-in/ticket-out” technology, automated ticketredemption machines, player tracking system enhancements and the development ofa Seneca brand inter-property progressive link. Reinvestment in our gamingfacilities will help to ensure that our patrons have an enjoyable entertainmentexperience.  In Fiscal 2006 and 2005, wehave spent $241.7 million and $172.7 million, respectively, in the expansion ofour facilities, the acquisition of land, upgrades to our facilities, and thepurchase of equipment.

·    *Offer the Highest Quality Service.*    Webelieve that we can distinguish our gaming facilities with consistent superiorpatron service, which is a fundamental component of our business and marketingstrategy. We attribute our success at Seneca Niagara Casino and Hotel andSeneca Allegany Casino to our employees’ ability to provide efficient andfriendly service.  During Fiscal 2006, wemade an investment of approximately $1.0 million in a service program providedto all our employees, developing our expectation of the guest serviceexperience to be provided by each employee. Each new employee participates in this service training as part of theirorientation.  It is our intention tocontinue to invest in providing the highest level of guest service, as webelieve that offering our patrons the highest standard of service is anintegral component of our long-term financial success.

**Marketand Competition**

*Market.*    SenecaNiagara Casino and Hotel is conveniently located on the Nation’s Territory inthe City of Niagara Falls, New York, approximately 20 miles north of Buffaloand approximately 90 miles west of Rochester. Our primary market for thiscasino includes the cities of Buffalo and Niagara Falls and covers the area inthe United States within an estimated 50 miles of Seneca Niagara Casino andHotel.  Our secondary market includes theCity of Rochester and covers the area in the United States within an estimated51 to 100 miles of Seneca Niagara Casino and Hotel.  Our outer markets include Erie andPittsburgh, Pennsylvania, Ohio, other areas of New York and Ontario, Canada.  With the opening of our 604-room luxuryhotel, we are expanding our geographic reach with targeted marketing effortsfor higher-end gaming patrons in the New York City area, Connecticut,  Massachusetts, and Toronto, Canada.  In addition, Niagara Falls is a major touristdestination.  Seneca Allegany Casino islocated immediately off Interstate 86 in southwestern New York. Since itsopening in May 2004, the primary market for this casino has been the areawithin 75 miles of Seneca Allegany Casino, which includes Erie, Pennsylvania,and the secondary market has been the area within 75 to 175 miles of SenecaAllegany Casino, which includes Cleveland and Akron, Ohio and Pittsburgh,Pennsylvania. Seneca Allegany Casino caters primarily to middle-market,drive-in patrons from its primary and secondary markets.  With the opening of our 212-room resort hotelat Seneca Allegany Casino, expected to be opened by March 31, 2007, we plan toimplement additional targeted marketing programs focused on expanding ourgeographic reach.  Seneca Buffalo CreekCasino will be located in the inner-harbor district of Buffalo.**** Until the permanentSeneca Buffalo Creek Casino is constructed, planned for 2008, the temporaryfacility is expected to have a limited market due to its small size.

As ofSeptember 30, 2006, approximately 26% of the approximate 1.2 million SenecaLink Player’s Card members lived in the Buffalo-Niagara area, and approximately19%, 19% and 21% lived in Pennsylvania, Ohio and other areas of New York,respectively.

*Competition- General*.    The United States andCanadian gaming industries are highly regulated and the overall number ofcasino operations in the Northeast is limited. In recent years, there has beena trend to relax the legal restrictions on entry and to permit the developmentof additional gaming operations. Currently, there are two casino resorts, Casino Niagara and NiagaraFallsview Casino Resort, and five racetrack facilities with gaming, FingerLakes Gaming and Racetrack, Fairgrounds Gaming and  Raceway, Batavia Downs Gaming and Raceway,Fort Erie Racetrack and Slots and Woodbine Racetrack, within the 100-mileradius that constitutes Seneca Niagara Casino and Hotel’s secondary market.  Fairgrounds Gaming and Raceway, a racetrackfacility within Seneca Allegany Casino’s primary market which offersapproximately 1,000 Video Gaming Machines (VGMs), is the only directcompetition in this casino’s primary market. Existing gaming facilities withineach of our casinos’ primary market area, as well as potentially new marketentrants, have and will have a direct effect on our operations. In addition,casinos and gaming-related operations in the broader regional market may alsoaffect us and may reduce our ability to draw patrons.

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*CanadianCompetition.*    SenecaNiagara Casino and Hotel competes with Casino Niagara and Niagara FallsviewCasino Resort which are located in Niagara Falls, Ontario, and are both withintwo miles of Seneca Niagara Casino and Hotel. Casino Niagara and NiagaraFallsview Casino Resort are owned and operated by the Province of Ontario andmanaged by the Hyatt-led Falls Management Company. Casino Niagara offers over95,000 square feet of gaming space including more than 1,800 slot machines, 80table games, three restaurants, and three bars. Niagara Fallsview Casino Resortopened in June 2004. Niagara Fallsview Casino Resort features 180,000square feet of gaming space that includes over 3,000 slots, 150 table games, a374-room Hyatt hotel, a spa and various restaurant and entertainment venues.Nordic Gaming Corporation also operates a racetrack and gaming facility locatedin Fort Erie, Ontario. This facility features approximately 1,200 slot machinesand is located approximately 22 miles from Seneca Niagara Casino andHotel.  To a lesser extent, we competewith Casino Rama, which is north of Toronto and approximately 150 miles northof Seneca Niagara Casino and Hotel and is located on the Chippewas ofMnjikaning (Rama) First Nation’s Territory.

*New YorkState Competition.*  Despite the exclusivity in Western New York provided by the Compact, ourcasinos face competition in New York State from both Indian and non-Indiangaming operations. The Compact allows New York State to permit the TuscaroraIndian Nation and the Tonawanda Band of Seneca Indians to obtain the right toinclude gaming devices in a compact without abrogating the exclusivityprovisions of the Compact, so long as either tribe locates its proposed gamingfacility either on its existing reservations or more than 25 miles from aNation Gaming Facility. In addition, New York State could allow other Indiangaming facilities to be located within our area of exclusivity, in which caseit would forfeit its right to receive exclusivity fees for the types of Class IIIgames in such competitor’s facility on which the Nation pays an exclusivity feeunder the Compact. Of the seven federally recognized Indian tribes or nationsin New York other than the Nation, only the St. Regis Mohawk Tribe and theOneida Indian Nation of New York have signed compacts with New York State toopen casinos.

The St. Regis Mohawk Tribecurrently operates a small casino facility near Hogansburg, New York,approximately 350 miles and 390 miles from Seneca Niagara Casino and Hotel andSeneca Allegany Casino, respectively, and the Oneida Indian Nation operates agaming facility resort near Syracuse, New York, approximately 190 miles and 235miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino,respectively. In October 2001, New York State authorized six new casinosto be run by Native Americans in the state, each of which was to be permittedto feature Class III slot machines. The State’s legislation authorizingthe six new Indian casinos was recently upheld by the New York Court of Appealsin *Dalton v. Pataki, et al.,* and *Karr v. Pataki, et al.* Three of these authorized casinos areor will be operated by us (Seneca Niagara Casino and Hotel, Seneca AlleganyCasino and Seneca Buffalo Creek Casino). It was expected that the other threecasinos would be located in Sullivan and Ulster Counties in the Catskillregion, approximately 330 miles and 320 miles from Seneca Niagara Casino andHotel and Seneca Allegany Casino, respectively.

The Governor previously reachedsettlement agreements, subject to numerous contingencies, with the followingtribes for Class III gaming operations to be located in Sullivan or UlsterCounties in the Catskills region: the St. Regis Mohawk Tribe, the Seneca-CayugaTribe of Oklahoma, the Cayuga Nation of New York, the Oneida Nation ofWisconsin, and the Stockbridge Munsee Community.  However, as a result of the United StatesSupreme Court’s recent decision in *City of Sherrill, NY v.Oneida Indian Nation of New York,* 125 S. Ct. 1478 (March 29,2005), the Governor withdrew pending legislation and land claim settlementswith the Seneca-Cayuga Tribe of Oklahoma, the Cayuga Nation of New York, theOneida Nation of Wisconsin, and the Stockbridge Munsee Community. In light ofthis decision and subsequent events the only casino development that we believeto be imminent in Sullivan or Ulster County, New York, is the developmentplanned by the St. Regis Mohawks.  TheSt. Regis Mohawks have entered into a development agreement with Empire Resortsfor the purpose of constructing a $500 million Class III gaming facilityimmediately adjacent to Monticello Raceway.

In 2001, eight racetracks in NewYork State were awarded licenses to operate VGMs. In January 2004,Sportsystems (now known as Delaware North Gaming & Entertainment)opened a 1,300 machine video gaming facility at Saratoga Raceway in SaratogaSprings, New York, approximately 325 miles and 340 miles from Seneca NiagaraCasino and Hotel and Seneca Allegany Casino, respectively. Shortly thereafter,in February 2004, Finger Lakes Gaming and Race Track in Farmington, NewYork, approximately 100 miles and 140 miles from Seneca Niagara Casino andHotel and Seneca Allegany Casino, respectively, operates over 1,000 VGMs in avideo gaming facility. Fairgrounds Gaming and Raceway in Hamburg, New York,approximately 30 miles and 50 miles from Seneca Niagara Casino and Hotel andSeneca Allegany Casino, respectively, opened a 27,000 square foot gamingfacility in March 2004 and offers nearly 1,000 VGMs. MonticelloRaceway in Monticello, New York, approximately 325 miles and 280 miles fromSeneca Niagara Casino and Hotel and Seneca Allegany Casino, respectively, openeda gaming facility on June 30, 2004, with nearly 1,800 VGMs.

Batavia Downs, in Batavia, NewYork, approximately 50 miles from Seneca Niagara Casino and Hotel, opened onMay 18, 2005, with 580 VGMs. The New York Racing Association granteda right to operate VGMs at the Aqueduct racetrack in Queens, New York,approximately 425 miles and 380 miles from Seneca Niagara Casino and Hotel andSeneca Allegany 

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Casino, respectively. Aftersuspending work on the 4,500 video gaming machine facility from August toDecember 2003, the project was scheduled for completion by mid-2005;however, as of September 30, 2006 , the project had been stopped again and VGMswere not in operation at the Aqueduct racetrack. In October 2006, Vernon DownsRacetrack in Vernon, New York, approximately 200 miles and 245 miles fromSeneca Niagara Casino and Hotel and Seneca Allegany Casino, respectively,commenced operation of a gaming facility housing 1,000 VGM’s.  On July 4, 2006, Tioga Downs, locatedapproximately 190 miles and 160 miles from Seneca Niagara Casino and Hotel andSeneca Allegany Casino, respectively, opened a 750 VGM facility in central NewYork.  Both Vernon Downs and Tioga Downsare operated by Nevada Gold, Inc. Yonkers Raceway near Manhattan, New York, completed construction of agaming facility in October 2006. Initially, the facility will feature approximately 1,870 VGM’s, and uponcompletion of additional construction, the facility will feature approximately5,500 VGM’s.  In April 2005,Governor Pataki signed a law providing race tracks with a larger share ofproceeds from VGMs and extending VGM authorization through 2017. This law alsoallows for up to eight additional VGM venues in New York State.  These eight licenses would be awarded in acompetitive bid process to the state-owned Off-Track Betting Corporation orother operators which may be located in our primary and secondary markets.

Other proposed gaming operations inNew York State include a Cayuga tribe development in Union Springs, New York,approximately 140 miles from Seneca Niagara Casino and Hotel, which has beenapproved for a Class II gaming license; a proposed high stakes bingo hallin Aurelius, New York, approximately 150 miles from Seneca Niagara Casino andHotel, which is being pursued by the Seneca-Cayuga Tribe of Oklahoma; and aproposed casino in Hampton Bays, New York, approximately 530 miles from SenecaNiagara Casino and Hotel, which is being pursued by the Shinnecock Tribe. Thelikelihood and timing of these projects is uncertain at this point in time.

There are also several federallyrecognized Indian tribes and unrecognized Indian groups that are pursuingcasino projects in New York State and other northeastern states, which, ifsuccessful and completed, could compete with us.

*Pennsylvania*.  On July 5,2004, the governor of Pennsylvania signed a bill permitting up to an aggregateof 61,000 slot machines at 14 locations in Pennsylvania.  The Pennsylvania legislation permits up to5,000 slot machines at seven proposed or existing racetracks, five stand alonegaming facilities with up to 5,000 slot machines each, and 500 slot machines attwo existing resorts.  As of October 26,2006 the Pennsylvania Gaming Control Board had approved six category 1 (awardedto existing/proposed racetracks) licenses, one of which will allow MTR GamingGroup, which owns and operates Mountaineer Park in Chester, West Virginia, tobuild and operate Presque Isle Downs in Erie, Pennsylvania.  This facility is expected to open in February2007, operating approximately 2,000 slots. Presque Isle Downs will be located approximately 120 and 80 miles fromSeneca Niagara Casino and Hotel and Seneca Allegany Casino, respectfully.  Presque Isle Downs will compete directly withSeneca Allegany Casino and indirectly with Seneca Niagara Casino andHotel.  It is expected that, of the fivestand-alone gaming facilities authorized by Pennsylvania, at least one facilitywill be located in the Pittsburgh, Pennsylvania area, a secondary market for SenecaAllegany Casino, and an outer market for Seneca Niagara Casino and Hotel.

*OtherCompetitive Regional Gaming Operations.    *Foxwoods Resort Casino and the Mohegan Sun Casino are locatedin southeastern Connecticut (approximately 460 miles and 480 miles from SenecaNiagara Casino and Hotel and Seneca Allegany Casino, respectively), and areoperated by the Mashantucket Pequot Tribe of Connecticut and the Mohegan IndianTribe of Connecticut, respectively. There are also numerous casinos in AtlanticCity, New Jersey (approximately 480 miles and 430 miles from the Seneca NiagaraCasino and Hotel and Seneca Allegany Casino, respectively) with which wecompete.  We also face competition fromother non-gaming leisure activities and destinations.

If we are unable to competesuccessfully, our business, financial condition and results of operations couldbe materially adversely affected. For more detail on this risk, please see “Item1A. - Risk Factors—We compete with casinos, other forms of gaming and otherresort properties. If we are unable to compete successfully, we may not be ableto generate sufficient cash flow to fund our operations or service our debt.”

**Class IIIGaming Compact**

The Nation’s Compact with New YorkState provides the Nation with the right to establish and operate threeClass III gaming facilities in Western New York. The Compact grants theNation the exclusive right to operate specifically defined gaming devices,including slot machines, within a 10,500 square-mile, geographic area inWestern New York, beginning on Route 14, approximately 30 miles East ofRochester, and extending westerly throughout New York State. In exchange forthis exclusivity, the Nation pays exclusivity fees to New York State based on apercentage of the slot machine net drop (money dropped into the machines afterpayout but before our expenses). The exclusivity payment is 18% for the firstfour years, 22% for years 5-7 (beginning January 1, 2007), and 25% for theremainder of the term (beginning January 1, 2010). The exclusivity payment toNew York State was approximately $68.3 million for calendar year 2005, $57.1million for calendar year 2004 and $39.0 million for calendar year 2003. If NewYork State breaches the exclusivity arrangement by, for example, allowing a 

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person or entity to operateClass III slot machines within the zone of exclusivity, then the Stateforfeits the exclusivity fees as to Class III slot machines. The Compactallows New York State to permit the Tuscarora Indian Nation and the TonawandaBand of Seneca Indians to obtain the right to include gaming devices in acompact without abrogating the exclusivity provisions of the Compact, so longas either tribe locates its proposed gaming facility either on its existingreservations or more than 25 miles from a gaming facility site authorized bythe Compact. The Compact provides that the Nation may acquire property andestablish a gaming facility in the City of Niagara Falls within an approximate50 acre area designated as land to be developed by the Nation. Seneca NiagaraCasino is located on land within this designated area on lands held inrestricted fee pursuant to the Seneca Nation Lands Claim Settlement Act of 1990(SNLCSA). The two additional Class III gaming facilities include the SenecaAllegany Casino on the Nation’s Allegany Territory, and a third facility inErie County.  The Nation’s exclusivity toestablish a Class III gaming facility in Erie County could have expired onDecember 9, 2005, if we had not commenced construction of the facility byDecember 9, 2005 and may expire on December 9, 2007, if we fail to commenceClass III Gaming operations by December 9, 2007.  See “Seneca Buffalo Creek Casino” discussionabove.  The Compact expires in December2016 and may be renewed by the Nation and the State of New York for anadditional seven-year period.

**Employees**

As ofSeptember 30, 2006, SGC employed 3,868 employees.  Of those, Seneca Niagara Casino and Hotelemployed 2,905 employees, including 999 casino staff, 804 food and beverageemployees, 257 hotel employees, 150 security staff, 540 administrativeemployees, 117 parking and transportation employees and a management team of38, and Seneca Allegany Casino employed 963 employees, including 368 casinostaff, 248 food and beverage employees, 85 security staff, 203 administrativeemployees, 51 parking and transportation employees and a management team of eight.

We consider relations with ouremployees to be good. None of our employees are currently members of any laborunion or similar organization.

**Seneca GamingCorporation and the Nation**

*Seneca GamingCorporation. *SGC was established by the Nation in August 2002 for thepurpose of developing, constructing, leasing, operating, managing, maintaining,promoting and financing Nation gaming facilities, including without limitationany Class III gaming facilities established in accordance with theCompact.  Our Class II operations weretransferred to the Nation as of January 1, 2005.  For further discussion of our former Class IIoperations, see “Status of Former Class II Operations”, above.  SGC is a governmental instrumentality of theNation and was established by the Nation pursuant to Nation law by a dulyenacted resolution of the Council. SGC is wholly owned by the Nation foreconomic and governmental purposes and shares in the Nation’s sovereignimmunity, which can be waived if the board of directors adopts a resolutionwaiving immunity in a specific situation and such waiver is approved by theNation’s Council. SGC is managed by a board of directors with seven members,not less than five of whom must be enrolled members of the Nation. The Nation’sCouncil alone has the power to appoint and remove SGC’s directors.

There are three subsidiaries underthe control, operation and management of SGC: Seneca Niagara Falls GamingCorporation, established in August 2002 to finance, develop, and operatethe Nation’s gaming facility in downtown Niagara Falls, New York; Seneca ErieGaming Corporation, established in August 2003 to finance, develop, andoperate the Nation’s gaming facility in Erie County, New York; and SenecaTerritory Gaming Corporation, established in September 2003 to finance,develop, and operate the Nation’s gaming facilities on the Nation’s Allegany orCattaraugus Territories. SNFGC operates the Seneca Niagara Casino and Hotel located on the Nation’s Niagara FallsTerritory in Niagara Falls, New York. STGC operates the Nation’s SenecaAllegany Casino, located in the City of Salamanca, New York on the Nation’sAllegany Territory. SEGC is engaged in the development and construction of thegaming facility to be located on the Nation’s Buffalo Creek Territory.  Each of SGC’s subsidiaries is required tomake periodic financial reports and submit an annual report to the SGC board ofdirectors. The SGC board of directors is required to make quarterly and annualreports to the Council regarding the financial condition of the companies,including but not limited to, significant problems and accomplishments, futureplans, and such other information as the Council deems pertinent. The membersof the boards of directors of SGC and its subsidiaries are the same.

*Seneca GamingAuthority. *SGC’s gaming operations are subject to the supervision andregulation of the Seneca Gaming Authority, or SGA, which was established byNation ordinance and is responsible for overseeing regulation of all of theNation’s gaming operations. The Nation’s gaming ordinance which providesregulatory authority to SGA for the Nation’s Class III gaming wasoriginally adopted on August 1, 2002, subsequently amended onNovember 16, 2002 and approved by the National Indian Gaming Commission(NIGC) on November 26, 2002. The Nation amended the gaming ordinance toextend SGA’s regulatory authority to include jurisdiction over Class IIgaming. The amended ordinance was further amended in August 2006 to incorporatecertain clarifications into the ordinance. This amendment was approved by the NIGC as of November 6, 2006. The SGAconsists of five commissioners selected by the Nation and is responsible for,among other things, 

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monitoring and regulating thestandards of operation and standards of management of all authorizedClass III gaming, protecting the assets and integrity of casinooperations, overseeing casino security and surveillance, monitoring thecompliance of the Nation’s gaming activities with external accounting and auditcontrol procedures, and supervising the licensure of all employees and vendorsof the Nation’s gaming activities. SGA’s authority does not extend toactivities that are not directly related to Class III gaming undertaken by theNation under the Compact, such as ownership and operation of our hotels andother amenities, or our golf course development activities.  The SGA functions independently andautonomously from the Council in all matters within its purview. While the SGAis responsible for regulatory matters relating to the Nation’s gamingactivities, SGC (or one of its subsidiaries) is responsible for the day-to-daymanagement and operation of the Nation’s Class III gaming activities.  For further discussion of the Seneca GamingAuthority, see “Regulation of the Nation, Seneca Gaming Corporation and itsSubsidiaries”, below.

*The Nation.*  The Seneca Nation of Indians is a federallyrecognized, self-governing Indian nation operating under a Constitution originallyadopted in 1848 and most recently amended in 1993. The Nation’s current totalenrollment population is approximately 7,500. The Seneca Nation is one of theSix Nations of the Iroquois Confederacy that consists of the Seneca, Cayuga,Onondaga, Oneida, Mohawk and Tuscarora nations. The members of the Nationoriginally lived in the area between the Genesee River and Seneca Lake in theFinger Lakes region of New York. Today, the Seneca Nation holds title to fivedistinct Territories in Western New York State, including land in Niagara Fallsand Buffalo and land set aside by the 1794 Treaty of Canandaigua: the Allegany,Cattaraugus and Oil Spring Territories. These three Territories designated bythe Treaty encompass parts of four counties in New York State: Allegany,Cattaraugus, Chautauqua, and Erie counties. The Oil Springs Territory is 640acres, or one square mile, of land located 43 miles southeast of theCattaraugus Territory and 24 miles east of the Allegany Territory. The AlleganyTerritory is composed of 31,097 acres and includes the City of Salamanca whichis located within its territorial boundaries. The Cattaraugus Territory is 35miles north of Allegany and encompasses 22,012 acres of land. In addition,approximately 24 acres of land (of the approximate 50 acre parcel identified inAppendix I of the Compact) in Niagara Falls and approximately nine acres ofland in Erie County have been converted into restricted fee lands pursuant tothe  SNLCSA. By operation of federal law,these lands and other parcels that may be acquired in the future pursuant tothe SNLCSA, whether in Niagara Falls or Erie County, are subject torestrictions against alienation, constitute Indian country subject to thejurisdiction of the Nation, and qualify as gaming eligible Indian landspursuant to the Indian Gaming Regulatory Act (IGRA).  For further discussion of land acquisitionsin Niagara Falls, New York, see “Niagara Falls Real Estate Acquisitions”,above.

*NationGovernance. *The Nation came into formal existence in 1848 when the chiefsystem was replaced by a constitution with elected officials. The Nation’sConstitution provides for three branches of government: executive, legislativeand judicial. The Nation holds an election every two years for its three ExecutiveBranch officers: the President, the Treasurer and the Clerk. These officersalternate between the two principal Territories, Cattaraugus and Allegany,every two years. The next election of the Executive Branch Officers will beheld in November 2008. The Legislative Branch, or the Council, has sixteenmembers, of which eight members are elected from each of the two principalTerritories. Each Councillor is elected to a four-year term, which isstaggered.  An election of eight Councilmembers was recently held in November 2006. The next election of eight Council members will be inNovember 2008.

*NationGovernmental Operations. *The Nation currently has administrative departments locatedon both the Allegany and Cattaraugus Territories. The Nation’s programs includetribal administration functions as well as a wide array of community services,including health, environmental, education, recreation and community planning.In order to provide efficient services to the communities, many departmentshave offices located on both Territories. The tribal administrative executiveoffices are housed in the two central administration buildings located on theAllegany and Cattaraugus Territories: the G.R. Plummer and the William SenecaBuildings. The other Nation organizational departments are located in buildingsadjacent to the main tribal administration building or surrounding area.

*NationBusinesses. *The Nation enterprises, subdivisions of the Nation’sgovernment, are responsible for the various economic development initiativesundertaken by the Nation other than SGC and its subsidiaries. The Nationenterprises are currently comprised of the following: Seneca ManagementDevelopment Corporation, Seneca Construction Management Corporation, SenecaGaming & Entertainment, Seneca One Stop, Seneca-Iroquois NationalMuseum, and Highbanks Campground. None of these enterprises is a part of SGC orits subsidiaries or otherwise contributes to its revenue. Individual Senecaentrepreneurs also operate their own businesses on Nation lands. The businessesinclude, but are not limited to, restaurants, retail shops, hotels, gasstations, and Internet-based businesses.

*TribalEmployment Rights**Ordinance*.  Our operations are subject to the Nation’sTribal Employment Rights Ordinance (TERO) which requires the granting of apreference to enrolled Nation members and other Native Americans in the hiringof employees and in the engagement of certain vendors and contractors.  TERO is implemented by a five membercommission, appointed by the Nation’s Council. With respect to employees, TERO requires that we give preference toqualified Indians in 

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all hiring, promotion, training and all other aspects ofemployment.  With respect to vendors,TERO requires that, in awarding contracts or subcontracts for supplies,services, labor and materials in an amount in excess of $250 where the majorityof the work will occur on Nation lands, we give preference to Indian-ownedfirms when contracts are subject to a competitive bidding process and the bidsof the Indian-owned firms fall within a defined percentage or amount of thelowest responsive bid (ranging from 1% when the lowest responsive bid is $7million or more, to $9,000 when the lowest responsive bid is $100,000 or less),in each case as specified in the ordinance. The Nation, through its TERO Commission, has the sole power to determineand certify whether and to what extent a firm is “Indian-owned”.

**Regulationof the Nation, Seneca Gaming Corporation and its Subsidiaries**

The conduct of our Class IIIgaming activities on Nation lands is subject to multiple levels of regulation,including regulation by the Nation through its Gaming Ordinance (and the SGA,which has regulatory jurisdiction over the Nation’s gaming activities) andregulation by the State of New York, through the New York State Racing andWagering Board and the New York State Police, each in accordance with theCompact between the Nation and New York State. See “MaterialAgreements—Nation-State Gaming Compact” for further discussion of theregulatory authority of the SGA and New York State gaming officials.  The federal government also oversees Indiangaming generally pursuant to IGRA and exercises regulatory oversight throughthe NIGC. The Department of Justice also possesses authority to enforce IGRAand the Gambling Devices Act, 15 U.S.C. § 1171-78, more commonly known asthe Johnson Act. The following description of the regulatory environment inwhich gaming takes place and in which SGC and its subsidiaries operate isintended as a summary and is not a complete recitation of all relevant laws.Moreover, because the regulatory environment is dynamic and evolving, it isimpossible to predict how certain provisions will ultimately be interpreted orapplied or how they may affect SGC and its subsidiaries. Changes in such lawsor regulations could, under certain circumstances, have a material adverseeffect on the operations of SGC and its subsidiaries.

**Seneca NationLaw and Legal Systems**

*Applicability ofState and Federal Law.*    TheNation is an Indian tribal government with certain sovereign powers. The Nation’sability to enact its own laws and regulations to regulate gaming activitiesderives from the exercise of the Nation’s inherent sovereign powers, recognizedby the United States in the 1794 Treaty of Canandaigua and in subsequentfederal court opinions. It is the position of the United States, and federalcourts have uniformly held, that Indian nations are subject to certain federallaws and certain state laws where federal law so prescribes. It is thereforepossible that a federal agency with whose regulations the Nation may not becurrently complying could object to such noncompliance. If an agency sought toenforce compliance, such agency action and any resultant federal court rulingcould result in the disruption of construction and related activities of SGCwhich events would have a material adverse effect on our operations andfinancial results.

*Waiver ofSovereign Immunity; Court Jurisdiction; Exhaustion of Tribal Remedies.*    Indian nations enjoy sovereignimmunity from unconsented suit similar to that of the states and the UnitedStates. An Indian nation and its wholly owned tribal entities, such as SGC andits subsidiaries, share in the Indian nation’s sovereign immunity, but mayformally waive their sovereign immunity with respect to suits against them. TheNation and SGC, respectively, granted a limited waiver of sovereign immunityand consent to suit in connection with the senior notes issued by SGC in 2004and 2005, including suits against SGC to enforce its obligation to repay thesenior notes.  Courts have held waiversof sovereign immunity to be effective, if given explicitly with properauthorization.

The remedies available against anIndian nation also depend, at least in part, upon the jurisdiction of courtsand the rules of comity and doctrines requiring initial exhaustion ofremedies in tribal tribunals and, as to some judicial remedies, the particularnation’s consent to jurisdictional provisions contained in the disputedagreements. The U.S. Supreme Court has ruled that state courts do not havejurisdiction over actions involving Indians or Indian tribes and arising withinIndian country unless Congress specifically grants jurisdiction to thosecourts. Congress has allowed the courts of New York State to hear certainmatters involving Indians and occurring on Indian lands in New York, althougheach situation must be analyzed on a case-by-case basis.

The Nation’s judiciary branch iscomprised of separate Peacemaker, Appellate, and Surrogate Courts. The Nationcourt system has its own clerks and facilities and has heard numerous civilcases.

The U.S. Supreme Court has heldthat, under certain circumstances, where a tribal court exists, the remediesand jurisdictional questions in that forum must first be exhausted before theclaim can properly be heard by federal courts that would otherwise havejurisdiction. We sometimes waive our right to require exhaustion of tribalcourt remedies.  For example, the Nationand SGC, respectively, consented to the jurisdiction of the federal and NewYork State courts in connection with any action by the trustee to enforce thesenior notes and operative documents related thereto and agreed to waive therequirement of exhaustion of tribal court remedies. However, it is not clearthat such a waiver would be effective. Generally, where a dispute as to the 

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existence of jurisdiction in thetribal forum exists, the tribal court must first rule as to the limits ofits own jurisdiction. In the event that a waiver of tribal court jurisdictionis held to be ineffective, the recipient of the waiver (e.g., the trustee andholders of the senior notes) may be required to enforce their rights andremedies against the Nation or SGC in Nation court. In addition, unless thedecisions of the Nation court violate some applicable state or federal law, ifany, there may be no effective right to appeal such decisions in state orfederal court.

The Federal Court of Appeals forthe Second Circuit (which has appellate jurisdiction over federal districtcourts located in New York State) has ruled that if a non-member of a tribeasserts a claim against a tribe based on state or federal law, and not ontribal law, and no prior tribal court proceedings are pending, a federal courtgenerally may adjudicate the claim without requiring the plaintiff to exhausttribal court remedies. A similar ruling by a New York State appellate courtconcluded that the state trial court properly proceeded with adjudicating adispute rather than requiring the plaintiff to exhaust tribal court remedieswhere the dispute was among tribal members involving issues not concerninginternal tribal affairs, the state court had jurisdiction concurrent withtribal courts over the issues and no case was currently pending before thetribal court. Courts in other states and federal judicial circuits have reacheddifferent conclusions, and it cannot be certain whether a court in New YorkState will defer exercising jurisdiction over a case until after theappropriate tribal court has had an opportunity to adjudicate the matter, evenwhere there is a waiver of exhaustion of tribal court remedies.

**The IndianGaming Regulatory Act of 1988**

*IGRA.*    All gaming activities on Indian landsare subject to IGRA. Congress enacted IGRA in order to establish a system forregulating gaming activities on Indian lands. IGRA’s purpose is to provide astatutory basis for the operation of gaming by Indian tribes as a means ofpromoting tribal economic development, self sufficiency, and strong tribalgovernments. Congress simultaneously sought to shield Indian gaming fromorganized crime and other corrupting influences, to ensure that the Indiantribe is the primary beneficiary of the gaming operation and that gaming isconducted fairly and honestly by both the operator and players.

*Classes ofGaming.*    IGRAdivides gaming into three classes, each of which is regulated differently.Class I gaming encompasses social games solely for prizes of minimal valueor traditional forms of Indian gaming engaged in by individuals as a part of,or in connection with, tribal ceremonies or celebrations. Such gaming issubject to the exclusive jurisdiction of the tribes and is not subject toregulation under IGRA. Class II gaming includes bingo and similar games, and issubject to tribal regulation and federal oversight by the NIGC. Class IIIgaming, the most heavily regulated of the three classes, encompasses all otherforms of gaming, and includes slot machines, casino games, banking card games,dog racing, and lotteries. Class III gaming is lawful only if it is (1)authorized by a tribal ordinance, (2) located in a State that permits suchgaming for any purpose by any person, organization, or entity, and (3)conducted in conformance with a Tribal-State compact.

*National IndianGaming Commission.*    TheNIGC, an independent executive agency located in the Department of theInterior, is vested with regulatory authority over gaming activities on Indianlands pursuant to IGRA and its implementing regulations. The NIGC is chargedwith the administration and enforcement of IGRA. The NIGC regulates gaming byIndian tribes, in order to shield tribes from organized crime and othercorrupting influences, to ensure that the Indian tribe is the primary beneficiaryof the gaming operation and that gaming is conducted fairly and honestly byboth the operator and players. Congress aimed to make gaming a means ofpromoting tribal economic development, self-sufficiency, and strong tribalgovernments. To carry out these goals, Congress gave the NIGC substantialpower, including the authority to initiate enforcement actions, close tribalgaming operations and levy civil fines. Moreover, the NIGC has authority toissue regulations governing gaming activities of Indian lands, review andapprove Class II and Class III gaming ordinances, review and approvemanagement agreements for tribal gaming operations, conduct investigations andgenerally monitor Indian gaming activities. IGRA also provides for federal criminalpenalties for illegal gaming on Indian land and for theft from Indian gamingfacilities. The Secretary of the Interior retains certain responsibilitiesunder IGRA, such as the approval of tribal-state compacts and approval of percapita distribution plans.

*NIGCRegulations Implement Certain Provisions of IGRA*. Theseregulations govern, among other things, the submission and approval of tribalgaming ordinances or resolutions, and require an Indian tribe to have the soleproprietary interest in and responsibility for the conduct of gamingactivities. Pursuant to NIGC regulations, tribes are required to issue gaminglicenses only under certain articulated standards, to conduct or commissionfinancial audits of their gaming enterprises, to perform or commission backgroundinvestigations of primary management officials and key employees and tomaintain facilities in a manner that adequately protects the environment andthe public health and safety. NIGC regulations also set forth a reviewprocedure for tribal licensing of all gaming operation employees and requiretribes to report certain specified information, including information derivedfrom background investigations, to the NIGC. On August 24, 2005, the United States District Court For TheDistrict of Columbia in *Colorado River IndianTribes vs. National Indian Gaming Commission,* ruled “that the [IGRA]does not confer upon the NIGC the authority to issue or enforce [minimuminternal control standards] for Class III gaming.”  Accordingly, theCourt declared unlawful the minimum internal control standards as applied toClass III gaming.  

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OnOctober 26, 2006, the D.C. Circuit Court of Appeals unanimously upheld thisdecision finding that the Indian Gaming Regulatory Act does not grant the NIGCpower to impose operational standards on Class III gaming.

OnNovember 18, 2005, Senate Indian Affairs Committee Chairman McCain (R-AZ)introduced S. 2078, the Indian Gaming Regulatory Act Amendments of 2005. S. 2078 makes a number of amendments to IGRA, including authorizing the NIGC topromulgate “regulations addressing minimum internal control standards for classII gaming and class III gaming activities.”  The import of this particularamendment is to essentially overrule the *ColoradoRiver Indian Tribes vs. National Indian Gaming Commission* decision*.*

*Tribal-StateCompacts.*    UnderIGRA, Class III gaming activities are lawful on Indian lands only if suchactivities are conducted in conformance with a Tribal-State gaming compact. ATribal-State gaming compact is the product of negotiation by a tribe and astate which sets the terms by which the tribe may conduct Class IIIgaming. IGRA contemplates that states and tribes will utilize the compactingprocess to address public policy issues of mutual concern. IGRA provides a representativelist of the types of provisions that may be included in a Tribal-State gamingcompact. Among other things, Congress sought through the compact process toaccommodate significant governmental interests of the states. At the same time,IGRA’s compacting process affords reciprocal protection for the significantgovernmental interests of tribes by requiring a state to negotiate over a formof Class III gaming as long as the state permits it for any purpose by anyperson. The mechanism for entering into a Tribal-State gaming compact is setforth in IGRA.

The Nation’s Compact was executedon August 18, 2002, and deemed approved by the Secretary of the Interioron October 25, 2002 pursuant to IGRA. After taking effect onDecember 9, 2002, when notice was published in the Federal Register, theCompact authorized the Nation to own and operate three Class III gamingfacilities, two then off-Territory in the City of Niagara Falls and in ErieCounty, and one on then already existing Nation Territory.

Tribal-state gaming compacts havebeen the subject of litigation in thirteen states, including New York State. In1996, the U.S. Supreme Court ruled in the case of *SeminoleTribe of Florida v. Florida* that the provision of IGRA that permitsIndian tribes to sue in federal court to force states to negotiate tribal-stategaming compacts in good faith is unconstitutional, as applied to anunconsenting state, by virtue of the Eleventh Amendment to the U.S.Constitution.

In 1999, certain legislators,organizations and individuals opposed to casino gambling brought a lawsuit:(1) challenging the validity of the 1993 gaming compact between New YorkState and the St. Regis Mohawk Tribe under the separation of powers provisionsin the New York State Constitution; and (2) seeking a declaration that NewYork State Constitution’s general prohibition on gambling covers LasVegas-style gaming at casinos operated pursuant to IGRA by Indian tribes ontheir Territory lands in New York. The plaintiffs also requested an injunctionprohibiting New York State from expending any money in furtherance of thegaming compact.

In October 2001, the New YorkLegislature passed Chapter 383 of the Laws of 2001, or Chapter 383, whichallowed Governor Pataki to enter into a gaming compact with the Seneca Nationof Indians and to enter into gaming compacts with other Indian tribes for theestablishment of three additional casinos in the Catskills. Chapter 383 alsoapproved the installation of VGMs at certain racetracks.

In January 2002, two actionswere filed in the Supreme Court of the State of New York, County of Albany,challenging legislation that, among other things, authorized the Governor ofNew York to execute tribal-state gaming compacts, approved the use of slotmachines as games of chance, approved the use of VGMs at racetracks andauthorized the participation of New York State in a multi-state lottery. Theactions are captioned *Dalton v. Pataki, et al.,*and *Karr v. Pataki, et al*. Plaintiffs soughta judgment declaring the legislation unconstitutional and enjoining itsimplementation. These two cases were consolidated and we refer to both casesbelow as *Dalton v. Pataki*.

On July 17, 2003, the New YorkSupreme Court dismissed the plaintiffs’ complaints in *Dalton v.Pataki* and held that the legislation is constitutional. Theplaintiffs appealed the Court’s decision to the Third Department of the NewYork Supreme Court’s Appellate Division and oral argument was held onDecember 16, 2003. On July 7, 2004, a five judge panel issued itsOpinion and Order declaring the legislation at issue, Chapter 383 of the Lawsof 2001, constitutional as challenged. Notwithstanding the constitutionality ofVGMs, the court declared the licensing of VGMs to racetracks to beunconstitutional due to the impermissible revenue distribution scheme set forththerein. Lastly, the court declared the provision of Chapter 383 of the Laws of2001 authorizing the Division of the Lottery to participate in the multi-statelottery constitutional.

On May 3, 2005, the New YorkCourt of Appeals held the legislation (including the licensing of VGMs toracetracks) to be constitutional. In July 2005, the New York Court ofAppeals, the State’s highest court, denied a motion to rehear the case.  Appellants filed a writ of certiorari seekingreview by the United States Supreme Court. On November 28, 2005, the United States Supreme Court denied thewrit.

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Although we can provide noassurance, we believe that any change in New York law will not retroactivelyinvalidate what the State has agreed to in the Compact. If New York State wereto make various forms of gaming illegal or against public policy (or the courtswere to similarly rule), or otherwise to take a legal position adverse to SGC,such actions could have a material adverse effect on our ability to conduct ourgaming operations as currently conducted.

While no assurance can be given asto litigation in New York State, any invalidation of the Nation’s Compact wouldnot affect the Nation’s ability to engage in Class II Gaming.

*Indian Lands.*    In order for the Nation to conductgaming pursuant to the Compact, it must do so on Indian lands within itsjurisdiction. Indian lands include, but are not limited to, lands locatedwithin the boundaries of an Indian Territory. For non-Territory lands toqualify as Indian lands under IGRA, the land must be either held in trust bythe United States for the benefit of any Indian tribe or individual, or held byany Indian tribe or individual subject to restriction by the United Statesagainst alienation, and the tribe must exercise governmental power over thoselands.

As it relates to lands that havebeen acquired in trust or restricted fee status for gaming purposes afterOctober 17, 1988, IGRA generally prohibits gaming on such lands unlesscertain conditions are met. As relevant to date, lands that are acquired aspart of a settlement of a land claim are exempt from the prohibition againstgaming on lands acquired after the enactment of IGRA.

Pursuant to the Compact, the Nationmay acquire property and establish gaming facilities in the City of NiagaraFalls within the boundaries of the approximate 50 acre area of land describedin Appendix I of the Compact and designated as land to be developed by theNation in connection with its gaming facilities. The Compact also authorizesthe Nation to establish a gaming facility in Erie County and one on thenalready existing Nation Territory. Moreover, the Compact authorizes the Nationto use funds appropriated under the SNLCSA to acquire parcels of land in NiagaraFalls and Erie County for gaming purposes. See “Material Agreements—Nation-State Gaming Compact”, below.

In 1990, Congress enacted theSNLCSA which provides the Nation with fair compensation for use of its land andfor the impact on the Nation from prior lease arrangements in the City ofSalamanca, New York. The funds appropriated under the SNLCSA are available forthe Nation to acquire additional land which could be placed into restricted feestatus. The SNLCSA provides that unless the Secretary of the Interiordetermines that lands acquired pursuant to the SNLCSA should not be subject torestrictions against alienation, such lands shall be held in restricted feestatus by the Nation.

As determined by the Secretary ofthe Interior in connection with the approval of the Compact, the Nation willhave jurisdiction over lands placed into restricted fee status pursuant to theSNLCSA. Indeed, lands placed in restricted status pursuant to the SNLCSA areheld in the same legal manner as existing Nation lands are held and thus,subject to the Nation’s jurisdiction. In addition, the Secretary determinedthat lands placed into restricted fee status pursuant to the SNLCSA are Indianlands as defined by IGRA, and the Nation is authorized to use such land forgaming purposes pursuant to IGRA, because such lands will be acquired as partof a settlement of a land claim.

In the future, if and when allfunds appropriated under the SNLCSA have been used by the Nation, the Nationmay acquire lands in fee status and then request such lands to be held in truston its behalf through the land-into-trust process.  To the extent the Nation acquires lands intrust in the future, it is noted that the land-into-trust process, as comparedto the restricted fee process under the SNLCSA, will be much more cumbersomeand lengthy.

As of December 15, 2006, the Nation(as opposed to SGC or its subsidiaries) had acquired approximately 24 acres inNiagara Falls (of the approximate 50 acre area of land described in Appendix Iof the Compact) with funds appropriated under the SNLCSA.  On October 3, 2005, the Nation acquiredapproximately nine acres of land in Erie County with SNLCSA funds.  On November 9, 2006, SEGC purchased thetwo-block section of Fulton Street which bisects the nine-acre site purchasedby the Nation, creating a contiguous site for development of the land.  The Nation’s Council has approved the purchasefrom SEGC (with SNLCSA funds) of the two block section of Fulton Street.  See discussion of “Seneca Buffalo CreekCasino”, above.  By operation of federallaw, these lands and other parcels that may be acquired in the future pursuantto the SNLCSA (in Niagara Falls or Erie County), are subject to restrictionsagainst alienation, constitute Indian country subject to the jurisdiction ofthe Nation, and qualify as gaming eligible Indian lands pursuant to IGRA. TheNation’s existing casino and hotel on the Niagara Falls Territory is, and theplanned casino on the Buffalo Creek Territory will be, situated on these lands.

In addition to the two thenoff-Territory sites in Niagara Falls and Erie County, the Compact alsoauthorizes the Nation to establish a gaming facility on then already existingNation Territory. The lands upon which the Nation owns, operates and managesits Territory-based Seneca Allegany Casino, are located within the Nation’sAllegany Territory boundaries, thus constituting Indian lands eligible forgaming pursuant to IGRA.

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*Possible Changesin Federal and State Law.*    Severalbills have been proposed during the current and recent sessions of Congressthat could affect Indian gaming.  Mostnotably Senator McCain’s S. 2078, the Indian Gaming Regulatory ActAmendments of 2006 and Congressman Pombo’s (R-CA) H. 4893, Restricting IndianGaming to Homelands of Tribes Act of 2006, propose additional regulations fortribes and more restrictions on “off-reservation” gaming.  Also, theadministration has published proposed regulations relative to off-reservationgaming.  Certain of such bills andregulations, if enacted, could impair the ability of the Nation and SGC toexpand its gaming operations and adversely impact the future growth of theNation’s revenue base. In addition, from time to time, various governmentofficials have proposed taxing Indian casino gaming or otherwise limiting orrestricting the conduct of gaming operations by Indian tribes. No assurance canbe given that such legislation, if and when enacted by Congress, would not havea material adverse effect on the operations of SGC. If Congress were to enactcomprehensive amendments to the IGRA, such legislation could have a materialadverse effect on the operations of SGC. In addition, under federal law, gamingon the Nation’s lands may be dependent upon the permissibility under New Yorklaw of certain forms of gaming or similar activities. If New York State were tomake various forms of gaming illegal or against public policy (or the courtswere to similarly rule), or otherwise to take a legal position adverse to SGC,such actions could have a material adverse effect on our ability to conduct ourgaming operations as currently conducted.

**MaterialAgreements**

*The followingsummaries of certain material agreements in effect as of December 15, 2006related to our operations, to which the Nation or SGC (or its subsidiaries) isa party do not purport to be complete and are qualified in their entirety byreference to the agreements summarized herein. Capitalized terms used but nototherwise defined herein have the meanings ascribed to such terms in theagreement being summarized (unless otherwise indicated).*

*Nation-StateGaming Compact*

The Nation engages inClass III gaming activities in accordance with the Compact, approved onOctober 25, 2002. The Compact was negotiated between the Nation and NewYork State in accordance with the provisions of IGRA applicable to the conductof Class III gaming operations by Indian tribes. See “Regulation of theNation and Seneca Gaming Corporation and its Subsidiaries—The Indian GamingRegulatory Act of 1988—Tribal-State Compacts.”

The Compact provides, among otherthings, that:

(1)  The Nation mayconduct the following games of chance on its lands: baccarat, bang, beat thedealer, best poker hand, blackjack, Caribbean stud poker, chuck-a-luck, craps,gaming devices, hazard, joker seven, keno, let it ride poker, minibaccarat, paigow poker, pai gow tiles, red dog, roulette, sic bo, super pan, under and overseven, wheel games, casino war, Spanish blackjack, multiple action blackjack,and three card poker. The legality of slot machines pursuant to State law,however, is the subject of ongoing State court litigation. See “Regulation ofthe Nation and Seneca Gaming Corporation and its Subsidiaries—The Indian GamingRegulatory Act of 1988—Tribal-State Compacts.” The Compact sets forthspecifications describing and governing the operation of each of these types ofgames by the Nation.

(2)  The Compact providesfor the establishment of the Seneca Gaming Authority, or SGA, which exercisesjurisdiction over and responsibility for the conduct of gaming operations bythe Nation. The SGA was established pursuant to the Gaming Ordinance. The NewYork State Racing and Wagering Board and the New York State Police,collectively, the SGO, act in a concurrent regulatory and oversight role withregard to the Nation’s Class III gaming operations. The SGA is entitled tounfettered access to all areas of the Nation’s gaming facilities including thesurveillance room(s), copies of daily inspection reports as well as access tothe business and accounting records relating to the Nation’s gaming operationsduring the course of an investigation. Each Nation Class III gamingoperation must provide reasonable office and reserved parking space adjacent tothe Class III gaming facilities for the SGO. New York State is empoweredto sue to enforce applicable Compact terms and to remedy violations througharbitration or in federal court.

(3)  Law enforcementresponsibilities relating to the Nation’s Class III gaming operations areconcurrent between the Nation Law Enforcement Agency and the New York StatePolice as a matter of federal law. Nothing in the Compact alters thejurisdiction of New York State, if any, over Indian land as provided byapplicable law. Members of the New York State Police in the course of officialduties have unfettered access to all areas of the Class III gaming andauxiliary facilities, subject only to State and federal constitutionallimitations. As stated, the Nation Law Enforcement Agency may exerciseconcurrent authority with that of the New York State Police to maintain publicorder and safety, to the extent authorized by federal law.

(4)  All gaming employeesare required to apply for, and obtain, a valid gaming employee license issuedby the SGA, following a fingerprint check by the New York State Division ofCriminal Justice Services, a background investigation by the New York StatePolice, and a suitability determination by the SGO. Applicants must submit alicense application to the SGA concerning 

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personal and family history,personal and business references, criminal conviction record, businessactivities, financial affairs, gaming industry experience, gaming schooleducation and general educational background. The SGA may in specifiedcircumstances suspend, revoke or deny a renewal of any gaming license.

(5)  Any enterpriseproviding gaming services, gaming supplies or gaming equipment to a NationClass III gaming operation must hold a current valid gaming serviceregistration issued by the SGA.

(6)  Any enterprise thatprovides goods, supplies or services to a Nation Class III gamingoperation (other than gaming services, gaming supplies or gaming equipment) ina total amount exceeding $75,000 in a single twelve-month period must be identifiedto the board by the Commission. The SGA cooperates with the SGO in anyreasonable investigations deemed necessary by the SGO relating to the fitnessof any such enterprise to engage in any business with a Nation Class IIIgaming operation. The SGO may bar such an enterprise from providing such goods,supplies or services upon a determination of a threat to the effectiveregulation of Class III gaming or danger of unfair or illegal practices,methods and activities in the conduct of Class III gaming.

(7)  The Nation’sClass III gaming operations must conform with a detailed set ofoperational and management standards relating to a variety of matters,including accounting, internal controls, operational procedures, surveillancepersonnel and the handling of cash and credit.

(8)  The Nation mustmaintain complete and accurate records of all transactions relating to therevenues and costs of its gaming operations. The forms of such accounts must beconsistent with generally accepted accounting principles. An annual audit ofthe financial statements of its gaming operations must be conducted by anindependent certified public accountant in a manner consistent with generallyaccepted auditing standards.

(9)  The Nationreimburses New York State for its costs of oversight under the Compact. Costsinclude staffing, fringe benefits, overhead costs and non-personal services.

(10)  The Nationprohibits the possession of firearms in its Class III gaming facilitiesexcept by persons authorized by law and does not permit persons under the ageof 18 to be admitted to any Class III gaming facility or to place anywager, directly or indirectly. The SGA maintains and shares with SGC a list ofpersons barred from the Class III gaming facilities because of criminalhistories or associations posing a threat to gaming integrity or safety.

(11)  As required by IGRAand the Nation’s Class III Gaming Ordinance, SGC has constructed,maintained, and operated its gaming facilities in a manner that adequatelyprotects the environment and the public health and safety.

(12)  SGC (or itssubsidiaries) or the Nation on its behalf maintains liability insurance tocompensate injured patrons of Class III gaming facilities. The Nation hasestablished procedures for the adjudication of compensation for tort claims bypatrons of Class III gaming facilities.

(13)  Except for disputesconcerning the games and activities permitted under the Compact, the Nation andNew York State have established binding arbitration as a method of resolutionof all other disputes concerning compliance with and interpretation of Compactprovisions.

(14)  The terms andconditions of the Compact may be modified or amended by written agreement ofboth parties. If the State agrees to permit any other Nation or Indian tribe toconduct a Class III game or activity which has not been authorized underthe Compact, the State shall notify the Nation, which may then conduct suchgame or activity upon adoption of the State’s specifications regarding suchgame or activity.

(15)  The Compact is ineffect until December 9, 2016, to be renewed for an additional period ofseven years unless either party objects in writing, or terminated as a resultof any of the following: (1) repeal of IGRA; (2) the Nation adopts areferendum revoking the Nation’s authority to conduct Class III gaming; or(3) either the Nation or the State commits a Material Breach as defined bythe Compact.

(16)  The Compact in noway waives the right of the Nation to request negotiations for amendment ormodification to the Compact with respect to a Class III game or activitywhich is to be conducted on Nation lands but which is not permitted under theprovisions of the Compact.

(17)  Except asspecifically provided in the Compact, neither New York State nor the Nationwaived its sovereign immunity by entering into the Compact.

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The President of the Nation and theGovernor of New York signed the Compact on August 18, 2002, and, onOctober 25, 2002, by operation of law, the Compact was deemed approved inaccordance with IGRA. The Compact took effect on December 9, 2002, whennotice was published in the Federal Register.

*Assignment andPlan of Distribution Agreement*

On May 5, 2004, SGC enteredinto an Assignment and Plan of Distribution Agreement, or the AssignmentAgreement, with the Nation. Pursuant to this agreement, the Nation has pursuantto the charters of each of SNFGC, STGC and SEGC, adopted a plan of distributionproviding that in the event of the dissolution or final liquidation of any ofthese entities, the net liquidation or dissolution proceeds shall bedistributed to SGC. The Nation further assigned to SGC all of its right, titleand interest in and to these proceeds. The Nation entered into the AssignmentAgreement because even though SNFGC, STGC, and SEGC are owned by SGC, accordingto the charters of these subsidiaries, in the event of a liquidation ordissolution of a subsidiary, the Nation, and not SGC, would be entitled toreceive the net proceeds of the liquidation or dissolution after allliabilities and obligations of the subsidiary have been paid, satisfied and discharged.Each of the Nation and SGC also waived their respective sovereign immunity fromunconsented suit and consent to suit in accordance with the AssignmentAgreement. Remedies against the Nation are generally limited to specificperformance. However, in the event a subsidiary has distributed net liquidationor dissolution proceeds to the Nation and the Nation has not transferred thoseproceeds to SGC, the Nation may be required to transfer an amount equal to theliquidation proceeds to SGC, or if such remedy is not available, SGC may file aclaim for money damages in an amount no greater than the amount of netliquidation or dissolution proceeds not assigned. Any such money damages forwhich the Nation is liable are only payable from assets held by the Nation,SGC, SNFGC, STGC, or SEGC related to the gaming business, other than realproperty held in trust for the Nation by the United States.

*ConstructionAgreements*

On July 14, 2005, STGC entered into aconstruction management agreement with Seneca Construction ManagementCorporation, or SCMC, a wholly owned corporation of the Nation, to manage theconstruction of the new 212-room hotel and casino at Seneca AlleganyCasino.  SCMC replaced Klewin, the priorconstruction manager for this project. SCMC is responsible for contract procurement and daily oversight of theconstruction project. The construction agreement, as amended, with SCMCprovides that the cost of all of the contract work to be completed under theagreement will not exceed a guaranteed maximum amount of $132.5 million.  If STGC further changes the scope of theproject or finishing materials, the guaranteed maximum amount under thecontract may be further increased.  Alsoduring 2005, SNFGC entered into a construction management agreement with SCMCfor the completion of the luxury hotel project at Seneca Niagara Casino andHotel.  Effective December 1, 2005, SEGCentered into an agreement with SCMC for the demolition and land preparationwork in connection with the site for the Seneca Buffalo Creek Casino.  This work was completed at a cost of $2.8million.  For the fiscal years endedSeptember 30, 2006 and 2005, SNFGC, STGC and SEGC have collectively madepayments to SCMC for construction management fees and other costs of $6.2million and $0.6 million, respectively.

*Buffalo CreekAgreement with City of Buffalo*

On November 9, 2006, weentered into an agreement with the City of Buffalo for the purchase of atwo-block section of Fulton Street in the City of Buffalo, which streetbi-sected the nine acre parcel previously acquired by the Nation.  The agreement provides for, among otherthings, the purchase of the two-block section of Fulton Street for $631,600;and commitments by us to expend $5 million - $7 million in total forinfrastructure improvements relating to our proposed permanent Seneca BuffaloCreek Casino and $1.7 million annually to market Seneca Buffalo Creek Casinooutside of the Western New York region.

**Item1A.  Risk Factors**

Inaddition to the other information in this Annual Report, the following riskfactors should be carefully considered in evaluating Seneca Gaming Corporationand our business because such risk factors may have a significant impact on ourbusiness, operating results and financial condition.  As a result of the risk factors set forthbelow and elsewhere in this Annual Report, actual results could differmaterially from those projected in any forward-looking statements.

**We havesubstantial indebtedness which could adversely affect our financial conditionand prevent us from fulfilling our obligations, including our senior notes.**

Wehave substantial indebtedness and have significant fixed debt serviceobligations in addition to our operating expenses. As of September 30,2006, we had $500.0 million of 7-1⁄4 % senior notes outstanding. TheIndenture governing the senior notes permits us and our subsidiaries to incuradditional debt in certain, limited circumstances. If we incur additional debtin the future, the related risks could intensify.

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Our high level of indebtednesscould have important consequences to you and significant adverse effects on ourbusiness. For example, it could:

·           increase our vulnerability to general adverse economic andindustry conditions or a downturn in our business;

·           limit our ability to obtain additional debt financing forworking capital, capital expenditures or other purposes;

·           require us to dedicate a substantial portion of our cash flowfrom operations to payments on our indebtedness, thereby reducing theavailability of our cash flow to fund working capital, capital expenditures,development projects and other general business purposes;

·           limit our flexibility in planning for, or reacting to,changes in our business and the industry in which we operate; and

·           place us at a competitive disadvantage compared to ourcompetitors that have less debt and/or more financial resources.

If our indebtedness affects ouroperations in these ways, our business, financial condition and results ofoperations could suffer, making it more difficult for us to satisfy ourobligations.

**Our failure togenerate sufficient cash flow from our operations could adversely affect ourability to make payments on the senior notes and our other obligations.**

Our ability to make payments on thesenior notes and our other obligations will depend on our ability to generatecash flow from our current and future operations. Our ability to generatesufficient cash flow to satisfy our obligations will depend on our futureoperating performance, which is subject to many economic, competitive,regulatory and business factors that are beyond our control. If we are not ableto generate sufficient cash flow to service our debt obligations, we may needto refinance or restructure our debt, sell assets or reduce or delay capitalinvestments, or seek to raise additional capital. For the following reasons,among others, these measures may not be available to us on reasonable terms orat all, or, if available, they may not be adequate to enable us to satisfy ourobligations under the senior notes:

·           our ability to incur additional debt will be limited by thecovenants of the Indenture governing the senior notes;

·           the Indenture governing the senior notes includes covenantswhich limit our ability to create additional liens on or sell our assets; and

·           unlike non-governmental businesses, we are prohibited by lawfrom generating cash through an offering of equity securities.

If our cash flow is insufficientand we are unable to raise additional capital, we may not be able to serviceour debt obligations, including making payments on our senior notes.

**Our obligationsunder the Indenture governing the senior notes are not secured, and the seniornote holders’ rights to receive payments on the senior notes are effectivelysubordinated to SGC’s and the Guarantors’ secured indebtedness.**

Holders of SGC’s and the Guarantors’secured indebtedness will have claims that are prior to the claims of holdersof senior notes to the extent of the value of the assets securing the otherindebtedness. The Indenture governing the senior notes permits certain securedindebtedness.  The senior notes areeffectively subordinated to all of that secured indebtedness. In the event ofany distribution or payment in any foreclosure, dissolution, winding-up,liquidation, reorganization, or other bankruptcy proceeding, holders of SGC’sand the Guarantors’ secured indebtedness will have prior claim to those assetsthat constitute their collateral. Holders of the senior notes will participateratably with all holders of SGC’s and the Guarantors’ unsecured indebtednessthat is deemed to be of the same class as the senior notes, and potentiallywith all of SGC’s and the Guarantors’ other general creditors, based upon therespective amounts owed to each holder or creditor, in the remaining assets. Inany of the foregoing events, we cannot assure senior note holders that therewill be sufficient assets to pay amounts due on the senior notes. As a result,holders of senior notes may receive less, ratably, than holders of securedindebtedness.

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As of September 30, 2006, theamount of the consolidated indebtedness of SGC was approximately $494.3million, of which none is secured indebtedness. We are permitted to incursubstantial additional indebtedness in the future under the terms of the Indenturegoverning the senior notes.

**SGC conductssubstantially all of its operations through its subsidiaries and may be limitedin its ability to access funds from its subsidiaries to service its debt,including the notes.**

SGC conducts substantially all ofits operations through its subsidiaries. Accordingly, SGC relies on dividendsfrom its subsidiaries to provide funds necessary to meet its obligations,including the payment of principal and interest on the senior notes. Theability of any subsidiary to pay dividends or make cash distributions to SGCmay be contractually restricted. If SGC is unable to access the cash flows fromits subsidiaries, SGC may have difficulty meeting its debt obligations,including the senior notes.  Although theIndenture governing the senior notes restricts our ability to incur additionalindebtedness, those restrictions are subject to exceptions.

**The senior notesare not the obligation of the Nation and the senior note holders’ rights ascreditors are limited to the assets of SGC and the Guarantors.**

SGC and the Guarantors are liableexclusively for the payment of the senior notes.  The Nation is not obligated for the paymentof the senior notes. The assets of the Nation and its affiliates other than SGCand the Guarantors will not be available to pay the senior notes. Therefore,the senior note holders’ rights as creditors in a bankruptcy, liquidation orreorganization or similar proceeding would be limited to the assets of SGC andthe Guarantors and the senior note holders would have no right to the assets ofthe Nation or its other affiliates.

**The senior noteholders’ ability to enforce their rights or have an adequate remedy against theNation and us may be limited by the sovereign immunity of the Nation and us. Ifsenior note holders are unable to enforce their rights, they may lose theirentire investment in the senior notes.**

We issued the senior notes pursuantto the Indenture. In addition, in connection with our issuance of the seniornotes, the Nation entered into the Nation Agreement with the Trustee pursuantto which the Nation agreed not to take certain actions with respect to us whilethe senior notes were outstanding. References to the “Nation Agreement” are to the Nation Agreement asamended on May 23, 2005.  On May 5,2004, the Nation entered into an assignment and plan of distribution agreement,or the Assignment Agreement, with SGC pursuant to which the Nation assigned toSGC the Nation’s rights to the net proceeds in the event of a liquidation ordissolution of SNFGC, STGC or SEGC and pursuant to the plan of distribution,the net liquidation or dissolution proceeds of such entities shall bedistributed by such entities directly to SGC. See “Item 1. - Business---Material Agreements—Assignment and Plan of Distribution Agreement.” Underfederal law, we and the Nation have sovereign immunity and may not be suedwithout our and its consent, respectively. In the Indenture governing thesenior notes, we do, and, in the Nation Agreement and the Assignment Agreement,the Nation does, grant a limited waiver of sovereign immunity and consent tosuits to interpret or enforce the Indenture governing the senior notes, and theother agreements entered into in connection with the respective offeringsinvolving the senior notes.  This waiverdoes not extend to all possible claims or remedies that a holder of the seniornotes might allege or seek against us or the Nation. Specifically, the waiverlimits available remedies to specific performance in most cases and limitedmoney damages equal to the amount of a payment made in prohibition of theIndenture governing the senior notes or to the amount of the net liquidation ordissolution proceeds not assigned to SGC; *provided, that*,such money damages are only payable from assets held by the Nation, SGC, SNFGC,STGC or SEGC related to the gaming business, other than real property held intrust for the Nation by the United States. In the event that a New York courtwould find that specific performance is not an available remedy, the trusteeand the holders of the senior notes may not have an adequate remedy against theNation under the Nation Agreement and the Assignment Agreement. Furthermore, inthe event that the Nation’s or our limited waiver of sovereign immunity isunenforceable, the trustee and the holders of the senior notes could beprecluded from judicially enforcing their rights and remedies under the seniornotes, the Indenture governing the senior notes, the Nation Agreement, and theAssignment Agreement.

Although we are subject to federalsecurities laws and could be liable with respect to any civil or criminalenforcement action brought by the United States government, we and the Nationhave not waived our sovereign immunity from private civil suits, including forviolations of the federal securities laws. Accordingly, the holders of thesenior notes may not have any remedy against us or the Nation for violations ofthe federal or state securities laws if we raise sovereign immunity as anaffirmative defense and it is accepted by the applicable court of law.

**Uncertaintyexists as to whether a federal or state court would have jurisdiction in anaction related to the senior notes.**

Obtaining jurisdiction over anIndian tribe and tribal instrumentalities, such as the Nation and us, can bedifficult. Often, a commercial dispute with an Indian tribe or instrumentalitycannot be heard in federal court because the typical requirements for federaljurisdiction are absent. The failure to satisfy the requirements for federaljurisdiction occurs because there is generally 

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no federal law question involvedand there is no diversity of citizenship as an Indian tribe is not consideredto be a citizen of a state for purposes of obtaining federal diversityjurisdiction.

The extent to which state courtswill assume jurisdiction over disputes involving Indian tribes varies fromstate to state. The senior notes, the Indenture governing the senior notes andthe related agreements are governed by the laws of New York State. There isconflicting case law on the issue of whether disputes with Indian tribes orinstrumentalities should be heard in federal, state or tribal court. As aresult of these conflicting cases, it is possible that neither a federal nor astate court would accept jurisdiction to resolve a matter involving the seniornotes and the holders of the senior notes may have no legal recourse to a stateor federal court.

In addition, under certain legaldoctrines, a federal court or state court otherwise having jurisdiction maydecline to hear a matter involving an Indian tribe and instead defer the matterfor disposition in a tribal court or other tribal proceedings. For matterssubject to the waiver of sovereign immunity by the Nation and us, the Nationand we have waived our rights to have these matters resolved in any tribalcourt or other proceeding of the Nation. There is case law, however, suggestingthese rights may not be waived. The Nation presently has a tribal court, and afederal or state court may defer to that tribal court if, contrary to thewaiver of sovereign immunity by us and the Nation, we or the Nation seek orallege our right to seek tribal proceedings for resolution of a dispute relatedto the senior notes. The tribal court system is different from federal andstate civil courts. For example, there is no requirement that a judge be alawyer. The tribal court may reach a different conclusion than the federal orstate courts would and this may have a material adverse effect on the rights ofthe senior note holders. Accordingly, holders of senior notes or the trusteeunder the Indenture governing the senior notes may have difficulty bringingsuits against the Nation and us in federal or state court.

**Senior noteholders may be required to dispose of their senior notes, or their senior notesmay be redeemed, if their ownership of the senior notes jeopardizes our gamingoperations or violates the Compact.**

We may have the right to causesenior note holders to dispose of their senior notes, or to redeem their seniornotes, if regulations are promulgated pursuant to which their ownership of thesenior notes is determined to be unsuitable by the Seneca Gaming Authority orthe New York State Racing and Wagering Board. In such event, the redemptionprice will be the lowest of the amount paid for the senior notes, the principalamount of the senior notes and the then current fair market value of the seniornotes.

**It is uncertainwhether we or the Nation may be subject to the U.S. Bankruptcy Code, whichcould impair the senior note holders’ ability to realize on our assets.**

It is uncertain whether we or theNation may be a debtor in a case under the U.S. Bankruptcy Code. Withoutbankruptcy court protection, other creditors might receive preferentialpayments or otherwise obtain more than they would have under a bankruptcy courtproceeding. If either we or the Nation commence a case under the BankruptcyCode and the bankruptcy court does not dismiss the case, payments from thedebtor would cease. It is uncertain how long payments under the senior notescould be delayed following commencement of a bankruptcy case.

**If theguarantees of the senior notes are deemed fraudulent conveyances orpreferential transfers, a court may subordinate or void them.**

The Guarantors have incurredsubstantial debt under the guarantees of the senior notes. The incurrence bythe Guarantors of debt under their guarantees may be subject to review underfederal and state fraudulent conveyance laws if a bankruptcy, reorganization orrehabilitation case or a lawsuit, including circumstances in which bankruptcyis not involved, were commenced by, or on behalf of, unpaid creditors of ourguarantors at some future date. Federal and state statutes allow courts, underspecific circumstances, to void guarantees and related liens and require noteholders to return payments received from the issuer or the guarantors.

An unpaid creditor orrepresentative of creditors could file a lawsuit claiming that the issuance ofguarantees constituted a “fraudulent conveyance.” To make such a determination,a court would have to find that a Guarantor did not receive fair considerationor reasonably equivalent value for the guarantee, and that, at the time theguarantee was issued, such Guarantor:

·           was insolvent;

·           was rendered insolvent by the issuance of the senior notes;

·           was engaged in a business or transaction for which itsremaining assets constituted unreasonably small capital; or

·           intended to incur, or believed that it would incur, debtsbeyond its ability to repay as those debts matured.

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If a court were to make such afinding in respect to a Guarantor’s guarantee, it could void all or a portionof such Guarantor’s obligations under its guarantee of the senior notes,subordinate the claim in respect of its guarantee to its other existing andfuture indebtedness or take other actions detrimental to holders of the seniornotes, including, in certain circumstances, invalidating the guarantees of thesenior notes.

The measure of insolvency for thesepurposes will vary depending upon the law of the jurisdiction being applied.Generally, however, a company will be considered insolvent for these purposesif the sum of that company’s debts is greater than the fair value of all ofthat company’s property, or if the present fair salable value of that company’sassets is less than the amount that will be required to pay its probableliability on its existing debts as they mature. Moreover, regardless ofinsolvency, a court could void an incurrence of indebtedness, including thesenior notes, if it determined that the transaction was made with intent tohinder, delay or defraud creditors, or a court could subordinate theindebtedness, including the senior notes or the guarantees, to the claims ofall existing and future creditors on similar grounds. We cannot determine inadvance what standard a court would apply to determine whether we were “insolvent”in connection with the sale of the senior notes.

There is a risk of a preferentialtransfer if:

·           a Guarantor declares bankruptcy or its creditors force it todeclare bankruptcy within 90 days (or in certain cases, one year) after apayment on the guarantee; or

·           a guarantee was made in contemplation of insolvency.

A guarantee could be voided by acourt as a preferential transfer. In addition, a court could require holders ofsenior notes to return any payments made on the senior notes during the 90-day(or one-year) period.

Each guarantee contains a provisionintended to limit the Guarantor’s liability to the maximum amount that it couldincur without causing the incurrence of obligations under its guarantee to be afraudulent conveyance. This provision may not be effective to protect theguarantees from being voided under a fraudulent conveyance law.

**SGC and theGuarantors may not be able to repurchase senior notes upon a change of control.**

The Indenture governing the seniornotes requires SGC and the Guarantors to repurchase all outstanding notes at101% of the principal amount thereof plus accrued and unpaid interest, if any,upon the occurrence of specific kinds of change of control events. SGC and theGuarantors may not have sufficient funds to purchase the senior notes after achange of control. SGC’s and the Guarantors’ failure to purchase the seniornotes would be a default under the Indenture governing the senior notes.

**We arecontrolled by the Nation and the interests of the Nation may conflict with theinterests of senior note holders.**

The Guarantors are wholly owned andcontrolled by SGC, which is wholly owned and controlled by the Nation.Circumstances may occur in which the interests of the Nation, the Council orthe members of the Nation could be in conflict with the interests of a holderof the senior notes. In particular, the Nation, the Council or the members ofthe Nation could make business or other decisions that may affect a senior noteholder. For example, the Nation, subject to the restrictions in the Indenture,could decide to expand our facilities, incur more debt, increase distributionsor other payments to the Nation, dispose of assets or enter into othertransactions that, in their judgment, are in their interest, even though thesetransactions might involve risks to holders of the senior notes, includingmaking it more difficult for us to make payments on the senior notes and forthe Guarantors to guarantee these payments.  Additionally, the Nation’s sovereign interests may result in policies ordecisions that may conflict with the interests’ of the senior noteholders.  For example, the Nation maydetermine not to approve a limited waiver of sovereign immunity in connectionwith a potential commercially favorable transaction between us and a thirdparty, based principally on sovereignty considerations rather than customarycommercial considerations, resulting in the loss of that commercially favorablebusiness opportunity.  The loss of thisopportunity could adversely affect us and, as a result, the senior noteholders.

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**The Nation has alimited body of laws and has not adopted a corporate code. As a result, legalterms used in this Annual Report, the prospectuses related to the senior notes,the Indenture governing the senior notes and related transaction documents mayhave a different meaning under the laws of the Nation than under laws withwhich you are familiar.**

The Nation has a limited number oflaws, which primarily consist of the Nation’s constitution, a limited number ofordinances and codes, Council resolutions and judicial interpretations ofNation law. Because the body and scope of the Nation’s laws are not as fullydeveloped as federal and state law, in many instances under Nation law it isdifficult to predict how and which law will be applied. In particular, theNation has not adopted a corporate code. Therefore, terms used in this AnnualReport, the prospectuses related to the senior notes, the Indenture governingthe senior notes and other related transaction documents, including, but notlimited to, terms such as “liquidation” and “dissolution” that may requireapplication and interpretation of the Nation’s laws may have no definedmeanings under those laws or may have meanings different from what one isaccustomed to finding under laws with which one is familiar.

**We are subjectto greater risks than a geographically diverse company.**

We currently rely exclusively oncash flow from Seneca Niagara Casino and Hotel and Seneca Allegany Casino toservice our obligations, including the senior notes. While we expect to expandthe geographic scope of our patron base as a result of our expansion projects, ourSeneca Niagara Casino and Hotel  reliesprimarily on patrons from within a 100-mile radius for its cash flow and SenecaAllegany Casino relies primarily on patrons from within an 80-mile radius forits cash flow. Further, our future expansion plans for additional casinooperations as permitted by the Compact are limited to Western New York. As aresult, in addition to our susceptibility to adverse global and domesticeconomic, political and business conditions, any economic downturn in theregion could have a material adverse effect on our operations. An economicdownturn would likely cause a decline in the disposable income of consumers inthe region, which could result in a decrease in the number of patrons at SenecaNiagara Casino and Hotel and Seneca Allegany Casino, the frequency of theirvisits and the average amount that they would each be willing to spend at thecasinos. We are subject to greater risks than more geographically diversifiedgaming or resort operations and may continue to be subject to these risks uponcompletion of our expansion project, including:

·           a downturn in national, regional or local economicconditions;

·           an increase in competition in New York State or theNortheastern United States and Canada, particularly for day-trip patronsresiding in New York State, including as a result of recent legislationpermitting new Indian casinos and video gaming machines at certain racetracks;

·           impeded access due to road construction or closures ofprimary access routes; and

·           adverse weather, and natural and other disasters in theNortheastern United States and Canada.

Although we maintain insurancecustomary in our industry (including property, casualty, terrorism and businessinterruption insurance), we cannot assure you that such insurance will beadequate or available to cover all the risks to which our business and assetsmay be subject. The occurrence of any one of the events described above couldcause a material disruption in our business and make us unable to generatesufficient cash flow to make payments on the senior notes.

**We compete withcasinos, other forms of gaming and other resort properties. If we are unable tocompete successfully, we may not be able to generate sufficient cash flow tofund our operations or service our debt.**

Our casino operations compete withcasinos, other forms of gaming and other resort properties located within andoutside New York State. We face intense competition in our primary andsecondary market areas, in addition to competition from casinos and gamingoperations in our broader regional market. New market entrants in New York State and elsewhere in the northeasternUnited States could also adversely affect our operations and our ability tomeet our financial obligations.**For a moreextensive discussion of the competitive landscape affecting our operations, see“Item 1. - Business—Market and Competition.”

**We depend on ourkey personnel to manage our business effectively and if we are unable to retainour key personnel, our ability to execute our business strategy could beimpaired.**

Our future success depends upon thecontinued services of certain of our key operating and executive personnel. Theloss of the services of such key operating and executive personnel could havean adverse impact on us. There can be no assurance that the services of suchpersonnel will continue to be made available to us. We do not maintain keyperson life insurance policies on any of our executives.

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**We could facedifficulties in attracting and retaining qualified employees.**

The operation of the expandedfacilities of Seneca Niagara Casino and Hotel and Seneca Allegany Casino andthe expected opening of Seneca Buffalo Creek Casino will require us to hirequalified executives, managers and a significant number of skilled employeeswith gaming and hospitality industry experience and qualifications. Currently,there is a shortage of skilled labor in the gaming industry in general. Wecannot assure you that we will be able to recruit, train and retain asufficient number of qualified employees, particularly due to the very smallnumber of workers skilled in the gaming industry that reside in the immediatevicinity of either casino.

**The Indenturegoverning the senior notes contains various covenants and provisions that limitour management’s discretion in the operation of our business.**

The Indenture governing the seniornotes includes covenants and provisions that, among other things, restrict ourability to:

·           incur additional debt;

·           make investments;

·           create liens;

·           enter into transactions with affiliates;

·           sell assets;

·           merge, consolidate or sell substantially all of our assets;and

·           make capital expenditures.

All of these restrictive covenantsmay limit our ability to expand our operations or to pursue our business strategies.Changes in business conditions or results of operations, adverse regulatorydevelopments or other events beyond our control may affect our ability tocomply with these and other provisions of the Indenture governing the seniornotes. The breach of any of these covenants could result in a default under ourindebtedness, which could cause those obligations to become due and payable. Ifour indebtedness were to be accelerated, there can be no assurance that wewould be able to pay it.

**Our operations couldbe adversely affected during our expansion.**

Although construction activitiesrelated to Seneca Allegany Casino are planned to minimize disruptions,construction noise and debris may disrupt Seneca Allegany Casino’s currentoperations. Unexpected construction delays could exacerbate or magnify thesedisruptions. We cannot assure you that construction activities will not have amaterial adverse effect on our results of operations.

**Failure tocomplete our expansion projects and other future development projects on budgetand on time could adversely affect our financial condition.**

Our current expansion projects are,and any future expansion projects will be, subject to significant developmentand construction risks, any of which could cause unanticipated cost increasesand delays. These include, among others, the following:

·           shortages of material and skilled labor;

·           failure to generate sufficient operating cash flow to meetour expansion needs;

·           labor disputes and work stoppages;

·           weather interference or delays;

·           engineering problems;

·           environmental problems;

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·           regulatory problems;

·           increased distributions or head lease payments to the Nationdelaying construction timetables due to availability of cash;

·           changes to the plans or specifications;

·           fire, earthquake, flood and other natural disasters; and

·           geological, construction, excavation and equipment problems.

We cannot provide assurance thattotal costs for constructing and equipping the Seneca Allegany Casino andhotel,  will not exceed $167.0 million  Failure to complete our expansion projects ontime and within our budgets may cause us to devote additional resources to theprojects, which could divert our time and attention away from our operation ofSeneca Niagara Casino and Hotel and Seneca Allegany Casino and could cause ourbusiness to suffer.

In addition, we may not be able tocomplete our other expansion plans, including the temporary and permanentSeneca Buffalo Creek Casinos, in a timely manner or at all.

**We may not beable to generate enough cash flow to complete our current and future expansionprojects.**

We intend to fund a portion of ourcurrent and future expansion projects with cash flows from operations. Wecannot provide assurance that we will be able to generate the required amountof cash from our operations to complete any or all of these projects. Inaddition, distributions or increased head lease payments to the Nation beyondwhat is currently anticipated will result in our cash flow being diverted fromthe construction of our hotels. If we are not able to generate enough cash topay for our expansion projects, our projects may be delayed and we may need tofind additional sources of funds, which may not be available on termsacceptable to us, if at all. Further, if we incur additional debt to cover thecost of our expansion projects, risks related to our indebtedness couldintensify. If we cannot generate enough cash or find alternative sources offunding to expand our operations, our business, financial condition and resultsof operations could be materially adversely affected and we may not be able tomake payments on the senior notes.

**We have limitedexperience operating casinos and hotels in Western New York.**

While our current senior managementhas over 100 years of combined experience managing significant gamingfacilities with hotels, our casinos have been in operation sinceDecember 31, 2002 and May 1, 2004, respectively, we have limitedexperience operating our hotel in Niagara Falls, and no experience operatinghotels in Salamanca, New York. Our expansion plans include opening anadditional casino in Buffalo, New York and the completion of our resort hotelfor Seneca Allegany Casino. We may experience difficulties in operatingmultiple casinos and hotels in a limited geographic region. Further, theaddition of our hotels and other new and untested amenities to our existingcasinos have many of the same risks inherent in the establishment of a newbusiness enterprise since we have limited or no operating history in those activities.We may not be able to timely identify or anticipate all of the material risksassociated with operating that business or additional casinos. Our lack ofoperating history in these new ventures may adversely affect our futureoperating results, ability to generate adequate cash flow and ability to makepayments on the senior notes.

**Our businesscould be affected by weather-related factors and seasonality.**

Our results of operations may beadversely affected by weather-related and seasonal factors. Since opening,Seneca Niagara Casino and Hotel’s and Seneca Allegany Casino’s gaming revenuehave not been materially impacted by severe weather conditions, but severewinter weather conditions may deter or prevent patrons from reaching our gamingfacilities or undertaking day trips. In addition, some recreational activities,such as tourism, are curtailed during the winter months. Although our cash flowmanagement system assumes seasonal fluctuations in gaming revenue for both ofour casinos to ensure adequate cash flow during expected periods of lowerrevenue, we cannot provide assurance that weather-related and seasonal factorswill not have a material adverse effect on our operations. Our limitedoperating history makes it difficult to predict the future effects ofseasonality on our business, if any.

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**Althoughlitigation challenging the validity of our Compact and our right to conductClass III gaming in New York State has been unsuccessful to date, thevalidity of our Compact and our right to conduct Class III gaming in NewYork State could still be challenged in court or otherwise adversely affectedby legislation, regulation, or judicial action relating to gaming generally, orour right to conduct Class III gaming, in particular.**

In October 2001, the New YorkLegislature passed Chapter 383 of the Laws of 2001, or Chapter 383, whichallowed Governor Pataki to enter into a gaming compact with the Seneca Nationof Indians and to enter into gaming compacts with other Indian tribes for theestablishment of three additional casinos in the Catskills. Chapter 383 alsoapproved the installation of VGMs at certain racetracks.

In January 2002, two actionswere filed in the Supreme Court of the State of New York, County of Albany,challenging legislation that, among other things, authorized the Governor ofNew York to execute tribal-state gaming compacts, approved the use of slotmachines as games of chance, approved the use of video lottery terminals atracetracks and authorized the participation of New York State in a multi-statelottery. The actions are captioned *Dalton v. Pataki, et al.,*and *Karr v. Pataki, et al*. Plaintiffs soughta judgment declaring the legislation unconstitutional and enjoining itsimplementation. These two cases were consolidated and we refer to both casesbelow as *Dalton v. Pataki*.

On July 17, 2003, the New YorkSupreme Court dismissed the plaintiffs’ complaints in *Dalton v.Pataki* and held that the legislation is constitutional. Theplaintiffs appealed the Court’s decision to the Third Department of the NewYork Supreme Court’s Appellate Division and oral argument was held onDecember 16, 2003. On July 7, 2004, a five judge panel issued itsOpinion and Order declaring the legislation at issue, Chapter 383 of the Lawsof 2001, constitutional as challenged. Notwithstanding the constitutionality ofVGMs, the court declared the licensing of VGMs to racetracks to beunconstitutional due to the impermissible revenue distribution scheme set forththerein. Lastly, the court declared the provision of Chapter 383 of the Laws of2001 authorizing the Division of the Lottery to participate in the multi-statelottery constitutional.

On May 3, 2005, the New York Court ofAppeals held the legislation (including the licensing of VGMs to racetracks) tobe constitutional. In July 2005, the New York Court of Appeals, the State’shighest court, denied a motion to rehear the case.  Appellants filed a writ of certiorari seekingreview by the United States Supreme Court. On November 28, 2005, the United States Supreme Court denied thewrit.

If New York State were to make various formsof gaming illegal or against public policy (or the courts were to similarlyrule), or otherwise to take a legal position adverse to SGC, such actions couldhave a material adverse effect on our ability to conduct our gaming operationsas currently conducted.

**If ourability to operate Class III gaming facilities on land held in restrictedfee were successfully challenged, it would have a material adverse effect onour ability to conduct gaming operations in Niagara Falls and Erie County pursuantto the Compact.**

The Compact authorizes the Nationto use funds appropriated under the Seneca Nation Land Claims Settlement Act,or SNLCSA, to acquire parcels of land in Niagara Falls and Erie County forgaming purposes. In 1990, Congress enacted SNLCSA, which provides the Nationwith fair compensation for use of its land and for the impact on the Nationfrom prior lease arrangements in the City of Salamanca, New York. The fundsappropriated under the SNLCSA are available for the Nation to acquire land,which could be placed into restricted fee status. As previously determined bythe U.S. Secretary of the Interior, the Nation possesses jurisdiction overlands placed into restricted fee status pursuant to SNLCSA, and such landsconstitute gaming eligible Indian lands as defined by the Indian GamingRegulatory Act, or IGRA. While we believe that there is substantial support forthe Secretary’s determination that lands placed into restricted fee pursuant toSNLCSA qualify as gaming eligible Indian lands as defined by IGRA, includingthe lands upon which Seneca Niagara Casino is located, it is possible that someperson or group could successfully challenge the Secretary’s conclusion thatthe Nation is authorized to use such land for gaming purposes pursuant to IGRA.

If the Secretary’s determinationthat the Nation is authorized to use such land for gaming purposes pursuant toIGRA were successfully challenged, the Nation would be unable to conduct anygaming under IGRA at its current gaming facility in Niagara Falls or proposedgaming facility in Erie County. However, such an adverse determination wouldnot affect the ability of the Nation to operate its Seneca Allegany Casino,which is located on existing Nation reservation territory.

In January 2006, anaction was filed in the United State District Court, Western District of NewYork by various plaintiffs against the United States Department of Interior,the National Indian Gaming Commission and three individuals in their officialcapacities as Secretary of the Interior, Acting Assistant Secretary of theInterior for Indian Affairs and Chairman of the National Indian GamingCommission.  The action seeks declaratoryand injunctive relief under the Administrative Procedure Act, the DeclaratoryJudgments Act, the National Historic Preservation Act (NHPA), the NationalEnvironmental Policy Act (NEPA) and the Indian Regulatory Gaming Act and isprincipally directed at the decisions and actions of the defendants that permitthe construction and operation of our Seneca Buffalo Creek Casino.  The plaintiffs claim that the defendants havefailed to comply with NEPA, NHPA, and IGRA and have requested that the Courttake numerous actions including declaring that the 

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lands acquired by theNation pursuant to SNLCSA are not gaming eligible Indian lands within themeaning of IGRA and declaring that the Nation’s Compact violates IGRA.  If the plaintiffs are successful, the Nationwould be unable to conduct any gaming upon lands acquired pursuant toSNLCSA.  On November 1, 2006 oralargument was heard on the defendant’s motion to dismiss for lack ofjurisdiction, on the Nation’s amicus motion to dismiss based upon failure tojoin the Nation as a necessary party and sovereign immunity, and on theplaintiff’s motion for summary judgment.  As of December 15, 2006, thejudge had not ruled on such motions.

On or about February 1,2006, an action was filed in the New York Supreme Court, County of Erie, byvarious plaintiffs against George E. Pataki, in his official capacity asGovernor of the State of New York; State Gaming Officials of the New York StateWagering Board; City of Buffalo; Common Council of the City of Buffalo; AnthonyMasiello in his previous capacity as Mayor of Buffalo; Byron Brown in hiscapacity as Mayor of Buffalo; City of Buffalo Department of Public Works;Buffalo Sewer Authority; and Niagara Frontier Transportation Authority.  The action initially sought directive andinjunctive relief under the State Environmental Quality Review Act (SEQRA); theFirst Parks, Recreation, Historic Preservation Law (PRHPL); First CityEnvironmental Review Ordination (CERO); and Freedom of Information Law (FOIL)and is principally directed at the decisions and actions of the defendants inconnection with our Seneca Buffalo Creek Casino.  The plaintiffs initially claimed that thedefendants had failed to comply with SEQRA, PRHPL, CERO and FOIL and requestedthat the Court take numerous actions including directing compliance with SEQRA,PRHPL, CERO and FOIL and restraining further action relating to the developmentof our Seneca Buffalo Creek Casino.  InJune 2006, the plaintiffs amended their complaint to drop their claims againstGovernor Pataki, the State Gaming Officials and the Niagara Frontier TransportationAuthority, and added the Buffalo Department of Economic Development, Permitsand Inspections as a party. The amended complaint also dropped all claimsexcept for the SEQRA and CERO claims. In October 2006, the plaintiffs alsomoved for an injunction to prevent the Buffalo Creek Agreement with the City ofBuffalo from being executed and performed, which motion was denied and is nowunder appeal. If the plaintiffs are successful, the Nation may be delayed inthe completion of the Seneca Buffalo Creek Casino at this site or may be unableto complete the Seneca Buffalo Creek at this site.  Certain of these plaintiffs are alsoplaintiffs in the federal lawsuit filed in January 2006 and referenced above.

On or about April 6,2006, an action was filed in the United State District Court, Western Districtof New York, by Daniel T. Warren, a pro se plaintiff, against the United Statesof America, the United State Department of the Interior, the National IndianGaming Commission, and five individuals in their official capacities as ActingSecretary of the Interior, Acting Assistant Secretary of the Interior forIndian Affairs and Chairman of the National Indian Gaming Commission, as wellas Governor George E. Pataki, as Governor of the State of New York, and CherylRitchko-Buley, as Chairwoman of the New York State Racing and WageringBoard.  The action initially sought  declaratory and injunctive relief as tonumerous matters including declaring that IGRA is unconstitutional, that theCompact violates IGRA, that the New York Constitution is not preempted by IGRA,that New York does not have the authority under state law to enter into atribal state compact under IGRA, that certain actions of the defendants werenot in accordance with law, and that certain lands purchased by the Nation werenot subject to being taken into trust or restricted fee status under the SNLCSAor were not pursuant to settlement of a land claim within the meaning of IGRA;and enjoining the defendants from taking actions which would further casinogambling in the State of New York under IGRA or on any lands acquired by theNation pursuant to SNLCSA. On August 16, 2006, the plaintiff amended hiscomplaint bringing:  a Tenth Amendmentchallenge to IGRA;  a claim that theCompact violates IGRA by providing for gaming which is not otherwise lawful inNew York; a claim that both the Compact and the statute authorizing theGovernor of New York to enter into the Compact violate various provisions ofthe New York State Constitution; and a claim that the United States has failedto promulgate regulations for gaming on off-reservation territory, in violationof its statutory duties.  The effect ofsuch amendment was to limit the claims remaining in the case, by dropping manyof the federal law claims in the original complaint.  On December 1, 2006, the court heard argumenton the plaintiff’s motion to join additional parties in which he seeks to addas defendants (1) Barry E. Snyder, Sr., as President of the Seneca Nation ofIndians; (2) John Pasqualoni, as President and CEO of the Seneca GamingCorporation; (3) the Seneca Nation of Indians; and (4) the Seneca GamingCorporation.  As of December 15, 2006,the court had not ruled upon this motion. Dispositive motions (to dismiss) on behalf of both the plaintiff and thedefendants have not yet been heard by the court.  If the plaintiff is successful in thislawsuit, the Nation could be unable to conduct any gaming upon lands acquiredpursuant to SNLCSA.

**We may not beable to acquire the remaining approximate 4 acres of the approximate 50 acresin the City of Niagara Falls, New York, designated by New York State under theCompact for ownership by the Nation.**

Consistent with the terms of theCompact, we intend to acquire the remaining approximate 4 acres of theapproximate 50 acres in the City of Niagara Falls, New York, designated by NewYork State under the Compact for ownership by the Nation.  Also consistent with the terms of theCompact, the New York State Urban Development Corporation d/b/a Empire State DevelopmentCorporation, or ESDC, is assisting the Nation in acquiring this land fromproperty owners, including through the exercise of the power of eminentdomain.  There can be no assurance thatESDC will be successful in acquiring the land through condemnationproceedings.   Failure to acquire theadditional land could adversely impact our future operations.

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**We may besubject to material liabilities arising out of the condemnation process throughwhich we are acquiring lands in the City of Niagara Falls, NY.**

In Niagara Falls, NY, the appraisedvalue of the land and fixtures that have been acquired by us through thecondemnation process is subject to challenge under New York state law.  If a court determines that the value for theland and fixtures is higher than the appraised value we paid to a condemnee,then we may be liable to the condemnee for the difference and potentially alsoresponsible for certain additional costs and payments to the condemnee.

**Terrorism andwar may directly or indirectly harm our business.**

The strength and profitability ofour business will depend on consumer demand for casino resorts in general andfor the type of luxury amenities Seneca Niagara Casino offers. Changes inconsumer preferences or discretionary consumer spending could harm ourbusiness. The terrorist attacks of September 11, 2001 and ongoingterrorist and war activities in the United States and elsewhere, have had anegative impact on travel and leisure expenditures, including lodging, gamingand tourism. We cannot predict the extent to which terrorist activities maycontinue to affect us, directly or indirectly, in the future. An extendedperiod of reduced discretionary spending and/or disruptions or declines intravel, conferences and conventions could significantly harm our operations.

**We may besubject to material environmental liability as a result of unknownenvironmental hazards.**

Under various federal, state andlocal environmental laws, ordinances and regulations, a current or previousowner or operator of real estate may be required to investigate and clean uphazardous or toxic substances or chemical releases on or relating to itsproperty and may be held liable to a governmental entity or to third partiesfor property damage, personal injury and for investigation and cleanup costsincurred by such parties in connection with the contamination. Such lawstypically impose cleanup responsibility and liability without regard to whetherthe owner knew of or caused the presence of contaminants. The costs of investigation,remediation or removal of such substances may be substantial. Although theNation has not waived its sovereign immunity with regard to such federal, stateand local environmental legislation, the existence or discovery of anenvironmental hazard on any of its lands could result in an assertion ofliability under federal environmental laws and have a significant adverseeffect on the Nation’s relations with the state and the local community.

**We rely in parton federal and in part on common law trade name protection to protect certainof our trademarks.**

We rely in part on federal and inpart on common law trade name protection to protect certain of our trademarks.We may face claims by third parties for alleged trade name infringement. Anyresulting claims, if successful, could require us to cease using one or more ofthe names used in our business or require us to pay to use these names.

**The entity thatmanaged construction at our luxury hotel project in Niagara Falls, NY and isnow managing the construction of our resort hotel and casino expansion projectsis an entity with limited operating experience and limited experience inconstruction management.**

SCMC is an entity formed by, andwholly owned by the Seneca Nation and organized for the purpose of managingconstruction projects.  We entered intoconstruction management agreements with SCMC in connection with each of theSeneca Allegany Casino hotel and casino project and the Seneca Niagara Casinoluxury hotel expansion project (which is now complete).  Although SCMC has hired key personnel who areknowledgeable and experienced in managing large construction projects, SCMC hasvery limited experience in overseeing and managing construction projects.  SCMC may not be able to identify oranticipate all material risks related to managing our construction projects,which could adversely affect our ability to timely and successfully develop andconstruct these projects as well as our business and results of operations.

**A change in ourcurrent tax-exempt status could have a material adverse effect on our abilityto repay our obligations under the senior notes.**

A change in our current tax-exemptstatus could have a material adverse effect on our ability to repay ourobligations under the senior notes. Based on our current interpretations offederal tax law, we will continue to treat our income as not being subject tofederal income tax. However, we have not sought a private letter ruling fromthe Internal Revenue Service, or the IRS, confirming that interpretation.

SGC and each of its subsidiariesare instrumentalities of the Nation’s government and chartered under the lawsof the Nation. Under current law, the Nation is not subject to federal incometax and we do not believe that SGC or the Guarantors, as instrumentalities ofthe Nation’s government, are so subject. The IRS, prior to 1996, took theposition that tribal corporations wholly owned by a tribe were treated the sameas the tribe and not subject to federal income tax. However, in 1996, the IRSpublicly announced that it was taking the issue under submission and intendedto study it further, and did not state whether any such future guidance wouldbe prospective only or be retroactive. When the IRS changed its position on thefederal tax status of state chartered corporations wholly owned by a tribe(stating that such entities were taxable), it made such change prospective andprovided a transition period with retroactive relief if the form of thecorporation was modified. Following the 

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IRS public announcement in 1996,some tribal corporations have obtained private letter rulings from the IRS tothe effect that their operations would not be subject to federal income tax.Private letter rulings cannot be relied upon by other taxpayers. As of the dateof this Annual Report, the IRS had not issued definitive guidance upon which wecould rely as to whether it agreed or disagreed that tribal corporations aresubject to federal income tax, or, if subject to federal income tax in somecircumstances and not others, the circumstances in which a tribal corporationwould be subject to federal income tax. Consequently, there is no controllinglegal authority that supports or is contrary to our position that we are notsubject to federal income tax. If our interpretations are incorrect, or if theapplicable tax law changes in this regard, our cash flow and ability to serviceour obligations under the senior notes may be adversely affected.

Efforts have been made in Congressover the past several years to tax the income of tribal business enterprises.These have included a House of Representatives bill that would have taxedgaming income earned by Indian tribes as business income subject to corporatetax rates. Although that legislation has not been enacted, similar legislationcould be enacted in the future. Any future legislation permitting the taxationof the Nation or our business could have a material adverse effect on ourbusiness, financial condition, results of operations or ability to pay ourobligations under the senior notes.

**Any adversechanges in the laws regulating our gaming operations or failure to maintainlicenses required under gaming laws and regulations and other permits andapprovals required under applicable laws and regulations could have a materialadverse effect on our ability to conduct gaming operations and on our abilityto fulfill our obligations under the senior notes.**

Gaming on the Nation’s land isregulated by Nation laws, the Compact and federal statutes, most notably theIGRA. Several bills have been proposed during the current and recent sessionsof Congress that could affect Indian gaming. Notably, though its proposedlegislation has yet to be presented to Congress, the Policies and ProceduresSubproject of the Bureau of Indian Affairs has proposed sweeping changes to thefederal laws concerning Indians. Certain of such bills, if enacted, couldimpair the ability of the Nation and SGC to expand its gaming operations andadversely impact the future growth of the Nation’s revenue base. In addition,from time to time, various government officials have proposed taxing Indiancasino gaming or otherwise limiting or restricting the conduct of gamingoperations by Indian tribes. No assurance can be given that such legislation,if and when enacted by Congress, would not have a material adverse effect onthe operations of SGC. In addition, under federal law, gaming on the Nation’slands may be dependent upon the permissibility under New York law of certainforms of gaming or similar activities. If New York State were to make variousforms of gaming illegal or against public policy (or the courts were tosimilarly rule), or otherwise to take a legal position adverse to the Compactor any of its provisions, such actions could have a material adverse effect onour ability to conduct our gaming operations as currently conducted. Moreover,a 1996 U.S. Supreme Court decision may permit a state to avoid or refuse tonegotiate amendments to existing compacts such as the Compact.

Currently, the operation of all gamingon Indian lands is subject to IGRA. For the past several years, legislation hasbeen introduced in Congress designed to address numerous perceived problemswith this Act. Most of the proposals that have been seriously considered wouldbe prospective in effect and have contained clauses that would grandfatherexisting Indian gaming operations such as Seneca Niagara Casino and Hotel.However, certain legislative acts have also proposed repealing many of theprovisions of IGRA. While none of the substantive proposed amendments to IGRAhas proceeded out of committee hearings to a vote by either house of Congress,we cannot predict the success of future legislative acts. Changes in applicablelaws and regulations or an increase in the cost of compliance with applicablelaws and regulations could limit or materially affect the types of gaming thatwe may offer and the revenue our operations generate. Furthermore, if Congressenacted legislation that was applied retroactively, our ability to meet ouroutstanding debt obligations could be adversely affected.

Under the Compact and federal,state and Nation law we are required to maintain certain licenses, permits andapprovals in order to conduct gaming operations. Failure to maintain suchlicenses, permits and approvals could have a material adverse affect on ourability to conduct gaming operations and on our ability to make payment on ourobligations under the senior notes.

**Changes in themembership of the Council, its policies or the Nation’s constitution could adverselyaffect our operations.**

The Nation is governed by aCouncil, consisting of sixteen members, of which eight members are elected fromeach of the two principal Territories. Councilors are elected to four-yearterms, which are staggered. The Nation holds an election every two years forits three executive branch officers: the President, the Treasurer and theClerk. These officers alternate between the two principal Territories. The mostrecent election of the executive branch officers and eight Council members tookplace on November 7, 2006. We cannot assure that  this new Council, or any subsequently electedCouncil, will pursue the same agenda or goals as the prior government, inparticular with respect to us, our expansion projects or compliance with theCompact and our other obligations including the covenants contained in theIndenture (including, but not limited to, timely payment of the 

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exclusivity fee and our publicfilings). In addition, the Council acts by majority vote and with respect to anyissue or policy, a change in views by one or more members could result in achange in the policy adopted by the Council. Changes in the Council or itspolicies could result in significant changes in our structure or operations orin our planned expansions. In addition, the Council appoints the members of SGC’sboard of directors. The Council may also remove a member of SGC’s board ofdirectors for cause either upon the recommendation of a majority of SGC’s boardof directors, or upon its own initiative with a vote of at least tenCouncilors. The term cause has not been defined in SGC’s charter or in Nationlaw, and therefore, we do not know how this term will be interpreted. As aresult, a change in the membership or views of existing members of Council adverseto the existing board or management could result in a change in SGC’s board ofdirectors and potentially in SGC’s management. Any such changes could adverselyaffect our business plan or otherwise result in a material adverse effect inour business, financial condition, results of operations or ability to makepayments on the senior notes. See “Directors and Executive Officers of theRegistrant” for a discussion regarding the more active role the new Senecagovernment has taken in managing our affairs.

Further, while we believe thatunder the Nation’s constitution, adopted in 1848 and last amended in 1993, areferendum may only be called by the Council, our interpretation of the Nation’sconstitution could be incorrect or the constitution may be amended in thefuture to provide that the Seneca people may call a referendum without theapproval of the Council. If the constitution were amended to allow the Senecapeople to call for a referendum directly, the Nation may adopt laws adverselyaffecting our business and results of operations.

**Item 1B.  Unresolved Staff Comments**

Not applicable

**Item 2.  Properties**

*Seneca NiagaraCasino and Hotel.*    SenecaNiagara Casino and Hotel is located on Nation Territory in Niagara Falls, NewYork, in the former Niagara Falls Convention and Civic Center, which we leasefrom the Nation. Seneca Niagara Casino and Hotel is located approximately 20miles north of Buffalo, New York and approximately 90 miles west of Rochester,New York.

Pursuant to the Compact, the Nationmay acquire property and establish gaming facilities in the City of NiagaraFalls within the boundaries of the approximately 50 acre area of land describedin Appendix I of the Compact and designated as land to be developed by theNation in connection with the Nation’s gaming facilities. The Compact alsoauthorizes the Nation to establish a gaming facility in Erie County and one onthe Nation’s Allegany Territory. The Compact authorizes the Nation to use fundsappropriated under the SNLCSA to acquire parcels of land in Niagara Falls andErie County for gaming purposes.

As of December 15, 2006, SNFGC hasacquired, at a cost of $46.1 million, which cost may increase based on existingand future potential valuation challenges, approximately 44 acres of theremaining land in the City of Niagara Falls, New York, designated by New YorkState under the Compact for ownership by the Nation, thus reducing theremaining acreage to be acquired to four acres. SNFGC has waived its right to acquire approximately two acres of landdesignated in the Compact for ownership by the Nation, in return for a right offirst refusal to purchase such property if this two-acre parcel is offered forsale in the future by its owners, a religious organization.

As of December 15, 2006, the Nationhad acquired approximately 24 acres (of the approximate 50 acres described inAppendix I of the Compact) with funds appropriated under the SNLCSA in NiagaraFalls. By operation of federal law, these lands and other parcels that may beacquired in the future pursuant to the SNLCSA (whether in Niagara Falls or ErieCounty) are subject to restrictions against alienation, constitute Indiancountry subject to the jurisdiction of the Nation, and qualify as gamingeligible Indian lands pursuant to IGRA. Seneca Niagara Casino and Hotel and its2,300 space parking garage are situated on the Nation’s restricted fee lands.

In March 2006 we acquired 257 acresof land with the intent to design and build a championship level golf course inLewiston, New York, approximately 8 miles from Seneca Niagara Casino andHotel.  We have selected the Robert TrentJones II firm to design the golf course. This land and the development project are intended to be sold to SenecaManagement Development Corporation. The purchase of the land and developmentrights is expected to be financed by SMDC through a loan provided by SGC.

For further information relating tothe real estate acquisitions of the Nation, SGC and its subsidiaries, see “Item1. — Business --- Seneca Niagara Casino and Hotel --- Niagara Falls Real EstateAcquisitions”, above.

*Seneca AlleganyCasino.*    SenecaAllegany Casino is located on the Nation’s Allegany Territory in the City ofSalamanca, New York. STGC leases the gaming facility in which Seneca AlleganyCasino is located from the Nation. Seneca Allegany Casino is locatedimmediately off Interstate 86, approximately 70 miles south of Niagara Falls,New York and is within 75 

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miles of Erie, Pennsylvania, and165 miles of Cleveland and Akron, Ohio and Pittsburgh, Pennsylvania. The landupon which the Nation owns and operates Seneca Allegany Casino is within theNation’s territorial boundaries, and is therefore eligible for gaming pursuantto IGRA.

*Seneca BuffaloCreek Casino.*    OnOctober 3, 2005, the Nation acquired approximately nine acres of landlocated within two city blocks in the inner-harbor district of downtownBuffalo, designating these nine acres as the Erie County gaming site forpurposes of the Compact.  We commencedconstruction of our Erie County gaming facility on these nine acres in downtownBuffalo on December 8, 2005.  Theapproximate nine acres acquired in Erie County were acquired with fundsappropriated under the SNLCSA.   InNovember 2006, SEGC also acquired from the City of Buffalo, New York, atwo-block area of Fulton Street which bisects the previous nine-acre site, thusallowing SEGC to build the permanent Seneca Buffalo Creek Casino using ourpreferred grand design.

*Irving, New York*.  SGC ownsapproximately 113 acres in Irving, New York. This acreage is not currently being used in our gaming operations.

**Item 3. Legal Proceedings**

*Seneca Niagara Falls GamingCorporation v. Klewin Building Company, Inc.* (American Arbitration No. 15 110 00691 05;Arbitration before the Arbitration Panel of James W. Gresens, Robert A. Dean,and S. Thomas Aiston (Arbitration))

On October 15, 2003,SNFGC and Klewin entered into an Owner-Design/Builder Agreement whereby Klewinagreed to design and build a hotel, casino and spa for SNFGC for a guaranteedmaximum price of $153,048,497.  On August10, 2005, SNFGC provided Klewin with a notice of default because of Klewin’sfailure to pay the architect and Klewin’s acknowledgement that it would notdeliver the project within the guaranteed maximum price.  A second notice of default was issued basedon Klewin’s failure to pay its subcontractors. These matters are the subject ofan arbitration proceeding pursuant to the arbitration clause in thecontract.  The arbitration hearing isscheduled to begin on May 7, 2007.  Theparties are currently engaged in discovery.

*SNFGC v. Klewin Building Company,Inc., C.R. Klewin Gaming & Hospitality, Inc., and T.D. Banknorth, N.A.;T.D. Banknorth, N.A. v. JCJ Architecture, Inc. f/k/a Jeter, Cook &Jepson-Architects, Inc.* (Supreme Court, Complex LitigationDocket, Hartford, Connecticut; Docket No. X03-CV-05-4009818-S)

On August 24, 2005, SNFGCfiled a complaint against Klewin and BankNorth, as joint defendants, in theSuperior Court for the Judicial District of New London, Connecticut. The suitwas filed to obtain immediate injunctive relief in conjunction with the pendingdemand for arbitration by SNFGC related to Klewin ‘s failure to make requiredpayments to the subcontractors for the construction of Seneca Niagara Casino’snew luxury hotel. SNFGC filed the complaint in order to enjoin the defendantsfrom utilizing approximately $14.6 million paid by SNFGC into an account withBankNorth in the name of Klewin, which was set up by SNFGC principally for thepurpose of paying Klewin’s subcontractors (including the architect) on theconstruction project. SNFGC was subsequently informed by Klewin thatapproximately $14.6 million paid by SNFGC into the account was “swept” byBankNorth and, as a result, several subcontractors (including the architect)were not paid by Klewin. Among other things, the complaint seeks temporary andpermanent injunctive relief requiring that the defendants return to the accountthe approximate $14.6 million that has been removed from that account andtemporary and permanent injunctive relief enjoining defendants from utilizingthe approximate $14.6 million that has been removed from the account,other than for payment of Klewin’s subcontractors on the constructionprojects.  We subsequently advanced fundsdirectly to the architect and to SCMC for payment to the remainingsubcontractors.

* *On August 25, 2005, theparties appeared before the court and agreed to a stipulated immediate orderfreezing the remaining balance of approximately $5.5 million in the accountpending a hearing on SNFGC’s application for temporary and permanent injunctiverelief, subject to limited draw rights of not more than $350,000 per weekpermitted to Klewin for its operating expenses pursuant to a budget to besubmitted by Klewin weekly. We intend to seek recovery of all amounts alreadywithdrawn from the account, except to the extent disbursed for appropriatepurposes. On September 14, 2005, Klewin filed an Application for ImmediateTemporary Injunction seeking a temporary injunction prohibiting us from usingdesign and construction documents and appropriating Klewin employees.  Klewin has also asserted counterclaimsalleging, among other matters, tortuous interference with their business.  A hearing related to these counterclaims andthe temporary injunction was held on November 22, 2005 and onNovember 30, 2005, the Court granted our motion to dismiss Klewin’scounterclaims and Application for Immediate Temporary Injunction.  Klewin has filed an appeal.  On November 23, 2005, BankNorth filed ananswer asserting, among other matters, certain counterclaims including therequest for a declaratory judgment to the effect that they would be permittedto retain approximately $9.1 million of the $14.6 million swept fromthe Klewin account.  On January 17, 2006,we filed a motion for attachment against other Klewin assets (other than thebank account at issue), which motion was heard on September 20 and 21, 2006.  On December 1, 2006, the court granted SNFGC’sorder for an attachment pendente 

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lite to the value of$11.2 million, which order applied to all real property, bank accounts, andother assets owned by Klewin (other than the bank account at issue).  Klewin filed a notice of appeal on December7, 2006.  As of December 15, 2006, thetemporary injunction on the bank account at issue remains in place.

*SNFGC and STGC,as assignees v. T.D. BankNorth, N.A. (Niagara County Supreme Court; Index No.124716*

* *On December23, 2005, SNFGC and STGC filed a complaint in Niagara County Supreme Courtseeking to recover monies taken by BankNorth that were originally directed tothe Klewin subcontractors and to the architect, along with an award ofattorneys’ fees, under  Section 77of the New York Lien Law and under the theory of common law conversion.   SNFGC and STGC commenced the action asassignees of the claims of the subcontractors and the architect.  On February 27, 2006, BankNorth filed amotion to dismiss the action, claiming that the trust fund provisions of theNew York Lien Law do not apply and the Connecticut action was filed first,before the New York action.  An orderdenying BankNorth’s motion to dismiss was filed on May 24, 2006.  BankNorth served its answer to SNFGC’scomplaint on June 28, 2006, and also filed a motion to reargue and renew itsprior motion to dismiss. On December 8, 2006, the court granted the defendant’smotion to reargue and granted the defendant’s previously denied motion forsummary judgment.

We can provide no assurance that wewill be able to recover all or any portion of the approximate$14.6 million at issue in the foregoing matters involving Klewin andBankNorth.

*Citizens Against Casino Gamblingv. Norton (1:06-cv-00001-WMS (WDNY))*

In January 2006, anaction was filed in the United State District Court, Western District of NewYork by various plaintiffs against the United States Department of Interior,the National Indian Gaming Commission and three individuals in their officialcapacities as Secretary of the Interior, Acting Assistant Secretary of theInterior for Indian Affairs and Chairman of the National Indian GamingCommission.  The action seeks declaratoryand injunctive relief under the Administrative Procedure Act, the DeclaratoryJudgments Act, the National Historic Preservation Act (NHPA), the NationalEnvironmental Policy Act (NEPA) and the Indian Regulatory Gaming Act and isprincipally directed at the decisions and actions of the defendants that permitthe construction and operation of our Seneca Buffalo Creek Casino.  The plaintiffs claim that the defendants havefailed to comply with NEPA, NHPA, and IGRA and have requested that the Courttake numerous actions including declaring that the lands acquired by the Nationpursuant to SNLCSA are not gaming eligible Indian lands within the meaning ofIGRA and declaring that the Nation’s Compact violates IGRA.  If the plaintiffs are successful, the Nationwould be unable to conduct any gaming upon lands acquired pursuant toSNLCSA.  On November 1, 2006 oralargument was heard on the defendant’s motion to dismiss for lack ofjurisdiction, on the Nation’s amicus motion to dismiss based upon failure tojoin the Nation as a necessary party and sovereign immunity, and on theplaintiff’s motion for summary judgment.  As of December 15, 2006, thejudge had not ruled on such motions.

*Scott v. Pataki (NYS SupremeCourt, Erie County, Index No. 001189/06)*

On or about February 1,2006, an action was filed in the New York Supreme Court, County of Erie, byvarious plaintiffs against George E. Pataki, in his official capacity asGovernor of the State of New York; State Gaming Officials of the New York StateWagering Board; City of Buffalo; Common Council of the City of Buffalo; AnthonyMasiello in his previous capacity as Mayor of Buffalo; Byron Brown in hiscapacity as Mayor of Buffalo; City of Buffalo Department of Public Works;Buffalo Sewer Authority; and Niagara Frontier Transportation Authority.  The action initially sought directive andinjunctive relief under the State Environmental Quality Review Act (SEQRA); theFirst Parks, Recreation, Historic Preservation Law (PRHPL); First CityEnvironmental Review Ordination (CERO); and Freedom of Information Law (FOIL)and is principally directed at the decisions and actions of the defendants inconnection with our Seneca Buffalo Creek Casino.  The plaintiffs initially claimed that thedefendants had failed to comply with SEQRA, PRHPL, CERO and FOIL and had requestedthat the Court take numerous actions including directing compliance with SEQRA,PRHPL, CERO and FOIL and restraining further action relating to the developmentof our Seneca Buffalo Creek Casino.  InJune 2006, the plaintiffs amended their complaint to drop their claims againstGovernor Pataki, the State Gaming Officials and the Niagara FrontierTransportation Authority, and added the Buffalo City Department of EconomicDevelopment, Permits and Inspections as a party.  The amended complaint also dropped all claimsexcept for the SEQRA and CERO claims.  InOctober 2006, the plaintiffs moved for an injunction to prevent the BuffaloCreek Agreement with the City of Buffalo from being executed and performed, butthe motion was denied based upon the judge’s determination that the plaintiffsfailed to show a likelihood of success on the merits.  The plaintiffs have appealed the denial ofthe injunction to the New York Supreme Court Appellate Division.  A hearing on the appeal is anticipated tooccur in late 2007.

If the plaintiffs aresuccessful, the Nation may be delayed in the completion of the Seneca BuffaloCreek Casino at this site or may be unable to complete the Seneca Buffalo CreekCasino at this site.  Certain of theseplaintiffs are also plaintiffs in the federal lawsuit filed in January 2006 andreferenced above.

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*Warren v. United States(1:06-cy-00226-JTE (WDNY))*

* *On or about April 6, 2006,an action was filed in the United State District Court, Western District of NewYork, by Daniel T. Warren, a pro se plaintiff, against the United States ofAmerica, the United State Department of the Interior, the National IndianGaming Commission, and five individuals in their official capacities as ActingSecretary of the Interior, Acting Assistant Secretary of the Interior forIndian Affairs and Chairman of the National Indian Gaming Commission, as wellas Governor George E. Pataki, as Governor of the State of New York, and CherylRitchko-Buley, as Chairwoman of the New York State Racing and WageringBoard.  The action initially sought  declaratory and injunctive relief as to numerousmatters including declaring that IGRA is unconstitutional, that the Compactviolates IGRA, that the New York Constitution is not preempted by IGRA, thatNew York does not have the authority under state law to enter into a tribalstate compact under IGRA, that certain actions of the defendants were not inaccordance with law, and that certain lands purchased by the Nation were notsubject to being taken into trust or restricted fee status under the SNLCSA orwere not pursuant to settlement of a land claim within the meaning of IGRA; andenjoining the defendants from taking actions which would further casinogambling in the state of New York under IGRA or on any lands acquired by theNation pursuant to SNLCSA. On August 16, 2006, the plaintiff amended hiscomplaint bringing:  a Tenth Amendmentchallenge to IGRA;  a claim that theCompact violates IGRA by providing for gaming which is not otherwise lawful inNew York; a claim that both the Compact and the statute authorizing theGovernor of New York to enter into the Compact violate various provisions ofthe New York Constitution; and a claim that the United States has failed topromulgate regulations for gaming on off-reservation territory, in violation ofits statutory duties.  The effect of suchamendment was to limit the claims remaining in the case, by dropping many ofthe federal law claims in the original complaint.  On December 1, 2006, the court heard argumenton the plaintiff’s motion to join additional parties in which he seeks to addas defendants (1) Barry E. Snyder, Sr., as President of the Seneca Nation ofIndians; (2) John Pasqualoni, as President and CEO of SGC; (3) the SenecaNation of Indians; and (4) SGC.  As ofDecember 15, 2006, the court had not ruled upon this motion.  Dispositive motions (to dismiss) on behalf ofboth the plaintiff and the defendants have not yet been heard by thecourt.  If the plaintiff is successful inthis lawsuit, the Nation could be unable to conduct any gaming upon landsacquired pursuant to SNLCSA.

*County of Erie v. City of Buffalo(NYS Supreme Court, Index No. 2006-10440).*

On November 6, 2006, asuit was brought in New York Supreme Court, County of Erie, by the County ofErie, New York, Joel Giambra (as County Executive), and Andrew Eszak (asCommissioner of the County of Erie Department of Environment and Planning),against the City of Buffalo, Mayor Byron Brown and the Buffalo Common Councilseeking to invalidate the Buffalo Creek Agreement on the basis that the Cityfailed to refer the agreement to the County under Section 239-m of the New YorkState General Municipal Law.  Thedefendants filed a motion to dismiss on December 1, 2006, which is pendingbefore the court.  If the plaintiffs aresuccessful, the Nation may be delayed in the completion of the Seneca BuffaloCreek Casino or may be unable to complete the Seneca Buffalo Creek Casino asplanned.

**Item 4. Submission of Matters to a Vote of Security Holders**

NotApplicable.

**PART II**

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

NotApplicable.

**Item 6. Selected Financial Data**

The Nation established SGC as awholly owned entity to operate all of the Nation’s Class III gaming andresort-related activities. The selected consolidated financial data set forthbelow as of and for Fiscal 2006, Fiscal 2005, Fiscal 2004, Fiscal 2003 and asof and for the period ended September 30, 2002 have been derived from ouraudited financial statements included in this Annual Report.  This information should be read with ourfinancial statements and the related notes included in this Annual Reportbeginning on page F-1. You should also read the following information inconjunction with “Management’s Discussion and Analysis of Financial Conditionand Results of Operations.”

36

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| ** **                                                                | ** ** | **Fiscal Year Ended  September 30,** | ** ** | **Period   from   Inception  to Sept. 30,** | ** ** |
|---------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                                                | ** ** | **2006**                                            | ** ** | **2005**                                                        | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                                | ** ** | **(Dollars in Thousands)**                | ** ** |
| **Statement  of Operations Data:**                                        | ** ** | ** **                                          | ** ** | ** **                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenues:                                                                 |       |                                                |       |                                                            |       |   |   |   |   |   |   |
| Gaming                                                                    |       | $ 519,620                                      |       | $ 440,156                                                  |       | $ 337,536 |   | $ 184,332 |   | $         — |   |
| Food and beverage                                                         |       | 50,141                                              |       | 41,689                                                          |       | 31,358 |   | 16,158 |   | — |   |
| Lodging                                                                   |       | 10,654                                              |       | —                                                          |       | — |   | — |   | — |   |
| Retail and other                                                          |       | 19,940                                              |       | 16,955                                                          |       | 11,797 |   | 4,823 |   | — |   |
|                                                                      |       |                                                |       |                                                            |       |   |   |   |   |   |   |
| Gross revenues                                                            |       | 600,355                                             |       | 498,800                                                         |       | 380,691 |   | 205,313 |   | — |   |
| Less: Promotional allowances                                              |       | (77,861                                             | )          | (49,647                                                         | )          | (24,295 | ) | (9,557 | ) | — |   |
|                                                                      |       |                                                |       |                                                            |       |   |   |   |   |   |   |
| Net revenues                                                              |       | 522,494                                             |       | 449,153                                                         |       | 356,396 |   | 195,756 |   | — |   |
| Expenses:                                                                 |       |                                                |       |                                                            |       |   |   |   |   |   |   |
| Gaming                                                                    |       | 129,396                                             |       | 114,746                                                         |       | 92,531 |   | 53,686 |   | — |   |
| Food and beverage                                                         |       | 43,485                                              |       | 34,877                                                          |       | 26,387 |   | 15,856 |   | — |   |
| Lodging                                                                   |       | 6,131                                               |       | —                                                          |       | — |   | — |   | — |   |
| Retail, entertainment and other                                           |       | 11,668                                              |       | 10,418                                                          |       | 7,184 |   | 2,732 |   | — |   |
| Advertising, general and administrative                                   |       | 131,997                                             |       | 117,188                                                         |       | 91,552 |   | 42,176 |   | — |   |
| Pre-opening costs                                                         |       | 9,478                                               |       | 1,509                                                           |       | 4,228 |   | 7,155 |   | 2,961 |   |
| Depreciation and amortization                                             |       | 38,992                                              |       | 26,295                                                          |       | 17,638 |   | 8,723 |   | — |   |
|                                                                      |       |                                                |       |                                                            |       |   |   |   |   |   |   |
| Total operating expenses                                                  |       | 371,147                                             |       | 305,033                                                         |       | 239,520 |   | 130,328 |   | 2,961 |   |
| Operating income                                                          |       | 151,347                                             |       | 144,120                                                         |       | 116,876 |   | 65,428 |   | (2,961 | ) |
| Other income and  (expense):                                              |       |                                                |       |                                                            |       |   |   |   |   |   |   |
| Other non-operating expenses                                              |       | (558                                                | )          | (13,301                                                         | )          | — |   | — |   | — |   |
| Interest income                                                           |       | 5,814                                               |       | 5,116                                                           |       | 1,535 |   | 44 |   | — |   |
| Interest expense                                                          |       | (33,198                                             | )          | (90,366                                                         | )          | (33,702 | ) | (15,515 | ) | — |   |
|                                                                      |       |                                                |       |                                                            |       |   |   |   |   |   |   |
| Net other expense                                                         |       | (27,942                                             | )          | (98,551                                                         | )          | (32,167 | ) | (15,471 | ) | — |   |
|                                                                      |       |                                                |       |                                                            |       |   |   |   |   |   |   |
| Net income                                                                |       | $ 123,405                                      |       | $   45,569                                       |       | $   84,709 |   | $   49,957 |   | $   (2,961 | ) |
|                                                                      |       |                                                |       |                                                            |       |   |   |   |   |   |   |
| **Other  Financial Data:**                                                | ** ** | ** **                                          | ** ** | ** **                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| EBITDA(1)                                                                 |       | $ 189,781                                      |       | $ 157,114                                                  |       | $ 134,514 |   | $   74,151 |   | $   (2,961 | ) |
| Cash provided by  (used in) operating activities                          |       | 181,838                                             |       | 47,652                                                          |       | 143,803 |   | 97,720 |   | (69 | ) |
| Cash used in  investing activities                                        |       | (233,582                                            | )          | (192,147                                                        | )          | (238,703 | ) | (118,963 | ) | (39 | ) |
| Cash (used in)  provided by financing activities                          |       | (12,528                                             | )          | 75,367                                                          |       | 246,867 |   | 80,739 |   | 240 |   |
| Capital  expenditures and payments for land acquisitions and other assets |       | 241,741                                             |       | 172,684                                                         |       | 180,740 |   | 118,963 |   | 39 |   |
| Ratio of earnings to  fixed charges(2)                                    |       | 4.0x                                                |       | 1.4x                                                            |       | 3.4x |   | 3.9x |   | — |   |

 
| ** **                 | ** ** | **As of September 30,** | ** ** |
|----------------------------|------------|----------------------------------------|------------|
| ** **                 | ** ** | **2006**                               | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                 | ** ** | **(Dollars in Thousands)**   | ** ** |
| **Balance  Sheet Data:**   |       |                                   |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents |       | $   78,195              |       | $ 142,467 |   | $ 211,595 |   | $  59,628 |   | $       132 |   |
| Total assets               |       | 840,376                                |       | 698,848 |   | 584,056 |   | 181,749 |   | 2,883 |   |
| Total  liabilities         |       | 650,745                                |       | 589,423 |   | 497,369 |   | 134,753 |   | 5,844 |   |
| Total capital              |       | $ 189,631                         |       | $ 109,425 |   | $   86,687 |   | $  46,996 |   | $   (2,961 | ) |

 

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(1)             EBITDArepresents earnings before interest, depreciation and amortization. We are notsubject to U.S. federal income taxation under current interpretations of theU.S. federal tax code. EBITDA is presented to provide additional informationthat our management uses to assess our business and because we believe it is frequentlyused by securities analysts, investors and other interested parties in theevaluation of companies in our industry. However, other companies in ourindustry may calculate EBITDA differently than we do. EBITDA is not ameasurement of financial condition or profitability under generally acceptedaccounting principles and should not be considered as an alternative to cashflow from operating activities or as a measure of liquidity or an alternativeto net income as indicators of our operating performance or any other measuresof performance derived in accordance with generally accepted accountingprinciples.

EBITDA includespre-opening costs of approximately $9.5 million, $1.5 million, $4.2 million,$7.2 million and $3.0 million for Fiscal 2006, Fiscal 2005, Fiscal 2004, Fiscal2003 and the period from inception through September 30, 2002, respectively. 

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The following table setsforth a reconciliation of net income to EBITDA, which management believes isthe most nearly equivalent measure under U.S. generally accepted accountingprinciples. The adjustments set forth below are those relevant to the periodspresented. 
|                               | ** ** | **Fiscal Year Ended September 30,** | ** ** | **Period   from   Inception   to Sept. 30,** | ** ** |
|-------------------------------|------------|---------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                    | ** ** | **2006**                                                | ** ** | **2005**                                                              | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                    | ** ** | **(Dollars in Thousands)**                    | ** ** |
| Net income  (loss)            |       | $ 123,405                                          |       | $   45,569                                             |       | $   84,709 |   | $  49,957 |   | $   (2,961 | ) |
| Depreciation and amortization |       | 38,992                                                  |       | 26,295                                                                |       | 17,638 |   | 8,723 |   | — |   |
| Net interest expense          |       | 27,384                                                  |       | 85,250                                                                |       | 32,167 |   | 15,471 |   | — |   |
|                          |       |                                                    |       |                                                                  |       |   |   |   |   |   |   |
| EBITDA                        |       | $ 189,781                                          |       | $ 157,114                                                        |       | $ 134,514 |   | $  74,151 |   | $   (2,961 | ) |

 

(2)             Theratio of earnings to fixed charges is computed by dividing earnings by fixedcharges. For purposes of determining the ratio of earnings to fixed charges,the term “earnings” is the amount resulting from adding (i) net income,(ii) fixed charges and (iii) amortization of capitalized interest,less the amount of interest capitalized. The term “fixed charges” is the amountresulting from adding (i) interest expense whether expensed orcapitalized, and (ii) the amortization of debt financing costs.  Note that for the fiscal year endedSeptember 30, 2005, this ratio includes the effect of a $49.2 millioncharge to earnings, recorded as interest expense, relating to the earlyextinguishment of the Term Loan, and a non-recurring charge to earningsrelating to the Klewin matter, as discussed below.

**Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

*You should read the following discussion andanalysis in conjunction with the section titled “Selected ConsolidatedFinancial and Other Data” and the financial statements and related notesincluded elsewhere in this Annual Report. References herein to years are tofiscal years of Seneca Gaming Corporation unless otherwise noted. Our fiscalyear is from October 1 through September 30.*

**Overview**

Seneca Gaming Corporation is whollyowned by the Seneca Nation of Indians of New York and chartered to develop,manage and direct all of the Nation’s Class III gaming operations. TheNation entered into a Compact with New York State on August 18, 2002 thatprovides the Nation with the right to establish and operate threeClass III gaming facilities in Western New York. We opened our firstClass III gaming facility on Nation Territory in the City of NiagaraFalls, New York on December 31, 2002, featuring principally Class IIIslot machines and table games. This facility is operated by our wholly ownedsubsidiary SNFGC. On May 1, 2004, we opened our second Class IIIgaming facility, Seneca Allegany Casino, on the Nation’s Territory in the Cityof Salamanca, New York. This facility features Class III slot machines andtable games. We formed STGC on September 20, 2003 as a wholly ownedsubsidiary to operate this facility.

Also, since our Seneca AlleganyCasino was open for only five months during Fiscal 2004, comparisons betweenFiscal 2005 and Fiscal 2004 are less meaningful in some respects.

Under the Compact, the Nation hasthe right to establish and operate a third Class III gaming facility in ErieCounty, New York.  If the Nation hadfailed to commence construction of a Class III gaming facility in ErieCounty by December 9, 2005, the Nation’s exclusive right under the Compactto own and operate a Class III gaming facility in Erie County could haveterminated, and if the Nation fails to commence Class III gamingoperations in Erie County by December 9, 2007, the Nation’s exclusiveright under the Compact to own and operate a Class III gaming facility inErie County may terminate. On October 3, 2005 the Nation acquiredapproximately nine acres of land in the inner-harbor district of downtownBuffalo.  We commenced construction ofour Erie County gaming facility on these nine acres on December 8, 2005.  We plan to open a temporary Class III gamingfacility on this site in May 2007, and the permanent Class III gaming facilityon this site in 2009.

**ExecutiveSummary**

*Our CurrentOperations.*    Wecurrently operate two Class III gaming facilities, Seneca Niagara Casinoand Hotel, in the City of Niagara Falls, New York, and Seneca Allegany Casino,in the City of Salamanca, New York. Our casino operations include gaming,lodging, dining, entertainment and retail. For Fiscal 2006 and Fiscal 2005,approximately 94% and 94%, respectively, of our net revenue was derived fromour Class III gaming activities.

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*Key PerformanceIndicators.*    Ouroperating results are dependent on the volume of patrons at our casinos and ourability to attract them for repeat visits.

*Seneca NiagaraCasino and Hotel.*    Priorto the opening of our luxury hotel, Seneca Niagara Casino primarily relied ondrive-in and bus patrons from the Buffalo, Niagara Falls, and Rochester areasin New York and secondarily from Erie, Pennsylvania, Ohio and other parts ofNew York.  Since the opening of the newluxury hotel and expanded gaming and related amenities during fiscal 2006,Seneca Niagara Casino and Hotel has experienced steady growth in its patronbase. We believe that the expansion of Seneca Niagara Casino and Hotel,including the addition of our luxury hotel and other amenities, has enabled usto increase higher-end patron volume, gaming activity and length of stay andextended our geographic penetration and appeal to a more diverse demographicbase.  Since the full opening of theluxury hotel on March 31, 2006, our average occupancy rate has beenapproximately 78%.  During the sameperiod approximately 69% of our occupied rooms were complimentary rooms for ourgaming patrons.

As of September 30, 2006, wehad paid for substantially all of our completed expansion projects out of cashflow from operations along with the proceeds of our senior notes. Our completedexpansion projects since the opening of the casino on December 31, 2002 includethe addition of Turtle Island, a non-smoking casino room, a 2,300-space parkinggarage, the Western Door, an upscale steakhouse, our “Pennies From Heaven” slotroom located on the mezzanine level overlooking our main casino, addingapproximately 6,600 square feet of gaming space and 242 additional ticketed slotmachines and our luxury hotel with expanded gaming floor and relatedamenities.  We opened substantially allpublic areas and the first 10 floors of rooms on December 15, 2005, andcompletely opened the remaining hotel rooms and all amenities on March 31,2006.  The total cost of the luxury hotelexpansion project was $234.0 million.

*Seneca AlleganyCasino.*    Since itsopening on May 1, 2004, Seneca Allegany Casino has experienced steadygrowth in its patron base, net revenue, and profitability. Seneca AlleganyCasino has attracted patrons from the southern portion of Western New York,Erie and Pittsburgh, Pennsylvania and Ohio. From opening throughSeptember 30, 2006, approximately 65% of its patrons have come fromoutside New York State.

In July 2005, we openedour 1,850-space parking garage, which cost $32.2 million, and we areconstructing a 212-room hotel and permanent casino at Seneca Allegany Casino.We believe this expansion is necessary to provide a first-class gamingexperience for our patrons, to increase their length of stay and to maintainthe competitive position of the facility in light of expected futurecompetition in Pennsylvania.  Wecurrently expect the total cost to complete the resort hotel project, includingthe cost of furniture, fixtures and equipment, will be from $156.0 millionto $167.0 million.  We plan tocontinue to fund this expansion with cash flows from operations and cash onhand.  We expect to open the new gamingfloor by the end of December 2006, and completely open the hotel and otheramenities by March 31, 2007.

*Class IIGaming Operations. *As of January 1, 2005, we transferred all Class IIoperations to the Nation. We opened the Seneca Allegany Class II Facilityon May 1, 2004. During the five months ended September 30, 2004 andall of Fiscal 2005, we invested approximately $2.0 million and $0.4 million,respectively, in renovating and upgrading the Seneca Allegany Class IIFacility and received approximately $2.5 million and $1.4 million, respectively,of net revenue from this facility during these periods.

As of January 1, 2005,separate management selected by the Nation runs the poker operations at theSeneca Niagara Casino and Hotel and Seneca Allegany Casino.  The related leases cover the costs, amongother things, of rental and services provided by us, including accounting, andfood and beverage. We opened the poker rooms at the Seneca Niagara Casino andSeneca Allegany Class II Facility on May 14, 2004 and May 1,2004, respectively. We did not open a poker room at the Seneca Allegany Casinountil October 1, 2004. From the opening of the poker rooms at SenecaNiagara Casino and Seneca Allegany Class II Facility throughSeptember 30, 2004, and for Fiscal 2005, we received approximately $2.7million and $2.0 million, respectively, of net poker revenue.

The transfer of the Class IIoperations as of January 1, 2005 is consistent with our understanding ofthe Council’s intent that we manage and operate the Nation’s Class IIIoperations and that the Council, through Seneca Gaming and Entertainment,directly manages and operates the Nation’s Class II operations as it hashistorically done.

We recorded in January 2005the value of the improvements, video lottery terminals, and other costs weincurred to improve the Seneca Allegany Class II Facility of $2.4 millionas an equity distribution to the Nation.

We funded all the construction,equipment and pre-opening costs of Seneca Allegany Casino entirely from SenecaNiagara Casino’s free cash flow, in the form of intercompany loans from SGC.

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*Current, Continued and FutureReliance on Cash Flow*. We have purchased the site of our expectedfuture casino in Erie County and intend to fund the maintenance of ourfacilities and our planned future expansion projects from our cash flow andcash on hand. We currently rely and will continue to rely on our ability togenerate cash flow from operations to service our debt financing.

*Seasonality*.  Due to the continuedconstruction and expansion activity during our initial years of operation, wehave not yet been able to clearly determine the effect of seasonality on ouroperations.

*Overall Outlook.*      Since the opening on December 31, 2002 of theSeneca Niagara Casino, we have invested significantly in the development,expansion and maintenance of our gaming properties. In 2007, we will continuethis investment with the opening of our permanent casino and our 212-roomresort hotel and amenities on the Nation’s Allegany Territory, the opening ofour temporary casino on the Seneca Buffalo Creek Territory, and the start ofconstruction of our permanent gaming facility on the Seneca Buffalo CreekTerritory.

We believe the Western New York hotel, entertainmentand gaming markets are significantly underserved, and our exclusivity, as providedin the Nation’s Compact with the State of New York, gives us the opportunity toserve these markets by providing our patrons with unique entertainment andgaming options at our properties. In addition, the March 2006 opening of our hotelon the Nation’s Niagara Territory has enabled us to penetrate a widergeographic area and attract higher-end gaming patrons, providing us with acompetitive advantage.

It is, and will continue to be, our intent to be thepremier entertainment and gaming operator in the Western New York region,including areas in northern Pennsylvania and Ohio within our primary andsecondary markets. To further that objective, and to provide for expandedopportunities in the convention and tourism markets, we have started a masterplanning process for Niagara Falls that will include our Allegany and Buffalofacilities. As we continue to develop and expand our facilities, we intend tohave them complement each other, offer a diverse hotel, entertainment andgaming environment for our guests, and provide financial operating results inexcess of industry averages.

**Critical Accounting Policies and Estimates**

Management’s discussion and analysis of our financialcondition, results of operations and liquidity and capital resources are basedon our consolidated financial statements. To prepare our consolidated financialstatements in accordance with accounting principles generally accepted in theUnited States of America, we must make estimates and assumptions that affectthe amounts reported in the consolidated financial statements. We regularlyevaluate these estimates and assumptions, particularly in areas we consider tobe critical accounting estimates, where changes in the estimates andassumptions could have a material impact on our results of operations,financial position and, to a lesser extent, cash flows. There can be noassurance that actual results will not differ from our estimates. To provide anunderstanding of the methodology we apply, our significant accounting policiesand basis of presentation are summarized in Note 2 to our audited consolidatedfinancial statements included in this Annual Report for the year endedSeptember 30, 2006. We believe the following accounting policies involve ahigher degree of management judgment. 

*Liability for Unredeemed Seneca Link Player’s CardPoints.*    Patrons who are members of ourSeneca Link Player’s Card rewards program earn promotional points based on thevolume and type of their gaming activity. The Seneca Link Player’s Cardaccumulates points that are redeemable for food and beverages at ourrestaurants, hotel stays and products offered at our retail stores. Points areaccrued and reflected as current liabilities on our balance sheets based uponexpected redemption rates and the estimated cost of the service or merchandiseto be provided. Management reviews the adequacy of the accrual for unredeemedpoints by periodically evaluating the historical redemption and projectedtrends. Actual results could differ from our estimates.

*Self-Insurance Reserves.*    Wehave financial exposure for portions of our employee benefits programs andgeneral liability reserves. We accrue for liabilities based on filed claims andestimates of claims incurred but not reported. In our opinion our accruals tocover these costs are adequate, but actual results may vary from the amountaccrued.

*Property and Equipment.*    Wehave a significant amount of capital invested in our property and equipment,which is stated at cost less accumulated depreciation and amortization. We usejudgment in determining if or when assets have been impaired and the estimateduseful lives of assets. The accuracy of these estimates affects whether or notimpairment exists, and the depreciation and amortization expense recognized inour results of operations. Leasehold improvements represent a significantportion of our property and equipment balance. These assets are amortized overthe lesser of the related lease term or the estimated life of the assets. Theuseful lives assigned to our other property and equipment assets are based onour standard policy, which we believe represents the useful life of eachcategory of asset. In accordance with SFAS No. 144, Accounting for theImpairment or Disposal of Long-Lived Assets, the carrying values of ourlong-lived assets are reviewed when events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable. Assets are groupedat the 

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property level when estimating future cash flows fordetermining whether an asset has been impaired. Management assesses thepossibility of asset impairment by using the estimates of future cash flows,which are affected by current operating results, trends and prospects, as wellas the effect of obsolescence, demand, competition and other economic factors. 

*Regulatory Costs.    *Wehave financial exposure for unbilled regulatory costs related to oversightprovided by the New York State Police (State Police).  There is an on-going dispute between theNation and the State Police as to the appropriate amount of costs that are dueto the State Police for their regulatory oversight.  As of September 30, 2006, we have accruedapproximately $12.1 million to cover such costs.  In our opinion, this accrual is adequate, butactual results may vary from the amount accrued. 

Our analysis of cash flows represents our bestestimates at the time of the review. However, changes in these assumptions dueto actual market conditions that cause less favorable results than ourestimates may result in impairment in the future. 

**Operating Results**

*Operating Results*
| ** **                              | ** ** | **Fiscal Year Ended  September 30,** | ** ** |
|-----------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                              | ** ** | **2006**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)**                | ** ** |
| Net revenue                             |       | $ 522,494                                      |       | $ 449,153 |   | $ 356,396 |   |
| Operating expenses:                     |       |                                                |       |   |   |   |   |
| Gaming                                  |       | 129,396                                             |       | 114,746 |   | 92,531 |   |
| Food and beverage                       |       | 43,485                                              |       | 34,877 |   | 26,387 |   |
| Lodging                                 |       | 6,131                                               |       | — |   | — |   |
| Retail, entertainment and other         |       | 11,668                                              |       | 10,418 |   | 7,184 |   |
| Advertising, general and administrative |       | 131,997                                             |       | 117,188 |   | 91,552 |   |
| Pre-opening costs                       |       | 9,478                                               |       | 1,509 |   | 4,228 |   |
| Depreciation and amortization           |       | 38,992                                              |       | 26,295 |   | 17,638 |   |
|                                    |       |                                                |       |   |   |   |   |
| Operating income.                       |       | $ 151,347                                      |       | $ 144,120 |   | $ 116,876 |   |

 

The most importantfactors and trends contributing to our operating performance during Fiscal2006, 2005 and 2004 were: 

·                                          Ourability to successfully market Seneca Niagara Casino and Hotel and, since itsMay 1, 2004 opening, Seneca Allegany Casino, to our primary and secondarytarget markets.

**·****                                        **Ouropening of the luxury hotel at Seneca Niagara Casino and Hotel, enabling us tobetter attract higher-end gaming guests, extend the stay of our guests andexpand our geographic marketing reach. 

·                                          Ouropening of the Seneca Events Center at Seneca Niagara Casino and Hotel,resulting in increased entertainment offerings for our guests.

·                                          Ourability to enroll approximately 1.2 million patrons in our cross-propertySeneca Link Player’s Card program, which has increased our ability to useeffective direct mail and targeted marketing programs to establish patronloyalty to the Seneca brand at a profitable level.

·                                          Ourmix of slot machines, which we believe is superior to our competition andincludes the latest product introductions by leading United States andinternational slot manufacturers. 

·                                          Ouruse of current information technology, including “ticket-in/ticket-out” slotmachines, automated jackpot payment machines, ticket redemption units,electronic slot bonusing and database programs to increase operatingefficiencies.

·                                          Ourability to operate at a high margin, which we achieve through the carefulmonitoring and control of labor costs and the effective use of our marketingand advertising expenditures.

·                                          Ourcontinued expansion at and reinvestment in both of our properties.

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*Detailed RevenueInformation*
| ** **                       | ** ** | **Fiscal Year Ended  September 30,** | ** ** |
|----------------------------------|------------|-----------------------------------------------------|------------|
| ** **                       | ** ** | **2006**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                       | ** ** | **(Dollars in Thousands)**                | ** ** |
| Gaming revenue:                  |       |                                                |       |   |   |   |   |
| Slots                            |       | $                                                   | 452,473    |   | $ | 372,116 |   | 275,129 |   |
| Table games                      |       | 66,694                                              |       | 64,030 |   | 57,045 |   |
| Other                            |       | 453                                                 |       | 4,010 |   | 5,362 |   |
|                             |       |                                                |       |   |   |   |   |
| Gaming revenue                   |       | 519,620                                             |       | 440,156 |   | 337,536 |   |
| Non-gaming revenue:              |       |                                                |       |   |   |   |   |
| Food and  beverage               |       | 50,141                                              |       | 41,689 |   | 31,358 |   |
| Lodging                          |       | 10,654                                              |       | — |   | — |   |
| Retail,  entertainment and other |       | 19,940                                              |       | 16,955 |   | 11,797 |   |
|                             |       |                                                |       |   |   |   |   |
| Non-gaming  revenue              |       | 80,735                                              |       | 58,644 |   | 43,155 |   |
| Less promotional  allowance      |       | (77,861                                             | )          | (49,647 | ) | (24,295 | ) |
|                             |       |                                                |       |   |   |   |   |
| Net revenues                     |       | $                                                   | 522,494    |   | $ | 449,153 |   | 356,396 |   |

 

Our gaming revenue for Fiscal 2006 increased relativeto Fiscal 2005 primarily due to the December 15, 2005 opening of our expandedgaming area at Seneca Niagara Casino and Hotel, which added approximately 950slot machines and 20 additional table games, and the complete opening of our604-room luxury hotel on March 31, 2006. Our gaming revenue for the fiscal year ended September 30, 2005increased relative to 2004 due primarily to the opening of Seneca AlleganyCasino on May 1, 2004, which added approximately 1,886 slot machines and24 table games to our operations, the addition of 315 slot machines at SenecaNiagara Casino and continued growth in our patron database. In addition, inJuly 2004 at Seneca Niagara Casino and in August 2004 at SenecaAllegany Casino, we implemented electronic slot bonusing which are included inslot revenues and promotional allowances. This program allows us to reward our slot patrons, based on theirpropensity to game, by providing free slot play directly at the slot machinethrough the use of their Seneca Link Player’s Card. The free slot play must beplayed at a slot machine, and cannot be redeemed for cash.  The amount totaled $19.6 million, $9.6million and $1.4 million at Seneca Niagara Casino during fiscal 2006, 2005 and2004, respectively, and $10.0 million, $5.7 million and $0.1 million at SenecaAllegany Casino during Fiscal 2006, 2005 and 2004, respectively.  The large increase in free slot play duringFiscal 2006 was partially due to selected promotions during the year thatallowed patrons to exchange Seneca Link Player’s Card points for free slotplay.  As of September 30, 2006, ourcasinos had an aggregate of 123 table games and 6,292 slot machines availableto our patrons, representing a net increase of 20 table games and a netincrease of 1,126 slot machines from September 30, 2005.  During these periods the number of patronsenrolled in our Seneca Link Player’s Card program has steadily increased. As ofSeptember 30, 2006, we had approximately 1.2 million patrons enrolled, anincrease of approximately 252,000 patrons over the number enrolled atSeptember 30, 2005.

Our net gaming revenue, net of promotional credits of$29.6 million and $15.2 million in 2006 and 2005, respectively, increased $65.1million, or 15%, for Fiscal 2006 relative to Fiscal 2005.  During Fiscal 2006, Seneca Niagara Casino andHotel’s net gaming revenue increased $51.3 million, or 18%, while SenecaAllegany Casino’s net gaming revenue increased $13.8 million, or 10% over thesame period.

Our net gaming revenue, net of promotional credits of$15.2 million and $1.5 million, respectively, increased $88.9 million, or 26%,for the Fiscal 2005 relative to Fiscal 2004. During Fiscal 2005, Seneca Niagara Casino net gaming revenue increased$0.3 million, while Seneca Allegany Casino accounted for $88.6 million of ourincreased net gaming revenue for Fiscal 2005, mainly due to an additional sevenmonths of operations in that year.

Our food and beverage revenue and retail revenue haveincreased in direct relation to our increase in gaming revenue. There is adirect relation of our food and beverage revenue and retail revenue to ourgaming revenue because a significant portion of this revenue is from players’point redemptions.  For Fiscal 2006 and2005, 57% and 56%, respectively, of our food and beverage and 87% and 86%,respectively, of our retail revenue represented players’ pointredemptions.  For Fiscal 2006, food andbeverage revenue increased $8.5 million, or 20% to $50.1 million.  Seneca Niagara Casino and Hotel contributed

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$7.3 million of the increase due to the addition ofthree full service restaurants, a deli and two additional bars, all opened byJanuary 31, 2006.  Seneca Allegany Casinoaccounted for $1.2 million of the increase, as increased gaming play generatedhigher player point redemptions for food and beverage.

For Fiscal 2005, food and beverage revenue increased$10.3 million, or 33% over Fiscal 2004. Seneca Niagara Casino contributed $2.3 million of the increase due tohigher gaming revenue and seven additional months of operation of oursteakhouse.  Seneca Allegany Casinocontributed $8.0 million of the increase, due mainly to an additional sevenmonths of operations during Fiscal 2005.

On December 30, 2005, we officially opened the firstten floors of our 604-room luxury hotel at Seneca Niagara Casino and Hotel,with the full opening occurring on March 31, 2006.  Lodging revenue for Fiscal 2006 representssales of occupied rooms during the period. Incidental income from other amenities within the hotel are classifiedwith retail, entertainment and other revenue.

For Fiscal 2006, our retail, entertainment and otherrevenue increased by $3.0 million, or 18% compared to Fiscal 2005.  The increase for Fiscal 2006 was primarilydue to a $1.3 million increase in entertainment revenue at Seneca NiagaraCasino and Hotel, due to the opening of our Seneca Events Center in December2005.  In addition, retail revenue atboth of our properties increased a combined $1.3 million for Fiscal 2006, inrelation to the prior year, due to increased player point redemptions forretail merchandise, generated from higher gaming revenue.

For Fiscal 2005, our retail, entertainment and otherrevenue increased by $5.2 million, or 44% compared to Fiscal 2004.  The increase was primarily attributable tohigher revenue at our Seneca Allegany Casino of $3.4 million due to an additionalseven months of operations in 2005, and a $1.8 million increase at SenecaNiagara Casino, due to higher gaming revenue.

*DetailedOperating Expenses Information*
| ** **                              | ** ** | **Fiscal Year Ended  September 30,** | ** ** |
|-----------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                              | ** ** | **2006**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)**                | ** ** |
| Operating  expenses:                    |       |                                                |       |   |   |   |   |
| Gaming                                  |       | $                                                   | 129,396    |   | $ | 114,746 |   | $ | 92,531 |   |
| Food and beverage                       |       | 43,485                                              |       | 34,877 |   | 26,387 |   |
| Lodging                                 |       | 6,131                                               |       | — |   | — |   |
| Retail, entertainment and other         |       | 11,668                                              |       | 10,418 |   | 7,184 |   |
| Advertising, general and administrative |       | 131,997                                             |       | 117,188 |   | 91,552 |   |
| Pre-opening costs                       |       | 9,478                                               |       | 1,509 |   | 4,228 |   |
| Depreciation and amortization           |       | 38,992                                              |       | 26,295 |   | 17,638 |   |
|                                    |       |                                                |       |   |   |   |   |
| Operating  expenses                     |       | $                                                   | 371,147    |   | $ | 305,033 |   | $ | 239,520 |   |

 

The most important factors making up our operatingexpenses during Fiscal 2006, 2005 and 2004 are the following:

Gaming expenses principally consist of costs incurredfrom operating our table games and slot machines, of which the primarycomponents are related payroll and employee benefit costs, and the slotexclusivity fee due to New York State pursuant to the Compact. For Fiscal 2006,2005 and 2004, the slot exclusivity fee expense was $79.0 million, $67.3million and $51.6 million, respectively. For Fiscal 2006, 2005 and 2004, Seneca Niagara Casino and Hotel incurreda slot exclusivity fee of $53.8 million, $45.0 million and $44.0 million,respectively.  Seneca Allegany Casino’sshare of this expense for Fiscal 2006, 2005 and 2004 was $25.2 million, $22.3million and $7.6 million, respectively. The increase in the slot exclusivity fee was attributed to higher slotrevenue.  Currently, the exclusivity feeis 18% of the slot machine net drop (money dropped into the machines afterpayout but before our expenses). This fee will increase to 22% onJanuary 1, 2007 and to 25% on January 1, 2010.   The remainder of the variance in gaming expensesis principally due to higher costs of labor and benefits during 2006,reflecting increased headcount as well as higher medical insurance costs.

Food and beverage expenses are costs we incur for theoperation of our restaurants, snack bars and beverage outlets. The primarycomponents of these expenses are the cost of food and beverages, and relatedpayroll and employee benefit expenses. For Fiscal 2006, our food and beverage costs increased $8.6 million, or25%, from the comparable 2005 period. This increase was primarily due to a $7.8million increase in food and beverage expenses at Seneca Niagara Casino andHotel, particularly 

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labor cost increases from the addition of threefull-service restaurants, a deli and two new bars in conjunction with theopening of the luxury hotel in December 2005. The remaining increase in expenses was due to higher cost of salesrelating to higher redemptions of players club points for food and beverages atboth our casinos, resulting from higher gaming play in Fiscal 2006 in relationto 2005.  For Fiscal 2005 our food andbeverage costs increased $8.5 million, or 32% respectively, from the comparable2004 period.  This increase was due to thehigher food and beverage revenue at both casinos of $10.3 million, along withpayroll and other expenses relating to the additional seven months of operationof the steakhouse at Seneca Niagara Casino during Fiscal 2005.

Lodging expenses are costs we incur for the operationof our luxury hotel in Niagara Falls, New York, which partially opened inDecember 2005, and completely opened on March 31, 2006.  The major components of lodging expensesduring Fiscal 2006 were payroll and benefits costs, laundry expense andoperating supplies.

Retail, entertainment and other expenses represent ourcosts to operate our retail shops and entertainment offerings. The componentsof these expenses include related payroll and employee benefit costs, thepurchase of products offered for sale in our retail outlets, and contract costsfor entertainers.  For Fiscal 2006, thesecosts increased approximately $1.3 million, or 12%.  This change was principally attributable to a$0.8 million increase in contract entertainment costs due to a greater numberand quality of shows at Seneca Niagara Casino and Hotel’s Seneca Events Center,along with a $0.3 million increase in retail cost of sales at Seneca AlleganyCasino, due to higher player’s club point redemptions during the 2006 fiscalyear.  For Fiscal 2005 these costsincreased approximately $3.2 million, or 44%. The increase was principally attributable to higher point redemptions byour patrons at Seneca Niagara Casino and Hotel and Seneca Allegany Casino forretail merchandise, and also to higher revenues at Seneca Allegany Casino dueto the additional seven months of operations in fiscal 2005 as compared to2004.

Advertising, general and administrative expenses areincurred to support our operations. These expenses consist primarily of related payroll and employeebenefits costs, regulatory, advertising, rent, marketing, insurance, legal andenergy costs.  For Fiscal 2006, theseexpenses were $132.0 million compared with $117.2 million during the sameperiod in 2005, an increase of $14.8 million, or 13%.  The increase was due to several factors,including a $4.2 million increase in lease expense payable to the Nation forrental of the land upon which we operate our casinos, a $2.4 million increasein regulatory costs (particularly for New York State Police expenses), a $2.3million increase in energy costs (particularly for natural gas to support thenew luxury hotel and expanded facilities at Seneca Niagara Casino and Hotel)and a $1.5 million increase in advertising costs (related to the new luxuryhotel and related amenities and significant entertainment events).  The remaining increase was primarily due tohigher labor and benefits costs relating to an increased number of employeeshired to support the expanded facilities at Seneca Niagara Casino andHotel.  For Fiscal 2005, advertising,general and administrative expenses were $117.2 million compared to $91.6million during the same period in 2004, or an increase of $25.6 million, or28%.  The increase was mainly due to a$27.2 million increase at Seneca Allegany Casino attributable to an additionalseven months of operations during 2005. For Fiscal 2005, regulatory costs increased $5.0 million or 44.6%.  In addition, we made lease payments to theNation for the land upon which we operate Seneca Niagara Casino and SenecaAllegany Casino totaling $26.8 million and $15.8 million during Fiscal 2005 and2004, respectively.  Seneca NiagaraCasino advertising, general and administrative expenses decreased $2.5 millionfor Fiscal 2005 relative to the same period in 2004, mainly due to a $1.4million decrease in promotional expenses.

Pre-opening expenses are costs we incurred principallyin connection with the May 1, 2004 opening of Seneca Allegany Casino, theexpansion at Seneca Niagara Casino and Hotel including the opening of theluxury hotel, and the anticipated opening of our Seneca Buffalo CreekCasino.  These expenses include employeecosts, legal, marketing and advertising expenses and other direct expensesrelated to the opening of our casinos. Pre-opening expenses associated with the opening of Seneca AlleganyCasino were approximately $3.8 million during Fiscal 2004.  In addition, we incurred pre-opening expensesat Seneca Niagara Casino and Hotel during fiscal 2006 and 2005 of approximately$5.1 million and $0.6 million, respectively in connection with the partial andcomplete opening of our new luxury hotel in December 2005 and March 2006,respectively.  During Fiscal 2006 and2005, we also incurred approximately $3.9 million and $0.9 million fordevelopment expenses related to our future Seneca Buffalo Creek Casino,including $3.1 million in 2006 lease expense paid to the Nation.

For Fiscal 2006, depreciation and amortization expensewas $39.0 million, an increase of $12.7 million, or 48% over Fiscal 2005.  This increase was principally due to the additionof the luxury hotel at Seneca Niagara Casino and Hotel in December 2005, alongwith the increased depreciation in Fiscal 2006 relating to the parking garageat Seneca Allegany Casino, which opened July 1, 2005.

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*Non-OperatingExpenses*

The following table summarizesinformation related to interest on our long term debt:
| ** **       | ** ** | **Fiscal Year Ended  September 30,** | ** ** |
|------------------|------------|-----------------------------------------------------|------------|
| ** **       | ** ** | **2006**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **       | ** ** | **(Dollars in Thousands)**                | ** ** |
| Interest expense |       | $                                                   | 33,198     |   | $ | 90,366 |   | $ | 33,702 |   |
|                  |            |                                                     |            |  |  |  |  |  |  |  |

 

Interest expense for Fiscal 2006 represents intereston our $500 million aggregate principal amount of 71⁄4% senior notes, partiallyoffset by capitalized interest during the construction phase of our luxuryhotel in Niagara Falls and on our construction activities for our SenecaAllegany Casino.  Our interest cost forFiscal 2005 increased $56.7 million, which is inclusive of $49.2 millionrelating to the prepayment of SNFGC’s Term Loan, a $12.7 million increase ininterest expense relating to the seven additional months of interest on the$300 million aggregate principal amount of the 2004 senior notes, issued inMay 2004 by SGC, and $4.8 million increased interest expense relating tothe $200 million aggregate principal amount of the 2005 senior notes, issued inMay 2005.  These amounts werepartially offset by lower interest on SNFGC’s Term Loan, due to the 2005prepayment.  Prior to its extinguishmentin May 2005, the Term Loan required us to make monthly interest paymentson the outstanding balance at one-month LIBOR plus 29%.

*Net Income*

Net income for Fiscal 2006 was $123.4 million comparedto $45.6 million for the comparable 2005 period, an increase of $77.8 million,or 171%.  This increase was mainlyattributable to the charge to earnings in Fiscal 2005 of approximately $49.2million incurred pursuant to the early extinguishment of the Term Loan, the$13.3 million non-recurring construction charge in Fiscal 2005 and thefavorable financial impact of the December 15, 2005 opening of our expandedcasino gaming area and the opening of our 604-room luxury hotel at SenecaNiagara Casino and Hotel during Fiscal 2006.

Net income for Fiscal 2005 was $45.6 million comparedto $84.7 million in the comparable 2004 period, a decrease of $39.1 million, or46%.  This decrease was mainlyattributable to the $49.2 million charge noted above, along with the $13.3million non-recurring construction charge above, partially offset by theincrease in net income from the operations of the Seneca Allegany Casino, whichopened May 1, 2004.

**Liquidity andCapital Resources**

*Cash Flows*
| ** **                                            | ** ** | **Fiscal Year Ended  September 30,** | ** ** |
|-------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                            | ** ** | **2006**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                            | ** ** | **(Dollars in Thousands)**                | ** ** |
| Net cash  provided by operations                      |       | $                                                   | 181,838    |   | $ | 47,652 |   | $ | 143,803 |   |
| Investing cash  flows                                 |       |                                                |       |   |   |   |   |
| Capital expenditures                                  |       | (203,729                                            | )          | (171,011 | ) | (168,704 | ) |
| Payments for land acquisitions and other assets       |       | (38,012                                             | )          | (1,673 | ) | (12,036 | ) |
| Refund of deposits                                    |       | 168                                                 |       | 700 |   | — |   |
| Payment to collateralize letter of credit, net        |       | (25,800                                             | )          | — |   | — |   |
| Sales (purchases) of investments, net                 |       | 33,791                                              |       | (20,163 | ) | (57,963 | ) |
|                                                  |       |                                                |       |   |   |   |   |
| Net cash used in investing activities                 |       | (233,582                                            | )          | (192,147 | ) | (238,703 | ) |
| Financing cash  flows                                 |       |                                                |       |   |   |   |   |
| Proceeds from long-term debt                          |       | —                                              |       | 193,000 |   | 341,966 |   |
| Repayments of long-term debt                          |       | —                                              |       | (80,325 | ) | (46,916 | ) |
| Payments to sinking fund, net                         |       | —                                              |       | (11,917 | ) | (6,048 | ) |
| Purchase of interest rate caps                        |       | —                                              |       | — |   | (2,188 | ) |
| Proceeds from sale of interest rate caps              |       | —                                              |       | 683 |   | — |   |
| Payment of deferred financing costs                   |       | (682                                                | )          | (4,982 | ) | (11,937 | ) |
| Cash distributions paid to the Nation                 |       | (11,846                                             | )          | (21,092 | ) | (28,010 | ) |
|                                                  |       |                                                |       |   |   |   |   |
| Net cash (used in) provided by financing activities   |       | (12,528                                             | )          | 75,367 |   | 246,867 |   |
|                                                  |       |                                                |       |   |   |   |   |
| Net (decrease) increase  in cash and cash equivalents |       | (64,272                                             | )          | (69,128 | ) | 151,967 |   |
|                                                       |            |                                                     |            |  |  |  |  |  |  |  |

 

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*Cash Flows—Operating Activities.  *The increase in cash flows fromoperations during Fiscal 2006 compared to the same period in 2005 was primarilydue to a $77.8 million increase in net income which is principally due to theabsence of a $49.2 million interest expense charge during 2005 relating to theearly extinguishment of the Term Loan, and the absence of a $13.3 millionnon-recurring construction charge, along with the favorable financial resultsrelating to the opening of the 604-room luxury hotel, including 35,000 squarefeet of additional gaming space at Seneca Niagara Casino and Hotel during fiscal2006. The decrease in cash flows from operations during Fiscal 2005 compared tothe same period in 2004 was primarily due to a $39.1 million decrease in netincome which resulted from the two non-recurring charges in 2005 noted above,partially offset by higher net income at Seneca Allegany Casino of $26.1million due to an additional seven months of operations in 2005.  In addition to the net income decrease,working capital outflows resulted from the payment during 2005 of 12 months ofaccrued exclusivity fees incurred in 2004. During 2005, exclusivity fees started to be paid by the Company monthlyto the Nation as incurred.

*Cash Flows—Investing Activities.    *Our capital expenditures of $203.7 million during Fiscal 2006were comprised of $143.5 million of costs associated with the construction andequipping of the Seneca Niagara Casino and Hotel, and $59.2 million related tothe construction and equipping of our Seneca Allegany Casino.  We also incurred costs toward landacquisition in 2006 and 2005 of $38.0 million and $1.7 million, respectively.

During Fiscal 2004, we invested $48.0 million incollateralized market auction preferred stock (MAPS) and $9.9 million in a U.S.Government entity short-term note. These investments do not meet the definitionof a cash equivalent.  MAPS has adividend rate determined periodically (typically less than 90 days) based on anauction mechanism.  MAPS are typicallysecured by the issuing funds’ underlying investment portfolio, which mustmaintain a 2-to-1 minimum net asset coverage ratio.  Notwithstanding the liquidity which may beprovided by the auction process, market auction preferred stock generally doesnot have a scheduled maturity.  DuringFiscal 2005, we invested an additional $20.1 million in similar instruments.  During Fiscal 2006, we sold $33.8 million ofthese investments.

*Cash Flows—Financing Activities.   *We borrowed the remaining $22.7 million that was availableunder the Term Loan on April 15, 2004. On May 23, 2005, we paid theTerm Loan in full.  The negotiatedpayment in full of the Term Loan resulted in a charge to earnings on the earlyextinguishment of the Term Loan of approximately $49.2 million, including thewrite-off of $2.5 million of deferred financing costs. Prior to its payment, wewere obligated to pay interest on the outstanding balance at LIBOR plus 29%. Inaddition, SNFGC was obligated to maintain a minimum cash balance of $10.0million and a pro rata share of the sinking fund obligation. In addition, inFiscal 2003, we borrowed an aggregate $37.3 million from vendors to finance theinitial equipment for Seneca Niagara Casino at interest rates ranging from 6.0%to 6.42% for 36 months. The outstanding balances of these loans were paid infull in May 2004, and we recognized a gain, net of the write-off ofdeferred finance fees related to these financings of $415,000. This gain isincluded in Other Income in our Statement of Operations for the fiscal yearended September 30, 2004.

In May 2004, SGC sold $300.0 million of 2004senior notes, with net proceeds to SGC of $288.7 million after financing costs.These net proceeds were, or will be, used principally to fund in whole or inpart: (1) SNFGC’s construction and equipping of the luxury hotel, whichwas completed and opened on March 31, 2006; (2) the acquisition ofthe remaining approximate 24 acres of the approximate 48 acres in the City ofNiagara Falls, New York; (3) the payment of the Empire State DevelopmentCorporation bonds to New York State, which were paid off on August 16,2004 for $22.0 million; (4) the repayment of the vendor equipmentfinancing referenced above, which occurred in May 2004; and (5) a$25.0 million distribution to the Nation, which was made in fiscal 2004.

In May 2005, SGC sold $200.0 million of 2005senior notes as an add-on to the 2004 senior notes receiving gross proceeds of$193.0 million (as the issue price was 96.5% since the 2005 notes were issuedwith original issue discount).  Of the$193.0 million gross proceeds, as of September 30, 2006, approximately$126.7 million had been used to pay in full the Term Loan and approximately$4.7 million had been used to pay fees and expenses associated with theoffering of the 2005 senior notes.  Theremaining $61.6 million in gross proceeds will be used to fund certain costsassociated with the expansion of our operations, for general corporate purposesand to pay additional fees and expenses associated with the offering of the2005 senior notes, including the related exchange offer.

In addition, we purchased two interest rate caps inMay 2004 for $2.2 million that effectively capped the Term Loan interestat 29% plus 4% on the one month LIBOR. In June 2005, we sold the two interest rate caps for $0.7 millionin connection with the termination of the Term Loan.

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*Principal Debt Arrangements.   *As of September 30, 2006, our long-term debt consistedof the senior notes on which we pay a fixed interest rate of 71⁄4%. Following isa summary of certain material terms of the senior notes and the Term Loan.

The Senior Notes.    OnMay 5, 2004 and May 23, 2005, SGC issued $300.0 million and $200.0million, respectively, in senior notes with fixed interest payable at a rate of71⁄4% per annum due 2012, which we refer to collectively as the senior notes,under the Indenture. The notes are currently guaranteed by STGC, SEGC andSNFGC. SNFGC became a guarantor of the senior notes upon payment in full of theTerm Loan on May 23, 2005. Interest on the senior notes is payablesemi-annually on November 1 and May 1. The senior notes mature onMay 1, 2012. The senior notes are unsecured general obligations. As ofSeptember 30, 2006, accrued interest on the senior notes was $15.1million.

The Indenture contains certain covenants, includinglimitations on restricted payments and the incurrence of indebtedness andreporting obligations. As of the date of this Annual Report, SGC is incompliance with all of its covenant requirements in the Indenture.

Term Loan.    OnNovember 22, 2002, SNFGC entered into a five-year Term Loan withFreemantle, which required Freemantle to provide $80.0 million in financing forthe initial construction of the SNFGC casino facility and other related costs.Immediately prior to payment in full on May 23, 2005 and as ofSeptember 30, 2004, $80.0 million was outstanding under the TermLoan.  SNFGC paid interest on a monthlybasis in arrears at one-month LIBOR plus 29%. In addition, SNFGC incurred an availability fee of 0.5% per month on anyunborrowed balance.

Prior to the payment in full of the Term Loan, SNFGCwas obligated to make payments into a sinking fund account to be held for thebenefit of and as additional collateral for Freemantle. Payments of $6.0million and $12.0 million were made in December 2003 and 2004,respectively, into the sinking fund. Commencing January 1, 2005 andthrough December 31, 2006, equal quarterly payments of $5.5 million eachwere due on or before the last day of each calendar quarter.  Prior to the payment in full of the TermLoan, the sinking fund consisted of $23.5 million.  After payment in full of the Term Loan, allfunds in the sinking fund were released and $5.5 million and $18.0 million werereclassified as cash and cash equivalents and short-term investments,respectively.

On May 9, 2005, SNFGC, the Nation and Freemantleentered into a Termination Agreement to terminate the Term Loan and to allowSNFGC to pay in full the Term Loan at a negotiated amount, which occurred onMay 23, 2005. Pursuant to the terms of the Termination Agreement and infull payment of the Term Loan, we paid an amount equal to approximately $126.7million, representing (i) the outstanding principal of $80.0 million underthe Term Loan plus (ii) the aggregate amount of interest on such principalat a prescribed interest rate that would have otherwise been payable if the TermLoan had not been paid on May 23, 2005, but was instead paid 81⁄2 monthsprior to its November 22, 2007 stated maturity, which amount wasapproximately $46.7 million.  The paymentin full of the Term Loan reduced the future interest payments that would haveotherwise been payable under the Term Loan if it had not been paid in full byapproximately $18.0 million. The payment in full of the Term Loan, however,resulted in a charge to earnings on the early extinguishment of the Term Loanof approximately $49.2 million, including the write off of $2.5 million ofdeferred financing costs. The prescribed interest rate was one-month LIBOR asof May 18, 2005 plus 29%. A significant portion of the proceeds from theoffering of the 2005 senior notes were used to pay in full the Term Loan.  Upon payment in full of the Term Loan, SNFGCbecame a full and unconditional guarantor of the 2004 and 2005 senior notes.

The above descriptions of the senior notes, the TermLoan and the Termination Agreement are only a summary. You should review theIndenture, the Term Loan agreement and the Termination Agreement for anunderstanding of all of the terms and conditions of these financingarrangements.

We intend to acquire the remaining acreage in the Cityof Niagara Falls, New York, designated by New York State under the Compact forownership by the Nation. Under the Compact, the Nation is required to fund theacquisition of this property, including all related costs and expenses. Asinitial security for the Nation’s obligations to pay site acquisition costs andin furtherance of the ongoing condemnation proceeding, the Nation was requiredto deliver, and has delivered, to ESDC a letter of credit in the amount of$33.5 million representing 150% of the then estimate of the total remainingsite acquisition costs not yet paid by the Nation.  On July 13, 2006, we acquired,through the condemnation process, approximately 18 acres of land and tradefixtures appurtenant thereto from Fallsite, LLC (“Fallsite”) and Fallsville,LLC (“Fallsville”) for an aggregate initial advance payment of $18.0 million,which land is a portion of the land in the City of Niagara Falls, New Yorkdesignated under the Compact for ownership by the Nation. Of this amount, $7.7 million was drawn on the letter of creditas part of the consideration for the purchase, leaving $25.8 million available underthe letter of credit.  If the estimate ofsuch site acquisition costs increases or if certain other events occur, theNation may have to provide an additional letter of credit or replace the

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existing one with one for a larger monetary amount or,if acceptable to the ESDC, provide a supplemental cash escrow amount.  This outstanding letter of credit is 100%cash collateralized (with cash and cash equivalents) by us.

Pursuant to agreements entered into in furtherance ofthe Compact, SNFGC was obligated to pay to ESDC the principal due on certainbonds (issued by ESDC in connection with the 1970s construction of the NiagaraFalls Convention Center) upon the opening of a permanent gaming facility in theCity of Niagara Falls, New York. The principal amount due was $23.9 million.ESDC accepted an early, discounted payment of approximately $22.0 million infull satisfaction of our $23.9 million obligation under the Compact. Thispayment was made on August 16, 2004.

We have constructed a 1,850 space-parking garage at acost of $32.2 million, and are constructing a 212-room hotel and casino at ourSeneca Allegany Casino.  The currentexpected total cost to complete the hotel and permanent casino project is from$156.0 million to $167.0 million.  Thegarage opened on July 1, 2005.  Wehad initially planned to complete the entire project, including the resorthotel and its amenities, before the end of December 2006.  Due to certain delays, primarily relating tothe lack of availability of selected materials, we now expect to open thepermanent gaming floor in December 2006, and to complete the entire project bythe end of March 2007.

We expect cash generated from our operations, availablecash and cash equivalents and short-term investments as of September 30,2006 to be sufficient to fund our expansion plans described above, service ourdebt, and meet our working capital requirements for the near future. However,our ability to fund our operations, make planned capital expenditures andservice our debt depends on our future operating performance and cash flow,which are in turn subject to prevailing economic conditions and to financial,business and other factors, some of which are beyond our control. Additionally,unlike traditional corporations, we are prohibited by law from generating cashthrough an offering of equity securities and our ability to incur additionalindebtedness is limited under the terms of the Indenture governing the seniornotes.

We are highly leveraged and have significant interestpayment requirements under the senior notes. As such, limitations on ourcapital resources could force us to delay or abandon capital projects as wellas the construction and development of new properties.

**ContractualObligations**

The following table reflects oursignificant contractual obligations as of September 30, 2006.
| ** **                                                       | ** ** | **Payment due by period** | ** ** |
|------------------------------------------------------------------|------------|------------------------------------------|------------|
| **Contractual Obligations**                                 | ** ** | **Total**                                | ** ** | **1 Year** | ** ** | **2-3  Years** | ** ** | **4-5  Years** | ** ** | **After 5  Years** | ** ** |
| **(dollars in thousands)**                             | ** ** | ** **                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Principal amount  of the 2004 senior notes                       |       | $                                        | 300,000    |   | $ | — |   | $ | — |   | $ | — |   | $ | 300,000 |   |
| Principal amount  of the 2005 senior notes                       |       | 200,000                                  |       | — |   | — |   | — |   | 200,000 |   |
| Interest  payments on 2004 senior notes(1)                       |       | 130,500                                  |       | 21,750 |   | 43,500 |   | 43,500 |   | 21,750 |   |
| Interest  payments on 2005 senior notes(1)                       |       | 87,000                                   |       | 14,500 |   | 29,000 |   | 29,000 |   | 14,500 |   |
| Seneca Allegany  Casino construction projects                    |       | 65,000                                   |       | 65,000 |   | — |   | — |   | — |   |
| Seneca Niagara  Casino operating lease with the Nation(2)        |       | 346,306                                  |       | 15,914 |   | 33,274 |   | 35,300 |   | 261,818 |   |
| Seneca Allegany  Casino operating lease with the Nation(2)       |       | 346,306                                  |       | 15,914 |   | 33,274 |   | 35,300 |   | 261,818 |   |
| Seneca Buffalo  Creek Casino operating lease with the Nation (3) |       | 326,425                                  |       | 15,000 |   | 31,364 |   | 33,274 |   | 246,787 |   |
|                                                             |       |                                     |       |   |   |   |   |   |   |   |   |
| Total                                                            |       | $                                        | 1,801,537  |   | $ | 148,078 |   | $ | 170,412 |   | $ | 176,374 |   | $ | 1,306,673 |   |

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(1)      Intereston the 2004 and 2005 senior notes is 7.25%.

(2)      Amountsrepresent annual lease payments based upon $1.3 million per month, an increaseof 3% on October 1, 2006 and an assumed 3% increase on each October 1thereafter through the term of the Compact. Annual increases must be authorized by the board of directors of SGCand, subject to compliance with the terms of the Indenture governing the seniornotes, may exceed 3%.

(3)      Amountsrepresent annual lease payments based upon $1.25 million per month beginningOctober 1, 2006, and an assumed 3% increase on October 1, 2007 and each October1st thereafter through the term of the Compact.Annual increases must be authorized by the board of directors and, subject tocompliance with the terms of the Indenture governing the senior notes, mayexceed 3%.

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**Regulation**

Our operations are regulated by Nation laws, theCompact and federal statutes, most notably the Indian Gaming Regulatory Act, orIGRA. Several bills have been proposed during the current and recent sessionsof Congress that could affect Indian gaming. Most notably Senator McCain’s S. 2078, the Indian GamingRegulatory Act Amendments of 2006 and Congressman Pombo’s (R-CA) H. 4893,Restricting Indian Gaming to Homelands of Tribes Act of 2006, proposeadditional regulations for tribes and more restrictions on “off-reservation”gaming.  Also,the administration has published proposed regulations relative tooff-reservation gaming.  Certain of suchbills and regulations, if enacted, could impair the ability of the Nation andSGC to expand its gaming operations and adversely impact the future growth ofthe Nation’s revenue base. In addition, from time to time, various governmentofficials have proposed taxing Indian casino gaming or otherwise limiting orrestricting the conduct of gaming operations by Indian tribes. No assurance canbe given that such legislation, if and when enacted by Congress, would not havea material adverse effect on the operations of SGC. If Congress were to enactcomprehensive amendments to the IGRA, such legislation could have a materialadverse effect on the operations of SGC. In addition, under federal law, gamingon the Nation’s lands may be dependent upon the permissibility under New Yorklaw of certain forms of gaming or similar activities. If New York State were tomake various forms of gaming illegal or against public policy (or the courtswere to similarly rule), or otherwise to take a legal position adverse to SGC,such actions could have a material adverse effect on our ability to conduct ourgaming operations as currently conducted. Moreover, a 1996 U.S. Supreme Courtdecision may permit a state to avoid or refuse to negotiate amendments toexisting compacts such as the Compact.

**Recent Accounting Pronouncements**

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”).  This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.  SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007.  The Company does not believe that the adoption of SFAS 157 will have a material effect on its results of operations or consolidated financial position.

**Item7A. Quantitative and Qualitative Disclosures about Market Risk**

Market risk is the risk of loss arising from adversechanges in market rates and prices, such as interest rates, foreign currencyexchange rates and commodity prices. Since our senior notes are fixed-rate indebtedness, we believe that ourexposure to market risk in the form of interest rate fluctuations is low.

**Item 8. Financial Statements and SupplementaryData**

Ourconsolidated financial statements and notes thereto, referred to in Item15(a)(1) of this Annual Report, are filed as part of this Annual Reportand appear beginning on page F-1.

**Item 9. Changes and Disagreements with Accountants on Accounting and FinancialDisclosure**

None.

**Item 9A. Controls andProcedures**

**Evaluation ofDisclosure Controls and Procedures**

Ourmanagement, with the participation of our principal executive and financialofficers, has evaluated the effectiveness of our disclosure controls andprocedures, as such term is defined in Rule 13a-15 and Rule 15d-15under the Securities Exchange Act of 1934, as of September 30, 2006.  This evaluation has allowed us to makeconclusions, as set forth below, regarding the effectiveness of our disclosurecontrols and procedures.  There areinherent limitations to the effectiveness of any system of disclosure controlsand procedures, including cost limitations, the possibility of human error,judgments and assumptions regarding the likelihood of future events, and thecircumvention or overriding of the controls and procedures.  Accordingly, even effective disclosurecontrols and procedures can only provide reasonable assurance of achieving thedesired control objective.  We believeour disclosure controls and procedures are designed to provide reasonableassurance that information required to be disclosed in our reports filed underthe Securities Exchange Act of 1934, such as this Annual Report onForm 10-K, is recorded, processed, summarized and reported within the timeperiods specified in the SEC rules and forms. We also believe our disclosurecontrols and procedures are designed to ensure that such information isaccumulated and communicated to our management as appropriate to allow timelydecisions regarding required disclosure.

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Basedon the evaluation of the effectiveness of our disclosure controls andprocedures, as of September 30, 2006, completed by our management, withthe participation of our President and Chief Executive Officer and ChiefFinancial Officer (as our principal executive officer and principal financialofficer, respectively), our President and Chief Executive Officer and ChiefFinancial Officer, have concluded that our disclosure controls and procedureswere effective.

**Changesin Internal Control Over Financial Reporting**

Therehas been no change in our internal control over financial reporting during ourfourth fiscal quarter that has materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.

**Item 9B. Other Information**

Notapplicable.

**PART III**

**Item 10. Directors and Executive Officers of theRegistrant**

Thefollowing table sets forth information concerning our executive officers anddirectors as of December 15, 2006:
| **Name**                    | ** ** | **Age** | ** ** | **Position**                                                               |
|-----------------------------|------------|---------|------------|----------------------------------------------------------------------------|
| John Pasqualoni             |       | 60      |       | President and Chief Executive Officer                                      |
| Joseph D’Amato  (1)    |       | 58      |       | Chief Operating Officer                                                    |
| Patrick M. Fox  (2)         |       | 54      |       | Chief Financial Officer                                                    |
| Barry W. Brandon            |       | 45      |       | Senior Vice President and General Counsel                                  |
| Rajat R. Shah               |       | 35      |       | Senior Vice President of Corporate Development and  Deputy General Counsel |
| Michael Speller  (3)        |       | 51      |       | Senior Vice President of Gaming Operations                                 |
| Brian Hansberry             |       | 52      |       | General Manager of Seneca Niagara Casino and Hotel                         |
| Barry E.  Snyder, Sr.  |       | 67      |       | Chairman of the Board of Directors                                         |
| Bergal L.  Mitchell III     |       | 33      |       | Vice Chairman of the Board of Directors                                    |
| Maurice A. John, Sr.   |       | 58      |       | Treasurer and Director                                                     |
| Martin E.  Seneca, Jr. |       | 64      |       | Secretary and Director                                                     |
| N. Cochise  Redeye          |       | 50      |       | Director                                                                   |
| Maribel Printup             |       | 77      |       | Director                                                                   |
| Michael L. John             |       | 38      |       | Director                                                                   |

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(1)      Mr. D’Amatowas appointed Chief Operating Officer on June 22, 2006, having previouslyserved as Senior Vice President of Finance and Administration.

(2)      Mr.Fox was appointed Chief Financial Officer on June 22, 2006, having previouslyserved as Vice President of Finance.

(3)      Mr.Speller was appointed Senior Vice President of Gaming Operations on June 22,2006, having previously served as Senior Vice President of Table Games andPoker.

The Council alone has the power to appoint and removedirectors from SGC and each of its subsidiaries. Since the Council election inNovember 2004, the Council has taken a more active role in managing ouraffairs. As previously discussed, all of our Class II gaming operations weretransferred to the Nation as of January 1, 2005, as part of the initialactions taken by the  then-new Council atits first meeting on November 13, 2004. In addition, the then-President ofthe Nation subsequently issued two executive orders affecting the management ofSGC and its subsidiaries. By executive orders in November 2004, the Nation’sPresident (1) established a Gaming Management Task Force to review themanagement and operation of the Nation’s Class III gaming facilitieswithin 120 days of the executive order and (2) imposed certain temporarycost containment measures on the operations of the casinos requiringpre-approval from the Nation’s President or Treasurer before certainexpenditures are made by us.

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In addition, on December 20, 2004, the Councilamended each of the charters of SGC and its subsidiaries requiring moreoversight by the Council. These amendments include, but are not limited to,Council approval of:

(i)  SGC and/or itssubsidiaries agreeing to (a) waive such corporation’s sovereign immunityand (b) submit to jurisdiction of non-Nation courts;

(ii)  any significantexpenditure (in excess of $3 million) of corporate resources via approval of acomprehensive business plan regarding such activity requiring the expenditure;

(iii)  termination of theoperation of any gaming facility;

(iv)  any amendments toany of the bylaws of SGC and its subsidiaries;

(v)   any agreements withany government or governmental agency or entity;

(vi)  incurrence of anysignificant guarantees or liabilities by SGC or its subsidiaries;

(vii)  any intercompanyloans; purchase of real property and significant expenditures for personalproperty; and

(viii)  obtainingfinancing and issuance of obligations by SGC or its subsidiaries.

These amendments also (i) prohibit SGC and itssubsidiaries from engaging in any activities to politically influence anyIndian nation, federal, state, or local government or their officials,(ii) clarify that the requirement that board members shall not have beenconvicted of a “Felony” to involve only those offenses set forth under theIndian Major Crimes Act (18 U.S.C. §1153) and (iii) change the boardmembership requirement to require at least five members of each board to beenrolled members of the Nation and that no members of Council may serve on theboards of directors.

***John Pasqualoni***has been our President and Chief Executive Officer since June 21, 2005.Prior to his election to that position, Mr. Pasqualoni served briefly asour interim President and Chief Executive Officer and Chief Operating Officerof all our gaming operations. Prior to his appointment as Chief Operating Officerin February 2005, Mr. Pasqualoni was our Senior Vice President, SlotOperations/Marketing. Mr. Pasqualoni has been with SGC sinceOctober 2002. Previously, Mr. Pasqualoni was employed by ResortsInternational Hotel and Casino in Atlantic City from November 2001 toOctober 2002 and attained the position of Senior Vice President of SlotOperations/Promotions. From June 1999 to November 2001,Mr. Pasqualoni was a gaming industry consultant to Louisiana Downs andResorts International Hotel and Casino. From March 1998 to June 1999,Mr. Pasqualoni was a partner at Top Gun Gaming, LLC, a slot machinedevelopment company. From 1993 to 1998, Mr. Pasqualoni was Vice Presidentof Slot Operations and Casino Marketing at the Foxwoods Resort Casino.Additionally, he has worked in slot management positions at several casinos andhotel gaming complexes, including the Frontier Hotel in Las Vegas, Bally’s ParkPlace Casino, Tropicana Casino, the Hilton/Trump’s Castle and Trump Plaza HotelCasino in Atlantic City and the Lucayan Beach Hotel Resort in the Bahamas.

***Joseph D’Amato***was appointed our Chief Operating Officer on June 22, 2006.  Mr. D’Amato formerly served as  Senior Vice President of Finance andAdministration since July 2004 and has been with SGC sinceDecember 2002. From August 2000 to November 2002, he was SeniorVice President of Finance/ CFO of Resorts International Casino in AtlanticCity. Prior to joining Resorts, he was employed for over three years by theTrump Organization, serving as the COO of Trump’s riverboat operation in Gary,Indiana and then as Vice President of Finance/CFO of Trump Marina. Prior to hisemployment at Trump, Mr. D’Amato held various financial managementpositions with Bally’s Casinos in Atlantic City, including Vice President ofFinance and Administration, Vice President of Finance and Treasurer.  Mr. D’Amato is a Certified PublicAccountant (inactive status) in New Jersey and Pennsylvania.

***Patrick M. Fox***was appointed our Chief Financial Officer on June 22, 2006.  Prior to his appointment, Mr. Fox served asVice President of Finance since October 24, 2005.  For the four months prior to October 24,2005, Mr. Fox served as Financial Controller of Majestic Star Casino.  From April 2004 through May 2005, Mr. Foxserved as Chief Financial Officer of Prairie Meadows Racetrack & Casino andfrom November 2001 through April 2004 he served as Chief Financial Officer ofTrump Indiana, Inc. (which corporation filed for bankruptcy shortly after April2004).  Prior to such time, Mr. Foxserved as Director of Finance of the Carlson Group, an engineering andarchitectural firm, from February 2001 through September 2001.  Prior to February 2001, and for approximately25 years, he was with Arthur Andersen and Accenture (formerly AndersenConsulting) where he held several auditing and management positions.  Mr. Fox is a certified public accountant.

***Barry W. Brandon***has served as our Senior Vice President and General Counsel sinceAugust 2004. Prior to accepting his current position with SGC, he was apartner at the law firm of Akin Gump Strauss Hauer & Feld LLP where hepracticed federal Indian law and policy. From April 1998 toDecember 2000, Mr. Brandon served first as the General Counsel andthen 

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the Chief of Staff of the National Indian GamingCommission in Washington, D.C. From June 1997 to April 1998, he wasthe Deputy Director of the Secretary’s Office on Indian Water Rights at theU.S. Department of the Interior. From September 1994 to June 1997,Mr. Brandon served as Senior Trial Attorney at the U.S. Department ofJustice, Indian Resources Section.

***Rajat R. Shah***has served as our Senior Vice President of Corporate Development and DeputyGeneral Counsel since May 2, 2005. Prior to joining SGC, Mr. Shah wasa counsel at the law firm of Akin Gump Strauss Hauer & Feld LLP wherehe practiced corporate and securities law, with a concentration in the areas offinance, securities, mergers and acquisitions and joint ventures. FromSeptember 1996 until July 1998, Mr. Shah worked as an associateat the law firm of Pillsbury Winthrop Shaw Pittman LLP.  Mr. Shah is a member of the board ofdirectors for the Buffalo Children’s Hospital Board Foundation.

***Michael F. Speller*** was appointed Senior Vice President of Gaming Operations onJune 22, 2006, having served as our Senior Vice President of Table Games andPoker since June 2004. From September 2002 to June 2004,Mr. Speller served as our Vice President of Table Games. From 1999 toSeptember 2002, Mr. Speller worked as an independent gaming consultant.Mr. Speller has over 30 years of gaming experience in both domestic andinternational gaming jurisdictions. He has worked with major casino operatorsincluding the Tropicana in Atlantic City, Coral Casino Group in London,England, Resorts International in Paradise Island, Bahamas, and Foxwoods Resortand Casino in Connecticut. He has extensive senior management experience at thechief executive officer, chief operating officer and general manager levels.

***Brian Hansberry***has served as the General Manager of Seneca Niagara Casino and Hotel sinceAugust 28, 2006.  Prior to that time, Mr.Hansberry had served as STGC’s Vice President and Chief Operating Officer sinceDecember 2003. Mr. Hansberry joined us in October 2002 as atable games shift manager and subsequently as table games manager.Mr. Hansberry has over 25 years of experience in the gaming industry. Hehas worked for several gaming corporations including Resorts InternationalCasino and The Sands Casino Hotel in Atlantic City, and Players Island CasinoIsle of Capri in Louisiana. Mr. Hansberry has experience in operations,marketing and administration, and has held the positions of Director ofOperations and Vice President of Operations and Administration.

***Barry E. Snyder, Sr.*** has served as Chairman of the board of directors of SGCsince December 2004. Mr. Snyder served as  the President of the Nation from November2004 to November 2006, and previously served the Nation in this capacity on twoother occasions. Mr. Snyder is the former owner of the Seneca Hawk TobaccoShop.   Mr. Snyder also serves on theboard of directors of the Seneca Management Development Corporation.

***Bergal L. Mitchell, III*** has served as a member and Vice Chairman of the board ofdirectors of SGC since August 2002 and December 2004, respectively.Mr. Mitchell was a member of Council from November 2000 toNovember 2004. Mr. Mitchell has been employed by Ross John Enterprisesince 1996 where he has held various business development positions.  Mr. Mitchell also serves on the board ofdirectors of the Seneca Management Development Corporation.

***Maurice A. John, Sr.*** has served as Treasurer of the board of directors of SGCsince December 2004. Mr. John was recently elected as the Presidentof the Nation in November 2006.  FromNovember 2004 to November 2006, Mr. John served as Treasurer of the Nation andpreviously served two terms in the Nation’s Council. Mr. John has alsoserved the Nation as a judge in the Nation’s appellate court. Mr. John wasthe former President of the Coalition of Indian Controlled School Boards, anational Indian Education Organization. Mr. John has an existing tax lienimposed by the U.S. Government which is a result of his beliefs in the treatiesbetween the United States of America and the Seneca Nation of Indians.  Mr. John also serves on the board ofdirectors of the Seneca Management Development Corporation and SenecaConstruction Management Corporation.

***Martin E. Seneca, Jr.*** has served as Secretary of the board of directors of SGCsince December 2004. Mr. Seneca currently engages in the privatepractice of law and serves as a special legal advisor to the President of theNation. He received his J.D. from Harvard Law School. He is a former WhiteHouse Fellow and a former Deputy Commissioner of the Bureau of Indian Affairs.Mr. Seneca also serves on the board of directors of the Seneca ManagementDevelopment Corporation.

***Norman Cochise Redeye*** has served as a member of the board of directors of SGCsince February 2005. Mr. Redeye is a retired detective from the ErieCounty Sheriff’s Office, a position he held since 1981. In addition,Mr. Redeye has served as a Lay Advocate in the Seneca Nation of IndiansPeacemakers’ Court for the past 20 years. Prior to joining the Erie County Sheriff’s Office, Mr. Redeyeserved as a member of the U.S. Air Force from 1974 until 1980.   Mr. Redeye also serves on the board ofdirectors of the Seneca Management Development Corporation.

***Maribel Printup***has served as a member of the board of directors of SGC sinceFebruary 2005. Ms. Printup currently serves as a chairperson emeritusof the board of trustees of the Seneca Iroquois National Museum.Ms. Printup also served as Councilor of the Nation’s Council from 1998 to2000 and was with the Bureau of Indian Affairs for 25 years. During the last 10years in which Ms. Printup was with the Bureau of Indian Affairs, sheserved as National Program Coordinator for the Johnson O’Malley Program.

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Ms. Printup also serves on the board of directors ofthe Seneca Management Development Corporation.

***Michael L. John***hasserved as a member of the board of directors of SGC since November 2006.  Mr. John also served as member of the Nation’sCouncil from November 1998 through November 2006, and as Chief of Staff for theSeneca Nation of Indians from November 2004 through November 2006.  Mr. John also served as TERO Chairman from 2000through 2006, and as Chairman of the Nation’s Compact Negotiations Committeefrom 1998 through 2000.  Mr. John alsoserves on the board of directors of the Seneca Management DevelopmentCorporation.

*AuditCommittee of the Board of Directors*

Our board of directors has established an auditcommittee to assist it with its responsibilities. The board handles allcompensation and other matters directly. The principal duties of our auditcommittee are as follows:

·      torecommend board action related to the discharge of the board of directors’responsibilities with respect to overseeing the integrity of our financialstatements, our compliance with legal and regulatory requirements, our riskassessment and risk management policies and procedures, and the performance ofour internal and external audit functions;

·      tohire, monitor the performance of and, if necessary, replace the independentauditors;

·      toapprove any significant non-audit relationship with the independent auditorsand assess the independent auditor’s qualifications and independence;

·      toperform an annual evaluation of the committee itself; and

·      toundertake any other action deemed appropriate or necessary by the board ofdirectors or applicable rules or regulations.

The audit committee is comprised of members from theboard of directors. The members of our audit committee are Martin E.Seneca, Jr., chairman of the committee, Bergal L. Mitchell III, Maurice A.John, Sr. and Michael L. John.

*AuditCommittee Financial Expert*

The board of directors has determined that it does nothave an audit committee financial expert, meaning that no person has pastemployment experience in finance or accounting, requisite professionalcertification in accounting or any other comparable experience or background, whichresults in the individual’s financial sophistication, including being or havingbeen a chief executive officer, chief financial officer or other senior officerwith financial oversight responsibilities. While we are not required to have an audit committee financial expert,the board of directors has looked, and expects to continue to look, for anindividual meeting the requisite criteria of an audit committee financialexpert to serve on our board and audit committee.

*DirectorCompensation*

Our directors receive the following compensation:(i) the Chairman of the Board receives a $100,000 annual fee;(ii) each non-Nation employee director receives a $40,000 annual fee; and(iii) each Nation employee director receives $500 per meeting.  In addition, we reimburse directors fortravel and other expenses incurred in connection with their duties as directorsof SGC and each director has complimentary privileges of $1,000 per month ateach of our casinos. Nation executives who also serve as directors have unlimitedcomplimentary privileges at both of our casinos. These complimentary privilegesare to be used by our directors solely for business purposes.  The directors are also entitled to all othernon-compensatory benefits available to our employees, including, but notlimited to, health, dental and disability benefits.  The amended charters of SGC and itssubsidiaries prohibit any of our employees from serving as one of ourdirectors.

*Code ofEthics*

Wehave adopted a Code of Business Conduct and Ethics applicable to all of ouremployees, including our principal executive officer, principal financialofficer and principal accounting officer and all other senior financialexecutives, and to our directors when acting in their capacity as directors.Our Code of Business Conduct and Ethics is designed to set the standards ofbusiness conduct and ethics and to help directors and employees resolve ethicalissues. The purpose of our Code of Business Conduct

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andEthics is to ensure to the greatest possible extent that our business isconducted in a consistently legal and ethical manner. Employees may submitconcerns or complaints regarding audit, accounting, internal controls or otherethical issues on a confidential basis by means of a toll-free telephone callor an anonymous email. We investigate all concerns and complaints.  Our Code of Business Conduct and Ethics isavailable to investors on our website at www.senecagamingcorporation.com orfree of charge upon written request. Any such request should be sent by mail toSeneca Gaming Corporation, 310 Fourth Street Niagara Falls, New York (SenecaNation Territory) 14303, Attn: General Counsel or should be made by telephoneby calling (716) 299-1100.

Weintend to disclose on our website amendments to, or waivers from, any provisionof our Code of Business Conduct and Ethics that applies to our principalexecutive officer, principal financial officer, principal accounting officer orpersons performing similar functions, and that relates to any element of thecode of ethics definition enumerated in Item 406(b) of Regulation S-K.

**Item 11. Executive Compensation**

The following table sets forth the compensation earnedduring the last three fiscal years by our Chief Executive Officer and our fourmost highly compensated executive officers other than the Chief ExecutiveOfficer whose total compensation exceeded $100,000 for Fiscal 2006:

**Summary Compensation Table**
|                                                     | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                     | ** ** | **Other  compensation** | ** ** |
|-----------------------------------------------------|------------|------------|------------|------------------------------|------------|--------------------------------|------------|-------------------------|------------|
| ** **                                          | ** ** | ** ** | ** ** | **Annual compensation** | ** ** | **401(k) Plan  Matching** | ** ** |
| **Name and Principal Position**      | ** ** | **Year**   | ** ** | **Salary($)**                | ** ** | **Bonus($)(1)**                | ** ** | **Contributions**       | ** ** |
|                                                |       |       |       |                         |       |                           |       |                    |       |
| John Pasqualoni                                     |       | 2006       |       | $923,750                     |       | —                         |       | 2,813                   |       |
| President and Chief  Executive Officer              |       | 2005       |       | 390,000                      |       | $237,500                       |       | 2,625                   |       |
|                                                     |       | 2004       |       | 266,250                      |       | 187,500                        |       | 2,606                   |       |
|                                                |       |       |       |                         |       |                           |       |                    |       |
| Joseph D’Amato                                 |       | 2006       |       | $517,603                     |       | $221,000                       |       | 4,106                   |       |
| Chief Operating Officer                             |       | 2005       |       | 375,000                      |       | 187,500                        |       | 5,954                   |       |
|                                                |       | 2004       |       | 249,327                      |       | 262,500                        |       | 3,531                   |       |
|                                                |       |       |       |                         |       |                           |       |                    |       |
| Michael F. Speller                                  |       | 2006       |       | $393,863                     |       | 134,500                        |       | 2,598                   |       |
| Senior Vice President of  Gaming Operations         |       | 2005       |       | 290,000                      |       | 125,000                        |       | 2,621                   |       |
|                                                     |       | 2004       |       | 203,750                      |       | 137,500                        |       | 2,054                   |       |
|                                                |       |       |       |                         |       |                           |       |                    |       |
| Barry Brandon                                       |       | 2006       |       | $700,000                     |       | $75,000                        |       | 4,106                   |       |
| Senior Vice President and General Counsel           |       | 2005       |       | 375,000                      |       | 187,500                        |       | 4,404                   |       |
|                                                |       | 2004       |       | 62,671                       |       | 106,250                        |       | —                  |       |
|                                                |       |       |       |                         |       |                           |       |                    |       |
| Rajat R. Shah                                       |       | 2006       |       | $700,000                     |       | —                         |       | 2,427                   |       |
| Senior Vice President of  Corporate Development and |       | 2005       |       | 295,005                      |       | 155,000                        |       | —                  |       |
| Deputy General Counsel                              |       |       |       |                         |       |                           |       |                    |       |

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(1)      Bonuseswere earned on a fiscal year basis, and may be paid in the following fiscalyear.

**Employment Agreements**

SGC has entered into employment agreements withseveral of its executive officers, the material terms of which are summarizedbelow.

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***John Pasqualoni.*** ****In connection with his election as interim President andChief Executive Officer, Mr. Pasqualoni and SGC entered into a secondamended and restated employment agreement on April 6, 2005.  As of January 30, 2006, SGC and Mr. Pasqualonientered into an amendment to Mr. Pasqualoni’s second amended and restatedemployment to, among other matters, modify Mr. Pasqualoni’s compensation, withsuch amendment effective as of October 1, 2005.

Mr. Pasqualoni is entitled to an annual basesalary of $390,000 for the period commencing June 1, 2004 and endingSeptember 30, 2005, $923,750 for the fiscal year ending September 30,2006, and $923,750 for the fiscal year ending September 30, 2007, with asalary review by the board of directors each fiscal year thereafter at whichtime the board of directors shall determine whether, in its sole discretion,Mr. Pasqualoni’s base salary shall be increased.

For the fiscal years ended prior to October 1, 2005,the effective date of the amendment to Mr. Pasqualoni’s second amended andrestated employment agreement, Mr. Pasqualoni was also eligible for anannual performance bonus. For the fiscal year ending September 30, 2005,Mr. Pasqualoni was eligible for an annual performance bonus equal to$187,500 if SGC’s Consolidated EBITDA for the 2005 fiscal year is at least$140.0 million. This performance bonus was paid to Mr. Pasqualoni inNovember 2005.

If Mr. Pasqualoni’s employment is terminated forany reason other than for cause, his death or disability, the loss by theNation of its ability to conduct gaming activities, or the loss byMr. Pasqualoni of his license to work at the Nation’s gaming facilities,we are obligated to: (i) pay Mr. Pasqualoni his earned, but unpaid,base salary through the termination date, and (ii) continue to pay hisbase salary in effect as of the date of termination for a period following histermination equal to the lesser of (A) 18 months or (B) the remainderof the period ending on the termination date. Following the termination of hisemployment, Mr. Pasqualoni has a duty to mitigate damages by seekingemployment with duties and salary comparable to those provided by us, and if heobtains such employment, he shall reimburse us the amount of the compensationhe has received from such other entity for such period, but not to exceed theamount of the compensation we have paid him for such period.

***Joseph D’Amato.***    Mr. D’Amatoand SGC entered into an amended and restated employment agreement onJuly 13, 2004, pursuant to which Mr. D’Amato agreed to serve asSenior Vice President of Finance and Administration of each of SGC, SNFGC, STGCand SEGC through September 30, 2007, unless his employment is earlierterminated pursuant to the terms of the agreement or renewed by subsequentwritten agreement.  On September 14,2006, Mr. D’Amato’s amended and restated employment agreement was furtheramended to, among other matters, reflect Mr. D’Amato appointment to ChiefOperating Officer, extend the term of the agreement through September 30, 2009,and to reflect certain changes to Mr. D’Amato’s compensation effective as ofJune 22, 2006.  Mr. D’Amato is entitledto an annual base salary of $375,000 for the period commencing June 1,2004 and ending September 30, 2005, an annual base salary of $400,000prorated for the period between October 1, 2005 and June 21, 2006, an annualbase salary of $825,000 for the fiscal year ending September 30, 2006  (prorated for the period from June 22, 2006through September 30, 2006), an annual base salary of $825,000 for the fiscalyear ending September 30, 2007, and a minimum annual base salary of $825,000for the fiscal years ending September 30, 2008 and September 30, 2009,respectively, with such minimum amounts subject to increase based uponnegotiations between SGC and Mr. D’Amato. For the fiscal year ending September 30, 2005, Mr. D’Amato waseligible for an annual performance bonus equal to $187,500 if SGC’sConsolidated EBITDA for the 2005 fiscal year is at least $140.0 million. Thisperformance bonus was paid to Mr. D’Amato in November 2005.  For the fiscal year ending September 30,2006, Mr. D’Amato was eligible for a prorated performance bonus equal to$146,000 if SGC’s Consolidated EBITDA for the 2006 fiscal year is at least$145.0 million.  This performance bonuswas paid to Mr. D’Amato in September 2006.  In addition, Mr. D’Amato received a signing bonus of $75,000 inconnection with entering into his employment agreement.

If Mr. D’Amato’s employment is terminated for anyreason other than for cause, his death or disability, the loss by the Nation ofits ability to conduct gaming activities, or the loss by Mr. D’Amato ofhis license to work at the Nation’s gaming facilities, we are obligated to:(i) pay Mr. D’Amato his earned, but unpaid, base salary through thetermination date, (ii) pay Mr. D’Amato a pro-rata performance bonusfor the year of his termination, and (iii) continue to pay his base salaryin effect as of the date of termination for a period following his terminationequal to the lesser of (A) 18 months or (B) the remainder of theperiod ending on the termination date. Following the termination of hisemployment, Mr. D’Amato has a duty to mitigate damages by seekingemployment with duties and salary comparable to those provided by us, and if heobtains such employment, he shall reimburse us the amount of the compensationhe has received from such other entity for such period, but not to exceed theamount of the compensation we have paid him for such period.

***Michael F. Speller.***    Mr. Speller and SGC entered intoan amended and restated employment agreement on July 13, 2004, pursuant towhich Mr. Speller agreed to serve as Senior Vice President of Table Gamesand Poker of each of SGC, SNFGC, STGC and SEGC through September 30, 2007,unless his employment is terminated earlier pursuant to the terms of theagreement or renewed by subsequent written agreement. On September 14, 2006,Mr. Speller’s amended and restated employment agreement was furtheramended to, among other matters, reflect Mr. Speller’s appointment to SeniorVice 

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President of Gaming Operations, extend the term of theagreement through September 30, 2009, and to reflect certain changes to Mr.Speller’s compensation effective as of June 22, 2006.   Mr. Speller is entitled to an annualbase salary of $225,000 for the period commencing June 1, 2004 and endingSeptember 30, 2004, $290,000 for the fiscal year ending September 30,2005, $315,000 prorated for the period between October 1, 2005 and June 21,2006, an annual base salary of $600,000 for the fiscal year-ended September 30,2006 (prorated for the period from June 22, 2006 through September 30, 2006),an annual base salary of $600,000 for the fiscal year-ended September 30, 2007,and a minimum annual base salary of $600,000 for the fiscal years-endedSeptember 30, 2008 and 2009, respectively, with such minimum amounts subject toincrease based upon negotiations between SGC and Mr. Speller. For the fiscalyear ending September 30, 2005, Mr. Speller was eligible for anannual performance bonus equal to $125,000 if SGC’s Consolidated EBITDA for the2005 fiscal year is at least $140.0 million. This performance bonus was paid toMr. Speller in November 2005. For the fiscal year ending September 30, 2006, Mr. Speller waseligible for a prorated performance bonus equal to $109,500 if SGC’sConsolidated EBITDA for the 2006 fiscal year is at least $145.0 million. Thisbonus was paid to Mr. Speller in September 2006.  In addition, Mr. Speller received asigning bonus of $25,000 in connection with entering into his employmentagreement.

If Mr. Speller’s employment is terminated for anyreason other than for cause, his death or disability, the loss by the Nation ofits ability to conduct gaming activities, or the loss by Mr. Speller ofhis license to work at the Nation’s gaming facilities, we are obligated to: (i)pay Mr. Speller his earned, but unpaid, base salary through the terminationdate, (ii) pay Mr. Speller a pro-rata performance bonus for the year of histermination, and (iii) continue to pay his base salary in effect as of the dateof termination for a period following his termination equal to the lesser of(A) 18 months or (B) the remainder of the period ending on the terminationdate. Following the termination of his employment, Mr. Speller has a duty tomitigate damages by seeking employment with duties and salary comparable tothose provided by us, and if he obtains such employment, he shall reimburse usthe amount of the compensation he has received from such other entity for suchperiod, but not to exceed the amount of the compensation we have paid him forsuch period.

***Barry W. Brandon.***    Mr. Brandon and SGC entered intoan employment agreement on July 13, 2004, and an amendment to such agreementeffective October 1, 2005, pursuant to which Mr. Brandon agreed toserve as Senior Vice President and General Counsel of each of SGC, SNFGC, STGCand SEGC from August 1, 2004 through September 30, 2007, unless hisemployment is earlier terminated pursuant to the terms of the agreement orrenewed by subsequent written agreement. Mr. Brandon’s employment agreement wasamended as of September 14, 2006 to, among other matters, extend the term ofthe agreement through September 30, 2009, and to reflect certain changes to Mr.Brandon’s compensation.  Mr. Brandonis entitled to an annual base salary of $375,000 for the period commencingAugust 1, 2004 and ending September 30, 2005, $700,000 for the fiscalyear ending September 30, 2006, and $700,000 for the fiscal year endingSeptember 30, 2007, and a minimum annual base salary of $700,000 for eachof the fiscal years ending September 30, 2008 and September 30, 2009, with suchminimum amounts subject to increase based upon negotiations between SGC and Mr.Brandon.  For the fiscal year endingSeptember 30, 2005, Mr. Brandon was eligible for an annualperformance bonus equal to $187,500 if SGC’s Consolidated EBITDA for the 2005fiscal year is at least $140.0 million. This performance bonus was paid to Mr. Brandon inNovember 2005.   Mr. Brandonreceived a signing bonus of $75,000 in connection with entering into hisemployment agreement.

If Mr. Brandon’s employment is terminated for anyreason other than for cause, his death or disability, the loss by the Nation ofits ability to conduct gaming activities, or the loss by Mr. Brandon ofhis license to work at the Nation’s gaming facilities, we are obligated to:(i) pay Mr. Brandon his earned, but unpaid, base salary through thetermination date and (ii) continue to pay his base salary in effect as ofthe date of termination for a period following his termination equal to thelesser of (A) 18 months or (B) the remainder of the period ending onthe termination date. Following the termination of his employment,Mr. Brandon has a duty to mitigate damages by seeking employment withduties and salary comparable to those provided by us, and if he obtains suchemployment, he shall reimburse us the amount of the compensation he hasreceived from such other entity for such period, but not to exceed the amountof the compensation we have paid him for such period.

***Rajat R. Shah.***    Mr. Shahand SGC entered into an employment agreement on April 28, 2005, pursuantto which Mr. Shah agreed to serve as Senior Vice President of CorporateDevelopment and Deputy General Counsel of each of SGC, SNFGC, STGC and SEGCthrough September 30, 2008, unless his employment is terminated earlierpursuant to the terms of the agreement or renewed by subsequent writtenagreement. Mr. Shah’s employment agreement was amended as of September 14, 2006to, among other matters, extend the term of the agreement through September 30,2009, and to reflect certain changes to Mr. Shah’s compensation.  Mr. Shah is entitled to receive anamount equal to $295,625 from the period commencing May 2, 2005 and endingSeptember 30, 2005, an annual salary of $700,000 for the fiscal yearending September 30, 2006, an annual salary of $700,000 for the fiscalyear ending September 30, 2007, and a minimum annual base salary of$700,000 for each of fiscal years ending September 30, 2008 and September 30,2009, with such minimum amounts subject to increase based upon negotiationsbetween SGC and Mr. Shah.

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If Mr. Shah’s employment is terminated for anyreason other than for cause, his death or disability, the loss by the Nation ofits ability to conduct gaming activities, or the loss by Mr. Shah of hislicense to work at the Nation’s gaming facilities, we are obligated to:(i) pay Mr. Shah his earned, but unpaid, base salary through thetermination date, and (ii) continue to pay his base salary in effect as ofthe date of termination for a period following his termination equal to thelesser of (A) 18 months or (B) the remainder of the period ending onthe termination date. Following the termination of his employment,Mr. Shah has a duty to mitigate damages by seeking employment with dutiesand salary comparable to those provided by us, and if he obtains suchemployment, he shall reimburse us the amount of the compensation he hasreceived from such other entity for such period, but not to exceed the amountof the compensation we have paid him for such period.

***Patrick M. Fox.***    Mr. Foxand SGC entered into an employment agreement on October 24, 2005, pursuant towhich Mr. Fox agreed to serve as Vice President of Finance of each of SGC,SNFGC, STGC and SEGC from October 24, 2005 through October 23, 2007, unless hisemployment is earlier terminated pursuant to the terms of the agreement orrenewed by subsequent written agreement. Mr. Fox’s employment agreement wasamended as of June 22, 2006 to, among other matters, reflect Mr. Fox’sappointment to Chief Financial Officer, extend the term of the agreementthrough June 21, 2008, and to reflect certain changes to Mr. Fox’s compensation.  Mr. Fox is entitled to an annual basesalary of $170,000 for the period commencing October 24, 2005 and ending June21, 2006.  As of June 22, 2006, Mr. Fox’sannual base salary is $325,000.  Mr. Fox’ssalary is subject to review on an annual basis.

If Mr. Fox’s employment is terminated for anyreason other than for cause, his death or disability, the loss by the Nation ofits ability to conduct gaming activities, or the loss by Mr. Fox of hislicense to work at the Nation’s gaming facilities, we are obligated to:(i) pay Mr. Fox his earned, but unpaid, base salary through thetermination date and (ii) continue to pay his base salary in effect as ofthe date of termination for a period following his termination equal to thelesser of (A) 6 months or (B) the remainder of the period ending onthe termination date. Following the termination of his employment, Mr. Foxhas a duty to mitigate damages by seeking employment with duties and salarycomparable to those provided by us, and if he obtains such employment, he shallreimburse us the amount of the compensation he has received from such otherentity for such period, but not to exceed the amount of the compensation wehave paid him for such period.

**Medical Reimbursement Plan**

We have in place an executive medical reimbursementplan pursuant to which members of our senior management are entitled toreimbursement for up to $100,000 in otherwise uncovered medical expenses. Wepay all premiums for this plan on behalf of our senior executives. As ofSeptember 30, 2006, the annual cost was approximately $6,000 for eachmember of senior management covered by this plan.

**Item 12. Security Ownership of Certain BeneficialOwners and Management and Related Stockholder Matters**

We arewholly owned by the Seneca Nation of Indians.

**Item 13. Certain Relationships and RelatedTransactions**

*Transactionswith the Nation*

The Nation entered into an operating lease agreementwith SNFGC on October 25, 2002 for use of the land and the building wherethe Seneca Niagara Casino currently operates. The Seneca Niagara Casino leaseterm expires in 2023. During Fiscal 2006, SNFGC made lease payments to theNation of $15.5 million. Rent is payable only to the extent thatsufficient funds are available from the net proceeds derived from the operationof the Seneca Niagara Casino and other commercial activities related to theoperation of that casino.

STGC acquired and assumed the leasehold interests heldby Sandra Abrams and Valent Farms, LLC under long term leases with the Nationon December 29, 2003 and February 19, 2003, respectively. SenecaAllegany Casino was built on land occupied pursuant to such leases. Pursuant tothe terms of the Indenture governing the senior notes, the monthly payments tothe Nation under the leases with SNFGC and STGC are limited to $1.25 millioneach with annual increases up to 3.0% beginning October 1, 2005.

STGC currently leases the land upon which the SenecaAllegany Casino operates from the Nation pursuant to an oral lease agreement. DuringFiscal 2006, STGC made lease payments to the Nation of $15.5 million.

Effective April 1, 2006, SEGC leases the land uponwhich the planned Seneca Buffalo Creek Casino is expected to operate from theNation pursuant to an oral agreement, as authorized by the SGC board ofdirectors on April 18, 2006.  BeginningApril 1, 2006, SEGC made monthly lease payments of $0.5 million to theNation.  Effective October 1, 2006, theboard of directors approved an increase to SEGC’s monthly lease payments to$1.25 million, which payments may be increased by 3% each October 1 beginningOctober 1, 2007.

We reimburse the Nation for all of the regulatorycosts of the SGA, the New York State Racing and Wagering Board and the New YorkState Police, which are incurred by the Nation. For Fiscal 2006, we incurredapproximately $18.6 million for regulatory costs.

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During Fiscal 2006, SEGC distributed land withaggregate acquisition costs of approximately $7.4 million to the Nation.

We make distributions to the Nation pursuant toresolutions adopted by our board of directors for specific projects identifiedby the Nation and for general purposes. During Fiscal 2006, we distributed$11.8 million to the Nation, including a $2.0 million portion of a $26.0million distribution which was approved by the SGC board of directors, declaredin September 2006 and payable in $2.0 million increments over a thirteen monthperiod.  On December 11, 2006, SGCdeclared an additional $20.0 million distribution to the Nation, payable in 10equal monthly installments of $2.0 million beginning December 2006.  We intend to continue to make distributionsto the Nation subject to the restrictions set forth in the Indenture governingthe senior notes.

During Fiscal 2006, SGC distributed approximately$79.0 million to the Nation for the payment of the exclusivity fee to New YorkState for revenue generated through September 30, 2006

As of January 1, 2005, we transferred allClass II operations to the Nation, including our poker operations.  We lease space within both Seneca NiagaraCasino & Hotel and Seneca Allegany Casino to the Nation for operationof the poker rooms.  During Fiscal 2006and Fiscal 2005, we recorded $806,000 and $875,000 of rental income,respectively, and at September 30, 2006, we had recorded $401,000 as areceivable from the Nation relating to poker room rentals.

On July 14, 2005, STGC entered into aconstruction management agreement with SCMC to manage the construction of the212-room hotel and casino at Seneca Allegany Casino.  SCMC is responsible for contract procurementand daily oversight of the construction project.  The construction agreement with SCMC, asamended, provides that the cost of all of the contract work to be completedunder the agreement will not exceed a guaranteed maximum price (GMP) of $132.5million.  If STGC further changes thescope of the project or finishing materials, the GMP under the contract may befurther increased.

Effective September 1, 2005, SNFGC enteredinto an agreement with SCMC to manage the construction of the luxury hotel andgaming expansion project at Seneca Niagara Casino and Hotel.  This project was completely opened on March31, 2006, and cost $234.0 million including the cost of equipment andfurnishings.

SCMC was also contracted by SEGC for thedemolition and site preparation work for our planned gaming facility on theSeneca Buffalo Creek Territory.  Suchsite preparation and demolition work was completed at a cost of $2.8 million.

**Related Party Transactions**

During Fiscal 2006, SGC purchased an aggregate of$90,000, of tobacco products from KW Seneca Tobacco, which is owned by KevinSeneca, the newly-elected treasurer of the Nation and a former member of theCouncil.  We have not purchased from thisvendor since April 2006.

During Fiscal 2006 STGC paid M&M Allegany Junctionapproximately $261,000 for leasing the building used by STGC for administrativepurposes. M&M Allegany Junction is owned by Merle Watt, Sr., the brotherof Maribel Printup, a member of our board of directors.

During Fiscal 2006, SNFGC paid RGBK, Inc.approximately $131,000 for kitchen design services. A principal of this firm isa brother-in-law of Michael Speller, SGC’s Senior Vice President of GamingOperations. 

During Fiscal 2006, SNFGC paid KMM Gaming, Inc.approximately $67,000 for gaming consulting services. KMM Gaming, Inc. is ownedby the sister-in-law of SGC’s President and CEO.

Reference is made to “Directors and Executive Officersof the Registrant” for a discussion of certain matters relating to thecompensation and employment of our officers and compensation of our directors.

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**Item 14. Principal Accountant Fees and Services**

Thefollowing table sets forth the aggregate fees incurred by SGC related to theservices of SGC’s independent registered public accounting firm,Ernst & Young LLP for the years indicated:

|                       | ** ** | **Fiscal Year September 30,** | ** ** |
|-----------------------|------------|----------------------------------------------|------------|
| ** **            | ** ** | **2006**                                     | ** ** | **2005** | ** ** |
|                  |       |                                         |       |   |   |
| Audit fees(1)         |       | $                                            | 632,323    |   | $ | 763,054 |   |
| Audit-related fees(2) |       | 31,568                                       |       | 17,923 |   |
| All other fees(3)     |       | 18,940                                       |       | — |   |
| Total                 |       | $                                            | 682,831    |   | $ | 780,977 |   |

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(1)   The audit fees relate to the audit of SGC’sannual financial statements and quarterly reviews. Audit fees also includeservices for agreed upon procedures reports in connection with the NationalIndian Gaming Commission requirements. For 2005, this amount also includes fees related to the 2005 senior noteoffering of $179,150, including Ernst & Young LLP consent included inthe Registration Statement on Form S-4 and comfort letter procedures.

(2)   Audit related fees relate to audit servicesfor the Company’s employee benefit plan.

(3)   All other fees relate to Section 404compliance procedures.

**Preapprovalof Services Required**

Underthe policies and procedures established by our audit committee, each engagementfor audit and permissible non-audit services to be provided by our independentregistered public accounting firm must be approved by the auditcommittee. The preapproval policy prohibits the independent registeredpublic accounting firm from providing the following services: bookkeeping orother services related to our accounting records or financial statements;financial information systems design and implementation; appraisal or valuationservices; fairness opinions or contribution-in-kind reports; actuarialservices; internal audit outsourcing services; management function services;human resource services; broker-dealer, investment adviser or investmentbanking services; legal services; and expert services unrelated to the audit.

**PART IV**

**Item 15. Exhibits and Financial StatementSchedules**
| (a)1. and 2. |   |   | Financial statements required as a part of this  Annual Report on Form 10-K are listed on the “Index to Consolidated  Financial Statements” at page 66 herein. All financial statements  schedules are omitted since the required information is included in the  financial statements or the notes thereto, or is not applicable. |
|-------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              |   |   |                                                                                                                                                                                                                                                                                                                                                   |   |
| (a)3.             |   |   | Exhibits                                                                                                                                                                                                                                                                                                                                               |
|              |   |   |                                                                                                                                                                                                                                                                                                                                                   |   |
|                   | 1.1    |   |                                                                                                                                                                                                                                                                                                                                                   | Purchase Agreement, dated April 29, 2004, by  and among SGC, the Guarantors defined therein and Merrill Lynch &  Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of  America Securities LLC and Wells Fargo Securities, LLC, as the Initial  Purchasers (incorporated by reference to Exhibit 1.1 to SGC’s  Registration Statement No. 333-117633 filed with the SEC on  July 23, 2004). |
|              |   |   |                                                                                                                                                                                                                                                                                                                                                   |   |
|              | 1.2    |   |                                                                                                                                                                                                                                                                                                                                                   | Purchase Agreement, dated May 18, 2005, by and  among SGC, the Guarantors as defined therein and Merrill Lynch &  Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of  America Securities LLC and Wells Fargo Securities, LLC, as the Initial  Purchasers (incorporated by reference to Exhibit 1.1 to SGC’s Quarterly  Report on Form 10-Q filed with the SEC on August 15, 2005). |
|              |   |   |                                                                                                                                                                                                                                                                                                                                                   |   |
|              | 3.1    |   |                                                                                                                                                                                                                                                                                                                                                   | Fifth Amended and Restated Charter of SGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005). |
|              |   |   |                                                                                                                                                                                                                                                                                                                                                   |   |
|              | 3.2    |   |                                                                                                                                                                                                                                                                                                                                                   | Second Amended and Restated By-Laws of SGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005). |
|              |   |   |                                                                                                                                                                                                                                                                                                                                                   |   |

 

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|        | 3.3    |   |   | Third Amended and Restated Charter of SNFGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 3.4    |   |   | Third Amended and Restated By-Laws of SNFGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                                                                         |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 3.5    |   |   | Second Amended and Restated Charter of STGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                                                                         |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 3.6    |   |   | Amended and Restated By-Laws of STGC (incorporated  by reference to Exhibit 3.1 to SGC’s Annual Report on Form 10-K  filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                                                                                |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 3.7    |   |   | Second Amended and Restated Charter of SEGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                                                                         |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 3.8    |   |   | Amended and Restated By-Laws of SEGC (incorporated  by reference to Exhibit 3.1 to SGC’s Annual Report on Form 10-K  filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                                                                                |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 4.1    |   |   | Indenture, dated as of May 5, 2004, among SGC,  the Guarantors as defined therein and Wells Fargo Bank, National Association,  as Trustee, relating to our $300,000,000 principal amount of 71⁄4% Senior Notes  due 2012 (including form of note) (incorporated by reference to Exhibit 4.1  to SGC’s Registration Statement No. 333-117633 filed with the SEC on  July 23, 2004).                                                                                                                              |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 4.2    |   |   | Supplemental Indenture, dated as of May 23,  2005, to the Indenture, dated as of May 5, 2004, among SGC, the  Guarantors as defined therein and Wells Fargo Bank, National Association, as  Trustee, relating to our $200,000,000 principal amount of 71⁄4% Senior Notes  due 2012, Series B (including form of note) (incorporated by reference  to Exhibit 4.1 to SGC’s Quarterly Report on Form 10-Q filed with  the SEC on August 15, 2005).                                                      |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 4.3    |   |   | Registration Rights Agreement, dated as of  May 5, 2004, among SGC, the Guarantors party thereto and Merrill  Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith  Incorporated, Banc of America Securities LLC and Wells Fargo Securities, LLC,  as the Initial Purchasers (incorporated by reference to Exhibit 4.2 to  SGC’s Registration Statement No. 333-117633 filed with the SEC on  July 23, 2004).                                                                                      |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 4.4    |   |   | Registration Rights Agreement, dated as of  May 23, 2005, among SGC, the Guarantors party thereto and Merrill  Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith  Incorporated, Banc of America Securities LLC and Wells Fargo Securities, LLC,  as the Initial Purchasers (incorporated by reference to Exhibit 4.2 to  SGC’s Quarterly Report on Form 10-Q filed with the SEC on  August 15, 2005).                                                                                           |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 4.5    |   |   | Nation Agreement, dated May 5, 2004, between  Seneca Nation of Indians, Merrill Lynch & Co., Merrill Lynch,  Pierce, Fenner & Smith Incorporated, Bank of America Securities LLC  and Wells Fargo Securities, LLC, collectively as the Initial Purchasers, and  Wells Fargo Bank, National Association, as Trustee (incorporated by reference  to Exhibit 4.3 to SGC’s Registration Statement No. 333-117633 filed  with the SEC on July 23, 2004).                                              |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 4.6    |   |   | Amendment No. 1, dated May 23, 2005, to  Nation Agreement, dated May 5, 2004, between Seneca Nation of Indians,  Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith  Incorporated, Bank of America Securities LLC and Wells Fargo Securities, LLC,  collectively as the Initial Purchasers, and Wells Fargo Bank, National  Association, as Trustee (incorporated by reference to Exhibit 4.3 to  SGC’s Quarterly Report on Form 10-Q filed with the SEC on  August 15, 2005). |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 4.7    |   |   | Assignment and Plan of Distribution Agreement,  entered into and effective as of May 5, 2004, by and between Seneca  Nation of Indians and SGC (incorporated by reference to Exhibit 4.2 to  SGC’s Registration Statement No. 333-117633 filed with the SEC on  July 23, 2004).                                                                                                                                                                                                                                    |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.1   |   |   | Nation-State Gaming Compact between the Seneca  Nation of Indians and New York State, effective December 9, 2002  (incorporated by reference to Exhibit 10.1 to SGC’s Registration  Statement No. 333-117633 filed with the SEC on July 23, 2004).                                                                                                                                                                                                                                                                 |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

 

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|        | 10.2   |   |   | Term Loan Agreement, dated as of November 22,  2002, between Freemantle Limited, as Lender, and SNFGC, as Borrower, as  amended by Amendment No. 1 on December 6, 2002 (incorporated by  reference to Exhibit 10.2 to SGC’s Registration Statement  No. 333-117633 filed with the SEC on July 23, 2004).                                                                 |
|--------|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.3   |   |   | Amendment No. 2 to Term Loan Agreement, dated  April 22, 2004, between Freemantle Limited, as Lender, and SNFGC as  Borrower (incorporated by reference to Exhibit 10.14 to SGC’s Registration  Statement No. 333-117633 filed with the SEC on August 18, 2004).                                                                                                              |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.4   |   |   | Nation Agreement, dated as of November 22,  2002, between Freemantle Limited, as Lender, and the Seneca Nation of Indians  (incorporated by reference to Exhibit 10.3 to SGC’s Registration  Statement No. 333-117633 filed with the SEC on July 23, 2004).                                                                                                                        |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.5   |   |   | Amendment No. 1 to Nation Agreement, dated  April 22, 2004, between Freemantle Limited, as Lender, and the Seneca  Nation of Indians (incorporated by reference to Exhibit 10.15 to SGC’s  Registration Statement No. 333-117633 filed with the SEC on  August 18, 2004).                                                                                                     |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.6   |   |   | Term Loan Termination Agreement, dated as of  May 9, 2005, between Freemantle Limited, as Lender, and SNFGC, as  Borrower (incorporated by reference to Exhibit 10.1 to SGC’s Current  Report on Form 8-K filed with the SEC on May 10, 2005).                                                                                                                                     |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.7   |   |   | Agreement of Lease (“Head Lease Agreement”), dated  as of October 25, 2002, between Seneca Nation of Indians, as Landlord,  and SNFGC, as Tenant, as amended on December 23, 2002 (incorporated by  reference to Exhibit 10.4 to SGC’s Registration Statement  No. 333-117633 filed with the SEC on July 23, 2004).                                                 |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.8   |   |   | Agreement, dated as of October 15, 2003,  between SNFGC, as Owner, and Klewin Building Company, Inc., as  Design/Builder (for Seneca Niagara Casino luxury hotel) (incorporated by  reference to Exhibit 10.6 to SGC’s Registration Statement  No. 333-117633 filed with the SEC on August 18, 2004).                                                                         |
|   | 10.9   |   |   | First Amendment to Design/Build Agreement, dated as  of February 10, 2004, by and between SNFGC, as Owner, and Klewin  Building Company, Inc., as Design/Builder (for Seneca Niagara Casino  Hotel) (incorporated by reference to Exhibit 10.7 to SGC’s Registration  Statement No. 333-117633 filed with the SEC on August 18, 2004).                                        |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.10  |   |   | Agreement, dated as of September 1, 2004,  between SNFGC, as Owner, and Klewin Building Company, Inc., as  Design/Builder (for Seneca Allegany Casino Parking Garage) (incorporated by  reference to Exhibit 10.10 to SGC’s Annual Report on Form 10-K  filed with the SEC on May 9, 2005).                                                                                   |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.11  |   |   | Agreement, dated as of September 1, 2004,  between STGC, as Owner, and Klewin Building Company, Inc., as  Design/Builder (for Seneca Allegany Casino hotel and casino) (incorporated by  reference to Exhibit 10.11 to SGC’s Annual Report on Form 10-K  filed with the SEC on May 9, 2005).                                                                                  |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.12  |   |   | Construction Management Agreement, dated as of  July 14, 2005, between Seneca Construction Management Corporation, as  Construction Manager, and STGC, as Owner (for Seneca Allegany Casino Phase II  Hotel and Casino) (incorporated by reference to Exhibit 10.1 to SGC’s  Current Report on Form 8-K filed with the SEC on July 17, 2005).                                      |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.13  |   |   | Letter of Agreement, dated June 29, 2005, for  Mutual Termination of the Agreement dated September 1, 2004 between  SNFGC, as Owner, and Klewin Building Company, Inc., as Design/Builder  (for Seneca Allegany Casino Phase II Hotel and Casino) (incorporated by  reference to Exhibit 10.2 to SGC’s Current Report on Form 8-K filed  with the SEC on July 17, 2005). |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.14  | +      |   | Employment Agreement, dated July 13, 2004,  between SGC and Barry W. Brandon (incorporated by reference to  Exhibit 10.9 to SGC’s Registration Statement No. 333-117633 filed  with the SEC on July 23, 2004).                                                                                                                                                                     |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.15  | +      |   | Amended and Restated Employment Agreement, dated  April 13, 2004, between SGC and G. Michael Brown (incorporated by  reference to Exhibit 10.8 to SGC’s Registration Statement  No. 33-117633 filed with the SEC on July 23, 2004).                                                                                                                                                |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 10.16  | +      |   | Amended and Restated Employment Agreement, dated  July 13, 2004, between SGC and Annette Mohawk Smith (incorporated by  reference to Exhibit 10.10 to SGC’s Registration Statement  No. 333-117633 filed with the SEC on July 23, 2004).                                                                                                                                           |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |

 

62

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|        | 10.17  | +      |   | Second Amended and Restated Employment Agreement,  dated April 6, 2005, between SGC and John Pasqualoni (incorporated by  reference to Exhibit 10.16 to SGC’s Annual Report on Form 10-K  filed with the SEC on May 9, 2005).                                                                                                                 |
|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.18  | +      |   | Amended and Restated Employment Agreement, dated  July 13, 2004, between SGC and Joseph D’Amato (incorporated by reference  to Exhibit 10.12 to SGC’s Registration Statement No. 333-117633  filed with the SEC on July 23, 2004).                                                                                                       |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.19  | +      |   | Amended and Restated Employment Agreement, dated  July 13, 2004, between SGC and Michael F. Speller (incorporated by  reference to Exhibit 10.13 to SGC’s Registration Statement  No. 333-117633 filed with the SEC on July 23, 2004).                                                                                                        |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.20  | +      |   | Employment Agreement, dated April 28, 2005,  between SGC and Rajat Shah (incorporated by reference to Exhibit 10.11  to SGC’s Annual Report on Form 10-K filed with the SEC on May 9,  2005).                                                                                                                                                 |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.21  | +      |   | Separation and Consulting Agreement, dated  April 6, 2005, between SGC and C. Michael Brown (incorporated by  reference to Exhibit 10.1 to Current Report on Form 8-K filed with  the SEC on April 6, 2005).                                                                                                                                       |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.22  | +      |   | Amendment No. 1 to Employment Agreement, dated  as of October 1, 2005, between SGC and Barry W. Brandon (incorporated by  reference to Exhibit 10.20 to SGC’s Registration Statement  No. 333-128443 filed with the SEC on November 30, 2005)                                                                                            |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.23  | +      |   | Amendment No. 1 to Second Amended and Restated  Employment Agreement, dated as of January 30, 2006, between SGC and John  Pasqualoni (incorporated by reference to Exhibit 10.23 to SGC’s Amendment No.  3 to Registration Statement on Form S-4 filed with the SEC on February 2,  2006).                                                                        |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.24  | +      |   | Letter of Resignation and Mutual Release of all  Claims, dated as of April 28, 2006, executed by Annette Smith and SGC  (incorporated by reference to Exhibit 10.1 to SGC’s Current Report on 8-K  filed with the SEC on May 4, 2006).                                                                                                                            |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.25  | +      |   | Amendment No. 2 to Employment Agreement, effective  as of September 14, 2006, between SGC and Barry W. Brandon (incorporated by  reference to Exhibit 10.1 to SGC’s Current Report on Form 8-K filed with the  SEC on September 20, 2006).                                                                                                                        |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.26  | +      |   | Amendment No. 1 to Employment Agreement, effective  as of September 14, 2006, between SGC and Rajat Shah (incorporated by  reference to Exhibit 10.2 to SGC’s Current Report on Form 8-K filed with the  SEC on September 20, 2006).                                                                                                                              |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.27  | +      |   | Amendment No. 1 to Employment Agreement, entered  into on September 14, 2006 and effective as of June 22, 2006, between SGC and  Joseph D’Amato (incorporated by reference to Exhibit 10.3 to SGC’s Current  Report on Form 8-K filed with the SEC on September 20, 2006).                                                                                   |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.28  | +      |   | Amendment No. 1 to Employment Agreement, entered  into on September 14, 2006 and effective as of June 22, 2006, between SGC and  Michael Speller (incorporated by reference to Exhibit 10.4 to SGC’s Current  Report on Form 8-K filed with the SEC on September 20, 2006).                                                                                       |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.29  | *+     |   | Employment Agreement, dated December 15, 2006,  and effective as of June 22, 2006, between Seneca Gaming Corporation and  Patrick M. Fox.                                                                                                                                                                                                               |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.30  |   |   | Construction Management Agreement, entered into  January 12, 2006 and effective as of September 1, 2005, between SNFGC, as  Owner, and Seneca Construction Management Corporation, as Construction  Manager (incorporated by reference to Exhibit 10.21 to SGC’s Amendment No. 2  to Registration Statement on Form S-4 filed with the SEC on January 17,  2006). |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                   |

 

63

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|        | 10.31  |   |   | First Amendment to Construction Management  Agreement, dated as of January 12, 2006, by and between Seneca Construction  Management Corporation, as Construction Manager, and STGC, as Owner  (incorporated by reference to Exhibit 10.22 to SGC’s Amendment No. 2 to  Registration Statement on Form S-4 filed with the SEC on January 17, 2006).           |
|--------|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.32  |   |   | Construction Management Agreement, dated and  effective as of May 9, 2006, between SEGC, as Owner, and Seneca Construction  Management Corporation, as Construction Manager (for demolition work on  Seneca Buffalo Creek Territory) (incorporated by reference to Exhibit 10.1 to  SGC’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2006). |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.33  |   |   | Agreement between the City of Buffalo, New York,  Seneca Gaming Corporation, Seneca Erie Gaming Corporation and the Seneca  Nation of Indians, effective November 9, 2006 (incorporated by reference to  Exhibit 10.1 to SGC’s Current Report on Form 8-K filed with the SEC on  November 14, 2006).                                                         |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | 21.1   | *      |   | List of Subsidiaries of SGC.                                                                                                                                                                                                                                                                                                                                      |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | 24.1   | *      |   | Power of Attorney (included on the signature  page of this Annual Report).                                                                                                                                                                                                                                                                                   |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | 31.1   | *      |   | Certification pursuant to Section 302 of the  Sarbanes-Oxley Act.                                                                                                                                                                                                                                                                                            |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | 31.2   | *      |   | Certification pursuant to Section 302 of the  Sarbanes-Oxley Act.                                                                                                                                                                                                                                                                                            |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | 32.1   | *      |   | Certification pursuant to Section 906 of the  Sarbanes-Oxley Act.                                                                                                                                                                                                                                                                                            |

----

*      Filed herewith.

+      Management contract or compensatory planor arrangement.

(b)           See item (a)3. above

(c)           See item (a)1. and 2. above.

**SIGNATURES**

Pursuant to the requirements of Section 13 or15(d) the Securities Exchange Act of 1934, the registrant has duly causedthis annual report to be signed on its behalf by the undersigned, thereuntoduly authorized, in Niagara Falls, State of New York, on the 15th day ofDecember, 2006.
|        |   | SENECA GAMING CORPORATION |
|--------|--------|---------------------------|
|   |   |                      |   |   |
|   |   | By:                       |   | /s/ John Pasqualoni |
|   |   |                      |   |   |
|   |   |                      |   | John Pasqualoni |
|   |   |                      |   | President and Chief Executive Officer |

 

**POWER OF ATTORNEY**

Each person whose signature appears below constitutesand appoints John Pasqualoni and Patrick M. Fox, and each or any of them, hisor her true and lawful attorney-in-fact and agent, each with full power ofsubstitution and resubstitution, for him or her in his or her name, place andstead, in any and all capacities, to sign on his or her behalf individually andin each capacity stated below any or all amendments to this annual report onForm 10-K and any other documents in connection therewith, with theSecurities and Exchange Commission, granting unto said attorney-in-fact andagent, and each of them, full power and authority to do and perform each andevery act and thing requisite and necessary to be done in and about thepremises, as fully to all intents and purposes as he or she might or could doin person, hereby ratifying and confirming all that such attorneys-in-fact andagent, or his or their substitute or substitutes, may lawfully do or cause tobe done by virtue hereof.  This Power ofAttorney may be signed in several counterparts.

64

----

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this annual report has been signed by the followingpersons on behalf of the registrant and in the capacities and on the dateindicated.
| Signature                      | ** ** | **Title**                                                             | ** ** | **Date**          |
|--------------------------------|------------|-----------------------------------------------------------------------|------------|-------------------|
| ** **                     |       |                                                                  |       |              |
| /s/ John Pasqualoni            |       | President and Chief Executive Officer (Principal  Executive Officer)  |       | December 15, 2006 |
| John Pasqualoni                |       |                                                                  |       |              |
|                           |       |                                                                  |       |              |
| /s/ Patrick M. Fox             |       | Chief Financial Officer (Principal Financial and  Accounting Officer) |       | December 15, 2006 |
| Patrick M. Fox                 |       |                                                                  |       |              |
|                           |       |                                                                  |       |              |
| /s/ Barry E. Snyder, Sr.  |       | Chairman of the Board of Directors                                    |       | December 15, 2006 |
| Barry E. Snyder, Sr.      |       |                                                                  |       |              |
|                           |       |                                                                  |       |              |
| /s/ Bergal L. Mitchell III     |       | Vice Chairman of the Board of Directors                               |       | December 15, 2006 |
| Bergal L. Mitchell III         |       |                                                                  |       |              |
|                           |       |                                                                  |       |              |
| /s/ Maurice A. John, Sr.  |       | Treasurer and Director                                                |       | December 15, 2006 |
| Maurice A. John, Sr.      |       |                                                                  |       |              |
|                           |       |                                                                  |       |              |
| /s/ N. Cochise Redeye          |       | Director                                                              |       | December 15, 2006 |
| N. Cochise Redeye              |       |                                                                  |       |              |
|                           |       |                                                                  |       |              |
| /s/ Maribel Printup            |       | Director                                                              |       | December 15, 2006 |
| Maribel Printup                |       |                                                                  |       |              |
|                           |       |                                                                  |       |              |
| /s/ Martin E. Seneca, Jr. |       | Director                                                              |       | December 15, 2006 |
| Martin E. Seneca, Jr.     |       |                                                                  |       |              |
|                           |       |                                                                  |       |              |
|                           |       |                                                                  |       |              |
| Michael L. John                |       | Director                                                              |       |              |

 

65

----

 

**SENECA GAMINGCORPORATION**

**INDEX TOCONSOLIDATED FINANCIAL STATEMENTS**

 
| **Audited Consolidated Financial Statements:**                                                                        | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|------------|
| ** **                                                                                                            | ** ** | ** ** |
| Report of Independent Registered Public Accounting  Firm                                                              |       | F-1        |
|                                                                                                                  |       |       |
| Consolidated  Balance Sheets, as of September 30, 2006 and 2005                                                  |       | F-2        |
|                                                                                                                  |       |       |
| Consolidated Statements of Income and Changes in  Capital, for the years ended September 30, 2006, 2005 and 2004 |       | F-3        |
|                                                                                                                  |       |       |
| Consolidated Statements of Cash Flows, for the years  ended September 30, 2006, 2005 and 2004                    |       | F-4        |
|                                                                                                                  |       |       |
| Notes to Consolidated Financial Statements                                                                            |       | F-5        |

 

66

----

 

**SENECA GAMINGCORPORATION**

**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

The Board of DirectorsSeneca Gaming Corporation

We have auditedthe accompanying consolidated balance sheets of Seneca Gaming Corporation as ofSeptember 30, 2006 and 2005, and the related consolidated statements ofincome and changes in capital, and cash flows for each of the three years inthe period ended September 30, 2006. These consolidated financialstatements are the responsibility of the Company’s management. Our responsibilityis to express an opinion on these consolidated financial statements based onour audits.

We conducted ouraudits in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. We were not engaged to perform anaudit of the Company’s internal control over financial reporting. Our auditincluded consideration of internal control over financial reporting as a basisfor designing audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express nosuch opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management,and evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.

In our opinion,the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Seneca GamingCorporation at September 30, 2006 and 2005, and the consolidated resultsof its operations and its cash flows for each of the three years in the periodended September 30, 2006, in conformity with U.S. generally acceptedaccounting principles.
|  |   | /s/ Ernst & Young LLP |
|--|--------|--------------------------------|

 

Buffalo, New YorkDecember 1, 2006, except for Note 14as to which the date is December 11, 2006

 

F-1

----

 

**SENECA GAMINGCORPORATION**

**CONSOLIDATEDBALANCE SHEETS**

 
| ** **                                     | ** ** | **September 30,** | ** ** |
|------------------------------------------------|------------|------------------------|------------|
| ** **                                     | ** ** | **2006**               | ** ** | **2005** | ** ** |
| **Assets**                                     | ** ** | ** **             | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | ** **             | ** ** | ** ** | ** ** |
| Current assets:                                |       |                   |       |   |   |
| Cash and cash  equivalents                     |       | $                      | 78,195     |   | $ | 142,467 |   |
| Short-term  investments                        |       | 62,300                 |       | 96,091 |   |
| Receivables from  affiliates                   |       | 410                    |       | 875 |   |
| Other  receivables, net                        |       | 2,139                  |       | 1,979 |   |
| Inventories                                    |       | 2,734                  |       | 2,095 |   |
| Other current  assets                          |       | 6,268                  |       | 6,437 |   |
|                                           |       |                   |       |   |   |
| Total current  assets                          |       | 152,046                |       | 249,944 |   |
|                                           |       |                   |       |   |   |
| Property and equipment,  net                   |       | 615,207                |       | 430,418 |   |
| Restricted cash                                |       | 25,800                 |       | — |   |
| Other long-term assets                         |       | 47,323                 |       | 18,486 |   |
| Total assets                                   |       | $                      | 840,376    |   | $ | 698,848 |   |
| **Liabilities  and Shareholders’ Equity** | ** ** | ** **             | ** ** | ** ** | ** ** |
|  Current liabilities:                     |       |                   |       |   |   |
| Trade payable                                  |       | $                      | 4,939      |   | $ | 3,898 |   |
| Construction  payables — SCMC             |       | 52,489                 |       | 10,894 |   |
| Other  construction payables                   |       | —                 |       | 23,341 |   |
| Distributions  payable to Nation               |       | 24,000                 |       | — |   |
| Exclusivity fees  payable                      |       | 7,263                  |       | 5,717 |   |
| Accrued interest                               |       | 15,104                 |       | 14,218 |   |
| Customer point  liability                      |       | 11,632                 |       | 10,682 |   |
| Accrued  regulatory costs                      |       | 14,700                 |       | 9,347 |   |
| Other current  liabilities                     |       | 26,271                 |       | 17,974 |   |
| Total current  liabilities                     |       | 156,398                |       | 96,071 |   |
| Long-term debt                                 |       | 494,347                |       | 493,352 |   |
| Total  liabilities                             |       | 650,745                |       | 589,423 |   |
|  Capital:                                 |       |                   |       |   |   |
| Retained  earnings                             |       | 189,631                |       | 109,425 |   |
| Total liabilities and capital                  |       | $                      | 840,376    |   | $ | 698,848 |   |

 

*See accompanying notes*

F-2

----

**SENECA GAMINGCORPORATION**

**CONSOLIDATEDSTATEMENTS OF INCOME AND CHANGES IN CAPITAL**

 
| ** **                                                                   | ** ** | **Year Ended September 30,** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                   | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Revenues:**                                                                |       |                                        |       |   |   |   |   |
| Gaming                                                                       |       | $                                           | 519,620    |   | $ | 440,156 |   | $ | 337,536 |   |
| Food and beverage                                                            |       | 50,141                                      |       | 41,689 |   | 31,358 |   |
| Lodging                                                                      |       | 10,654                                      |       | — |   | — |   |
| Retail, entertainment and other                                              |       | 19,940                                      |       | 16,955 |   | 11,797 |   |
| Less: promotional allowances                                                 |       | (77,861                                     | )          | (49,647 | ) | (24,295 | ) |
| Net revenues                                                                 |       | 522,494                                     |       | 449,153 |   | 356,396 |   |
|                                                                         |       |                                        |       |   |   |   |   |
| **Expenses:**                                                                |       |                                        |       |   |   |   |   |
| Gaming                                                                       |       | 129,396                                     |       | 114,746 |   | 92,531 |   |
| Food and beverage                                                            |       | 43,485                                      |       | 34,877 |   | 26,387 |   |
| Lodging                                                                      |       | 6,131                                       |       | — |   | — |   |
| Retail, entertainment and other                                              |       | 11,668                                      |       | 10,418 |   | 7,184 |   |
| Advertising, general and administrative                                      |       | 131,997                                     |       | 117,188 |   | 91,552 |   |
| Pre-opening costs                                                            |       | 9,478                                       |       | 1,509 |   | 4,228 |   |
| Depreciation and amortization                                                |       | 38,992                                      |       | 26,295 |   | 17,638 |   |
| Total operating expenses                                                     |       | 371,147                                     |       | 305,033 |   | 239,520 |   |
| Operating income                                                             |       | 151,347                                     |       | 144,120 |   | 116,876 |   |
| Other  non-operating expenses                                                |       | (558                                        | )          | (13,301 | ) | — |   |
| Interest income                                                              |       | 5,814                                       |       | 5,116 |   | 1,535 |   |
| Interest expense                                                             |       | (33,198                                     | )          | (90,366 | ) | (33,702 | ) |
| Net income                                                                   |       | $                                           | 123,405    |   | $ | 45,569 |   | $ | 84,709 |   |
| Beginning capital balance                                                    |       | 109,425                                     |       | 86,687 |   | 46,996 |   |
| Cash distributions declared to the Nation                                    |       | (35,846                                     | )          | (20,438 | ) | (28,665 | ) |
| Distribution of real property, equipment and  leasehold rights to the Nation |       | (7,353                                      | )          | (2,393 | ) | (16,353 | ) |
| Ending capital  balance                                                      |       | $                                           | 189,631    |   | $ | 109,425 |   | $ | 86,687 |   |

 

*See accompanying notes.*

F-3

----

**SENECA GAMINGCORPORATION**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

 
| ** **                                                                          | ** ** | **Year Ended September 30,** | ** ** |
|-------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                          | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Cash flows  relating to operating activities                                        |       |                                        |       |   |   |   |   |
| Net income                                                                          |       | $                                           | 123,405    |   | $ | 45,569 |   | $ | 84,709 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities - |       |                                        |       |   |   |   |   |
| Depreciation and amortization                                                       |       | 38,992                                      |       | 26,295 |   | 17,638 |   |
| Amortization of deferred financing costs and debt  discount                         |       | 3,196                                       |       | 2,445 |   | 1,735 |   |
| Provision for bad debts                                                             |       | 349                                         |       | 171 |   | 96 |   |
| Write-off of acquisition costs and deferred  financing costs                        |       | 135                                         |       | 2,468 |   | — |   |
| Fair market value adjustment of interest rate cap                                   |       | —                                      |       | 177 |   | 1,328 |   |
| Other                                                                               |       | 40                                          |       | 1,315 |   | (264 | ) |
| Change in operating assets and liabilities:                                         |       |                                        |       |   |   |   |   |
| Current assets                                                                      |       | (514                                        | )          | (4,947 | ) | (1,713 | ) |
| Long-term assets                                                                    |       | —                                      |       | (149 | ) | (1,287 | ) |
| Current liabilities                                                                 |       | 16,235                                      |       | (25,692 | ) | 41,561 |   |
| Net cash provided by operating activities                                           |       | 181,838                                     |       | 47,652 |   | 143,803 |   |
|                                                                                |       |                                        |       |   |   |   |   |
| Cash flows  relating to investing activities:                                       |       |                                        |       |   |   |   |   |
| Purchases of property and equipment                                                 |       | (203,729                                    | )          | (171,011 | ) | (168,704 | ) |
| Land acquisition costs                                                              |       | (38,012                                     | )          | (1,673 | ) | (12,036 | ) |
| Payment to collateralize letter of credit                                           |       | (25,800                                     | )          | — |   | — |   |
| Refund of deposits                                                                  |       | 168                                         |       | 700 |   | — |   |
| Sales (purchases) of investments, net                                               |       | 33,791                                      |       | (20,163 | ) | (57,963 | ) |
| Net cash used in investing activities                                               |       | (233,582                                    | )          | (192,147 | ) | (238,703 | ) |
| Cash flows relating to financing activities:                                        |       |                                        |       |   |   |   |   |
| Proceeds from long-term debt                                                        |       | —                                      |       | 193,000 |   | 341,966 |   |
| Repayment of long-term debt                                                         |       | —                                      |       | (80,325 | ) | (46,916 | ) |
| Payments to sinking fund, net                                                       |       | —                                      |       | (11,917 | ) | (6,048 | ) |
| Purchase of interest rate caps                                                      |       | —                                      |       | — |   | (2,188 | ) |
| Proceeds from sale of interest rate caps                                            |       | —                                      |       | 683 |   | — |   |
| Payment of deferred financing costs                                                 |       | (682                                        | )          | (4,982 | ) | (11,937 | ) |
| Distributions paid to the Nation                                                    |       | (11,846                                     | )          | (21,092 | ) | (28,010 | ) |
|                                                                                |       |                                        |       |   |   |   |   |
| Net cash (used in) provided by financing activities                                 |       | (12,528                                     | )          | 75,367 |   | 246,867 |   |
|                                                                                |       |                                        |       |   |   |   |   |
| Net (decrease)  increase in cash                                                    |       | (64,272                                     | )          | (69,128 | ) | 151,967 |   |
|                                                                                |       |                                        |       |   |   |   |   |
| Cash balances:                                                                      |       |                                        |       |   |   |   |   |
| Beginning of period                                                                 |       | 142,467                                     |       | 211,595 |   | 59,628 |   |
|                                                                                |       |                                        |       |   |   |   |   |
| End of period                                                                       |       | $                                           | 78,195     |   | $ | 142,467 |   | $ | 211,595 |   |
| **Supplemental  disclosures of cash flow information**                              |       |                                        |       |   |   |   |   |
| Cash paid for  interest, net of amounts capitalized                                 |       | $                                           | 35,364     |   | $ | 81,748 |   | $ | 21,213 |   |
| Noncash  investing activities:                                                      |       |                                        |       |   |   |   |   |
| Distribution of property and leasehold rights to the  Nation                        |       | $                                           | 7,353      |   | $ | 2,393 |   | $ | 16,353 |   |
| Noncash  financing activities:                                                      |       |                                        |       |   |   |   |   |
| Cash distributions to the Nation declared but not  paid                             |       | $                                           | 24,000     |   | $ | — |   | $ | — |   |
| Discount  received upon extinguishment of long-term debt                            |       | —                                      |       | 882 |   | — |   |

*See accompanyingnotes.*

F-4

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**SENECAGAMING CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**1. Organization and Basis ofPresentation**

The consolidated financial statements include theaccounts of Seneca Gaming Corporation (SGC) and its wholly owned subsidiaries(collectively, the Company).  Inconsolidation, all intercompany balances and transactions have been eliminated.

SGC, which was formed on August 1, 2002, iswholly owned by the Seneca Nation of Indians, or the Nation. The Nation is afederally recognized Indian tribe with total territorial land comprisingapproximately 54,000 acres in the Western New York region. SGC was organized bythe Nation to operate and manage its Class III Gaming activities pursuantto the Indian Gaming Regulatory Act of 1988, or IGRA. Under IGRA, federallyrecognized Indian tribes are permitted to conduct full-scale casino gamingoperations on tribal land, subject to, among other things, the negotiation of acompact with the affected state. Pursuant to IGRA, the Nation entered into theNation-State Gaming Compact with the State of New York dated April 12,2002, or the Compact, which has been approved by the Federal Bureau of IndianAffairs, Department of the Interior. The Compact provides the Nation theexclusive right to conduct Class III gaming activities at three sites inthe western region of the State of New York.

TheNation’s Constitution established the Nation’s Council, or the Council, to actas the Nation’s legislative authority. The Council acts on the Nation’s behalfwith respect to SGC, and the Council established the Seneca Gaming Authority,or SGA, to regulate the gaming activities of SGC under the Compact.

TheCouncil, at the request of the SGC Board of Directors, chartered threesubsidiary corporations of SGC to operate the three sites authorized by theCompact. In addition, the SGC Board of Directors hired the executive managementof SGC, including the President and Chief Executive Officer, to oversee,develop, and manage the three sites. The subsidiary corporations are asfollows:

SenecaNiagara Falls Gaming Corporation, or SNFGC

SenecaTerritory Gaming Corporation, or STGC

SenecaErie Gaming Corporation, or SEGC

SNFGCwas formed on August 1, 2002 to operate the Nation’s gaming activities inNiagara Falls, New York. Operations at SNFGC’s casino, or Seneca NiagaraCasino, commenced December 31, 2002. In connection with the approval of the Compact on October 25, 2002,the State of New York transferred to the Nation certain property upon which theformer Niagara Falls, New York, Convention Center (the Facility) waslocated.  As provided for in the Compact,the Nation leased the property to SNFGC pursuant to a lease agreement datedOctober 25, 2002.  SNFGC then leasedthe property to the Empire State Development Corporation (ESDC) pursuant to asublease agreement dated October 25, 2002. The ESDC then subleased the property back to SNFGC under a sub-subleaseagreement also dated as of October 25, 2002.  The SNFGC casino is located on this leasedproperty site and operates in the renovated facility.  The sub-sublease agreement with ESDC requiredSNFGC to pay Supplemental Rent of approximately $24 million in the event SNFGCconducted Class III gaming in a structure within the City of Niagara Fallsoutside of the Facility.  TheSupplemental Rent represents the remaining general obligation bonds outstandingissued by ESDC in connection with financing of the Facility in the 1970s.  The sublease and sub-sublease were enteredinto in order to provide ESDC a continuing contractual interest in the Facility.

Basedon the Company’s expansion plans, which includes expanded Class IIIgaming, the liability for payment of the Supplemental Rent becameprobable.  As a result, the Companynegotiated a discounted payment of $22.0 million, which was paid to ESDC inAugust 2004.  This payment fulfilledthe Nation’s and SNFGC’s obligation under the Compact with respect to suchSupplemental Rent and results in the termination of both the sublease andsub-sublease.  The Company has recordedthe $22.0 million payment as leasehold improvements, since it represents anadditional cost of the facility leased from the Nation.  This amount is being amortized over theremaining term of the Compact, through 2023.

STGCwas formed on September 20, 2003 to operate the Nation’s gaming activitiesin Salamanca, New York on its territorial land. From its formation until theMay 1, 2004 opening of the STGC’s casino in Salamanca, or the SenecaAllegany Casino, STGC dedicated its efforts to the construction and equippingof the Seneca Allegany Casino, hiring and training staff, and obtainingregulatory approvals.

F-5

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SEGC was formed onAugust 9, 2003 to operate the Nation’s gaming activities in Erie County,New York.  On October 3, 2005, theNation acquired approximately nine acres of land in the inner-harbor districtof downtown Buffalo.  SEGC commencedconstruction of SEGC’s Seneca Buffalo Creek Casino on those nine acres onDecember 8, 2005.  The exclusiveright, under the Compact, to establish and operate a third Class IIIgaming facility in Erie County may terminate if the Nation or SEGC fails tocommence Class III gaming operations by December 9, 2007.

SGC’s fiscal year-end isSeptember 30. References to 2006, 2005, and 2004 represent the years endedSeptember 30, 2006, September 30, 2005, and September 30, 2004,respectively.  As described inNote 11, the Nation incurs certain costs for regulatory and other expensesthat are passed through to the Company on a dollar-for-dollar basis.

**2. Summary of SignificantAccounting Policies**

**Cash and Cash Equivalents**

Cash and cash equivalentsinclude investments with initial maturities of three months or less. Cash andcash equivalents are carried at cost, which approximates market value.

**Short-Term Investments**

Investments with anoriginal maturity of greater than three months to one year, and collateralizedmarket auction preferred stock, are stated at fair value.

Short-term investments atSeptember 30, 2006 consist of market auction preferred stock instrumentswith a carrying value of $62,300,000. The carrying value approximates fair value at September 30, 2006.

Marketauction preferred stock has a dividend rate determined periodically (typicallyless than 90 days) based on an auction mechanism. Notwithstanding the liquiditywhich may be provided by the auction process, market auction preferred stockgenerally does not have a scheduled maturity. Short-term investments are classified as available for sale as definedin SFAS No. 115.  Realized gainsand/or losses from the sales of short-term investments were not material forall years presented.  Also, for all yearspresented there were no unrealized gains or losses recorded in accumulatedother comprehensive income, nor were any amounts reclassified to accumulated othercomprehensive income.

**Receivables**

Receivables consistprimarily of gaming receivables and non-gaming receivables. Gaming receivablesrepresent credit extended to approved casino customers. The Company maintainsan allowance for doubtful accounts which is based on management’s estimate ofthe amount expected to be uncollectible considering experience and theinformation management obtains regarding the creditworthiness of the customer.The collectibility of these receivables could be affected by future business oreconomic trends.

**Inventories**

Inventories consistprincipally of food and beverage, retail, and operating supplies. Inventoriesare stated at the lower of cost or market. Cost is determined using thefirst-in first-out method for retail and warehouse inventories and using theaverage cost method for food and beverage inventories.

**Property and Equipment**

Property and equipmentare stated at cost. Depreciation is provided over the estimated useful lives ofthe assets using the straight-line basis. Amortization of leaseholdimprovements is over the lesser of the term of the lease or the estimateduseful life. Useful life estimates of asset categories are as follows:
| Buildings                             |   | 40  years         |   |
|---------------------------------------|--------|-------------------|--------|
| Leasehold  improvements — casino |   | 10–21  years |   |
| Leasehold  improvements — other  |   | 4–5  years   |   |
| Furniture and equipment               |   | 3–7 years    |   |

 

F-6

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The cost of significantimprovements is capitalized. Costs of normal repairs and maintenance arecharged to expense as incurred. Gains or losses on disposition of property andequipment are included in the determination of income. Interest incurred forconstruction related projects are capitalized and amortized over the life ofthe related asset using the straight-line method. The interest rate used was71⁄4% in all years presented. The amount of interest capitalized for 2006, 2005and 2004 was approximately $6,250,000, $5,054,000 and $654,000, respectively.

In accordance with theFinancial Accounting Standard Board’s Statement of Financial AccountingStandards No. 144, *Accounting for theImpairment or Disposal of Long-Lived Assets* (SFAS 144), the carryingvalue of the Company’s assets are reviewed when events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. If it is determined that an impairment loss has occurred based oncurrent and future levels of income and expected future cash flows as well asother factors, then an impairment loss is recognized as a deduction indetermining operating income. SGC management concludes that no such impairmentexists at September 30, 2006.

**Deferred Financing Costs**

Deferred financing costs include costs incurred in connection withissuance of long-term debt. These costs are amortized over the term of therelated financing agreement. Amortization expense for 2006, 2005, and 2004, was$2,201,000, $2,445,000 and $1,735,000, respectively.

**Customer Point Liability**

Customer point liability represents the estimated future cost ofunredeemed Seneca Link Player’s Club points. Management reviews the adequacy of this accrual by periodicallyevaluating the redemption experience and projected trends.  Actual results could differ from thoseestimates.

**Other Current Liabilities**

Accruals for estimates of vested employee benefits, marketing, andcertain other costs are classified in other current liabilities on theaccompanying consolidated balance sheets. Actual results could differ from those estimates.

**Advertising**

The Company expenses advertising costs as incurred. Total advertisingexpenses for 2006, 2005 and 2004 were $7,579,000, $6,123,000 and $5,665,000,respectively.

**Pre-opening Costs**

In accordance with the American Institute of Certified PublicAccountants’ Statement of Position 98-5, *Reporting on the Costs ofStart-up Activities*, pre-opening costs are expensed as incurred.Pre-opening costs in 2006, 2005 and 2004 consist of development costs inobtaining Class III gaming approval as well as employee costs, legal,marketing and advertising expenses, and other direct expenses related to theopening of SNFGC and STGC, and the development of SEGC. For the years endedSeptember 30, 2006, 2005 and 2004, such costs totaled $9,478,000,$1,509,000 and 4,228,000, respectively.

**Casino Revenues**

SGC recognizes casino revenue as gaming wins less gaming losses.Revenues from food and beverage, retail, entertainment, and other services arerecognized at the time the service is performed.

**Promotional Allowances**

SGC operates a complimentary program in which food and beverage,retail, entertainment, and other services are provided to guests based onpoints that are earned through the Company’s Seneca Link Player’s Card. Theretail value of these complimentary items is included in gross revenues andthen deducted as promotional allowances to arrive at net revenues.

F-7

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The retail value of providing such promotional allowances was includedin revenues as follows:
| ** **                        | ** ** | **Years Ended September 30,** | ** ** |
|-----------------------------------|------------|----------------------------------------------|------------|
| ** **                        | ** ** | **2006**                                     | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                        | ** ** | **(In Thousands)**                      | ** ** |
|                              |       |                                         |       |   |   |   |   |
| Food and  beverage                |       | $29,271                                      |       | $23,769 |   | $15,636 |   |
| Lodging                           |       | 6,712                                        |       | — |   | — |   |
| Retail,  entertainment, and other |       | 12,262                                       |       | 10,631 |   | 7,182 |   |
| Promotional slot  credits         |       | 29,616                                       |       | 15,247 |   | 1,477 |   |
| Promotional allowances            |       | $77,861                                      |       | $49,647 |   | $24,295 |   |

 

The estimated cost of providing such promotional allowances was asfollows:
| ** **                        | ** ** | **Years Ended September 30,** | ** ** |
|-----------------------------------|------------|----------------------------------------------|------------|
| ** **                        | ** ** | **2006**                                     | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                        | ** ** | **(In Thousands)**                      | ** ** |
|                              |       |                                         |       |   |   |   |   |
| Food and  beverage                |       | $25,416                                      |       | $19,885 |   | $13,299 |   |
| Lodging                           |       | 3,620                                        |       | — |   | — |   |
| Retail,  entertainment, and other |       | 8,929                                        |       | 8,082 |   | 5,205 |   |
| Promotional allowances            |       | $37,965                                      |       | $27,967 |   | $18,504 |   |

 

**Gaming Expenses**

Gaming expenses include the slot exclusivity fee which the Company isrequired to pay to the State of New York based on its Compact (see Note 12),the cost of casino operations, and earned Seneca Link Player’s Card points. TheCompany accrues for Seneca Link Player’s Card points expected to be redeemed inthe future based on the cost of items expected to be redeemed.

**Retirement Savings Plan**

The Company sponsors a defined contribution retirement savings plan forits employees.  The Company’s expenserelating to this plan was $434,000, $306,000 and $136,000 in the fiscal yearsended September 30, 2006, 2005 and 2004, respectively.

**Income Taxes**

The Nation is a sovereign Indian nation with independent legaljurisdiction over its people and its lands. As an enterprise owned by theNation, SGC is not subject to federal or state income taxes.

**Fair Value of Financial Instruments**

The carrying amount of cash and cash equivalents, short-terminvestments, receivables, accounts payable, and accrued expenses, and thesenior notes approximate fair value.

**Recent AccountingPronouncements**

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”).  This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.  SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007.  The Company does not believe that the adoption of SFAS 157 will have a material effect on its results of operations or consolidated financial position.

**Management’s Use of Estimates**

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the amounts reportedin the financial statements and accompanying notes. The most significantestimates included in the accompanying financial statements relate to theliability associated with unredeemed Seneca Link Player’s Card points, vestedemployee benefits, and regulatory costs. Actual amounts could differ from theseestimates.

F-8

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**Reclassification**

Certain amounts from the prior year have been reclassified to conformto the current year presentation.

**3. Cash and Cash Equivalents**

For reporting purposes, cash and cash equivalents include all operatingcash and in-house funds.

**4. Concentration of Credit Risk**

Financial instruments that potentially subject SGC to concentrations ofcredit risk consist principally of cash and cash equivalent accounts infinancial institutions. SGC maintains its cash balances in several financialinstitutions. Accounts are insured by the Federal Deposit Insurance Corporationup to $100,000. Cash and cash equivalents exceeding federally insured limitstotaled approximately $49.0 million and $117.0 million at September 30,2006 and 2005, respectively.

**5. Other Receivables, Net**

Components of other receivables, net are as follows:
|                                  | ** ** | **September 30,**  | ** ** |
|----------------------------------|------------|-------------------------|------------|
| ** **                       | ** ** | **2006**                | ** ** | **2005** | ** ** |
| ** **                       | ** ** | **(In Thousands)** | ** ** |
|                             |       |                    |       |   |   |
| Gaming                           |       | $1,311                  |       | $1,127 |   |
| Non-gaming                       |       | 1,291                   |       | 1,126 |   |
|                             |       | 2,602                   |       | 2,253 |   |
| Allowance for  doubtful accounts |       | (463                    | )          | (274 | ) |
| Receivables, net                 |       | $2,139                  |       | $1,979 |   |

 

**6. Other Current Assets**

Components of other current assets are as follows:
|                      | ** ** | **September 30,**  | ** ** |
|----------------------|------------|-------------------------|------------|
| ** **           | ** ** | **2006**                | ** ** | **2005** | ** ** |
| ** **           | ** ** | **(In Thousands)** | ** ** |
|                 |       |                    |       |   |   |
| Prepaid expenses     |       | $5,939                  |       | $6,192 |   |
| Other                |       | 329                     |       | 245 |   |
| Other current assets |       | $6,268                  |       | $6,437 |   |

 

**7. Property and Equipment, Net**

Components of property and equipment are as follows:
|                                                 | ** ** | **September 30,**  | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|
| ** **                                      | ** ** | **2006**                | ** ** | **2005** | ** ** |
| ** **                                      | ** ** | **(In Thousands)** | ** ** |
|                                            |       |                    |       |   |   |
| Buildings                                       |       | $ 344,530          |       | $ 105,004 |   |
| Leasehold  improvements — casino           |       | 106,085                 |       | 105,412 |   |
| Leasehold  improvements — other            |       | 345                     |       | 345 |   |
| Furniture and  equipment                        |       | 152,152                 |       | 101,944 |   |
| Construction-in-progress                        |       | 103,485                 |       | 170,275 |   |
|                                            |       | 706,597                 |       | 482,980 |   |
| Less accumulated  depreciation and amortization |       | (91,390                 | )          | (52,562 | ) |
| Property and equipment,  net                    |       | $ 615,207          |       | $ 430,418 |   |

 

F-9

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**8. Other Long-Term Assets**

Components of other long-term assets are as follows:
|                                   | ** ** | **September 30,**  | ** ** |
|-----------------------------------|------------|-------------------------|------------|
| ** **                        | ** ** | **2006**                | ** ** | **2005** | ** ** |
| ** **                        | ** ** | **(In Thousands)** | ** ** |
|                              |       |                    |       |   |   |
| Deferred  financing costs, net    |       | $12,463                 |       | $13,981 |   |
| Land to be  distributed to Nation |       | 31,982                  |       | 3,901 |   |
| Deposits and  other               |       | 2,878                   |       | 604 |   |
|                              |       | $47,323                 |       | $18,486 |   |

 

In 2006 and 2005, the Company incurred costs toward the acquisition ofland totaling $38.0 million and $1.7 million, respectively, which are includedin other long-term assets (net of amounts transferred to the Nation) within theaccompanying consolidated balance sheets.  At September 30, 2006, deposits and other includes $2.4 million in costsassociated with the purchase of land to be used to develop a golf course.  Such amounts are intended to be sold toanother wholly owned subsidiary of the Nation.

During 2005, the Company made deposits to a sinking fund required bythe Freemantle Term Loan, in the amount of $17.5 million.  Upon termination of the Term Loan inMay 2005, the $23.5 million of deposited funds plus accumulated earningswere transferred, $18.0 million to short-term investments and $5.5 million tocash and cash equivalents.

**9. Restricted Cash**

**Therestricted cash balance within the accompanying consolidated balance sheetsrepresents cash in an interest-bearing bank account which is restricted for useas collateral for a $25.8 million available letter of credit with a bank, whichwill be drawn upon to fund the intended purchase of certain parcels of landcontemplated in the Compact with New York State, earmarked for ownership by theNation.**

**10. Other Current Liabilities**

Components of other current liabilities are as follows:
|                                        | ** ** | **September 30,**  | ** ** |
|----------------------------------------|------------|-------------------------|------------|
| ** **                             | ** ** | **2006**                | ** ** | **2005** | ** ** |
| ** **                             | ** ** | **(In Thousands)** | ** ** |
|                                   |       |                    |       |   |   |
| Accrued  salaries, wages, and benefits |       | $11,925                 |       | $  7,522 |   |
| Gaming  liabilities                    |       | 3,713                   |       | 2,010 |   |
| Other accrued  expenses                |       | 10,633                  |       | 8,442 |   |
| Other current  liabilities             |       | $26,271                 |       | $17,974 |   |

 

**11. Long-Term Debt**

Long-term debt, as described below, consists of the following:
|                                            | ** ** | **September 30,**  | ** ** |
|--------------------------------------------|------------|-------------------------|------------|
| ** **                                 | ** ** | **2006**                | ** ** | **2005** | ** ** |
| ** **                                 | ** ** | **(In Thousands)** | ** ** |
|                                       |       |                    |       |   |   |
| 2004 71⁄4% Senior  Notes due 2012       |       | $ 300,000          |       | $ 300,000 |   |
| 2005 71⁄4% Senior  Notes due 2012       |       | 194,347                 |       | 193,352 |   |
|                                       |       | 494,347                 |       | 493,352 |   |
| Less current  maturities of long-term debt |       | —                  |       | — |   |
| Long-term debt                             |       | $ 494,347          |       | $ 493,352 |   |

 

**71⁄4% Senior Notes due 2012**

On May 5, 2004, SGC issued $300.0 million in71⁄4% senior notes due 2012, or the 2004 senior notes. The 2004 senior notes areguaranteed by STGC, SEGC and, as of May 23, 2005, SNFGC or collectively,the Guarantors.  All of the guarantorsare wholly owned by SGC and their guarantees are full, unconditional, joint andseveral.  The net proceeds from the 2004senior 

F-10

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notes were, or will be, used principally to fund inwhole or in part (a) the repayment in May 2004 of vendor equipmentfinancing (discussed below), (b) SNFGC’s construction and equipping of a604-room hotel, (c) the acquisition of the remaining 26 acres in NiagaraFalls, as provided for in the Compact, (d) the payment of $22.0 million inAugust 2004 to satisfy the obligation to the Empire State DevelopmentCorporation in connection with the transfer of certain property to the Nationfor use as the Seneca Niagara Casino, and (e) a $25.0 million distributionto the Nation.  All assets of SGC comefrom the proceeds of the offerings of senior notes, along with any intercompanyadvances or loans to SGC’s subsidiaries. SGC has no independent operating assets or operating activities.

On May 23, 2005, SGC issued an additional $200.0million in 71⁄4% senior notes due 2012, Series B, or the 2005 senior notes.The 2005 senior notes are treated as a single class with the 2004 senior notesand are identical to the 2004 senior notes, except for certain tax attributesand prior to November 1, 2005 the amount of interest accrued thereon.  Gross proceeds on the 2005 senior notes wereapproximately $193.0 million.  Suchproceeds were, or will be, used to (a) pay in full and terminate onMay 23, 2005, the senior secured term loan, or the Term Loan, made byFreemantle Limited, or Freemantle, to SNFGC in November 2002, for anegotiated amount of approximately $126.7 million, representing $80.0 millionin outstanding principal and approximately $46.7 million for interest on suchprincipal, at a prescribed interest rate, that would have otherwise beenpayable if the Term Loan had not been paid on May 23, 2005, but wasinstead paid 81⁄2 months prior to its November 22, 2007 stated maturity,(b) to fund certain costs associated with the expansion of our operations,(c) to pay the fees and expenses associated with the offering of the 2005senior notes, and (d) for general corporate purposes.  Interest on the 2004 and 2005 senior notes ispayable semi-annually on November 1 and May 1. The 2004 and 2005senior notes are unsecured and rank equally. As of September 30, 2006,aggregate accrued interest on the 2004 and 2005 senior notes was$15.1 million.

The Indenture governingthe 2004 and 2005 senior notes contains certain financial and non-financialcovenants. The financial covenants include limitations on restricted paymentsand the incurrence of indebtedness, while the non-financial covenants includereporting obligations and compliance with laws and regulations. As ofSeptember 30, 2006, SGC was in compliance with all covenants in theIndenture applicable to it.

**Term Loan**

SNFGCentered into a five-year Term Loan with Freemantle Limited (Lender) datedNovember 22, 2002. The Term Loan required that the Lender provide $80.0million in financing for the initial construction of the SNFGC casino facilityand other related costs.  As discussedabove, on May 23, 2005, the Term Loan was paid in full. The negotiatedpayment in full of the Term Loan resulted in a charge to earnings on the earlyextinguishment of the Term Loan of approximately $49.2 million, including thewrite-off of $2.5 million of deferred financing costs.  These amounts are included in interestexpense in the accompanying consolidated statements of income.

Uponrepayment of the Term Loan, SNFGC became a full and unconditional guarantor ofthe 2004 and 2005 notes.

**Equipment Financing**

During 2003, SNFGC entered into five financing arrangements withcertain slot machine vendors providing approximately $37.0 million to financeSNFGC’s gaming equipment, including its slot machines. Interest rates on theseloans ranged from 6.0% to 6.42%. These loans were retired in May 2004using proceeds from the Company’s 2004 Senior Notes. A gain of $415,000 wasrecognized in 2004, net of a $467,000 write-off of deferred financing costsrelated to these loans.

During 2004, STGC entered into four financing arrangements with certainslot machine vendors providing approximately $18.1 million to finance STGC’sslot machine purchases. Interest rates on these loans ranged from 6.0% to 8.0%.These notes were retired in May 2004 from the proceeds of the Company’s2004 Senior Notes.

**Derivative Instruments**

SGC isconsidered an “end user” of derivative instruments and engages in derivativetransactions for risk management purposes only. Effective on May 25, 2004,SGC entered into two interest rate cap agreements for an aggregate notionalamount of $80.0 million, equal to the then outstanding balance of the TermLoan. The instruments were purchased for approximately $1.1 million each,$2.2 million in total. Periodic changes in the fair market value of theinstruments were recorded as adjustments to interest expense. Both instrumentswere sold in the third quarter of 2005 subsequent to the payment in full andtermination of the Term Loan.  Grossproceeds from the sale of these instruments was $0.7 million.

F-11

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Maturities of the Company’s long-term debt (in thousands of dollars)are as follows:
|                                       | ** ** | **Maturities**                                                | ** ** |
|---------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                            | ** ** | ** **                                                    | ** ** |
| Fiscal year ended  September 30: |       |                                                          |       |
| 2007                                  |       | $         — |       |
| 2008                                  |       | —                                                        |       |
| 2009                                  |       | —                                                        |       |
| 2010                                  |       | —                                                        |       |
| 2011                                  |       | —                                                        |       |
| Thereafter                            |       | 500,000                                                       |       |
|                                  |       | $ 500,000                                                |       |

 

**12. Related-Party Transactions**

**Land Leases from the Nation**

The Nation hasentered into an operating lease agreement (each a Head Lease) with each ofSNFGC (dated October 25, 2002) and STGC (effective as of May 1, 2004), for useof the land and/or buildings which are currently used in operating the SenecaNiagara Casino and Hotel and the Seneca Allegany Casino, respectively.  The STGC Head Lease is currently an oralagreement.  STGC is in the process offormalizing a written agreement with the Nation.  These agreements expire at the end of theCompact, in 2016 (provided that the Compact may be renewed throught 2023).  Monthly payments for both SNFGC and STGC wereinitially $1.0 million.  On March 1, 2005and June 1, 2005, respectively, the monthly payments for STGC and SNFGC wereincreased to $1.25 million.  On April 18,2006, the SGC board of directors approved 3% increases to lease payments forboth SNFGC and STGC, to $1.3 million, effective October 1, 2005.  The increased expense has been recordedduring the 2006 fiscal year.  The leasepayments may increase by 3% annually on each October 1 over the remaining leaselife.  Annual increases must beauthorized by the board of directors of SGC and, subject to compliance with theterms of the Indenture governing the senior notes, may exceed 3%.  Under the SNFGC Head Lease, rent is payableonly to the extent that sufficient funds are available, measured on an annualbasis, from the net proceeds derived from the operation of the casinofacilities and other related operations, and if on an annual basis sufficientfunds are not available, any shortfall in the rent amount does notaccumulate.  Due to the related partynature of these leases, which can be effectively modified by the Nation, theCompany records monthly lease expense equal to the required payment amount forthe respective month.  These leasescontain no renewal options or escalation clauses.

Effective April 1,2006, SEGC leases the land upon which the planned Seneca Buffalo Creek Casinois expected to operate from the Nation pursuant to an oral agreement, asauthorized by the SGC board of directors on April 18, 2006.  Beginning April 1, 2006, SEGC made monthlylease payments of $0.5 million to the Nation. Effective October 1, 2006, the board of directors approved an increaseto SEGC’s monthly lease payments to $1.25 million, which payments may beincreased by 3% each October 1 beginning October 1, 2007.  SEGC is in the process of formalizing awritten agreement with the Nation. Expenses resulting from the above lease agreements were as follows forthe fiscal years ended September 30, 2006, 2005 and 2004 (in millions ofdollars):
|            | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|------------|------------|------------|------------|------------|------------|------------|------------|
| ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| SNFGC      |       | $15.5      |       | $13.0      |       | $12.0      |       |
| STGC       |       | 15.5       |       | 13.8       |       | 3.8        |       |
| SEGC       |       | 3.1        |       | —     |       | —     |       |
|       |       | $34.1      |       | $26.8      |       | $15.8      |       |

 

SNFGC and STGC bothrecord the lease costs as a component of advertising, general andadministrative costs in the accompanying consolidated statements ofincome.  SEGC records the lease cost as acomponent of pre-opening costs in the accompanying consolidated statements ofoperations.

**Other Related-Party Transactions**

On July 14, 2005, STGC entered into aconstruction management agreement with Seneca Construction ManagementCorporation, or SCMC, a wholly owned corporation of the Nation, to manage theconstruction of the new 212-room hotel and casino at Seneca AlleganyCasino.  SCMC is responsible for contractprocurement and daily oversight of the construction project. The constructionagreement with SCMC, as amended, provides that the cost of all of the contractwork to be completed under the agreement will not exceed a guaranteed maximumamount of $132.5 million.  If STGCfurther changes the scope of the project or finishing materials, the guaranteedmaximum amount under the contract may be further increased.  Effective September 1,

F-12

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2005, SNFGC entered into a construction managementagreement with SCMC for the completion of the luxury hotel project at SenecaNiagara Casino.  The hotel was partiallyopened on December 15, 2005, and completely opened on March 31, 2006.  Total cost of the project was $234.0million.  Effective as of December 1,2005, SEGC entered into an agreement with SCMC for the demolition and landpreparation work in connection with the site for the Seneca Buffalo CreekCasino.  This work was completed at acost of $2.8 million.  For the fiscalyears ended September 30, 2006 and 2005, SNFGC, STGC and SEGC have collectivelymade payments to SCMC for construction management fees and other costs of $6.2million and $0.6 million, respectively.

As of January 1, 2005, the Company transferredall Class II operations to the Nation, including its pokeroperations.  The Company leases spacewithin both Seneca Niagara Casino & Hotel and Seneca Allegany Casinoto the Nation for operation of the poker rooms. During 2006 and 2005, the Company recorded $806,000 and $875,000 ofrental income, respectively, and at September 30, 2006, the Company hasrecorded $401,000 as a receivable from the Nation relating to poker room rentals.

During 2006 and 2005, the Company declared cash distributions to theNation of $35.8 million and $20.4 million, respectively.  Cash distributions of $11.8 million and $21.1million were paid in 2006 and 2005, respectively.

During 2006 and 2005, the Company distributed real property andleasehold rights acquired, net of liabilities transferred, for use in itscasino operations to the Nation.  Thedistribution amounts of $7.4 million and $2.4 million for 2006 and 2005,respectively, is based on the acquisition costs.

The Company is charged by the Nation for SGA costs, which are incurredby the Nation. SGA costs charged to the Company were approximately $9.8 millionin 2006, $8.7 million in 2005 and $6.2 million in 2004. The Company also incurscosts which are passed through the Nation for New York State gaming regulatoryservices and New York State Police and Cattaraugus County Sheriff Departmentservices. The Company has recorded expenses of approximately $8.8 million in2006, $7.4 million in 2005 and $5.0 million in 2004 in connection with theseservices.  At September 30, 2006 and2005, approximately $14.7 million and $9.3 million, respectively, of the SGA,other regulatory, and police costs are recorded as accrued regulatory costs inthe accompanying consolidated balance sheets.

During 2006, 2005 and 2004, the Company purchased $90,000, $248,000 and$689,000, respectively, of tobacco products from an entity in which the owneris the newly-elected treasurer of the Nation and a former SGA Commissioner.  We have ceased purchasing from this vendoreffective April 2006.

STGC leases office space in a building owned by thebrother of a member of the Company’s board of directors.  During the fiscal years endedSeptember 30, 2006 and 2005, such lease payments totaled approximately$261,000 and $258,000, respectively.

During the fiscal year ended September 30, 2006,SNFGC paid RGBK, Inc. approximately $131,000 for kitchen design services. Aprincipal of this firm is a brother-in-law of Michael Speller, SGC’s Senior VicePresident of Gaming Operations.

During Fiscal 2006, SNFGC paid KMM Gaming, Inc.approximately $67,000 for gaming consulting services. KMM Gaming, Inc. is ownedby the sister-in-law of SGC’s President and CEO.

**13. Commitments and Contingencies**

**Litigation**

On August 24, 2005, SNFGC filed a complaintagainst Klewin and BankNorth, as joint defendants, in the Superior Court forthe Judicial District of New London, Connecticut. The suit was filed to obtainimmediate injunctive relief in conjunction with a pending demand forarbitration by SNFGC related to Klewin ‘s failure to make required payments tothe subcontractors for the construction of Seneca Niagara Casino’s new luxuryhotel. SNFGC filed the complaint in order to enjoin the defendants fromutilizing approximately $14.6 million paid by SNFGC (approximately $11.25million was for the benefit of subcontractors on the Seneca Niagara Casinoproject and the balance related to the Seneca Allegany Casino expansionprojects) into an account with BankNorth in the name of Klewin, which was setup by SNFGC principally for the purpose of paying Klewin’s subcontractors(including the architect) on the construction project. SNFGC was subsequentlyinformed by Klewin that approximately $14.6 million paid by SNFGC into theaccount was “swept” by BankNorth and, as a result, several subcontractors(including the architect) were not paid by Klewin. Among other things, thecomplaint seeks temporary and permanent injunctive relief requiring that thedefendants return to the account the approximate $14.6 million that hasbeen removed from that account and temporary and permanent injunctive reliefenjoining defendants from utilizing the approximate $14.6 million that hasbeen removed from the account, other than for payment of Klewin’ssubcontractors on the construction projects. SNFGC has advanced funds to the architect and SCMC for payment to theremaining subcontractors.

On August 25, 2005, the parties appeared beforethe court and agreed to a stipulated immediate order freezing the remainingbalance of approximately $5.5 million in the account pending a hearing on SNFGC’sapplication for temporary and permanent injunctive relief, subject to limiteddraw rights of not more than $350,000 per week permitted to Klewin for its operatingexpenses pursuant to a budget to be submitted by Klewin weekly.  The Company intends to seek recovery of allamounts already withdrawn from the account, except to the extent disbursed forappropriate purposes. On September 14, 2005, Klewin

F-13

----

filed an Application for Immediate TemporaryInjunction seeking a temporary injunction prohibiting the Company from usingdesign and construction documents and appropriating Klewin employees.  Klewin has also asserted counterclaimsalleging, among other matters, tortuous interference with their business.  A hearing related to these counterclaims andthe temporary injunction was held on November 22, 2005 and onNovember 30, 2005, the Court granted the Company’s motion to dismissKlewin’s counterclaims and Application for Immediate Temporary Injunction.  On November 23, 2005, BankNorth filed ananswer asserting, among other matters, certain counterclaims including arequest for a declaratory judgment to the effect that BankNorth would bepermitted to retain approximately $9.1 million of the $14.6 millionswept from the Klewin account.  OnJanuary 17, 2006, SNFGC filed a motion for attachment against other Klewinassets (other than the bank account at issue), which motion was heard onSeptember 20 and 21, 2006.  On December1, 2006, the court granted SNFGC’s order for an attachment pendente lite to thevalue of $11.2 million, which order applied to all real property, bankaccounts, and other assets owned by Klewin (other than the bank account atissue).  As of December 1, 2006, thetemporary injunction on the bank account at issue remains in place.

On December 23, 2005, SNFGC and STGC filed a complaintin Niagara County Supreme Court seeking to recover monies taken by BankNorththat were originally directed to the Klewin subcontractors and to thearchitect, along with an award of attorneys’ fees, under  Section 77 of the New York Lien Law andunder the theory of common law conversion.  SNFGC and STGC commenced the action as assignees of the claims of thesubcontractors and the architect.  OnFebruary 27, 2006, BankNorth filed a motion to dismiss the action, claimingthat the trust fund provisions of the New York Lien Law do not apply and theConnecticut action was filed first, before the New York action.  An order denying BankNorth’s motion todismiss was filed on May 24, 2006. BankNorth served its answer to SNFGC’s complaint on June 28, 2006, andalso filed a motion to reargue and renew its prior motion to dismiss.  As of December 1, 2006, the court had notrendered its decision on BankNorth’s renewed motion to dismiss.

The arbitration hearing on the Klewin matter isscheduled to begin on May 7, 2007.  Theparties are currently engaged in discovery.

The Company can provide no assurance that it will beable to recover all or any portion of the approximate $14.6 million.  As such, the Company has recorded a $13.3million charge to earnings, representing the unrecovered amounts above, net of$1.3 million of management fees and other amounts which were otherwise dueKlewin.

In January 2006, anaction was filed in the United State District Court, Western District of NewYork by various plaintiffs against the United States Department of Interior,the National Indian Gaming Commission and three individuals in their officialcapacities as Secretary of the Interior, Acting Assistant Secretary of theInterior for Indian Affairs and Chairman of the National Indian GamingCommission.  The action seeks declaratoryand injunctive relief under the Administrative Procedure Act, the DeclaratoryJudgments Act, the National Historic Preservation Act (NHPA), the NationalEnvironmental Policy Act (NEPA) and the Indian Regulatory Gaming Act and isprincipally directed at the decisions and actions of the defendants that permitthe construction and operation of our Seneca Buffalo Creek Casino.  The plaintiffs claim that the defendants havefailed to comply with NEPA, NHPA, and IGRA and have requested that the Courttake numerous actions including declaring that the lands acquired by the Nationpursuant to SNLCSA are not gaming eligible Indian lands within the meaning ofIGRA and declaring that the Nation’s Compact violates IGRA.  If the plaintiffs are successful, the Nationwould be unable to conduct any gaming upon lands acquired pursuant toSNLCSA.  On November 1, 2006 oralargument was heard on the defendant’s motion to dismiss for lack ofjurisdiction, on the Nation’s amicus motion to dismiss based upon failure tojoin the Nation as a necessary party and sovereign immunity, and on theplaintiff’s motion for summary judgment.  As of December 1, 2006, thejudge had not ruled on such motions.

On or about February 1,2006, an action was filed in the New York Supreme Court, County of Erie, byvarious plaintiffs against George E. Pataki, in his official capacity asGovernor of the State of New York; State Gaming Officials of the New York StateWagering Board; City of Buffalo; Common Council of the City of Buffalo; AnthonyMasiello in his previous capacity as Mayor of Buffalo; Byron Brown in hiscapacity as Mayor of Buffalo; City of Buffalo Department of Public Works;Buffalo Sewer Authority; and Niagara Frontier Transportation Authority.  The action seeks directive and injunctiverelief under the State Environmental Quality Review Act (SEQRA); the FirstParks, Recreation, Historic Preservation Law (PRHPL); First City EnvironmentalReview Ordination (CERO); and Freedom of Information Law (FOIL) and isprincipally directed at the decisions and actions of the defendants in connectionwith our Seneca Buffalo Creek Casino. The plaintiffs initially claimed that the defendants had failed tocomply with SEQRA, PRHPL, CERO and FOIL and had requested that the Court takenumerous actions including directing compliance with SEQRA, PRHPL, CERO andFOIL and restraining further action relating to the development of our SenecaBuffalo Creek Casino.  In June 2006, theplaintiffs amended their complaint to drop their claims against GovernorPataki, the State Gaming Officials and the Niagara Frontier TransportationAuthority, and added the Buffalo City Department of Economic Development,Permits and Inspections as a party. The amended complaint also dropped allclaims except for the SEQRA and CERO claims. In October 2006, the plaintiffsmoved for an injunction to prevent the Buffalo Creek Agreement with the City ofBuffalo from being executed and performed, but the motion was denied based uponthe judge’s determination that the plaintiffs failed to show a likelihood ofsuccess on the merits. The plaintiffs have appealed the denial of theinjunction to the New York Supreme Court Appellate Division. A hearing on theappeal is anticipated to occur in late 2007. If the plaintiffs are successful,the Nation may be delayed in the completion of the Seneca Buffalo Creek Casinoat this site or may be unable to complete the Seneca Buffalo Creek at thissite.  Certain of these plaintiffs arealso plaintiffs in the federal lawsuit filed in January 2006 and referenced above.

On November 6, 2006,a suit was brought in the New York Supreme Court, County of Erie, by the Countyof Erie, New York, Joel Giambra (as County Executive), and Andrew Eszak (asCommissioner of the County of Erie Department of Environment and Planning),against the City of Buffalo, Mayor Byron Brown and the Buffalo Common Councilseeking to invalidate the Buffalo Creek Agreement on the basis that the Cityfailed to refer the agreement to the County under Section 239(m) of theNew York State General Municipal Law. The defendants filed a motion to dismisson December 1, 2006. If the plaintiffs are successful, the Nation may bedelayed in the completion of the Seneca Buffalo Creek Casino or may be unableto complete the Seneca Buffalo Creek Casino as planned.

F-14

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On or about April 6,2006, an action was filed in the United State District Court, Western Districtof New York, by Daniel T. Warren, a pro se plaintiff, against the United Statesof America, the United State Department of the Interior, the National IndianGaming Commission, and five individuals in their official capacities as ActingSecretary of the Interior, Acting Assistant Secretary of the Interior forIndian Affairs and Chairman of the National Indian Gaming Commission, as wellas Governor George E. Pataki, as Governor of the State of New York, and CherylRitchko-Buley, as Chairwoman of the New York State Racing and WageringBoard.  The action initially sought  declaratory and injunctive relief as tonumerous matters including declaring that IGRA is unconstitutional, that theCompact violates IGRA, that the New York Constitution is not preempted by IGRA,that New York does not have the authority under state law to enter into atribal state compact under IGRA, that certain actions of the defendants werenot in accordance with law, and that certain lands purchased by the Nation werenot subject to being taken into trust or restricted fee status under the SNLCSAor were not pursuant to settlement of a land claim within the meaning of IGRA;and enjoining the defendants from taking actions which would further casinogambling in the State of New York under IGRA or on any lands acquired by theNation pursuant to SNLCSA. On August 16, 2006, the plaintiff amended hiscomplaint bringing:  a Tenth Amendmentchallenge to IGRA;  a claim that theCompact violates IGRA by providing for gaming which is not otherwise lawful inNew York; a claim that both the Compact and the statute authorizing theGovernor of New York to enter into the Compact violate various provisions ofthe New York State Constitution; and a claim that the United States has failedto promulgate regulations for gaming on off-reservation territory, in violationof its statutory duties.  The effect ofsuch amendment was to limit the claims remaining in the case, by dropping manyof the federal law claims in the original complaint.  On December 1, 2006, the court heard argumenton the plaintiff’s motion to join additional parties in which he seeks to addas defendants (1) Barry E. Snyder, Sr., as President of the Seneca Nation ofIndians; (2) John Pasqualoni, as President and CEO of the Seneca GamingCorporation; (3) the Seneca Nation of Indians; and (4) the Seneca GamingCorporation.  Dispositive motions (todismiss) on behalf of both the plaintiff and the defendants have not yet beenheard by the court.  If the plaintiff issuccessful in this lawsuit, the Nation could be unable to conduct any gamingupon lands acquired pursuant to SNLCSA.

The Company is a defendant in certain other litigation in the normalcourse of business. In the opinion of management, based on the advice ofcounsel, the aggregate liability, if any, arising from such litigation will nothave a material adverse effect on the Company’s financial condition or resultsof operations.

**The Seneca Nation Compact**

As part of its Compact, the Nation agrees to contribute to the State ofNew York a portion of the proceeds from the operation and conduct of eachcategory of Gaming Device for which exclusivity exists, based on the win ofsuch machines (cash dropped into machines, after payouts but before expenses)and totaled on a cumulative quarterly basis to be adjusted annually at the endof the relevant calendar year.  However,beginning in February 2005, the Company began advancing to the Nation on amonthly basis the exclusivity fee due for the prior month.  The exclusivity fee to the State of New Yorkfor years 1–4 (through December 31, 2006), is 18.0%, payable on an annualbasis. Thereafter, the exclusivity fee is 22% for years 5–7 (throughDecember 31, 2009), payable on a semi-annual basis and 25.0% for years 8–14(through December 31, 2016), payable on a quarterly basis.

Amounts payable for exclusivity fees were $7.3 million and $5.7 millionat September 30, 2006 and 2005, respectively, and are recorded asexclusivity fees payable on the accompanying consolidated balance sheets. Theexclusivity fee expense was $79.0 million, $67.3 million and $51.6 million forthe years ended September 30, 2006, 2005 and 2004, respectively.

**Additional Casino Locations and Expansion**

As described in Note 1, the Compact provides the Nation the exclusiveright to conduct Class III gaming activities at three sites in the westernregion of the State of New York.  Theconstruction of our third casino in Erie County, as well as expansion by STGCat Seneca Allegany Casino will require significant capital outlays. The amountand timing of these capital expenditures are dependent on various factorsincluding financing availability, certain Nation and governmental approvals,construction timelines, and the performance of its two operating casinos.

**Capital Projects**

On December 30, 2005, SNFGC officially opened the first 10 of 26 floorsof rooms of its 604-room luxury hotel, which includes 35,000 square feet ofadditional gaming space, three new restaurants, three new retail stores and a25,200 square foot multi-purpose room and an additional 8,000 square feet ofconference and banquet space.  On March31, 2006, the remaining 16 floors, including a penthouse floor featuringluxurious one and two-bedroom suites with butler service, were officiallyopened, along with a full-service spa, salon, fitness center and pool.  The luxury hotel is adjacent and connected tothe Seneca Niagara Casino.  The entirecomplex, including the luxury hotel and the Seneca Niagara Casino, is referredto as the Seneca Niagara Casino and Hotel. The total cost to construct and equip the luxury hotel and amenities was$234.0 million.

F-15

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During 2004, the Company began to construct a parking garage andperform site preparation work for a hotel connected to the existing SenecaAllegany Casino featuring 212 rooms.  Theparking garage opened on July 1, 2005 and cost $32.2 million.  STGC estimates that the total cost toconstruct and equip the resort hotel and gaming expansion with all amenitieswill be between $156.0 million and $167.0 million.  The new gaming floor is expected to be openedby the end of December 2006, and the hotel and its other amenities is scheduledto open in March 2007.  The Company hascapitalized $98.9 million as of September 30, 2006 for the resort hotelproject.

On December 8, 2005, the Company commenced construction of our ErieCounty gaming facility, which is referred to as the Seneca Buffalo Creek Casinoon nine acres of land within the inner-harbor district of downtown Buffalo, NY,constituting the Nation’s Buffalo Creek Territory.  The Company’s board of directors and theNation’s Council on August 8 and August 12, 2006, respectively, authorized theimmediate commencement of construction on a temporary Class III gaming facilityat the Seneca Buffalo Creek Territory site. The temporary gaming facility will be approximately 6,000 square feetwith approximately 125 slot machines and a snack bar.  The Company expects to open the temporarygaming facility in Spring 2007.

The Company is also finalizing the design and construction bid packagesfor a permanent Class III gaming facility on the Seneca Buffalo CreekTerritory.  The cost to construct andequip the Seneca Buffalo Creek Casino permanent facility is currently expectedto be approximately $125.0 million.

**Operating Leases**

In addition to its Head Lease with the Nation (Note 11), the Companyrents land and building space, an employee parking lot, and warehouse space;and administrative space for its STGC casino facility, under various operatingleases. The lease terms vary from yearly to 21 years with renewal options.Total rent expense under all operating leases for 2006, 2005 and 2004 wasapproximately $37.5 million, $32.7 million and $21.0 million,respectively.  The terms of the 2004 and2005 Senior Notes limit the monthly payments under the SNFGC Head Lease andSTGC land lease to $1.25 million with annual increases up to 3.0% beginning noearlier than October 2005. Estimated minimum rents due under the operatingleases (including the Head Lease and STGC land lease) are as follows:
|                                       | ** ** | **(In Thousands)**                                       | ** ** |
|---------------------------------------|------------|---------------------------------------------------------------|------------|
| Fiscal year ended  September 30: |       |                                                          |       |
| 2007                                  |       | $         47,075 |       |
| 2008                                  |       | 48,488                                                        |       |
| 2009                                  |       | 49,853                                                        |       |
| 2010                                  |       | 51,169                                                        |       |
| 2011                                  |       | 52,704                                                        |       |
| Thereafter                            |       | 770,425                                                       |       |
|                                  |       | $    1,019,714                            |       |

 

**14. SubsequentEvent**

On December 11, 2006, the Company’s board of directorsapproved a distribution to the Nation in the amount of $20.0 million, payablein ten equal monthly installments of $2.0 million beginning in December 2006.

F-16

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** **
| Exhibits | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|----------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 1.1      |       | Purchase Agreement, dated April 29, 2004, by  and among SGC, the Guarantors defined therein and Merrill Lynch &  Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of  America Securities LLC and Wells Fargo Securities, LLC, as the Initial  Purchasers (incorporated by reference to Exhibit 1.1 to SGC’s  Registration Statement No. 333-117633 filed with the SEC on  July 23, 2004).                                      |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 1.2      |       | Purchase Agreement, dated May 18, 2005, by and  among SGC, the Guarantors as defined therein and Merrill Lynch &  Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of  America Securities LLC and Wells Fargo Securities, LLC, as the Initial  Purchasers (incorporated by reference to Exhibit 1.1 to SGC’s Quarterly  Report on Form 10-Q filed with the SEC on August 15, 2005).                                            |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.1      |       | Fifth Amended and Restated Charter of SGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                      |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.2      |       | Second Amended and Restated By-Laws of SGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                     |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.3      |       | Third Amended and Restated Charter of SNFGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on Form 10-K  filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                    |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.4      |       | Third Amended and Restated By-Laws of SNFGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                    |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.5      |       | Second Amended and Restated Charter of STGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                    |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.6      |       | Amended and Restated By-Laws of STGC (incorporated  by reference to Exhibit 3.1 to SGC’s Annual Report on Form 10-K  filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                           |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.7      |       | Second Amended and Restated Charter of SEGC  (incorporated by reference to Exhibit 3.1 to SGC’s Annual Report on  Form 10-K filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                    |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.8      |       | Amended and Restated By-Laws of SEGC (incorporated  by reference to Exhibit 3.1 to SGC’s Annual Report on Form 10-K  filed with the SEC on May 9, 2005).                                                                                                                                                                                                                                                                                                           |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.1      |       | Indenture, dated as of May 5, 2004, among SGC,  the Guarantors as defined therein and Wells Fargo Bank, National Association,  as Trustee, relating to our $300,000,000 principal amount of 71⁄4% Senior Notes  due 2012 (including form of note) (incorporated by reference to  Exhibit 4.1 to SGC’s Registration Statement No. 333-117633 filed  with the SEC on July 23, 2004).                                                                         |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.2      |       | Supplemental Indenture, dated as of May 23,  2005, to the Indenture, dated as of May 5, 2004, among SGC, the  Guarantors as defined therein and Wells Fargo Bank, National Association, as  Trustee, relating to our $200,000,000 principal amount of 71⁄4% Senior Notes  due 2012, Series B (including form of note) (incorporated by reference  to Exhibit 4.1 to SGC’s Quarterly Report on Form 10-Q filed with  the SEC on August 15, 2005). |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.3      |       | Registration Rights Agreement, dated as of  May 5, 2004, among SGC, the Guarantors party thereto and Merrill  Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith  Incorporated, Banc of America Securities LLC and Wells Fargo Securities, LLC,  as the Initial Purchasers (incorporated by reference to Exhibit 4.2 to  SGC’s Registration Statement No. 333-117633 filed with the SEC on  July 23, 2004).                                 |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.4      |       | Registration Rights Agreement, dated as of  May 23, 2005, among SGC, the Guarantors party thereto and Merrill  Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith  Incorporated, Banc of America Securities LLC and Wells Fargo Securities, LLC,  as the Initial Purchasers (incorporated by reference to Exhibit 4.2 to  SGC’s Quarterly Report on Form 10-Q filed with the SEC on  August 15, 2005).                                      |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

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| 4.5    |   | Nation Agreement, dated May 5, 2004, between  Seneca Nation of Indians, Merrill Lynch & Co., Merrill Lynch,  Pierce, Fenner & Smith Incorporated, Bank of America Securities LLC  and Wells Fargo Securities, LLC, collectively as the Initial Purchasers, and  Wells Fargo Bank, National Association, as Trustee (incorporated by reference  to Exhibit 4.3 to SGC’s Registration Statement No. 333-117633 filed  with the SEC on July 23, 2004).                                              |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.6    |   | Amendment No. 1, dated May 23, 2005, to  Nation Agreement, dated May 5, 2004, between Seneca Nation of Indians,  Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith  Incorporated, Bank of America Securities LLC and Wells Fargo Securities, LLC,  collectively as the Initial Purchasers, and Wells Fargo Bank, National  Association, as Trustee (incorporated by reference to Exhibit 4.3 to  SGC’s Quarterly Report on Form 10-Q filed with the SEC on  August 15, 2005). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.7    |   | Assignment and Plan of Distribution Agreement,  entered into and effective as of May 5, 2004, by and between Seneca  Nation of Indians and SGC (incorporated by reference to Exhibit 4.2 to  SGC’s Registration Statement No. 333-117633 filed with the SEC on  July 23, 2004).                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.1   |   | Nation-State Gaming Compact between the Seneca  Nation of Indians and New York State, effective December 9, 2002  (incorporated by reference to Exhibit 10.1 to SGC’s Registration  Statement No. 333-117633 filed with the SEC on July 23, 2004).                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.2   |   | Term Loan Agreement, dated as of November 22,  2002, between Freemantle Limited, as Lender, and SNFGC, as Borrower, as  amended by Amendment No. 1 on December 6, 2002 (incorporated by  reference to Exhibit 10.2 to SGC’s Registration Statement  No. 333-117633 filed with the SEC on July 23, 2004).                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.3   |   | Amendment No. 2 to Term Loan Agreement, dated  April 22, 2004, between Freemantle Limited, as Lender, and SNFGC as  Borrower (incorporated by reference to Exhibit 10.14 to SGC’s  Registration Statement No. 333-117633 filed with the SEC on  August 18, 2004).                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.4   |   | Nation Agreement, dated as of November 22,  2002, between Freemantle Limited, as Lender, and the Seneca Nation of Indians  (incorporated by reference to Exhibit 10.3 to SGC’s Registration  Statement No. 333-117633 filed with the SEC on July 23, 2004).                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.5   |   | Amendment No. 1 to Nation Agreement, dated  April 22, 2004, between Freemantle Limited, as Lender, and the Seneca  Nation of Indians (incorporated by reference to Exhibit 10.15 to SGC’s  Registration Statement No. 333-117633 filed with the SEC on  August 18, 2004).                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.6   |   | Term Loan Termination Agreement, dated as of  May 9, 2005, between Freemantle Limited, as Lender, and SNFGC, as  Borrower (incorporated by reference to Exhibit 10.1 to SGC’s Current  Report on Form 8-K filed with the SEC on May 10, 2005).                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.7   |   | Agreement of Lease (“Head Lease Agreement”), dated  as of October 25, 2002, between Seneca Nation of Indians, as Landlord,  and SNFGC, as Tenant, as amended on December 23, 2002 (incorporated by  reference to Exhibit 10.4 to SGC’s Registration Statement  No. 333-117633 filed with the SEC on July 23, 2004).                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.8   |   | Agreement, dated as of October 15, 2003,  between SNFGC, as Owner, and Klewin Building Company, Inc., as  Design/Builder (for Seneca Niagara Casino luxury hotel) (incorporated by  reference to Exhibit 10.6 to SGC’s Registration Statement  No. 333-117633 filed with the SEC on August 18, 2004).                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.9   |   | First Amendment to Design/Build Agreement, dated as  of February 10, 2004, by and between SNFGC, as Owner, and Klewin  Building Company, Inc., as Design/Builder (for Seneca Niagara Casino  Hotel) (incorporated by reference to Exhibit 10.7 to SGC’s Registration  Statement No. 333-117633 filed with the SEC on August 18, 2004).                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.10  |   | Agreement, dated as of September 1, 2004,  between SNFGC, as Owner, and Klewin Building Company, Inc., as  Design/Builder (for Seneca Allegany Casino Parking Garage) (incorporated by  reference to Exhibit 10.10 to SGC’s Annual Report on Form 10-K  filed with the SEC on May 9, 2005).                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.11  |   | Agreement, dated as of September 1, 2004,  between STGC, as Owner, and Klewin Building Company, Inc., as Design/Builder  (for Seneca Allegany Casino hotel and casino) (incorporated by reference to  Exhibit 10.11 to SGC’s Annual Report on Form 10-K filed with the  SEC on May 9, 2005).                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.12  |   | Construction Management Agreement, dated as of  July 14, 2005, between Seneca Construction Management Corporation, as  Construction Manager, and STGC, as Owner (for Seneca Allegany Casino Phase II  Hotel and Casino) (incorporated by reference to Exhibit 10.1 to SGC’s  Current Report on Form 8-K filed with the SEC on July 17, 2005).                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

 

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| 10.13  |   | Letter of Agreement, dated June 29, 2005, for  Mutual Termination of the Agreement dated September 1, 2004 between  SNFGC, as Owner, and Klewin Building Company, Inc., as Design/Builder  (for Seneca Allegany Casino Phase II Hotel and Casino) (incorporated by  reference to Exhibit 10.2 to SGC’s Current Report on Form 8-K filed  with the SEC on July 17, 2005). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.14  | +      | Employment Agreement, dated July 13, 2004,  between SGC and Barry W. Brandon (incorporated by reference to  Exhibit 10.9 to SGC’s Registration Statement No. 333-117633 filed  with the SEC on July 23, 2004).                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.15  | +      | Amended and Restated Employment Agreement, dated  April 13, 2004, between SGC and G. Michael Brown (incorporated by  reference to Exhibit 10.8 to SGC’s Registration Statement  No. 33-117633 filed with the SEC on July 23, 2004).                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.16  | +      | Amended and Restated Employment Agreement, dated  July 13, 2004, between SGC and Annette Mohawk Smith (incorporated by  reference to Exhibit 10.10 to SGC’s Registration Statement  No. 333-117633 filed with the SEC on July 23, 2004).                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.17  | +      | Second Amended and Restated Employment Agreement,  dated April 6, 2005, between SGC and John Pasqualoni (incorporated by  reference to Exhibit 10.16 to SGC’s Annual Report on Form 10-K  filed with the SEC on May 9, 2005).                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.18  | +      | Amended and Restated Employment Agreement, dated  July 13, 2004, between SGC and Joseph D’Amato (incorporated by reference  to Exhibit 10.12 to SGC’s Registration Statement No. 333-117633  filed with the SEC on July 23, 2004).                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.19  | +      | Amended and Restated Employment Agreement, dated  July 13, 2004, between SGC and Michael F. Speller (incorporated by  reference to Exhibit 10.13 to SGC’s Registration Statement  No. 333-117633 filed with the SEC on July 23, 2004).                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.20  | +      | Employment Agreement, dated April 28, 2005,  between SGC and Rajat Shah (incorporated by reference to Exhibit 10.11  to SGC’s Annual Report on Form 10-K filed with the SEC on May 9,  2005).                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.21  | +      | Separation and Consulting Agreement, dated  April 6, 2005, between SGC and C. Michael Brown (incorporated by  reference to Exhibit 10.1 to Current Report on Form 8-K filed with  the SEC on April 6, 2005).                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.22  | +      | Amendment No. 1 to Employment Agreement, dated  as of October 1, 2005, between SGC and Barry W. Brandon (incorporated by  reference to Exhibit 10.20 to SGC’s Registration Statement  No. 333-128443 filed with the SEC on November 30, 2005)                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.23  | +      | Amendment No. 1 to Second Amended and Restated  Employment Agreement, dated as of January 30, 2006, between SGC and John  Pasqualoni (incorporated by reference to Exhibit 10.23 to SGC’s Amendment No.  3 to Registration Statement on Form S-4 filed with the SEC on February 2,  2006).                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.24  | +      | Letter of Resignation and Mutual Release of all  Claims, dated as of April 28, 2006, executed by Annette Smith and SGC  (incorporated by reference to Exhibit 10.1 to SGC’s Current Report on 8-K  filed with the SEC on May 4, 2006).                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.25  | +      | Amendment No. 2 to Employment Agreement, effective  as of September 14, 2006, between SGC and Barry W. Brandon (incorporated by  reference to Exhibit 10.1 to SGC’s Current Report on Form 8-K filed with the  SEC on September 20, 2006).                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.26  | +      | Amendment No. 1 to Employment Agreement, effective  as of September 14, 2006, between SGC and Rajat Shah (incorporated by  reference to Exhibit 10.2 to SGC’s Current Report on Form 8-K filed with the  SEC on September 20, 2006).                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                        |

 

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| 10.27  | +      | Amendment No. 1 to Employment Agreement, entered  into on September 14, 2006 and effective as of June 22, 2006, between SGC and  Joseph D’Amato (incorporated by reference to Exhibit 10.3 to SGC’s Current  Report on Form 8-K filed with the SEC on September 20, 2006).                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 10.28  | +      | Amendment No. 1 to Employment Agreement, entered  into on September 14, 2006 and effective as of June 22, 2006, between SGC and  Michael Speller (incorporated by reference to Exhibit 10.4 to SGC’s Current  Report on Form 8-K filed with the SEC on September 20, 2006).                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 10.29  | *+     | Employment Agreement, dated December 15, 2006,  and effective as of June 22, 2006, between Seneca Gaming Corporation and  Patrick M. Fox.                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 10.30  |   | Construction Management Agreement, entered into  January 12, 2006 and effective as of September 1, 2005, between SNFGC, as  Owner, and Seneca Construction Management Corporation, as Construction  Manager (incorporated by reference to Exhibit 10.21 to SGC’s Amendment No. 2  to Registration Statement on Form S-4 filed with the SEC on January 17,  2006). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 10.31  |   | First Amendment to Construction Management  Agreement, dated as of January 12, 2006, by and between Seneca Construction  Management Corporation, as Construction Manager, and STGC, as Owner  (incorporated by reference to Exhibit 10.22 to SGC’s Amendment No. 2 to  Registration Statement on Form S-4 filed with the SEC on January 17, 2006).                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 10.32  |   | Construction Management Agreement, dated and  effective as of May 9, 2006, between SEGC, as Owner, and Seneca Construction  Management Corporation, as Construction Manager (for demolition work on  Seneca Buffalo Creek Territory) (incorporated by reference to Exhibit 10.1 to  SGC’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2006).      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 10.33  |   | Agreement between the City of Buffalo, New York,  Seneca Gaming Corporation, Seneca Erie Gaming Corporation and the Seneca  Nation of Indians, effective November 9, 2006 (incorporated by reference to  Exhibit 10.1 to SGC’s Current Report on Form 8-K filed with the SEC on  November 14, 2006).                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 12.1   | *      | Statement regarding Computation of Ratios.                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 21.1   | *      | List of Subsidiaries of SGC.                                                                                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 24.1   | *      | Power of Attorney (included on the signature  page of this Annual Report).                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 31.1   | *      | Certification pursuant to Section 302 of the  Sarbanes-Oxley Act.                                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 31.2   | *      | Certification pursuant to Section 302 of the  Sarbanes-Oxley Act.                                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 32.1   | *      | Certification pursuant to Section 906 of the  Sarbanes-Oxley Act.                                                                                                                                                                                                                                                                                                 |

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*      Filed herewith.

+      Management contract or compensatory planor arrangement.

(b)    See item (a)3. above

(c)    See item (a)1. and 2. above.

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