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


                                    FORM 10-K
                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

           (Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 31, 2006
                                       OR

 [  ]      TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from                             to _____________
                               ---------------------------

                        Commission file number 000-21430
                          RIVIERA HOLDINGS CORPORATION
             (Exact name of registrant as specified in its charter)

        Nevada                                          88-0296885
----------------------                              -----------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

2901 Las Vegas Boulevard South
Las Vegas, Nevada                                              89109
---------------------------------------              -----------------------
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code:  (702) 734-5110
                                                     --------------

Securities registered pursuant to Section 12(b) of the Act:

    Title of Each Class               Name of Each Exchange on Which Registered
Common Stock, $.001 par value               American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value
                                (Title of class)

Indicate by check mark if the registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the  Securities  Act.
YES         NO     X
    -------      ----------

Indicate by check mark if the  registrant  is not required to file reports
pursuant to Section 13 or  Section 15(d)  of the Act.
  YES    NO   X
     ----   ----

           Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO ___

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

                                        1
<PAGE>


     Indicate by check mark whether the registrant is a large accelerated filer,
an  accelerated  filer,  or a  non-accelerated  filer.  See  definition  of
"accelerated  filer  and  large  accelerated  filer"  in Rule  12b-2 of the
Exchange Act. (Check One)

            Large accelerated filer            Accelerated filer X
                                   -------                    -------
            Non-accelerated filer
                                  -------

         Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).  YES    NO     X
                                                ----   --------

           Based on the closing sale price of the registrant's common stock on
the American Stock Exchange on June 30, 2006, the aggregate market value of the
common stock held by non-affiliates of the registrant was approximately
$228,167,000.

           As of February 23, 2007 the number of outstanding shares of the
registrant's common stock was 12,463,755.


Documents incorporated by reference: Portions of the registrant's 2007
definitive annual meeting proxy statement on Schedule 14A (to be filed pursuant
to Regulation 14A) are incorporated by reference into Part III of this Form
10-K.
       ====================================================================
                               Page 1 of 59 pages
                    Exhibit Index Appears on Page 51 hereof.

                                        2

<PAGE>


                   RIVIERA HOLDINGS CORPORATION AND SUBSIDIARY
                    ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
                          YEAR ENDED DECEMBER 31, 2006

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>  <C>                                                                 <C>
Item 1.   Business........................................................4
             General .....................................................4
             Riviera Las Vegas............................................4
             Riviera Black Hawk...........................................9
             Geographical Markets........................................10
             Competition.................................................11
             Employees and Labor Relations...............................13
             Regulation and Licensing....................................14
             Federal Registration........................................21

Item 1A. Risk Factors....................................................22

Item 2.   Properties.....................................................30

Item 3.   Legal Proceedings..............................................31

Item 4.   Submission of Matters to a Vote of Security Holders............31

Item 5.   Market for the Registrant's Common Equity,
          Related Stockholder Matters and Issuer
          Purchases of Equity Securities.................................31

Item 6.   Selected Financial Data........................................34

Item 7.   Management's Discussion and Analysis of Financial
               Condition and Results of Operation........................34
             Overall Outlook and Recent Developments.....................34
             Results of Operations.......................................35
             2006 Compared to 2005.......................................35
             2005 Compared to 2004.......................................37
             Liquidity and Capital Resources.............................38
             Critical Accounting Policies................................39
             Recently Issued Accounting Standards........................41
             Forward-Looking Statements..................................42

Item 7A. Qualitative and Quantitative Disclosure About Market Risk.......43

Item 8.   Financial Statements and Supplementary Data....................44

Item 9.   Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure....................44

Item 9A. Controls and Procedures.........................................44

Item 9B. Other Information...............................................45

Item 10.  Directors and Executive Officers of the Registrant.............45

Item 11.  Executive Compensation.........................................48

Item 12.  Security Ownership of Certain Beneficial Owners
          and Management and Related Stockholder Matters.................48

Item 13.  Certain Relationships and Related Transactions ................48

Item 14.  Principal Accountant Fees and Services.........................48

Item 15.  Exhibits and Financial Statement Schedules.....................48
</TABLE>

                                        3

<PAGE>

         PART I

Item 1.    Business

General

           Riviera Holdings Corporation, a Nevada corporation (the "Company"),
through its wholly owned subsidiary, Riviera Operating Corporation, owns and
operates the Riviera Hotel & Casino ("Riviera Las Vegas") located on the Las
Vegas Boulevard in Las Vegas, Nevada. Riviera Las Vegas opened in 1955, and has
a long-standing reputation for delivering traditional Las Vegas-style gaming,
entertainment and other amenities.

           The Company, through its wholly owned subsidiary, Riviera Black Hawk,
Inc., owns and operates the Riviera Black Hawk Casino ("Riviera Black Hawk"), a
limited-stakes casino in Black Hawk, Colorado, which opened on February 4, 2000.

           The Company determines segments based upon geographic gaming markets
and also reviews corporate expenses separately. The Company has two segments:
the Las Vegas, Nevada market and the Black Hawk, Colorado market. The segment
information can be found in Note 15 of the Notes to the Consolidated Financial
Statements included in this document.

           The Company maintains an Internet website at www.rivierahotel.com and
makes available on the website, free of charge, the Company's Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any
and all amendments to such reports, filed or furnished pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as soon as reasonably practicable after the Company electronically files
such material with, or furnishes it to, the United States Securities and
Exchange Commission (the "SEC"). The Company has included its website address in
this filing only as a textual reference. The information contained on that
website is not incorporated by reference into this Annual Report on Form 10-K.

Riviera Las Vegas

General

           Riviera Las Vegas is located on the corner of Las Vegas Boulevard and
Riviera Boulevard in Clark County, Nevada, across from Circus Circus. Riviera
Las Vegas targets slot and mid-level table game customers and various convention
groups with a focus on creating repeat customers and increasing our loyalty
program membership. Key elements of this strategy includes offering a
value-oriented experience by providing a variety of hotel rooms, restaurants and
entertainment, with traditional Las Vegas shows, all at reasonable prices.

Gaming

           Riviera Las Vegas has 110,000 square feet of casino space. The casino
currently has approximately 990 slot machines and 35 gaming tables, including
blackjack, craps, roulette, pai gow poker, Caribbean Stud(R) Poker, Three Card
Poker, Let It Ride(R), 357 Poker, Texas Hold'em Bonus Poker and mini-baccarat.
The casino also includes a poker room and a race and sports book.

           We continually update gaming operations at Riviera Las Vegas to
respond to both changing market conditions and customer demand in an effort to
attract new customers and encourage repeat customer business through player
tracking and database management. We maintain a slot players club, through which
members receive special promotions and targeted mailings. New and innovative
slot and table games have been introduced based on customer feedback. We devote
substantial time and attention to the type, location and player activity of all
of our slot machines. We maintain a capital investment program for the upgrade
of our slot machines and related equipment.

           Our current marketing programs are directed at mid-level gaming
customers as opposed to high-stakes bettors. Mid-level gaming customers tend to
provide us with a less volatile, more consistent gaming revenue stream.
Consistent with our focus on mid-level gaming customers is our tendency to offer
lower table game limits, stricter credit policies and more emphasis on slot
machine play.

                                        4
<PAGE>

           During 2006, we continued a number of initiatives at Riviera Las
Vegas to increase slot play, including the replacement of older slot machines
with new machines utilizing ticket-in/ticket-out "TITO" technology and relocated
our slot hosts to a more visable and accessible area to improve service and
convenience to our customers. Slot hosts are our employees who interact with
patrons as goodwill ambassadors to generate loyalty. Our strategy is to continue
to increase slot play through marketing programs and other improvements,
including (1) our ongoing slot upgrade program, (2) operation of our player
tracking system, (3) addition of a new multi-tiered players club, called Club
Riviera, (4) sponsorship of slot tournaments, (5) creation of promotional
programs, and (6) "Penny Town". Penny Town is comprised primarily of penny and
nickel slot machines, which is one of the most popular segments of the Las Vegas
slot market.

Hotel

           Riviera Las Vegas' hotel is comprised of five towers with 2,075 guest
rooms, including 177 suites, as follows:
<TABLE>
<CAPTION>

                                                                        Latest
                                 Year     Std.                           Remodel
     Tower Description          Built     Rooms    Suites    Total        Year

<S>                              <C>       <C>       <C>      <C>         <C>
     North Tower                 1955      379       11       390         2004
     South Tower                 1967      132       30       162         2004
     Monte Carlo                 1974      216       81       297         2005
     San Remo                    1977      241        6       247         2006
     Monaco                      1988      930       49       979         2004
                                         -----     ----     -----
          Total                          1,898     177       2,075
                                         =====     ===       =====
</TABLE>

           Despite the significant increase in rooms on the Las Vegas Strip
since 1997, we believe Riviera Las Vegas has attained room occupancy rates that
are consistent with other properties on the Las Vegas Strip. From 1994 to 2000,
the occupancy rate ranged from 95.2% to 98.2%, and was 91.5% for 2001, 89.6% for
2002, 92.2% for 2003, 92.6% for 2004, 92.6% for 2005 and 92.2% for 2006 (based
on available rooms). The average occupancy rate through December 2006, citywide
was 93.9% in 2006 according to the Las Vegas Convention and Visitors Authority
(the "LVCVA").

Restaurants

           The quality, value and variety of food services are critical to
attracting Las Vegas visitors. Riviera Las Vegas offers five bars, four
restaurants and serves an average of approximately 4,500 meals per day,
including banquets and room service. Riviera Las Vegas completely remodeled its
buffet in 2001, upgrading the ambiance and food quality, and featuring cuisine
from various countries as well as a carving station. In 2006, Kady's Coffee Shop
was remolded with new carpet, chairs and flat panel tv's. The following outlines
for each restaurant, the type of service provided and total seating capacity:
<TABLE>
<CAPTION>

                                                                   Seating
Name                              Type                             Capacity

<S>                                <C>                               <C>
Kady's                            Coffee Shop                        290
Kristofer's                       Steak and Seafood                  162
Ristorante Italiano               Italian                            126
World's Fare Buffet               All-you-can-eat                    366
                                                                     ---
 Total                                                               944
                                                                     ===
</TABLE>

           In addition, Riviera Las Vegas operates a snack bar and continental
breakfast, and has a fast-food "food court" operated by a third party. The food
court has 200 seats and several fast-food restaurants, including A&W/KFC
Express, Pizza Hut Express(R), Quiznos(R) and La Salsa(R). Riviera Las Vegas has
also contracted with a third party, who will own and operate The Banana Leaf,
which is scheduled to open in the first quarter of 2007. Banana Leaf will serve
breakfast, lunch and dinner, and will feature Asian cuisine.

                                        5
<PAGE>

Convention Center

           Riviera Las Vegas features 160,000 square feet of convention, meeting
and banquet space. The convention center is one of the larger ones in Las Vegas
and is an important feature that attracts customers. The facility can be
reconfigured for multiple meetings of small groups or large gatherings of up to
5,000 people. Riviera Las Vegas hosted 290 conventions in 2006. The hotel
currently has over 750,000 convention-related advance bookings of rooms through
2011, consisting of over 386,000 definite bookings and over 371,000 tentative
bookings. In 2006 approximately 36% of the hotel's rooms were occupied for
conventions. Based on current bookings we estimate that 35% of the rooms will be
occupied for conventions in 2007.

           The Royal Pavilion portion of the convention center, which opened in
February 1999 and comprises approximately 60,000 square feet of our convention
facility, features convention, meeting and banquet facilities, teleconferencing,
wireless Internet and satellite uplink capability, and 12 skyboxes. The
convention space at the Las Vegas, Venetian and Mandalay convention centers and
others has enabled Las Vegas to attract and book new conventions that may have
had date and exhibit space conflicts in the past. Our flexibility of meeting
space and proximity to the Las Vegas Convention Center continues to position us
to increase our mix of small meetings and conventions, as well as new
multi-hotel conventions booked into the Las Vegas Convention Center.

Entertainment

           Riviera Las Vegas has one of the most extensive entertainment
programs in Las Vegas, offering a variety of regularly scheduled shows. We
believe entertainment provides an effective marketing tool to attract our
customers. Riviera Las Vegas' entertainment program includes such well received
shows as An Evening at La Cage(R) (a female impersonation show), Crazy Girls(R)
(an adult revue), and featured comedians at the Riviera Comedy Club as well as a
variety of regularly scheduled shows in our LeBistro Theater. In addition, a new
ice show entitled "ICE/Direct From Moscow" is scheduled to open in our
Versailles Showroom by mid-2007. We update our shows continually in response to
customer surveys and to keep them fresh. Tickets for the shows are offered at
reasonable prices in keeping with our emphasis on mid-level customers.

           The following outlines for each entertainment center, the type of
service provided and total seating capacity:
<TABLE>
<CAPTION>

         Name                         Type                     Seating Capacity

         ICE/Direct
<S>                                    <C>                         <C>
             From Moscow*             Variety                      875
         La Cage                      Female Impersonation         575
         Crazy Girls                  Adult Revue                  375
         Comedy Club                  Comedy                       350
         Le Bistro                    Variety                      190
                                                                   ---
                                                                 2,365
                                                                 =====
</TABLE>

           * Scheduled to open by mid-2007.

           We opened a nightclub in 2005, Syn City, which operates five nights
per week in our Le Bistro Theater. Syn City opens at 12:00 am, which allows us
to continue to offer a variety of entertainment in the Le Bistro Theater prior
to 12:00 am and during Syn City's nights off.

           A majority of our shows are owned and operated by third parties,
which gives us financial flexibility in utilizing our marketing dollars. We
receive rent, ticket sales commissions, and a number of comp seats for use by
our marketing department.

                                        6

<PAGE>
Future Expansion Possibilities

           We continue to explore the possible development of an approximately
60,000 square-foot entertainment complex that would be constructed directly over
the casino, and could contain specialty-themed entertainment that would appeal
to Riviera Las Vegas' main target audience, adults aged 45 to 65. The exit from
the complex would deliver patrons to the casino.

           We also continue to explore options for the development of our
26-acre site. These options include a joint venture for the development of a
condominium, time-share or an additional hotel tower and parking garage. Under
the terms of the indenture governing our $215 million 11% Senior Secured Notes
(the "Note Indenture"), we could contribute up to 6 acres of land to such
projects, and if we decide to develop a hotel, condominium or time-share tower,
a third party could construct and sell condominium or time-share units and
arrange financing. We believe that additional rooms adjacent to the Las Vegas
Convention Center would be particularly attractive to business customers and
would provide a base for additional casino customers. The development of a
condominium tower, time-share tower, hotel tower or parking facility would
require additional financing and, in the case of a condominium or time-share
tower, a joint venture partner, none of which we have in place at this time.

Marketing Strategies-Las Vegas

           Our tiered marketing program, Club Riviera, is intended to develop
and retain a loyal following of repeat slot and mid-level table game customers.
We believe we have been able to successfully attract these patrons using Riviera
Las Vegas' restaurants, hotel accommodations and entertainment and by focusing
on customer service. We have adopted a selective approach to the extension of
credit to these customers in order to reduce volatility of operating results. We
use our research data to tailor promotional offers to the specific tastes and
level of play of our targeted customers.

           Riviera Las Vegas will continue to emphasize marketing programs that
appeal to slot and mid-level table game customers with a focus on creating
repeat customers and increasing walk-in traffic. In addition, a key marketing
focus is expanding Riviera Las Vegas' core conventioneer customer base. In
developing an overall marketing program, we conduct extensive, ongoing research
of our target customers' preferences through surveys, one-on-one interviews and
focus groups.

           Create Repeat Customers

           Generating customer loyalty is a critical component of our business
strategy, as retaining customers is less expensive than attracting new ones. We
have developed a focused and coordinated multi-tiered marketing program intended
to develop a loyal customer base which emphasizes (1) providing a high level of
service to our customers to ensure an enjoyable experience while at the Riviera
Las Vegas, (2) responding to customer surveys, (3) focusing marketing efforts
and promotional programs on customers with positive gaming profiles and (4)
rewarding loyalty with increased incentives to our higher-tiered members. We
believe our player tracking system helps us retain customers and use our player
data to tailor promotional offers to the specific tastes and level of play of
our targeted customers. All slot and table players are encouraged to join Club
Riviera, which tracks their level of play, and participate in surveys that
provide us with helpful information and personal preferences. Members of Club
Riviera earn bonus points based upon their level of play, redeemable for free
gifts, complimentary services or bonus credits. We make promotional offers to
qualifying customers through direct mail, telemarketing and e-mail. We design
promotional offers targeted at certain mid-level gaming patrons that are
expected to provide significant revenues based upon their historical gaming
patterns. We contact these customers through a combination of direct mail and
telemarketing by an in-house marketing staff and independent representatives
located in major cities. We use a proprietary database which is linked to our
player tracking system to help identify customers' requirements and preferences,
thereby allowing us to customize promotions to attract repeat visitors. We offer
customers personalized service, credit availability and access to a variety of
complimentary or reduced-rate room, dinner and entertainment reservations all
based on the customer's profile. We use a specialized multi-tiered marketing
approach to attract customers in each of our major markets. We design slot and
table game tournaments and special events for specific levels of play. Utilizing
our proprietary database, our marketing department targets and invites the most
appropriate customers for the customized events. In addition, we host an array
of special events, including slot and table game tournaments, designed to
attract customers for an extended stay. We have found that this individualized
marketing approach has provided significant revenues and profitable repeat
business.

                                        7
<PAGE>

           Provide Extensive Entertainment Options

           We also focus on attracting guests through a range of entertainment
options. We have one of the most extensive entertainment programs in Las Vegas
with a variety of regularly scheduled shows and special limited engagement
shows. The shows attract additional gaming revenue as well as provide us rental
and commission revenue.

           Attract Walk-In Traffic

           We seek to maximize the number of people who patronize the Riviera
Las Vegas but who are not guests in the hotel by capitalizing on Riviera Las
Vegas' prime Las Vegas Strip location, convention center proximity and several
popular in-house productions. Riviera Las Vegas is well situated on the Las
Vegas Strip near Circus Circus, Sahara, Las Vegas Hilton, the Las Vegas
Convention Center, Wynn Las Vegas, the planned $4.5 billion Echelon project
planned on the site of the recently closed Stardust and the $2 billion
Fontainebleau project just to our north, as well as numerous non-gaming
condominium and time-share projects which are either planned or under
construction within walking distance of our casino. However, recent closures and
construction in our immediate area, has caused a significant reduction in
walk-in traffic and may continue to do so for the foreseeable future. We
continue to strive to attract customers from those facilities, as well as
capitalize on the visitors in Las Vegas in general, with the goal of increasing
walk-in traffic by (1) promoting Penny Town, (2) providing a variety of quality,
value-priced entertainment and dining options, and (3) offering the "$40 for
$20" slot promotions, and placing them inside the casino.

           Focus on Convention Customers

           This market consists of two groups: (1) those trade organizations and
groups that hold their events in the banquet and meeting space provided by a
single hotel and (2) those attending city-wide events, usually held at the Las
Vegas Convention Center. We target convention business because it typically
provides patrons willing to pay higher room rates and we are able to provide
certain advance planning benefits, since conventions are usually booked two
years in advance of the event date. We focus our marketing efforts on
conventions whose participants have the most active gaming profile and higher
room rates, banquet and function spending habits. We also benefit from our
proximity to the Las Vegas Convention Center, which makes us attractive to
city-wide conventioneers looking to avoid the congestion that occurs during a
major convention, particularly at the south end of the Las Vegas Strip. In 2006
we derived 36% of our hotel occupancy and 41% of our room revenues from
convention customers and we consider them to be a critical component of our
customer base. We believe that the completed expansion of Riviera Las Vegas'
convention facility in February 1999, from 100,000 to 160,000 square feet, has
accommodated the growth in the size and number of groups that presently use the
facility, attracted new convention groups and increased the percentage of rooms
occupied by conventioneers.

           We have found that our customers also use tour and travel "package"
options to reduce the cost of travel, lodging and entertainment. These packages
are produced by wholesale operators and travel agents and emphasize mid-week
stays. Tour and travel patrons often book at off-peak periods, enabling us to
maintain occupancy rates at the highest levels throughout the year. We have
developed specialized marketing programs and cultivated relationships with
wholesale operators, travel agents and major domestic air carriers to expand
this market. We make an effort to convert many tour and travel customers who
meet our target customer gaming profile into repeat slot customers. While we
continue to pursue the tour and travel market, we have allocated less room
inventory to this market due to the lower room rates. As a result, we are
placing more emphasis and dedicating more rooms to our rated slot customers,
which we believe generates greater revenue.

           Internet

           The Internet segment of our business remained stable in 2006. This
segment attracts customers in search of a bargain, those making last-minute
travel arrangements and those who have the confidence in and find it convenient
to book rooms over the Internet. In 2006, our Internet bookings accounted for
approximately 10.9% of total occupied rooms.

                                        8

<PAGE>
Riviera Black Hawk

Business

           Riviera Black Hawk opened on February 4, 2000. Located in Black Hawk,
Colorado, approximately 40 miles west of Denver, our casino is the first casino
encountered by visitors arriving from Denver on Highway 119. Our casino features
the fourth largest number of gaming devices in the market with approximately 900
slot machines and 8 live gaming tables. For Colorado gaming and tax law
purposes, each slot machine or table game is considered one gaming device.

           We also offer a variety of non-gaming amenities designed to help
differentiate our casino, including:

o parking spaces for 520 vehicles, of which 92% are covered, with convenient and
free self-park and valet options; o a 252-seat casual buffet-styled restaurant;
o a delicatessen; o two themed bars; and o an entertainment center with seating
for approximately 400 people.

           The initial participants in this market were small, privately held
gaming facilities whose inability to offer convenient parking and a full range
of traditional casino amenities limited the growth of this market. Subsequently,
larger casinos offering such amenities have entered the market, have been
gaining market share and have contributed to the consistent growth in the
overall market. As of December 31, 2006, there were 25 casinos in the Black
Hawk/Central City market, with 11 casinos each offering more than 400 gaming
devices. The Isle of Capri, located across the street from our casino, has 1,407
gaming machines, 18 gaming tables, 1,100 covered parking spaces and 238 hotel
rooms, and it owns and is connected by inside walkways to the Colorado Central
Station, which has 677 gaming machines, 12 gaming tables, 1,250 parking spaces
and 164 hotel rooms.

Marketing strategy

           We attract customers to our casino by implementing marketing
strategies and promotions designed specifically for this market. In so doing, we
hope to create customer loyalty and benefit from repeat visits by our customers.
Specific marketing programs to support this strategy include the Riviera Black
Hawk Player's Club and "V.I.P." services offered to repeat gaming customers. The
Riviera Black Hawk Player's Club is a loyalty program that rewards casino play
and repeat visits to the casino with various privileges and amenities such as
free play, logo gift items and invitations to special events, such as parties,
concerts and complimentary accommodations at our Las Vegas property. We have
used the Player's Club promotion in Riviera Las Vegas and have tailored it for
the Black Hawk/Central City market to implement it at Riviera Black Hawk.
"V.I.P." services are available to the highest level of players and include
special valet and self-parking services, complimentary food and entertainment
offerings and special events specifically designed for this group of customers.

           We benefit from strong walk-in traffic due to the proximity of our
casino to the Colorado Central Station and the Isle of Capri. We have and
continue to develop specific marketing programs designed to attract these
walk-in customers. We emphasize quality food and beverage amenities with
friendly service as a marketing tool. In addition, we provide entertainment
programs designed to meet the tastes of the Black Hawk/Central City market, such
as live music performances by popular regional and national groups.

           We rely on database marketing in order to best identify target
customer segments of the population and to tailor our casino's promotions and
amenities to our core group of customers. We use the database to identify and
stratify slot players living primarily in Colorado for appropriate incentives.
Approximately 323,000 of these slot players have been identified as of December
31, 2006. In addition, we promote our casino by advertising in newspapers and on
the radio in the local areas.

                                        9

<PAGE>
Geographical Markets

The Las Vegas Market

           Las Vegas is one of the largest and fastest growing entertainment
markets in the country. According to the LVCVA, the number of visitors who
traveled to Las Vegas during 2006 increased to approximately 38.9 million in
2006. Approximately 35.5 million people visited Las Vegas in 2003, 37.4 million
in 2004, 38.6 million in 2005, and 38.9 million in 2006. Clark County gaming
continues to be a strong and growing business. Clark County gaming revenues were
$7.8 billion in 2003, $8.7 billion in 2004, $9.7 billion in 2005 and $10.6
billion in 2006. The terrorist attacks of September 11, 2001 had an adverse
effect on the number of visitors traveling to Las Vegas. Similar events in the
future could have an adverse effect on the number of visitors traveling to Las
Vegas.

           Gaming and tourism are the major attractions of Las Vegas,
complemented by warm weather and the availability of many year-round
recreational activities. Although Las Vegas' principal market is the western
region of the United States, most significantly southern California and Arizona,
Las Vegas also serves as a destination resort for visitors from all over the
world. Significant percentages of visitors to Las Vegas are international
visitors.

           Historically, Las Vegas has had one of the strongest hotel markets in
the country. The number of hotel and motel rooms in Las Vegas has increased by
97% from approximately 67,000 at the end of 1989 to approximately 132,000 at the
end of 2006, giving Las Vegas the most hotel and motel rooms of any metropolitan
area in the world. Despite this significant increase in the number of rooms, the
Las Vegas hotel occupancy rate equaled or exceeded 84% each year from 1993
through 2006, with a hotel occupancy rate of 94% in 2006. During 2006,
approximately 2,900 new hotel rooms opened and 3,900 closed in Las Vegas.

           We believe that the growth in the Las Vegas market has been enhanced
as a result of: (1) a dedicated program by the LVCVA and major Las Vegas
casino/hotels to promote Las Vegas as a major convention site, (2) the increased
capacity of McCarran International Airport and (3) the introduction of large
themed "must see" destination resorts in Las Vegas. In 1988, approximately 1.7
million people attended conventions in Las Vegas and generated approximately
$1.2 billion of economic impact. The number of convention attendees was up to
6.3 million in 2006 with an economic impact of $8.2 billion.

           During the past 13 years, McCarran International Airport has expanded
its facilities to accommodate the increased number of airlines and passengers,
which it services. The number of passengers traveling through McCarran
International Airport has increased from approximately 22.5 million in 1993 to
an estimated 46.2 million in 2006. Work continues on the nearly $4 billion
capital additions planned for McCarran International Airport over the next
four-year period.

The Black Hawk/Central City Market

           Gaming was introduced to the Black Hawk/Central City market in
October 1991 following a statewide referendum where Colorado voters approved
limited stakes gaming for three historic mining towns, namely Black Hawk,
Central City and Cripple Creek. Limited stakes gaming is defined as a maximum
single bet of $5.00. Black Hawk and Central City are contiguous cities located
approximately 40 miles west of Denver and about 10 miles north of Interstate
Highway 70, the main east-west artery from Denver. Historically, these two gold
mining communities were popular tourist towns. However, since the inception of
casino gaming in October 1991, gaming establishments have displaced many of the
former tourist-related businesses.

           The first casino in the Black Hawk/Central City market opened in
October 1991, with 13 casinos open by the end of that year. The pace of
expansion increased in 1992 with the number of casinos in the market peaking at
42. However, due to a trend of consolidation in the market and the displacement
of small casinos by the entry of larger, better-capitalized operators, the
number of casinos has declined to 26 as of December 31, 2006.

                                        10
<PAGE>

           The Black Hawk/Central City market primarily caters to "day-trip"
customers from Denver, Boulder, Fort Collins and Golden as well as Cheyenne,
Wyoming. The United States Census Bureau estimates that in 2005 the population
of the Denver-Aurora-Boulder Combined Statistical area was 2.9 million. Since
1992, the number of gaming devices in the Black Hawk/Central City market has
grown approximately 81% from 7,252 in 1992 to 13,162 in 2006. Gaming revenues in
the Black Hawk/Central City market increased by approximately 4.1% in 2006 over
2005. The City of Black Hawk itself experienced an approximate 4.3% increase in
gaming revenue in 2006.

           The City of Black Hawk has experienced more significant growth in
gaming revenues than Central City from 1992 through 2004. The popularity of
Black Hawk in comparison to Central City was due primarily to Black Hawk's
superior access to major highways, as patrons had to first pass through Black
Hawk to access Central City from Denver. However, a new road opened in November
2004, which links Central City directly with Interstate 70, and allows customers
to reach Central City without driving through Black Hawk. As a result of this
new access road Central City gaming revenues grew by 36% in 2005 and 2.7% in
2006 as compared to 2.6% and 4.3% growth for Black Hawk in 2005 and 2006,
respectively. Despite the impressive growth experienced by Central City casinos
in 2005 and 2006, gaming revenues in Central City still represent only 13% of
the total gaming revenues for the Central City/Black Hawk market. Although the
new road allows customers direct access to Central City, most customers continue
to frequent Black Hawk casinos because of the superior amenities Black Hawk
casinos offer. Due to this superior location, larger casino operators have
focused on building in Black Hawk. As a result, casinos in Black Hawk now
generally feature a larger average number of gaming devices, a wider variety of
amenities and convenient free parking for patrons.

Competition

Las Vegas, Nevada

           Intense competition exists among companies in the gaming industry,
many of which have significantly greater resources than we do. Riviera Las Vegas
faces competition from all other casinos and hotels in the Las Vegas area. We
believe that our most direct competition comes from certain large casino/hotels
located on or near the Las Vegas Strip, which offer amenities and marketing
programs similar to those offered by Riviera Las Vegas.

           Las Vegas gaming square footage and room capacity are continuing to
grow and are expected to continue to increase during the next several years.

           As of December 31, 2006, there were 15 Las Vegas projects slated for
completion by 2011, including the development or expansion of existing
casino/hotels. Current and future expansions, additions and enhancements to
existing properties and construction of new properties by our competitors could
divert business from our facilities. There can be no assurance that we will
compete successfully in the Las Vegas market in the future.

           During 2006, available room nights in the Las Vegas market decreased
from approximately 48.5 million to approximately 48.0 million, or 1.4%, while
total room nights occupied increased from approximately 43.2 million to 43.6
million, or 1.0%. The ending room inventory at December 31, 2006 was
approximately 132,000. At Riviera Las Vegas, room occupancy decreased from 92.6%
in 2005 to 92.2% in 2006 (lower than the Las Vegas hotel average of 93.9%). Room
rates increased by $6.63 or 9.2% from $71.84_in 2005 to $78.47 in 2006. Revenue
per available room (Rev/Par) increased $5.86 or 8.8% from $66.51 in 2005 to
$72.37 in 2006.

           We also compete to some extent with casinos in other states,
riverboat and Native American gaming ventures, state-sponsored lotteries, on-
and off-track wagering, card parlors and other forms of legalized gaming in the
United States, as well as with gaming on cruise ships and other parts of the
world. In addition, certain states have recently legalized or are considering
legalizing casino gaming in specific geographical areas within those states and
internationally. Any future development of casinos, lotteries or other forms of
gaming in other states and internationally, could have a material adverse effect
on our results of operations.

                                        11

<PAGE>

           The number of casinos on Native American lands has increased since
the enactment of the Indian Gaming Regulatory Act of 1988. California voters
addressed this issue on March 7, 2000 when they voted in favor of an amendment
to the California Constitution that allows Las Vegas-style gambling on Native
American lands in that state. While new gaming jurisdictions generally have not
materially impacted Las Vegas, the expansion of gaming into California poses a
more serious threat to the continued growth of Las Vegas.

           Our current business is highly dependent on gaming in Las Vegas.
Riviera Las Vegas derives a substantial percentage of its business from
tourists, including customers from southern California and the southwestern
United States. Weakness in the economy of southern California has in the past,
and could in the future, adversely affect our financial results. The events of
September 11, 2001 had the most serious effect on our financial results. Similar
events in the future could also have a material adverse effect on our financial
results.

Black Hawk, Colorado

           The Black Hawk/Central City gaming market is characterized by intense
competition. The primary competitive factors in the market are location,
availability and convenience of parking, number of slot machines and gaming
tables, promotional incentives, hotel rooms, types and pricing of non-gaming
amenities, name recognition and overall atmosphere. Our main competitors are the
larger gaming facilities, particularly those with considerable on-site or nearby
parking and established reputations in the local market. As of December 31,
2006, there were 26 gaming facilities in the Black Hawk/Central City market with
11 casinos each offering more than 400 gaming positions. Additional projects
have also been announced, proposed, discussed or rumored for the Black
Hawk/Central City market.

           The gaming facilities near the intersection of Main and Mill Streets
provide significant competition to our casino. Colorado Central Station which is
now owned through a joint venture with Isle of Capri and is connected via inside
walkways to the Isle of Capri, is located across the street from our casino and
has 687 slot machines, 12 gaming tables, approximately 1,250 parking spaces and
164 hotel rooms. The Isle of Capri, one of the most successful casinos in
Colorado, is located directly across the street from our casino and features
1,407 slot machines, 18 table games, 1,100 parking spaces, and 238 hotel rooms.
An expansion and renovation of Main Street was completed in the second quarter
of 2006. As a result of the Main Street expansion, Riviera Black Hawk is the
first property on Main Street accessible to all customers traveling to Black
Hawk from the Denver Metro area via State Route 119. Our parking garage is the
first and most easily accessible parking garage directly from Main Street.

           The number of hotel rooms currently in the Black Hawk/Central City
market is 596, with only 5 gaming facilities providing hotel accommodations.
These include Fortune Valley with 118 rooms, Century Casino with 26 rooms, the
Lodge at Black Hawk with 50 rooms, the Isle of Capri with 238 rooms and Colorado
Central Station with 164 rooms. Casinos offering hotel accommodations for
overnight stay have a competitive advantage over our casino. However, we believe
that self-parking is a more effective utilization of our available space
providing hotel accommodations is not a cost-effective use of our capital
resources at this time.

           The Ameristar Black Hawk property was re-branded in the Ameristar
name on April 1, 2006, and has received significant increased traffic to the
property in the second half of 2006. Ameristar is moving along with its $260
million major capital expansion, with the first phase completed in November
2005, which included an expansion of the parking garage to 1,550 parking spaces.
In December 2005, the remodeling of the first floor, which contains the casino
and non-gaming venues, was substantially completed. Once the first floor was
completed, the construction disruption dissipated. Recently, the second floor
was opened with 700 more slot machines. The hotel construction began last
quarter, with 536 rooms slated to open in the first quarter of 2009.

           Historically, the City of Black Hawk has enjoyed an advantage over
Central City because customers have to drive through Black Hawk to reach Central
City. However, there is a new road that opened in November 2004, which links
Central City directly with Interstate 70 and allows customers to reach Central
City without driving through Black Hawk. Although this road allows customers to
directly access Central City, we believe that most customers will continue to
frequent Black Hawk casinos because of the superior amenities Black Hawk casinos
offer. This new road provides additional access to the Black Hawk/Central City
market, which is especially important on weekends when the traditional road
system is overburdened. We believe the new access road is important for the
continued growth of the market. The new access road proved valuable between June
21st and September 13th of 2005 when a major rockslide closed Highway 6, the
major route customers from the Denver area take to the Black Hawk/Central City
market.

                                        12

<PAGE>
           Limited stakes gaming in Colorado is constitutionally authorized in
Central City, Black Hawk, Cripple Creek and two Native American reservations in
southwest Colorado. However, gaming could be approved in other Colorado
communities in the future. The legalization of gaming closer to Denver would
likely have a material adverse effect on our results of operations. We also
compete with other forms of gaming in Colorado, including lottery gaming, and
horse and dog racing, as well as other forms of entertainment.

           It is also possible that new forms of gaming could compete with our
casino. Currently, Colorado law does not authorize video lottery terminals.
However, Colorado law permits the legislature, with executive approval, to
authorize new types of lottery gaming, such as video lottery terminals. Video
lottery terminals are games of chance, similar to slot machines, in which the
player pushes a button that causes a random set of numbers or characters to be
displayed on a video screen. The player may be awarded a ticket, which can be
exchanged for cash or credit play. This form of gaming could compete with slot
machine gaming. Voters in the State of Colorado have rejected a proposal, which
would have authorized video lottery terminals in five racetracks in Colorado.
However, there is no guarantee that such a proposal or similar one will not be
approved in the future.

           In addition, Colorado enacted a smoking ban in 2006, which excludes
casinos. However, recent significant efforts have been undertaken to lift this
exclusion and restrict smoking in Colorado casinos as well. This could have a
material adverse effect on our results of operations.

           Pursuant to a license agreement, Riviera Las Vegas licenses the use
at Riviera Black Hawk of all of the trademarks, service marks and logos used by
Riviera Las Vegas. The license agreement provides that additional trademarks,
service marks and logos acquired or developed by us and used at our other
facilities will be subject to the license agreement.

Employees and Labor Relations

Riviera Las Vegas

           As of December 31, 2006, Riviera Las Vegas had 1,257 full-time
equivalent employees and had collective bargaining contracts with eight unions
covering approximately 714 of such employees, including food and beverage
employees, rooms department employees, carpenters, engineers, stagehands,
musicians, electricians, painters and teamsters. Riviera Las Vegas' agreement
with the Painters Union expires on May 31, 2010. The Carpenters' Union agreement
expired on July 31, 2005, and an initial one-year and subsequent open-ended
extensions were agreed to by us and the Union. Negotiations with the Carpenters'
Union for a new multiyear agreement commenced in 2006 and are ongoing.
Agreements with the Southern Nevada Culinary and Bartenders Union, covering the
majority of our unionized employees expire in 2007, as does our agreement with
the Stagehands Union. Our negotiations with the Southern Nevada Culinary and
Bartenders Union and Stagehands Union will commence in the first half of 2007.
Our agreement with the Teamsters Union expires in 2008 and the Operating
Engineers Union and Electrician Union agreements expire in 2009. Our collective
bargaining agreement with the Musicians Union expired in 1999 and we continue to
operate under the terms of that agreement. Although unions have been active in
Las Vegas, Riviera Las Vegas considers its employee relations to be
satisfactory. There can be no assurance, however, that new agreements will be
reached without union action or on terms satisfactory to Riviera Las Vegas.

Riviera Black Hawk

           As of December 31, 2006, Riviera Black Hawk had 243 full-time
equivalent employees, none of whom are covered by collective bargaining
contracts. The Black Hawk/Central City labor market is very competitive. Riviera
Black Hawk believes that it will be able to maintain its current employee level.
There can be no assurance, however, that new and existing casinos will not
affect Riviera Black Hawk's ability to maintain its current employee level.

                                        13

<PAGE>

           Although there are no collective bargaining agreements in Black Hawk
casinos, we have recently become aware of organization activity by Local 7 of
the United Food & Commercial Workers International Union. This activity is
targeting casino employees in Black Hawk and Central City. There can be no
assurance that the union will not succeed in its organization effort, and if
successful, that an agreement will be reached without union action or on terms
satisfactory to Riviera Black Hawk.

Regulation and Licensing

Nevada

Nevada Gaming Authorities

           The ownership and operation of casino gaming facilities in Nevada are
subject to: (1) The Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, the "Nevada Act") and (2) various local ordinances and
regulations. Our gaming operations are subject to the licensing and regulatory
control of the Nevada Gaming Commission (the "Nevada Commission"), the State of
Nevada Gaming Control Board (the "Nevada Board"), the Clark County Business
Department and the Clark County liquor/gaming authorities (collectively, the
"Clark County Board"), all of which are collectively referred to as the "Nevada
Gaming Authorities."

           The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (1) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time and in any
capacity; (2) the establishment and maintenance of responsible accounting
practices and procedures; (3) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (4) the prevention of cheating and
fraudulent practices; and (5) providing a source of state and local revenues
through taxation and licensing fees. Changes in such laws, regulations and
procedures could have an adverse effect on our operations.

           Riviera Operating Corporation is required to be and is licensed by
the Nevada Gaming Authorities (a "Corporate Licensee"). The gaming license held
by Riviera Operating Corporation requires the periodic payment of fees and taxes
and is not transferable. Riviera Operating Corporation is also licensed as a
manufacturer and distributor of gaming devices. Such licenses require the
periodic payment of fees and are not transferable. We are registered by the
Nevada Commission as a publicly traded corporation (a "Registered Corporation")
and have been found suitable to own the stock of Riviera Operating Corporation.
As a Registered Corporation, we are required periodically to submit detailed
financial and operating reports to the Nevada Commission and to furnish any
other information, which the Nevada Commission may require. No person may become
a stockholder of, or receive any percentage of profits from, Riviera Operating
Corporation without first obtaining licenses and approvals from the Nevada
Gaming Authorities. We and Riviera Operating Corporation have obtained, from the
Nevada Gaming Authorities, the various registrations, approvals, permits,
findings of suitability and licenses required in order to engage in gaming
activities and manufacturing and distribution activities in Nevada.

           The Nevada Gaming Authorities may investigate any individual who has
a material relationship to, or material involvement with, us or Riviera
Operating Corporation in order to determine whether such individual is suitable
or should be licensed as a business associate of a gaming licensee. Officers,
directors and certain key employees of Riviera Operating Corporation must file
applications with the Nevada Gaming Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. Our officers,
directors and key employees who are actively and directly involved in the gaming
activities of Riviera Operating Corporation may be required to be licensed or
found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities
may deny an application for licensing for any cause, which they deem reasonable.
A finding of suitability is comparable to licensing, and both require submission
of detailed personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of suitability must pay
all the costs of the investigation. Any change in a corporate position by a
licensed person must be reported to the Nevada Gaming Authorities. In addition
to their authority to deny an application for a finding of suitability or
licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.

                                        14

<PAGE>

           If the Nevada Gaming Authorities were to find an officer, director or
key employee unsuitable for licensing or unsuitable to continue having a
relationship with Riviera Operating Corporation or us, we would have to sever
all relationships with such person. In addition, the Nevada Commission may
require us or Riviera Operating Corporation to terminate the employment of any
person who refuses to file appropriate applications. Determinations of
suitability or questions pertaining to licensing are not subject to judicial
review in Nevada.

           We and Riviera Operating Corporation are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
by Riviera Operating Corporation must be reported to or approved by the Nevada
Commission.

           If it were determined that the Nevada Act was violated by Riviera
Operating Corporation, the gaming license it holds could be limited,
conditioned, suspended or revoked, subject to compliance with certain statutory
and regulatory procedures. In addition, we or Riviera Operating Corporation and
the persons involved could be subject to substantial fines for each violation of
the Nevada Act, at the discretion of the Nevada Commission. Further, a
supervisor could be appointed by the Nevada Commission to operate our casino
and, under certain circumstances, earnings generated during the supervisor's
appointment (except for reasonable rental value of the casino) could be
forfeited to the State of Nevada. Limitation, conditioning or suspension of the
gaming license of Riviera Operating Corporation or the appointment of a
supervisor could (and revocation of any gaming license would) materially
adversely affect our gaming operations.

           Any beneficial holder of our voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have its suitability as a beneficial holder of our voting securities
determined if the Nevada Commission has reason to believe that such ownership
would otherwise be inconsistent with the declared policies of the State of
Nevada. The applicant must pay all costs of investigation incurred by the Nevada
Gaming Authorities in conducting any such investigation.

           The Nevada Act requires any person who acquires more than 5% of a
Registered Corporation's voting securities to report the acquisition to the
Nevada Commission. The Nevada Act requires that beneficial owners of more than
10% of our voting securities apply to the Nevada Commission for a finding of
suitability within thirty days after the Chairman of the Nevada Board mails the
written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires more than
10%, but not more than 15%, of our voting securities may apply to the Nevada
Commission for a waiver of such finding of suitability if such institutional
investor holds our voting securities for investment purposes only. An
institutional investor that has obtained a waiver may, in certain circumstances,
hold up to 19% of our voting securities and maintain its waiver for a limited
period of time. An institutional investor shall not be deemed to hold our voting
securities for investment purposes unless the voting securities were acquired
and are held in the ordinary course of business as an institutional investor and
not for the purpose of causing, directly or indirectly, the election of a
majority of the members of our board of directors, any change in our corporate
charter, bylaws, management, policies or operations, or any of our gaming
affiliates, or any other action which the Nevada Commission finds to be
inconsistent with holding our voting securities for investment purposes only.
Activities which are deemed consistent with holding our voting securities for
investment purposes only include: (1) voting on all matters voted on by
stockholders; (2) making financial and other inquiries of management of the type
normally made by securities analysts for informational purposes and not to cause
a change in management, policies or operations; and (3) such other activities as
the Nevada Commission may determine to be consistent with such investment
intent. If the beneficial holder of our voting securities who must be found
suitable is a business entity or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.

           Any person who fails or refuses to apply for a finding of suitability
or a license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board may be found unsuitable. The same
restrictions apply to a record owner of stock if the record owner, after
request, fails to identify the beneficial owner. Any stockholder who is found
unsuitable and who holds, directly or indirectly, any beneficial ownership of
stock beyond such period of time prescribed by the Nevada Commission may be
guilty of a criminal offense. We are subject to disciplinary action if, after we
receive notice that a person is unsuitable to be a stockholder or to have any
other relationship with us or Riviera Operating Corporation, we (1) pay that
person any dividend or interest upon voting our securities, (2) allow that
person to exercise, directly or indirectly, any voting right conferred through
securities held by that person, (3) pay remuneration in any form to that person
for services rendered or otherwise, or (4) fail to pursue all lawful efforts to
require such unsuitable person to relinquish his voting securities including, if
necessary, the immediate purchase of said voting securities for cash at fair
market value. Additionally, the Clark County Board has the authority to approve
all persons owning or controlling the stock of any corporation controlling a
gaming licensee.

                                        15

<PAGE>

           The Nevada Commission may, in its discretion, require any holder of
our debt securities to file applications, be investigated and be found suitable
to own such securities, if it has reason to believe that such ownership would be
inconsistent with the declared policies of the State of Nevada. If the Nevada
Commission determines that a person is unsuitable to own such security, then we
can be sanctioned (which may include the loss of our approvals) if, without the
prior approval of the Nevada Commission, we (1) pay to the unsuitable person any
dividend, interest, or any distribution whatsoever, (2) recognize any voting
right by such unsuitable person in connection with such securities, (3) pay the
unsuitable person remuneration in any form or (4) make any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.

           We are required to maintain a current stock ledger in Nevada, which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. We are also required to render maximum assistance in
determining the identity of the beneficial owner. The Nevada Commission has the
power to require our stock certificates to bear a legend indicating that the
securities are subject to the Nevada Act. However, the Nevada Commission has not
imposed such a requirement on us.

           We may not make a public offering of our securities without the prior
approval of the Nevada Commission if the securities or proceeds therefrom are
intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. In
addition, (1) a Corporate Licensee, such as Riviera Operating Corporation, may
not guarantee a security issued by a Registered Corporation pursuant to a public
offering, or hypothecate its assets to secure the payment or performance of the
obligations evidenced by such a security, without the prior approval of the
Nevada Commission; (2) the pledge of the stock of a Corporate Licensee is void
without the prior approval of the Nevada Commission; and (3) restrictions upon
the transfer of an equity security issued by a Corporate Licensee and agreements
not to encumber such securities are ineffective without the prior approval of
the Nevada Commission.

           Changes in control of a Registered Corporation through merger,
consolidation, stock or asset acquisitions, management or consulting agreements,
or any act or conduct by a person whereby he obtains control, may not occur
without the prior approval of the Nevada Commission. Entities seeking to acquire
control of a Registered Corporation must meet a variety of stringent standards
of the Nevada Board and Nevada Commission prior to assuming control. The Nevada
Commission may also require controlling stockholders, officers, directors and
other persons having a material relationship or involvement with the entity
proposing to acquire control, to be investigated and licensed as part of the
approval process relating to the transaction.

           The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defensive
tactics affecting Nevada corporate gaming licensees and Registered Corporations
that are affiliated with those operations may be injurious to stable and
productive corporate gaming. The Nevada Commission has established regulations
to ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (1) assure the
financial stability of corporate gaming licensees and their affiliates; (2)
preserve the beneficial aspects of conducting business in the corporate form;
and (3) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Registered Corporation can make exceptional repurchases of
voting securities above the current market price and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Registered
Corporation's board of directors in response to a tender offer made directly to
the Registered Corporation's stockholders for the purposes of acquiring control
of the Registered Corporation.

                                        16

<PAGE>

           License fees and taxes, computed in various ways depending on the
type of gaming or activity involved, are payable to the State of Nevada and to
the county in which Riviera Operating Corporation's operations are conducted.
Depending upon the particular fee or tax involved, these fees and taxes are
payable monthly, quarterly or annually and are based upon: (1) a percentage of
the gross revenues received; (2) the number of gaming devices operated; or (3)
the number of table games operated. A live entertainment tax is also paid by
casinos where live entertainment is furnished in connection with admission
charges, the serving or selling of food, refreshments or the selling of
merchandise. Nevada licensees that hold a license to manufacture and distribute
slot machines and gaming devices, such as Riviera Operating Corporation, also
pay certain fees and taxes to the State of Nevada.

           Any person who is licensed, required to be licensed, registered, or
required to be registered, or a person who is under common control with any of
such persons (collectively, "Licensees"), and who proposes to become involved in
a gaming venture outside of Nevada, is required to deposit with the Nevada
Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay
the expenses of investigation by the Nevada Board of such person's participation
in such foreign gaming. The revolving fund is subject to increase or decrease in
the discretion of the Nevada Commission. Thereafter, Licensees are required to
comply with certain reporting requirements imposed by the Nevada Act. Licensees
are also subject to disciplinary action by the Nevada Commission if they
knowingly violate any laws of the foreign jurisdiction pertaining to the foreign
gaming operation, fail to conduct the foreign gaming operation in accordance
with the standards of honesty and integrity required of Nevada gaming
operations, engage in activities or enter into associations that are harmful to
the State of Nevada or its ability to collect gaming taxes and fees, or employ,
have contact with or associate with a person in the foreign operation who has
been denied a license or finding of suitability in Nevada on the ground of
personal unsuitability.

Other Nevada Regulation

           The sale of alcoholic beverages at Riviera Las Vegas is subject to
licensing, control and regulation by the Clark County Board. All such licenses
are revocable and none of them are transferable. The Clark County Board has full
power to limit, condition, suspend or revoke any such license, and any such
disciplinary action could (and revocation would) have a material adverse effect
on our operations.

Colorado

Colorado Gaming and Liquor Regulation

Summary

           In general, Riviera Black Hawk, its principal executive officers and
those of Riviera Holdings Corporation, and any Riviera Black Hawk employees who
are involved in Colorado gaming operations are required to be found suitable for
licensure by the Colorado Gaming Commission (the "Colorado Commission").
Colorado also requires that persons owning, directly or indirectly, 5% or more
of our stock be certified as suitable for licensure. Riviera Black Hawk's
original retail gaming license was approved by the Colorado Commission on
November 18, 1999, and has been renewed each subsequent year.

Background

           Pursuant to an amendment to the Colorado Constitution (the "Colorado
Amendment"), limited stakes gaming became lawful in the cities of Central City,
Black Hawk and Cripple Creek on October 1, 1991. Limited stakes gaming means a
maximum single bet of five dollars on slot machines and in the card games of
blackjack and poker.

           Limited stakes gaming is confined to the commercial district of Black
Hawk, as defined by Black Hawk on May 4, 1978. In addition, the Colorado
Amendment restricts limited stakes gaming to structures that conform to the
architectural styles and designs that were common to the areas prior to World
War I, and which conform to the requirements of applicable city ordinances
regardless of the age of the structures. Under the Colorado Amendment, no more
than 35% of the square footage of any building and no more than 50% of any one
floor of any building may be used for limited stakes gaming. Persons under the
age of 21 cannot participate in limited stakes gaming. The Colorado Amendment
also prohibits limited stakes gaming between the hours of 2:00 a.m. and 8:00
a.m., and allows limited stakes gaming in establishments licensed to sell
alcoholic beverages.

                                        17

<PAGE>

           Further, the Colorado Limited Gaming Act of 1991 (the "Colorado Act")
provides that, in addition to any applicable license fees, a gaming tax shall be
imposed upon retail gaming licensees (casinos) up to a maximum of 40% of the
adjusted gross proceeds ("AGP") derived from limited stakes gaming. AGP is
generally defined as the total amounts wagered less payouts to players, except
for poker in which AGP means the monies retained by the casino as compensation
(the "rake"). The tax rates are set by the Colorado Commission annually.

           The Colorado Act declares public policy on limited stakes gaming to
be that: (1) the success of limited stakes gaming is dependent upon public
confidence and trust that licensed limited stakes gaming is conducted honestly
and competitively; the rights of the creditors of licensees are protected;
gaming is free from criminal and corruptive elements; (2) public confidence and
trust can be maintained only by strict regulation of all persons, locations,
practices, associations and activities related to the operation of licensed
gaming establishments and the manufacture or distribution of gaming devices and
equipment; (3) all establishments where limited gaming is conducted and where
gambling devices are operated, and all manufacturers, sellers and distributors
of certain gambling devices and equipment must therefore be licensed, controlled
and assisted to protect the public health, safety, good order and the general
welfare of the inhabitants of the state to foster the stability and success of
limited stakes gaming and to preserve the economy, policies and free competition
in Colorado; and (4) no applicant for a license or other affirmative Colorado
Commission approval has any right to a license or to the granting of the
approval sought. Any license issued or other Colorado Commission approval
granted pursuant to the provisions of the Colorado Act is a revocable privilege,
and no holder acquires any vested rights therein.

Regulatory Structure

           The Colorado Act subjects the ownership and operation of limited
stakes gaming facilities in Colorado to extensive licensing and regulation by
the Colorado Commission. The Colorado Commission has full and exclusive
authority to promulgate, and has promulgated, rules and regulations governing
the licensing, conduct and operation of limited stakes gaming. The Colorado Act
also created the Colorado Division of Gaming within the Colorado Revenue
Department to license, regulate and supervise the conduct of limited stakes
gaming in Colorado. The division is supervised and administered by the Director
of the Division of Gaming.

Gaming Licenses

           The Colorado Commission may issue the following licenses applicable
to the operation of Riviera Black Hawk:
<TABLE>
<CAPTION>

<S>         <C>
o        operator;
o        retail gaming;
o        support; and
o        key employee.
</TABLE>

            The first two licenses require annual renewal by the Colorado
Commission. Support and key employee licenses are issued for two-year periods
and are renewable by the Division of Gaming Director. The Colorado Commission
has broad discretion to condition, suspend for up to six months, revoke, limit
or restrict a license at any time and also has the authority to impose fines.

           An applicant for a gaming license must complete comprehensive
application forms, pay required fees and provide all information required by the
Colorado Commission and the Division of Gaming. Prior to licensure, applicants
must satisfy the Colorado Commission that they are suitable for licensing.
Applicants have the burden of proving their qualifications and must pay the full
cost of any background investigations. There is no limit on the cost of, or the
time it takes to complete, such background investigations.

                                        18

<PAGE>

           Gaming employees must hold either a support or key employee license.
Every large retail gaming licensee, such as Riviera Black Hawk, must have a key
employee licensee on premises and in charge of all limited stakes gaming
activities when limited stakes gaming is being conducted. The Colorado
Commission may determine that a gaming employee is a key employee and require
that such person apply for a key employee license.

            A retail gaming license is required for all persons conducting
limited stakes gaming on their premises. In addition, an operator license is
required for all persons who engage in the business of placing and operating
slot machines on the premises of a retailer. However, a retailer is not required
to hold an operator license. No person may have an ownership interest in more
than three retail gaming licenses. The definition of "ownership interest" for
purposes of the multiple license prohibition, however, has numerous exclusions
based on percentages of ownership interest or voting rights.

           A slot machine manufacturer or distributor license is required for
all persons who manufacture, import and distribute slot machines in Colorado. No
manufacturer or distributor of slot machines or associated equipment may
knowingly, without notification being provided to the Colorado Division within
ten days, have any interest in any casino operator, allow any of its officers or
any other person with a substantial interest in such business to have such an
interest, employ any person employed by a casino operator, or allow any casino
operator or any person having a substantial interest therein, to have any
interest in such business.

           The Colorado Act and regulations thereunder (the "Colorado
Regulations") require that every officer, director, and stockholder of private
corporations, or equivalent office or ownership holders for non-corporate
applicants, and every officer, director or stockholder holding a 5% or greater
interest or controlling interest in a publicly traded corporation, or owners of
an applicant or licensee, shall be a person of good moral character and submit
to a full background investigation conducted by the Division of Gaming and the
Colorado Commission. The Colorado Commission may require any person having an
interest, of any kind, in a license to undergo a full background investigation
and pay the cost of investigation in the same manner as an applicant.

           Persons found unsuitable by the Colorado Commission may be required
immediately to terminate any interest, association, or agreement with, or
relationship to, a licensee. A finding of unsuitability with respect to any
officer, director, employee, associate, lender or beneficial owner of a licensee
or applicant also may jeopardize the licensee's license or the applicant's
application. A license approval may be conditioned upon the termination of any
relationship with unsuitable persons. A person may be found unsuitable because
of prior acts, associations or financial conditions. Acts that would lead to a
finding of unsuitability include, among others, those that would violate the
Colorado Act or the Colorado Regulations or that contravene the legislative
purpose of the Colorado Act.

Duties of Licensees

           A licensee must keep the Division of Gaming advised of its business
operations including, but not limited to, gaming contracts and leases. All rules
for the conduct of gaming activity pursuant to the Colorado Act or the Colorado
Regulations must be strictly followed.

           Licensees, such as Riviera Black Hawk, have a continuing duty to
report immediately to the Division of Gaming the name, date of birth and social
security number of each person who obtains an ownership, financial or equity
interest in the licensee of 5% or greater, who has the ability to control the
licensee, who has the ability to exercise significant influence over the
licensee or who loans any money or other thing of value to the licensee.
Licensees must report to the Division of Gaming all gaming licenses, and all
applications for gaming licenses, in foreign jurisdictions.

           With limited exceptions applicable to licensees that are publicly
traded entities, no person may sell, lease, purchase, convey or acquire any
interest in a retail gaming or operator license or business without the prior
approval of the Colorado Commission.

           All agreements, contracts, leases, or arrangements in violation of
the Colorado Amendment, the Colorado Act or the Colorado Regulations are void
and unenforceable.

                                        19

<PAGE>

Taxes, Fees and Fines

           The Colorado Amendment requires each retail gaming licensee to pay in
monthly increments an annual tax of up to 40% of its AGP derived from limited
stakes gaming. Annually during April, May, and June, the Colorado Commission, as
mandated by the Colorado Regulations, conducts rule-making hearings concerning
the gaming tax rate and device fee rate for the subsequent gaming year. The
gaming year begins on July 1st. However, during such hearings rigid adherence to
addressing only specific, designated subjects related to the gaming taxes is not
required, and there is not a limit to the time or practical restriction on the
subject matters which the Colorado Commission may consider in determining the
various tax rates. Currently, the gaming tax is:
<TABLE>
<CAPTION>

<S>                  <C>
o 0.25% on the first $2 million of these amounts;
o 2% on amounts from $2 million to $4 million;
o 4% on amounts from $4 million to $5 million;
o 11% on amounts from $5 million to $10 million;
o 16% on amounts from $10 million to $15 million; and
o 20% on amounts over $15 million.
</TABLE>

           The City of Black Hawk assesses an annual device fee of $750.00 per
device on all gaming devices exceeding 50. There is no statutory limit on state
or city device fees, which may be increased at the discretion of the Colorado
Commission or the city. In addition, a business improvement fee of as much as
$7.42 per device and a monthly transportation authority device fee of $6.41 per
device also may apply depending upon the location of the licensed premises in
Black Hawk.

           Black Hawk also imposes taxes and fees on other aspects of the
businesses of retail gaming licensees, such as parking, alcoholic beverage
licenses and other municipal taxes and fees. Significant increases in these fees
and taxes, or the imposition of new taxes and fees, may occur.

           Violation of the Colorado Act or the Colorado Regulations generally
constitutes a class 1 misdemeanor, except as may be specifically provided
otherwise in the Colorado Act, which may subject the violator to fines or
incarceration or both. A licensee who violates the Colorado Act or Colorado
Regulations is subject to suspension of the license for a period of up to six
months, fines or both, or to license revocation.

Requirements for Publicly Traded Corporations

           The Colorado Commission has enacted Rule 4.5, which imposes
requirements on publicly traded corporations holding gaming licenses in Colorado
and on gaming licenses owned directly or indirectly by a publicly traded
corporation, whether through a subsidiary or intermediary company. The term
"publicly traded corporation" includes corporations, firms, limited liability
companies, trusts, partnerships and other forms of business organizations. Such
requirements automatically apply to any ownership interest held by a publicly
traded corporation, holding company or intermediary company thereof, where the
ownership interest directly or indirectly is, or will be upon approval of the
Colorado Commission, 5% or more of the entire licensee. In any event, if the
Colorado Commission determines that a publicly traded corporation, or a
subsidiary, intermediary company or holding company, has the actual ability to
exercise influence over a licensee, regardless of the percentage of ownership
possessed by said entity, the Colorado Commission may require the entity to
comply with the disclosure regulations contained in Rule 4.5.

           Under Rule 4.5, gaming licensees, affiliated companies and
controlling persons commencing a public offering of voting securities must
notify the Colorado Commission no later than ten business days after the initial
filing of a registration statement with the SEC. Licensed, publicly traded
corporations are also required to send proxy statements to the Division of
Gaming within five days after their distribution. Licensees to whom Rule 4.5
applies must include in their charter documents provisions that: restrict the
rights of the licensees to issue voting interests or securities except in
accordance with the Colorado Act and the Colorado Regulations; limit the rights
of persons to transfer voting interests or securities of licensees except in
accordance with the Colorado Act and the Colorado Regulations; and provide that
holders of voting interests or securities of licensees found unsuitable by the

                                        20

<PAGE>

Colorado Commission may, within 60 days of such finding of unsuitability, be
required to sell their interests or securities back to the issuer at the lesser
of the cash equivalent of the holders' investment or the market price as of the
date of the finding of unsuitability. Alternatively, the holders may, within 60
days after the finding of unsuitability, transfer the voting interests or
securities to a suitable person, as determined by the Colorado Commission. Until
the voting interests or securities are held by suitable persons, the issuer may
not pay dividends or interest, the securities may not be voted, they may not be
included in the voting or securities of the issuer, and the issuer may not pay
any remuneration in any form to the holders of the securities.

           Pursuant to Rule 4.5, persons who acquire direct or indirect
beneficial ownership of either (1) 5% or more of any class of voting securities
of a publicly traded corporation that is required to include in its articles of
organization the Rule 4.5 charter provisions, or (2) a 5% or greater beneficial
interest in a gaming licensee, directly or indirectly through any class of
voting securities of any holding company or intermediary company of a licensee
(collectively such persons are hereinafter referred to as the "qualifying
persons"), must notify the Division of Gaming within 10 days of such
acquisition, must submit all requested information, and are subject to a finding
of suitability as required by the Division of Gaming or the Colorado Commission.
Licensees also must notify any qualifying persons of these requirements. A
qualifying person other than an institutional investor whose interest equals 10%
or more must apply to the Colorado Commission for a finding of suitability
within 45 days after acquiring such securities. Licensees must also notify any
qualifying persons of these requirements. Whether or not notified, qualifying
persons are responsible for complying with these requirements.

           A qualifying person who is an institutional investor under Rule 4.5
and who, individually or in association with others, acquires, directly or
indirectly, the beneficial ownership of 15% or more of any class of voting
securities must apply to the Colorado Commission for a finding of suitability
within 45 days after acquiring such interests.

           The Colorado Regulations also provide for exemption from the
requirements for a finding of suitability when the Colorado Commission finds
such action to be consistent with the purposes of the Colorado Act.

           Pursuant to Rule 4.5, persons found unsuitable by the Colorado
Commission must be removed from any position as an officer, director, or
employee of a licensee, or from a holding or intermediary company. Such
unsuitable persons also are prohibited from any beneficial ownership of the
voting securities of any such entities. Licensees, or affiliated entities of
licensees, are subject to sanctions for paying dividends or distributions to
persons found unsuitable by the Colorado Commission, or for recognizing voting
rights of, or paying a salary or any remuneration for services to, unsuitable
persons. Licensees or their affiliated entities also may be sanctioned for
failing to pursue efforts to require unsuitable persons to relinquish their
interest. The Colorado Commission may determine that anyone with a material
relationship to, or material involvement with, a licensee or an affiliated
company must apply for a finding of suitability or must apply for a key employee
license.

Alcoholic Beverage Licenses

           The sale of alcoholic beverages in gaming establishments is subject
to strict licensing, control and regulation by state and local authorities.
Alcoholic beverage licenses are revocable and nontransferable. State and local
licensing authorities have full power to limit, condition, suspend for as long
as six months or revoke any such licenses. Violation of state alcoholic beverage
laws may constitute a criminal offense resulting in incarceration, fines, or
both.

           There are various classes of retail liquor licenses, which may be
issued under the Colorado Liquor Code. A gaming licensee may sell malt, vinous
or spirituous liquors only by the individual drink for consumption on the
premises. Even though a retail gaming licensee may be issued one of the various
classes of retail liquor licenses, such gaming licensee, and persons affiliated
with that licensee, are subject to restrictions concerning what other types of
liquor licenses they may hold. An application for an alcoholic beverage license
in Colorado requires notice, posting and a public hearing before the local
liquor licensing authority (e.g., the City of Black Hawk) prior to approval of
the same. The Colorado Department of Revenue's Liquor Enforcement Division must
also approve the application. Riviera Black Hawk's hotel and restaurant license
has been approved by both the local licensing authority and the State Division
of Liquor Enforcement. Such license must be, and has been, renewed annually
since its issuance.

                                        21

<PAGE>

Federal Registration

           Riviera Operating Corporation is required to annually file with the
Attorney General of the United States in connection with the sales,
distribution, or operations of slot machines. All requisite filings for 2006
have been made.

Item 1A.  Risk Factors

           An investment in our securities involves a high degree of risk. We
operate in a highly competitive, dynamic and rapidly changing industry that
involves numerous risks and uncertainties. Moreover, our debt instruments impose
restrictions on us that are for the benefit of certain of our creditors, but not
necessarily for our stockholders or us. Anyone who is making an investment
decision regarding our securities should carefully consider the following risk
factors, as well as the other information contained or incorporated by reference
in this report. The risks and uncertainties described below are those that we
currently believe may materially affect our company or your investment. Other
risks and uncertainties that we do not presently consider to be material, or of
which we are not presently aware, may become important factors that adversely
affect our security holders or us in the future. If any of the risks discussed
below actually materialize, then our business, financial condition, operating
results, cash flows and future prospects, or your investment in our securities,
could be materially and adversely affected, resulting in a loss of all or part
of your investment.

     Risks Relating To Our Business And Our Capital Structure

         We Face Intense Competition In The Two Markets Where We Operate

           In Las Vegas, intense competition has resulted from, among other
things, significant increases in new hotel rooms, casino sizes and convention,
trade show and meeting facilities. Our success depends on the success of Riviera
Las Vegas and its ability to attract visitors and to continue operating
successfully. Riviera Las Vegas competes with high-end, middle market and other
casinos resort properties and hotels, including those located on or near the Las
Vegas Strip or in downtown Las Vegas, on the basis of overall atmosphere, range
of amenities, level of service, price, location, entertainment offered, shopping
and restaurant facilities, theme and size. Currently, there are approximately 30
major gaming properties located on or near the Las Vegas Strip, approximately
ten additional major gaming properties in the downtown area and many additional
gaming properties located in other areas of Las Vegas. Companies that have more
than one hotel/casino facility operate many of these properties, and many have
greater name recognition and financial and marketing resources than we do and
market to the same target demographic groups as we do. Furthermore, additional
major hotel/casino openings and significant expansion of existing properties,
containing a large number of hotel rooms and attractions, are expected to occur
in Las Vegas in the coming years, which will put even further pressure on us to
remain competitive.

           In Black Hawk/Central City, the primary competitive factors are
location, availability and convenience of parking, number of slot machines and
gaming tables, promotional incentives, hotel rooms, types and pricing of
non-gaming amenities, name recognition and overall atmosphere. Our main
competitors are the larger gaming facilities, particularly those with
considerable on-site or nearby parking and established reputations in the local
market. Two of the most successful casinos in Colorado are located across the
street from, and are considerably larger than, Riviera Black Hawk. Three other
casinos in our market offer hotel accommodations as well as gaming facilities,
and thereby have some competitive advantages over us. Also, a road which opened
in November 2004 and which enables drivers to bypass Black Hawk on their way to
Central City, has led to significant recent growth in the Central City gaming
market and may give our Central City competitors an advantage over us.

           There have also been efforts in Colorado by Native American tribes to
acquire land to use for construction of a casino that would operate without the
limitations imposed on the Colorado casino industry, and efforts by other
parties to amend the Colorado Constitution to permit installation of slot
machines at five racetracks. Thus far, the Native American casino initiatives in
Colorado have either been rejected or have failed to win support from government
authorities, and in 2003 a race track/slot machine initiative was rejected by
Colorado voters. Nevertheless, if either of these types of initiatives were to
be pursued further in Colorado and gain the necessary approvals, then our
Colorado operations could be adversely affected.

                                        22

<PAGE>

           In addition to the competition that we face from our competitors in
Las Vegas and Colorado, we face substantial competition from other companies in
the gaming industry generally, such as land-based casinos, dockside casinos,
riverboat casinos, casinos located on Native American land in California and
elsewhere, and other forms of legalized gambling. If other casinos operate more
successfully, if other existing gaming properties continue to be enhanced or
expanded, or if additional hotels and casinos are established in or around the
locations where we conduct business, we may lose market share.

           The number of casinos on Native American lands has increased since
enactment of the Indian Gaming Regulatory Act of 1988. In 2000 California voters
approved an amendment to the California Constitution that allows Las Vegas-style
gaming on Native America lands in that state. While new gaming jurisdictions
generally have not materially impacted Las Vegas, the expansion of gaming into
California poses a more serious threat to the continued growth of Las Vegas.

           We also compete, to some extent, with other forms of gaming on both a
local and national level, including state-sponsored lotteries, Internet gaming,
on- and off-track wagering and card parlors. In particular, the legalization of
gaming or the expansion of legalized gaming in or near any geographic area from
which we attract or expect to attract a significant number of our customers
could have a significant adverse effect on our business, financial condition,
results of operations and future prospects.

           Increased competition may also require us to make substantial capital
expenditures to maintain or enhance the competitive positions of our two
properties. Because we are highly leveraged, after we satisfy our obligations
under our outstanding indebtedness we might not have sufficient financing to
make such expenditures. If we are unable to make such expenditures, our
competitive position, results of operations and future prospects could be
materially and adversely affected.

         Our Company Operates In Only Two Markets, Las Vegas And Black Hawk,
            Which Exposes Us To Greater Risks Than Gaming Companies
           With More Operating Properties Or A Presence In More Markets

           We do not have material assets or operations other than Riviera Las
Vegas and Riviera Black Hawk. Therefore, we are entirely dependent upon these
two properties for our cash flow. This makes us more sensitive to events and
conditions affecting the markets in which we operate, including the following:

           o      local economic and competitive conditions,

           o      inaccessibility due to weather conditions, road construction
                  or closure of primary access routes;

           o      decline in air passenger traffic due to higher ticket costs or
                  fears concerning air travel;

           o      a decline in automobile traffic due to higher gasoline prices;

           o      changes in state and local laws and regulations, including
                  those affecting gaming;

           o     an increase in the cost of electrical power for Riviera Las
                 Vegas as a result of, among other things, power shortages in
                 California or other western states with which Nevada shares a
                 single regional power grid; and

           o      a decline in the number of visitors to Las Vegas or the number
                  of Colorado residents who visit Black Hawk.

         Our Significant Indebtedness Could Adversely Affect Our Financial
              Health And Prevent Us From Fulfilling Our Obligations
                    Under Our Outstanding Indebtedness

           We have a significant amount of debt, which could have important
consequences to our stockholders and significant effects on our business and our
ability to satisfy our debt obligations. For example, it could:

                                        23

<PAGE>

           o      increase our vulnerability to adverse economic or industry
                  conditions or a downturn in our business;

           o     limit our ability to redeem our 11% Senior Secured Notes ("11%
                 Notes") if we are required to do so as a result of a change in
                 control of our company or regulatory requirements;

           o     result in an event of default if we fail to comply with the
                 financial and other restrictive covenants in our Note Indenture
                 or our senior secured credit facility, which could result in
                 all of our indebtedness becoming immediately due and payable
                 and would permit certain lenders to foreclose on our assets
                 securing that indebtedness;

           o     limit our ability to fund or obtain additional financing for
                 future working capital needs, capital expenditures and other
                 general financial requirements;

           o     require us to dedicate a substantial portion of our cash flow
                 from operations to payments on our indebtedness, thereby
                 reducing the availability of our cash flow to fund working
                 capital needs, capital expenditures, development projects,
                 acquisitions and other general corporate purposes;

           o     limit our flexibility in planning for, or reacting to, changes
                 in our business and industry; and

           o     place us at a disadvantage compared to our competitors that
                 have less debt or whose debt is at lower interest rates and on
                 more favorable terms than our debt.

         We Will Need To Refinance Our 11% Notes In Order To Repay Them, And
                Refinancing Terms May Be Unfavorable To Us

           Our ability to repay the 11% Notes on or before the June 15, 2010
maturity date will depend on our ability to refinance them, because our cash
flow from operations is insufficient for this purpose. We are currently
exploring refinancing opportunities, with a view to refinancing in the second
half of 2007. However, in view of, among other things, our lack of profitability
and the other risk factors that we are reporting, we may have to accept
refinancing terms that are unfavorable to us. This, in turn, could have further
adverse effects on our financial health and our ability to satisfy our debt
obligations.

      We Are Dependent On Key Personnel Whom We Might Have Difficulty Replacing,
        Due To A  Shortage Of Management-Level Personnel In Our Industry And
             Market Perceptions About Our Prospects

           Our ability to operate successfully is dependent, in part, upon the
continued services of certain of our executive personnel. Our loss of any of
them or our inability to attract or retain key employees in the future could
have a material adverse effect on us. We have an employment agreement with
William L. Westerman, our Chairman of the Board, President and Chief Executive
Officer ("CEO") who has been with us or our predecessor company since 1991. Mr.
Westerman is employed for an indefinite period, subject to termination by us
upon at least 90 days' written notice or termination by him upon at least 180
days' written notice. Mr. Westerman's contract is also subject to earlier
termination upon the occurrence of certain events. We cannot assure you that we
would find a suitable replacement for Mr. Westerman if he retires or his
employment terminates for any other reason. There is a shortage of skilled
management-level employees in the gaming industry. This shortage, combined with
our relatively limited financial and marketing resources, competitive position
and market perceptions about our future prospects, particularly since our April
5, 2006 Agreement and Plan of Merger (the "Merger Agreement") was terminated on
August 29, 2006, would likely add to our difficulties in finding suitable
replacements if we lose the services of any of our executives or other key
personnel which might make it difficult for us to attract and retain qualified
personnel at that level.

                                        24

<PAGE>

       Certain Transactions Or Events Could Make Us Liable For An Approximately
             $7.9 Million  Topping Fee

           Because our shareholders disapproved the Merger Agreement at a time
when a competing takeover proposal had been announced and had not been
withdrawn, we could be liable to Riviera Acquisition Holdings Inc. ("RAHI") for
a Topping Fee of approximately $7.9 million if, within 12 months after the
August 29, 2006 termination date of the Merger Agreement, we enter into a
definitive agreement with a third party with respect to the consummation of a
"Takeover Proposal" or a Takeover Proposal is consummated. A Takeover Proposal
includes a proposal for the acquisition of 30% or more of our assets or more
than 30% of our outstanding common stock or the stock of any of our subsidiaries
or for the acquisition of us or any of our subsidiaries through a merger or
other business combination.

        Regulations Issued By Gaming Or Other Governmental Authorities Could
           Adversely Affect Our Operations

           As owners and operators of gaming facilities, we are subject to
extensive governmental regulation. The ownership, management and operation of
gaming facilities are subject to extensive laws, regulations and ordinances,
which are administered by various federal, state and local government entities
and agencies. The gaming authorities in the jurisdictions in which we operate
have broad authority and discretion to require us and our officers, directors,
managers, employees and certain security holders to obtain various licenses,
registrations, permits, findings of suitability or other approvals. To enforce
applicable gaming regulations, gaming authorities may, among other things,
limit, suspend or revoke the licenses of any gaming entity or individual, and
may levy fines against us or individuals or may cause us to forfeit our assets
for violations of gaming laws or regulations. Any of these actions would have a
material adverse effect on us.

           Nevada and Colorado state and local government authorities require us
to obtain gaming licenses and require our officers and key employees to
demonstrate suitability to be involved in gaming operations. Those authorities
may limit, condition, suspend or revoke a license for any cause they deem
reasonable. Also, if we violate any gaming laws or regulations, those
authorities may levy substantial fines against us or the individuals involved in
the violations. The occurrence of any of these events could have a material
adverse effect on our business, financial condition, results of operations and
future prospects.

           We can not assure you that any new licenses, registrations, findings
of suitability, permits and approvals, including for any proposed expansion of
our properties or our entry into new markets, will be given or that our existing
ones will be renewed when they expire. Any failure to renew or maintain our
licenses or receive new licenses when necessary would have a material adverse
effect on us.

           We are subject to a variety of other laws, rules and regulations,
including those pertaining to zoning, environmental matters, construction, land
use and the serving of alcoholic beverages. We also pay substantial taxes and
fees in connection with our operations as a gaming company, which taxes and fees
are subject to increase or other change at any time. Any changes to these laws
could have a material adverse effect on our business, financial condition,
results of operations and future prospects.

           Our compliance costs associated with these laws, regulations and
licenses are significant. A change in the laws, regulations and licenses
applicable to our business or a violation of any of them could require us to
make material expenditures or could otherwise materially adversely affect our
business, financial condition, results of operations and future prospects.

           In Black Hawk and in other jurisdictions from which we attract
customers, or in which we may expand, gaming is subject to local referendum. If
the results of a referendum held in a jurisdiction in which we operate were to
restrict gaming in whole or in part or if the results of a referendum in a
nearby non-gaming jurisdiction were to permit gaming, our results of operations
could be negatively impacted.

         We Are Subject To Potential Exposure To Environmental Liabilities

                                        25
<PAGE>

           Generally, we are subject to various federal, state and local
governmental laws and regulations relating to the use, storage, discharge,
emission and disposal of hazardous materials. Failure to comply could result in
the imposition of severe penalties or restrictions on our operations by
governmental agencies or courts. We are not aware of any such exposure at our
properties. Riviera Black Hawk is located within a 400-square mile area that in
1983 was designated as the Clear Creek Central/City National Priorities List
Site Study Area under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended. Although Riviera Black Hawk is not within any
of the specific areas currently identified for investigation or remediation
under that statute, environmental problems may subsequently be discovered,
including in connection with any future construction on our property.
Furthermore, governmental authorities could broaden their investigations and
identify areas of concern within the site, we could be identified as a
"potentially responsible party" and any related liability could have a material
adverse effect on us. We do not have insurance to cover environmental
liabilities, if we incur any.

         Energy Price Increases May Adversely Affect Our Costs Of Operations
            And Our Revenues

           Our casino properties use significant amounts of electricity, natural
gas and other forms of energy. Recent substantial increases in the cost of
electricity in the United States have negatively affected our operating results
and are likely to continue to do so. The extent of the impact is subject to the
magnitude and duration of energy price increases, but this impact could be
material. In addition, energy price increases in cities that constitute a
significant source of customers for our properties could result in a decline in
disposable income of potential customers and a corresponding decrease in
visitation to our properties, which could negatively impact our revenues.

         Our Business, Financial Condition, Results Of Operations And Future
           Prospects Are Dependent On Many Factors That Are Beyond
           Our Control

           The economic health of our business is generally affected by a number
of factors that are beyond our control, including:

           o      decline in tourism and travel due to concerns about homeland
                  security, terrorism or other destabilizing events;

           o      decline in the Las Vegas convention business;

           o      intense competitive  conditions in the gaming industry,
                  including the effect of such conditions on the pricing of our
                  games and products;

           o      general economic conditions and economic conditions specific
                  to our primary markets;

           o      changes in the  regulatory  regimes  affecting  our business,
                  including  changes to  applicable  gaming,  employment,
                  environmental or tax regulations;

           o      inaccessibility to our property due to construction on
                  adjoining or nearby properties, streets or walkways;

           o      substantial increases in the cost of electricity, natural gas
                  and other forms of energy;

           o      local conditions in key gaming markets, including seasonal and
                  weather-related factors;

           o      increased transportation costs;

           o      levels of disposable income of casino customers;

           o      continued increases in health care costs;

                                        26
<PAGE>

           o      increases in gaming taxes or fees;

           o      the relative popularity of entertainment alternatives to
                  casino gaming that compete for the leisure dollar;

           o      an outbreak or suspicion of an outbreak of an infectious
                  communicable disease; and

           o      the adoption of anti-smoking regulations.

           Any of these factors could negatively impact our property or the
casino industry generally, and as a result, our business, financial condition
and results of operations.

         We May Incur Losses That Are Not Adequately Covered By Insurance

           Insurance may not be available in the future or adequate to cover all
loss or damage to which our business or our assets might be subjected. Since the
terrorist attacks of September 11, 2001, insurance coverage for certain types of
damages or occurrences has diminished substantially and is no longer available
at reasonable commercial rates. The lack of adequate insurance for certain types
or levels of risk could expose us to significant losses if a catastrophe or
lawsuit occurs for which we do not have insurance coverage. Any losses we incur
that are not adequately covered by insurance may decrease our future operating
income, require us to pay the costs of replacing or repairing destroyed property
and reduce the funds available for payment of our debt obligations.

         We Are Subject To Litigation, Which, If Adversely Determined, Could
             Cause Us To Incur Substantial Losses

           From time to time during the normal course of operating our business,
we are subject to various litigation claims and other legal disputes. Some of
the litigation claims may not be covered under our insurance policies or our
insurance carriers may seek to deny coverage. As a result, we might be required
to incur significant legal fees, which may have a material adverse effect on us.
In addition, because we cannot predict the outcome of any legal action, it is
possible that as a result of litigation, we will be subject to adverse judgments
or settlements that could significantly reduce our earnings or result in losses.

         Homeland Security, Terrorism And War Concerns, As Well As Other
           Factors Affecting Discretionary Consumer Spending, May Harm
           Our Operating Results

           The strength and profitability of our business depend on consumer
demand for hotel/casino resorts, gaming in general and the types of amenities we
offer. A general downturn in economic conditions and changes in consumer
preferences or discretionary consumer spending could harm our business. The
terrorist attacks of September 11, 2001, ongoing war activities and concerns
about terrorism and homeland security have had a negative impact on travel and
leisure expenditures, including lodging, gaming (in some jurisdictions) and
tourism. We cannot predict the extent to which those events may continue to
affect us, directly or indirectly, in the future. An extended period of reduced
discretionary spending or disruptions or declines in travel could significantly
harm our operations.

           In addition to concerns about war, homeland security and terrorism,
other factors affecting discretionary consumer spending, including general or
regional economic conditions, disposable consumer income, fears of recession and
consumer confidence in the economy, may negatively impact our business. Negative
changes in factors affecting discretionary spending could reduce customer demand
for the products and services we offer, thus imposing practical limits on our
pricing and harming our operations.

Risks Relating To Our Common Stock

         Our Stock Price Has Been Volatile, Which Could Result In Substantial
Losses For Our Shareholders.

           Our common stock is traded on the American Stock Exchange ("AMEX").
Our stock's average daily trading volume for the 52-week period ended February
21, 2007 was approximately 71,830 shares. The daily closing sale prices of our
stock, as reported by AMEX, have ranged from $13.80 to $25.35 for the 52-week
period ended February 21, 2007. The volatility of the trading price of our stock
could be due to many factors including, but not limited to:

                                        27

<PAGE>

            .    our entry into the Merger Agreement on April 5, 2006 and
                 termination of it on August 29, 2006;

            .    our announcement that we received a competing takeover proposal
                 while the Merger Agreement was still in effect;

            .    the  announcements  in November 2006 of our receipt of a new
                 takeover  proposal and in December 2006 of the withdrawal
                 of that proposal;

            .    the 2006 sale by our CEO of 2,095,593 shares of our stock at
                 $15.00 per share;

            .    fluctuations in Las Vegas real estate values, particularly as
                 they affect property on the Las Vegas Strip;

            .    the relatively low trading volume for our stock;

            .    quarterly fluctuations in our financial results;

            .    changes in analysts' estimates of our financial performance or
                 future prospects;

            .    announcements of new services or programs;

            .    additions or departures of key personnel;

            .    general conditions in our industry and in the financial
                 markets; and

            .    a variety of other risk factors including the ones described
                 elsewhere in this report.

         The Volatility Of The Las Vegas Real Estate Market Might Result In A
             Substantial Decline In Our Stock Price

           Over the past three years, the market value of real estate located on
or near the Las Vegas Strip has increased substantially. Over that same period,
there has been a substantial increase in the trading price of our stock. Our Las
Vegas property, which is located near the northern end of the Las Vegas Strip
and consists of approximately 26 acres, is valued on our balance sheet at its
1993 historical cost of $21 million. We believe that the increase in the value
of real estate on the Las Vegas Strip has been a significant factor in the
increase in our stock price over the past three years. Likewise, we believe that
any future downward trend in those real estate values could cause a significant
drop in the price of our stock.

         There Are Limitations On Changes In Control Of Our Company That Could
           Reduce Your Ability To Sell Our Shares In Excess Of
            Current Market Prices

           The Note Indenture restricts the ability of anyone to effect a change
in control of our company. If anyone acquires 35% or more of our outstanding
stock, or if other events occur that constitute a change in control according to
our Note Indenture, then we would have to make a prompt offer to repurchase all
of our 11% Notes at 101% of their principal amount plus accrued interest. It is
unlikely that we would have the funds to repurchase our 11% Notes within the
required time frame unless we obtained the necessary funding as part of the
change in control transaction, which adds significantly to the funding that a
buyer would need to acquire our company. Our Note Indenture also would require
us to obtain the consent of holders of a majority of the outstanding principal
amount of the 11% Notes in order for us to be a party to a merger or to sell all
or substantially all of our assets unless, after giving effect to the
transaction, we meet certain net worth or financial ratio tests, which might be
difficult or impossible for us to meet.

                                        28

           Besides our Note Indenture, our articles of incorporation and bylaws
contain provisions that could reduce the likelihood of a change in control or
acquisition of our company. These could limit your ability to sell your shares
at a premium or otherwise affect the price of our common stock. These
provisions:

            .   limit the voting power of persons who acquire more than 10% of
                our outstanding stock without our prior approval.

            .   permit us to issue up to 60 million shares of common stock;

            .   permit us to increase the size of our board of directors and
                fill the resulting vacancies without a vote by shareholders; and

            .   limit the persons who may call special meetings of shareholders.

           In addition, Nevada law contains provisions governing the acquisition
of a substantial or controlling interest in certain publicly-held Nevada
corporations, including our company. Those laws provide generally that any
person who acquires more than a specified percentage of our outstanding stock
must obtain certain approvals from us before the acquisition or they might be
denied voting rights or the ability to engage in various transactions with us,
unless our disinterested stockholders vote to restore those rights. The
ownership percentage that triggers some of these restrictions is 10%, and
further restrictions can be triggered at the 20%, 33-1/3% or 50.1% ownership
level.

           Also, a person that seeks to acquire control must satisfy the
licensing requirements of the Nevada and Colorado gaming authorities. The gaming
authorities may also require controlling stockholders, officers, directors and
other persons having a material relationship or involvement with a person
proposing to acquire control to be investigated and licensed as part of the
approval process relating to the transaction.

           Nevada law also provides that we may resist a change or potential
change in control if our board of directors determines that the change is not in
the best interest of our company.

         We Have Never Paid Dividends, Do Not Intend To Pay Dividends In The
          Foreseeable Future And Cannot Pay Dividends To Any Unsuitable Person

           We have never paid dividends on our stock, nor do we anticipate
paying dividends in the foreseeable future. We intend to retain our cash flow or
earnings, if any, to use in our growth and ongoing operations. In addition,
because we are a holding company, our ability to pay dividends would be
dependent on our subsidiaries' ability to provide funds to us. However, the
terms of our debt instruments and credit facilities materially restrict our
ability to pay dividends even when our subsidiaries pay dividends to us. Also,
due to gaming law considerations, our articles of incorporation prohibit the
payment of dividends to anyone who is deemed an "unsuitable person" or is an
affiliate of an "unsuitable person."

       Certain Owners Of Our Stock May Have To File An Application With, And Be
        Investigated By, Nevada Gaming Authorities.  If That Owner Is Deemed
       "Unsuitable," It Will Lose Most Of The Attributes Of Being A Stockholder

          Any person who acquires beneficial ownership of more than 10% of our
voting securities must apply to the Nevada Commission for a finding of
suitability within 30 days after the Chairman of the Nevada Board mails a
written notice requiring such application. Under certain circumstances, if an
"institutional investor" (as defined in Nevada gaming regulations) acquires
beneficial ownership of more than 10% but not more than 15% of our voting
securities and holds the securities only for investment purposes, it may apply
for a waiver of such finding of suitability requirement. In addition, any
beneficial owner of our voting securities, regardless of the number of shares
owned, may be required, at the discretion of the Nevada Commission, to apply for
a finding of suitability. A finding of suitability is comparable to licensing,
and the applicant must pay all costs of investigation incurred by the Nevada
gaming authorities in conducting the investigation.

          Any such person who fails to apply for a finding of suitability within
30 days after being ordered to do so by the Nevada Commission may be found to be
unsuitable. Any person who is found by the Nevada Commission to be unsuitable to
be a beneficial owner of our voting securities but continues such beneficial
ownership beyond the period of time prescribed by the Nevada Commission may be
guilty of a criminal offense. We will be subject to disciplinary action if,
after we receive notice that a person is unsuitable to be a beneficial owner of
our voting securities or to have any other relationship with us, we:

                                        29

<PAGE>

           .    pay that person any dividend or interest on our voting
                securities;

           .    allow that person to exercise, directly or indirectly, any
                voting right conferred through our voting securities held by
                that person;

           .    pay that person any remuneration in any form for services
                rendered or otherwise; or

           .    fail to pursue all lawful efforts to require that person to
                relinquish our voting securities for cash at fair market value.


         We May Redeem Shares Due To Gaming Law Considerations, Either As
Required By Gaming Authorities Or In Our Discretion

           Our articles of incorporation provide that if a gaming authority
determines that any stockholder or its affiliates are unsuitable, or if deemed
necessary or advisable by us for gaming law considerations, we may redeem shares
of our stock that the stockholder or the stockholder's affiliates own or
control. The redemption price will be the amount required by the gaming
authority or, if the gaming authority does not determine the price, the price
deemed reasonable by us. If we determine the redemption price, that price will
be capped at the market price of the shares on the date we give the redemption
notice. We may pay the redemption price in cash, by promissory note, or both, as
required by the applicable gaming authority and, if not so required, as we
elect.

 We Do Not Meet AMEX's Earnings Or Net Worth Listing Standards

           Our common stock is listed on AMEX under the symbol RIV. We do not
currently meet the earnings or net worth standards of AMEX. We have been
informed, however, that according to AMEX policy, AMEX will not normally
consider suspending dealings in or delisting the securities of a company which
is below the earnings and net worth standards if the total market value of that
company's publicly held shares is at least $15 million. Based on the number of
our publicly held shares as of February 21, 2006, our shares must have a
per-share market value of at least $1.50 in order to meet that $15 million
level. However, we cannot be sure that AMEX will continue to follow that policy
or that the price of our shares will continue to enable us to stay at that level
in the future. If our shares were delisted from AMEX, the marketability and
liquidity of our stock could be significantly reduced.

Item 2.    Properties

           Riviera Las Vegas

           Riviera Las Vegas is located on the Las Vegas Strip, at 2901 Las
Vegas Boulevard South, Las Vegas, Nevada and occupies approximately 26 acres.
The buildings comprise approximately 1.8 million square feet, including 110,000
square feet of casino space, a 160,000 square-foot convention, meeting and
banquet facility, 2,075 hotel rooms (including 177 luxury suites) in five
towers, three restaurants, a buffet, four showrooms, a lounge and approximately
2,300 parking spaces. In addition, executive and other offices for Riviera Las
Vegas are located on the property.

           There are approximately 35 food and retail concessions operated under
individual leases with third parties. The leases are for periods from one month
to, including option periods, up to twenty years.

           The Riviera Las Vegas and Riviera Black Hawk properties are
encumbered by deeds of trust securing our 11% Notes, which mature in June 2010
and our five-year senior secured credit facility, which expires in July 2007.

                                        30

<PAGE>
           Riviera Black Hawk

           Riviera Black Hawk is located on 1.63 acres of land at 400 Main
Street, Black Hawk, Colorado. The buildings include approximately 325,000 square
feet and comprise 32,000 square feet of gaming space, parking spaces for
approximately 520 vehicles (substantially all of which are covered), a 252-seat
buffet, two bars and an entertainment center with seating for approximately 400
people.

Item 3.    Legal Proceedings

           On June 19, 2006, a complaint (the "Consolidated Complaint")
captioned "In Re Riviera Holdings Corporation Shareholders' Litigation" was
filed against the Company and its directors in the District Court of Clark
County, Nevada (the "Court") (Case No. A520100), as a consolidation of four
class action complaints previously filed (the "Prior Complaints"). The
Consolidated Complaint was filed pursuant to a Stipulation and Pretrial Order
entered by the Court, and was substantially similar to the Prior Complaints. The
plaintiffs requested the Court to do the following, among other things: (i)
declare that the case is maintainable as a class action; (ii) declare that the
Merger Agreement is unlawful; (iii) enjoin consummation of the merger
contemplated by the Merger Agreement "unless and until ...[the Company] adopts
and implements a procedure or process to obtain the highest possible price for
shareholders"; (iv) direct the defendants to disclose all material information
before seeking shareholder approval of "any acquisition;" and (v) impose a
constructive trust, in favor of the plaintiffs, on any benefits improperly
received by the defendants. On August 29, 2006, our stockholders disapproved the
Merger Agreement and we terminated it. As a result, the parties to the
Consolidated Complaint agreed to extend the deadline to file a motion to dismiss
from September 1, 2006 to March 1, 2007. On or around February 26, 2007, the
parties agreed to dismiss the Consolidated Complaint and on March 2, 2007, the
parties filed a Stipulation and Order to Dismiss the Consolidated Complaint
("Dismissal Order") with the Court. The Consolidated Complaint will be formally
dismissed upon the Court's execution of the Dismissal Order.

           We are also a party to routine lawsuits, either as plaintiff or as
defendant, arising from the normal operations of a hotel or casino. We do not
believe that the outcome of such litigation, in the aggregate, will have a
material adverse effect on our financial position or results of our operations.

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

           Not applicable.


           PART II


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

           (a) Our common stock is traded on AMEX. As of March 1, 2007, we had
approximately 270 shareholders of record and individual participants in security
position listings. There are a significantly greater number of shareholders
whose shares are held in street name. Based on information we collected as of
March 1, 2007, we estimate that we have at least 1,100 beneficial holders in
total.

           We have never paid dividends on our common stock and do not expect to
pay dividends (cash or otherwise) on our common stock for the foreseeable
future. Our ability to pay dividends is primarily dependent upon receipt of
dividends and distributions from our subsidiaries, which include the operations
of Riviera Las Vegas and Riviera Black Hawk. In addition, the Note Indenture and
our senior secured credit facility, which are discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" and in Note 8 to our financial statements in
this report, materially restrict our ability to pay dividends.

           We do not currently meet the earnings or net worth listing standards
of AMEX. We have been informed, however, that according to AMEX policy, AMEX
will not normally consider suspending dealings in or delisting the securities of
a company that does not meet the earnings or net worth standards if the
company's publicly held shares have a market value of at least $15 million.
However, we cannot give any assurance that AMEX will continue to follow that
policy or that our share price will continue to enable us to stay at that level
in the future. Based on the number of our publicly held shares as of February
23, 2007, our share price would have to be at least $1.50 in order for us to
reach the $15 million level. If our shares were delisted from AMEX, the
marketability and liquidity of our common stock could be significantly reduced.

                                        31

<PAGE>

           The table below sets forth the high and low sale prices by quarter
for the years ended December 31, 2006 and 2005, based on AMEX reported prices by
certain brokers who have had transactions in our common stock during the year:

<TABLE>
<CAPTION>

                    First            Second            Third           Fourth
                   Quarter          Quarter           Quarter         Quarter
2006
<S>                 <C>              <C>              <C>              <C>
HIGH               $16.85           $25.11           $22.52          $24.16
LOW                 13.95            17.11            19.25           19.23

2005
HIGH               $16.23           $24.00           $26.83          $22.27
LOW                 11.25            11.30            20.22           12.59
</TABLE>

Equity Compensation Plan Information (as of December 31, 2006)
<TABLE>
<CAPTION>

Plan category               A                       B                   C
--------------   Number of securities to     Weighted-average     Number of securities
                 be issued upon exercise     exercise price      remaining available for
                 of outstanding options,     of outstanding    future issuance under equity
                   warrants and rights       options, warrants   compensation plans (excluding
                  -------------------        and rights          securities reflected in
                                             -------                  column A)
                                                                     ---------

Equity compensation
<S>                       <C>                   <C>                  <C>
plans approved by         258,000               $3.93                1,126,000
security holders

Equity compensation
plans not approved by     169,200                N/A                  167,472(1)
security holders(2)

Total                     427,200               $3.93                1,293,472

</TABLE>

           (1) Of the 167,472 shares referenced in column C of the above table,
121,452 are from our Restricted Stock Plan and 46,020 are from our Stock
Compensation Plan for Directors Serving on the Compensation Committee, which are
described in Note 12 of our consolidated financial statements included in this
report. We have a Stock Compensation Plan, under which directors who are members
of the Compensation Committee have the right to receive all or part of their
annual fees in the form of Common Stock having a fair market value equal to the
amount of their fees. Of the 50,000 shares that are allocated to this plan,
46,020 remain available for issuance.

           (2) Restricted stock for employees issued in 2005 which was not
approved by security holders.

                                        32
<PAGE>
              Comparison of Five-Year Cumulative Total Returns
                         Performance Graph for
                      Riviera Holdings Corporation

             Produced on 03/01/07 including data to 12/29/2006

         The following graph compares the annual change in the cumulative  total
return,  assuming reinvestment of dividends,  on the Company's Common Stock with
the annual  change in the  cumulative  total returns of the NASDAQ Broad Market,
the  American  Stock  Exchange  Index  (the  "AMEX  Index"),  the New York Stock
Exchange (the "NYSE") and the NASDAQ  Amusement and  Recreation  Services  Index
(the "NASDAQ 79xx"),  which the Company considers to be its peer industry group.
The graph  assumes an  investment  of $100 on December 31, 2001,  in each of the
Common  Stock,  the  stocks  comprising  the  NASDAQ  Broad  Market,  the stocks
comprising the AMEX Index and the stocks comprising the NASDAQ 79xx.


The graph is a Comparison of Cumulative Total Return Among the Company, NYSE/
AMEX/Nasdaq Stock Market (US Companies) and Nasdaq stocks (SIC 7900 - 7999 US
Companies amusement and recreation services) (1).
<TABLE>
<CAPTION>

                     Riviera           NYSE/AMEX/Nasdaq            Nasdaq
                                        U.S. Companies            (SIC 79xx)
                                                          US Amusement Companies

<S> <C>               <C>                  <C>                      <C>
 12/31/01             100.0                100.0                    100.0
 12/31/02             101.9                 79.4                     81.9
 12/31/03             127.6                104.6                    115.5
 12/31/04             978.8                117.5                    145.9
 12/31/05            1159.7                124.7                    139.5
 12/31/06            1709.4                144.6                    187.8
</TABLE>

(1) Comprised of companies whose stock is traded on the Nasdaq National Market
    and whose standard industrial classification is within 7900-7999.  The
    company does not necessarily believe that this is an indication of the value
    of the Company's stock.




                                                33

<PAGE>
(b) Not Applicable

(c) Not Applicable


Item 6.    Selected Financial Data

           The following table sets forth a summary of selected financial data
for the Company for the years ended December 31 (in thousands, except Net Loss
Per Diluted Common Share, and adjusted for three-for-one stock split in 2005):
<TABLE>
<CAPTION>

---------------------- ---------- ----------- ---------- ----------- ----------
                        2006        2005        2004          2003       2002
---------------------- ---------- ----------- ---------- ----------- ----------
<S>                     <C>         <C>        <C>         <C>        <C>
Net Operating Revenue   $200,994    $202,227   $201,350    $190,159   $188,292
Net Loss                  ($335)    ($3,992)   ($2,086)   ($14,453)  ($24,726)
Net Loss Per Diluted
  Common Share           ($0.03)     ($0.34)    ($0.20)     ($1.39)    ($2.39)
Total Assets            $213,682    $211,769   $217,536    $221,538   $235,896
Long-Term Debt          $215,004    $215,431   $216,467    $219,625   $220,124
---------------------- ---------- ----------- ---------- ----------- ----------
</TABLE>

           The net loss for 2006 was impacted by costs totaling approximately
$3.0 million or $0.25 per share, including mergers, acquisitions and development
costs of $1.3 million, Sarbanes-Oxley expenses of $820,000 and equity based
compensation expense of $813,000. The net loss for 2005 was impacted by costs
totaling approximately $3.6 million or $0.30 per share, including Sarbanes-Oxley
Act expenses of $1.2 million, equity-based compensation expense of $1.6 million
and asset impairment write-down of $777,000. The net losses for 2003 and 2004
were impacted by $2.4 million or ($0.23) per share and $1.1 million or ($0.10)
per share, respectively, for mergers, acquisitions or development costs. The net
loss for 2002 was impacted by costs associated with refinancing our bonds.


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

Overall Outlook and Recent Developments

           We own and operate Riviera Las Vegas on the Las Vegas Strip in Las
Vegas, Nevada, and Riviera Black Hawk in Black Hawk, Colorado.

           Our capital expenditures for Riviera Las Vegas are geared to maintain
the hotel rooms, gaming product and amenities in sufficient condition to compete
for customers in the convention market and casino market. In 2007, we intend to
begin a process of upgrading our rooms in Las Vegas by featuring new Euro beds
and flat screen TV's. Room rates and slot revenues are the primary factors
driving our operating margins. We use technology to maintain labor costs at a
reasonable level, including kiosks for hotel check-in, slot ticket redemption
and slot club redemptions. As of December 31, 2006 substantially all of our slot
machines had been converted to the Ticket-In Ticket-Out (TITO) system in both
Las Vegas and Black Hawk. In Black Hawk, the $5 maximum bet restricts table
games to a minimum and the area is basically a "locals" slot customer market.
Our capital expenditures in Black Hawk are geared to maintain competitive slot
machines compared to the market and upgrade our Food & Beverage amenities.

           Our marketing focus in Las Vegas is on using direct marketing efforts
to customers in our database and providing complimentary rooms to our slot
customers based on the level of their play, while reducing the number of rooms
available for our Tour and Travel customers. We also seek to maximize the number
of people who patronize Las Vegas but who are not guests in our hotel by
capitalizing on our prime Las Vegas Strip location, convention center proximity
and several popular in-house productions. We are well situated on the Las Vegas
Strip near Circus Circus, Sahara, Las Vegas Hilton, the Las Vegas Convention
Center, Wynn Las Vegas, the planned $4.5 billion Echelon project planned on the
site of the recently closed Stardust and the $2 billion Fontainebleau project
just to our north, as well as numerous non-gaming condominium and time-share
projects which are either planned or under construction within walking distance
of our casino. However, the recent closures of the Stardust and Westward Ho as
well as construction in our immediate area, has caused a significant reduction
in walk-in traffic and may continue to do so for the foreseeable future.

                                                34

<PAGE>

           Our marketing focus in Black Hawk is on using direct marketing
efforts to customers in our database and providing exciting events and
give-aways to our loyalty program members.

           On August 29, 2006, our shareholders disapproved the Merger Agreement
that we had entered into on April 5, 2006 and we terminated it. Consummation of
the merger as contemplated by the Merger Agreement would have resulted in our
shareholders receiving $17 in cash for each share of our stock that they held.

           Under the Merger Agreement, we agreed to pay a "Topping Fee" of
approximately $7.9 million if: (i) the Merger Agreement is terminated because
our shareholders did not approve it; (ii) prior to such termination, a competing
"Takeover Proposal" (which includes a proposal for the acquisition of 30% or
more of our assets or more than 30% of our outstanding stock or the stock of any
of our subsidiaries or for the acquisition of us or any of our subsidiaries
through a merger or other business combination) had been announced and had not
been withdrawn; and (iii) within 12 months after such termination, we enter into
a definitive agreement with a third party with respect to the consummation of a
Takeover Proposal or any Takeover Proposal is consummated.

           On August 8, 2006, we announced that we received an unsolicited,
competing takeover proposal on substantially the same terms and conditions set
forth in the Merger Agreement. Prior to our termination of the Merger Agreement,
that competing takeover proposal had not been withdrawn. On September 6, 2006,
we announced that our board of directors had terminated its consideration of
that takeover proposal.

           On November 13, 2006, we reported (i) our receipt of a non-binding
proposal from Ian Bruce Eichner and the D.E. Shaw group, on behalf of an entity
to be formed by them, to acquire by merger all of our outstanding shares at a
cash price of $21 per share, (ii) our entry into an exclusive negotiating
agreement with Mr. Eichner and a member of the D.E. Shaw group and (iii) certain
related resolutions adopted by our board of directors. On December 13, 2006, the
exclusive negotiating agreement and the related approvals and waivers by our
board of directors expired and the proposal was withdrawn.

           In order to attain profitable operations, we must reach income from
operations of approximately $26.0 million, (which is 2.3 percent higher than our
year-end 2006 level of such income) based on our current debt structure. Going
forward, we expect our Sarbanes-Oxley Act expenses to decrease significantly as
we move into our third year (2007) of being an accelerated filer, we estimate
our future annual equity-based compensation expense to be approximately
$800,000, and we expect asset impairment charges to be nominal. Mergers,
acquisitions and development costs are in large part the results of contacts
made or opportunities offered by third parties, which may be outside of our
control and may require our attention and resources in view of our fiduciary
duties to stockholders. If, however, we can significantly reduce our mergers,
acquisitions and development costs and meet our estimated requirements mentioned
above in this paragraph, our income from operations would exceed $26 million,
which would slightly exceed our current interest expense and would likely result
in a nominal net income.

           If we are able to refinance our 11% Notes at a more favorable
interest rate, we could save in excess of $2 million for each percentage point
reduction in interest rate. This could have a significant positive effect on our
net income. We are currently exploring refinancing opportunities and we expect
to refinance in 2007.


Results of Operations

2006 Compared to 2005

           The following table sets forth, for the periods indicated, certain
operating data for Riviera Las Vegas and Riviera Black Hawk. Net revenues
displayed in this table and discussed in this section are net of cash rebates
and promotional allowances. Operating income from properties is presented on the
following schedule:

                                        35

<PAGE>
<TABLE>
<CAPTION>

                                    Year Ended December 31,  $ Change    % Change
(Dollars In Thousands)                  2006         2005   Incr/(Decr)  Incr/(Decr)

Net Revenues:
<S>                                  <C>         <C>         <C>         <C>
  Riviera Las Vegas                  $ 149,202   $ 150,688   $ (1,486)   (1.0)%
  Riviera Black Hawk                    51,742      51,539        203     0.4 %
                                      --------    --------   --------    ------
           Total Net Revenues        $ 200,944   $ 202,227   $ (1,283)   (0.6)%
                                      ========    ========   ========   =======
Operating Income:
  Riviera Las Vegas                   $ 21,000    $ 19,065    $ 1,935    10.1 %
  Riviera Black Hawk                    11,209      10,941        268     2.4 %
  Mergers, Acquisitions, Development
     and Project Costs                  (1,318)         65     (1,383)    N/M
  Sarbanes-Oxley Act Expenses             (820)     (1,233)       413   (33.5)%
  Equity Compensation                     (813)     (1,627)       814   (50.0)%
  Asset Impairment                         (19)       (777)       758   (97.6)%
  Corporate Expenses                    (3,823)     (4,045)       222    (5.5)%
                                       --------    --------   -------   -------
           Total Operating Income     $ 25,416    $ 22,389    $ 3,027    13.5 %
                                       ========    ========   =======   =======
</TABLE>
Riviera Las Vegas

Revenues

           Net revenues for Riviera Las Vegas decreased by approximately $1.5
million, or 1.0%, from $150.7 million in 2005 to $149.2 million in 2006
primarily due to decreased entertainment and other revenue. Poker was
reestablished in 2005 and continued to show growth in 2006. Entertainment
revenues decreased by approximately $3.7 million, or 21.2%, from $17.4 million
during 2005 to $13.7 million during 2006 due to the closure of our Splash show
in the main showroom in September 2006 and reduced covers in our other shows. We
are in negotiation for a replacement show and the showroom should reopen
sometime in mid 2007. Other revenues decreased $1.8 million as a result of the
outsourcing of our gift shops to ABC Stores in February 2006. Slot revenues
increased $2.4 million from $45.0 million in 2005 to $47.4 million in 2006 as a
result of increased volume and the increase in hold percentage. Poker revenues
increased from $652,000 in 2005 to $1.2 million in 2006 and offset the decrease
in table games revenue, resulting from lower volume and a lower hold percentage
in 2006. Room revenues increased $4.7 million, as the average room rate
increased $6.63 or 9.2% from $71.87 to $78.47 and hotel occupancy decreased
slightly from 92.6% in 2005 to 92.2% in 2006. Revenue per available room (Rev
Par) increased $5.86 from $66.51 to $72.37 or 8.8%. The increase was due to a
11.1% increase in convention room revenue, which made up 41.4% of total room
revenue.

Operating Income

     Operating income in 2006 increased $1.9 million,  to $21.0 million or 10.1%
from $19.1 million in 2005.  This increase is primarily due to increased  gaming
and hotel revenues as described above, and the effects of increased  spending of
casino  marketing and other expenses in the gaming  departments due to increased
promotional  costs  for our 50th  anniversary  celebration  and free  slot  play
program in 2005 that were not profitable when compared to current promotions.

                                        36
<PAGE>
Riviera Black Hawk

Revenues

           Net revenues for Riviera Black Hawk, which are primarily gaming
revenues, increased $203,000, or 0.4% from $51.5 million in 2005 to $51.7
million in 2006. Revenues in 2005 were negatively impacted by a rockslide that
closed a major access road to the market for three months and by other road
projects throughout the year. Revenues in 2006 were negatively impacted by
weather conditions in December 2006, including a large snowfall which caused the
major roads to be closed for approximately five days and by increased
competition in the region with expansions and new property openings during 2006.
Operating Income

           Operating income increased $735,000 from $10.5 million in 2005 to
$11.2 million in 2006. The improvement results from efficiencies generated from
the TITO conversion and the 2005 asset impairment write-off of approximately
$467,000 due to the discontinuation of a project to build a pedestrian bridge
connecting to the Isle of Capri.

Consolidated Operations

           Operating income increased $3.0 million from $22.4 million in 2005 to
$25.4 million in 2006 due to increased gaming and hotel revenue and a decrease
in depreciation and amortization expense as a result of our convention center in
Las Vegas and slot machines and equipment in Black Hawk becoming fully
depreciated in late 2005 and early 2006.

Net loss was $335,000 in 2006 down $3.6 million from a net loss of $3.9 million
in 2005 due to an increase in operating income and reduced interest expense.

 Results of Operations

2005 Compared to 2004

           The following table sets forth, for the periods indicated, certain
operating data for Riviera Las Vegas and Riviera Black Hawk. Net revenues
displayed in this table and discussed in this section are net of cash rebates
and promotional allowances. Operating income from properties is presented as
shown on the Consolidated Statement of Operations.
<TABLE>
<CAPTION>

                                    Year Ended December 31,  $ Change    % Change
(Dollars In Thousands)                  2005         2004   Incr/(Decr)  Incr/(Decr)

Net Revenues:
<S>                                  <C>         <C>         <C>         <C>
  Riviera Las Vegas                  $ 150,688   $ 147,949   $  2,739     1.9%
  Riviera Black Hawk                    51,539      53,401     (1,862)   (3.5)%
                                      --------    --------   --------    ------
           Total Net Revenues        $ 202,227   $ 201,350   $    877      0.4%
                                      ========    ========   ========   =======
Operating Income:
  Riviera Las Vegas                   $ 19,065    $ 19,271    $  (206)   (1.1)%
  Riviera Black Hawk                    10,941      10,919         22     0.2 %
  Mergers, Acquisitions, Development
     and Project Costs                      65      (1,193)     1,258  (105.4)%
  Sarbanes-Oxley Act Expenses           (1,233)          0     (1,233)
  Equity Compensation                   (1,627)          0     (1,627)
  Asset Impairment                        (777)          0       (777)
  Corporate Expenses                    (4,045)     (4,038)        (7)   (0.2)%
                                       --------    --------   -------   -------
           Total Operating Income     $ 22,389    $ 24,959    $(2,570)  (10.3)%
                                       ========    ========   =======   =======
</TABLE>

                                        37

<PAGE>
Riviera Las Vegas

Revenues

           Riviera Las Vegas' net revenues increased by approximately $2.7
million, or 1.8%, from $148.0 million in 2004 to $151.0 million in 2005
primarily due to increased average daily rate for our rooms. Room revenues
increased $5.1 million, as the average room rate increased $7.03 or 10.8% from
$64.81 to $71.87 and hotel occupancy remained constant at 92.6%. Rev Par
increased $6.52 from $59.99 to $66.51 or 10.9%. The increase was due to a 16.1%
increase in convention room revenue, which made up 42.9% of total room revenue.
Revenues at the gaming tables increased $1.2 million due to an increase in hold
percentage as customers continued to play new games, which generally have a high
hold percentage. Slot revenues increased slightly, however after deducting cash
rebates and free play, net slot revenues were down $2.2 million or 5.1%. Surveys
indicate that our gaming customers are spending less of their gaming budgets at
our casino than in the past. As a result of these surveys, we have revised our
marketing plans to include activities, which our customers favor, including more
entertainment on the casino floor during the daytime hours and more food and
beverage options. Entertainment revenues decreased by approximately $3.3
million, or 16.2%, from $20.7 million during 2004 to $17.1 million during 2005
due primarily to the addition of new shows by Las Vegas Strip competitors.
Largely due to this increase in competition, we experienced an overall
attendance decrease of 163,100 or approximately 25%.

Operating Income

           Operating income decreased $206,000, or 1.1%, from $19.3 million in
2004 to $19.1 million in 2005 primarily due to higher slot marketing costs in
2005. During 2005, casino marketing and other expenses increased $1.7 million as
our margin decreased 3.5% in the gaming departments, due to increased
promotional costs of approximately $600,000 for our 50th anniversary celebration
and free slot play programs that supported revenues but were not as profitable
when compared with prior promotions. Food, beverage and entertainment
departmental profits were down approximately $1.5 million due, in part, to
higher payroll costs under union contracts.

Riviera Black Hawk

Revenues

           Riviera Black Hawk's net revenues decreased $1.9 million, or 3.5%
from $53.4 million in 2004 to $51.6 million in 2005.Revenues were negatively
impacted by a rockslide that closed a major access road to the market for three
months and by other road projects throughout the year.

Operating Income

           Operating income decreased by $445,000, or 4.1% from $10.9 million in
2004 to $10.5 million in 2005. Lower revenues were partially offset by decreased
general and administrative expense.

Consolidated Operations

           Operating income was impacted by costs totaling approximately $3.6
million or $0.30 per share, including Sarbanes-Oxley Act expenses of $1.2
million, equity-based compensation of $1.6 million and asset impairment of
$837,000. Mergers, acquisitions and development costs decreased $1.3 million,
resulting from a $1 million fee paid to us by a potential buyer of our company,
which offset 2005 costs. Our discussions with that party ended in 2005, and we
retained the fee.

Net loss  increased  $1.9 million from $2.1 million in 2004 to $3.9 million in
2005 due to a decrease in operating  income as discussed above.

Liquidity and Capital Resources

           Cash and cash equivalents at December 31, 2006 increased $4.7 million
from December 31, 2005 to $25.3 million. Cash balances include amounts that may
be required to fund our CEO's pension obligation with five days notice. (See
Notes 7 and 12 to the financial statements). Although we are aware of no current
intention of our CEO to require this funding, under certain circumstances we
would have to disburse approximately $3.0 million in a short period, subject to
the provisions of our agreement with him.

                                        38

<PAGE>

           For 2006, our net cash provided by operating activities increased to
$14.4 million compared to $11.0 million in 2005 due primarily to a decrease in
operating loss. Cash flows used in investing activities were $9.1 million in
2006 compared to $8.3 million in 2005 due to an increase in capital
expenditures. Net cash used in financing activities was $587,000 in 2006
compared to $1.0 million in 2005. We believe that cash flow from operations,
combined with our $25.3 million cash and the $30 million available on our senior
secured credit facility discussed below, will be sufficient to cover our annual
debt service and enable our investment in budgeted capital expenditures. Such
expenditures include approximately $8.0 million in maintenance capital
expenditures and property upgrades of approximately $3.0 million, which we will
use primarily for the room renovation program at Rivera Las Vegas, the purchase
of slot machines in Las Vegas and Black Hawk and for other contingencies.

           On June 26, 2002, we secured debt in the principal amount of $215
million in the form of the 11% Notes with a maturity date of June 15, 2010.
Interest on the 11% Notes is at the annual rate of 11%, paid semiannually on
each June 15 and December 15. Cash flow from operations is not expected to be
sufficient to pay 100% of the principal of the 11% Notes at maturity.
Accordingly, our ability to repay the 11% Notes at maturity will be dependent
upon our ability to refinance the 11% Notes. There can be no assurance that we
will be able to refinance the principal amount of the 11% Notes at maturity or
that any such refinancing will be on favorable terms. On June 15, 2006, we were
able to redeem the 11% Notes at a premium beginning at 105.5% and declining each
subsequent year to par in 2009. We are currently exploring refinancing
opportunities, with a view to refinancing the 11% Notes in the second half of
2007, on more favorable terms and rates than exist today. At that time, the call
premium will be 103.67%.

           The Note Indenture provides that, in certain circumstances, we must
offer to repurchase the 11% Notes upon the occurrence of a change of control or
certain other events. In the event of such mandatory redemption or repurchase
prior to maturity, we would be unable to pay the principal amount of the 11%
Notes without a refinancing.

           The Note Indenture contains certain covenants, which limit our
ability, subject to certain exceptions, to: (1) incur additional indebtedness;
(2) pay dividends or other distributions, repurchase capital stock or other
equity interests or subordinated indebtedness; (3) enter into certain
transactions with affiliates; (4) create certain liens; (5) sell certain assets;
and (6) enter into certain mergers and consolidations. As a result of these
restrictions, our ability to incur additional indebtedness to fund operations or
to make capital expenditures is limited. In the event that cash flow from
operations is insufficient to cover cash requirements, we would be required to
curtail or defer certain capital expenditure programs, which could have an
adverse effect on operations. As of December 31, 2006, we believe that we were
in compliance with the covenants.

           On July 26, 2002, we entered into a $30 million, five-year senior
secured credit facility, which expires July 26, 2007. The credit facility is
secured by substantially the same collateral that secures the 11% Notes. The
lien on the collateral securing the credit facility is senior to the lien
securing the 11% Notes. The credit facility contains customary conditions to
borrowing and certain representations and warranties customary in gaming-related
finance. The credit facility also contains financial covenants and restrictions
regarding, among other things, indebtedness, distributions and changes in
control. Under the credit facility, we can obtain extensions of credit in the
forms of cash and letters of credit. We are required to pay interest on all
outstanding cash advances at the rate of interest announced by Wells Fargo Bank
at its principal office in San Francisco as its prime rate plus 0.75% or at the
rate at which major international banks in London charge each other for
borrowings (LIBOR) in U.S. dollars plus 3.00%. However, the minimum interest
rate we will be charged on outstanding cash advances is 4.50%. We expect to
refinance a similar type arrangement in the second-half of 2007 in connection
with our refinancing of the 11% Notes.

Contractual Obligations

           The table under "Item 7A. Quantitative and Qualitative Disclosures
about Market Risk" summarizes our contractual obligations and commitments as of
December 31, 2006.

                                        39

<PAGE>

Critical Accounting Policies and Estimates

           The preparation of our consolidated financial statements requires us
to adopt accounting policies and to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenue, expenses and provision for
income taxes. We periodically evaluate our policies, and our estimates and
assumptions related to these policies. We operate in a highly regulated
industry. For Riviera Las Vegas and Riviera Black Hawk we are subject to
regulations governing operating and internal control procedures. The majority of
our casino revenue is in the form of cash, personal checks or gaming chips and
tokens, which by their nature do not require complex estimations. We estimate
certain liabilities with payment periods that extend for longer than several
months. Such estimates include customer loyalty liabilities, self-insured
medical and workers compensation costs and litigation costs. We believe that
these estimates are reasonable based upon our past experience with the business
and based upon our assumptions related to possible outcomes in the future.
Future actual results might differ materially from these estimates.

           We have determined that the following accounting policies and related
estimates are critical to the preparation of our consolidated financial
statements because such estimates are highly uncertain or susceptible to change
so as to present a significant risk of a material impact on our financial
condition or operating performance, and such policies and estimates were
selected from among available alternatives, or require the exercise of
significant management judgment to apply.

Long-lived Assets

           We have a significant investment in long-lived property and
equipment. We estimate that the non-discounted future cash flows expected to
result from the use of these assets exceed the current carrying value of these
assets. Any adverse change to the estimate of these non-discounted future cash
flows could necessitate an impairment charge that would adversely affect our
operating results. We estimate useful lives for our assets based on historical
experience, estimates of such classes of assets' commercial lives generally, and
the likelihood of technological obsolescence. Should the actual useful life of a
class of assets differ from the estimated useful life, we would record an
impairment charge or adjust the period over which this asset is depreciated. We
review useful lives, and obsolescence, and we assess commercial viability of
these assets periodically.

Deferred Tax Assets

           We utilize estimates related to estimated future taxable income in
the application of Statement of Financial Accounting Standards ("SFAS") No. 109
to the realization of deferred tax assets. Our estimates are based upon recent
operating results and budgets for future operating results. The valuation
allowance has been recorded for our net operating loss carry forwards, excluding
our AMT credits, which have an indefinite life.

Allowance for Credit Losses

           We maintain an allowance for estimated credit losses based on
historical experience and specific customer collection issues. Any unforeseen
change in customer liquidity or financial condition could adversely affect the
collectibility of that account and our operating results.

Litigation Cost Accrued

           We assess our exposures to loss contingencies including legal
matters, and we provide for an exposure if it is judged to be probable and
estimable. However, any accruals made in relation thereto do not include the
estimated costs of defense for any legal services that we have not yet received.
If the actual loss from a contingency exceeds our estimate, our operating
results could be adversely impacted.

Self-insurance Provisions

           We are self-insured for various levels of general liability, workers'
compensation, and non-union employee medical insurance coverage. Insurance
claims and provisions include accruals of estimated settlements for known
claims, as well as accrued estimates of incurred but not reported claims. In
estimating these costs, we consider our historical claims experience and make
judgments about the expected levels of costs per claim. Changes in health care
costs, accident frequency and severity and other factors can materially affect
the estimate for these liabilities.

                                        40

<PAGE>

           Self-insurance reserves can be affected by price changes in the
medical field, speed of processing claims by our third party administrator,
estimates of claims incurred but not reported, homogeneous nature of claims and
other factors. Significant changes in those factors could affect the estimates
for self-insurance by $100,000 or more. A 10% increase in medical costs could
impact our reserves and increase our expense by approximately $280,000 on an
annual basis.

Loyalty Club Program

           We offer to our guests the opportunity to earn points redeemable for
cash and complimentary rooms and food and beverage based on their level of
gaming and non-gaming activities while at our properties. An accrual is recorded
as points are earned based upon expected redemption rates and, in the case of
complimentaries, the estimated cost of the complimentary to be provided.

Recently Issued Accounting Standards

           In February 2007, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities". SFAS No. 159 permits companies to choose to measure many financial
instruments and certain other items at fair value. The objective is to improve
financial reporting by providing companies with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. The fair value option established by SFAS No. 159 permits all
companies to choose to measure eligible items at fair value at specified
election dates. At each subsequent reporting date, a company shall report in
earnings any unrealized gains and losses on items for which the fair value
option has been elected. SFAS No. 159 is effective as of the beginning of a
company's first fiscal year that begins after November 15, 2007. Early adoption
is permitted as of the beginning of a fiscal year that begins on or before
November 15, 2007, provided the company also elects to apply the provisions of
SFAS No. 157, "Fair Value Measurements" (see below). We are currently evaluating
the impact that the adoption of SFAS No. 159 will have on our consolidated
financial statements.

           In September 2006, the FASB issued SFAS No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans--an
amendment of FASB Statements No. 87, 88, 106 and 132(R)". SFAS No. 158 requires
employers to recognize the over-funded or under-funded status of a defined
benefit postretirement plan as an asset or liability and to recognize changes in
that funded status in the year in which the changes occur through other
comprehensive income. This Statement also requires employers to measure the
funded status of a plan as of the date of its year end and is effective for
publicly traded companies as of the end of the fiscal year ending after December
31, 2006. The adoption of SFAS No. 158 did not have a material effect on our
consolidated financial statements as we do not currently have a defined benefit
postretirement plan that meets the criteria specified under SFAS No. 158.

           In September 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements", which defines fair value, establishes a framework for measuring
fair value in GAAP, and expands disclosures about fair value measurements. This
Statement applies under other accounting pronouncements that require or permit
fair value measurements, the FASB having previously concluded in those
accounting pronouncements that fair value is the relevant measurement attribute.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. We are currently evaluating the impact that the adoption of SFAS No. 157
will have on our consolidated financial statements.

           On September 13, 2006, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 108 ("SAB 108") "Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial.
Statements". SAB 108 clarifies how companies should quantify financial statement
misstatements. SAB 108 is effective for fiscal years ending on or after November
15, 2006, with earlier adoption encouraged. The adoption of SAB 108 did not have
a material impact on our results of operations, financial position or cash
flows.

                                        41

<PAGE>

           In July 2006, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income
Taxes, which clarifies the accounting for uncertainty in income taxes recognized
in the financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 provides guidance on the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosures, and
transition. FIN 48 is effective for fiscal years beginning after December 15,
2006. We are currently evaluating the impact of this standard on our Condensed
Consolidated Financial Statements and we do not believe the adoption will have a
material impact.

           In June 2006, the Emerging Issues Task Force reached a consensus on
Issue No. 06-3 ("EITF 06-3"), "Disclosure Requirements for Taxes Assessed by a
Governmental Authority on Revenue-Producing Transactions." The consensus allows
companies to choose between two acceptable alternatives based on their
accounting policies for transactions in which the company collects taxes on
behalf of a governmental authority, such as sales taxes. Under the gross method,
taxes collected are accounted for as a component of sales revenue with an
offsetting expense. Conversely, the net method allows a reduction to sales
revenue. If such taxes are reported gross and are significant, companies should
disclose the amount of those taxes. The guidance should be applied to financial
reports through retrospective application for all periods presented, if amounts
are significant, for interim and annual reporting beginning February 1, 2007. We
do not expect the adoption of EITF 06-3 to have a material effect on our
consolidated financial statements.

         In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections,  a  replacement  of APB Opinion No. 20 and SFAS No. 3. SFAS No. 154
replaces  APB  Opinion  No. 20,  Accounting  Changes  and SFAS No. 3,  Reporting
Accounting  Changes in Interim Financial  Statements and changes the requirement
for the  accounting  for and reporting of a change in accounting  principles not
prescribed by specific transition  provisions of the newly adopted standard.  It
carries  forward  without  change the  requirements  of APB  Opinion  No. 20 for
accounting  for error  corrections  and changes in estimates.  The provisions of
SFAS No. 154 will be effective  for  accounting  changes made in the fiscal year
beginning  after December 15, 2005. The adoption did not have a material impact
on our consolidated financial statements.

Forward-Looking Statements

           Throughout this report we make "forward-looking statements," as that
term is defined in Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. Forward-looking statements include the words
"may," "would," "could," "likely," "estimate," "intend," "plan," "continue,"
"believe," "expect," "projections" or "anticipate" and similar words and include
all discussions about our ongoing or future plans, objectives or expectations.
We do not guarantee that any of the transactions or events described in this
report will happen as described or that any positive trends referred to in this
report will continue. These forward-looking statements generally relate to our
plans, objectives and expectations for future operations and results and are
based upon what we consider to be reasonable estimates. Although we believe that
our forward-looking statements are reasonable at the present time, we may not
achieve or we may modify our plans, objectives and expectations. You should read
this report completely and with the understanding that actual future results may
be materially different from what we expect. We do not plan to update
forward-looking statements even though our situation or plans may change in the
future, unless applicable law requires us to do so.

           Specific factors that might cause our actual results to differ from
our expectations, might cause us to modify our plans or objectives, or might
affect our ability to meet our expectations include, but are not limited to:

o  the  availability  and  adequacy of our cash flow to meet our  requirements,
      including  payment of amounts due under our debt instruments;
o  our substantial indebtedness, debt service requirements and liquidity
      constraints;
o  our ability to refinance our 11% Notes on more favorable terms later this
       year;
o  the availability of additional capital to support capital improvements and
       development;
o  fluctuations in the value of our real estate, particularly in Las Vegas;
o  competition in the gaming industry, including the availability and success
       of alternative gaming venues and other entertainment attractions;
o  retirement or other loss of our senior officers;
o  economic, competitive, demographic, business and other conditions in our
        local and regional markets;
o  changes or developments in laws, regulations or taxes in the gaming industry;

                                        42

<PAGE>
o  actions taken or not taken by third parties, such as our customers, suppliers
        and competitors, as well as legislative, regulatory, judicial and other
        governmental authorities;
o  changes in personnel or compensation, including federal minimum wage
        requirements;
o  our failure to obtain, delays in obtaining, or the loss of, any licenses,
        permits or approvals, including gaming and liquor licenses, or the
        limitation, conditioning, suspension or revocation of any such licenses,
        permits or approvals, or our failure to obtain an unconditional renewal
        of any of our licenses, permits or approvals on a timely basis;
o  the loss of any of our casino facilities due to terrorist acts, casualty,
        weather, mechanical failure or any extended or extraordinary maintenance
        or inspection that may be required;
o  other adverse conditions, such as economic downturns, changes in general
        customer confidence or spending, increased transportation costs, travel
        concerns or weather-related factors, that may adversely affect the
        economy in general or the casino industry in particular;
o  changes in our business strategy, capital improvements or development plans;
o  the consequences of the war in Iraq and other military conflicts in the
        Middle East, concerns about homeland security and any future security
        alerts or terrorist attacks such as the attacks that occurred on
        September 11, 2001;
o  other risk factors discussed elsewhere in this report; and
o  a decline in the public acceptance of gaming.

            All future written and oral forward-looking statements attributable
to us or any person acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
In light of these and other risks, uncertainties and assumptions, the
forward-looking events discussed in this report might not occur.

Item 7A.      Quantitative and Qualitative Disclosures about Market Risk

           Market risks relating to our operations result primarily from changes
in interest rates. We invest our cash and cash equivalents in U.S. Treasury
Bills with maturities of 30 days or less. Such investments are generally not
affected by changes in interest rates.

           As of December 31, 2006, we had $215.0 million in borrowings. The
borrowings include $215 million in 11% Notes maturing in 2010 (with a carrying
value of $213.2 million) and equipment loans/capital leases maturing at various
dates through 2009. Interest under the 11% Notes is at a fixed rate of 11%. The
equipment loans and capital leases have interest rates ranging from 5.5% to
5.8%. The borrowings also include $411,000 in a special improvement district
bond offering ("SID Bonds") with the City of Black Hawk. Our share of the debt
on the SID Bonds of $1.2 million is payable over a ten-year period ending 2010.
The SID Bonds bear interest at 5.5%. We are not susceptible to interest rate
risk because our outstanding debt is at fixed rates. Our $30 million senior
secured revolving credit facility is at prime plus three-quarters of one percent
and does not subject us to a material interest rate fluctuation as we have had
virtually no borrowings on the revolver. An annual fee of 0.5 percent is charged
in monthly installments on the unused portions of the revolver plus a $3,000
monthly service fee. As of December 31, 2006, we had no borrowings outstanding
under our senior secured credit facility.

                                        43

<PAGE>
<TABLE>
<CAPTION>
Interest Rate Sensitivity
Principal (Notational Amount by Expected Maturity)
Average Interest Rate

(Dollars in Thousands)                                                                    Fair Value
                                2007     2008    2009     2010   2011  Thereafter Total   At 12/31/06
                                ----     ----   -----     ----   ----  ---------- -----  ------------
Long -Term Debt                                  All interest rates are fixed
   Including Current Portions
Equipment loans and
<S>                              <C>      <C>      <C>     <C>     <C>     <C>       <C>       <C>
 capital leases-Las Vegas        $751     $187     $54                               $992      $992
Average interest rate            5.8%     5.8%    5.8%

11% Notes                                                $215,000                $215,000  $227,105
Less unamortized discount                                 (1,399)                 (1,399)   (1,399)
Average interest rate                                       11.8%

SID Bonds-Black Hawk,
 Colorado casino project         $128     $137    $146                               $411      $411
Average interest rate            5.5%     5.5%    5.5%

Total of all Long-Term Debt,
Including Current Portions
                                 $879     $324    $200   $213,601                $215,004  $227,109

Other Long - Term Liabilities
Including Current Portion

CEO pension plan obligation    $1,000   $1,000  $1,000        $93                  $3,093    $3,093

Average interest rate           11.8%    11.8%   11.8%      11.8%

Total Long-Term Obligations    $1,879   $1,324  $1,200   $213,694                $218,097  $230,613

Expected Interest payments    $24,087  $23,828 $23,692    $11,836

</TABLE>

Item 8.    Financial Statements and Supplementary Data

           See Financial Statements in Part IV; Item 15(a).

Item 9.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure

           None.

Item 9A.   Controls and Procedures

Disclosure Controls and Procedures

           We maintain disclosure controls and procedures (as defined in
Exchange Act Rules 13a - 15(e) and 15d - 15(e)) that are designed to provide
reasonable assurance that information required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to our management, including our CEO and Chief
Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, our management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and our management necessarily is
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.

                                        44
<PAGE>

           As of December 31, 2006 we carried out an evaluation, under the
supervision and with the participation of our management, including our CEO and
CFO, of the effectiveness of the design and operation of our disclosure controls
and procedures. Based on the foregoing, our CEO and CFO concluded that our
disclosure controls and procedures are effective.

Internal Control Over Financial Reporting

           Internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) refers to the process designed
by, or under the supervision of, our CEO and CFO, and effected by our board of
directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. Our management is responsible for establishing and
maintaining adequate internal control over our financial reporting.

           We have evaluated the effectiveness of our internal control over
financial reporting as of December 31, 2006. This evaluation was performed using
the internal control evaluation framework developed by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on such evaluation,
our management has concluded that, as of such date, our internal control over
financial reporting was effective.

           The registered public accounting firm that audited our financial
statements included in this Form 10-K has issued an attestation report on our
management's assessment of our internal control over financial reporting. That
attestation report appears under "Report of Independent Registered Public
Accounting Firm" on page F - 1 of this Form 10-K.

           There has been no change in our internal control over financial
reporting during our most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.

Item 9B.  Other Information

None.

         PART III

Item 10.   Directors and Executive Officers of the Registrant


Directors

           The following table presents information as of February 23, 2007
regarding our directors and the directors of Riviera Operating Corporation
("ROC"), our wholly-owned subsidiary:
<TABLE>
<CAPTION>

      Name                Age      Position

<S>                       <C>                           <C>
  William L. Westerman    75     Our Chairman of the Board, CEO and President;
                                 Chairman of the Board and Chief Executive
                                 Officer of ROC

   Jeffrey A. Silver      61     Our and ROC's Director

   Paul A. Harvey         69     Our and ROC's Director

   Vincent L. DiVito      47     Our and ROC's Director

   James N. Land, Jr.     77     Our and ROC's Director
</TABLE>

                                        45
<PAGE>

           William L. Westerman has been our Chairman of the Board and CEO since
February 1993. Mr. Westerman was a consultant to Riviera, Inc. (our predecessor
company) from July 1, 1991 until he was appointed Chairman of the Board and CEO
of Riviera, Inc. on January 1, 1992. From 1973 to June 30, 1991, Mr. Westerman
was President and CEO of Cellu-Craft Inc., a manufacturer of flexible packaging
primarily for food products, and then had several positions with Alusuisse, a
multi-national aluminum and chemical company, following its acquisition of
Cellu-Craft in 1989.

           Jeffrey A. Silver has been one of our and ROC's Directors since
February 26, 2001. Mr. Silver is a shareholder with the law firm of Gordon &
Silver, Ltd., in Las Vegas, Nevada. Mr. Silver served as the Chief Deputy
District Attorney, Clark County, Nevada from 1972 to 1975 and was a Board Member
with the Nevada Gaming Control Board from 1975 to 1978 before engaging in the
private practice of law from 1979 to 1981 and 1984 to the present. Mr. Silver
was the Chief Operating Officer ("COO") and General Counsel of the Landmark
Hotel & Casino from 1981 to 1983, CEO of the Riviera, Inc. from 1983 to 1984 and
Senior Vice President at Caesars Palace in 1984. Mr. Silver served on the Board
of the LVCVA from 1989 to 1992 as Secretary/Treasurer and also served as
trustee. He was a member of the Board of Directors of the Greater Las Vegas
Chamber of Commerce from 1988 to 1995 and in 1988 was its Chairman. Mr. Silver
served for four years as a member of the United States Travel and Tourism
Advisory Board. He was President of the International Association of Gaming
Attorneys from 1992 to 1994 and Chairman of the American Bar Association Section
of Gaming Law from 1994 to 1996.

           Major General Paul A. Harvey USAF (Ret) has been one of our and ROC's
Directors since May 18, 2001. General Harvey is a consultant to the gaming,
hotel and resort industry. General Harvey spent 32 years on active duty in the
United States Air Force where he held numerous command positions throughout the
United States, Europe, Africa and the Middle East. He flew 160 combat missions
in Vietnam and Southeast Asia before retiring in 1991 as a command pilot with
over 5,000 flying hours. Following retirement, he was an Executive in Residence
and Assistant to the President of William Carey College and taught MBA studies
in management and leadership. General Harvey was the Executive Director of the
Mississippi Gaming Commission from 1993 through 1998 before becoming President
and CEO of Signature Works, Inc., the largest employer of blind and visually
impaired people in the world. In 2000 Signature Works, Inc. merged with LCI,
Inc. His present company, PDH Associates, Inc., provides consulting service to
the gaming, hotel and resort industry. Since 1996, General Harvey has served on
the board of directors of the National Center for Responsible Gaming. He also
serves on the board of directors of Vending Data Corporation which is
headquartered in Las Vegas, Nevada and is an AMEX-listed company, and on the
board of directors of Mikohn Gaming Corporation, d/b/a Progressive International
Corporation, also headquartered in Las Vegas, Nevada and a publicly reporting
company under the Exchange Act. General Harvey is also a Commissioner on the
Mississippi Band of Choctaw Indians Athletic and Boxing Commission.

           Vincent L. DiVito was appointed as one of our and ROC's Directors
effective June 14, 2002. Mr. DiVito is Vice President, CFO and Treasurer of
Lonza, Inc., a global specialties chemical business headquartered in Allendale,
New Jersey. Lonza, Inc. is part of Lonza Group, whose stock is traded on the
Swiss Stock Exchange. Prior to September 2000, Mr. DiVito was the Vice President
and CFO of Algroup Wheaton, a global pharmaceutical and cosmetics packaging
company, after having served as the Director of Business Development. From 1984
to 1990 Mr. DiVito was the Vice President of Miracle Adhesives Corp. (a division
of Pratt & Lambert, an AMEX-listed manufacturer of paints, coatings and
adhesives). He also serves on the board of directors of Vending Data Corporation
which is headquartered in Las Vegas, Nevada and is an AMEX-listed company. Prior
to 1984, Mr. DiVito spent two years on an audit team at Ernst & Whinney (now
Ernst & Young). Mr. DiVito is a certified public accountant and certified
management accountant.

           James N. Land, Jr., is a corporate consultant and was appointed as
one of our and ROC's Directors on April 12, 2004. Mr. Land was first elected a
Director of the Company and ROC on January 21, 1999 and served in that position
until May 31, 2002. From 1956 to 1976, Mr. Land was employed by The First Boston
Corporation in various capacities, including Director, Senior Vice President,
Co-Head of Corporate Finance, and head of International Operations. From 1971
through 1999, he served as Director of various companies, including Kaiser
Industries Corporation, Marathon Oil Company, Castle & Cooke, Inc., Manville
Corporation, NWA, Inc., Northwest Airlines, and Raytheon Company.

                                        46

<PAGE>

Executive Officers

           The following table presents information as of February 23, 2007
regarding our and ROC's executive officers:
<TABLE>
<CAPTION>
 Name                    Age    Position

<S>                      <C>                  <C>
 William L. Westerman    75     Our and ROC's Chairman of the Board and
                                CEO, and our President

 Mark B. Lefever         42     Our and ROC's Treasurer and CFO, and
                                Executive Vice President of Finance of ROC

 Tullio J. Marchionne    52     Our Secretary and General Counsel, and Secretary
                                and Executive Vice President of ROC

 Robert A. Vannucci      59     President and Chief Operating Officer of ROC
</TABLE>

For a description of the business experience of William L. Westerman, see
"Directors" above.

           Mark Lefever became our and ROC's CFO and Treasurer and ROC's
Executive Vice President of Finance on May 22, 2006. From 2004 to April 2006,
Mr. Lefever was Senior Vice President and CFO of Resorts International Hotel &
Casino, Inc., located in Atlantic City, New Jersey. From 2001 until December
2003, Mr. Lefever was General Manager and Vice President of 29 Palms Enterprises
& Operating Company for Trump 29 Casino, a California Native American casino
located in the greater Palm Springs area. Prior to that, Mr. Lefever served
initially as Vice President and CFO and later as COO of the Desert Inn Resort &
Casino from 1997 through 2000. Mr. Lefever's gaming career began in Tunica,
Mississippi as the Vice President and CFO of Sheraton Casino from 1996 through
1997. Prior to his gaming positions, Mr. Lefever spent 10 years in the audit and
business advisory practice with Arthur Andersen LLC. He is a member of the New
Jersey Society of Certified Public Accountants, and holds a BS degree in
Accounting from Villanova University.

           Tullio J. Marchionne became our General Counsel on January 10, 2000,
was appointed as our and ROC's Secretary on February 17, 2000 and was elected
Vice President of ROC on February 26, 2001 and Executive Vice President in June
of 2005. Mr. Marchionne was initially employed by Riviera, Inc., in June 1986 as
a casino dealer and served in various capacities including Pit Manager, General
Counsel and Director of Gaming Administration until September 1996, when he was
transferred to the Four Queens Hotel and Casino as Director of Casino Operations
pursuant to the management agreement our subsidiary had with the Four Queens. He
served in that position until May 1997. Mr. Marchionne served as the General
Manager of the Regency Casino Thessaloniki, located in Thessaloniki, Greece,
from June 1997 until December 1997. Mr. Marchionne served as a Casino Supervisor
with Bally's Las Vegas from February 1998 until June 1998, Director of Casino
Operations at the Maxim Hotel and Casino in Las Vegas from June 1998 until
November 1998 and Director of Table Games at the Resort At Summerlin from
November 1998 until December 1999.

           Robert A. Vannucci was elected Vice President of Marketing and
Entertainment of ROC on April 26, 1994, Executive Vice President of Marketing
and Entertainment on July 1, 1998 and President of ROC on October 1, 2000. Mr.
Vannucci had been Director of Marketing of ROC since July 19, 1993. Mr. Vannucci
was Senior Vice President of Marketing and Operations at the Sands Casino Hotel
in Las Vegas from April 1991 to February 1993. He was Vice President and General
Manager of Fitzgerald's Las Vegas (a casino/hotel) from 1988 to January 1991.

           Our and ROC's officers serve at the discretion of our and ROC's
respective Boards of Directors, and they are also subject to the licensing
requirements of the Nevada Gaming Commission and Colorado Gaming Commission.

Audit Committee; Audit Committee Financial Expert

           We have a  separately-designated  standing  Audit  Committee,
established  in accordance  with section  3(a)(58)(A)  of the Exchange Act.  The
members of our Audit Committee are Vincent L. DiVito, Paul A. Harvey and James
N. Land, Jr.

                                        47
<PAGE>

           We have determined that the Chairman of our Audit Committee, Vincent
L. DiVito, who meets the AMEX audit committee independence requirements, is an
"audit committee financial expert", as defined in Item 407(d)(5)(ii) of SEC
Regulation S-K. Mr. DiVito is a certified public accountant and certified
management accountant, spent two years on the audit team at Ernst & Whinney (now
Ernst & Young) and is currently the CFO and treasurer of a global specialties
chemical business.

Section 16(a) Beneficial Ownership Reporting Compliance

           Section 16(a) of the Exchange Act (Section 16(a)) requires our
directors and executive officers and persons who own more than 10% of our common
stock to file with the SEC certain reports regarding ownership of our common
stock. Such persons are required to furnish us with copies of all Section 16(a)
reports they file. Based solely on our review of such reports that were
furnished to us and written representations made to us by those reporting
persons in connection with certain of those reporting requirements, we believe
that all the reporting persons met their Section 16(a) reporting obligations on
a timely basis during 2006.

Code of Ethics

           We have adopted certain ethical policies that apply to all of our
employees at the level of Supervisor or higher, including our principal
executive officer, principal financial officer and principal accounting officer.
Those policies, together with certain rules adopted by our Disclosure Committee,
comprise what we consider to be our code of ethics. Those policies and rules are
posted on our Internet web site at www.theriviera.com.

Item 11.   Executive Compensation

           Information regarding this item is incorporated herein by reference
to our proxy statement to be filed on or about April 6, 2007, relating to the
annual meeting of our stockholders to be held on May 15, 2007.

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

           Information regarding this item is incorporated herein by reference
to our proxy statement to be filed on or about April 6, 2007, relating to our
annual meeting of stockholders to be held on May 15, 2007.

Item 13.   Certain Relationships and Related Transactions

           Information regarding this item is incorporated herein by reference
to our proxy statement to be filed on or about April 6, 2007, relating to our
annual meeting of stockholders to be held on May 15, 2007.

Item 14.   Principal Accountant Fees and Services

           Information regarding this item is incorporated herein by reference
to our proxy statement to be filed on or about April 6, 2007, relating to our
annual meeting of stockholders of the Company to be held on May 15, 2007.

         PART IV

Item 15.   Exhibits and Financial Statement Schedules

           (a)(1)   List of Financial Statements

           The following is the list of Registered Public Accounting Firm
            Reports and the consolidated Financial Statements of the Company:

                                                48

<PAGE>

            .    Report of Independent Registered Public Accounting Firm on
                 Internal Control Over Financial Reporting . Report of
                 Independent Registered Public Accounting Firm on the
                 Consolidated Financial Statements

            .    Consolidated Balance Sheets as of December 31, 2006 and 2005

            .    Consolidated Statements of Operations for the Years Ended
                 December 31, 2006, 2005 and 2004

            .    Consolidated Statements of Stockholders' Deficiency for the
                 Years Ended December 31, 2006, 2005, and 2004

            .    Consolidated Statements of Cash Flows for the Years Ended
                 December 31, 2006, 2005 and 2004

            .    Notes to Consolidated Financial Statements

           (a)(2)   List of Financial Statement Schedules

           No financial statement schedules have been filed herewith since they
            are either not required, are not applicable, or the required
            information is shown in the consolidated financial statements or
            related notes.

           (a)(3)   List of Exhibits

              Exhibits required by Item 601 of Regulation S-K are listed in the
Exhibit Index herein, which information is incorporated herein by reference, and
such exhibits are filed herewith.

           (b)     The exhibits required by Item 601 of Regulation S-K are
                   filed as exhibits to this Form 10-K.

           (c)     Not applicable.


                                        49
<PAGE>

                                   SIGNATURES

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

                                  RIVIERA HOLDINGS CORPORATION


                                  By:   /s/  WILLIAM L. WESTERMAN
                                        -------------------------
                                        William L. Westerman
                                        Chief Executive Officer and President
                                        (Principal Executive Officer)

                                  March 2, 2007


           Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Signature                                 Title                        Date
<TABLE>
<CAPTION>


<S>                                    <C>                                 <C>
/s/ WILLIAM L. WESTERMAN     Chairman of the Board, Chief        March 2, 2007
------------------------     Executive Officer and President
William L. Westerman


/s/ MARK B. LEFEVER          Treasurer (Principal Financial      March 2, 2007
------------------------     and Accounting Officer)
Mark B. Lefever


/s/ JEFFREY A. SILVER        Director                            March 2, 2007
------------------------
Jeffrey A. Silver


/s/ PAUL A. HARVEY           Director                            March 2, 2007
------------------------
Paul A. Harvey


/s/ VINCENT L. DIVITO        Director                            March 2, 2007
-----------------------
Vincent L. DiVito


/s/ JAMES N. LAND, JR.       Director                            March 2, 2007
-----------------------
James N. Land, Jr.
</TABLE>

                                                50
<PAGE>


                                  EXHIBIT INDEX

Exhibit       Description
Number


3.1*     Articles of  Incorporation  of the Company (see Exhibit 3 to Quarterly
         Report on Form 10-Q filed on November 10, 2003, Commission File No.
         0-21430)

3.2*     Bylaws of the Company (see Exhibit 3.2 to Registration  Statement on
         Form S-4 filed on September 10,  1997,  Commission File No. 0-21430)

3.3*     Articles of  Incorporation  of Riviera  Operating  Corporation  (see
         Exhibit 3.3 to Registration  Statement on Form S-4 filed on September
         10, 1997, Commission File No. 0-21430)

3.4*     Bylaws of Riviera Operating  Corporation (see Exhibit 3.4 to
         Registration  Statement on Form S-4 filed on September 10, 1997,
         Commission File No. 0-21430)

3.5*     Articles of Incorporation  of Riviera Gaming  Management,  Inc. (see
         Exhibit 3.5 to Registration  Statement on Form S-4 filed on September
         10, 1997, Commission File No. 0-21430)

3.6*     Bylaws  of  Riviera  Gaming  Management,  Inc.  (see  Exhibit  3.6 to
         Registration  Statement  on Form  S-4  filed  on September 10, 1997,
         Commission File No. 0-21430)

3.7*     Articles of  Incorporation  of Riviera Black Hawk,  Inc. (see Exhibits
         3.01 and 3.02 to Amendment No. 1 to Registration Statement on Form S-4
         filed by Riviera Black Hawk, Inc. on August 31, 1999, Commission File
         No. 333-81613)

3.8*     Bylaws of Riviera Black Hawk, Inc. (see Exhibit 3.03 to Amendment No.
         1 to Registration  Statement on Form S-4 filed by Riviera Black Hawk,
         Inc. on August 31, 1999, Commission File No. 333-81613).

4.1*     Indenture dated as of June 26, 2002 among the Company, the
         Guarantors party thereto and The Bank of New York, as trustee
         (see Exhibit 4.1 to Registration Statement on Form S-4 filed on
         August 9, 2002, Commission File No. 333-97907).

4.2*     Form of the Company's 11% Senior  Secured Notes due 2010 (see Exhibit
         4.1 to  Registration  Statement on Form S-4 filed on August 9, 2002,
         Commission File No. 333-97907)

10.1*    Registration  Rights Agreement dated as of June 26,  2002 by and among
         the Company,  the Guarantors party thereto,  and Jefferies & Company,
         Inc. (see Exhibit 10.1 to Registration  Statement on Form S-4 filed on
         August 9, 2002, Commission File No. 333-97907)

10.2*    Purchase Agreement dated June 19, 2002 among the Company, the
         Guarantors party thereto, and Jefferies & Company, Inc. (see
         Exhibit 10.2 to Registration Statement on Form S-4 filed on
         August 9, 2002, Commission File No. 333-97907)

10.3*    Amended and Restated Lease Agreement between Riviera Operating
         Corporation and Mardi Gras Food Court, Inc. dated March 15, 1998
         (see Exhibit 10.3 to Registration Statement on Form S-4 filed on
         August 9, 2002, Commission File No.
         333-97907)

10.4*    Lease Agreement between Riviera,  Inc. and Leroy's Horse and Sports
         Place (see Exhibit 10.3 to Form 10, Commission File No. 0-21430)

10.5*    Indemnity  Agreement,  dated June 30, 1993, from Riviera,  Inc. and
         Meshulam Riklis in favor of the Company and Riviera Operating
         Corporation  (see Exhibit 10.7 to  Registration  Statement on Form S-1
         filed on August 11, 1993,  Commission  File No. 33-67206)

                                        51

<PAGE>
10.6*    Equity Registration Rights Agreement dated June 30, 1993, among
         the Company and the Holders of Registerable Shares (see Exhibit
         10.9 to Registration Statement on Form S-1 filed on August 11,
         1993, Commission File No. 33-67206)

10.7*    Operating  Agreement dated June 30, 1993,  between the Company and
         Riviera Operating  Corporation (see Exhibit 10.15 to Registration
         Statement on Form S-1 filed on August 11, 1993, Commission File No.
         33-67206)

10.8*    Adoption  Agreement  regarding  Profit  Sharing and 401(k)  Plans of
         the Company  (see  Exhibit 10.16  to  Registration Statement on Form
         S-1 filed on August 11, 1993, Commission File No. 33-67206)

10.9*    Tax Sharing Agreement between the Company and Riviera Operating
         Corporation dated June 30,  1993 (see Exhibit 10.24 to Amendment No. 1
         to Registration Statement on Form S-1 filed on August 19, 1993,
         Commission File No. 33-67206)

10.10*   Tax Sharing  Agreement between the Company and Riviera Black Hawk, Inc.
         dated  March 31,  1999 (see Exhibit 10.12 to Registration Statement on
         Form S-4 filed on August 9, 2002, Commission File No. 333-97907)

10.11*(A)1993 Stock Option Plan (see Exhibit 4.4 to Registration  Statement on
         Form S-8 filed on May 13,  1996,  Commission File No. 333-03631)

10.12*(A)Stock Compensation Plan for Directors Serving on the
         Compensation Committee (see Exhibit 10.14 to Registration
         Statement on Form S-4 filed on August 9, 2002, Commission File
         No. 333-97907)

10.13*(A)Employment Agreement dated as of November 21, 1996 among the
         Company, Riviera Operating Corporation and William L. Westerman
         (see Exhibit 10.31 to Form 10-K for the fiscal year ended
         December 31, 1996, Commission File No. 0-21430)

10.14*(A)Amendment to Employment  Agreement between the Company and William L.
         Westerman  effective January 1, 2001 (see Exhibit 10.40 to Form 10-K
         filed March 23, 2001, Commission File No. 0-21430)

10.15*(A)Deferred  Compensation  Plan dated  November 1, 2000 (see Exhibit
         10.19 to Form 10-K filed March 25, 2005,  Commission File No. 0-21430)

10.16*(A)Restricted Stock Plan (see Exhibit 10.20 to Form 10-K filed March 25,
         2005, Commission File No. 0-21430)

10.17*   Deed of Trust,  Assignment of Rents, Leases, Fixture Filing and
         Security Agreement dated June 26, 2002, executed by the Company for the
         benefit of The Bank of New York (see  Exhibit 10.21  to  Registration
         Statement  on Form S-4 filed on August 9, 2002, Commission File No.
         333-97907)

10.18*   Deed of Trust to Public Trustee, Security Agreement, Fixture
         Filing and Assignment of Rents, Leases and Leasehold Interests
         dated as of June 26, 2002, by Riviera Black Hawk, Inc. for the
         benefit of The Bank of New York (see Exhibit 10.22 to
         Registration Statement on Form S-4 filed on August 9, 2002,
         Commission File No. 333-97907)

10.19*   Security  Agreement  dated  June 26,  2002 by and among the Company,
         Riviera  Operating  Corporation,  Riviera  Gaming Management,  Inc.,
         Riviera Gaming Management of Colorado,  Inc., Riviera Black Hawk, Inc,
         and The Bank of New York (see Exhibit 10.23 to Registration Statement
         on Form S-4 filed on August 9, 2002, Commission File No. 333-97907)


                                                52
<PAGE>
10.20*   Assignment  of Rents,  Leases and Leasehold  Interests  dated as of
         June 26,  2002 by Riviera Black Hawk,  Inc. for the benefit  of The
         Bank of New York (see  Exhibit  10.24 to  Registration  Statement  on
         Form S-4 filed on August 9, 2002, Commission File No. 333-97907)

10.21*   Stock Pledge and Security  Agreement  dated June 26,  2002,  executed
         by the Company (see Exhibit 10.25 to Registration Statement on Form S-4
         filed on August 9, 2002, Commission File No. 333-97907)

10.22*   Stock Pledge and Security Agreement dated June 26,  2002, executed by
         Riviera Operating  Corporation (see Exhibit 10.26 to Registration
         Statement on Form S-4 filed on August 9, 2002, Commission File No.
         333-97907)

10.23*   Stock Pledge and Security  Agreement  dated June 26,  2002,  executed
         by Riviera Gaming  Management,  Inc. (see Exhibit 10.27 to Registration
         Statement on Form S-4 filed on August 9, 2002, Commission File No.
         333-97907)

10.24*   Environmental  Indemnity  dated as of  June 26,  2002 by and  among
         the  Company  and  Riviera Black  Hawk,  Inc.,  as indemnitors,  and
         The Bank of New York, as trustee (see  Exhibit 10.28  to Registration
         Statement on Form S-4 filed on August 9, 2002, Commission File No.
         333-97907)

10.25*   Environmental Indemnity dated as of June 26, 2002 by and between the
         Company, as indemnitor,  and The Bank of New York, as  trustee  (see
         Exhibit  10.29 to Registration Statement on Form S-4 filed on August 9,
         2002,  Commission  File  No. 333-97907)

10.26*   Loan and Security Agreement dated as of July 26,  2002 by and among the
         Company and the other Borrower parties thereto, the Guarantors  parties
         thereto and Foothill Capital  Corporation (see Exhibit 10.30 to
         Registration  Statement on Form S-4 filed on August 9, 2002, Commission
         File No. 333-97907)

10.27*   Intercreditor  Agreement  dated as of  July 26,  2002 by and between
         The Bank of New York,  as  trustee,  and  Foothill Capital Corporation
         (see Exhibit 10.31 to Registration  Statement on Form S-4 filed on
         August 9, 2002,  Commission File No. 333-97907)

10.28*   Fee Letter, dated July 26,  2002, issued by the Company,  Riviera Black
         Hawk, Inc. and Riviera Operating Corporation to Foothill  Capital
         Corporation  (see  Exhibit  10.32 to Registration Statement on Form S-4
         filed on August 9,  2002, Commission File No. 333-97907)

10.29*   Intellectual  Property  Security  Agreement dated as of July 26,  2002
         by and between the Company and the other Debtors parties thereto,  and
         Foothill Capital  Corporation (see  Exhibit 10.33 to Registration
         Statement on Form S-4 filed on August 9, 2002, Commission File No.
         333-97907)

10.30*   Deed of Trust, Assignment of Rents, Leases, Fixture Filing and
         Security Agreement dated July 26, 2002, executed by the Company
         for the benefit of Foothill Capital Corporation (see Exhibit
         10.34 to Amendment No. 1 to Registration Statement on Form S-4
         filed on September 26, 2002, Commission File No. 333-97907)

10.31*   Environmental  Indemnity dated July 26,  2002 from the Company in favor
         of Foothill  Capital  Corporation  (see Exhibit 10.35 to Registration
         Statement on Form S-4 filed on August 9, 2002, Commission File No.
         333-97907)

10.32*   Continuing  Guaranty  dated  July 26,  2002 by and among the  Company,
         the other  Borrowers  parties  thereto  and the Guarantors parties
         thereto in favor of Foothill Capital  Corporation.  (see Exhibit 10.36
         to Registration  Statement on Form S-4 filed on August 9, 2002,
         Commission File No. 333-97907)

                                                53

<PAGE>

10.33*   Subordination  Agreement dated July 26,  2002 by and among the Company
         and the other Creditors parties thereto in favor of Foothill  Capital
         Corporation  (see Exhibit 10.37  to  Registration  Statement on Form
         S-4 filed on August 9, 2002, Commission File No. 333-97907)

10.34*   Stock Pledge and Security  Agreement  dated July 26,  2002,  executed
         by the Company (see Exhibit 10.38 to Registration Statement on Form S-4
         filed on August 9, 2002, Commission File No. 333-97907)

10.35*   Stock Pledge and Security Agreement dated July 26,  2002, executed by
         Riviera Operating  Corporation (see Exhibit 10.39 to Registration
         Statement on Form S-4 filed on August 9, 2002, Commission File No.
         333-97907)

10.36*   Stock Pledge and Security  Agreement  dated July 26,  2002,  executed
         by Riviera Gaming  Management,  Inc. (see Exhibit 10.40 to Registration
         Statement on Form S-4 filed on August 9, 2002, Commission File No.
         333-97907)

10.37*   Deed of Trust to Public  Trustee,  Security  Agreement,  Fixture Filing
         and  Assignment of Rents,  Leases and Leasehold Interests dated July
         26,  2002,  executed by Riviera Black Hawk, Inc. for the benefit of
         Foothill  Capital  Corporation (see Exhibit 10.41 to Amendment  No. 1
         to  Registration  Statement on Form S-4 filed on September 26, 2002,
         Commission File No. 333-97907)

10.38*   Environmental Indemnity dated July 26, 2002 from the Company and
         Riviera Black Hawk, Inc. in favor of Foothill Capital
         Corporation (see Exhibit 10.42 to Registration Statement on Form
         S-4 filed on August 9, 2002, Commission File No.
         333-97907)

10.39*(A)Non-Qualified  Stock Option Plan for  Non-Employee  Directors  (see
         Exhibit 4.6 to  Registration  Statement on Form S-8 filed on May 13,
         1996, Commission File No. 333-03631)

10.40*(A)Second  Amendment to Employment  Agreement  between the Company and
         William L.  Westerman  effective July 15, 2003 (see Exhibit 10.46 to
         Form 10-K filed on March 16, 2004, Commission File No. 0-21430)

10.41*(A)Amendment of 1993 Stock  Option Plan (see  Exhibit  10.47 to Form 10-K
         filed on  March 25,  2005,  Commission  File No. 0-21430)

10.42*   Amendment  Numbers One,  Two,  Three and Four to Loan and Security
         Agreement,  originally  dated July 26, 2002, by and among the Company
         and the other borrowers thereto,  the Guarantors party thereto and
         Foothill Capital  Corporation (see Exhibit 10.48 to Form 10-K filed on
         March 25, 2005, Commission File No. 0-21430)

10.43*   Purchase and License Agreement,  dated September 25, 2003, between
         Bally Gaming, Inc. and Riviera Operating Corporation (see Exhibit 10.49
         filed on March 25, 2005, Commission File No. 0-21430)

10.44*(A)2005 Incentive Stock Option Plan (see Exhibit A To Schedule 14A filed
         on April 22, 2005, Commission File No. 0-21430)

10.45*(A)2005  Non-Qualified  Stock Option Plan for  Non-Employee  Directors
         (see Exhibit B to  Schedule 14A  filed on April 22, 2005, Commission
         File No. 0-21430)

10.46*(A)Incentive  Compensation  Program as amended  August 3, 1995 (see
         Exhibit  10.51 to  Form 10-K  filed on March 15, 2006, Commission File
         No. 0-21430.

10.47*(A)Form of Restricted Stock Agreement under the Company's
         Restricted Stock Plan (see Exhibit 10.52 to Form 10-K filed on
         March 15, 2006, Commission File No. 0-21430)


                                        54
<PAGE>

10.48*   Agreement and Plan of Merger, dated April 5, 2006, among Riv
         Acquisition  Holdings Inc., Riv Acquisition Inc. and the Company (see
         Appendix A to revised  definitive  proxy materials on Schedule 14A
         filed on July 3, 2006,  Commission File No. 0-21430)

10.49*(A)Employment Agreement between the Company and Mark B. Lefever
         (see Exhibit 10.3 to Form 10-Q filed on August 9, 2006,
         Commission File No. 0-21430)

10.50*(A)Employment Agreement among Riviera Holdings Corporation,
         Riviera Operating Corporation and Robert A. Vannucci (see
         Exhibit 10.1 to Form 10-Q filed on November 6, 2006, Commission
         File No. 0-21430

10.51(A) Forms of Salary Continuation Agreements with Riviera Operating
         Corporation and Riviera Black Hawk, Inc.

21.1*    Subsidiaries  of the Company (see  Exhibit 21.1 to  Registration
         Statement  on Form S-4 filed with the  Commission  on August 9, 2002,
         Commission File No. 333-97907)

23.1     Consent of Deloitte & Touche LLP, Independent Registered Public
         Accounting Firm

31.1     Certification of the Principal Executive Officer of the Registrant
         pursuant to Exchange Act Rule 13a-14(a)

31.2     Certification of the Principal Financial Officer of the Registrant
         pursuant to Exchange Act Rule 13a-14(a)

32.1     Certification  of the Principal  Executive  Officer of the  Registrant
         pursuant to Exchange Act Rule  13a-14(b) and 18 U.S.C. 1350

32.2     Certification  of the Principal  Financial  Officer of the  Registrant
         pursuant to Exchange Act Rule  13a-14(b) and 18 U.S.C. 1350

* These are incorporated herein by reference as exhibits hereto. Following the
description of each such exhibit is a reference to it as it appeared in a
specified document previously filed with the Securities and Exchange Commission,
to which there have been no amendments or changes, unless otherwise indicated.

(A) Management contract or compensatory plan or arrangement


                                        55
<PAGE>

       Riviera Holdings
       Corporation

       Consolidated Financial Statements for the Years Ended December 31,
       2006, 2005 and 2004 and Reports of Independent Registered Public
       Accounting Firm

<PAGE>

RIVIERA HOLDINGS CORPORATION

TABLE OF CONTENTS
------------------------------------------------------------------------------



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER
 FINANCIAL REPORTING

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON THE CONSOLIDATED
 FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS:

   Balance Sheets as of December 31, 2006 and 2005

   Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004

   Statements of Stockholders' Deficiency for the Years Ended
     December 31, 2006, 2005 and 2004

   Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004

   Notes to Consolidated Financial Statements

<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of
Riviera Holdings Corporation
Las Vegas, Nevada

     We have  audited  management's  assessment,  included  in the  accompanying
     Management's  Report on Internal  Control Over  Financial  Reporting,  that
     Riviera Holdings  Corporation and subsidiaries  (the "Company")  maintained
     effective  internal  control  over  financial  reporting as of December 31,
     2006,  based  on  criteria  established  in  Internal   Control--Integrated
     Framework  issued  by the  Committee  of  Sponsoring  Organizations  of the
     Treadway   Commission.   The  Company's   management  is  responsible   for
     maintaining effective internal control over financial reporting and for its
     assessment  of  the   effectiveness  of  internal  control  over  financial
     reporting.  Our  responsibility  is to express  an opinion on  management's
     assessment and an opinion on the  effectiveness  of the Company's  internal
     control over financial reporting based on our audit.

     We  conducted  our audit in  accordance  with the  standards  of the Public
     Company Accounting Oversight Board (United States). Those standards require
     that we plan and perform  the audit to obtain  reasonable  assurance  about
     whether effective internal control over financial  reporting was maintained
     in all material respects.  Our audit included obtaining an understanding of
     internal  control  over  financial   reporting,   evaluating   management's
     assessment,  testing and evaluating the design and operating  effectiveness
     of internal control,  and performing such other procedures as we considered
     necessary  in the  circumstances.  We  believe  that our audit  provides  a
     reasonable basis for our opinion.

     A company's internal control over financial reporting is a process designed
     by, or under the  supervision  of, the  company's  principal  executive and
     principal financial officers, or persons performing similar functions,  and
     effected  by the  company's  board  of  directors,  management,  and  other
     personnel to provide  reasonable  assurance  regarding the  reliability  of
     financial  reporting  and  the  preparation  of  financial  statements  for
     external  purposes  in  accordance  with  generally   accepted   accounting
     principles.  A company's internal control over financial reporting includes
     those  policies  and  procedures  that (1)  pertain to the  maintenance  of
     records that,  in  reasonable  detail,  accurately  and fairly  reflect the
     transactions  and  dispositions  of the assets of the company;  (2) provide
     reasonable  assurance that transactions are recorded as necessary to permit
     preparation of financial  statements in accordance with generally  accepted
     accounting  principles,  and that receipts and  expenditures of the company
     are being made only in accordance  with  authorizations  of management  and
     directors of the company;  and (3) provide reasonable  assurance  regarding
     prevention  or  timely  detection  of  unauthorized  acquisition,  use,  or
     disposition  of the company's  assets that could have a material  effect on
     the financial statements.

                                        F-1

<PAGE>

     Because of the inherent  limitations  of internal  control  over  financial
     reporting,  including the  possibility of collusion or improper  management
     override of controls,  material misstatements due to error or fraud may not
     be  prevented  or  detected on a timely  basis.  Also,  projections  of any
     evaluation  of the  effectiveness  of the internal  control over  financial
     reporting  to future  periods are subject to the risk that the controls may
     become inadequate  because of changes in conditions,  or that the degree of
     compliance with the policies or procedures may deteriorate.

     In  our  opinion,  management's  assessment  that  the  Company  maintained
     effective  internal  control  over  financial  reporting as of December 31,
     2006, is fairly  stated,  in all material  respects,  based on the criteria
     established  in  Internal  Control--Integrated   Framework  issued  by  the
     Committee of Sponsoring  Organizations of the Treadway Commission.  Also in
     our opinion,  the Company maintained,  in all material respects,  effective
     internal control over financial reporting as of December 31, 2006, based on
     the criteria established in Internal  Control--Integrated  Framework issued
     by the Committee of Sponsoring Organizations of the Treadway Commission.

     We have also  audited,  in  accordance  with the  standards  of the  Public
     Company  Accounting  Oversight  Board  (United  States),  the  consolidated
     financial  statements  as of and  for the  year  December  31,  2006 of the
     Company and our report dated March 9, 2007 expressed an unqualified opinion
     on those financial statements and includes an explanatory paragraph related
     to the adoption of Statement of Financial  Accounting Standards No. 123(R),
     Accounting of Stock-Based Payment, on January 1, 2006.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada
March 9, 2007


                                        F-2
<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of
Riviera Holdings Corporation
Las Vegas, Nevada

     We have audited the  accompanying  consolidated  balance  sheets of Riviera
     Holdings  Corporation and  subsidiaries  (the "Company") as of December 31,
     2006 and 2005,  and the  related  consolidated  statements  of  operations,
     stockholders' deficiency, and cash flows for each of the three years in the
     period  ended  December  31,  2006.  These  financial  statements  are  the
     responsibility  of  the  Company's  management.  Our  responsibility  is to
     express an opinion on the financial statements based on our audits.

     We  conducted  our audits in  accordance  with the  standards of the Public
     Company Accounting Oversight Board (United States). Those standards require
     that we plan and perform  the audit to obtain  reasonable  assurance  about
     whether the  financial  statements  are free of material  misstatement.  An
     audit includes examining,  on a test basis, evidence supporting the amounts
     and  disclosures  in the  financial  statements.  An  audit  also  includes
     assessing the accounting  principles used and significant estimates made by
     management,   as  well  as  evaluating  the  overall  financial   statement
     presentation. We believe that our audits provide a reasonable basis for our
     opinion.

     In our opinion,  such consolidated  financial statements present fairly, in
     all  material   respects,   the  financial  position  of  Riviera  Holdings
     Corporation  and  subsidiaries  as of December  31, 2006 and 2005,  and the
     results  of their  operations  and their  cash  flows for each of the three
     years in the period ended December 31, 2006, in conformity  with accounting
     principles generally accepted in the United States of America.

     As  discussed  in  Note  1  to  the  consolidated financial statements, on
     January 1, 2006,  the  Company  changed  their  method  of  accounting for
     share-based  compendation to conform to Statement of Financial Accounting
     Standards No. 123(R), Accounting of Stock-Based Payment.

     We have also  audited,  in  accordance  with the  standards  of the  Public
     Company  Accounting  Oversight Board (United States),  the effectiveness of
     the Company's internal control over financial  reporting as of December 31,
     2006,  based on the criteria  established  in Internal  Control--Integrated
     Framework  issued  by the  Committee  of  Sponsoring  Organizations  of the
     Treadway  Commission  and our  report  dated  March 9, 2007,  expressed  an
     unqualified opinion on management's  assessment of the effectiveness of the
     Company's  internal  control over  financial  reporting and an  unqualified
     opinion  on  the  effectiveness  of the  Company's  internal  control  over
     financial reporting.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada
March 9, 2007

                                        F-3

<PAGE>
<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
(In Thousands, except shares)
-------------------------------------------------------------------------------

ASSETS                                                      2006        2005

CURRENT ASSETS:
<S>                                                         <C>          <C>
  Cash and cash equivalents                              $ 25,285     $ 20,571
  Accounts receivable - net of allowance
      of $163 and $1,244                                    3,063        3,544
  Inventories                                               1,792        2,485
  Prepaid expenses                                          4,002        4,197
                                                           ------       -------
           Total current assets                            34,142       30,797

PROPERTY AND EQUIPMENT Net                                171,320      171,130

OTHER ASSETS                                                5,774        7,396

DEFERRED INCOME TAXES-Net                                   2,446        2,446
                                                         --------    ---------
           Total assets                                 $ 213,682    $ 211,769
                                                        =========   ==========

LIABILITIES AND STOCKHOLDERS  DEFICIENCY

CURRENT LIABILITIES:
  Current portion of long-term debt                         $ 879        $ 824
  Current portion of obligation to officers                 1,000        1,000
  Accounts payable                                          9,126       10,133
  Accrued interest                                          1,063        1,087
  Accrued expenses                                         13,167       12,261
                                                           ------       ------
           Total current liabilities                       25,235       25,305

LONG-TERM DEBT - Net of current portion                   214,124      214,607

OTHER LONG-TERM DEBT                                        2,763            -

OBLIGATION TO OFFICERS - Net of current portion             2,094        3,126
                                                          -------      -------
            Total liabilities                             244,216      243,038

COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS  EQUITY (DEFICIENCY):
  Common stock, $.001 par value 60,000,000 shares
    authorized; 17,131,824 and 17,082,324 shares
    issued at December 31, 2006 and 2005, respectively,        17           17
    12,369,431 and 12,223,233 shares outstanding
  Additional paid-in capital                               18,165       17,301
  Treasury stock, 4,762,393 and 4,859,091 shares at
   December 31, 2006 and 2005, respectively                (9,841)     (10,047)
  Acumulated Deficit                                      (38,875)     (38,540)
                                                          --------     --------
           Total stockholders deficiency                  (30,534)     (31,269)

           Total liabilities and stockholders            ---------    ---------
              deficiency                                $ 213,682    $ 211,769
                                                         =========   ==========
See notes to consolidated financial statements.

</TABLE>

                                        F-4

<PAGE>

<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(In Thousands, Except Per Share Amounts)
-------------------------------------------------------------------------------

                                               2006        2005        2004
REVENUES
<S>                                             <C>         <C>         <C>
  Casino                                    $ 111,459   $ 108,130   $ 110,461
  Rooms                                        56,700      52,021      46,925
  Food and beverage                            33,125      34,132      34,123
  Entertainment                                13,672      17,371      20,767
  Other                                         6,431       8,312       8,243
                                              -------     -------     -------
          Total revenues                      221,387     219,966     220,519
                                              -------     -------     -------
  Less promotional allowances                  20,443      17,739      19,169
                                              -------     -------     -------
          Net revenues                        200,944     202,227     201,350

COSTS AND EXPENSES
  Direct costs and expenses of operating
   departments:
    Casino                                     58,000      56,092      54,530
    Rooms                                      27,185      27,133      25,987
    Food and beverage                          24,224      24,645      23,675
    Entertainment                               9,536      13,214      14,066
    Other                                       1,437       2,906       2,836
  Other operating expenses
    General and administrative
        Equity compensation                       813       1,627     -
        Sarbanes-Oxley Act professional fees      820       1,233     -
        Other general and administrative       39,485      38,211      40,252
    Mergers, acquisitions and development
        costs, net                              1,318         (65)      1,193
    Asset impairments                              19         777     -
    Depreciation and amortization              12,691      14,065      13,852
                                              -------     -------     -------
         Total costs and expenses             175,528     179,838     176,391
                                              -------     -------     --------
INCOME FROM OPERATIONS                         25,416      22,389      24,959
                                              -------     -------     --------
  Interest expense, net, including related
     party interest of $400, $518  and $638
     in 2006, 2005 and 2004, respectively     (25,751)    (26,388)    (27,045)
                                              -------     -------     --------
          Total interest expense, net         (25,751)    (26,388)    (27,045)
                                              -------     --------    --------
NET LOSS                                       $ (335)   $ (3,999)   $ (2,086)
                                              ========   =========   =========
EARNINGS PER SHARE DATA Loss per share,
    basic and diluted                         $ (0.03)    $ (0.34)    $ (0.20)
                                              ========   =========   =========
  Weighted-average common and common
    equivalent shares                          12,134      11,833      10,671
                                              ========    ========    ========

See notes to consolidated financial statements.
</TABLE>

                                        F-5

<PAGE>
<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIENCY
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(Dollars In Thousands)
----------------------------------------------------------------------------------------------------------
                                  Common Stock    Additional  Retained    Treasury Stock
                                -----------------  Paid-In    Earnings  -------------------
                                Shares    Amount   Capital    (Deficit)  Shares      Amount     Total
                               ------------------------------------------------------------------------

<S>                              <C>         <C>     <C>        <C>           <C>         <C>        <C>
BALANCE January 1, 2004        15,498,624  $ 15    $ 13,723   $ (32,455)  (5,063,871) $ (11,320) $(30,037)

  Distribution of treasury
   stock-deferred compensation
   trust                                -     -           -          -        16,707         37        37
  Stock issued under executive
   option plan                  1,048,500     1        2,167         -             -          -     2,168
  Other                             1,200     -         (198)        -            90        824       626
  Net loss                              -     -           -      (2,086)           -          -    (2,086)
                               -----------  ----     -------     -------- -----------  --------  --------
BALANCE December 31, 2004      16,548,324     16      15,692    (34,541)  (5,047,074)   (10,459)  (29,292)

  Stock issued under executive
    option plan                   166,500      1         395         -              -          -      396
  Stock based compensation -
    stock options                       -      -          60         -              -          -       60
  Distribution of treasury stock
    deferred compensation trust         -      -        (412)        -        187,983        412        -
  Stock based compensation -
    restricted stock                    -      -       1,566         -              -          -    1,566
  Issuance of deferred compensation
    -restricted stock              367,500     -           -         -              -          -        -
  Net loss                              -      -           -     (3,999)            -          -    (3,999)
                                ---------    ----    -------    --------    ----------    ------   ---------
BALANCE December 31, 2005       17,082,324    17      17,301    (38,540)   (4,859,091)   (10,047)  (31,269)

  Stock based compensation -
     stock options                      -      -          72           -            -          -       72
  Stock issued under executive
     option plan                   97,500      -         257           -            -          -      257
  Restricted stock - Forfeited    (48,000)     -           -           -            -          -        -
  Stock based compensation -
     restricted stock                   -      -         741           -            -          -      741
  Distribution of treasury stock -
     deferred compensation              -      -        (206)          -       96,698        206        -
  Net loss                              -      -           -        (335)           -          -     (335)
                                ---------- -----   ---------  -----------   ----------  -------------------
BALANCE December 31, 2006      17,131,824   $ 17    $ 18,165   $ (38,875)  (4,762,393)  $ (9,841)$(30,534)

See notes to consolidated financial statements.
</TABLE>

                                                F-6

<PAGE>
<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(In Thousands)
------------------------------------------------------------------------------


                                                     2006     2005       2004

OPERATING ACTIVITIES:
<S>                                                    <C>     <C>       <C>
  Net loss                                          $ (335) $ (3,999) $ (2,086)
  Adjustments to reconcile net loss to net cash
   provided by operating activities:
    Depreciation and amortization                   12,691    14,065    13,852
    Write off of development and project cost            -         -     1,193
    Stock-based compensation - restricted stock        741     1,566         -
    Stock-based compensation - stock options            72        60         -
    Provision for bad debts                            146       243       (49)
    Amortization of deferred loan fees               1,999     2,000     2,056
    Change in operating assets and liabilities:
      Accounts receivable net                          335       111      (859)
      Inventories                                      693      (438)      (21)
      Prepaid expenses and other assets                195       (96)   (1,100)
      Accounts payable                              (1,979)    1,261       800
      Accrued expenses                                 906    (2,936)      326
      Other assets                                      15       219       557
      Deferred compensation plan obligation            (32)      (48)     (691)
      Obligation to officers                        (1,000)   (1,000)   (1,000)
                                                   --------   -------  --------
         Net cash provided by operating activities  14,447    11,008    12,978

INVESTING ACTIVITIES:
  Capital expenditures for property and equipment
      Las Vegas                                     (5,651)   (5,240)   (7,169)
  Capital expenditures for property and equipment
      Black Hawk                                    (3,495)   (3,038)   (3,477)
                                                    -------  --------  --------
         Net cash used in investing activities      (9,146)   (8,278)  (10,646)
                                                    -------  --------  --------
</TABLE>

                                        F-7

<PAGE>
<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(In Thousands)
--------------------------------------------------------------------------------


                                                    2006       2005       2004
                                                    ----       ----       ----
FINANCING ACTIVITIES:
<S>                                                  <C>        <C>       <C>
  Proceeds from long-term borrowings                    -         -      $ 316
  Repayment of Foothill line of credit                  -         -     (2,000)
  Repayments on long-term borrowings                 (844)   (1,440)    (3,937)
  Exercise of employee stock options                  257       395      2,168
  Other                                                 -         -        663
                                                    ------   ------     -------
          Net cash used in financing activities      (587)   (1,045)    (2,790)
                                                    ------   -------    -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS    4,714     1,685       (458)

CASH AND CASH EQUIVALENTS Beginning of year        20,571    18,886     19,344
                                                   ------   -------    -------
CASH AND CASH EQUIVALENTS End of year            $ 25,285  $ 20,571   $ 18,886
                                                   ======   =======    =======

SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING
AND INVESTING ACTIVITIES:
  Property acquired with accounts payable
       Las Vegas, Nevada                            $ 812     $ 406      $ 331
                                                    =====    ======     ======
  Property acquired with debt Las Vegas, Nevada         -         -      $ 325
                                                    =====    ======     ======
  Property acquired with accounts payable
       Black Hawk, Colorado                         $ 619      $ 53      $ 354
                                                    =====    ======     ======
  Non-cash item Main Street expansion Black Hawk
       to financed by SID bonds                   $ 2,763         -          -
                                                   ======    ======     ======
  Cash interest paid                             $ 24,329  $ 24,608   $ 25,023
                                                   ======    ======     ======
  Distribution of deferred compensation treasury
       shares                                       $ 206     $ 412       $ 37
                                                   ======   =======    =======

See notes to consolidated financial statements.
</TABLE>

                                        F-8

<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
------------------------------------------------------------------------------


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Nature  of   Operations--Riviera   Holdings  Corporation  ("RHC")  and  its
     wholly-owned  subsidiaries  (together,  the  "Company") own and operate the
     Riviera  Hotel & Casino  ("Riviera  Las  Vegas") on the Strip in Las Vegas,
     Nevada and the Riviera  Black Hawk Casino  ("Riviera  Black Hawk") in Black
     Hawk, Colorado.

     Riviera  Las Vegas is  located  on the Las Vegas  Strip,  at 2901 Las Vegas
     Boulevard  South,  Las Vegas,  Nevada and occupies  approximately 26 acres.
     Riviera  Black Hawk is  located  on 1.63 acres of land at 400 Main  Street,
     Black Hawk, Colorado.

     The Company's  operations are subject to extensive regulation in the states
     of Nevada and Colorado by the respective  Gaming Control Boards and various
     other state and local  regulatory  agencies.  Management  believes that the
     Company's procedures comply, in all material respects,  with the applicable
     regulations for supervising casino  operations,  recording casino and other
     revenues, and granting credit.

     Principles of Consolidation--The  consolidated financial statements include
     the  accounts  of  Riviera   Holdings   Corporation  and  its  wholly-owned
     subsidiaries. All material intercompany accounts and transactions have been
     eliminated.

     Cash Equivalents--All  highly liquid investment securities with maturity of
     three months or less when acquired are considered to be cash equivalents.

     Securities  classified as cash equivalents consist of short-term investment
     and money market accounts (all with original maturities of 90 days or less)
     and had a value of  $10,809,000  and  $4,614,000  at December  31, 2006 and
     2005, respectively.

     Inventories--Inventories  consist primarily of food,  beverage,  gift shop,
     and promotional  items and are stated at the lower of cost (determined on a
     first-in, first-out basis) or market.

     Property and  Equipment--Property  and  equipment  are stated at cost,  and
     capitalized  lease assets are stated at the present value of future minimum
     lease payments at the date of lease inception.  Depreciation is computed by
     the straight-line  method over the shorter of the estimated useful lives or
     lease terms, if applicable,  of the related assets,  which lives range from
     three years for certain equipment to 40 years for buildings.

     The Company  periodically  assesses  the  recoverability  of  property  and
     equipment  and  evaluates  such assets for  impairment  whenever  events or
     circumstances  indicate  that the  carrying  amount  of an asset may not be
     recoverable.  Asset  impairment is determined to exist if estimated  future
     cash flows,  undiscounted and without interest  charges,  are less than the
     carrying amount.

                                        F-9

<PAGE>

     Other  Assets--Other  assets  include  deferred  bond  offering  costs  and
     commissions,  which  are  amortized  over the life of the  debt  using  the
     "interest method". Such amortized costs are included in interest expense.

     Stock-Based  Compensation--As  of December 31,  2006,  the Company has five
     active  stock-based   compensation   plans  and  two  expired   stock-based
     compensation  plans.  On January  1,2006 we adopted  Statement of Financial
     Accounting  Standards ("SFAS") No. 123 (R), using the modified  prospective
     method application.  Accordingly,  prior amounts have not been restated. In
     the first quarter of 2006,  our adoption of SFAS No. 123 (R) resulted in no
     incremental  stock-based  compensation  expense,  as we had  no  non-vested
     options   outstanding  at  January  1,  2006.  Under  the  Company's  Stock
     Compensation  Plan, the Company shall at the discretion of the non-employee
     directors serving on the Company's Compensation Committee,  issue shares of
     Company common stock to those directors in lieu of cash  compensation.  The
     shares  issued under this plan are valued at the market value of the shares
     on each regularly scheduled date for paying directors' fees.

     Had compensation  cost for the Company's stock option plans been determined
     based on the fair value at the date of grant for awards consistent with the
     provisions  of SFAS No. 123 (using the grant date fair value  method  value
     method), the Company's net loss and pro forma net loss per common share and
     common share  equivalent would have been increased to the pro forma amounts
     indicated below at December 31 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
                                                         2005         2004

<S>                                                   <C>          <C>
Net loss as reported                                  $ (3,999)    $ (2,086)
Stock -based employee compenstion expense                   60            -
Deduct:  Total stock-based employee compensation
  expense determined under fair value-based methods
  for awards net of related tax effects                    (44)         (48)
Net loss pro forma                                    $ (3,983)    $ (2,134)
Basic loss per common share as reported               $  (0.34)    $  (0.20)
Basic loss per common share pro forma                 $  (0.34)    $  (0.20)
Diluted loss per common and common
  share equivalent as reported                        $  (0.34)    $  (0.20)
Diluted loss per common and common share
  equivalent pro forma                                $  (0.34)    $  (0.20)
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes option pricing model with the following  weighted-average
     assumptions  used for grants in 2006,  respectively:  dividend yield of 0%;
     expected  volatility 64%;  risk-free  interest rates of 4.87%; and expected
     lives of 6.25 years.  No options were granted in 2004 or 2005. The weighted
     fair value of options granted in 2006 was $14.30 per share.

      Fair Value Disclosures

     Cash and Cash  Equivalents,  Accounts  Receivable,  Accounts  Payable,  and
     Accrued  Expenses--The  carrying  value  of  these  items  is a  reasonable
     estimate of their fair value due to their short term nature.

                                        F-10
<PAGE>

     Long-Term Debt--The fair value of the Company's long-term debt is estimated
     based on the quoted market prices for the same or similar  issues or on the
     current  rates  offered  to the  Company  for  debt of the  same  remaining
     maturities. Based on the borrowing rates currently available to the Company
     for debt with similar  terms and average  maturities,  the  estimated  fair
     value of  long-term  debt  outstanding  at  December  31,  2006 and 2005 is
     approximately $227,105,000 and $231,019,000, respectively.

      Treasury Stock

     Treasury  shares  are  stated  at cost.  Included,  as  treasury  shares at
     December  31,  2006 and 2005 were  94,324 and  191,022  shares  held by the
     Company's Deferred  Compensation Plan. These shares are eligible for voting
     by the plan participants. 96,698 and 187,893  shares were  distributed
     under the Deferred  Compensation  Plan during the years ended December 31,
     2006 and 2005.

      Revenue Recognition

     Casino Revenue--Casino revenue is the net win from gaming activities, which
     is the  difference  between  gaming  wins and  losses  less  slot club cash
     points,   cash  vouchers,   free  play  and  other  related  customer  cash
     incentives.

     Room Revenue, Food and Beverage Revenue,  Entertainment  Revenue, and Other
     Revenue--The  Company  recognizes  room,  food and beverage,  entertainment
     revenue, and other revenue at the time that goods or services are provided.
     Prices are fixed or  determinable,  pervasive  evidence  of an  arrangement
     exists, and collection is reasonably assured.

     Promotional  Allowances-Revenues  include  the  estimated  retail  value of
     rooms,  food and  beverage,  and  entertainment  provided to customers on a
     complimentary   basis.  Such  amounts  are  then  deducted  as  promotional
     allowance.  The estimated cost of providing these promotional allowances is
     charged to the casino department in the following amounts in thousands:
<TABLE>
<CAPTION>
                                                  Year Ended December 31
                                             -------------------------------
                                                2006       2005       2004
                                              ---------  --------  ---------
<S>                                           <C>        <C>        <C>
Food and beverage                             $ 9,147    $ 8,510    $ 8,693
Rooms                                           2,693      1,333      1,096
Entertainment                                     629        632        890
                                             ---------  ----------  --------
Total costs allocated to casino departments   $12,469    $10,475    $10,679
                                              ========   =========  =======
</TABLE>

     Estimates  and  Assumptions-The  preparation  of  financial  statements  in
     conformity  with  accounting  principles  generally  accepted in the United
     States of America  requires  management to make  estimates and  assumptions
     that affect the reported amounts of assets and  liabilities,  disclosure of
     contingent assets and liabilities at the date of the financial  statements,
     and the  reported  amounts of revenues and  expenses  during the  reporting
     period. Significant estimates used by the Company include recoverability of
     and estimated useful lives for depreciable and amortizable assets,  certain
     accrued liabilities (including self-insurance reserves and customer loyalty
     programs),  realizability of deferred tax assets,  valuation of stock based
     compensation and collection allowances for receivables.  Actual results may
     differ materially from estimates.

                                        F-11
<PAGE>

     Self-Insurance  Reserves-The  Company is self-insured for various levels of
     general liability,  workers'  compensation,  and non-union employee medical
     insurance  coverage.  Insurance  claims and  reserves  include  accruals of
     estimated  settlements  for known claims,  as well as accrued  estimates of
     incurred but not reported  claims.  In estimating  these costs, the Company
     considers its historical  claims  experience and makes  judgments about the
     expected levels of costs per claim. Changes in health care costs,  accident
     frequency and severity and other factors can materially affect the estimate
     for these liabilities.

     Loyalty Club Program-We  offer to our guests the opportunity to earn points
     redeemable for cash and complimentary  rooms and food and beverage based on
     their level of gaming and non-gaming activities while at our properties. An
     accrual is recorded  as points are earned  based upon  expected  redemption
     rates  and,  in the  case of  complimentaries,  the  estimated  cost of the
     complimentary to be provided.

     Advertising-The  costs of  advertising  are  expensed as  incurred  and are
     allocated  to each  revenue  department  based  upon  content.  Advertising
     expense was $2,814,000,  $2,472,000 and $3,338,000 in 2006, 2005, and 2004,
     respectively.

     Sarbanes-Oxley  Act Expenses  -These costs represent  professional  fees to
     consultants and external  auditors  directly related to the compliance with
     Section 404 of the Sarbanes-Oxley Act of 2002.

     Recently  Issued  Accounting  Standards--  In February  2007, the Financial
     Accounting  Standards  Board ("FASB")  issued SFAS No. 159, "The Fair Value
     Option  for  Financial  Assets  and  Financial  Liabilities".  SFAS No. 159
     permits  companies  to choose to measure  many  financial  instruments  and
     certain other items at fair value.  The  objective is to improve  financial
     reporting  by  providing   companies  with  the   opportunity  to  mitigate
     volatility  in reported  earnings  caused by measuring  related  assets and
     liabilities  differently  without having to apply complex hedge  accounting
     provisions.  The fair value option  established by SFAS No. 159 permits all
     companies  to choose to measure  eligible  items at fair value at specified
     election dates.  At each subsequent  reporting date, a company shall report
     in  earnings  any  unrealized  gains and losses on items for which the fair
     value  option  has  been  elected.  SFAS  No.  159 is  effective  as of the
     beginning of a company's  first fiscal year that begins after  November 15,
     2007. Early adoption is permitted as of the beginning of a fiscal year that
     begins on or before November 15, 2007,  provided the company also elects to
     apply the  provisions  of SFAS No.  157,  "Fair  Value  Measurements"  (see
     below).  We are currently  evaluating  the impact that the adoption of SFAS
     No. 159 will have on our consolidated financial statements.

     In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
     Defined Benefit  Pension and Other  Postretirement  Plans--an  amendment of
     FASB  Statements  No.  87,  88,  106 and  132(R)".  SFAS No.  158  requires
     employers to recognize the over-funded or under-funded  status of a defined
     benefit  postretirement  plan as an asset  or  liability  and to  recognize
     changes  in that  funded  status  in the year in which  the  changes  occur
     through other comprehensive  income. This Statement also requires employers
     to measure  the funded  status of a plan as of the date of its year end and
     is effective for publicly traded companies as of the end of the fiscal year
     ending after December 31, 2006. The adoption of SFAS No. 158 did not have a
     material  effect  on our  consolidated  financial  statements  as we do not
     currently  have a  defined  benefit  postretirement  plan  that  meets  the
     criteria  specified  under SFAS No. 158. In September 2006, the FASB issued
     SFAS  No.  157,  "Fair  Value  Measurements",  which  defines  fair  value,
     establishes  a  framework  for  measuring  fair value in GAAP,  and expands
     disclosures  about fair value  measurements.  This Statement  applies under
     other  accounting   pronouncements   that  require  or  permit  fair  value
     measurements,  the FASB having  previously  concluded  in those  accounting
     pronouncements that fair value is the relevant measurement attribute.  SFAS
     No. 157 is  effective  for  financial  statements  issued for fiscal  years
     beginning  after November 15, 2007, and interim periods within those fiscal
     years. We are currently evaluating the impact that the adoption of SFAS No.
     157 will have on our consolidated financial statements.

                                        F-12

<PAGE>

     On September 13, 2006, the Securities and Exchange  Commission issued Staff
     Accounting  Bulletin No. 108 ("SAB 108")  "Considering the Effects of Prior
     Year   Misstatements   when  Quantifying   Misstatements  in  Current  Year
     Financial.  Statements".  SAB 108 clarifies how companies  should  quantify
     financial  statement  misstatements.  SAB 108 is effective for fiscal years
     ending on or after November 15, 2006, with earlier adoption encouraged. The
     adoption  of SAB 108 did not have an impact on our  results of  operations,
     financial position or cash flows.

     In July 2006, the Financial  Accounting  Standards  Board  ("FASB")  issued
     Interpretation  No. 48 ("FIN 48"),  Accounting  for  Uncertainty  in Income
     Taxes,  which  clarifies the  accounting  for  uncertainty  in income taxes
     recognized in the financial  statements in accordance  with FASB  Statement
     No. 109,  Accounting  for Income  Taxes.  FIN 48  provides  guidance on the
     financial statement  recognition and measurement of a tax position taken or
     expected  to be taken in a tax  return.  FIN 48 also  provides  guidance on
     derecognition,   classification,  interest  and  penalties,  accounting  in
     interim  periods,  disclosures,  and  transition.  FIN 48 is effective  for
     fiscal years beginning after December 15, 2006. We are currently evaluating
     the impact of this standard on our Consolidated  Financial Statements,  but
     currently we do not believe the adoption will have a material impact.

     In June 2006,  the Emerging  Issues Task Force reached a consensus on Issue
     No. 06-3 ("EITF 06-3"),  "Disclosure  Requirements  for Taxes Assessed by a
     Governmental  Authority on  Revenue-Producing  Transactions." The consensus
     allows  companies to choose  between two acceptable  alternatives  based on
     their  accounting  policies for  transactions in which the company collects
     taxes on behalf of a governmental authority, such as sales taxes. Under the
     gross  method,  taxes  collected  are accounted for as a component of sales
     revenue with an  offsetting  expense.  Conversely,  the net method allows a
     reduction  to sales  revenue.  If such  taxes  are  reported  gross and are
     significant,  companies  should  disclose  the amount of those  taxes.  The
     guidance  should be  applied to  financial  reports  through  retrospective
     application  for all periods  presented,  if amounts are  significant,  for
     interim and annual reporting  beginning  February 1, 2007. We do not expect
     the  adoption  of EITF 06-3 to have a material  effect on our  consolidated
     financial statements.

     In May  2005,  the FASB  issued  SFAS No.  154,  Accounting  Changes  and
     Error Corrections,  a replacement  of APB Opinion No. 20 and SFAS No.  3.
     SFAS No. 154 replaces  APB  Opinion  No. 20,  Accounting  Changes  and SFAS
     No. 3,  Reporting Accounting  Changes in Interim Financial  Statements and
     changes the requirement for the  accounting  for and reporting of a change
     in accounting  principles not prescribed by specific transition  provisions
     of the newly adopted  standard. It carries  forward  without  change the
     requirements  of APB  Opinion  No. 20 for accounting  for error corrections
     and changes in estimates.  The provisions of SFAS No. 154 will be effective
     for  accounting  changes made in the fiscal year beginning after December
     15, 2005.  The adoption did not have a material impact on our consolidated
     financial statements.

2.    ACCOUNTS RECEIVABLE

     Accounts receivable consist of the following at December 31 (in thousands):

                                        F-13
<PAGE>
<TABLE>
<CAPTION>
                                         2006         2005
                                        -----       ------
<S>                                     <C>         <C>
Casino                                  $ 335       $1,454
Hotel                                   2,891        3,334
                                        -----       ------
Total                                   3,226        4,788
Less - Collection allowances             (163)      (1,244)
                                        -----        -----
     Accounts receivable - net         $3,063       $3,544
                                       ======       ======
</TABLE>

     Changes in the collection allowances consist of the following for the years
     ended December 31 (in thousands):
<TABLE>
<CAPTION>
                                        2006          2005          2004
                                       -----         -----         -----
<S>                                     <C>           <C>           <C>
Beginning balance                    $ 1,244       $ 1,214       $ 1,047
Write-offs                            (1,257)         (229)          (68)
Recoveries                                30            16            37
Provision for doubtful collection        146           243           198
                                       -----        ------        ------
Ending balance                         $ 163       $ 1,244       $ 1,214
                                       =====        ======       =======
</TABLE>

     The  Company  manages  its  credit  risk by  evaluating  customers'  credit
     worthiness before extending credit. The maximum credit losses that might be
     sustained  are  limited  to  the  recorded  receivables  less  any  amounts
     reserved.

     In 2006 Riviera Black Hawk entered into an agreement  with Global  Payments
     Gaming  Services Inc. a company that  guarantees  approved checks cashed at
     the property for a fee.

3.    PREPAID EXPENSES

      Prepaid expenses consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
                                        2006         2005
                                        ----         ----
<S>                                    <C>          <C>
Prepaid gaming taxes                   $1,527       $ 1,439
Prepaid insurance                         891           814
Other                                   1,584         1,944
                                       ------        ------
    Total                              $4,002       $ 4,197
                                       ======        ======
</TABLE>

4.    PROPERTY AND EQUIPMENT

      Property and equipment consist of the following at December 31 (in
      thousands):

                                        F-14

<PAGE>
<TABLE>
<CAPTION>
                                       2006          2005
                                       ----         ------
<S>                                     <C>           <C>
Land and improvements                 $ 40,904      $ 38,130
Buildings and improvements             143,417       143,417
Equipment, furniture, and fixtures     150,576       143,004
                                       -------       -------
Total cost                             334,897       324,551
Accumulated depreciation and
   amortization                       (163,577)     (153,421)
                                      ---------     ---------
Property and equipment-net            $171,320      $171,130
                                      ========      =========
</TABLE>

      Substantially all of the Company's property and equipment are pledged as
      collateral to secure debt (see Note 8).

5.    OTHER ASSETS

      Other assets consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>

                                         2006         2005
                                         ----         ----
<S>                                      <C>          <C>
Deposits                                 $ 58         $ 83
Bond offering costs and commissions,
net of accumulated amortization
of $7,149 and $5,556                    4,559        6,153
Other                                   1,157        1,160
                                       ------        -----
Total                                 $ 5,774      $ 7,396
                                       ======       ======
</TABLE>

6.      ACCOUNTS PAYABLE AND ACCRUED EXPENSES

      Accounts payable consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
                                        2006        2005
                                        ----        ----
<S>                                    <C>         <C>
Outstanding chip and token liability   $ 569       $ 401
Customer loyality liabilities            742         859
Progressive jackpot liabilities          515         654
Customer deposits and other              295         302
                                       -----       -----
Total customer-related payables        2,121       2,216

Accounts payable vendors               5,015       6,077
Insurance premiums                         -         246
Customer deposits, non-gaming          1,544       1,159
Other                                    446         435
                                       -----      ------
Total                                $ 9,126    $ 10,133
                                      ======      ======
</TABLE>

      Accrued expenses consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>

                                         2006       2005

<S>                                    <C>       <C>
Payroll and related taxes and benefits $ 8,886   $ 9,127
Property and gaming taxes                3,037     2,093
Other                                    1,244     1,041
                                         -----    -------
Total                                  $13,167   $12,261
                                        ======    ======
</TABLE>

                                        F-15
<PAGE>

7.    OBLIGATION TO OFFICERS

     Obligation to officers consists of the nonqualified pension plan obligation
     to our Chief Executive  Officer  ("CEO"),  including  accrued  interest and
     deferred  compensation  plan  liabilities,  payable upon  expiration of his
     employment contract or a change of control of the Company.  See Note 12 for
     a  description  of  this  plan.  Obligation  to  officers  consists  of the
     following at December 31 (in thousands).
<TABLE>
<CAPTION>

                                         2006     2005
                                         ----     ----
Nonqualified pension obligation CEO,
<S>                                      <C>      <C>
      unfunded                           $   -    $ 513
Accrued interest on pension CEO,
      unfunded                           3,093    3,610
Deferred compensation funded                 1        3
                                         3,094    4,126
                                         -----    -----
Less-current portion                    (1,000)  (1,000)
                                         -----    -----
Obligation to officers - net of
      current portion                   $2,094  $ 3,126
                                         =====    =====
</TABLE>

8.      LONG-TERM DEBT

 Long-term debt consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
                                                    2006            2005

11% Senior Secured Notes maturing on
  June 15, 2010, bearing interest, payable
  semiannually on June 15 and December 15
  of each year, redeemable June 15, 2006
  at 105.5%; 2007 at 103.7%, 2008 at 101.8%,
  2009 and thereafter at 100%.  These notes
  are collateralized by the land and physical
  structures comprising Riviera Las Vegas and
<S>                                                  <C>             <C>
  the assets of Riviera Black Hawk                 $213,601        $213,196

5.5% to 5.9% notes collateralized by equipment,
 payable monthly, including interest                    802           1,448

Capitalized lease obligations (Note 9)                  189             252

5.5% Special Improvement District Bonds -
  issued by the City of Black Hawk, Colorado,
  interest and principal payable monthly
  over 10 years beginning in 2000                       411             535
                                                     ------         -------
Total long-term debt                                215,003         215,431
Less-Current maturities by terms of debt               (879)           (824)
                                                    --------        --------
Total                                              $214,124        $214,607
                                                   =========       ========
</TABLE>

    Maturities of long-term debt for the years ending December 31 are as follows
    (in thousands):

                                        F-16
<PAGE>
<TABLE>
<CAPTION>
<C>                                                  <C>
2007                                                 $ 879
2008                                                   324
2009                                                   199
2010                                               213,601
2011                                                     -
Thereafter                                               -
                                                    --------
Total                                             $ 215,003
                                                    =======
</TABLE>


     On June 26, 2002, the Company obtained debt in the principal amount of $215
     million in the form of 11%  Senior  Secured  Notes with a maturity  date of
     June  15,  2010,  substantially  all of  which  were  later  exchanged  for
     virtually  identical  notes of the Company that were  registered  under the
     Securities Act of 1933, as amended (collectively, the "Notes"). Interest on
     the Notes is at the annual  rate of 11% paid  semiannually  on each June 15
     and December  15,  beginning  December  15,  2002.  The net proceeds of the
     Notes, along with cash on hand, were used to defease our 10% First Mortgage
     Notes due 2004 and to defease Riviera Black Hawk's 13% First Mortgage Notes
     due 2005  with  contingent  interest.  Cash  flow  from  operations  is not
     expected  to be  sufficient  to pay 100% of the  principal  of the Notes at
     maturity on June 15, 2010. Accordingly, the ability of the Company to repay
     the Notes at maturity  will be dependent  upon its ability to refinance the
     Notes. There can be no assurance that the Company will be able to refinance
     the Notes at maturity.

     On or after June 15, 2006,  the Company may redeem all or part of the Notes
     upon not less  than 30 nor more  than 60 days'  notice,  at the  redemption
     prices  (expressed as percentages of principal amount) set forth below plus
     accrued and unpaid  interest and liquidated  damages,  if any, on the Notes
     redeemed,  to the  applicable  redemption  date,  if  redeemed  during  the
     twelve-month period beginning on June 15 of the years indicated below:
<TABLE>
<CAPTION>

    Year                                                 Percentage
<S> <C>                                                  <C>
    2006 .................................................105.500%
    2007..................................................103.667%
    2008..................................................101.833%
    2009 and thereafter...................................100.000%
</TABLE>

     The indenture governing the Notes (the "Note Indenture")  provides that, in
     certain circumstances,  the Company must offer to repurchase the Notes upon
     the occurrence of a change of control or certain other events. In the event
     of such mandatory  redemption or repurchase prior to maturity,  the Company
     would  be  unable  to pay the  principal  amount  of the  Notes  without  a
     refinancing.

     The Note Indenture contains certain  covenants,  which limit the ability of
     the  Company,  subject to  certain  exceptions,  to:  (i) incur  additional
     indebtedness; (ii) pay dividends or other distributions, repurchase capital
     stock or other equity interests or subordinated  indebtedness;  (iii) enter
     into certain  transactions with affiliates;  (iv) create certain liens; (v)
     sell certain assets; or (vi) enter into certain mergers and consolidations.
     As a result of these  restrictions,  the  ability  of the  Company to incur
     additional  indebtedness to fund operations or to make capital expenditures
     is limited.  In the event that cash flow from operations is insufficient to
     cover cash  requirements,  the  Company may be required to curtail or defer
     certain of its capital  expenditure  programs,  which could have an adverse
     effect on operations. At December 31, 2006, the Company believes that it is
     in compliance with the covenants.

                                        F-17

<PAGE>

     On July 26, 2002, the Company entered into a $30 million, five-year secured
     credit facility.  The credit facility is secured by substantially  the same
     collateral that secures the Notes. The lien on the collateral  securing the
     credit facility is senior to the lien on the collateral securing the Notes.
     The credit facility contains customary  conditions to borrowing and certain
     representations and warranties customary in gaming-related financing.  The
     credit  facility  also  contains   financial   covenants  and  restrictions
     regarding, among other things,  indebtedness,  distributions and changes in
     control.  Under the credit facility,  the Company can obtain  extensions of
     credit in the forms of cash and letters of credit.  The Company is required
     to pay interest on all  outstanding  cash  advances at the rate of interest
     announced by Wells Fargo at its  principal  office in San  Francisco at its
     prime rate plus 0.75% or at the rate at which major  international banks in
     London  charge  each  other for  borrowings  in U.S.  dollars  plus  3.00%.
     However,  the minimum  interest rate we will be charged on outstanding cash
     advances is 4.50%.  The Company is required to pay a fee on all outstanding
     letters of credit equal to their face value times an annual percentage rate
     of 2.50%.  Additionally,  in the event of a default,  the  credit  facility
     lender  may  increase  the  interest  rate and  letter of credit  fee by an
     additional 2.00% per year during the period of default. An annual fee (paid
     monthly) of 0.5 percent is charged on the unused  portions of the  revolver
     plus a $3,000 monthly  service fee.  There were no advances  outstanding on
     this revolver at December 31, 2006.

     The 5.5%  Special  Improvement  District  Bonds were  issued by the City of
     Black Hawk,  Colorado.  The proceeds  were used for road  improvements  and
     other  infrastructure  projects  benefiting Riviera Black Hawk and a nearby
     casino.  Our share of the debt was $1.2  million  payable  over a  ten-year
     period that began in 2000.

9.    LEASING ACTIVITIES

     The Company leases certain office  equipment  under capital  leases.  These
     agreements have been capitalized at the present value of the future minimum
     lease  payments at lease  inception  and are  included  with  property  and
     equipment.  We estimate  that the fair  market  value of the  property  and
     equipment  subject to the leases  approximates the net present value of the
     leases.

     The  following  is a schedule by year of the minimum  rental  payments  due
     under capital leases as of December 31, 2006 (in thousands):

                                        F-18

<PAGE>
<TABLE>
<CAPTION>

<S><C>                                                      <C>
2007                                                     $ 83
2008                                                       83
2009                                                       61
2010                                                        -
2011                                                        -
Thereafter                                                  -
                                                          ----
Total minimum lease payments                              227
Less-Taxes, maintenance, and insurance                    (23)
Less-Interest portion of payments                         (15)
                                                         -----
Present value of net minimum lease payments             $ 189
                                                         =====
</TABLE>

     Property and equipment under capital lease as of December 31, 2006 and 2005
     were $325,000 and $11.4 million with  accumulated  amortization of $135,000
     million and $11.1 million, respectively.

     Rental  expense  under  operating  leases for the years ended  December 31,
     2006, 2005 and 2004 was  approximately  $503,000,  $1,096,000 and $964,000,
     respectively. All are cancelable within a year.

     In addition,  the Company  leases retail space to third parties  (primarily
     retail shops and fast food vendors) under terms of noncancelable  operating
     leases that expire in various years through 2011.  Rental income,  which is
     included in other revenue,  for the years ended December 31, 2006, 2005 and
     2004 was approximately $2,069,000, $2,205,000 and $1,907,000 respectively.

     At December 31, 2006,  the Company had future  minimum annual rental income
     due under noncancelable operating leases as follows (in thousands):
<TABLE>
<CAPTION>
<S><C>                                                   <C>
2007                                                  $ 2,123
2008                                                    1,188
2009                                                      856
2010                                                      804
2011                                                      122
                                                        ------
Total                                                 $ 5,093
                                                        ======
</TABLE>

     Certain   lease   arrangements   at  the  Riviera   Las  Vegas   contain  a
     buyout/liquidated  damages  provision.  This provision provides that in the
     event of a major  renovation or certain  other events,  the Company has the
     right,  according to an agreed-upon  formula, to buy out any remaining term
     of the lease by providing the tenant twelve months written notice.

10.   INCOME TAXES

     The effective  income tax rate of zero differs from the  statutory  Federal
     income tax rates for the years  ended  December  31 as follows  (dollars in
     thousands):

                                        F-19
<PAGE>
<TABLE>
<CAPTION>
                                   2006              2005              2004
                            ----------------  ------------------ -------------
                             Amount   Rate     Amount  Rate     Amount    Rate
                            ----------------  ---------------- --------------

Income taxes benefit
<S>                         <C>      <C>     <C>       <C>     <C>      <C>
  at Federal statutory rate $(117)   (35.0)% $ (1,400) (35.0)% $ (730)  (35.0)%
Employee Benefits             633    189.0 %      695   17.4 %  1,555    74.6 %
FICA Credit                  (222)   (66.3)%     (239)  (6.0)%   (216)  (10.4)%
Other                          -        -        (232)  (5.8)%    (92)   (4.4)%
Valuation allowance          (294)   (87.7)%    1,176   29.4 %   (517)  (24.8)%
                             -----   ------     -----   ------   -----   ------
Benefit for income taxes      $ -      0.0 %      $ -    0.0 %    $ -    0.0 %
                              ====    =====     ======  ======   =====  =======
</TABLE>

      Comparative analysis of the provision for income taxes is as follows:
<TABLE>
<CAPTION>

                                         2006         2005          2004
                                         ----         ----          ----
<S>                                      <C>           <C>           <C>
Current                                  $ -           $ -           $ -
Deferred                                   -             -             -
                                         ----          ----          ----
Total                                    $ -           $ -           $ -
                                         ====          ====          ====
</TABLE>

      The tax effects of the items composing the Company's net deferred tax
      asset consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
                                                                2006       2005
Deferred tax liabilities
<S>                                                              <C>        <C>
  Reserve differential for hospitality and gaming activities  $ 1,582    $ 1,168
  Difference between book and tax-depreciable property          5,955      4,820
  Other                                                            -         511
                                                               ------      -----
Total Deferred Tax Liabilities                                  7,537      6,499
                                                               ------     -----
</TABLE>
<TABLE>
<CAPTION>
Deferred tax assets
<S>                                                         <C>         <C>
    Net operating losss carryforward                        $ 21,985    $ 19,785
    Reserves not currently deductible                          2,480       2,536
    Bad debt reserves                                             57         474
    AMT and other credits                                      3,315       3,092
                                                              ------     -------
Total Deferred Tax Assets                                     27,837      25,887
                                                              ------      ------
Less - Valuation allowance                                   (17,854)    (16,942)
                                                             -------     ------
Net deffered tax asset                                       $ 2,446     $ 2,446
                                                             =======     =======
</TABLE>

          The Company has $3,315,000 of  alternative  minimum tax ("AMT") credit
     and  general   business  credit  available  to  offset  future  income  tax
     liabilities.  The AMT credits have no expiration date. The general business
     credit will not begin to expire until 2010.  The Company has  approximately
     $65,029,000   in  net  operating   loss   carryforwards,   which   includes
     approximately  $2.5  million  in  stock  based  compensation   expense  not
     reflected above. The net operating loss  carryforwards  will expire between
     2013 and 2027.  Currently,  the Company  does not  believe  that it is more
     likely  than  not  that  we  can  utilize  our   deferred  tax  assets  and
     accordingly,  a valuation allowance has been provided for substantially all
     deferred tax assets.

                                        F-20

<PAGE>

     The realizability of the net deferred tax asset related to Rivera Las Vegas
     is dependent  upon future  earnings.  The  Company's net deferred tax asset
     approximates  its AMT credit  carryforwards,  as such AMT  credits  have an
     indefinite life.

11.   COMMITMENTS AND CONTINGENCIES

     The Company is party to routine lawsuits arising from the normal operations
     of a  casino  or  hotel.  We do  not  believe  that  the  outcome  of  such
     litigation,  in the aggregate,  will have a material  adverse effect on the
     financial position, results of operations, or cash flows of the Company.

     Employees and Labor  Relations--  As of December 31, 2006,  the Company had
     approximately  1,500  full-time  equivalent  employees  and had  collective
     bargaining agreements in Las Vegas with eight unions covering approximately
     714 of  such  employees,  including  food  and  beverage  employees,  rooms
     department  employees,  carpenters,   engineers,   stagehands,   musicians,
     electricians,  painters and  teamsters.  The Company's  agreement  with the
     Carpenters  Union  expired in 2005 but was  extended  until July 2007.  The
     Company's  agreement with the Painters Union was  renegotiated  in 2005 and
     expires  in  2010.   Agreements  with  the  Southern  Nevada  Culinary  and
     Bartenders  Union,   covering  the  majority  of  the  Company's  unionized
     employees,  were  renegotiated  in 2002 and  expire  in  2007,  as does the
     agreement with the Stagehands Union. The agreement with the Teamsters Union
     expires  in  2008,  and  while  the  Operating  Engineers  and  Electrician
     agreements  expire in 2009.  The collective  bargaining  agreement with the
     Musicians  Union expired in 1999. The Company is currently in  negotiations
     with the Musicians Union. Although unions have been active in Las Vegas, we
     consider  our  employee  relations  to be  satisfactory.  There  can  be no
     assurance,  however,  that new  agreements  will be reached  without  union
     action or on terms satisfactory to the Company.

     Main Street  Extension  in Black Hawk - On June 29,  2006,  the Main Street
     extension opened in Black Hawk,  Colorado.  We are obligated,  based on the
     Fourth  Addendum to  Subdivision  Agreement with the City of Black Hawk and
     the Main Street  Cost  Allocation  Study,  to pay 21.45% of the cost of the
     project, once the City of Black Hawk has finalized the costs. Our estimated
     share of the cost, based on a initial  submission of costs is $2.8 million.
     Accordingly,  we have capitalized $2.8 million as a land improvement and as
     a long-term  liability.  Once the cost related to the Main Street Expansion
     is finalized,  the  obligation  will be funded  through  long-term  Special
     Improvement District Bonds issued by the City of Black Hawk.

     Topping  Fee  Related  to the  Merger  Agreement  - Under our April 5, 2006
     Agreement  and Plan of Merger  ("Merger  Agreement"),  we agreed to pay Riv
     Acquisition Holdings Inc. a "Topping Fee" of approximately $7.9 million if:
     (i) the Merger  Agreement is terminated  because our  shareholders  did not
     approve it; (ii) prior to such termination, a competing "Takeover Proposal"
     as defined  in the  Merger  Agreement  (which  includes a proposal  for the
     acquisition of 30% or more of the Company's  assets or more than 30% of the
     outstanding  stock of RHC or any RHC  subsidiary or for the  acquisition of
     RHC or any RHC subsidiary  through a merger or other business  combination)
     had been announced and had not been  withdrawn;  and (iii) within 12 months
     after such termination,  we enter into a definitive  agreement with a third
     party with respect to the  consummation of a Takeover  Proposal or any such
     Takeover Proposal is consummated.

                                        F-21

<PAGE>

     On August 8, 2006, we announced  that we had received a competing  proposal
     to acquire all of RHC's  outstanding  stock through a merger.  Prior to our
     termination  of the Merger  Agreement on August 29, 2006 due to disapproval
     by our  shareholders,  the  competing  proposal  had  not  been  withdrawn,
     Thereafter, our board of directors rejected the proposal.

12.   EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS

     William L.  Westerman  serves as our Chairman of the Board,  President  and
     CEO, and as Chairman of the Board and CEO of our  wholly-owned  subsidiary,
     Riviera Operating Corporation ("ROC"), and Riviera Black Hawk Inc.

     Under Mr. Westerman's employment agreement,  which was last amended on July
     15, 2003, he is employed for an indefinite  period,  subject to termination
     by  either  Mr.  Westerman  upon at least  180 days  written  notice or the
     Company upon at least 90 days written notice.  Mr.  Westerman's base annual
     compensation is $1,000,000.  Under his employment agreement,  Mr. Westerman
     is not entitled to  participate  in the Incentive  Compensation  Program or
     other executive bonus plan established by the Company.

     The employment  agreement required the Company to fund a retirement account
     for Mr.  Westerman.  Pursuant  to that  agreement,  the Company has made no
     further  principal  contributions to the retirement  account  subsequent to
     January  1,  2001  but  the  account  continues  to  accrue  interest.  The
     retirement account had a balance, including accrued interest, of $3,094,000
     as of December 31, 2006.

     Mr.  Westerman's  retirement account is credited quarterly with interest on
     the first day of each succeeding calendar quarter in an amount equal to the
     product of (i) the Company's  average  borrowing  cost for the  immediately
     preceding  fiscal year,  as determined  by the  Company's  Chief  Financial
     Officer, and (ii) the average outstanding balance in the retirement account
     during  the  preceding  calendar  quarter.  At  the  recommendation  of our
     Compensation Committee, in order to reduce the amount that would be payable
     immediately upon Mr. Westerman's separation from the Company, it was agreed
     that commencing April 1, 2003, and continuing the first day of each quarter
     thereafter,  he be paid  the  following  in  cash:  (i) a  distribution  of
     $250,000 from the principal balance of his retirement account; and (ii) the
     quarterly  interest  credited  to his  retirement  account  one  quarter in
     arrears. Total interest accrued to Mr. Westerman in 2006 was $400,000 while
     interest accrued was $518,000 for 2005 and $638,000 for 2004.

     We retain beneficial ownership of Mr. Westerman's retirement account, which
     is earmarked to pay his retirement benefits.  However, upon (1) the vote of
     a majority of the outstanding shares of common stock approving a "change of
     control" (as  discussed in the next  paragraph),  (2) the  occurrence  of a
     change of control without Mr. Westerman's  consent, (3) a breach by us of a
     material term of the employment  agreement or (4) the expiration or earlier
     termination  of the  employment  agreement for any reason other than cause,
     Mr.  Westerman has the right to require us to establish a "Rabbi Trust" for
     his  benefit.  He also has the right to  require us to fund such trust with
     cash equal to the amount then credited to his retirement account, including
     any  amount  to be  credited  to his  retirement  account  upon a change of
     control.

                                        F-22

<PAGE>

     On February 5, 1998,  our  stockholders  approved a merger  agreement  that
     constituted a change of control under Mr. Westerman's employment agreement.
     (That merger agreement was terminated without  consummation of the merger.)
     On March 5,  1998,  Mr.  Westerman  exercised  his right to  require  us to
     establish  and fund a Rabbi Trust for his benefit.  On March 20, 1998,  Mr.
     Westerman  waived his right to have us fund the Rabbi Trust in exchange for
     our agreement to fund it within five business days after notice from him.

     In the event that Mr.  Westerman  ceases to be  employed  by us (except for
     termination for cause, in which case Mr. Westerman would forfeit all rights
     to monies in the  retirement  account),  Mr.  Westerman will be entitled to
     receive the amount in the retirement account (principal and interest) in 20
     equal  quarterly  installments  commencing  as of the date he  ceases to be
     employed.  In the event that Mr.  Westerman's  Rabbi Trust has not yet been
     funded,  the balance of principal  and interest of the  retirement  account
     shall be paid directly to Mr.  Westerman upon his retirement or termination
     (except for cause) or upon a change of control.

     The agreement provides that for a period of 24 months following termination
     for any  reason  except  cause,  Mr.  Westerman  shall  not  engage  in any
     activity,  which is in competition with the Company within a 75-mile radius
     from the location of any hotel or casino then  operated by the Company.  As
     consideration  for not competing,  the Company shall pay to Mr. Westerman a
     total of $500,000 in two equal annual  installments of $250,000.  The first
     installment  is  payable  within  five  business  days  of  termination  of
     employment with the second installment  payable on the first anniversary of
     termination.

     In addition to Mr. Westerman, one other executive,  Robert Vannucci, has an
     employment agreement with us.

     Mr. Vannucci serves as President of ROC under an employment agreement dated
     as of September 1, 2006. Mr. Vannucci's base compensation is $400,000.

     Mr. Vannucci's  employment  agreement provides for an annual award of up to
     $200,000  under  our  Incentive   Compensation   Program  if  predetermined
     financial targets at Riviera Las Vegas are achieved. For 2006, Mr. Vannucci
     received an  Incentive  Compensation  Program  award of $92,500  cash.  Mr.
     Vannucci did not receive an Incentive  Compensation Program award for 2005.
     For 2004, Mr. Vannucci received an Incentive  Compensation Program award of
     $57,000  cash,  which  entitled  him to an  additional  incentive  award of
     $57,000, which he elected to receive in cash per his agreement at the time.
     Mr. Vannucci's agreement automatically renews annually;  provided, however,
     that Mr. Vannucci or we may terminate the employment  agreement at any time
     upon 30 days prior written  notice,  but if we terminate it without  cause,
     then Mr.  Vannucci will be entitled to one year's salary,  a prorated award
     under our Incentive  Compensation  Program,  two years of health  insurance
     benefits and a one-year automobile  allowance of $6,000, plus reimbursement
     of all reasonable automobile expenses (excluding lease or loan payments).

                                        F-23

<PAGE>

     Incentive  Compensation  Program--We have an Incentive Compensation Program
     covering employees who, in the opinion of our Chairman of the Board, either
     serve  in  key  executive,   administrative,   professional,  or  technical
     capacities  with us, or who have  made a  significant  contribution  to the
     successful  and  profitable  operation of the  Company.  The amount of each
     bonus is based  upon a  sliding  targeted  scale  of  earnings  established
     annually.  During the years ended  December  31, 2006,  2005 and 2004,  the
     Company  recorded  accrued  bonuses of  $581,000  $555,000  and  $1,085,000
     respectively, under this program.

     Pension Plan  Contributions--We  contribute to multi-employer pension plans
     under  various  union  agreements  in Las  Vegas  to  which we are a party.
     Contributions, based on wages paid to covered employees, were approximately
     $1,952,000,  $1,760,000  and  $1,715,000  for the years ended  December 31,
     2006,  2005 and 2004,  respectively.  Our share of any  unfunded  liability
     related to multi-employer plans, if any, is not determinable.

     Profit  Sharing and 401(k)  Plans--We  have profit sharing and 401(k) plans
     (the "Profit  Sharing and 401(k) Plans") for employees of Riviera Las Vegas
     and  Riviera  Black  Hawk  who are at least 21 years of age and who are not
     covered by a collective  bargaining  agreement  and are eligible  after one
     year of service.

     We may contribute to the 401(k)  component of the Profit Sharing and 401(k)
     Plans in an amount not to exceed 25% of the first 8% of each  participant's
     compensation.  We made contributions of $276,000, $290,000 and $303,000 for
     the  years  ended   December  31,  2006,   2005  and  2004.   We  also  pay
     administrative  costs of the Profit Sharing and 401(k) Plans, which are not
     significant.

     Prior to 2003, we suspended  contributions to the profit sharing  component
     of  the  Profit   Sharing  and  401(k)   Plans  and  we  have   substituted
     contributions to an Employee Stock Ownership Plan ("ESOP"),  (see "Employee
     Stock Ownership Plan," directly below).

     Employee Stock Ownership  Plan--The ESOP was  established  prior to 2003 to
     replace the profit sharing contribution component of the Profit Sharing and
     401(k) Plans. The 401(k)  component  remains  unchanged.  The ESOP provides
     that all  employees  of Riviera Las Vegas and  Riviera  Black Hawk who were
     employed on and completed a minimum of 1,000 hours of service by,  December
     31 of that plan year,  were at least 21 years of age,  and were not covered
     by a collective  bargaining  agreement are eligible to  participate  in the
     ESOP.  The ESOP  provides  that we will make a  contribution  to the ESOP's
     participants  at Riviera Las Vegas and Riviera  Black Hawk  relative to the
     economic  performance  of each property and for the corporate  participants
     relative to the economic performance of the entire Company. For Riviera Las
     Vegas, we will make a contribution equal to 1% of each eligible  employee's
     annual  compensation if a prescribed  annual  operating  earnings target is
     attained  and an  additional  1%  thereof  for  each $2  million  by  which
     operating  earnings  are  exceeded,  up to a maximum  of 4% for  2006.  For
     Riviera  Black  Hawk,  we  will  make a  contribution  equal  to 1% of each
     eligible  employee's  annual  compensation if a prescribed annual operating
     earnings target is attained, an additional 1% for the next $1.5 million and
     an  additional 1% thereof for each $2 million by which  operating  earnings
     are  exceeded,  up to a  maximum  of 4% for  2006.  For  Riviera  corporate
     participants,  we will  make a  contribution  equal to 1% of each  eligible
     employee's annual  compensation if a prescribed  annual operating  earnings
     target is  attained,  and an  additional  1% for each $2  million  by which
     operating earnings are exceeded, up to a maximum of 2%. Under the ESOP, our
     contributions  are made in cash,  which may be used to buy our common stock
     and pay participants upon separation of service. We contributed $0 in 2006,
     $126,000 in 2005 and $899,000 in 2004, respectively to the ESOP.

                                        F-24

<PAGE>

     Deferred   Compensation   Plan--Prior   to  2003,  we  adopted  a  Deferred
     Compensation  Plan  (the  "DCP").  The  purpose  of the  DCP is to  provide
     eligible  employees  with the  opportunity  to defer  the  receipt  of cash
     compensation.  Participation in the DCP is limited to employees who receive
     annual compensation of at least $100,000. The deferred funds other than the
     common  stock  component,  are  maintained  on the Company  books as funded
     liabilities  under Rabbi  Trusts for the benefit of the  participants.  All
     elections to defer the receipt of  compensation  must be made no later than
     December 1st preceding the plan year to which the election  relates and are
     irrevocable for the duration of that plan year. No deferrals have been made
     since 2004. Five executives  were  participating  in the DCP as of December
     31,  2006.  The DCP is  distributing  common  stock to  participants  under
     established schedules. The common stock is included in the Rabbi Trusts for
     the  participants  and is  recorded as  treasury  stock in these  financial
     statements.

     Restricted Stock Plan--Prior to 2003, we adopted a Restricted Stock Plan to
     provide  incentives,  to attract  and retain  highly  competent  persons as
     officers and key employees.  Participants  consist of such officers and key
     employees as our  Compensation  Committee  determines  to be  significantly
     responsible for our success and future growth and profitability.  Awards of
     restricted  stock are subject to such terms and  conditions as we determine
     to be appropriate at the time of the grant,  including  restrictions on the
     sale or other  disposition of such shares and provisions for the forfeiture
     of  unvested  shares  for  no   consideration   upon   termination  of  the
     participant's   employment   within  specified  periods  or  under  certain
     conditions. Please see Note 13.

     Salary  Continuation  Agreements--Approximately  66 executive  officers and
     certain other employees  (excluding Mr.  Westerman and Mr. Vannucci) of ROC
     and RBH have salary  continuation  agreements  effective  through  December
     2007,  pursuant  to which they will be  entitled  to receive (1) six months
     salary if their  employment with the Company is terminated,  without cause,
     within  12  months of a change of  control  of the  Company;  and (2) group
     health  insurance  for a period of 6 months.  The base salary  payments are
     payable  in  biweekly  installments,  subject  to the  employee's  duty  to
     mitigate by using his or her best efforts to find employment.  In addition,
     two  officers  and  two  significant  employees  have  salary  continuation
     agreements  effective through December 31, 2007,  pursuant to which each of
     them will be  entitled  to receive  one  year's  base  salary  and  certain
     benefits for two years,  if their  employment is  terminated  without cause
     within 24 months of a change of control of the  Company.  These four salary
     continuation  agreements  are  not  subject  to a  duty  to  mitigate.  The
     estimated total amount payable under all such agreements was  approximately
     $3.7 million, which includes $760,000 in benefits, as of December 31, 2006.

                                        F-25

<PAGE>

13.   STOCK OPTION PLANS

     Stock  Compensation  Plans--At  December 31, 2006,  we had two active stock
     option plans and two expired stock option plans, which are described below.
     Under the 1993 Employee Stock Option Plan (the "1993 Option Plan"), we were
     authorized to grant  options to employees  for up to one million  shares of
     our  common  stock.   Under  the   Non-Qualified   Stock  Option  Plan  for
     Non-Employee  Directors  (the "1996 Option  Plan"),  we were  authorized to
     grant options to non-employee  directors for up to 150,000 shares of common
     stock.  Under these plans,  the exercise  price of each option  equaled the
     market price of our stock on the date of grant (110% of market value in the
     case of an  incentive  option  granted  to an owner of more than 10% of our
     common  stock) and an  option's  maximum  term was 10 years (5 years in the
     case of an incentive  option  granted to a an owner of more than 10% of our
     common stock).  All options have become vested under the 1996 Option  Plan.
     Although  the 1993 Option Plan and 1996 Option Plan have expired, some
     options granted under these plans are still outstanding.

     On  January  1,  2006,  we  adopted  SFAS No.  123(R),  using the  modified
     prospective application. Accordingly, prior amounts have not been restated.
     In the first quarter of 2006 our adoption of SFAS No. 123(R) resulted in no
     incremental  stock-based  compensation  expense,  as we had  no  non-vested
     options outstanding at January 1, 2006.

     Effective  May 17,  2005,  we  implemented  two new stock  option plans and
     reserved a total of 1,150,000  shares for options issuable under the plans.
     We  allocated  150,000  shares  to  a  new  option  plan  for  non-employee
     directors.  We will grant  options  for 6,000  shares to each  non-employee
     director on each  anniversary of the effective  date of the plan.  Also, we
     will  grant  options  for  6,000  shares  to  each  person  who  becomes  a
     non-employee director after May 17, 2005. The option exercise price will be
     the closing market price of our stock on the date of the option grant.  The
     options will vest over five years at 20% per year,  commencing on the first
     anniversary of the grant.

     In 2005,  we allocated one million  shares to a new incentive  stock option
     plan for our officers and key  employees.  Our Stock Option  Committee will
     have  discretion as to whom those options will be granted and the number of
     shares to be allocated to each option grant. The option exercise price will
     be the closing  market price of our stock (110% of market value in the case
     of an incentive  option  granted to an owner of more than 10% of our common
     stock) on the date of the option  grant.  The  options  will vest over four
     years, with 20% vesting on the date of grant, and an additional 20% on each
     anniversary of the grant.

     In March of 2005 we  granted  385,500  restricted  shares to 21  executives
     under our  Restricted  Stock Plan.  On January 1, 2006, 301,500  restricted
     shares remained  outstanding.  As of December 31, 2006, $2,190,000 remained
     to be  realized  as expense  related to these  shares.  This amount will be
     recognized   straight  line  over  the  remaining  4  years.  On  the  2006
     anniversary of the grant,  54,300 shares vested and the  restrictions  were
     lifted.

     In May 2006 two executives who had been granted shares under our Restricted
     Stock Plan left the Company and forfeited their  remaining  48,000 unvested
     shares.

                                        F-26

<PAGE>

     Except  for  accelerated  vesting in the event of an  executive's  death or
     disability,  retirement at or after age 62, termination of employment by us
     other than for cause,  or certain events of hardship,  or in the event of a
     change in control of the Company, the vesting schedule for the shares is as
     follows.
<TABLE>
<CAPTION>

<S>                                 <C> <C>            <C>
                              March 10, 2006............20%
                              March 10, 2007............40%
                              March 10, 2008............60%
                              March 10, 2009............80%
                              March 10, 2010...........100%
</TABLE>

     On May 27,  2005,  we  granted  a total of  30,000  shares  of stock to our
     non-employee  directors.  Those  shares  are  subject  to  restrictions  on
     resales,  assignments,  pledges,  encumbrances  or other transfers prior to
     vesting. The shares vest at the rate of 20% per year on each anniversary of
     the grant  date.  However,  accelerated  vesting  will  occur  upon  death,
     disability,  a  change  of  control  of the  Company  or  under  any  other
     termination of directorship  status,  except  resignation prior to reaching
     age 62 or declining to stand for reelection prior to reaching age 62 (which
     would result in forfeiture of the non-vested shares).

     The activity of the 1993 Option Plan and the two director option plans (the
     1996 Option Plan and the 2005 Stock Option Plan for Non-employee Directors)
     is as follows:
<TABLE>
<CAPTION>
                                                                    Weighted-
                                                                     Average
                                                                    Per Share
                                                                     Exercise
1993 Option Plan                                    Shares            Price

<S>                  <C>                          <C>                <C>
Outstanding, January 1, 2004                      1,839,000          $ 2.21
  Exercised                                      (1,048,500)         $ 2.07
  Canceled                                         (397,500)         $ 1.84

Outstanding, December 31, 2004                      393,000          $ 2.39
  Exercised                                        (166,500)         $ 2.38

Outstanding, December 31, 2005                      226,500          $ 2.41
  Exercised                                         (67,500)         $ 2.37
  Expired                                            (3,000)         $ 2.45

Outstanding, December 31, 2006                      156,000          $ 2.42

Director Option Plans

Outstanding, January 1, 2004                         72,000          $ 2.37
  Reinstated                                         12,000          $ 4.46
Outstanding, December 31, 2004                       84,000          $ 2.54

  No activity                                             -
Outstanding, December 31, 2005                       84,000          $ 2.54

  Automatic grant to directors                       24,000         $ 21.60
  Exercised                                         (30,000)         $ 3.23
Outstanding, December 31, 2006                       78,000          $ 8.14
</TABLE>

                                                F-27

<PAGE>
<TABLE>
<CAPTION>
                                Number              Weighted-
                             Outstanding             Average           Weighted-
                                  at                Remaining           Average
         Range of            December 31,          Contractual          Exercise
     Exercise Prices             2006                  Life              Price
--------------------------------------------------------------------------------
<S>   <C>      <C>              <C>                 <C>                  <C>
      $1.33 to $2.00            36,000              5.9 years            $ 1.91
     $2.18 to $21.60           198,000              4.8 years           $ 4.77
</TABLE>

<TABLE>
<CAPTION>

                                      Exercise  Weighted Average  Aggregate Intrinsic
                              Shares    Price    Remaining Life        Value
<S>                 <C>   <C> <C>       <C>        <C>              <C>
 Shares exercisable 12/31/06  210,000   $2.35      4.41 years       $4,552,800
</TABLE>

     The total intrinsic value of options  exercised  during 2006, 2005 and 2004
     was $1,614,000 $2,053,000 and $5,037,000 respectively.

     Option  expense  recorded  in  2006  and  2005  was  $72,000  and  $60,000,
     respectively.  No option  expense was  recorded in 2004.  Restricted  stock
     expense   recorded  in  2006  and  2005  was  $741,000  and  $1.6  million,
     respectively.  No expense was recorded for restricted  stock in 2004. As of
     December  31,  2006,  $185,757  remains  to  be  recorded  as  expense  for
     outstanding  options.  This amount will be recognized  straight line over 4
     years.

14.   GUARANTOR INFORMATION

     The 11%  Notes and the $30  million  senior  secured  credit  facility  are
     guaranteed by all of our  restricted  subsidiaries.  These  guaranties  are
     full,  unconditional,  and joint and several.  Riviera Gaming Management of
     Missouri,  Inc. ("RGMM") and Riviera Gaming Management of New Mexico,  Inc.
     ("RGMNM") are  unrestricted  subsidiaries  of RHC and are not guarantors of
     the  11%  Notes.  RGMM  and  RGMNM  do  not  have  operations  and  do  not
     significantly   contribute  to  our   financial   position  or  results  of
     operations.

15.   LOSS PER SHARE

     Basic  loss per share is  computed  by  dividing  net loss per share by the
     weighted-average  number  of  common  shares  outstanding  for the  period.
     Diluted  loss per share is computed by dividing  net income by the weighted
     number of common and  common-equivalent  shares outstanding for the period.
     Options to purchase common stock, whose exercise price was greater than the
     average  market  price  for  the  period,   have  been  excluded  from  the
     computation  of  diluted  loss per share as their  effect  would  have been
     anti-delutive.  Such antidilutive  options  outstanding for the years ended
     December  31,  2006,  2005 and 2004 were  171,353;  276,196;  and  417,777,
     respectively based on the treasury method.

16.   SEGMENT DISCLOSURES

     We review our operations by our geographic gaming market segments:  Riviera
     Las Vegas and Riviera  Black Hawk.  All  inter-segment  revenues  have been
     eliminated.

                                        F-28

<PAGE>
<TABLE>
<CAPTION>
(in thousands)                              2006          2005          2004

Net revenues:
<S>                                     <C>            <C>           <C>
      Riviera Las Vegas                 $ 149,202      $ 150,688     $ 147,949
      Riviera Black Hawk                   51,742         51,539        53,401
                                        ----------   ------------    ----------
Total net revenues                      $ 200,944      $ 202,227     $ 201,350
                                       ===========   ===========     ==========

EBITDA(1)
      Riviera Las Vegas                    28,075         26,789        27,158
      Riviera Black Hawk                   16,825         17,282        16,884

Other costs and expenses:
      Corporate expense
            Equity-based compensation         813          1,627             -
            Sarbanes-Oxley Act
                professional fees             820          1,233             -
            Other corporate expenses        3,823          4,045         4,038
      Depreciation and amortization        12,691         14,065        13,852
      Mergers, acquisitions and
                development costs, net      1,318            (65)        1,193
      Asset impairments                        19            777             -
      Interest Expense                     26,366         26,608        27,079
      Interest income                        (615)          (220)          (34)
                                         ----------   ------------  -----------
                                           45,235         48,070        46,128
                                        -----------   ------------  -----------
      Net loss                             $ (335)      $ (3,999)     $ (2,086)
                                        ===========   ============  ===========

Interest expense:
      Riviera Las Vegas                  $ 18,643       $ 18,857      $ 19,140
      Riviera Black Hawk                    7,723          7,751         7,939
                                       ----------    ------------   -----------
                                         $ 26,366       $ 26,608      $ 27,079
                                       ===========   ============  ============

Depreciation Expense
      Riviera Las Vegas                   $ 9,032        $ 9,712       $ 9,839
      Riviera Black Hawk                    3,659          4,353         4,013
                                      ------------   ------------   ----------
                                         $ 12,691       $ 14,065      $ 13,852
                                       ==========    ============   ==========

Asset Impairment:
      Riviera Las Vegas                      $ 19          $ 310           $ -
      Riviera Black Hawk                        -            467             -
                                       ------------   -----------    ---------
                                             $ 19          $ 777           $ -
                                       ============   ===========    =========

                                                   December 31
                                          ---------------------------------
Property and equipment (2):                      2006           2005
                                          ---------------   ---------------

      Riviera Las Vegas                     $ 108,234       $ 111,209
      Riviera Black Hawk                       63,086          59,921
                                            ------------    ------------
                                            $ 171,320       $ 171,130
                                           =============    =============
</TABLE>

     (1) EBITDA consists of earnings before interest, income taxes, depreciation
and  amortization.  EBITDA  is  presented  solely as a  supplemental  disclosure
because we believe that it is a widely used measure of operating  performance in

                                        F-29

<PAGE>

the gaming industry and a principal  basis for valuation of gaming  companies by
certain  investors.  We  use  property-level  EBITDA  (EBITDA  before  corporate
expenses) as the primary  measure of operating  performance  of our  properties,
including the evaluation of operating personnel.  EBITDA should not be construed
as an alternative to operating income, as an indicator of operating performance,
as an  alternative  to cash  flow from  operating  activities,  as a measure  of
liquidity,  or as any other measure  determined in  accordance  with  accounting
principles  generally  accepted  in  the  United  States  of  America.  We  have
significant  uses  of  cash  flows,  including  capital  expenditures,  interest
payments and debt principal  repayments that are not reflected in EBITDA.  Also,
other gaming companies that report EBITDA  information may calculate EBITDA in a
different manner than we do.

     (2)  Property  and  equipment  represent  property  and  equipment  net  of
accumulated depreciation and amortization.

17.   RELATED PARTY TRANSACTIONS

     Jeffrey A. Silver, a member of our board of directors,  is a shareholder in
     the law firm of Gordon & Silver, Ltd. ("Gordon & Silver").  We have engaged
     Gordon & Silver for various securities issues and other legal matters since
     1993. We continue to utilize the services of Gordon & Silver and we believe
     that the fee arrangement is  substantially  equivalent to the  arrangements
     that would have been made with a comparable  law firm where a  relationship
     of this nature did not exist.  We incurred legal expenses to the firm which
     are  included  in  mergers,  acquisitions  and  development  cost,  net  of
     $495,000,  $137,000 and $85,000 in 2006,  2005 and 2004,  respectively.  We
     incurred legal expenses to the firm which are included in other general and
     administrative  costs of $56,000,  $297,000  and $91,000 in 2006,  2005 and
     2004, respectively.

18.  UNAUDITED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>

RIVIERA HOLDINGS CORPORATION
UNAUDITED QUARTERLY FINANCIAL DATA
(Amounts in Thousands, Except per Share Data)
--------------------------------------------------------------------------------
                                   March 31  June 30   September 30  December 31
Year ended December 31, 2006
<S>                                <C>       <C>          <C>          <C>
  Net revenues                     $51,689   $52,437      $50,349      $46,469
  Operating income                   7,789     6,895        5,988        4,744
  Income (loss) before tax benefit   1,280       418        (432)       (1,601)
  Net Income (loss)                  1,280       418        (432)       (1,601)
  Income (loss) per share
        basic & diluted             $ 0.11    $ 0.03     $ (0.04)     $ (0.13)


Year ended December 31, 2005:
  Net revenues                     $52,464   $53,257      $50,337      $46,169
  Operating income                   8,757     5,607        5,320        2,705
  Income (loss) before tax benefit   2,138    (1,003)     (1,273)       (3,861)
  Net Income (loss)                  2,138    (1,003)     (1,273)       (3,861)
  Income (loss) per share basic
       & diluted                    $ 0.18   $ (0.08)    $ (0.11)     $ (0.33)
</TABLE>





                                        F-30