**Tableof Contents**

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**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON, D.C. 20549**

** **

**FORM 10-Q**

** **
| **x** | ** ** | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
|-------|------------|---------------------------------------------------------------------------------------------------------|

 

**For the quarterly period ended June 30, 2008**

** **

**OR**

** **
| **o** | ** ** | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
|-------|------------|----------------------------------------------------------------------------------------------------------|

** **

**For the transition period from             to           **

** **

**Commission File Number: **333-117633

** **

**SENECA GAMING CORPORATION**

(Exact name ofregistrant as specified in its charter)

 

| **Not Applicable**                                               | ** ** | **7990**                                                   | ** ** | **54-2122988**                         |
|------------------------------------------------------------------|------------|------------------------------------------------------------|------------|----------------------------------------|
| (State  or other jurisdiction of  incorporation or organization) |       | (Primary  Standard Industrial  Classification Code Number) |       | (I.R.S.  Employer  Identification No.) |

 

**310 FourthStreet**

**NiagaraFalls, New York (Seneca Nation Territory) 14303**

**(716) 299-1100**

(Address, includingzip code, and telephone number,

including areacode, of registrant’s principal executive offices)

 

Indicateby check mark whether the registrant has (1) has filed all reportsrequired to be filed by Section 13 or 15 (d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

 

Yes x   Noo

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See definitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 
| Large accelerated filer o                     |   | Accelerated filer o         |
|-----------------------------------------------|--------|----------------------------------|
|                                          |   |                             |
| Non-accelerated filer x                       |   | Smaller reporting company o |
| (Do not check if a smaller reporting company) |   |                             |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

 

Yes o   Nox

 

AtAugust 14, 2008, the registrant had no outstanding shares of common stock.The registrant is wholly owned by the Seneca Nation of Indians.

 

 

 

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**TABLE OFCONTENTS**

 
| **PART I.   FINANCIAL INFORMATION** |                                                                                                                       |
|----------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|
| Item 1.                                            | Financial Statements                                                                                                       | 1 |
|                                               | Consolidated  Balance Sheets as of June 30, 2008 (Unaudited) and September 30,  2007                             | 1 |
|                                               | Consolidated Statements of  Operations for the three months and nine months ended June 30, 2008 and  2007 (Unaudited) | 2 |
|                                               | Consolidated  Statements of Cash Flows for the nine months ended June 30, 2008 and  2007 (Unaudited)                  | 3 |
|                                               | Notes to Consolidated Financial Statements                                                                                 | 4 |
| Item 2.                                            | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                | 11 |
| Item 3.                                            | Quantitative  and Qualitative Disclosures About Market Risk                                                                | 25 |
| Item 4T.                                           | Controls and  Procedures                                                                                                   | 25 |
|                                               |                                                                                                                       |   |
| **PART II.   OTHER INFORMATION**         |                                                                                                                       |
| Item 1.                                            | Legal Proceedings                                                                                                          | 26 |
| Item 1A.                                           | Risk Factors                                                                                                               | 27 |
| Item 2.                                            | Unregistered  Sales of Equity Securities and Use of Proceeds                                                               | 29 |
| Item 3.                                            | Defaults  Upon Senior Securities                                                                                           | 29 |
| Item 4.                                            | Submission  of Matters to a Vote of Security Holders                                                                       | 29 |
| Item 5.                                            | Other Information                                                                                                          | 29 |
| Item 6.                                            | Exhibits                                                                                                                   | 29 |
|                                               | Signatures                                                                                                                 | 30 |

 

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**PART I.  FINANCIAL INFORMATION**

 

**Item I.****                                                             ****Financial Statements**

 

**SENECAGAMING CORPORATION**

**CONSOLIDATEDBALANCE SHEETS**

**(Unaudited)**

 
| ** **                               | ** ** | **June 30,**                    | ** ** | **September 30,** | ** ** |
|------------------------------------------|------------|--------------------------------------|------------|------------------------|------------|
| ** **                               | ** ** | **2008**                             | ** ** | **2007**               | ** ** |
| ** **                               | ** ** | **(Dollars in Thousands)** | ** ** |
| **Assets**                               | ** ** | ** **                           | ** ** | ** **             | ** ** |
| Current assets:                          |       |                                 |       |                   |       |
| Cash and  cash equivalents               |       | $                                    | 62,872     |                   | $          | 78,662 |   |
| Short-term  investments                  |       | 350                                  |       | 19,100                 |       |
| Receivables  from affiliates             |       | 70                                   |       | 58                     |       |
| Other  receivables, net                  |       | 2,809                                |       | 3,585                  |       |
| Inventories                              |       | 4,130                                |       | 4,421                  |       |
| Other  current assets                    |       | 9,021                                |       | 8,194                  |       |
| Total  current assets                    |       | 79,252                               |       | 114,020                |       |
|                                     |       |                                 |       |                   |       |
| Property and equipment, net              |       | 756,884                              |       | 699,381                |       |
| Restricted  cash                         |       | —                               |       | 14,579                 |       |
| Other long-term assets                   |       | 60,448                               |       | 57,980                 |       |
|                                     |       |                                 |       |                   |       |
| Total assets                             |       | $                                    | 896,584    |                   | $          | 885,960 |   |
|                                     |       |                                 |       |                   |       |
| **Liabilities and Capital**              | ** ** | ** **                           | ** ** | ** **             | ** ** |
| Current liabilities:                     |       |                                 |       |                   |       |
| Trade  payables                          |       | $                                    | 8,542      |                   | $          | 6,194 |   |
| Construction  payables                   |       | 21,609                               |       | 21,201                 |       |
| Distributions  payable to Nation         |       | 12,000                               |       | 48,000                 |       |
| Exclusivity  fees payable                |       | 9,865                                |       | 9,279                  |       |
| Accrued  interest                        |       | 6,042                                |       | 15,104                 |       |
| Accrued regulatory expenses              |       | 27,125                               |       | 23,240                 |       |
| Accrued gaming liabilities               |       | 16,243                               |       | 15,071                 |       |
| Accrued  payroll and related liabilities |       | 12,177                               |       | 16,641                 |       |
| Accrued  other current liabilities       |       | 6,226                                |       | 5,639                  |       |
| Total  current liabilities               |       | 119,829                              |       | 160,369                |       |
|                                     |       |                                 |       |                   |       |
| Commitments and Contingencies            |       | —                               |       | —                 |       |
|                                     |       |                                 |       |                   |       |
| Long-term debt                           |       | 496,101                              |       | 495,347                |       |
|                                     |       |                                 |       |                   |       |
| Total  liabilities                       |       | 615,930                              |       | 655,716                |       |
|                                     |       |                                 |       |                   |       |
| Capital:                                 |       |                                 |       |                   |       |
| Retained earnings                        |       | 280,654                              |       | 230,244                |       |
|                                     |       |                                 |       |                   |       |
| Total  liabilities and capital           |       | $                                    | 896,584    |                   | $          | 885,960 |   |

 

See accompanying notes to consolidatedfinancial statements.

 

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**SENECAGAMING CORPORATION**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                               | ** ** | **Three Months Ended  June 30,** | ** ** | **Nine Months Ended  June 30,** | ** ** |
|------------------------------------------|------------|-------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                               | ** ** | **2008**                                        | ** ** | **2007**                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                               | ** ** | **(Dollars in Thousands)**            | ** ** |
| ** **                               | ** ** | ** **                                      | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Revenues**                             | ** ** | ** **                                      | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **                                      | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Gaming                                   |       | $                                               | 164,693    |                                           | $          | 149,528 |   | $ | 469,139 |   | $ | 429,205 |   |
| Food and  beverage                       |       | 16,295                                          |       | 14,360                                         |       | 46,677 |   | 40,388 |   |
| Lodging                                  |       | 7,277                                           |       | 6,555                                          |       | 21,501 |   | 15,800 |   |
| Retail,  entertainment and other         |       | 6,169                                           |       | 4,848                                          |       | 18,486 |   | 14,446 |   |
| Gross  Revenue                           |       | 194,434                                         |       | 175,291                                        |       | 555,803 |   | 499,839 |   |
| Less:  Promotional allowances            |       | (28,763                                         | )          | (26,088                                        | )          | (88,914 | ) | (74,583 | ) |
| Net revenues                             |       | 165,671                                         |       | 149,203                                        |       | 466,889 |   | 425,256 |   |
|                                     |       |                                            |       |                                           |       |   |   |   |   |
| **Expenses**                             | ** ** | ** **                                      | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **                                      | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Gaming                                   |       | 43,742                                          |       | 40,332                                         |       | 126,689 |   | 109,752 |   |
| Food and  beverage                       |       | 12,435                                          |       | 12,448                                         |       | 37,150 |   | 34,594 |   |
| Lodging                                  |       | 3,756                                           |       | 3,347                                          |       | 11,306 |   | 7,943 |   |
| Retail,  entertainment and other         |       | 3,703                                           |       | 3,116                                          |       | 10,851 |   | 8,928 |   |
| Advertising,  general and administrative |       | 47,934                                          |       | 37,548                                         |       | 144,766 |   | 109,676 |   |
| Pre-opening  costs                       |       | 70                                              |       | 4,636                                          |       | 294 |   | 15,218 |   |
| Depreciation                             |       | 12,604                                          |       | 13,503                                         |       | 38,533 |   | 36,113 |   |
|                                     |       |                                            |       |                                           |       |   |   |   |   |
| Total  operating expenses                |       | 124,244                                         |       | 114,930                                        |       | 369,589 |   | 322,224 |   |
|                                     |       |                                            |       |                                           |       |   |   |   |   |
| Operating  income                        |       | 41,427                                          |       | 34,273                                         |       | 97,300 |   | 103,032 |   |
|                                     |       |                                            |       |                                           |       |   |   |   |   |
| Other non-operating  income (expense)    |       | (250                                            | )          | 4,006                                          |       | (4,150 | ) | 3,720 |   |
| Interest  income                         |       | 129                                             |       | 565                                            |       | 1,251 |   | 3,056 |   |
| Interest  expense                        |       | (9,089                                          | )          | (9,502                                         | )          | (28,833 | ) | (26,024 | ) |
|                                     |       |                                            |       |                                           |       |   |   |   |   |
| Net income                               |       | $                                               | 32,217     |                                           | $          | 29,342 |   | $ | 65,568 |   | $ | 83,784 |   |

 

See accompanying notes to consolidatedfinancial statements.

 

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** **

**SENECAGAMING CORPORATION**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Nine Months Ended**      | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                         | ** ** | **June 30,**                    | ** ** |
| ** **                                                                         | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **                                                                         | ** ** | **(Dollars in Thousands)** | ** ** |
| **Cash  flows relating to operating activities:**                                  | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                                    | 65,568     |   | $ | 83,784 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                                 |       |   |   |
| Depreciation                                                                       |       | 38,533                               |       | 36,113 |   |
| Amortization  of deferred financing costs and debt discount                        |       | 2,429                                |       | 2,424 |   |
| Other than  temporary decline in investments                                       |       | 4,150                                |       | — |   |
| Bad debt  expense                                                                  |       | 227                                  |       | 737 |   |
| Write-off of  acquisition costs                                                    |       | 1,100                                |       | — |   |
| Loss on  disposal of assets                                                        |       | 26                                   |       | — |   |
|                                                                               |       |                                 |       |   |   |
| Change in  operating assets and liabilities:                                       |       |                                 |       |   |   |
| Current  assets                                                                    |       | 1                                    |       | (2,594 | ) |
| Long-term  assets                                                                  |       | (1,235                               | )          | — |   |
| Current  liabilities                                                               |       | (4,948                               | )          | (3,188 | )  |
|                                                                               |       |                                 |       |   |   |
| Net cash  provided by operating activities                                         |       | 105,851                              |       | 117,276 |   |
|                                                                               |       |                                 |       |   |   |
| **Cash  flows relating to investing activities:**                                  | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Purchases of  property and equipment                                               |       | (94,254                              | )          | (143,441 | ) |
| Land  acquisition costs                                                            |       | (5,408                               | )          | (17,852 | ) |
| Sales of  investments, net                                                         |       | 14,600                               |       | 42,700 |   |
| Decrease in  restricted cash                                                       |       | 14,579                               |       | 11,221 |   |
|                                                                               |       |                                 |       |   |   |
| Net cash  used in investing activities                                             |       | (70,483                              | )          | (107,372 | ) |
|                                                                               |       |                                 |       |   |   |
| **Cash  flows relating to financing activities:**                                  | ** ** | ** **                           | ** ** | ** ** | ** ** |
| ** **                                                                         | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Capital  contribution from Nation                                                  |       | —                               |       | 3,198 |   |
| Distributions  paid to the Nation                                                  |       | (51,158                              | )          | (36,692 | ) |
|                                                                               |       |                                 |       |   |   |
| Net cash  used in financing activities                                             |       | (51,158                              | )          | (33,494 | ) |
|                                                                               |       |                                 |       |   |   |
| Net decrease  in cash                                                              |       | (15,790                              | )          | (23,590 | ) |
|                                                                               |       |                                 |       |   |   |
| Cash  balances:                                                                    |       |                                 |       |   |   |
| Beginning of  period                                                               |       | 78,662                               |       | 78,195 |   |
|                                                                               |       |                                 |       |   |   |
| End of  period                                                                     |       | $                                    | 62,872     |   | $ | 54,605 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

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**SENECAGAMING CORPORATION**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**1.**                                      Organizationand Basis of Presentation

** **

The consolidated financial statements include theaccounts of Seneca Gaming Corporation, or SGC, and its wholly ownedsubsidiaries, or collectively, the Company. In consolidation, all intercompany balances and transactions have beeneliminated.  The accompanying unauditedconsolidated financial statements have been prepared in accordance with U.S.generally accepted accounting principles for interim financialinformation.  Accordingly, they do notinclude all of the information and notes required by generally acceptedaccounting principles for complete financial statements.  In the opinion of SGC’s management, alladjustments, consisting of normal recurring accruals, considered necessary fora fair presentation have been included. Operating results for the three months and nine months ended June 30,2008 are not necessarily indicative of the results that may be expected for theyear ending September 30, 2008.  Forfurther information, reference is made to the consolidated financial statementsand notes thereto included in SGC’s Annual Report on Form 10-K for thefiscal year ended September 30, 2007, or 2007 Form 10-K, as well asSGC’s other filings with the Securities and Exchange Commission, or SEC,pursuant to the Securities Exchange Act of 1934, as amended.

 

SGC, which was formed on August 1, 2002, iswholly owned by the Seneca Nation of Indians, or the Nation, a federallyrecognized Indian nation.  SGC wasorganized by the Nation to operate and manage its Class III gamingactivities on the Nation’s territories pursuant to the Indian Gaming RegulatoryAct of 1988, or IGRA.  Under IGRA,federally recognized Indian tribes are permitted to conduct full-scale casinogaming operations on tribal land, subject to, among other things, thenegotiation of a compact with the affected state.  Pursuant to IGRA, the Nation entered into theNation-State Gaming Compact with the State of New York in August 2002, orthe Compact, which has been approved by the Federal Bureau of Indian Affairs,Department of the Interior.  The Compactexpires in December 2016 and automatically renews for an additional sevenyear period unless either the Nation or the State of New York objects inwriting, in which case the parties are required to negotiate in good faith toaddress the objecting party’s concerns, with only the issue of a party’s goodfaith subject to third party dispute resolution.  The Compact provides that its terms willremain in effect during the pendency of such negotiations.  The Compact provides the Nation with theright to conduct Class III gaming activities at three sites in the westernregion of the State of New York.  Theright is exclusive, subject to certain limited exceptions.

 

The Nation’s Council, or the Council, acts as theNation’s legislative authority, and acts on the Nation’s behalf with respect toSGC.  The Council enacted a gamingordinance which established the Seneca Gaming Authority, or SGA, to regulatethe gaming activities of SGC under the Compact, and the gaming ordinance, asamended, continues to regulate the gaming activities of SGC.

 

The Council, at the request of the SGC Board ofDirectors, chartered three subsidiary corporations of SGC to develop andoperate the three sites authorized by the Compact. In addition, the SGC Boardof Directors hired the executive management of SGC, including the President andChief Executive Officer, to oversee and manage the operations at the threesites. The subsidiary corporations that operate the three sites authorized bythe Compact are as follows:

 

·              Seneca Niagara Falls GamingCorporation, or SNFGC

 

·              Seneca Territory GamingCorporation, or STGC; and

 

·              Seneca Erie Gaming Corporation, orSEGC

 

SNFGC was formed on August 1, 2002 to operatethe Nation’s Class III gaming facilities in Niagara Falls, New York.  Operations at SNFGC’s casino, the SenecaNiagara Casino, commenced December 31, 2002.  On March 31, 2006, SNFGC officiallycompleted the phased opening of its luxury hotel expansion, which included apermanent  147,000 square foot gamingfacility (providing 35,000 square feet more gaming space than the original112,000 square feet), a 604 room luxury hotel with 118 suites of various sizes,a full-service spa, salon, and fitness center, three fine dining restaurants(two additional) and a 24 hour casual restaurant, three new retail stores, anda 25,200 square-foot multi-purpose room and events center.  The luxury hotel is adjacent and connected tothe Seneca Niagara Casino.  The entirecomplex, including the luxury hotel and the Seneca Niagara Casino, is referredto as the Seneca Niagara Casino and Hotel.

 

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STGC was formed on September 20, 2003 tooperate the Nation’s Class III gaming facilities near Salamanca, New Yorkon its existing territorial land. Operations at STGC’s casino, the SenecaAllegany Casino, commenced May 1, 2004. On March 30, 2007, the phased opening of the permanent gamingfacility and resort hotel was completed, which included a permanent 63,500square foot gaming facility (providing 12,000 square feet more gaming spacethan the original 51,500 square foot temporary gaming facility), a 212-roomresort hotel, two fine dining restaurants, a 24 hour casual restaurant, a spaand fitness center, and retail and other amenities.  The conversion of the former approximate120,000 square foot temporary casino structure into an events center with aseating capacity for 2,300 people, along with additional administrative andsupport space, was completed in March 2008.  The entire complex, including the SenecaAllegany Casino and resort hotel, is referred to as the Seneca Allegany Casinoand Hotel.

 

SEGCwas formed on August 9, 2003 to operate the Nation’s Class III gamingfacility in Erie County, New York.  On October 3,2005, the Nation acquired approximately nine acres of land in the inner-harbordistrict of downtown Buffalo.  SEGCcommenced construction of its Seneca Buffalo Creek Casino on those nine acreson December 8, 2005 and on July 3, 2007 commenced Class IIIgaming on such property, in a temporary facility, in fulfillment of therequirement set forth in the Compact. Various plaintiffs have filed suit infederal and state court challenging the Nation’s right to conduct Class IIIgaming on the Nation’s nine acre Buffalo Creek Territory.  OnJuly 8, 2008, in a federal suit captioned *Citizens Against CasinoGambling in Erie County v. Kempthorne*, the Court issued its decision and order findingthat, although the Nation’s Buffalo Creek Territory is “Indian country”, theNIGC’s determination that the Nation’s Buffalo Creek Territory isgaming-eligible land pursuant to the IGRA’s settlement of a land claimexception was arbitrary, capricious, and not in accordance with the law.  The Court’s decision did not provide forinjunctive relief, and SEGC has continued its operations at the Seneca BuffaloCreek Casino.  Plaintiffs subsequentlyfiled a motion on July 14, 2008 to force the court to enforce itsjudgment.

 

On July 22, 2008, the United States filed a motion respondingto the plaintiffs’ motion to enforce and requesting that the case be remandedto the NIGC for further consideration. The remand motion is based uponsignificant changes in the controlling law, as interpreted by the U.S.Department of Interior.  The Seneca Nation of Indians simultaneouslyfiled an amicus brief supporting the United States’ motion for remand to theNIGC and opposing the plaintiffs’ motion to enforce (the Nation is not a partyto the lawsuit).  Oral argument on theforegoing motions is scheduled for August 21, 2008.

 

Ifthe plaintiffs are successful, the Nation, and therefore SEGC, may be unable tocontinue operating the existing Seneca Buffalo Creek Casino, may be delayed inthe completion of the Seneca Buffalo Creek Casino and Hotel at this site or maybe unable to conduct Class III gaming at this site. The NIGC hasindicated that it does not intend to take any precipitous action against theNation or its gaming facilities as it, in consultation with the U.S. Departmentof Justice, continues to assess its options. SEGC will continue to assessongoing events to determine if, and to what extend, any such matters result inan impairment of SEGC’s Buffalo Creek assets.

 

The Nation’s Council has also chartered, at therequest of the SGC Board of Directors, two additional subsidiary corporations,Lewiston Golf Course Corporation, or LGCC, a subsidiary of SNFGC and SenecaMassachusetts Gaming Corporation, or SMGC, a subsidiary of SGC.

 

LGCC was formed on July 18, 2007 by the Nation’sCouncil, as a new wholly-owned subsidiary of SNFGC to own, develop and operateSGC’s planned golf course in Lewiston, New York.

 

SMGC was formed on August 11, 2007 by theNation’s Council, as a new wholly-owned subsidiary of SGC, to exploredevelopment opportunities related to gaming in the Commonwealth ofMassachusetts.

 

**2.****            Short-Term Investments**

 

Short-terminvestments are classified as available for sale as defined in SFAS No. 115,*Accounting for Certain Investments in Debtand Equity Securities*.  Investments are stated at fairvalue.  The Company evaluates investments for conditions that may indicatethat an other-than-temporary decline in market value has occurred. Inconducting this review, numerous factors are considered which, individually orin the aggregate, may indicate that a decline is other-than-temporary. Based onthis evaluation, an other-than-temporary loss on one specific investment of$4.2 million was recorded in the first nine months of fiscal 2008 as othernon-operating expense. The cost basis of this investment has been reduced bythe amount of the other-than-temporary loss recorded.

 

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**3.**                                      PrincipalDebt Arrangements

 

Long-term debt, as described below, consists of the2004 and 2005 71⁄4% senior notes and the senior secured revolving loan agreement.

 

**71⁄4% Senior Notes**

** **

On May 5, 2004, SGC issued $300.0 millionin 71⁄4% senior notes due 2012, or the 2004 senior notes.  On May 23,2005, SGC issued an additional $200.0 million in 71⁄4% senior notes due 2012, Series B,or the 2005 senior notes.

 

The 2004 and 2005 senior notes are guaranteed bySNFGC, STGC, SEGC and LGCC. The 2005 senior notes are treated as a single classwith the 2004 senior notes and are identical to the 2004 senior notes, exceptfor certain tax attributes and prior to November 1, 2005 the amount ofinterest accrued thereon.   Interest on the 2004 and 2005 seniornotes is payable semi-annually on May 1 and November 1.  The2004 and 2005 senior notes are unsecured and rank equally.  As of June 30,2008, aggregate accrued interest on the 2004 and 2005 senior notes was$6.0 million. The senior notes, which mature on May 1, 2012, areredeemable at SGC’s option in whole or in part at any time after May 1,2008 at the redemption prices set forth in SGC’s Indenture, are subject toredemption requirements imposed by gaming laws and regulations and are requiredto be repurchased by SGC at the option of holders upon certain change ofcontrol events.

 

The Indenture governing the 2004 and 2005 seniornotes contains certain financial and non-financial covenants.  Thefinancial covenants include limitations on restricted payments, the incurrenceof indebtedness and affiliate transactions, while the non-financial covenantsinclude reporting obligations and compliance with laws and regulations. As of June 30, 2008, SGC was in compliance with all covenants in theIndenture.

 

**Senior Secured Revolving Loan Agreement**

 

Effective June 19, 2008, SGC entered into a $50.0million senior secured revolving loan agreement, which matures on June 19,2009. The maturity date may be extended by SGC at its election (at any timeafter the six month anniversary of the closing date and prior to June 19,2009) for an additional period of six months provided that no default or eventof default exists at the time of election.  Amounts borrowed under theloan agreement bear interest at either one, three or six-month LIBOR plus oneand one quarter percent (1.25%), or the prime rate (as reported in the *The Wall Street Journal*) plus one quarterpercent (.25%) at SGC’s discretion.  Anyoutstanding principal balance shall be paid on the maturity date.

 

SGC’sobligations under the loan agreement are secured by substantially all gamingand related assets (including substantially all gaming revenues) notconstituting real property or improvements.  SGC’s obligations areguaranteed by SNFGC, STGC, SEGC and LGCC.  The guarantors’ obligations aresecured by substantially all of each guarantor’s gaming and related assets(including substantially all gaming revenues) not constituting real property orimprovements.

 

The loan agreement contains certain financial covenants requiring SGCto achieve minimum consolidated EBITDA of $160 million (on a rolling 12 monthbasis) and certain leverage  and coverageratios. The loan agreement also contains additional customary covenants,including covenants restricting the incurrence of additional indebtedness, thecreation of additional liens and the disposition of assets. As of June 30,2008, SGC was in compliance with all covenants in the loan agreement.

 

As of June 30, 2008, at SGC’s request, the lenderunder the loan agreement had issued letters of credit totaling $16.8 million,$11.2 million of which may be drawn upon to fund the purchase of certainparcels within the 50 acre “footprint” described in the Compact and designatedfor ownership by the Nation, with the remaining $5.6 million issued inconnection with worker’s compensation policies. As of June 30, 2008, $33.2 million was available under the loanagreement.

 

Effective June 19, 2008, SGC’s securedreimbursement facilities were terminated and all outstanding letters of creditunder such facilities were assumed as outstanding letters of credit under thesenior secured revolving loan agreement.

 

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**4.****                                     ****Related-Party Transactions**

 

**Operating LeaseAgreements with the Nation**

 

The Nation has entered into operating leaseagreements (each a Head Lease) with each of SNFGC, STGC and SEGC.  Due to the related party nature of theseleases, which can be effectively modified by the Nation, SGC records monthlylease expense equal to the required payment amount for the respectivemonth.  Lease payment increases under theHead Leases are restricted under the terms of the Indenture governing thesenior notes, the Distribution Agreement referenced in Note 5, and the seniorsecured revolving loan agreement.  Theseleases contain no renewal options or escalation clauses.

 

The Amended and Restated SNFGC Head Lease (effectiveOctober 1, 2007) has a term expiring on December 31, 2023, and coversuse of all land owned (or to be owned) by the Nation within the 50 acre “footprint”described in Appendix I of the Compact, together with all Nation-ownedimprovements thereon, including the structures formerly known as the NiagaraFalls Convention Center and Lackey Plaza, and the office building currentlyknown as the Seneca Office Building.  Asof October 1, 2005, monthly lease payments under the SNFGC Head Lease were$1,287,500.  The lease payments wereincreased by 3%, effective October 1, 2006, to $1,326,125 per month, andan additional 3%, effective October 1, 2007, to $1,365,909 per month, ineach case as approved by the board of directors of each of SGC and SNFGC.  Pursuant to the terms of the Amended andRestated SNFGC Head Lease entered into on March 27, 2008, and effective asof October 1, 2007, lease payments were further increased, at the requestof the Nation, to $2,033,333 per month or by 49%, with such increase effectiveas of October 1, 2007.  On August 1,2008, at the request of the Nation, SGC approved an increase in the SNFGC HeadLease to $3,083,333 per month, or by 52%, effective October 1, 2008, andto $3,666,667 per month, or by 19%, effective October 1, 2009.  Such additional increases are conditionedupon compliance with the requirements of the senior notes Indenture related toaffiliate transactions, and are subject to compliance with all commitmentslegally binding upon the Nation or SNFGC, or to which the premises (describedin the lease) are subject.  Leasepayments may be further increased upon agreement of the parties, provided thatno increase may contravene, or constitute a default under, any agreement,indenture, instrument or other commitment legally binding upon the Nation orSNFGC, or to which the premises (described in the lease) are subject.

 

The STGC and SEGC Head Leases were entered intoeffective as of May 1, 2004 and April 1, 2006 respectively.  Both of these Head Leases have terms expiringon December 31, 2023, and cover use of the land which is currently beingused in operating the Seneca Allegany Casino and Hotel and Seneca Buffalo CreekCasino, respectively.  With respect tothe STGC Head Lease, as of October 1, 2005 monthly lease payments were$1,287,500.  Payments were increased by3%, effective October 1, 2006, to $1,326,125 per month, and by anadditional 3%, effective October 1, 2007, to $1,365,909 per month, in eachcase as approved by the board of directors of STGC.  Pursuant to an amendment to the STGC HeadLease entered into on March 27, 2008, and effective as of October 1,2007, the lease payments were increased, at the request of the Nation, to$1,691,667 per month, or by 24%.  On August 1,2008, at the request of the Nation, SGC approved increases in the leasepayments under the STGC Head Lease to $2,166,666 per month, or by 28%,effective October 1, 2008, and to $2,666,667 per month, or by 23%,effective October 1, 2009. With respect to the SEGC Head Lease, for thefirst six months of the term, SEGC made monthly lease payments of $520,000 tothe Nation.  Payments were increased,effective October 1, 2006, to $1,250,000, and by an additional 3%,effective October 1, 2007, to $1,287,500, in each case as approved by theboard of directors of SEGC.  Pursuant toan amendment to the SEGC Head Lease entered into on March 27, 2008, andeffective as of October 1, 2007, the lease payments were increased, at therequest of the Nation, to $1,441,667 per month, or by 12%. On August 1,2008, at the request of the Nation, SGC approved an increase in the leasepayments under the SEGC Head Lease to $1,500,000 per month, or by 4%, effectiveOctober 1, 2008.  The August 1,2008 STGC and SEGC lease payment increases are conditioned upon compliance withthe requirements of the senior notes Indenture related to affiliatetransactions, and are subject to compliance with all commitments legallybinding upon the Nation, STGC or SEGC, as the case may be, or to which thepremises (described in the leases) are subject. Lease payments under the STGC and SEGC Head Leases may be furtherincreased upon agreement of the parties, provided that no increase maycontravene, or constitute a default under, any agreement, indenture, instrumentor other commitment legally binding upon the Nation, STGC or SEGC,respectively, or to which the premises (described in the leases) are subject.

 

Because the Company intended (subject to compliancewith the senior notes Indenture and all other applicable commitments) thateffective October 1, 2007 its aggregate rent under the Head Leaseagreements would increase by $14 million for fiscal 2008, the Company commencedrecording lease expense utilizing the expected annual head lease amount duringthe quarter ended December 31, 2007.

 

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Lease expense resulting from the above agreementswas as follows for the three and nine month periods ended June 30, 2008and 2007:

 
| ** ** | ** ** | **Three Months Ended  June 30,** | ** ** | **Nine Months Ended  June 30,** | ** ** |
|------------|------------|-------------------------------------------------|------------|------------------------------------------------|------------|
| ** ** | ** ** | **2008**                                        | ** ** | **2007**                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** ** | ** ** | **(In Millions of Dollars)**     | ** ** |
| ** ** | ** ** | ** **                                      | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| SNFGC      |       | $                                               | 6.1        |                                           | $          | 4.0 |   | $ | 18.3 |   | $ | 11.9 |   |
|       |       |                                            |       |                                           |       |   |   |   |   |
| STGC       |       | 5.1                                             |       | 4.0                                            |       | 15.2 |   | 11.9 |   |
|       |       |                                            |       |                                           |       |   |   |   |   |
| SEGC       |       | 4.3                                             |       | 3.8                                            |       | 13.0 |   | 11.3 |   |
|       |       | $                                               | 15.5       |                                           | $          | 11.8 |   | $ | 46.5 |   | $ | 35.1 |   |

 

SNFGC, STGC, and SEGC record the lease costs as acomponent of advertising, general and administrative costs in the accompanyingconsolidated statements of operations. Prior to opening the temporary facility, SEGC recorded the lease cost asa component of pre-opening costs in the accompanying consolidated statements ofoperations.

 

**Other Related Party Transactions**

 

SNFGC, STGC and SEGC have each entered intoconstruction management agreements with Seneca Construction ManagementCorporation, or SCMC, for certain renovations and capital improvements atSeneca Niagara Casino and Hotel, Seneca Allegany Casino and Hotel, and SenecaBuffalo Creek Casino, respectively.  SCMCis wholly owned by the Nation.  For thethree and nine-month periods ended June 30, 2008, SNFGC, STGC and SEGChave collectively made payments to SCMC for construction management and relatedfees of $1.5 million and $3.0 million, respectively.  Such fees reflect the amounts earned by SCMCfor the performance of construction management services. Additional amountspaid to SCMC are passed-through and used to pay subcontractors, reimbursementsfor out-of-pocket expenses and similar costs.

 

SNFGC and STGC lease space within both SenecaNiagara Casino and Hotel and Seneca Allegany Casino and Hotel,respectively, for operation of poker rooms by Seneca Gaming &Entertainment, a Class II business enterprise of the Nation.  For the three-month periods ended June 30,2008 and 2007, SGC recorded $0.2 million and $0.1 million of poker room rentalincome and fees, respectively, and for the nine-month periods ended June 30,2008 and 2007, SGC recorded $0.2 million and $0.5 million of rental income andfees, respectively.  At June 30,2008 and 2007, SGC has recorded $0.1 million as a receivable from the Nationrelating to poker room rentals and fees.

 

Effective September 1, 2006, SGC declared cash distributions tothe Nation totaling $26 million, payable in thirteen equal monthly payments of$2 million beginning September 2006. Effective December 1, 2006, SGC declared additional cashdistributions to the Nation totaling $20 million, payable in ten equal monthlypayments of $2 million beginning December 2006.  Effective September 27, 2007, SGCdeclared cash distributions to the Nation totaling $48 million, payable intwelve equal monthly payments of $4 million beginning October 2007.   During the nine months ended June 30,2008, SGC paid cash distributions of $36 million to the Nation pursuant to theforegoing distribution declarations. The remaining declared cash distributionsof $12 million which are payable on future payment dates are shown as ‘Distributionspayable to Nation’ on the accompanying consolidated balance sheets.   In July 2008, SGC declared and paid anadditional $2.8 million distribution to the Nation.

 

On July 30, 2008, SGC declared cash distributions to the Nation,to fund a portion of certain construction projects, totaling $20 million, ofwhich $10 million is payable in each of fiscal year 2009 and 2010.  These amounts are payable in ten equalmonthly payments of $1 million beginning October 1, 2008 and 2009,respectively.

 

In addition to the foregoing declared cash distributions, during thenine months ended June 30, 2008, SGC distributed $14.9 million to theNation under the Distribution Agreement, dated April 27, 2007, relating tothe Seneca Nation of Indians Capital Improvements Authority’s specialobligation bonds.

 

During the nine months ended June 30, 2007, SGC distributed to theNation acquired real property of $1.5 million for use in its casino and otherrelated entertainment operations.  Suchdistribution amounts were based on the acquisition cost of the realproperty.  There were no suchdistributions for the nine months ended June 30, 2008. For the nine monthperiod ended June 30, 2007, the Nation paid $3.2 million to SEGC relating tothe Nation’s Buffalo Creek real property acquisitions, which is reported as acapital contribution from the Nation on the consolidated statements of cashflows.

 

In addition, SGC has recorded approximately $51.3 million in land andrelated acquisition costs as ‘Other long-term assets’ in the accompanyingconsolidated balance sheets as of June 30, 2008, which are expected to betransferred to the Nation.

 

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SGC is charged by the Nation for SGA gaming regulatory services, whichcosts are incurred by the Nation.  SGAcosts charged to SGC were approximately $2.5 million and $2.7 million for thethree months ended June 30, 2008 and 2007, respectively, and $8.3 millionand $7.7 million for the nine months ended June 30, 2008 and 2007,respectively.  SGC also incurs costs,which are passed through by the Nation, for New York State gaming regulatoryservices, New York State Police, Seneca Nation of Indians Marshals, BuffaloPolice****and Cattaraugus County SheriffDepartment services.  SGC recorded costsof approximately $3.1 million and $2.0 million for the three-month periodsended June 30, 2008 and 2007, respectively, and $8.1 million and $6.1million for the nine months ended June 30, 2008 and 2007, respectively, inconnection with these services.  At June 30,2008 and September 30, 2007, approximately $27.1 million and $23.2million, respectively, of SGA, other regulatory, and police costs were recordedas current liabilities.

 

STGC leases office space in a building owned by thebrother of a member of SGC’s board of directors.  For the three-month periods ended June 30,2008 and 2007, such lease expense totaled $63,000 and $61,000, respectively,and for the nine month periods ended June 30, 2008 and 2007, such leaseexpense totaled $191,000 and $184,000, respectively.

 

SNFGC, STGC, and SEGC, through a competitive biddingprocess, have purchased goods and services from DRJ Enterprises, which is ownedby the brother-in-law of the SGC Chairman. Payments to DRJ Enterprises for the three-month periods ended June 30,2008 and 2007 totaled $238,000 and $259,000, respectively, and $555,000 and$789,000 for the nine month periods ended June 30, 2008 and 2007,respectively.

 

**5.**                                      Commitmentsand Contingencies

** **

**The Seneca Nation Compact**

** **

As part of its Compact, the Nation agrees tocontribute to the State of New York a portion of the proceeds from theoperation and conduct of each category of gaming device for which exclusivityexists, based on the win of such machines (cash dropped into machines, afterpayouts but before expenses) and totaled on a cumulative quarterly basis to beadjusted annually at the end of the relevant calendar year.  The exclusivity fee to the State of New Yorkfor years 1-4 (through December 31, 2006) was 18% payable on an annualbasis.  Thereafter, the exclusivity feeis 22% for years 5-7 (through December 31, 2009) payable on a semi-annualbasis, and 25% for years 8-14 (through December 31, 2016) payable on aquarterly basis.

 

Pursuant to the Compact, amounts due to New YorkState are payable by the Nation.  In February 2005,SNFGC and STGC commenced monthly payments to the Nation of each entity’s priormonth’s exclusivity fees.  SEGC commencedsuch monthly payments in August 2007. For the three months ended June 30, 2008 and 2007, totalexclusivity fees were $30.4 million and $27.2 million, respectively.  Of the $30.4 million exclusivity fee for thethree months ended June 30, 2008, $20.2 million was attributable to SNFGC,$8.2 million was attributable to STGC, and $2.0 million was attributable toSEGC.  For the nine months ended June 30,2008 and 2007, total exclusivity fees were $85.3 million and $73.0 million,respectively.  Of the $85.3 millionexclusivity fee for the nine months ended June 30, 2008, $57.7 million wasattributable to SNFGC, $22.5 million was attributable to STGC, and $5.1 millionwas attributable to SEGC.

 

**Expansion and DevelopmentProjects**

** **

Asdescribed in Note 1, the Compact provides the Nation with the right to conduct Class IIIgaming activities at three sites in the western region of the State of NewYork.  The conversion of the formertemporary casino at the Seneca Allegany Casino and Hotel into a 120,000 squarefoot events center, and additional administration space was substantiallycomplete on December 31, 2007, with an official opening occurring on March 14,2008.  The exterior landscaping andfaçade enhancements, originally planned as part of the conversion of thetemporary casino, have been deferred to the next phase of construction.

 

Thenext phase of construction providing for an additional 196 room hotel, 31,000square feet of additional gaming and related amenities and landscaping andexterior enhancements to the property as a whole, commenced in April 2008and is anticipated to be completed in Fall 2009.  We continue to monitor increases in materialand construction costs and their impact on the original budget.  As of June 30, 2008, the Company hasspent $5.8 million related to this phase of construction.

 

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In March 2008, the Company completed a 109 slot machine expansion(for a total of 244 slot machines) of the temporary Seneca Buffalo CreekCasino.  Construction of the permanent Seneca Buffalo Creek Casino andHotel commenced in March 2008 and it is anticipated to open in Summer2010.  The permanent complex is expected to initially feature 90,000square feet of gaming space with 2,000 slot machines, 45 table games and a22-story all suite hotel with approximately 206 rooms. Planned amenitiesinclude a pool, spa and salon; four restaurants, meeting rooms, a retail outletand a 2,200-space parking garage. We continue to monitor increases in the costsof construction and materials and their impact on the original budget.  As of June 30, 2008, the Company haspaid $35.1 million on the construction of the permanent casino and hotel.

 

In July 2007, the Company commenced construction of the SenecaHickory Stick Golf Course, an 18-hole Robert Trent Jones II designed golfcourse. The golf course is located in Lewiston, New York and is approximately10 miles from the Seneca Niagara Casino and Hotel. Completion of the golfcourse is currently scheduled for late fall 2008. To allow for proper grow-inof the course it is anticipated that the earliest the course would be open for playwould be late summer or early fall of 2009. The decision as to when to open thegolf course for play will depend on how well the course matures in the 2009growing season. The total cost to construct the golf course, club house andrelated amenities is estimated to be $25.5 million.

 

The planned expansion projects at Allegany and Buffalo Creek, and thegolf course development in Lewiston, New York, will require significant capitaloutlays.  The ability to complete theseprojects by the targeted dates, or at all, will depend on various factorsincluding cash flow from operations, the availability of external financingwith regard to one or more of the projects, certain Nation and othergovernmental approvals, the effects of legal and/or administrative proceedings,and adherence to projected construction timelines.  In light of greater demands on our availablecash, increased competition and challenging economic and capital marketconditions, the Company, in consultation with the Nation, continues to evaluatethe scope, phasing and timing of its expansion plans on the Allegany andBuffalo Creek territories, and is reassessing the scaling and scope of itsclubhouse design for the Seneca Hickory Stick Golf Course.  The Company believes that it is early enoughin the design and construction process to accommodate appropriate changes toits plans, if necessary.

 

**Distribution Agreement Obligations**

 

On April 27, 2007, SGC entered into aDistribution Agreement among the Nation, the Seneca Nation of Indians CapitalImprovements Authority, or the Authority, SGC and Wells Fargo Bank, as Trustee,in connection with the Authority’s issuance in two series (one tax exempt andthe other taxable) of an aggregate principal amount of $159,495,000 specialobligation bonds, or the 2007 Bonds.  The Distribution Agreement obligatesSGC, subject to any contractual restrictions applicable to SGC (including, butnot limited to, those contained in the Indenture governing SGC’s 2004 and 2005senior notes), to make monthly distributions to the Nation at the times and inthe amounts necessary to enable the Authority to pay the debt service on the2007 Bonds as required under the Authority’s indenture.  At the directionof the Nation and the Authority, SGC will pay such distributions directly tothe Trustee.  The Authority’s debt service commenced on June 1,2007.  For the period from June 1, 2007 through November 1,2007, the Authority’s debt service averaged approximately $0.9 million permonth. For the period from December 1, 2007 through June 1, 2008, theAuthority’s debt service averaged approximately $1.7 million per month.  In June 2008, it was determined that theamortization (debt service) schedule upon which the foregoing $1.7 millionmonthly payments was made, was incorrect. A corrected amortization schedule was provided and, after giving effectto a resulting credit for amounts overpaid, for the period from January 1,2008 through December 1, 2023, the Authority’s debt service averagesapproximately $1.2 million per month. The foregoing debt service averages arebased on scheduled payments of interest and principal under the Authority’sindenture and bonds and do not address the effects of any earlier call forredemption, by acceleration or otherwise.  The Distribution Agreement providesthat neither the Trustee nor the Authority’s bondholders will have any recourseunder the Distribution Agreement to any revenues, assets or property of SGC orits subsidiaries should SGC fail to comply with its distributionobligations.  For the nine months ended June 30,2008, SGC distributed to the Nation $14.9 million for the Authority’s debtservice on the special obligation bonds.

 

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**Item 2.**                                                           Management’sDiscussion and Analysis of Financial Condition and Results of Operations

** **

Youshould read the following discussion and analysis in conjunction with thesections titled “Financial Statements” and “Notes to Consolidated FinancialStatements” included elsewhere in this Quarterly Report on Form 10-Q.  References below to years are to fiscal yearsof SGC unless otherwise noted. SGC’s fiscal year is from October 1 throughSeptember 30.

 

**Forward-Looking Statements**

 

When used in thisQuarterly Report on Form 10-Q, in other filings with the SEC, in our pressreleases or in our other public communications, the words “believe,” “estimate,”“anticipate,” “expect,” “contemplate,” “may,” “will” and similar expressionsare intended to identify forward-looking statements.  Statements looking forward in time areincluded in this Quarterly Report on Form 10-Q pursuant to the “safeharbor” provision of the Private Securities Litigation Reform Act of 1995.  Such statements are subject to certain risksand uncertainties, which could cause actual results to differ materially,including, but not limited to, the risk factors contained or referenced hereinand in our other reports filed with the SEC pursuant to the Securities ExchangeAct of 1934, as amended, including our 2007 Form 10-K.  Readers are cautioned not to place unduereliance on these forward-looking statements, which speak only as of theirrespective dates.  We undertake noobligation to update these forward-looking statements to reflect events orcircumstances occurring after their respective dates.

 

**Overview**

** **

SGCis wholly owned by the Nation and chartered to develop, manage and direct allof the Nation’s Class III gaming operations on the Nation’s territories inWestern New York. SGC was chartered by the Nation in August 2002.  In August 2002, the Nation entered intoa Compact with New York State that provides the Nation with the right toestablish and operate three Class III gaming facilities in Western NewYork.  We currently operate three Class IIIgaming facilities in Western New York—Seneca Niagara Casino and Hotel, which is located in the City of Niagara Falls,New York (Niagara Territory) and operated by SNFGC, approximately 20 milesnorth of Buffalo, New York; Seneca Allegany Casino and Hotel, which is locatedin the City of Salamanca, New York (Allegany Territory) and operated by STGC,approximately 75 miles northeast of Erie, Pennsylvania; and Seneca BuffaloCreek Casino, which is located in the inner harbor district of Buffalo, NewYork (Buffalo Creek Territory) and operated by SEGC. Seneca Niagara Casino andHotel opened on December 31, 2002 (initially, as the Seneca NiagaraCasino).  Seneca Allegany Casino andHotel opened on May 1, 2004 (initially, as the Seneca AlleganyCasino).  Seneca Buffalo Creek Casinocommenced operations on July 3, 2007 in a temporary facility.  Our three casinos are located on land held inrestricted fee by the Nation, which, together with the rights under theCompact, allows us to conduct Class III gaming operations at theselocations in New York State.

 

Asof June 30, 2008, Seneca Niagara Casino and Hotel featured over 147,000square feet of gaming space, 4,160 slot machines, 102 table games and 604 hotelrooms, and Seneca Allegany Casino and Hotel featured over 63,500 square feet ofgaming space, 2,336 slot machines, 40 table games and 212 hotel rooms.

 

OurSeneca Buffalo Creek Casino temporary facility had 244 Class III slotmachines, and no table games at June 30, 2008.  We plan to open our permanent Class IIIgaming facility and hotel on this site in 2010. See “Executive Summary – Seneca Buffalo Creek Casino,” “Part II.Item 1. — Legal Proceedings,” and “2007 Form 10-K Item 3. – LegalProceedings” for information regarding the status of, and litigation relatedto, our Seneca Buffalo Creek Casino.

 

**Executive Summary**

 

*Our Current Operations.*   We currently operate three Class III gaming facilities, SenecaNiagara Casino and Hotel on the Nation’s Niagara Territory, Seneca AlleganyCasino and Hotel on the Nation’s Allegany Territory, and the Seneca BuffaloCreek Casino (slots only temporary facility) on the Nation’s Buffalo CreekTerritory.  Our casino operations includegaming, dining, lodging, entertainment and retail.  For the three and nine months ended June 30,2008, approximately 92% of our net revenue was derived from our gamingactivities.

 

*Key Performance Indicators.*   Our operating results are dependent on the volume of patrons at ourcasinos, our ability to attract them for repeat visits, and the ability toincrease the amount they spend per trip.

 

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*Seneca Niagara Casino andHotel. *  Prior to the opening of our luxury hotel, Seneca Niagara Casino primarilyrelied on drive-in and bus patrons from the Buffalo, Niagara Falls, andRochester areas in New York and secondarily from the Erie, Pennsylvania area,Ohio and other parts of New York.  Sincecompletion of the phased opening of our new luxury hotel, expanded gaming floorand related amenities in March 2006, Seneca Niagara Casino and Hotel hasexperienced continuous growth in its patron base.  The expansion of Seneca Niagara Casino andHotel, including the addition of our luxury hotel and other amenities, hasenabled us to increase higher-end patron volume, gaming activity and length ofstay, and extend our geographic penetration and appeal to a more diversedemographic base.  The total cost of theluxury hotel expansion project was approximately $234 million.

 

*Seneca Allegany Casino and Hotel.*   Since opening on May 1, 2004, Seneca Allegany Casino and Hotel hasattracted patrons from the southern portion of Western New York, Erie andPittsburgh, Pennsylvania, and Ohio.  Asof June 30, 2008, approximately 42% of the casino’s patron base is fromoutside of the State of New York.

 

InMarch 2007, we opened a 212-room resort hotel, including two fine diningrestaurants, a 24-hour casual restaurant and other certain amenities, at SenecaAllegany Casino and Hotel after officially opening the new permanent gamingfloor in December 2006.  In March 2008,we completed the conversion of the former approximate 120,000 square foottemporary structure into an events center with a seating capacity for 2,300people, along with additional administrative and support space.  We believe the new resort hotel, permanentcasino and events center provide a first-class gaming experience for ourpatrons, which will result in an increase in their length of stay and maintainthe competitive position of this facility in light of competition inPennsylvania, consisting principally of a new gaming facility that opened inlate February 2007 in Erie, Pennsylvania (Presque Isle Downs),approximately 80 miles from the Seneca Allegany Casino and Hotel and 120 milesfrom the Seneca Niagara Casino and Hotel. Presque Isle Downs does not provide table games or lodging, butcurrently provides approximately 2,000 slot machines and dining andentertainment options that include a steakhouse, a buffet and four lounges.

 

Forthe next phase of development at Seneca Allegany Casino and Hotel, we havecommenced design, development and construction of an additional 196 room hoteltower, up to 31,000 square feet of additional gaming space and relatedamenities.   The completion date for thisphase of construction is targeted for Fall 2009.  As of June 30, 2008, the Company hasspent $5.8 million related to this phase of construction.

 

*Seneca Buffalo Creek Casino.    *On October 3, 2005, the Nation acquiredapproximately nine acres of land in the inner-harbor district of Buffalo, NewYork.  On July 3, 2007 we beganoperating a temporary Class III gaming facility (approximately 6,000square feet) featuring 135 slot machines and a snack bar.  During the quarter ended March 31, 2008,the temporary facility was expanded to include an additional 109 slot machines.The current temporary facility is approximately 8,600 square feet, and features244 slot machines and a snack bar.

 

InOctober 2007, we formally announced our plans for a permanent casino andhotel complex on the Buffalo Creek Territory.   As of June 30, 2008, the Company has paid $35.1 million on theconstruction of the permanent casino and hotel. The permanent Seneca Buffalo Creek Casino and Hotel is expected toinitially feature 90,000 square feet of gaming space, 2,000 slot machines, 45table games, four restaurants, a 22-story all suite hotel with approximately 206rooms, a full-service spa and salon, a 2,200-space parking garage and retailand other amenities.  Completion of thepermanent Seneca Buffalo Creek Casino and Hotel is targeted for Summer2010.  We intend to operate the permanentSeneca Buffalo Creek Casino and Hotel in a manner that will complement bothSeneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel.

 

Our ability to continue to operate the temporarySeneca Buffalo Creek Casino gaming facility, and our ability to complete thepermanent gaming facility, as well as the timing of the opening of thepermanent Seneca Buffalo Creek Casino, will depend on various factors,including existing legal challenges. Reference is made to our 2007 Form 10-K for a description of thelegal proceedings relating to the Seneca Buffalo Creek Casino.  See also “Part II. Item 1 - LegalProceedings” for material developments regarding certain of these proceedings.

 

*Seneca Hickory Stick Golf Course – Lewiston, NewYork. *In March 2006,we acquired 257 acres of land with the intent to design and build achampionship level golf course in Lewiston, New York, approximately eight milesfrom Seneca Niagara Casino and Hotel.  We selected the Robert Trent JonesII firm to design the golf course.  Construction of the golf coursecommenced in July 2007, with completion scheduled for late fall 2008.  To allow for proper grow-in of the course, itis anticipated that the official opening at the course will occur in latesummer or early fall 2009.  The decisionas to when to open the golf course for play will depend upon how well thecourse matures throughout the 2009 growing season.  The total cost to construct the golf course,club house and related amenities is estimated to be approximately $25.5million.

 

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In light of greater demands on our available cash, increasedcompetition and challenging economic and capital market conditions, theCompany, in consultation with the Nation, continues to evaluate the scope,phasing and timing of its expansion plans on the Allegany and Buffalo Creekterritories, and is reassessing the scaling and scope of its clubhouse designfor the Seneca Hickory Stick Golf Course. The Company believes that it is early enough in the design andconstruction process to accommodate appropriate changes to its plans, ifnecessary.

 

*Marketing.    *We use an integrated marketing strategy toattract and retain our patrons and to brand the Seneca name.  We coordinate our marketing events tomaximize the quality and length of stay of patron visits and to minimizecompetition among our gaming facilities. With the opening of the luxury hotel and related amenities at the SenecaNiagara Casino and Hotel and the resort hotel and related amenities at SenecaAllegany Casino and Hotel, we have increased and intend to further increase ourmarketing efforts in the region, including areas of New York outside of theNiagara Falls and Salamanca areas, in Pennsylvania, Ohio, and Toronto, Canadaand in areas outside the region including Michigan, Massachusetts, andConnecticut.

 

*Seasonality.*     We have generally observed seasonalincreases in gaming activity during the spring and summer months and decreasesin gaming activity during winter months associated with inclement weather,although analysis of the full impact, if any, of seasonality on our operationscontinues to be complicated by factors including the effects of constructiondisruption and ongoing expansion activity.

 

*OverallOutlook.*     SGCbelieves that it is the premier full service gaming operator in Western NewYork State and in the areas of Northern Pennsylvania and Ohio located withinits primary and secondary markets. Since the December 31, 2002 opening ofthe Seneca Niagara Casino, SGC has invested significantly in the development,expansion and maintenance of its gaming facilities, including investments madein the completed hotel and gaming expansion projects at Seneca Niagara Casinoand Hotel and Seneca Allegany Casino and Hotel, and the opening of thetemporary casino on the Seneca Buffalo Creek Territory. Investments are plannedto continue through the remainder of 2008 with ongoing construction of thesecond hotel tower at Seneca Allegany Casino and Hotel, the permanent gamingfacility on the Seneca Buffalo Creek Territory and the Seneca Hickory StickGolf Course in Lewiston, New York.  Theseplanned investments are expected to enable SGC to maintain its position as thepremier gaming operator in the region described above.  To further that objective, and to provide forexpanded opportunities in the convention and tourism markets, we also continueto proceed with a master planning process with respect to the Niagara Falls andAllegany gaming and related facilities. A principal goal is for all of ourfacilities to complement each other, offering diverse hotel, entertainment andgaming experiences for our guests.

 

Our ability to fund ouroperations, make planned capital expenditures, service our debt and satisfy ourother financial obligations continues to depend on our operating performanceand cash flow, which are in turn subject to prevailing economic conditions andto financial, business and other factors, some of which are beyond our control.Limitations on our capital resources and the softening of the credit marketcould force us to delay or abandon capital projects as well as the constructionand development of proposed expansion projects. See “Part I. Item 2 -Management’s Discussion and Analysis of Financial Condition and Results ofOperations — Liquidity and Capital Resources” for additional discussion of ourliquidity, capital resources and related matters.

 

Although currentweak economic conditions and increased regional competition present ongoingchallenges to the Company and will require ongoing operational efforts tomitigate these adverse developments, we continue to believe that the WesternNew York hotel, entertainment and gaming markets are underserved, and that theexclusivity provided by the Compact will continue to present us with a uniqueopportunity to serve these markets.

 

**CriticalAccounting Policies and Estimates**

** **

Therehave been no changes in critical accounting policies and estimates since thefiling of our 2007 Form 10-K.

 

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**OperatingResults - Three Months Ended June 30, 2008 Compared to the Three MonthsEnded June 30, 2007**

** **

*Operating Results*

 

| ** **                              | ** ** | **Three Months Ended**     | ** ** |
|-----------------------------------------|------------|--------------------------------------|------------|
| ** **                              | ** ** | **June 30,**                    | ** ** |
| ** **                              | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)** | ** ** |
| ** **                              | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Net revenue                             |       | $                                    | 165,671    |   | $ | 149,203 |   |
| ** **                              | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Operating expenses:                     |       |                                 |       |   |   |
| Gaming                                  |       | 43,742                               |       | 40,332 |   |
| Food and beverage                       |       | 12,435                               |       | 12,448 |   |
| Lodging                                 |       | 3,756                                |       | 3,347 |   |
| Retail, entertainment and other         |       | 3,703                                |       | 3,116 |   |
| Advertising, general and administrative |       | 47,934                               |       | 37,548 |   |
| Pre-opening costs                       |       | 70                                   |       | 4,636 |   |
| Depreciation                            |       | 12,604                               |       | 13,503 |   |
|                                    |       |                                 |       |   |   |
| Operating income                        |       | $                                    | 41,427     |   | $ | 34,273 |   |

 

Importantfactors or trends impacting our operating results during the three months endedJune 30, 2008 and 2007 were:

 

·                  Theopening of our temporary gaming facility on the Buffalo Creek Territory on July 3,2007.

 

·                  Ourability to enroll patrons in our cross-property Seneca Link Player’s Cardprogram, which has continued to facilitate our use of effective direct mail and targeted marketing programs toestablish patron loyalty to the Seneca brand at a profitable level.

 

·                  Ourmix of slot machines, which we believe is superior to our competition andincludes the latest product introductions by leading United States andinternational slot manufacturers, and the ongoing development of a Seneca brandinter-property progressive link.

 

·                  Ourcontinued reinvestment in both our Niagara Falls and Allegany properties.

 

·                  Smokingbans in New York and Canada which came into effect in July 2003 and May 2006,respectively, have helped to distinguish our properties from competitors, inaddition to the strong Canadian dollar, which has further helped to increasethe number of patrons from Canada.

 

·                  Ouropening of the Seneca Events Center at Seneca Allegany Casino and Hotel in March 2008,resulting in increased entertainment offerings for our guests, and the openingof an expanded buffet.

 

·                  Theopening in February 2007 of a competing gaming facility at Presque IsleDowns in Erie, Pennsylvania approximately 80 miles from the Seneca Allegany Casino and Hotel and 120 miles fromthe Seneca Niagara Casino and Hotel, offering approximately 2,000 slotmachines.

 

·                  Increasesin general and administrative expenses, including head lease expense,promotional expenses and regulatory costs.

 

·                  Increasesin payments to the Nation, which have limited our cash available forconstruction and reinvestment.

 

·                  Theeffects of higher fuel prices and a general downturn in the broader economy,which have softened demand for gaming and related entertainment offerings.

 

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*Detailed Revenue Information*

 

| ** **                              | ** ** | **Three Months Ended**                     | ** ** |
|-----------------------------------------|------------|------------------------------------------------------|------------|
| ** **                              | ** ** | **June 30,**                                    | ** ** |
| ** **                              | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Unaudited, Dollars in Thousands)** | ** ** |
|                                    |       |                                                 |       |   |   |
| Gaming revenue:                         |       |                                                 |       |   |   |
| Slots                                   |       | $                                                    | 147,625    |   | $ | 130,311 |   |
| Table games                             |       | 16,966                                               |       | 19,100 |   |
| Keno                                    |       | 102                                                  |       | 118 |   |
|                                    |       |                                                 |       |   |   |
| Gaming revenue                          |       | 164,693                                              |       | 149,528 |   |
|                                    |       |                                                 |       |   |   |
| Non-gaming revenue:                     |       |                                                 |       |   |   |
| Food and beverage                       |       | 16,295                                               |       | 14,360 |   |
| Lodging                                 |       | 7,277                                                |       | 6,555 |   |
| Retail, entertainment and other         |       | 6,169                                                |       | 4,848 |   |
|                                    |       |                                                 |       |   |   |
| Non-gaming revenue                      |       | 29,741                                               |       | 25,763 |   |
| Less promotional allowances and credits |       | (28,763                                              | )          | (26,088 | ) |
|                                    |       |                                                 |       |   |   |
| Net revenue                             |       | $                                                    | 165,671    |   | $ | 149,203 |   |

 

Ourgaming revenue for the three months ended June 30, 2008 increased whencompared to the same period in the prior year, primarily due to (a) theopening of our Buffalo Creek temporary gaming facility in July 2007, (b) highernumber of occupied rooms for the three months ended June 30, 2008 comparedto the three months ended June 30, 2007, (c) additional marketingprograms to continue to attract higher level gaming patrons, and (d) continuedgrowth of our player database.  As of June 30,2008, our gaming operations featured an aggregate 142 table games and 6,740 slotmachines, representing a net increase of 250 slot machines from June 30,2007.

 

Ournet gaming revenue, which includes a reduction for promotional slot credits of$12.0 million and $10.2 million in the quarters ended June 30, 2008 and2007, respectively, increased $13.4 million, or 10%.  The $1.8 million increase in promotional slotcredits was principally due to increased slot play, along with substantiallyhigher redemptions resulting from our *“Great Exchange”*marketing promotion which alternated between our Seneca Niagara and SenecaAllegany casinos and hotels each month during the three months ended June 30,2008, and allowed patrons to redeem a portion of Seneca Link Player’s Cardpoints for promotional slot credits. During the three months ended June 30, 2008, Seneca Niagara Casinoand Hotel’s net gaming revenue increased $5.7 million, or 6%. This increasereflected a $6.7 million increase in net slot revenue, and a $1.0 milliondecrease in net table games revenue**,**attributableto higher slot volume and lower table drop and hold percentage in relation tothe comparable quarter in the prior year.** **Seneca Allegany Casino and Hotel’snet gaming revenue for the quarter ended June 30, 2008 was $41.1 million,a decrease of $1.6 million, or 4%, from the quarter ended June 30,2007.  This was due to a $0.5 milliondecrease in net slot revenue, and a $1.1 million decrease in net table gamesrevenue during the 2008 quarter, resulting primarily from the negative impactof the current economic downturn upon gaming demand, and increased competitionfrom regional racinos, including Presque Isle Downs in Erie, Pennsylvania.  Such conditions present unique marketingopportunities which may allow for the ability to increase visitation fromexisting and new patrons residing in markets in the northeast.  Seneca Buffalo Creek Casino, which opened July 3,2007, generated $9.3 million in net gaming revenue, all attributable to slotplay.

 

Ourfood and beverage revenue has increased in direct relation to our increase ingaming revenue.  There is a directrelationship between our food and beverage revenue and our gaming revenuebecause a significant portion of this revenue is generated from players’ pointredemptions.

 

Forthe three months ended June 30, 2008 and 2007, 54% and 57%, respectively,of our food and beverage revenue and 77% and 81% of our retail revenue,respectively, represented players’ point redemptions.  For the three months ended June 30,2008, our consolidated food and beverage revenue increased $1.9 million, or 13%over the same period in 2007, to $16.3 million.

 

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SenecaNiagara Casino and Hotel’s food and beverage revenue for the quarter ended June 30,2008 increased $1.8 million, or 18%, in relation to the comparable prior yearperiod.  Seneca Buffalo Creek Casino’sfood and beverage revenue for the quarter ended June 30, 2008 was $0.1million.  Seneca Allegany Casino andHotel’s food and beverage revenue remained flat over the same quarter in theprior year.

 

Lodgingrevenue represents rentals of rooms in the luxury hotel in Niagara Falls, whichwas completed in  March 2006, and inthe resort hotel at Seneca Allegany Casino and Hotel, which opened on March 30,2007.** **Forthe three months ended June 30, 2008 and 2007, 29% and 21%, respectively,of our lodging revenue was attributable to cash payments by patrons (ascompared to revenue attributable to patron complimentaries).

 

Forthe three months ended June 30, 2008, our retail, entertainment and otherrevenue increased $1.3 million, or 27%, in relation to the comparable 2007period.  This increase was primarilyattributable to higher commissions received on ATM and credit cash advanceservices and higher entertainment revenue due to the opening of the EventCenter at the Seneca Allegany Casino and Hotel in March 2008.  For the three months ended June 30,2008, three headliner acts appeared at the Seneca Allegany Casino and HotelEvent Center, with an average ticket price of $50 and average show capacity of86%.

 

*Detailed Operating ExpensesInformation*

 

| ** **                              | ** ** | **Three Months Ended**     | ** ** |
|-----------------------------------------|------------|--------------------------------------|------------|
| ** **                              | ** ** | **June 30,**                    | ** ** |
| ** **                              | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)** | ** ** |
|                                    |       |                                 |       |   |   |
| Operating expenses:                     |       |                                 |       |   |   |
| Gaming                                  |       | $                                    | 43,742     |   | $ | 40,332 |   |
| Food and beverage                       |       | 12,435                               |       | 12,448 |   |
| Lodging                                 |       | 3,756                                |       | 3,347 |   |
| Retail, entertainment and other         |       | 3,703                                |       | 3,116 |   |
| Advertising, general and administrative |       | 47,934                               |       | 37,548 |   |
| Pre-opening costs                       |       | 70                                   |       | 4,636 |   |
| Depreciation                            |       | 12,604                               |       | 13,503 |   |
| Total Operating expenses                |       | $                                    | 124,244    |   | $ | 114,930 |   |

 

Gamingexpenses principally consist of costs incurred from operating our table gamesand slot machines, of which the primary components are payroll and relatedemployee benefit costs, and the slot exclusivity fee payable to New York Statepursuant to the Compact.   The slotexclusivity fee increased $3.2 million from $27.2 million for the threemonths ended June 30, 2007 to $30.4 million for the three months ended June 30,2008, due to higher net slot revenues.

 

Foodand beverage expenses are costs we incur for the operation of our restaurants,snack bars and beverage outlets.  Theprimary components of these expenses are the cost of food and beverage productsand payroll and related employee benefit expenses.  For the quarter ended June 30, 2008,food and beverage costs decreased due primarily to a the ability to more efficientlyoperate our food and beverage operations at lower cost of sales.

 

Lodgingexpenses primarily represent our costs to operate Seneca Niagara Casino andHotel’s luxury hotel and the resort hotel at Seneca Allegany Casino andHotel.  The components of these expensesinclude payroll and other employee benefit expenses, guest amenity supplies,laundry and other expenses.  For thethree months ended June 30, 2008, lodging expenses increased $0.4 million,or 12%, as compared to the three month period ended June 30, 2007.  The increase is due to higher occupancy atthe luxury hotel in Niagara Falls, and at the resort hotel at Seneca AlleganyCasino.

 

Retail,entertainment and other expenses represent our costs to operate our retailshops and entertainment offerings.  Thecomponents of these expenses include payroll and related employee benefitcosts, the cost of products offered for sale in our retail outlets, andcontract costs for entertainers.  For thethree months ended June 30, 2008, these costs increased approximately $0.6million, or 19%, over the comparable 2007 period, due principally to anincrease in headline entertainment costs in the current year’s quarter of $0.5million at the Seneca Niagara Casino and Hotel and $0.2 million at the SenecaAllegany Casino and Hotel.  SenecaNiagara Casino and Hotel hosted six headliner acts in the current year’squarter, compared to five acts in the same period in the prior year.  Seneca Allegany Casino and Hotel hosted 3headliner acts in the current year’s quarter, compared to one act in the sameperiod in the prior year.

 

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Advertising,general and administrative expenses are incurred to support ouroperations.   These expenses consistprimarily of payroll and related employee benefits costs, regulatory,advertising, lease, marketing, insurance, legal and energy costs.  For the three months ended June 30, 2008and 2007, such costs were $47.9 million and $37.5 million, respectively, anincrease of $10.4 million, or 28%.  Theincrease was mainly attributable to a $7.5 million increase in Head Leaseexpense in accordance with the amended Head Lease agreements, a $2.0 millionincrease in payroll and benefits due to the addition of senior management,marketing and information technology positions, a charge to include certainemployees in a benefit program who were previously excluded from such program,which amounts to an estimate of approximately $1.0 million, a $0.5 millionincrease in promotional expenses, a $0.8 million increase in regulatory costsand a $0.3 million increase in utilities, offset by a $0.8 million decrease inadvertising costs and a $0.4 million decrease in insurance costs.

 

Pre-openingexpenses are non-recurring costs incurred to support the expected opening ofnew facilities.  For the three monthsended June 30, 2008 and 2007, such costs were $0.1 million and $4.6million, respectively, a decrease of $4.5 million.  The decrease was primarily due to the $3.8million of Head Lease payments related to our temporary Buffalo Creek Casinofor the three months ended June 30, 2007, and $0.6 million of pre-openingexpenses for the three months ended June 30, 2007 related to thepreparation for the opening of the resort hotel on March 30, 2007 at theSeneca Allegany Casino, each being treated as pre-opening expenses for suchperiods.

 

Forthe three months ended June 30, 2008 and 2007, depreciation expense was$12.6 million and $13.5 million, respectively, a decrease of $0.9 million, or7%.  This decrease was attributable tocertain assets of Seneca Niagara Casino and Hotel and Seneca Allegany Casinoand Hotel becoming fully depreciated since the prior year.

 

*Non-Operating Expenses*

 

The following table summarizes information relatedto other non-operating income and expenses:

 
| ** **                     | ** ** | **Three Months Ended**     | ** ** |
|--------------------------------|------------|--------------------------------------|------------|
| ** **                     | ** ** | **June 30,**                    | ** ** |
| ** **                     | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **                     | ** ** | **(Dollars in Thousands)** | ** ** |
|                           |       |                                 |       |   |   |
| Non-operating income (expense) |       | $                                    | (250       | ) | $ | 4,006 |   |
|                                |            |                                      |            |  |  |  |  |

 

For the three months ended June 30, 2008, we recorded another-than-temporary loss on one specific investment of $0.3 million as othernon-operating expense. The cost basis of this investment has been reduced bythe amount of the other-than-temporary loss recorded.  We had non-operating income of $4.0 millionfor the three months ended June 30, 2007 ($3.6 million in cash and forgivenessof $0.4 million in construction payables) related to our settlement with KlewinBuilding Company.

 

The following table summarizes information relatedto interest on our long-term debt:

 
| ** **       | ** ** | **Three Months Ended**     | ** ** |
|------------------|------------|--------------------------------------|------------|
| ** **       | ** ** | **June 30,**                    | ** ** |
| ** **       | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **       | ** ** | **(Dollars in Thousands)** | ** ** |
|             |       |                                 |       |   |   |
| Interest expense |       | $                                    | 9,089      |   | $ | 9,502 |   |
|                  |            |                                      |            |  |  |  |  |

 

Ourinterest expense for the three months ended June 30, 2008 decreased $0.4million over the three months ended June 30, 2007.  This decrease was attributable to a $0.4million increase in the amount of interest capitalized in the quarter ended June 30,2008 compared to the same quarter in the prior year.  Capitalized interest relating to constructionprojects for the quarters ended June 30, 2008 and 2007 was $0.8 millionand $0.4 million, respectively, and is recorded as a component of net propertyand equipment within the accompanying consolidated balance sheets.

 

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**Operating Results - Nine Months Ended June 30,2008 Compared to the Nine Months Ended June 30, 2007**

 

*Operating Results*

 

| ** **                              | ** ** | **Nine Months Ended  June 30,** | ** ** |
|-----------------------------------------|------------|------------------------------------------------|------------|
| ** **                              | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)**           | ** ** |
| ** **                              | ** ** | ** **                                     | ** ** | ** ** | ** ** |
| Net revenue                             |       | $                                              | 466,889    |   | $ | 425,256 |   |
|                                    |       |                                           |       |   |   |
| Operating expenses:                     |       |                                           |       |   |   |
| Gaming                                  |       | 126,689                                        |       | 109,752 |   |
| Food and beverage                       |       | 37,150                                         |       | 34,594 |   |
| Lodging                                 |       | 11,306                                         |       | 7,943 |   |
| Retail, entertainment and other         |       | 10,851                                         |       | 8,928 |   |
| Advertising, general and administrative |       | 144,766                                        |       | 109,676 |   |
| Pre-opening costs                       |       | 294                                            |       | 15,218 |   |
| Depreciation                            |       | 38,533                                         |       | 36,113 |   |
|                                    |       |                                           |       |   |   |
| Operating income                        |       | $                                              | 97,300     |   | $ | 103,032 |   |

 

The most importantfactors and trends contributing to our operating performance during the ninemonths ended June 30, 2008 and 2007 were similar to those noted above forthe three month periods ended June 30, 2008 and 2007.

 

*Detailed Revenue Information*

 
| ** **                              | ** ** | **Nine Months Ended  June 30,** | ** ** |
|-----------------------------------------|------------|------------------------------------------------|------------|
| ** **                              | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
|                                    | ** ** | **(Dollars in Thousands)**           | ** ** |
|                                    |       |                                           |       |   |   |
| Gaming revenue:                         |       |                                           |       |   |   |
| Slots                                   |       | $                                              | 416,391    |   | $ | 372,981 |   |
| Table games                             |       | 52,422                                         |       | 55,903 |   |
| Keno                                    |       | 326                                            |       | 321 |   |
|                                    |       |                                           |       |   |   |
| Gaming revenue                          |       | 469,139                                        |       | 429,205 |   |
|                                    |       |                                           |       |   |   |
| Non-gaming revenue:                     |       |                                           |       |   |   |
| Food and beverage                       |       | 46,677                                         |       | 40,388 |   |
| Lodging                                 |       | 21,501                                         |       | 15,800 |   |
| Retail, entertainment and other         |       | 18,486                                         |       | 14,446 |   |
|                                    |       |                                           |       |   |   |
| Non-gaming revenue                      |       | 86,664                                         |       | 70,634 |   |
| Less promotional allowances and credits |       | (88,914                                        | )          | (74,583 | ) |
|                                    |       |                                           |       |   |   |
| Net revenue                             |       | $                                              | 466,889    |   | $ | 425,256 |   |

 

Our gaming revenuefor the nine months ended June 30, 2008 increased when compared to thesame period in the prior year primarily due to (a) the opening of theSeneca Buffalo Creek Casino temporary facility, which added 244 slot machinesto our operations, and (b) continued growth in our patron base.  As of June 30, 2008, our gamingoperations featured an aggregate of 142 table games and 6,740 slot machinesavailable to our patrons, representing a net increase of 250 slot machines anda net decrease of 1 table game from June 30, 2007.

 

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Our net gamingrevenue, which includes a reduction for promotional credits of $38.6 millionand $30.2 million in the nine month periods ended June 30, 2008 and 2007,respectively, increased $31.6 million, or 8%, for the nine months ended June 30,2008 relative to the nine month period ended June 30, 2007.  During the nine months ended June 30,2008, Seneca Niagara Casino and Hotel’s net gaming revenue increased $9.7million, or 3%, principally attributable to higher net slot revenue offset by adecrease in table games revenue.  SenecaAllegany Casino and Hotel’s net gaming revenue for the nine months ended June 30,2008 decreased $1.2 million or 1% from the nine months ended June 30, 2007.  This decrease reflects a $0.2 milliondecrease in net slot revenue and a $1.0 million decrease in table games revenueprimarily attributable to weak economic conditions and increased competitionfrom regional racinos, particularly Presque Isle Downs in Erie, Pennsylvania.  Seneca Buffalo Creek Casino’s net gamingrevenue for the nine months ended June 30, 2008 was $23.0 million, allattributable to slot play.

 

Our food andbeverage revenue and retail revenue have increased in direct relation to ourincrease in gaming revenue.  There is adirect relationship between our food and beverage revenue and our gamingrevenue because a significant portion of this revenue is generated from players’point redemptions.  For the nine monthsended June 30, 2008 and 2007, 55% and 58%, respectively, of our food andbeverage revenue represented Seneca Link Player’s Card point redemptions.  For the nine months ended June 30, 2008,food and beverage revenue increased $6.3 million, or 16% to $46.7 millionversus the same period ended June 30, 2007.  Seneca Niagara Casino and Hotel’s food andbeverage revenue for the nine months ended June 30, 2008 increased $4.2million, or 14%, versus the comparable period ended June 30, 2007,primarily due to the opening of an additional restaurant during 2008 and volumeassociated with the increase in gaming revenue. Seneca Allegany Casino and Hotel’s food and beverage revenue for thenine months ended June 30, 2008 increased $1.8 million, or 17%, inrelation to the comparable period ended June 30, 2007, primarily due tothe effect of the opening of two fine dining restaurants and one additional barin late March 2007 in conjunction with the hotel expansion at SenecaAllegany Casino and Hotel.

 

Lodging revenue represents rentals of rooms in the luxury hotel inNiagara Falls, which opened on March 31, 2006, and in the resort hotel onthe Allegany Territory, which opened on March 30, 2007.  For the nine months ended June 30, 2008 and2007, 24% and 20%, respectively, of our lodging revenue was attributable tocash payments by patrons (as compared to revenue attributable to patroncomplimentaries).

 

For the ninemonths ended June 30, 2008, our retail, entertainment and other revenueincreased by $4.0 million, or 28%, in relation to the comparable 2007period.  This increase was primarilyattributable to higher commissions received on ATM and credit cash advanceservices and higher entertainment revenue due to the opening of the EventCenter at the Seneca Allegany Casino and Hotel in March 2008.  For the nine months ended June 30, 2008and 2007, 76% and 83% of our retail revenue, respectively, represented SenecaLink Player’s Card point redemptions.

 

*Detailed Operating Expenses Information*

 

| ** **                              | ** ** | **Nine Months Ended  June 30,** | ** ** |
|-----------------------------------------|------------|------------------------------------------------|------------|
| ** **                              | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)**           | ** ** |
| ** **                              | ** ** | ** **                                     | ** ** | ** ** | ** ** |
| Operating expenses                      |       |                                           |       |   |   |
| Gaming                                  |       | $                                              | 126,689    |   | $ | 109,752 |   |
| Food and beverage                       |       | 37,150                                         |       | 34,594 |   |
| Lodging                                 |       | 11,306                                         |       | 7,943 |   |
| Retail, entertainment and other         |       | 10,851                                         |       | 8,928 |   |
| Advertising, general and administrative |       | 144,766                                        |       | 109,676 |   |
| Pre-opening costs                       |       | 294                                            |       | 15,218 |   |
| Depreciation                            |       | 38,533                                         |       | 36,113 |   |
| Total Operating expenses                |       | $                                              | 369,589    |   | $ | 322,224 |   |

 

Gaming expensesprincipally consist of costs incurred from operating our table games and slotmachines, of which the primary components are payroll and related employeebenefit costs, and the slot exclusivity fee due to New York State pursuant tothe Compact.  The slot exclusivity feeincreased by $12.3 million from $73.0 million for the nine months ended June 30,2007 to $85.3 million for the nine months ended June 30, 2008.  This was due to increased slot revenue, alongwith the four percentage point increase in the slot exclusivity fee effective January 1,2007 pursuant to the Compact. Approximately $5.2 million of the $12.3 millionincrease in slot exclusivity fees was due to the 4% increase in the fee rateunder the Compact.  In addition,gaming-related payroll and benefits costs increased $0.6 million in relation tothe prior year nine month period primarily due to the addition of the gamingfloor at Seneca Buffalo Creek Casino, which opened in July 2007.

 

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Food and beverageexpenses are costs incurred for the operation of our restaurants, snack barsand beverage outlets.  The primarycomponents of these expenses are the cost of food and beverages and payroll andrelated employee benefit expenses.  Forthe nine months ended June 30, 2008, food and beverage costs increased$2.6 million due to an increase in required food and beverage products, andfood and beverage payroll and benefits accounted for $1.8 million of thisincrease due to the increased staffing related to the opening of three additionalrestaurants and one additional bar, in conjunction with the hotel expansion atSeneca Allegany Casino and Hotel.

 

Lodging expensesprimarily represent our costs to operate SNFGC’s luxury hotel, and STGC’sresort hotel, which officially opened on March 30, 2007.  The components of these expenses includepayroll and other employee benefit expenses, guest amenity supplies, utilities,laundry and other expenses.   For thenine months ended June 30, 2008, lodging expenses increased $3.4 million,or 42%, compared to the same period in 2007, primarily due to the resort hotelat Seneca Allegany being open for the full nine months in the 2008 period.

 

Retail,entertainment and other expenses represent our costs to operate our retailshops and entertainment offerings.  Thecomponents of these expenses include payroll and related employee benefitcosts, the cost of products offered for sale in our retail outlets, andcontract costs for entertainers.  For thenine months ended June 30, 2008, retail, entertainment and other expensesincreased $1.9 million, or 22%, over the comparable period in 2007, primarilydue to the increase in headline entertainment costs at Seneca Niagara Casinoand Hotel and at the new events center at Seneca Allegany Casino and Hotel. In the nine months ended June 30, 2008, Seneca Niagara Casino andHotel hosted 19 headliner acts compared to 16 in the same period in the prioryear.  For the nine months ended June 30,2008, Seneca Allegany Casino and Hotel hosted four headliner acts compared tothree in the same period in the prior year.

 

Advertising,general and administrative expenses are incurred to support ouroperations.   These expenses consistprimarily of payroll and related employee benefits costs, regulatory,advertising, lease, marketing, insurance, legal and energy costs.  For the nine months ended June 30, 2008and 2007, such costs were $144.8 million and $109.7 million, respectively, a$35.1 million increase, or 32%.  Theincrease was mainly attributable to a $22.6 million increase in Head Leaseexpense, a $1.7 million increase in energy costs reflecting the full nine monthimpact of the expanded facilities at Seneca Allegany Casino and Hotel, a $2.6million increase in regulatory costs, a $2.9 million increase in labor and relatedcosts, and a $3.3 million increase in other operational costs in support ofexpanded facilities at both casinos.

 

*Non-Operating Expenses*

 

The followingtable summarizes information related to other non-operating income and expense:

 

| ** **                     | ** ** | **Nine Months Ended  June 30,** | ** ** |
|--------------------------------|------------|------------------------------------------------|------------|
| ** **                     | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
| ** **                     | ** ** | **(Dollars in Thousands)**           | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | ** ** | ** ** |
| Non-operating income (expense) |       | $                                              | (4,150     | ) | $ | 3,720 |   |
|                                |            |                                                |            |  |  |  |  |

 

For the nine months ended June 30, 2008, we recorded another-than-temporary loss on one specific investment of $4.2 million as othernon-operating expense. The cost basis of this investment has been reduced bythe amount of the other-than-temporary loss recorded.  We had net non-operating income of $3.7million for the nine months ended June 30, 2007 primarily related to oursettlement with Klewin Building Company ($3.6 million in cash and forgivenessof $0.4 million in construction payables).

 

The following tablesummarizes information related to interest on our long-term debt:

 

| ** **       | ** ** | **Nine Months Ended  June 30,** | ** ** |
|------------------|------------|------------------------------------------------|------------|
| ** **       | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
| ** **       | ** ** | **(Dollars in Thousands)**           | ** ** |
| ** **       | ** ** | ** **                                     | ** ** | ** ** | ** ** |
| Interest expense |       | $                                              | 28,833     |   | $ | 26,024 |   |
|                  |            |                                                |            |  |  |  |  |

 

Ourinterest expense for the nine months ended June 30, 2008 increased $2.8million over the nine months ended June 30, 2007.  This increase was attributable to lowercapitalized interest related to our construction of the luxury hotel at SenecaNiagara Casino and the resort hotel at Seneca Allegany Casino during the ninemonths ended June 30, 2008 and 2007, which totaled $0.8 million and $3.6million, respectively, and is recorded as a component of net property andequipment within the accompanying consolidated balance sheets.

 

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**Liquidity and Capital Resources**

 

*Cash Flows*

 

| ** **                                    | ** ** | **Nine Months Ended**      | ** ** |
|-----------------------------------------------|------------|--------------------------------------|------------|
| ** **                                    | ** ** | **June 30,**                    | ** ** |
| ** **                                    | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **                                    | ** ** | **(Dollars in Thousands)** | ** ** |
| ** **                                    | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Net cash provided by operations               |       | $                                    | 105,851    |   | $ | 117,276 |   |
|                                          |       |                                 |       |   |   |
| Cash flows relating to investing  activities: |       |                                 |       |   |   |
| Purchases of property and equipment           |       | (94,254                              | )          | (143,441 | ) |
| Land acquisition costs                        |       | (5,408                               | )          | (17,852 | ) |
| Sales of investments, net                     |       | 14,600                               |       | 42,700 |   |
| Withdrawal from restricted cash               |       | 14,579                               |       | 11,221 |   |
| Net cash used in investing activities         |       | (70,483                              | )          | (107,372 | ) |
|                                          |       |                                 |       |   |   |
| Cash flows relating to financing  activities: |       |                                 |       |   |   |
| Capital contribution from Nation              |       | —                               |       | 3,198 |   |
| Distributions paid to the Nation              |       | (51,158                              | )          | (36,692 | ) |
| Net cash used in financing activities         |       | (51,158                              | )          | (33,494 | ) |
|                                          |       |                                 |       |   |   |
| Net decrease in cash and cash equivalents     |       | $                                    | (15,790    | ) | $ | (23,590 | ) |

 

*Cash Flows—Operating Activities.*   The $11.4 million decrease in cash flows from operations during the ninemonths ended June 30, 2008 compared to the comparable period in 2007resulted principally from a $17.2 million decrease in net income compared tothe prior year, offset by a $2.4 million increase in depreciation expense and a$4.2 million other than temporary decline in the value of a specific short-terminvestment.

 

*Cash Flows—Investing Activities.*   Our capital expenditures of $94.3 million during the nine monthsended June 30, 2008****were mainlycomprised of $7.7 million of costs associated with the construction andequipping of the resort hotel, permanent gaming floor and amenities at theSeneca Allegany Casino and Hotel, $25.5 million for the conversion of thetemporary gaming facility at Seneca Allegany Casino and Hotel into an eventscenter, with related amenities, $5.8 million associated with pre-constructioncosts relating to the additional hotel tower at the Seneca Allegany Casino andHotel, $33.6 million relating to the construction of the permanent SenecaBuffalo Creek Casino and Hotel on the Nation’s Buffalo Creek Territory, and$5.1 million relating to construction of the Seneca Hickory Stick GolfCourse.  The remaining $16.6 million incapital expenditures were principally for the acquisition of equipment forexisting casino operations.  Our landacquisitions of $5.4 million include legal and acquisition costs related to certainparcels within the 50 acre “footprint” described in the Compact with New YorkState and designated for ownership by the Nation.  The withdrawal from restricted cash relatesto the termination of SGC’s secured reimbursement facilities relating to alloutstanding letters of credit.  Theletters of credit were assumed as outstanding under the senior securedrevolving loan agreement.   Salesof short-term investments represent transactions in short-term investments ofexcess cash in instruments having a maturity of more than 90 days.

 

*Cash Flows—Financing Activities.*     Effective September 1, 2006, SGCdeclared a cash distribution of $26.0 million to the Nation, payable inthirteen equal installments of $2.0 million, beginning in September 2006.  Effective December 11, 2006, SGCdeclared an additional cash distribution of $20.0 million to the Nation,payable in ten equal installments of $2.0 million, beginning in December 2006.  Effective September 27, 2007, SGCdeclared cash distributions to the Nation totaling $48 million, payable intwelve equal monthly payments of $4.0 million beginning October 2007.   During the nine months ended June 30,2008, SGC paid cash distributions of $36.0 million to the Nation pursuant tothe foregoing distribution declarations. The remaining declared cashdistributions of $12.0 million which are payable on future payment dates areshown as ‘Distributions payable to Nation’ on the accompanying consolidatedbalance sheets.  In addition to thedeclared cash distributions, during the nine months ended June 30, 2008,SGC distributed $14.9 million to the Nation under the Distribution Agreement,dated April 27, 2007, relating to the Seneca Nation of Indians CapitalImprovements Authority’s special obligation bonds.  During the nine months ended June 30,2007, SGC distributed to the Nation acquired real property of $1.5 million foruse in its casino and other related entertainment operations.  Such distribution amounts were based on theacquisition cost of the real property. For the nine month period ended June 30,2007, the Nation paid $3.2 million to SEGC relating to the Nation’s BuffaloCreek real property acquisitions, which is reported as a capital contributionfrom the Nation on the consolidated statements of cash flows.

 

*Principal Debt Arrangements.*   As of June 30, 2008, our long-term debt consists of the 2004 and2005 71⁄4% senior notes and the senior secured revolving loan agreement.

 

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71⁄4% Senior Notes.

 

As of June 30, 2008, SGC had outstanding $300.0million in 2004 senior notes and $200.0 million in 2005 senior notes.  The senior notes carry a fixed annualinterest rate of 71⁄4% and semi-annual interest payments are due on May 1and November 1.  The 2004 and 2005senior notes are unsecured and rank equally. As of June 30, 2008, aggregate accrued interest on the 2004 and2005 senior notes was $6.0 million. The senior notes mature on May 1, 2012, are redeemable at ouroption in whole or in part at any time after May 1, 2008 at the redemptionprices set forth in our Indenture, are subject to redemption requirementsimposed by gaming laws and regulations and are required to be repurchased by usat the option of the holders upon certain change of control events.

 

Senior Secured Revolving Loan Agreement.

 

Effective June 19, 2008, SGC entered into a $50.0million senior secured revolving loan agreement, which matures on June 19,2009. The maturity date may be extended by SGC at its election (at any timeafter the six months anniversary of the closing date and prior to June 19,2009) for an additional period of six months provided that no default or eventof default exists at the time of election.  Amounts borrowed under theloan agreement bear interest at either one, three or six-month LIBOR plus oneand one quarter percent (1.25%), or the prime rate (as reported in the *The Wall Street Journal*) plus one quarterpercent (.25%) at SGC’s discretion.  Anyoutstanding principal balance shall be paid on the maturity date.

 

SGC’sobligations under the loan agreement are secured by substantially all gamingand related assets (including substantially all gaming revenues) notconstituting real property or improvements.  SGC’s obligations areguaranteed by SNFGC, STGC, SEGC and LGCC.  The guarantors’ obligations aresecured by substantially all of each guarantor’s gaming and related assets(including substantially all gaming revenues) not constituting real property orimprovements.

 

The loan agreement contains certain financial covenants requiring SGCto achieve minimum consolidated EBITDA of $160 million (on a rolling 12 monthbasis) and certain leverage and coverage ratios. The loan agreement alsocontains additional customary covenants, including covenants restricting theincurrence of additional indebtedness, the creation of additional liens and thedisposition of assets. As of June 30, 2008, SGC was in compliance with allcovenants in the loan agreement.

 

As of June 30, 2008, at SGC’s request, the lenderunder the loan agreement had issued letters of credit totaling $16.8 million,$11.2 million of which may be drawn upon to fund the purchase of certainparcels within the 50 acre “footprint” described in the Compact with New YorkState and designated for ownership by the Nation, with the remaining $5.6million issued in connection with workers compensation policies.  As of June 30, 2008, $33.2 million wasavailable under the loan agreement.

 

Effective June 19, 2008, SGC’s securedreimbursement facilities were terminated and all outstanding letters of creditunder such facilities were assumed as outstanding letters of credit under thesenior secured revolving loan agreement.

 

*Expansion and Development Plans. *During thenext 18 months, we plan to make substantial capital investments in ourgaming facilities.

 

In March 2008,we completed the conversion of the former temporary casino facility at SenecaAllegany Casino and Hotel, at a cost of approximately $29 million andapproximately $4 million under budget, into an approximate 2,300 seat eventscenter with additional administrative and support space.  The exterior landscaping and façadeenhancements, originally planned as part of the conversion of the temporarycasino, have been deferred to the next phase of construction.

 

Thenext phase of construction providing for an additional 196 room hotel, 31,000square feet of additional gaming and related amenities, and, landscaping andexterior enhancements to the property as a whole, commenced in April 2008and is anticipated to be completed in Fall 2009.  We continue to monitor increases in materialand construction costs and their impact on the original budget.  As of June 30, 2008, the Company hasspent $5.8 million related to this phase of construction.

 

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In March 2008, the Company completed a109 slot machine expansion (for a total of 244 slot machines) of the temporarySeneca Buffalo Creek Casino.  Construction of the permanent Seneca BuffaloCreek Casino and Hotel commenced in March 2008 and is anticipated to openin Summer 2010.  The permanent complex is expected to initially feature90,000 square feet of gaming space with 2,000 slot machines, 45 table games anda 22-story all suite hotel with approximately 206 rooms. Planned amenitiesinclude a pool, spa and salon; four restaurants, meeting rooms, a retail outletand a 2,200-space parking garage. We continue to monitor increases in the costsof construction and materials and their impact on the original budget.  As of June 30, 2008, the Company haspaid $35.1 million on the construction of the permanent casino and hotel.    See “Executive Summary – Seneca Buffalo Creek Casino,” “Part II.Item 1. – Legal Proceedings,” and “2007 Form 10-K Item 3. – LegalProceedings” for information regarding the status of, and litigation relatedto, our Seneca Buffalo Creek Casino.

 

In July 2007, the Company commenced construction of the SenecaHickory Stick Golf Course, an 18-hole Robert Trent Jones II designed golfcourse. The golf course is located in Lewiston, New York and is approximately10 miles from the Seneca Niagara Casino and Hotel. Completion of the golfcourse is currently scheduled for late fall 2008. To allow for proper grow-inof the course it is anticipated that the earliest the course would be open forplay would be late summer or early fall of 2009. The decision as to when toopen the golf course for play will depend on how well the course matures in the2009 growing season. The total cost to construct the golf course, club houseand related amenities is estimated to be $25.5 million.

 

In light of greater demands on our available cash, increasedcompetition and challenging economic and capital market conditions, theCompany, in consultation with the Nation, continues to evaluate the scope,phasing and timing of its expansion plans on the Allegany and Buffalo Creekterritories, and is reassessing the scaling and scope of its clubhouse designfor the Seneca Hickory Stick Golf Course. The Company believes that it is early enough in the design andconstruction process to accommodate appropriate changes to its plans, ifnecessary.

 

With the exception of funding requirements for our expansionand development projects, which are expected to require obtaining externalfinancing on acceptable terms, we expect cash generated from our operations,available cash and cash equivalents and short-term investments as of June 30,2008, and cash available under our senior secured revolving loan agreement, tobe sufficient to service our debt, satisfy our other financial obligations, andto meet our working capital requirements for the remainder of the currentfiscal year.  As stated above, we are relyingon external financing to complete our expansion and development projects whichmay not be available to us, or, if available, may not be on terms consistentwith what we have previously obtained.

 

Our ability to fund our operations, make plannedcapital expenditures, service our debt and satisfy our other financialobligations depends on our future operating performance and cash flow, whichare in turn subject to prevailing economic conditions and to financial,business and other factors, some of which are beyond our control. Additionally,unlike traditional corporations, we are prohibited by law from generating cashthrough an offering of equity securities and our ability to incur additionalindebtedness is limited under the terms of the Indenture governing the seniornotes, the Distribution Agreement and the senior secured revolving loanagreement. Reference is made to our Annual Report on Form 10-K for theyear ended September 30, 2007 for a description of certain risk factorsdiscussing SGC’s ability to generate cash flow to complete its expansionprojects.

 

We are leveraged and have significant interestpayment requirements under the senior notes Indenture and the senior securedrevolving loan agreement, in addition to distribution obligations under theDistribution Agreement. As such, limitations on our capital resources couldforce us to delay or abandon capital projects as well as the construction anddevelopment of proposed expansion projects.

 

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*Distribution Agreement Obligations*

 

On April 27, 2007, we entered into aDistribution Agreement among the Nation, the Seneca Nation of Indians CapitalImprovements Authority, or the Authority, SGC and Wells Fargo Bank, as Trustee,in connection with the Authority’s issuance in two series (one tax exempt andthe other taxable) of an aggregate principal amount of $159,495,000 specialobligation bonds, or the 2007 Bonds.  TheDistribution Agreement obligates us, subject to any contractual restrictionsapplicable to us (including, but not limited to, the Indenture governing our2004 and 2005 senior notes) to make monthly distributions to the Nation at thetimes and in the amounts necessary to enable the Authority to pay the debtservice on the 2007 Bonds as required under the Authority’s indenture. At thedirection of the Nation and the Authority, we will pay such distributionsdirectly to the Trustee. The Authority’s debt service commenced on June 1,2007.  For the period from June 1,2007 through November 1, 2007, the Authority’s debt service averagedapproximately $0.9 million per month. For the period December 1, 2007through June 1, 2008, the Authority’s debt service averaged approximately$1.7 million per month.  In June 2008,it was determined that the amortization schedule provided, upon which theforegoing $1.7 million monthly payments was made,  was incorrect.  A corrected amortization (debt service) schedulewas provided and after giving effect to a resulting credit for amountsoverpaid, for the period from January 1, 2008 through December 1,2023, the Authority’s debt service averages approximately $1.2 million permonth. The foregoing debt service averages are based on scheduled payments ofinterest and principal under the Authority’s indenture and bonds and do notaddress the effects of any earlier call for redemption, by acceleration orotherwise.  The Distribution Agreementprovides that neither the Trustee nor the Authority’s bondholders will have anyrecourse under the Distribution Agreement to any revenues, assets or propertyof SGC or its subsidiaries should we fail to comply with our distributionobligations.

 

Reference is made to the Indenture governing SGC’ssenior notes and the Distribution Agreement for an understanding of all termsof such financing arrangements.

 

*Other Commitments – Niagara Falls Condemnation Proceedings*

 

We have acquired approximately 45 acres in the Cityof Niagara Falls, New York of the approximate 50 acres designated by New YorkState under the Compact for ownership by the Nation, and intend to acquireapproximately three additional acres. Under the Compact, the Nation is requiredto fund the acquisition of this property, including all related costs andexpenses. As initial security for the Nation’s obligations to pay siteacquisition costs and in furtherance of the ongoing condemnation proceeding,the Nation was required to deliver, and has delivered, to the Empire StateDevelopment Corporation (ESDC) a letter of credit in the amount of $33.5million representing 150% of the then estimate of the total remaining siteacquisition costs not yet paid by the Nation. On July 13, 2006, we acquired, through the condemnation process,approximately 18 acres of land and improvements (including fixtures) fromFallsite, LLC, or Fallsite and Fallsville, LLC, or Fallsville, for an aggregateinitial advance payment of $18.0 million, which land is a portion of the landin the City of Niagara Falls, New York designated under the Compact forownership by the Nation. Of this amount, $7.7 million was drawn on the letterof credit as part of the consideration for the purchase.  In March 2007, an additional $11.5million was drawn under the letter of credit to fund the acquisition of 18additional parcels of land and certain improvements.    In December 2007, an additional $3.0million was drawn under the letter of credit to fund the acquisition of sevenadditional parcels of land owned by the City of Niagara Falls.  The current letter of credit amount has beenreduced to approximately $11.2 million. If the estimate of such siteacquisition costs increases or if certain other events occur, the Nation mayhave to provide an additional letter of credit or replace the existing one withone for a larger monetary amount or, if acceptable to the ESDC, provide asupplemental cash escrow amount.    Unreimbursedamounts on the letter of credit may result in automatic draw-downs under thesenior secured loan agreement.

 

Theamounts paid to condemnees from whom we have acquired property are deemed to beadvance payments. Pursuant to the New York State Eminent Domain Procedure Law,or EDPL, the New York state courts will determine the final purchase price tobe paid to condemnees who elect to challenge the initial appraised value oftheir property.  To date, all recordowners from whom property was condemned pursuant to the EDPL have reservedrights to claim additional compensation. Four record owners have filed notices of claim to challenge the fairmarket value appraisals utilized by ESDC.  Fallsite LLC and Fallsville Splash, LLC have filed notices of claim inthe amounts of $40.0 and $35.0 million for land and trade fixtures, respectively,relating to a small former water park within the footprint.  ESDC’s fair market appraisal value for theforegoing was $17.0 million.  IntertrustDevelopment has filed a notice of claim for $15.8 million for land and tradefixtures associated with a former Holiday Inn hotel within the footprint. ESDC’sfair market appraisal value for the foregoing was $8.2 million.  Additionally, JFD Holdings has filed a noticeof claim for an unspecified amount for land and trade fixtures associated witha former Pizza Hut restaurant within the footprint.  ESDC’s fair market appraisal for theforegoing was approximately $0.4 million.

 

If the New York state courts determine that thevalue for the land and improvements, including trade fixtures, is higher thanwhat ESDC has determined to be their values, then we would be liable for thedifference and potentially also responsible for certain additional costs andpayments to the applicable condemnee(s), such as their attorney fees.

 

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**Regulation**

 

Our operations are regulated by Nation laws, theCompact and federal statutes, most notably the Indian Gaming Regulatory Act, orIGRA.  Several bills have been proposedduring past sessions of Congress that could affect Indian gaming.  Most notably Senator McCain’s S. 2078, theIndian Gaming Regulatory Act Amendments of 2006 and Congressman Pombo’s (R-CA)H. 4893, Restricting Indian Gaming to Homelands of Tribes Act of 2006, proposedadditional regulations for tribes and more restrictions on “off-reservation”gaming.   With new leadership in thecommittees of jurisdiction over Indian Affairs in the 110th Congress, Indiangaming has received very limited attention.

 

The Department of the Interior has recentlypublished final regulations effective August 25, 2008 governing theconduct of gaming on lands taken into trust after October 17, 1988.  The regulations on their face do not purportto impair the ability of the Nation and SGC to expand its gamingoperations.  Future gaming legislation orcourt decisions construing the new regulations could adversely impact expansionof SGC gaming operations and the future growth of the Nation’s revenue base. Inaddition, from time to time, various government officials have proposed taxingIndian casino gaming or otherwise limiting or restricting the conduct of gamingoperations by Indian tribes. No assurance can be given that such legislation,if and when enacted by Congress, would not have a material adverse effect onthe operations of SGC. If Congress were to enact comprehensive amendments tothe IGRA, such legislation could have a material adverse effect on theoperations of SGC. In addition, under federal law, gaming on the Nation’s landsmay be dependent upon the permissibility under New York law of certain forms ofgaming or similar activities. If New York State were to make various forms ofgaming illegal or against public policy (or the courts were to similarly rule),or otherwise to take a legal position adverse to SGC, such actions could have amaterial adverse effect on our ability to conduct our gaming operations ascurrently conducted. Moreover, a 1996 U.S. Supreme Court decision may permit astate to avoid or refuse to negotiate amendments to existing compacts such asthe Compact.

 

**New Accounting Pronouncements**

** **

There are no accounting standards that have not yetbeen adopted which are expected to have a material impact on our financialreporting.

 

**Item 3.**   Quantitativeand Qualitative Disclosures About Market Risk

** **

Reference is made to our 2007 Annual Report on Form 10-Kfor a complete discussion of our market risk. During the period ended June 30, 2008, we entered into a seniorsecured revolving loan agreement which will expose SGC to interest rate risk inthat amounts borrowed under the loan agreement will bear interest ateither one, three or six-month LIBOR plus one and one quarter percent (1.25%),or the prime rate (as reported in the *TheWall Street Journal*) plus one quarter percent (.25%).   Asof June 30, 2008, we had not drawn down on the revolving credit facility.See “Item 2. Management’s Discussion and Analysis of Financial Condition andResults of Operations—Principal Debt Arrangements” for further informationrelating to the senior secured revolving loan agreement.

 

**Item4T.          Controls andProcedures**

** **

**Evaluation of Disclosure Controls and Procedures**

 

We maintain disclosure controls and procedures (asthat term is defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934, or the Exchange Act) that are designed toensure that information required to be disclosed in our Exchange Act reports isrecorded, processed, summarized and reported within the time periods specifiedin the SEC’s rules and forms, and that such information is accumulated andcommunicated to our management, including our President and Chief ExecutiveOfficer and Chief Financial Officer, as appropriate, to allow timely decisionsregarding required disclosure.  Indesigning and evaluating the disclosure controls and procedures, managementrecognized that any controls and procedures, no matter how well designed andoperated, have inherent limitations due to cost issues, the possibility ofhuman error, judgments and assumptions regarding the likelihood of futureevents, and the circumvention and overriding of the controls andprocedures.   Accordingly, even effectivedisclosure of controls and procedures can provide only reasonable assurance of achievingthe desired control objectives.

 

SGC’s management, under the supervision of ourPresident and Chief Executive Officer, and with the participation of ourPresident and Chief Executive Officer and our Chief Financial Officer (as ourprincipal executive officer and principal financial officer, respectively), hasevaluated the effectiveness of the design and operation of our disclosurecontrols and procedures.  Based on thatevaluation, our President and Chief Executive Officer and Chief Financial Officerhave concluded that the design and operation of our disclosure controls andprocedures as of June 30, 2008 provided reasonable assurance that thedisclosure controls and procedures are effective to accomplish theirobjectives.

 

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**Changes in InternalControl over Financial Reporting**

** **

There has not been any change in our internalcontrol over financial reporting identified in connection with the evaluationrequired by Exchange Act Rules 13a-15 or 15d-15 or otherwise that occurredduring the quarter ended June 30, 2008 that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 

**Part II.     OTHERINFORMATION**

 

**Item 1.   Legal Proceedings**

** **

***Citizens Against Casino Gaming in ErieCounty v. Kempthorne (WDNY)***

 

Consistentwith information previously reported by SGC, on July 12, 2007 CitizensAgainst Casino Gambling in Erie County filed a second action in the UnitedStates District Court, Western District of New York against the United StatesDepartment of Interior, the National Indian Gaming Commission (“NIGC”) and twoindividuals in their official capacities as Secretary of the Interior andChairman of the NIGC, respectively.

 

Theaction sought declaratory and injunctive relief under the AdministrativeProcedure Act, the Declaratory Judgments Act, and the Indian Gaming RegulatoryAct (“IGRA”) and was principally directed at the decisions and actions of thedefendants in approving an amendment to the Seneca Nation of Indians’ Class IIIgaming ordinance (amended to address gaming on the Nation’s Buffalo CreekTerritory), and the Indian land opinion issued by the Chairman of the NIGCrelative to that approval.  The plaintiffs claimed that the defendants hadfailed to comply with federal law and requested that the Court take numerousactions including declaring that the lands acquired by the Nation pursuant tothe Seneca Nation Land Claims Settlement Act (“SNLCSA”) are not Indian landswithin the meaning of the IGRA.

 

Plaintiffsmoved for summary judgment and defendants moved to dismiss.  Neither theNation nor SGC is party to this action.  The Nation filed an amicus briefon the “Indian lands” issues.

 

OnJuly 8, 2008, the Court issued its decision and order finding (a) thatthe NIGC’s determination that the Nation’s Buffalo Creek Territory is “Indiancountry” was in accord with Congress’ intent in enacting the SNLCSA, and (b) thatthe NIGC’s July 2, 2007 determination that the Nation’s Buffalo CreekTerritory is gaming-eligible land pursuant to the IGRA’s settlement of a landclaim exception is arbitrary, capricious, and not in accordance with the law.

 

The Court’s decision did not provide for injunctiverelief, and SGC has continued its operations at the Seneca Buffalo CreekCasino.  Plaintiffs subsequently filed amotion on July 14, 2008 to force the court to enforce its judgment.

 

On July 22, 2008, the United States filed a motion respondingto the plaintiffs motion to enforce and requesting that the case be remanded tothe NIGC for further consideration. The remand motion is based upon significantchanges in the controlling law, as interpreted by the U.S. Department ofInterior.  The Seneca Nation of Indians simultaneously filed an amicus briefsupporting the United States’ motion for remand to the NIGC and opposing theplaintiffs’ motion to enforce.  Oralargument on the foregoing motions is scheduled for August 21, 2008. TheNIGC has indicated that it does not intend to take any precipitous actionagainst the Nation or its gaming facilities as it, in consultation with theU.S. Department of Justice, continues to assess its options.

 

Ifthe plaintiffs are successful, the Nation may be unable to continue operatingthe existing Seneca Buffalo Creek Casino, may be delayed in the completion ofthe Seneca Buffalo Creek Casino and Hotel at this site or may be unable toconduct Class III gaming at this site.

 

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

 

OnFebruary 1, 2006, an action was filed in the New York Supreme Court,County of Erie, by various petitioners against George E. Pataki, in hisofficial capacity as Governor of the State of New York; State Gaming Officialsof the New York State Wagering Board; City of Buffalo; Common Council of theCity of Buffalo; Anthony Masiello in his previous capacity as Mayor of Buffalo;Byron Brown in his capacity as Mayor of Buffalo; City of Buffalo Department ofPublic Works; Buffalo Sewer Authority; and Niagara Frontier TransportationAuthority.  The action initially soughtdeclaratory and injunctive relief under the State Environmental Quality ReviewAct (“SEQRA”); the First Parks, Recreation, Historic Preservation Law (“PRHPL”);First City Environmental Review Ordination (“CERO”); and Freedom of InformationLaw (“FOIL”) and is principally directed at the decisions and actions of thedefendants in connection with our Seneca Buffalo Creek Casino.  The plaintiffs initially claimed that thedefendants had failed to comply with SEQRA, PRHPL, CERO and FOIL and requestedthat the Court take numerous actions including directing compliance with SEQRA,PRHPL, CERO and FOIL and restraining further action relating to the developmentof our Seneca Buffalo Creek Casino.  In May 2006,the petitioners further sought to enjoin demolition activity on the nine acrecasino site, but the court declined to grant a preliminary injunctionpreventing demolition.  In June 2006,the petitioners amended their Petition to drop their claims against GovernorPataki, the State Gaming Officials and the Niagara Frontier TransportationAuthority, and added the Buffalo Department of Economic Development, Permitsand Inspections as a party. The amended Petition also dropped all claims exceptfor the SEQRA and CERO claims. In October 2006, the plaintiffs moved foran injunction to prevent an agreement between SEGC and the City of Buffalo(relating to the development of the Seneca Buffalo Creek Casino) from beingexecuted and performed, which motion was denied based upon a failure to show alikelihood of success on the merits.  Theplaintiffs appealed this ruling to the New York Supreme Court AppellateDivision.  On March 16, 2007, theAppellate Division unanimously affirmed the denial of the injunction.

 

Ahearing was held on the merits of the petition in September 2007.  On July 3, 2008, the Court dismissed thePetitioners’ claims holding: (1) that the Common Council of the City ofBuffalo properly reviewed the environmental impact of the construction of theBuffalo Creek Casino, and fully complied with SEQR and CERO; (2) that theabandonment and sale of Fulton Street was properly approved by the CommonCouncil of the City of Buffalo; (3) that the Seneca Nation of Indians is anecessary and indispensible party to the lawsuit; and (4) that Petitioner’ssubstantive claims are without merit.

 

Although Petitioners have indicated an intent toappeal the judge’s decision, no notice of appeal has been filed to date.

 

**Item 1A.**                                                  RiskFactors

** **

Certainrisk factors previously disclosed in our Annual Report on Form 10-K forthe fiscal year ended September 30, 2007 refer to the senior notes andthen-existing financial obligations. Those risk factors are modified as follows to reflect the $50.0 millionsenior secured revolving loan agreement entered into by SGC on June 19,2008:

 

**We have substantial indebtedness and otherfinancial obligations which could adversely affect our financial condition andprevent us from fulfilling our obligations, including our senior notes.**

 

We have substantial indebtedness and significant fixed debt serviceobligations in addition to our operating expenses. As of June 30, 2008, wehad $500.0 million of 7-1⁄4 % senior notes outstanding. The Indenture governingthe senior notes permits us and our subsidiaries to incur additional debt incertain, limited circumstances. If we incur additional debt in the future, therelated risks could increase.

 

In connection with an April 2007 issuance of $159.5 million ofbonds by a governmental instrumentality of the Nation (the “Authority Bonds”),we, subject to any contractual obligations applicable to us, are obligated,pursuant to a distribution agreement governing our distribution obligationswith respect to the Authority Bonds (the “Distribution Agreement”), to makemonthly distributions to the Nation at the times and in the amounts necessaryto pay the debt service on such Authority Bonds.  The foregoing distribution obligations are inaddition to distribution commitments to the Nation relating to Compactexclusivity fees, operating lease payments and certain regulatory and sharedservices expenses.  If we becomeobligated or committed to make additional distributions or payments to theNation in the future, the related risks could increase.

 

On June 19, 2008, we entered into a $50.0 millionsenior secured revolving loan agreement, which matures on June 19, 2009.SGC’s obligations under the loan agreement are secured by substantially allgaming and related assets (including substantially all gaming revenues) notconstituting real property or improvements.  SGC’s obligations areguaranteed by SNFGC, STGC, SEGC and LGCC.  The guarantors’ obligations aresecured by substantially all of each guarantor’s gaming and related assets(including substantially all gaming revenues) not constituting real property orimprovements.

 

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Our high level of indebtedness, our distribution obligations andcommitments and borrowing under the senior secured revolving loan agreementcould have important consequences to holders of our senior notes andsignificant adverse effects on our business. For example, it could:

 

·                  increase our vulnerability to generaladverse economic and industry conditions or a downturn in our business;

 

·                  limit our ability to obtainadditional debt financing for working capital, capital expenditures or otherpurposes;

 

·                  require us to dedicate a substantialportion of our cash flow from operations to payments on our indebtedness or tomeet our distribution obligations, thereby reducing the availability of ourcash flow to fund working capital, capital expenditures, development projectsand other general business purposes;

 

·                  limit our flexibility in planningfor, or reacting to, changes in our business and the industry in which weoperate; and

 

·                  place us at a competitivedisadvantage compared to our competitors that have less debt and otherfinancial obligations and/or more financial resources.

 

If our indebtedness and distribution obligations and commitments affectour operations in these ways, our business, financial condition and results ofoperations could suffer, making it more difficult for us to satisfy ourfinancial obligations.

 

**Our failure to generate sufficient cash flowfrom our operations could adversely affect our ability to make payments on oursenior notes and fulfill our other financial obligations.**

 

Our ability to make payments on the senior notes and fulfill our otherfinancial obligations will depend on our ability to generate cash flow from ourcurrent and future operations. Our ability to generate sufficient cash flow tosatisfy our financial obligations will depend on our future operatingperformance, which is subject to many economic, competitive, regulatory andbusiness factors that are beyond our control. If we are not able to generatesufficient cash flow to service our financial obligations, we may need torefinance or restructure such obligations, sell assets or reduce or delaycapital investments, or seek to raise additional capital. For the followingreasons, among others, these measures may not be available to us on reasonableterms or at all, or, if available, they may not be adequate to enable us tosatisfy our financial obligations, including the senior notes:

 

·                  our ability to incur additional debtwill be limited by the covenants of the Indenture governing the senior notes,covenants of the Distribution Agreement and covenants under our $50.0 millionsenior secured loan agreement;

 

·                  the Indenture governing the seniornotes and the loan agreement governing our senior secured revolving creditfacility include covenants which limit our ability to create additional lienson or sell our assets and the covenants of the Distribution Agreement limit ourability to sell our assets;

 

·                  unlike non-governmental businesses,we are prohibited by law from generating cash through an offering of equitysecurities.

 

If our cash flow is insufficient and we are unable to raise additionalcapital, we may not be able to satisfy our financial obligations, includingmaking payments on our senior notes.

 

The following is an additional risk factor relating to our $50.0million senior secured revolving loan agreement.

 

**The loan agreement governing our $50 millionsenior secured revolving credit facility contains various covenants andprovisions that limit our management’s discretion in the operation of ourbusiness.**

 

The senior secured revolving loan agreement includes covenants andprovisions that, among other things, restrict our ability to:

 

·                  incur additional debt;

 

·                  make investments;

 

·                  create liens;

 

·                  enter into transactions withaffiliates;

 

·                  sell assets;

 

·                  merge, consolidate or sellsubstantially all of our assets; and

 

·                  make capital expenditures.

 

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The senior secured revolving loan agreement further includes certainfinancial covenants requiring SGC to achieve minimum consolidated EBITDA of $160million (on a rolling 12 month basis) and certain leverage and coverage ratios.All of these restrictive covenants may limit our ability to expand ouroperations or to pursue our business strategies. Changes in business conditionsor results of operations, adverse regulatory developments or other eventsbeyond our control may affect our ability to comply with these and otherprovisions of the Indenture governing the senior notes. The breach of any ofthese covenants could result in a default under our indebtedness, which couldcause those obligations to become due and payable. If our indebtedness were tobe accelerated, we cannot assure you that we would be able to pay suchindebtedness.

 

Thereare no other material changes from the risk factors previously disclosed in ourAnnual Report on Form 10-K for the fiscal year ended September 30,2007, except as disclosed in this Form 10-Q, including without limitation,the risk factors relating to our Seneca Buffalo Creek Casino set forth in “Item2 — Management’s Discussion and Analysis of Financial Condition and Results ofOperations” – “Executive Summary — Buffalo Creek Casino” and those relating toour expansion and development projects set forth in “Item 2 — Management’sDiscussion and Analysis of Financial Condition and Results of Operations” —Liquidity and Capital Resources”.

 

**Item 2.**                                                           UnregisteredSales of Equity Securities and Use of Proceeds

** **

Not applicable.

 

**Item 3.**                                                           DefaultsUpon Senior Securities

** **

Not applicable.

 

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

** **

Not applicable.

 

**Item 5.**                                                           OtherInformation

** **

Not applicable.

 

**Item 6.****                                                          ****Exhibits**

 
| (a) |   | Exhibits (listed according to the number assigned in  the table in Item 601 of Regulation S-K): |
|-----|--------|-------------------------------------------------------------------------------------------------|

 
| Exhibit  No. | ** ** | **Description**                                                                                                                                                                                                                                           |
|--------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         |       |                                                                                                                                                                                                                                                      |
| 10.1         |       | Loan Agreement by and  among SGC and KeyBank National Association dated as of June 19, 2008 (incorporated  by reference to Exhibit 10.1 to SGC’s Current Report on Form 8-K  filed on June 25, 2008).                       |
|         |       |                                                                                                                                                                                                                                                      |
| 31.1         |       | Certification of E. Brian Hansberry, principal  executive officer, pursuant to Rule 13a-14 and 15d-14 of the Securities  Exchange Act of 1934 (filed herewith).                                                                                      |
|         |       |                                                                                                                                                                                                                                                      |
| 31.2         |       | Certification of David Sheridan, principal financial  officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange  Act of 1934 (filed herewith).                                                                                          |
|         |       |                                                                                                                                                                                                                                                      |
| 32.1         |       | Certification of E. Brian Hansberry, principal  executive officer and David Sheridan, principal financial officer, pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 (filed herewith). |

 

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**SIGNATURES**

**SENECAGAMING CORPORATION**

** **

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

DatedAugust 14, 2008

 
| /s/ E. Brian Hansberry                       |   |
|----------------------------------------------|--------|
| E. Brian Hansberry                           |   |
| President and Chief Executive Officer        |   |
| (Principal Executive Officer)                |   |
|                                         |   |
|                                         |   |
| /s/  David  Sheridan                    |   |
| David Sheridan                               |   |
| Chief Financial Officer                      |   |
| (Principal Financial and Accounting Officer) |   |

 

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