**UNITED STATES****SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

**ý****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended June 30, 2005**

 

**OR**

 

**o****TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from              to              **

 

**Commission File Number:  333-117633**

 

**SENECAGAMING CORPORATION**

(Exact name of registrant as specified in itscharter)

 
| **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 Fourth Street**

**Niagara Falls, New York (SenecaNation Territory) 14303**

**(716) 299-1100**

(Address, including zip code, and telephonenumber,

including area code, of registrant’sprincipal 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 ý   No o

 

Indicateby check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act). Yes o  No ý

 

AtAugust 1, 2005, 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**

 
| ** **        | ** **                                                                                                                       | **Page** |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------|----------|
| **PART I.**  | **FINANCIAL INFORMATION**                                                                                                        | 1        |
| Item 1.           | Financial Statements                                                                                                             | 1        |
|              | Condensed  Consolidated Balance Sheets as of June 30, 2005 (Unaudited) and September 30,  2004                         | 1        |
|              | Condensed  Consolidated Statements of Income for the three months and nine months ended June 30,  2005 and 2004 (Unaudited) | 2        |
|              | Condensed  Consolidated Statements of Cash Flows for the nine months ended June 30,  2005 and 2004 (Unaudited)              | 3        |
|              | Notes to  Condensed Consolidated Financial Statements                                                                            | 4        |
| Item 2.           | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                                      | 10       |
| Item 3.           | Quantitative and Qualitative Disclosures  About Market Risk                                                                      | 22       |
| Item 4.           | Controls and Procedures                                                                                                          | 23       |
|              |                                                                                                                             |     |
| **PART II.** | **OTHER INFORMATION**                                                                                                            | 25       |
| Item 1.           | Legal Proceedings                                                                                                                | 25       |
| Item 2.           | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                     | 25       |
| Item 3.           | Defaults Upon Senior  Securities                                                                                                 | 25       |
| Item 4.           | Submission of Matters  to a Vote of Security Holders                                                                             | 25       |
| Item 5.           | Other Information                                                                                                                | 25       |
| Item 6.           | Exhibits                                                                                                                         | 25       |
|              | Signatures                                                                                                                       | 27       |

 

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**PART I.  FINANCIALINFORMATION**

 

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

 

**SENECA GAMING CORPORATION**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

 
| ** **                                    | ** ** | **June 30,  2005**    | ** ** | **September 30,  2004** | ** ** |
|-----------------------------------------------|------------|----------------------------|------------|------------------------------|------------|
| ** **                                    | ** ** | **(dollars in thousands)** | ** ** |
| **Assets**                                    |       |                       |       |                         |       |
| Current assets:                               |       |                       |       |                         |       |
| Cash and cash equivalents                     |       | $                          | 140,194    |                         | $          | 211,595 |   |
| Short-term investments                        |       | 120,926                    |       | 57,963                       |       |
| Receivables                                   |       | 2,329                      |       | 1,348                        |       |
| Inventories                                   |       | 2,215                      |       | 2,123                        |       |
| Other current assets                          |       | 3,140                      |       | 3,171                        |       |
| Total current assets                          |       | 268,804                    |       | 276,200                      |       |
|                                          |       |                       |       |                         |       |
| Property and equipment, net                   |       | 376,088                    |       | 282,797                      |       |
| Other long-term assets                        |       | 18,762                     |       | 25,059                       |       |
| Total assets                                  |       | $                          | 663,654    |                         | $          | 584,056 |   |
|                                          |       |                       |       |                         |       |
| **Liabilities and Shareholders’ Equity** | ** ** | ** **                 | ** ** | ** **                   | ** ** |
| Current liabilities:                          |       |                       |       |                         |       |
| Current portion of long-term debt             |       | $                          | —     |                         | $          | 325 |   |
| Trade payables                                |       | 1,564                      |       | 3,415                        |       |
| Construction payables                         |       | 19,768                     |       | 28,807                       |       |
| Dividends payable to Nation                   |       | —                     |       | 655                          |       |
| Exclusivity fees payable                      |       | 5,426                      |       | 41,549                       |       |
| Accrued interest                              |       | 5,156                      |       | 10,866                       |       |
| Other current liabilities                     |       | 34,995                     |       | 31,752                       |       |
| Total current liabilities                     |       | 66,909                     |       | 117,369                      |       |
|                                          |       |                       |       |                         |       |
| Long-term debt                                |       | 493,104                    |       | 380,000                      |       |
| Total liabilities                             |       | 560,013                    |       | 497,369                      |       |
|                                          |       |                       |       |                         |       |
| Capital:                                      | ** ** | ** **                 | ** ** | ** **                   | ** ** |
| Retained earnings                             |       | 103,641                    |       | 86,687                       |       |
| Total liabilities and capital                 |       | $                          | 663,654    |                         | $          | 584,056 |   |

 

*See accompanying notes.*

 

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**SENECA GAMING CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF INCOME**

**(Unaudited)**

 
| ** **                              | ** ** | **Three Months Ended  June 30,** | ** ** | **Nine Months Ended  June 30,** | ** ** |
|-----------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                              | ** ** | **2005**                              | ** ** | **2004**                             | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                              | ** ** | **(dollars in thousands)**            | ** ** |
| **Revenues**                            |       |                                  |       |                                 |       |   |   |   |   |
| Gaming                                  |       | $                                     | 113,789    |                                 | $          | 88,770 |   | $ | 321,575 |   | $ | 230,724 |   |
| Food and beverage                       |       | 10,806                                |       | 8,392                                |       | 30,356 |   | 20,858 |   |
| Retail, entertainment and other         |       | 4,308                                 |       | 3,191                                |       | 12,591 |   | 8,311 |   |
| Less: promotional allowances            |       | (13,811                               | )          | (5,862                               | )          | (35,273 | ) | (15,317 | ) |
| Net revenues                            |       | 115,092                               |       | 94,491                               |       | 329,249 |   | 244,576 |   |
|                                    |       |                                  |       |                                 |       |   |   |   |   |
| **Expenses**                            |       |                                  |       |                                 |       |   |   |   |   |
| Gaming                                  |       | 28,647                                |       | 24,434                               |       | 85,199 |   | 63,384 |   |
| Food and beverage                       |       | 8,677                                 |       | 7,063                                |       | 25,714 |   | 17,508 |   |
| Retail, entertainment and other         |       | 2,523                                 |       | 1,750                                |       | 7,715 |   | 4,828 |   |
| Advertising, general and administrative |       | 28,280                                |       | 24,530                               |       | 87,147 |   | 61,798 |   |
| Pre-opening costs                       |       | 208                                   |       | 2,926                                |       | 391 |   | 3,954 |   |
| Depreciation and amortization           |       | 6,555                                 |       | 4,865                                |       | 19,391 |   | 11,366 |   |
|                                    |       |                                  |       |                                 |       |   |   |   |   |
| Total operating expenses                |       | 74,890                                |       | 65,568                               |       | 225,557 |   | 162,838 |   |
|                                    |       |                                  |       |                                 |       |   |   |   |   |
| Operating income                        |       | 40,202                                |       | 28,923                               |       | 103,692 |   | 81,738 |   |
| Interest income                         |       | 1,352                                 |       | 569                                  |       | 3,364 |   | 838 |   |
| Interest expense                        |       | (59,413                               | )          | (10,679                              | )          | (82,218 | ) | (20,968 | ) |
|                                    |       |                                  |       |                                 |       |   |   |   |   |
| Net income (loss)                       |       | $                                     | (17,859    | )                                    | $          | 18,813 |   | $ | 24,838 |   | $ | 61,608 |   |

 

*See accompanying notes.*

 

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**SENECAGAMING CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Nine Months Ended  June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                         | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| ** **                                                                         | ** ** | **(dollars in thousands)**           | ** ** |
| **Cash flows relating to operating activities:**                                   |       |                                 |       |   |   |
| Net income                                                                         |       | $                                    | 24,838     |   | $ | 61,608 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |                                 |       |   |   |
| Depreciation and amortization                                                      |       | 19,391                               |       | 11,366 |   |
| Amortization of deferred financing costs                                           |       | 2,022                                |       | 1,591 |   |
| Fair market value adjustment of interest rate cap                                  |       | 177                                  |       | 619 |   |
| Write-off deferred financing costs                                                 |       | 2,460                                |       | — |   |
| Other                                                                              |       | 88                                   |       | 54 |   |
| Change in operating assets and liabilities:                                        |       |                                 |       |   |   |
| Receivables                                                                        |       | (1,058                               | )          | 538 |   |
| Inventories                                                                        |       | (92                                  | )          | (689 | ) |
| Other current assets (liabilities)                                                 |       | 31                                   |       | (1,649 | ) |
| Trade payables                                                                     |       | (1,851                               | )          | 3,669 |   |
| Exclusivity fees payable                                                           |       | (36,123                              | )          | (3,405 | ) |
| Accrued interest                                                                   |       | (5,710                               | )          | 4,002 |   |
| Other current liabilities                                                          |       | 3,244                                |       | 9,448 |   |
| Net cash provided by operating activities                                          |       | $                                    | 7,417      |   | $ | 87,152 |   |
|                                                                               |       |                                 |       |   |   |
| **Cash flows relating to investing activities:**                                   |       |                                 |       |   |   |
| Purchases of property and equipment                                                |       | (124,179                             | )          | (112,068 | ) |
| Land acquisition costs                                                             |       | (197                                 | )          | (7,203 | ) |
| Purchase of investments                                                            |       | (44,998                              | )          | — |   |
| Net cash used in investing activities                                              |       | (169,374                             | )          | (119,271 | ) |
|                                                                               |       |                                 |       |   |   |
| **Cash flows relating to financing activities:**                                   |       |                                 |       |   |   |
| Payments to sinking fund, net                                                      |       | (11,917                              | )          | (6,014 | ) |
| Proceeds from long-term debt                                                       |       | 193,000                              |       | 341,966 |   |
| Repayments of long-term debt                                                       |       | (80,325                              | )          | (47,661 | ) |
| Payment of deferred financing costs                                                |       | (4,793                               | )          | (11,576 | ) |
| Payment for interest rate cap                                                      |       | —                               |       | (2,188 | ) |
| Proceeds from sale of interest rate cap                                            |       | 683                                  |       | — |   |
| Dividends paid to the Nation                                                       |       | (6,092                               | )          | (26,722 | ) |
| Net cash provided by financing activities                                          |       | 90,556                               |       | 247,805 |   |
|                                                                               |       |                                 |       |   |   |
| Net (decrease) increase in cash                                                    |       | (71,401                              | )          | 215,686 |   |
|                                                                               |       |                                 |       |   |   |
| Cash balances:                                                                     |       |                                 |       |   |   |
| Beginning of period                                                                |       | 211,595                              |       | 59,628 |   |
| End of period                                                                      |       | $                                    | 140,194    |   | $ | 275,314 |   |

 

*See accompanying notes.*

 

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**SENECAGAMING CORPORATION**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**1.**                                      Organization and Basis of Presentation

** **

The consolidated financial statements include the accounts of SenecaGaming Corporation, or SGC, and its wholly owned subsidiaries, or collectively,the Company. In consolidation, all intercompany balances and transactions havebeen eliminated. The accompanying unaudited consolidated financial statementshave been prepared in accordance with accounting principles generally acceptedin the United States for interim financial information. Accordingly, they donot include all of the information and footnotes required by generally acceptedaccounting principles for complete financial statements. In the opinion of theCompany’s management, all adjustments, consisting of normal recurring accruals,considered necessary for a fair presentation have been included. Operatingresults for the three and nine months ended June 30, 2005 are notnecessarily indicative of the results that may be expected for the year ended September 30,2005. For further information, reference is made to the consolidated financialstatements and footnotes thereto included in the Company’s Annual Report on Form 10-Kfor the fiscal year ended September 30, 2004.

 

SGC, which was formed on August 1, 2002, is wholly owned by theSeneca Nation of Indians, or the Nation. The Nation is a federally recognizedIndian tribe with total territorial land comprising approximately 54,000 acresin the Western New York region. SGC was organized by the Nation to operate andmanage its Class III Gaming activities pursuant to the Indian GamingRegulatory Act of 1988, or IGRA. Under IGRA, federally recognized Indian tribesare permitted to conduct full-scale casino gaming operations on tribal land,subject to, among other things, the negotiation of a compact with the affectedstate. Pursuant to IGRA, the Nation entered into the Nation-State Gaming Compactwith the State of New York dated April 12, 2002, or the Compact, which hasbeen approved by the Federal Bureau of Indian Affairs, Department of theInterior. The Compact provides the Nation the exclusive right to conduct Class IIIgaming activities at three sites in the western region of the State of NewYork.

 

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

 

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

 

•                                          Seneca Niagara Falls Gaming Corporation, or SNFGC

 

•                                          Seneca Territory Gaming Corporation, or STGC

 

•                                          Seneca Erie Gaming Corporation, or SEGC

 

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SNFGCwas formed on August 1, 2002 to operate the Nation’s gaming activities inNiagara Falls, New York. Operations at SNFGC’s casino, or Seneca NiagaraCasino, commenced December 31, 2002.

 

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

 

SEGC was formed on August 9, 2003 to operate the Nation’s gamingactivities in Erie County, New York and has selected a site for this facilitynear the Buffalo-Niagara International Airport in Cheektowaga, New York, or theCheektowaga Site. Due to litigation related to the purchase of this site, SEGCis considering alternative sites for this facility. The exclusive right, underthe Compact, to establish and operate a third Class III gaming facility inErie County may terminate if the Nation or SEGC fails to commence constructionof a Class III gaming facility in Erie County, New York by December 9,2005, or if the Nation or SEGC fails to commence Class III gamingoperations by December 9, 2007.

 

**2.**                                      Long-Term Debt

** **

Long-term debt, as described below, consists of the following:

 
| ** **                                | ** ** | **June 30,  2005** | ** ** | **September 30,  2004** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|------------------------------|------------|
| ** **                                | ** ** | **(In thousands)**      | ** ** |
| 71⁄4% senior notes                     |       | $                       | 493,104    |                         | $          | 300,000 |   |
| Term Loan                                 |       | —                  |       | 80,000                       |       |
| Other                                     |       | —                  |       | 325                          |       |
|                                      |       | 493,104                 |       | 380,325                      |       |
| Less current maturities of long-term debt |       | —                  |       | 325                          |       |
| Long-term debt                            |       | $                       | 493,104    |                         | $          | 380,000 |   |

 

**71⁄4%Senior Notes**

** **

On May 5, 2004, SGC issued $300.0 million in 71⁄4% senior notesdue 2012, or the 2004 senior notes. The 2004 senior notes are guaranteed bySTGC, SEGC and, as of May 23, 2005, SNFGC or collectively, the Guarantors.  The net proceeds from the 2004 senior noteswere, or will be, used principally to fund in whole or in part (a) therepayment in May 2004 of vendor equipment financing (discussed below), (b) SNFGC’sconstruction and equipping of a 604-room hotel, (c) the acquisition of theremaining 26 acres in Niagara Falls, as provided for in the Compact, (d) thepayment of $22.0 million in August 2004 to satisfy the obligation to theEmpire State Development Corporation in connection with the transfer of certainproperty to the Nation for use as the Seneca Niagara Casino, and (e) a$25.0 million distribution to the Nation.

 

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 2005 seniornotes are treated as a single class with the 2004 senior notes and areidentical to the 2004 senior notes, except for certain tax attributes

 

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andprior to November 1, 2005 the amount of interest accrued thereon.  Gross proceeds on the 2005 senior notes wereapproximately $193.0 million.  Suchproceeds were, or will be, used to (a) pay in full and terminate on May 23,2005, the senior secured term loan, or the Term Loan, made by FreemantleLimited, or Freemantle, to SNFGC in November 2002, for a negotiated amountof approximately $126.7 million, representing $80.0 million in outstandingprincipal and approximately $46.7 million for interest on such principal, at aprescribed interest rate, that would have otherwise been payable if the TermLoan had not been paid on May 23, 2005, but was instead paid 81⁄2 monthsprior to its November 22, 2007 stated maturity, (b) to fund certaincosts associated with the expansion of our operations, (c) to pay the feesand expenses associated with the offering of the 2005 senior notes and (d) forgeneral corporate purposes.  Interest onthe 2004 and 2005 senior notes is payable semi-annually on November 1 and May 1.The 2004 and 2005 senior notes are unsecured and rank equally. As of June 30,2005, aggregate accrued interest on the 2004 and 2005 senior notes was$5.2 million.

 

The Indenture governing the 2004 and 2005 senior notes contains certainfinancial and non-financial covenants. The financial covenants includelimitations on restricted payments and the incurrence of indebtedness, whilethe non-financial covenants include reporting obligations and compliance withlaws and regulations. As of June 30, 2005, SGC was in compliance with allcovenants in the Indenture applicable to it.

 

**TermLoan**

** **

SNFGC entered into a five year Term Loan with Freemantle on November 22,2002. The Term Loan provided $80.0 million in financing for the initialconstruction of the Seneca Niagara Casino and other related costs.

 

Asdiscussed above, on May 23, 2005, the Term Loan was paid in full. Thenegotiated payment in full of the Term Loan resulted in a charge to earnings onthe early extinguishment of the Term Loan of approximately $49.2 million,including the write-off of $2.5 million of deferred financing costs.

 

**EquipmentFinancing**

 

Priorto May 2004, SNFGC entered into five equipment financing arrangements withcertain slot machine vendors to borrow approximately $37.0 million tofinance the acquisition of gaming equipment, including slot machines. Interestrates on these loans ranged from 6.0% to 6.42%. These loans were repaid in May 2004with proceeds from the 2004 senior notes.

 

**DerivativeInstruments**

 

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

 

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**3.****                                     ****Related-Party Transactions**

 

**LandLeases from the Nation**

** **

The Nation entered into an operating lease agreement, or Head Lease,with SNFGC on October 25, 2002 for use of the land and the building wherethe Seneca Niagara Casino currently operates. The Seneca Niagara Casino leaseterm expires in 2023.   During the threeand nine months ended June 30, 2005, SNFGC made lease payments to theNation of $3.3 million and $9.3 million, respectively.  On June 16, 2005, the lease paymentswere increased to $1.25 million per month effective June 1, 2005.  Rent is payable only to the extent thatsufficient funds are available from the net proceeds derived from the operationof the Seneca Niagara Casino and other commercial activities related to theoperation of that casino.

 

STGC leases the land upon which the Seneca Allegany Casino operatesfrom the Nation pursuant to a verbal agreement. STGC and the Nation arefinalizing a written lease for the land. During the three month and nine monthsended June 30, 2005, STGC made lease payments to the Nation of $3.8million and $10.0 million, respectively. On February 16, 2005, the leasepayments were increased to $1.25 million per month effective March 1,2005.

 

**OtherRelated Party Transactions**

** **

On July 14,2005, STGC entered into a construction management agreement with SenecaConstruction Management Corporation, or SCMC, a wholly owned corporation of theNation, to manage the construction of the new 220-room hotel and casino atSeneca Allegany Casino. SCMC replaces Klewin Gaming & Hospitality, Inc.,or Klewin, the prior construction manager for the Seneca Allegany Casino hoteland casino project. SCMC will be responsible for contract procurement and dailyoversight of the construction project. The construction agreement provides thatthe cost of all of the contract work to be completed under the agreement willnot exceed a guaranteed maximum amount of $123.0 million. However, if STGCchanges the scope of the project or finishing materials, the guaranteed maximumamount under the contract may be increased.

 

The Company is charged by the Nation for SGA regulatory costs, whichare incurred by the Nation. SGA regulatory costs charged to the Company wereapproximately $2.3 million and $1.1 million for the three months ended June 30,2005 and 2004, respectively, and $6.4 million and $3.5 million for the ninemonths ended June 30, 2005 and 2004, respectively. The Company also incurscosts, which are passed through the Nation for New York State gaming regulatoryservices, and New York State Police and Cattaraugus County Sheriff Departmentservices. The Company has recorded approximately $1.3 million and $1.3million for the three months ended June 30, 2005 and 2004, respectively,and $5.5 million and $3.0 million for the nine months ended June 30, 2005and 2004, respectively, in connection with these services.

 

SGC incurred legal fees of $0 and $21,000 primarily for regulatory andCompact matters during the three months ended June 30, 2005 and 2004,respectively, and $22,000 and $125,000 during the nine months ended June 30,2005 and 2004, respectively, from a law firm that specializes in gaming regulatoryissues in which the Company’s former President and Chief Executive Officer, whoresigned on April 6, 2005, is a partner. The former President and Chief

 

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ExecutiveOfficer did not receive any remuneration from the law firm during 2004, and isnot actively involved in its management. The Company ceased using the servicesof this law firm effective November 8, 2004.

 

The Company purchases tobacco products from an entity owned by a memberof the Council and a former SGA Commissioner. During the three months ended June 30, 2005 and 2004, suchpurchases totaled $62,000 and $154,000, respectively, and during the ninemonths ended June 30, 2005 and 2004, such purchases totaled $210,000 and$458,000, respectively.

 

The Company purchases bottled water from an entity owned by a formermember of the Council.  During the threemonths ended June 30, 2005 and 2004, such purchases totaled $0 and$23,000, respectively, and during the nine months ended June 30, 2005 and2004, such purchases totaled $104,000 and $85,000, respectively.  As of November 2, 2004, this individualwas no longer a member of the Council.

 

STGC leases office space in a building owned by the brother of a memberof the Company’s board of directors. During the three months ended June 30, 2005 and 2004, such leasepayments totaled approximately $19,000 and $22,000, respectively, and duringthe nine months ended June 30, 2005 and 2004, such lease payments totaledapproximately $218,000 and $65,000, respectively.

 

**4.**                                      Commitments and Contingencies

** **

**TheSeneca Nation Compact**

** **

Under the Compact, the Nation has agreed to contribute to the State ofNew York a portion of the proceeds from the operation and conduct of eachcategory of gaming device for which exclusivity exists, based on the win ofsuch machines (cash dropped into machines, after payouts but before expenses)and totaled on a cumulative quarterly basis to be adjusted annually at the endof the relevant calendar year. The exclusivity fee to the State of New York foryears 1-4 is 18.0% paid on an annual basis. Thereafter, the exclusivity fee is22.0% for years 5-7 on a semi-annual basis and 25.0% for years 8-14 on aquarterly basis.

 

Pursuant to the Compact, amounts due to New York State are payable bythe Nation. Effective January 1, 2005, Seneca Niagara Casino and SenecaAllegany casino commenced  monthlypayments to the Nation of each entity’s prior month’s exclusivity fees. SGCtransferred $57.1 million in January 2005 to the Nation for the exclusivityfee owed to the State of New York for the 2004 calendar year. On April 29,2005, the Nation transferred this exclusivity fee to the State of New York. Forthe three months ended June 30, 2005 and 2004, total exclusivity fees were$17.5 million and $13.9 million, respectively. For the nine months ended June 30, 2005 and 2004, total exclusivityfees were $49.0 million and $35.2 million, respectively. Of the $17.5 millionexclusivity fee for the three months ended June 30, 2005, $11.6 millionwas attributable to SNFGC and $5.9 million was attributable to STGC.

 

**AdditionalCasino Location and Planned Expansion**

** **

The Compactprovides the Nation the exclusive right to conduct Class III gamingactivities at three sites in the western region of the State of New York. On April 9,2004, we

 

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entered into anon-binding letter of intent with Uniland Development Company, or Uniland, topurchase approximately 57.1 acres of property for the Cheektowaga Site. In May 2004,various parties, including the Mayor of the City of Buffalo, filed a complaintagainst Governor Pataki, the State of New York, the Town of Cheektowaga andUniland to prohibit the sale of the Cheektowaga Site to SEGC. On June 16,2004, Justice Makowski of the Supreme Court of the State of New York agreedwith the plaintiffs and held that the Compact provision allowing the Nation tolocate a Class III gaming facility anywhere in Erie County in the event asite in the City of Buffalo is rejected by the Nation for any reason isunconstitutional.  On April 27,2005, the Town of Cheektowaga filed a brief to appeal the Supreme Courtdecision.  In a matter related to thislitigation, on May 25, 2005, the Supreme Court of the State of New Yorkissued an order requiring the State of New York to comply with the requirementsof the State Environmental Quality Review Act, or SEQRA, which includespreparing an environmental impact statement in respect of the Cheektowaga Siteand the proposed acquisition and development of the casino before any furtheractions may be taken in respect of (a) constructing, maintaining oroperating a Class III gaming facility on the Cheektowaga Site or (b) thesale of the Cheektowaga Site to the Nation for such purposes. SGC believes itis unlikely that the State of New York can satisfy the requirements of SEQRAwithin a time period that would enable SGC to consummate the acquisition of theCheektowaga Site and commence construction of a Class III gaming facilityon such site by December 9, 2005 or commence Class III gamingoperations in Erie County by December 9, 2007 (the dates required by theCompact to avoid any potential termination of exclusivity with respect to theErie County site).  Because of theongoing litigation and the referenced time deadline, the Nation and SGC arealso considering alternative sites. This contemplated Erie County casino, aswell as planned expansion projects at Seneca Niagara Casino and Seneca AlleganyCasino, will require significant capital outlays. The Company’s ability tocomplete the Erie County casino and expansion projects will be dependent onvarious factors including meeting the requirements of the Compact (to theextent applicable), certain Nation and governmental approvals, cash flow fromthe Company’s existing casino operations, available cash and cash equivalentsand, if additional capital is required, the availability of external debtfinancing.

 

**5**.                                      **Class II Gaming OperationsTransfer**

 

Effective January 1, 2005 and at the direction of the Council, theClass II gaming operations at Seneca Niagara Casino and Seneca AlleganyCasino were transferred to the Nation’s Class II gaming division.  For the three months ended June 30, 2005and 2004, the Company had total revenues from these Class II gaming operationsof approximately $0 and $1.9 million, respectively. For the nine months ended June 30,2005 and 2004, the Company had total revenues from Class II gamingoperations of approximately $3.9 million and $1.9 million, respectively.  Also, equipment with a net book value of $2.5million was transferred to the Nation on January 1, 2005.  This was recorded as a distribution to theNation in January 2005.

 

**6.****                                     ****Subsequent Events**

 

As previouslydisclosed in our Current Report on Form 8-K filed with the SEC on July 14,2005, STGC entered into a construction management agreement with SCMC to managethe construction of the new 220-room hotel and casino at Seneca AlleganyCasino. Also, effective July 13, 2005, STGC and Klewin entered into amutual letter of agreement to terminate the design/construction agreemententered into by the parties on September 1, 2004 for the construction ofSeneca Allegany Casino’s 220-room hotel and casino.  Pursuant to the terms of

 

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the agreement, STGC paidall amounts payable to Klewin through May 31, 2005 and SCMC will purchasecertain equipment and materials already purchased by, and has hired certainemployees already hired by, Klewin in connection with the Seneca AlleganyCasino Hotel project.

 

**Item 2.**           Management’s Discussionand Analysis of Financial Condition and Results of Operation

** **

You should readthe following discussion and analysis in conjunction with the sections titled “FinancialStatements” and “Notes to Consolidated Financial Statements” included elsewherein this Form 10-Q. References below to years are to fiscal years of SGCunless otherwise noted. SGC’s fiscal year is from October 1 through September 30.

 

**Forward-Looking Statements**

 

When used in this QuarterlyReport on Form 10-Q, in future filings with the SEC, in our press releasesor in our other public communications, the words “believe,” “estimate,” “anticipate,”“expect,” “contemplate,” “may,” “will” and similar expressions are intended toidentify 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. Suchstatements are subject to certain risks and uncertainties, which could causeactual results to differ materially, including, but not limited to, the riskfactors contained or referenced herein and in our reports filed with the SECpursuant to the Securities Exchange Act of 1934, as amended, including our 2004Form 10-K. Readers are cautioned not to place undue reliance on theseforward-looking statements, which speak only as of the date hereof. Weundertake no obligation to publicly revise these forward-looking statements toreflect events or circumstances occurring after the date hereof or to reflectthe occurrence of anticipated or unanticipated events.

 

**Overview**

** **

Seneca GamingCorporation is wholly owned by the Seneca Nation of Indians of New York andchartered to manage and direct all of the Nation’s Class III gamingoperations. The Nation entered into a Compact with New York State on August 18,2002 that provides the Nation with the right to establish and operate three Class IIIgaming facilities in Western New York. We opened our first Class IIIgaming facility on Nation Territory in the City of Niagara Falls, New York on December 31,2002, featuring Class III slot machines, table games and keno. Thisfacility is operated by our wholly owned subsidiary SNFGC. On May 1 2004,we opened our second Class III gaming facility, Seneca Allegany Casino, onthe Nation’s Territory in the City of Salamanca, New York. This facilityfeatures Class III slot machines and table games. This facility isoperated by our wholly owned subsidiary STGC.

 

Our consolidatedresults of operations for the three and nine months ended June 30, 2004are impacted by the May 1, 2004 opening of our Seneca Allegany Casino.Since our Seneca Allegany Casino was open for only two months during the threeand nine months ended June 30, 2004, the comparisons of consolidatedresults of operations are less meaningful in some respects.

 

Under the Compact,the Nation also has an exclusive right to establish and operate a third Class IIIgaming facility in Erie County, New York. This exclusive right may terminate ifthe Nation fails to commence construction of a Class III gaming facilityin Erie County by

 

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December 9, 2005 orif the Nation fails to commence Class III Gaming operations at such siteby December 9, 2007. On April 9, 2004, we entered into a non-bindingletter of intent with Uniland to purchase approximately 57.1 acres of propertyfor this facility near the Buffalo-Niagara International Airport inCheektowaga, New York, or the Cheektowaga Site. In May 2004, variousparties, including the Mayor of the City of Buffalo, filed a complaint againstGovernor Pataki, the State of New York, the Town of Cheektowaga and Uniland toprohibit the sale of the Cheektowaga Site to us. On June 16, 2004, JusticeMakowski of the Supreme Court of the State of New York agreed with theplaintiffs and held that the Compact provision allowing the Nation to locate a Class IIIgaming facility anywhere in Erie County “in the event a site in the City ofBuffalo is rejected by the Nation for any reason” is unconstitutional. The Court’s decision further permanentlyrestrained and enjoined (1) Governor Pataki and the State of New York fromany action or activity that would assist the Nation in owning and operating a Class IIIgaming casino in Erie County other than the City of Buffalo and (2) Unilandfrom the sale or transfer of the Cheektowaga Site to us. On April 27,2005, the Town of Cheektowaga filed a brief to appeal the Supreme Courtdecision. In a matter related to this litigation, on May 25, 2005,the Supreme Court of the State of New York issued an order requiring the Stateof New York to comply with the requirements of the State Environmental QualityReview Act, or SEQRA, which includes preparing an environmental impact statementin respect of the Cheektowaga Site and the proposed acquisition and developmentof the casino before any further actions may be taken in respect of (a) constructing,maintaining or operating a Class III gaming facility on the CheektowagaSite or (b) the sale of the Cheektowaga Site to the Nation for suchpurposes.  SGC believes it is unlikelythat the State of New York can satisfy the requirements of SEQRA within a timeperiod that would enable SGC to consummate the acquisition of the CheektowagaSite and commence construction of a Class III gaming facility on such siteby December 9, 2005, or that SGC will otherwise be able to commenceconstruction of a Class III gaming facility in Erie County by December 9,2005 or commence Class III gaming operations in Erie County by December 9,2007 (the dates required by the Compact to avoid any potential termination ofexclusivity with respect to the Erie County site).  As aresult of the ongoing litigation and the referenced time deadlines, the Nationand SGC are also considering alternative sites.

 

**Executive Summary**

** **

*OurCurrent Operations.*  We currently operate two Class IIIgaming facilities, Seneca Niagara Casino, in the City of Niagara Falls, NewYork, and Seneca Allegany Casino, in the City of Salamanca, New York. Ourcasino operations include gaming, dining, entertainment and retail. For each ofthe three and nine months ended June 30, 2005, approximately 95% of ournet revenue was derived from our gaming activities.

 

*KeyPerformance Indicators.*  Our operating results aredependent on the volume of profitable patrons visiting our casinos, our abilityto attract them for repeat visits and our provision of superior service to ourpatrons.

 

*SenecaNiagara Casino.*  Seneca Niagara Casino currentlyrelies primarily on drive-in and bus patrons from the Buffalo, Niagara Falls,and Rochester areas in New York and secondarily from the Erie, Pennsylvaniaarea, Ohio and other parts of New York. Since opening on December 31,2002, Seneca Niagara Casino has experienced steady growth in its patron base,net revenue and profitability. We believe that the proposed expansion of SenecaNiagara Casino, including the addition of a luxury hotel and other amenities,will enable us to increase profitable

 

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patron volume and gamingactivity, extend our geographic penetration and appeal to a more diversedemographic base. The first phase of this expansion is expected to open in December 2005,and will add over 35,000 square feet of gaming space, approximately 300 rooms,a multi-purpose room for conventions, banquets and entertainment events, and an18,000 square-foot spa.

 

As of June 30,2005, we have paid for substantially all of our completed expansion projectsout of cash flow from operations. Our completed expansion projects include theaddition of Turtle Island, a non-smoking casino room, the Blue Heron Club, agaming salon designed exclusively for high stakes table game patrons, a new2,300-space parking garage and the Western Door, an upscale steakhouse.  In June 2004, we opened our “PenniesFrom Heaven” slot room located on the mezzanine level overlooking our maincasino, adding approximately 6,600 square feet of gaming space and 242additional ticketed slot machines. In addition, this project addedapproximately 7,800 square feet of banquet space for up to 350 patrons.

 

*SenecaAllegany Casino.*  Sinceopening on May 1, 2004, Seneca Allegany Casino has experienced steadygrowth in its patron base, net revenue, and profitability. Seneca AlleganyCasino has attracted patrons from the southern portion of western New York,Erie and Pittsburgh Pennsylvania, and Ohio. From opening through June 30,2005, approximately 64%, of the casino’s patrons have originated outside of theState of New York.

 

In July 2005,we opened our 1,850-space parking garage and we are constructing a 220-roomhotel and casino at Seneca Allegany Casino. We believe this expansion isnecessary to provide a first-class gaming experience for our patrons and tomaintain the competitive position of the facility in light of expected futurecompetition in Pennsylvania. We expect that this expansion, including the costof our recently opened parking garage, will cost between $180.0 and$185.0 million, and we plan to continue to fund this expansion with cashflows from operations and cash on hand. We expect the hotel to open in thelatter part of 2006.

 

*Current,Continued and Future Reliance on Cash Flow*. * *We intend to purchasethe site of our expected future casino in Erie County, fund the maintenance ofour facilities and fund our planned future expansion projects from our cashflow and cash on hand. We currently rely and will continue to rely on ourability to generate cash flow from operations to repay our debt financing.

 

*Seasonality.*  Our results of operations have not beenseasonal in nature.

 

*OverallOutlook.*  As discussed in more detail above, sinceinception, we have invested heavily in our operations and plan to continue todo so during the remainder of fiscal 2005 and in fiscal 2006. We believe thatinvestments in additional gaming space and non-gaming amenities at ourfacilities and our exclusive ability to offer Class III gaming in WesternNew York, will enable us to capitalize on what we believe is an underservedmarket in Western New York, Pennsylvania and parts of Ohio.

 

**Critical Accounting Policies and Estimates**

** **

There have been nochanges in accounting policies since the filing of our 2004 Form 10-K for the fiscal year endedSeptember 30, 2004.

 

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**Operating Results Three Months Ended June 30,2005 Compared to the Three Months Ended June 30, 2004**

** **

*Operating Results*

 
| ** **                              | ** ** | **Three Months Ended  June 30,**  | ** ** |
|-----------------------------------------|------------|----------------------------------------|------------|
| ** **                              | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| ** **                              | ** ** | **(unaudited, dollars in  thousands)** | ** ** |
| Net Revenue                             |       | $                                      | 115,092    |   | $ | 94,491 |   |
| Operating expenses:                     |       |                                   |       |   |   |
| Gaming                                  |       | 28,647                                 |       | 24,434 |   |
| Food and beverage                       |       | 8,677                                  |       | 7,063 |   |
| Retail, entertainment and other         |       | 2,523                                  |       | 1,750 |   |
| Advertising, general and administrative |       | 28,280                                 |       | 24,530 |   |
| Pre-opening costs                       |       | 208                                    |       | 2,926 |   |
| Depreciation and amortization           |       | 6,555                                  |       | 4,865 |   |
| Operating income                        |       | $                                      | 40,202     |   | $ | 28,923 |   |

 

The most importantfactors and trends contributing to our operating performance during the threemonths ended June 30, 2005 and 2004 were:

 

•                  Ourability to successfully market Seneca Niagara Casino and, since its May 1,2004 opening, Seneca Allegany Casino, to our primary target markets locatedwithin 100 miles of our casinos.

 

•                  Ourability to enroll over 863,000 patrons in our cross-property Seneca Link Player’sCard program, which has increased our ability to use effective direct mail andtargeted marketing programs to establish patron loyalty to the Seneca brand ata profitable level.

 

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

 

•                  Ouruse of current information technology, including “ticket-in/ticket-out” slotmachines, automated jackpot payment machines, electronic slot bonusing anddatabase programs to increase operating efficiencies.

 

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

 

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

 

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*DetailedRevenue Information*

 
| ** **                              | ** ** | **Three Months Ended  June 30,**  | ** ** |
|-----------------------------------------|------------|----------------------------------------|------------|
| ** **                              | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| ** **                              | ** ** | **(unaudited, dollars in  thousands)** | ** ** |
| Gaming revenue:                         |       |                                   |       |   |   |
| Slots                                   |       | $                                      | 98,017     |   | $ | 72,858 |   |
| Table games                             |       | 15,649                                 |       | 14,184 |   |
| Other                                   |       | 123                                    |       | 1,728 |   |
| Gaming revenue                          |       | 113,789                                |       | 88,770 |   |
| Non-gaming revenue:                     |       |                                   |       |   |   |
| Food and beverage                       |       | 10,806                                 |       | 8,392 |   |
| Retail, entertainment and other         |       | 4,308                                  |       | 3,191 |   |
| Non-gaming revenue                      |       | 15,114                                 |       | 11,583 |   |
| Less promotional allowances and credits |       | (13,811                                | )          | (5,862 | ) |
| Net revenue                             |       | $                                      | 115,092    |   | $ | 94,491 |   |

 

Our gaming revenue for the three months ended June 30, 2005increased relative to the comparable period last year due to the opening ofSeneca Allegany Casino on May 1, 2004, which added approximately 1,886slot machines and 24 table games to our operations, the addition of 315 slotmachines at Seneca Niagara Casino and continued growth in our patron base. Asof June 30, 2005, our casinos had an aggregate of 103 table games, and5,143 slot machines available to our patrons, representing a netdecrease of 18 table games, and a net increase of 268 slot machines from June 30,2004. During these periods, the number of patrons enrolled in our Seneca LinkPlayer’s Card program has steadily increased. As of June 30, 2005, we hadover 863,000 patrons enrolled, an increase of approximately 347,000 patronsover the number of enrolled members at June 30, 2004.

 

Our net gamingrevenue, net of promotional credits of $4.8 million in 2005 only, increased$20.2 million, or 23%, for the three months ended June 30, 2005relative to the comparable period ended June 30, 2004. During the threemonths ended June 30, 2005, Seneca Niagara Casino net gaming revenueincreased $1.9 million, or 3%. This increase was principally due to highernet slot revenue of $2.6 million, or 4%, partially offset by a $0.6 million or5% decrease in table games revenue during the comparative periods. The amountof money wagered, or dropped, at Seneca Niagara Casino declined by $3.7million, or 5%, with a consistent hold percentage for both periods. Weattribute this decline to several factors including the opening of our SenecaAllegany Casino, and the reduction of the number of games during the thirdquarter 2005.  Seneca Allegany Casinoaccounted for $35.4 million of net gaming revenue for the three monthsended June 30, 2005.

 

Our food andbeverage revenue and retail revenue have increased in direct relation to ourincrease in gaming revenue. There is a direct relation between our food andbeverage revenue and retail revenue to our gaming revenue because a significantportion of this revenue is from players’ point redemptions. For both the threemonths ended June 30, 2005 and 2004, 64% of our food and beverage revenueand 88% and 86% of our retail revenue, respectively, represented players’ pointredemptions. For the three months ended June 30, 2005, food and beveragerevenue increased $2.0 million, or 27% to $9.5 million. For the three monthsended June 30, 2005 Seneca Niagara Casino generated an additional $0.2million compared to the prior period, primarily due to increased utilization ofplayers’ points and the opening in May 2004 of our

 

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steakhouse. SenecaAllegany Casino generated $2.9 million in food and beverage revenue duringthe three months ended June 30, 2005.

 

For the threemonths ended June 30, 2005, our retail, entertainment and other revenueincreased by $1.1 million compared to the comparable 2004 period. Thisincrease was primarily attributable to higher revenue at our Seneca AlleganyCasino of $0.9 million, due to operating for an additional month during the2005 fiscal third quarter.

 

*Detailed Operating Expenses Information*

 
| ** **                              | ** ** | **Three Months Ended  June 30,**  | ** ** |
|-----------------------------------------|------------|----------------------------------------|------------|
| ** **                              | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| ** **                              | ** ** | **(unaudited, dollars in  thousands)** | ** ** |
| Operating expenses:                     |       |                                   |       |   |   |
| Gaming                                  |       | $                                      | 28,647     |   | $ | 24,434 |   |
| Food and beverage                       |       | 8,677                                  |       | 7,063 |   |
| Retail, entertainment and other         |       | 2,523                                  |       | 1,750 |   |
| Advertising, general and administrative |       | 28,280                                 |       | 24,530 |   |
| Pre-opening costs                       |       | 208                                    |       | 2,926 |   |
| Depreciation and amortization           |       | 6,555                                  |       | 4,865 |   |
| Operating expenses                      |       | $                                      | 74,890     |   | $ | 65,568 |   |

 

Gaming expensesprincipally consist of costs incurred from operating our table games and slotmachines, of which the primary components are related payroll and employeebenefit costs, and the slot exclusivity fee due to New York State pursuant tothe Compact. For the three months ended June 30, 2005 and 2004, the slotexclusivity fee was $17.5 million and $13.9 million, respectively.Seneca Allegany Casino incurred a slot exclusivity fee of $5.9 million and$27.0 million during the three months ended June 30, 2005 and 2004,respectively. In January 2005, we transferred $57.1 million to the Nationfor payment of the exclusivity fee for the 2004 calendar year. Effective January 1,2005, we are transferring the monthly slot exclusivity fee to the Nation in themonth subsequent to the liability being incurred. Currently, the exclusivityfee is 18% of the slot machine net drop (money dropped into the machines afterpayout but before our expenses). This fee will increase to 22% on January 1,2007 and to 25% on January 1, 2010.

 

Food and beverageexpenses are costs we incur for the operation of our restaurants, snack barsand beverage outlets. The primary components of these expenses are the cost offood and beverages and related payroll and employee benefit expenses. For thethree months ended June 30, 2005 our food and beverage costs increased$1.6 million, or 23%. This increase was due to a $2.4 million increase in foodand beverage revenue for the three months ended June 30, 2005 incomparison to the same period in 2004. $1.9 million of this revenueincrease was at Seneca Allegany Casino due primarily to operating for anadditional month during the 2005 quarter in relation to the 2004 quarter.

 

Retail,entertainment and other expenses represent our costs to operate our retailshops and entertainment offerings. The components of these expenses includerelated payroll and employee benefit costs, the purchase of products offeredfor sale in our retail outlets, and

 

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contract costs forentertainers. For the three months ended June 30, 2005 in relation to thesame period in 2004, these costs increased approximately $0.7 million, or44%.  Of the increase, $0.6 million wasattributable to the operation of the Seneca Allegany retail store.

 

Advertising,general and administrative expenses are incurred to support our operations.These expenses consist primarily of related payroll and employee benefitscosts, regulatory, advertising, rent, marketing, insurance, legal and energycosts. For the three months ended June 30, 2005 and 2004, such costs were$28.3 million and $24.5 million, a $3.8 million increase, or 15%.  This was mainly attributable to a $4.6million increase at Seneca Allegany Casino, partially offset by decreases incertain promotional expenses at Seneca Niagara Casino, principally related toour bus incentive program.

 

*Non-Operating Expenses*

 

The followingtable summarizes information related to interest on our long-term debt:

 
| ** **       | ** ** | **Three Months Ended  June 30,**  | ** ** |
|------------------|------------|----------------------------------------|------------|
| ** **       | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| ** **       | ** ** | **(unaudited, dollars in  thousands)** | ** ** |
| Interest expense |       | $                                      | 59,413     |   | $ | 10,679 |   |
|                  |            |                                        |            |  |  |  |  |

 

Our interest costfor the three months ended June 30, 2005 increased $48.7 million over thethree months ended June 30, 2004. This increase was primarily attributableto the $46.7 million in interest paid in connection with the negotiated payment in full and termination ofthe Term Loan in May 2005.

 

*NetIncome (Loss)*

 

Our net loss for the three months ended June 30, 2005 of $17.9million was attributable to a charge to earnings on the early extinguishment ofthe Term Loan (consisting of interest of $46.7 million and deferred financingcosts of $2.5 million) of approximately $49.2 million.

 

**Operating Results Nine Months Ended June 30, 2005Compared to the Nine Months Ended June 30, 2004**

 

*Operating Results*

 
| ** **                              | ** ** | **Nine Months Ended  June 30,**   | ** ** |
|-----------------------------------------|------------|----------------------------------------|------------|
| ** **                              | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| ** **                              | ** ** | **(unaudited, dollars in  thousands)** | ** ** |
| Net Revenue                             |       | $                                      | 329,249    |   | $ | 244,576 |   |
| Operating expenses:                     |       |                                   |       |   |   |
| Gaming                                  |       | 85,199                                 |       | 63,384 |   |
| Food and beverage                       |       | 25,714                                 |       | 17,508 |   |
| Retail, entertainment and other         |       | 7,715                                  |       | 4,828 |   |
| Advertising, general and administrative |       | 87,147                                 |       | 61,798 |   |
| Pre-opening costs                       |       | 391                                    |       | 3,954 |   |
| Depreciation and amortization           |       | 19,391                                 |       | 11,366 |   |
| Operating income                        |       | $                                      | 103,692    |   | $ | 81,738 |   |

 

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The most importantfactors and trends contributing to our operating performance during the ninemonths ended June 30, 2005 and 2004 were the same as noted for the threemonths ended June 30, 2005 and 2004.

 

*DetailedRevenue Information*

 
| ** **                              | ** ** | **Nine Months Ended  June 30,**  | ** ** |
|-----------------------------------------|------------|---------------------------------------|------------|
| ** **                              | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| ** **                              | ** ** | **(unaudited, dollars in thousands)** | ** ** |
| Gaming revenue:                         |       |                                  |       |   |   |
| Slots                                   |       | $                                     | 269,969    |   | $ | 187,248 |   |
| Table games                             |       | 47,849                                |       | 41,469 |   |
| Other                                   |       | 3,757                                 |       | 2,007 |   |
| Gaming revenue                          |       | 321,575                               |       | 230,724 |   |
| Non-gaming revenue:                     |       |                                  |       |   |   |
| Food and beverage                       |       | 30,356                                |       | 20,858 |   |
| Retail, entertainment and other         |       | 12,591                                |       | 8,311 |   |
| Non-gaming revenue                      |       | 42,947                                |       | 29,169 |   |
| Less promotional allowances and credits |       | (35,273                               | )          | (15,317 | ) |
| Net revenue                             |       | $                                     | 329,249    |   | $ | 244,576 |   |

 

Our gaming revenuefor the nine months ended June 30, 2005 increased relative to thecomparable period last year due to the opening of Seneca Allegany Casino on May 1,2004, which added approximately 1,886 slot machines and 24 table games to ouroperations, the addition of 315 slot machines at Seneca Niagara Casino andcontinued growth in our patron base. As of June 30, 2005, our casinos hadan aggregate of 103 table games and 5,143 slot machines available to ourpatrons, representing a net decrease of 18 table games, and a net increase of268 slot machines from June 30, 2004. During these periods, the number ofpatrons enrolled in our Seneca Link Player’s Card program has steadilyincreased. As of June 30, 2005, we had over 863,000 patrons enrolled, anincrease of approximately 347,000 patrons over the number of enrolled membersat June 30, 2004.

 

Our net gamingrevenue, net of promotional credits of $10.2 million in 2005 only, increased$86.1 million, or 37%, for the nine months ended June 30, 2005relative to the comparable period ended June 30, 2004. During the ninemonths ended June 30, 2005, Seneca Niagara Casino net gaming revenueincreased $1.3 million. This was due to a $4.4 million increase in netslot revenue, partially offset by a $3.8 million decrease in table gamesrevenue.  Seneca Allegany Casinoaccounted for $96.4 million of net gaming revenue for the nine months ended June 30,2005, as compared to $17.0 million in net gaming revenue for the two months inwhich Seneca Allegany Casino was operational during the comparable period in2004.

 

Our food andbeverage revenue and retail revenue have increased in direct relation to ourincrease in gaming revenue. There is a direct relation between our food andbeverage revenue

 

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and retail revenue to ourgaming revenue because a significant portion of this revenue is from players’point redemptions.  For the nine monthsended June 30, 2005 and 2004, 65% and 63% of our food and beverage revenueand 88% and 86% of our retail revenue, respectively, represented players’ pointredemptions. For the nine months ended June 30, 2005, food and beveragerevenue increased $9.5 million, or 45% to $30.4 million. For the nine monthsended June 30, 2005, Seneca Niagara Casino generated an additional $2.4million compared to the prior period, primarily due to higher gaming revenues,increased utilization of players’ points and the opening in May 2004 ofour steakhouse. Seneca Allegany Casino generated $8.4 million in food andbeverage revenue during the nine months ended June 30, 2005, representinga $7.1 million increase over its two months of operations during 2004.

 

For the ninemonths ended June 30, 2005, our retail, entertainment and other revenueincreased by $4.3 million compared to the comparable 2004 period. Thisincrease was primarily attributable to higher revenue at our Seneca AlleganyCasino of $2.8 million, principally retail, and a $1.5 million increase inrevenue at Seneca Niagara Casino.

 

*Detailed Operating Expenses Information*

 
| ** **                              | ** ** | **Nine Months Ended  June 30,**  | ** ** |
|-----------------------------------------|------------|---------------------------------------|------------|
| ** **                              | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| ** **                              | ** ** | **(unaudited, dollars in thousands)** | ** ** |
| Operating expenses:                     |       |                                  |       |   |   |
| Gaming                                  |       | $                                     | 85,199     |   | $ | 63,384 |   |
| Food and beverage                       |       | 25,714                                |       | 17,508 |   |
| Retail, entertainment and other         |       | 7,715                                 |       | 4,828 |   |
| Advertising, general and administrative |       | 87,147                                |       | 61,798 |   |
| Pre-opening costs                       |       | 391                                   |       | 3,954 |   |
| Depreciation and amortization           |       | 19,391                                |       | 11,366 |   |
| Operating expenses                      |       | $                                     | 225,557    |   | $ | 162,838 |   |

 

Gaming expensesprincipally consist of costs incurred from operating our table games and slotmachines, of which the primary components are related payroll and employeebenefit costs, and the slot exclusivity fee due to New York State pursuant tothe Compact. For the nine months ended June 30, 2005 and 2004, the slotexclusivity fee was $49.0 million and $35.2 million, respectively.Seneca Allegany Casino incurred a slot exclusivity fee of $15.5 millionduring the nine months ended June 30, 2005, in comparison to $5.9 millionfor the two months of operations during 2004.

 

For the ninemonths ended June 30, 2005 our food and beverage costs increased $8.2million, or 47%. This increase was due to a $4.1 million increase in productcosts relating to a $9.5 million increase in consolidated food and beveragerevenues, along with higher payroll and benefits costs during 2005 in relationto the prior year.  The higher costs reflectthe additional seven months of operations during 2005 at Seneca AlleganyCasino, and also one additional month of operations of our steakhouserestaurant at Seneca Niagara Casino, which opened on May 1, 2004.

 

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For the ninemonths ended June 30, 2005, retail, entertainment and other expensesincreased approximately $2.9 million, or 60%. Of the increase, $2.0 million wasattributable to the operation of the Seneca Allegany retail store.

 

For the nine monthsended June 30, 2005, advertising, general and administrative expensesincreased approximately $25.3 million, or 41%. This increase was mainlyattributable to a $25.9 million increase in such costs at Seneca AlleganyCasino.

 

*Non-Operating Expenses*

 

The followingtable summarizes information related to interest on our long-term debt:

 
| ** **       | ** ** | **Nine Months Ended  June 30,**   | ** ** |
|------------------|------------|----------------------------------------|------------|
| ** **       | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| ** **       | ** ** | **(unaudited, dollars in  thousands)** | ** ** |
| Interest expense |       | $                                      | 82,218     |   | $ | 20,968 |   |
|                  |            |                                        |            |  |  |  |  |

 

Our interest costfor the nine months ended June 30, 2005 represents an increase of $61.3million over the comparable period in 2004. This was primarily due to the $46.7million in interest paid in connection with the negotiated payment in full andtermination of the Term Loan in May 2005. The remainder of the increasewas attributable to the 2004senior notes issued in May 2004, net of capitalized interest.

 

*NetIncome*

 

Net* *incomefor the nine months ended June 30, 2005 was $24.8 million compared to$61.6 million in the comparable 2004 period, a decrease of $36.8 million, or60%.  The decrease was attributable to acharge to earnings of approximately $49.2 million loss incurred on the earlyextinguishment of the Term Loan, offset by the increase in operating incomefrom the operations of the Seneca Allegany Casino, which opened May 1,2004

 

**Liquidity and Capital Resources**

 

*Cash Flows*

 
| ** **                                           | ** ** | **Nine Months Ended  June 30,**   | ** ** |
|------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                           | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| ** **                                           | ** ** | **(unaudited, dollars in  thousands)** | ** ** |
| Net cash provided by operations                      |       | $                                      | 7,417      |   | $ | 87,152 |   |
|                                                 |       |                                   |       |   |   |
| Cash flows relating to investing activities:         |       |                                   |       |   |   |
| Capital expenditures                                 |       | (124,179                               | )          | (112,068 | ) |
| Payments for land acquisitions and other assets      |       | (197                                   | )          | (7,203 | ) |
| Purchase of investments                              |       | (44,998                                | )          | — |   |
| Net cash used in investing activities                |       | (169,374                               | )          | (119,271 | ) |
|                                                 |       |                                   |       |   |   |
| Cash flows relating to financing activities:         |       |                                   |       |   |   |
| Payments to sinking fund, net                        |       | (11,917                                | )          | (6,014 | ) |
| Proceeds from long-term debt                         |       | 193,000                                |       | 341,966 |   |
| Repayments of long-term debt                         |       | (80,325                                | )          | (47,661 | ) |
| Payment of deferred financing costs                  |       | (4,793                                 | )          | (11,576 | ) |
| Payment for interest rate cap                        |       | —                                 |       | (2,188 | ) |
| Proceeds from sale of interest rate cap              |       | 683                                    |       | — |   |
| Dividends paid to the Nation                         |       | (6,092                                 | )          | (26,722 | ) |
| Net cash used in financing activities                |       | 90,556                                 |       | 247,805 |   |
|                                                 |       |                                   |       |   |   |
| Net increase (decrease) in cash and cash equivalents |       | $                                      | (71,401    | ) | $ | 215,686 |   |

 

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*CashFlows—Operating Activities.*  The decrease in cashflows from operations during the nine months ended June 30, 2005 comparedto the same period in 2004 resulted principally from lower net income in 2005in comparison with the comparable period in 2004.  Although operating income for the nine monthsended June 30, 2005 increased $11.3 million, or 39%, net income wasnegatively impacted by the $46.7 million in interest paid in connection withthe negotiated payment in full and termination of the Term Loan. In addition,the Company paid exclusivity fees in the 2005 period for January through May 2005as well as for the 2004 calendar year, while the payment in the 2004 period wasonly for the 2003 calendar year.  Thiswas partially offset by an additional seven months of operations at SenecaAllegany Casino during the 2004 period, continued market penetration and theincrease in the membership of our Seneca Link Player’s Card program.

 

*CashFlows—Investing Activities.*  Our capitalexpenditures of $124.2 million during the nine months ended June 30,2005 were comprised of $76.0 million of costs associated with the constructionof the Seneca Niagara luxury hotel, and $29.2 million related to theconstruction of the Seneca Allegany garage and hotel. Purchases of investmentsrepresent short-term investments of excess cash in instruments having amaturity of more than 90 days.

 

*Cash Flows—Financing Activities.*  SNFGC paid in full the $80.0 million outstanding principal balance of its TermLoan in May 2005. The negotiated payment in full of the Term Loan resultedin a charge to earnings on the early extinguishment of the Term Loan ofapproximately $49.2 million, including the write-off of $2.5 million ofdeferred financing costs. Also in May 2005, SGC issued an additional$200.0 million senior notes as an add-on to our existing $300.0 million seniornotes issued in May 2004.

 

*PrincipalDebt Arrangements.*  As of June 30, 2005, ourlong-term debt consists of $300.0 million in 2004 senior notes and $200.0million in 2005 senior notes. We pay a fixed interest rate of 71⁄4% annually onboth the 2004 and 2005 senior notes.

 

During the next24 months, we plan to make substantial capital improvements to our gamingfacilities. In May 2004, at Seneca Niagara Casino we commencedconstruction of a new 604-room luxury hotel, including 35,000 square feet ofadditional gaming space with approximately 950 slot machines. Until recently,we expected the cost of constructing and equipping of this hotel to beapproximately $200.0 million, representing $153.0 million inconstruction costs pursuant to a guaranteed maximum fixed price design andconstruction contract for the luxury hotel, which includes a constructioncontingency of approximately

 

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$8.6 million, andapproximately $47.0 million for furniture, fixtures and equipment. We haverecently been informed by the designer/builder that the cost to complete theluxury hotel will exceed $200.0 million. We had based our $200.0 million estimate on the guaranteed maximumcontract sum of $153.0 million provided by the designer/builder in February 2004.We expect to receive a revised construction cost from the designer/builder inthe next few weeks.  We are currentlyevaluating our options to (1) enable timely completion of the luxury hoteland (2) attempt to ensure that the appropriate parties bear the additionalcost to complete the luxury hotel.  SenecaNiagara Casino will remain open during the construction and completion of theluxury hotel.

 

The Nation intendsto acquire the remaining approximately 26 acres of the approximately 50 acresin the City of Niagara Falls, New York, designated by New York State under theCompact for ownership by the Nation. Under the Compact, the Nation is requiredto fund the acquisition of this property, including all related costs andexpenses. As security for the Nation’s obligations to pay site acquisitioncosts and in furtherance of the ongoing condemnation proceeding, the Nationmust deliver to the Empire State Development Corporation, or ESDC, one or twoletter(s) of credit in the aggregate amount of (a) 150% of the estimate ofthe total remaining site acquisition costs not yet paid by the Nation, (b) anyadditional amount required by a court having jurisdiction over the proceedings,and (c) any other costs or expenses incurred or that may be incurred byESDC.  The Nation presently estimates150% of site acquisition costs to be approximately $32.5 million.

 

We haveconstructed a 1,850 space-parking garage and are constructing a 220-room hoteland casino at our Seneca Allegany Casino. We estimate the cost to construct andequip the garage and hotel and casino to be between $180.0 million and$185.0 million. The garage opened on July 1, 2005.  We expect the hotel to be opened in thelatter part of 2006.

 

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 2005 seniornotes are treated as a single class with the 2004 senior notes and areidentical to the 2004 senior notes, except for certain tax attributes and priorto November 1, 2005 the amount of interest accrued thereon.  Gross proceeds on the 2005 senior notes wereapproximately $193.0 million. Such proceeds were, or will be, used to (a) payin full and terminate on May 23, 2005, the senior secured term loan, orthe Term Loan, made by Freemantle Limited, or Freemantle, to SNFGC in November 2002,for a negotiated amount of approximately $126.7 million, representing $80.0million in outstanding principal and approximately $46.7 million for intereston such principal, at a prescribed interest rate, that would have otherwisebeen payable if the Term Loan had not been paid on May 23, 2005, but wasinstead paid 81⁄2 months prior to its November 22, 2007 stated maturity(resulting in a reduction of future interest payments that would have otherwisebeen payable under the Term Loan if it had not been paid in full, byapproximately $18.0 million), (b) to fund certain costs associated withthe expansion of our operations, (c) to pay the fees and expensesassociated with the offering of the 2005 senior notes and (d) for generalcorporate purposes.  Interest on the 2004and 2005 senior notes is payable semi-annually on November 1 and May 1.The 2004 and 2005 senior notes are unsecured and rank equally. As of June 30,2005, aggregate accrued interest on the 2004 and 2005 senior notes was$5.2 million.

 

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The payment in full of the Term Loan resulted in a charge to earningson the early extinguishment of the Term Loan of approximately $49.2 million,including the write off of $2.5 million of deferred financing costs.

 

We expect cashgenerated from our operations and available cash and cash equivalents as of June 30,2005 to be sufficient to fund our expansion plans described above, service ourdebt, and meet our working capital requirements for the near future. However,our ability to fund our operations, make planned capital expenditures andservice our debt depends on our future operating performance and cash flow,which are in turn subject to prevailing economic conditions and to financial,business and other factors, some of which are beyond our control. Additionally,unlike traditional corporations, we are prohibited by law from generating cashthrough an offering of equity securities and our ability to incur additionalindebtedness is limited under the terms of the indenture governing the 2004 and2005 senior notes.

 

We are highlyleveraged and have significant interest payment requirements on our 2004 and2005 senior notes. As such, limitations on our capital resources could force usto delay or abandon capital projects as well as the construction anddevelopment of new properties.

 

**Contractual Obligations**

** **

The Company’scontractual obligations have changed materially from the disclosures in our 2004 Form 10-K as a result ofthe payment in full and termination of the Term Loan, elimination of therelated sinking fund obligation and issuance of the 2005 senior notes.

 

**Item 3.**           Quantitative andQualitative Disclosures About Market Risk

** **

Reference is madeto our 2004 Form 10-K for a complete discussion of the Company’s marketrisk. This market risk information has materially changed as a result of thepayment in full and termination of the Term Loan, which resulted in theelimination of all the Company’s variable rate debt and related variable rateinterest risk.

 

**Regulation**

** **

Our operations areregulated by Nation laws, the Compact and federal statutes, most notably theIndian Gaming Regulatory Act, or IGRA. Several bills have been proposed duringthe current and recent sessions of U.S. Congress that could affect Indian gaming.Notably, though its proposed legislation has yet to be presented to Congress,the Policies and Procedures Subproject of the Bureau of Indian Affairs hasproposed sweeping changes to the federal laws concerning Indians. Certain ofsuch bills, if enacted, could impair the ability of the Nation and SGC toexpand its gaming operations and adversely impact the future growth of theNation’s revenue base. In addition, from time to time, various government officials haveproposed taxing Indian casino gaming or otherwise limiting or restricting theconduct of gaming operations by Indian tribes. Senator John McCain, Chairman ofthe Senate Indian Affairs Committee, has held a couple of hearings regardingpossible amendments to the IGRA. As it relates particularly to off-reservationgaming, there have been several Congressional hearings held by both the SenecaIndian Affairs Committee and the House Resources Committee. House ResourcesCommittee Chairman Richard Pombo has circulated a draft bill, which has not beenintroduced, to amend

 

22

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theIGRA to restrict off-reservation gaming activities by tribes. If Congress wereto enact comprehensive amendments to IGRA, such legislation could have amaterial adverse effect on the operations of SGC. In addition, under federallaw, gaming on the Nation’s lands may be dependent upon thepermissibility under New York law of certain forms of gaming or similaractivities. If New York State were to make various forms of gaming illegal oragainst public policy (or the courts were to rule similarly), or otherwiseto take a legal position adverse to the Compact or any of its provisions, suchactions could have a material adverse effect on the ability of our casinos toconduct their gaming operations as currently conducted. Moreover, a 1996 U.S.Supreme Court decision may permit a state to avoid or refuse to negotiateamendments to existing compacts such as the Compact.

 

**New Accounting Pronouncements**

** **

There are noaccounting standards that have not yet been adopted which are expected to havea material impact on our financial reporting.

 

**Item 4.**           Controls and Procedures

** **

**Evaluation of Disclosure Controlsand Procedures**

 

We maintaindisclosure controls and procedures (as that term is defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act)that are designed to ensure that information required to be disclosed in ourExchange Act reports is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and forms, and that suchinformation is accumulated and communicated to our management, including ourPresident and Chief Executive Officer, Chief Financial Officer and Senior VicePresident of Finance and Administration, as appropriate, to allow timelydecisions regarding required disclosure. In designing and evaluating thedisclosure controls and procedures, management recognized that any controls andprocedures, no matter how well designed and operated, have inherent limitationsdue to cost issues, the possibility of human error, judgments and assumptionsregarding the likelihood of future events, and the circumvention and overridingof the controls and procedures. Accordingly, even effective disclosure of controlsand procedures can provide only reasonable assurance of achieving the desiredcontrol objectives.

 

The Company’smanagement, under the supervision and with participation of our President andChief Executive Officer, Chief Financial Officer and Senior Vice President ofFinance and Administration has evaluated the effectiveness of the design andoperation of our disclosure controls and procedures. Based on that evaluation,our President and Chief Executive Officer, Chief Financial Officer and SeniorVice President of Finance and Administration have concluded that the design andoperation of our disclosure controls and procedures as of June 30, 2005provided reasonable assurance that the disclosure controls and procedures areeffective to accomplish their objectives.

 

**Changes in Internal Control over Financial Reporting**

** **

There has not beenany change in our internal control over financial reporting identified inconnection with the evaluation required by Exchange Act Rules 13a-15 or15d-15 or otherwise

 

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that occurred during thequarter ended June 30, 2005 that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

 

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**Part II.  OTHER INFORMATION**

 

**Item 1.**                                        Legal Proceedings

** **

The Compactauthorizes the Nation to use funds appropriated under the Seneca Nation LandClaims Settlement Act, or SNLCSA, to acquire parcels of land in Niagara Fallsand Erie County for gaming purposes, which land may then be placed inrestricted fee status. As previously determined by the U.S. Secretary of theInterior, the Nation possesses jurisdiction over lands placed into restrictedfee status pursuant to SNLCSA, and such lands constitute gaming eligible Indianlands as defined by the Indian Gaming Regulatory Act, or IGRA.  In May 2005, a petition was filed byDaniel T. Warren before the National Indian Gaming Commission claiming that theland acquired by the Nation in Niagara Falls and proposed to be acquired inErie County do not fall within the “discretionary grant” or “settlement lands”exemptions to the IGRA prohibition of Class III gaming on Indian land andrequesting that gaming on such lands be declared illegal. While the Nationbelieves that this petition is without merit, there can be no assurance thatthe petitioner’s claim will not be granted.

 

**Item 2.**                                        Unregistered Sales ofEquity Securities and Use of Proceeds

** **

Not applicable.

 

**Item 3.**                                        Defaults Upon Senior Securities

** **

Not applicable.

 

**Item 4.**                                        Submission of Matters to aVote of Security Holders

** **

Not applicable.

 

**Item 5.**                                        Other Information

** **

On August 15,2005, John Pasqualoni, our President and Chief Executive Officer, commencedtemporary medical leave of absence.  Mr.Pasqualoni is expected to return to his duties within the next two months.During Mr. Pasqualoni’s absence, the board of directors of SGC has designatedJoseph A. D’Amato, our Senior Vice President, Finance and Administration, asofficer in charge of our operations and to assume responsibilities and performthe functions of Mr. Pasqualoni.

 

**Item 6.**                                        Exhibits

 

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

 
| **Exhibit No.** | ** ** | **Exhibits**                                                                                                                                                                                                                                                                                  |
|----------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                                                                                                                          |
| 1.1                  | *          | Purchase Agreement, dated May 18, 2005, by and among SGC, the  Guarantors as defined therein and Merrill Lynch & Co., Merrill  Lynch, Pierce, Fenner & Smith Incorporated, Banc of America  Securities LLC and Wells Fargo Securities, LLC, as the Initial Purchasers. |
|                 |       |                                                                                                                                                                                                                                                                                          |
| 4.1                  | *          | Supplemental Indenture, dated as of May 23, 2005, to the  Indenture, dated as of May 5, 2004, among SGC, the Guarantors as defined  therein and Wells Fargo Bank, National Association, as Trustee, relating to  our $200,000,000 principal amount of                               |

 

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|   |   | 71⁄4% Senior Notes due 2012, Series B (including form of note).                                                                                                                                                                                                                                                                                                                         |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.2    | *      | Registration Rights Agreement, dated as of May 23, 2005, among  SGC, the Guarantors party thereto and Merrill Lynch & Co., Merrill  Lynch, Pierce, Fenner & Smith Incorporated, Banc of America  Securities LLC and Wells Fargo Securities, LLC, as the Initial Purchasers.                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.3    | *      | Amendment No. 1, dated May 23, 2005, to Nation Agreement,  dated May 5, 2004, between Seneca Nation of Indians, Merrill Lynch &  Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of  America Securities LLC and Wells Fargo Securities, LLC, collectively as the  Initial Purchasers, and Wells Fargo Bank, National Association, as Trustee.    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.1   |   | Term Loan Termination Agreement, dated as of May 9, 2005,  between Freemantle Limited, as Lender, and SNFGC, as Borrower (incorporated  by reference to Exhibit 10.1 to SGC’s Current Report on Form 8-K  filed with the SEC on May 10, 2005).                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.2   |   | Letter Agreement, dated June 29, 2005, for Mutual Termination of  the Agreement dated September 1, 2004 between SNFGC, as Owner, and  Klewin Building Company, Inc., as Design/Builder (for Seneca Allegany  Casino Hotel and Casino) (incorporated by reference to Exhibit 10.2 to  SGC’s Current Report on Form 8-K filed with the SEC on July 17,  2005). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.3   |   | Construction Management Agreement, dated as of July 14, 2005,  between Seneca Construction Management Corporation, as Construction Manager,  and STGC, as Owner (for Seneca Allegany Casino Phase II Hotel and Casino)  (incorporated by reference to Exhibit 10.1 to SGC’s Current Report on Form 8-K  filed with the SEC on July 17, 2005).                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 31.1   | *      | Certification of Joseph A. D’Amato, Principal Financial Officer (and  presently also performing the function of Principal Executive Officer during  the temporary medical leave of absence of John Pasqualoni), pursuant to Rule 13a-14  and 15d-14 of the Securities Exchange Act of 1934.                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 32.1   | *      | Certification of Joseph A. D’Amato, Principal Financial Officer (and presently  also performing the function of Chief Executive Officer during the temporary  medical leave of absence of John Pasqualoni), pursuant to 18 U.S.C. Section 1350,  as adopted to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                    |

 

----

*                   Filedherewith.

 

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**SIGNATURES**

 

**SENECA GAMING CORPORATION**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this reportto be signed on its behalf by the undersigned thereunto duly authorized.

 

DatedAugust 15, 2005

 

 
| /s/ Joseph A. D’Amato                         |   |
|----------------------------------------------------|--------|
| Joseph A. D’Amato                             |
| Senior Vice  President, Finance and Administration |
| (Principal  Financial and Accounting Officer)      |
|                                               |
| /s/ Annette M.  Smith                              |   |
| Annette M. Smith                                   |
| Chief Financial  Officer                           |

 

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