** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

** **

**FORM 10-Q**

** **

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

** **

**For the quarterly periodended March 31, 2008**

** **

**OR**

** **

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

** **

**For the transition periodfrom                     to           **

 

**Commission FileNumber: **333-117633

** **

**SENECA GAMING CORPORATION**

(Exact name of registrant as specified in its charter)

 

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

 

**310Fourth Street**

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

**(716) 299-1100**

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

Indicate by check markwhether the registrant has (1) has filed all reports required to be filedby Section 13 or 15 (d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

Yes x   No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

 

Yes o   No x

 

At May 15, 2008, theregistrant had no outstanding shares of common stock. The registrant is whollyowned by the Seneca Nation of Indians.

 

 

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**TABLEOF CONTENTS**

 
| **PART I.   FINANCIAL INFORMATION** |                                                                                                                       |
|----------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|
| Item 1.                                            | Financial  Statements                                                                                                      | 1 |
|                                               | Consolidated  Balance Sheets as of March 31, 2008 (Unaudited) and September 30,  2007                            | 1 |
|                                               | Consolidated  Statements of Operations for the three months and six months ended  March 31, 2008 and 2007 (Unaudited) | 2 |
|                                               | Consolidated  Statements of Cash Flows for the six months ended March 31, 2008 and  2007 (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                                                                | 23 |
| Item 4T.                                           | Controls and  Procedures                                                                                                   | 23 |
|                                               |                                                                                                                       |   |
| **PART II.   OTHER INFORMATION**         | 24                                                                                                                         |
| Item 1.                                            | Legal Proceedings                                                                                                          | 24 |
| Item 1A.                                           | Risk  Factors                                                                                                              | 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                                                                                                                   | 26 |
|                                               | Signatures                                                                                                                 |   |

 

ii

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**PART I. FINANCIAL INFORMATION**

 

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

 

**SENECAGAMING CORPORATION**

**CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

 
| ** **                        | ** ** | **March 31,**                   | ** ** | **September 30,** | ** ** |
|-----------------------------------|------------|--------------------------------------|------------|------------------------|------------|
| ** **                        | ** ** | **2008**                             | ** ** | **2007**               | ** ** |
| ** **                        | ** ** | **(Dollars in Thousands)** | ** ** |
| **Assets**                        | ** ** | ** **                           | ** ** | ** **             | ** ** |
| Current  assets:                  |       |                                 |       |                   |       |
| Cash and cash equivalents         |       | $                                    | 60,628     |                   | $          | 78,662 |   |
| Short-term investments            |       | 600                                  |       | 19,100                 |       |
| Receivables from affiliates       |       | 85                                   |       | 58                     |       |
| Other receivables, net            |       | 3,214                                |       | 3,585                  |       |
| Inventories                       |       | 3,923                                |       | 4,421                  |       |
| Other current assets              |       | 8,186                                |       | 8,194                  |       |
| Total current assets              |       | 76,636                               |       | 114,020                |       |
|                              |       |                                 |       |                   |       |
| Property  and equipment, net      |       | 725,585                              |       | 699,381                |       |
| Restricted cash                   |       | 16,653                               |       | 14,579                 |       |
| Other  long-term assets           |       | 59,458                               |       | 57,980                 |       |
|                              |       |                                 |       |                   |       |
| Total assets                      |       | $                                    | 878,332    |                   | $          | 885,960 |   |
|                              |       |                                 |       |                   |       |
| **Liabilities  and Capital**      | ** ** | ** **                           | ** ** | ** **             | ** ** |
| Current  liabilities:             |       |                                 |       |                   |       |
| Trade payables                    |       | 5,632                                |       | 6,194                  |       |
| Construction payables — SCMC |       | 13,768                               |       | 21,201                 |       |
| Distributions payable to Nation   |       | 24,000                               |       | 48,000                 |       |
| Exclusivity fees payable          |       | 9,868                                |       | 9,279                  |       |
| Accrued interest                  |       | 15,104                               |       | 15,104                 |       |
| Customer  point liability         |       | 10,051                               |       | 9,578                  |       |
| Accrued  regulatory expenses      |       | 25,652                               |       | 23,240                 |       |
| Other current liabilities         |       | 24,718                               |       | 27,773                 |       |
| Total current liabilities         |       | 128,793                              |       | 160,369                |       |
|                              |       |                                 |       |                   |       |
| Long-term  debt                   |       | 495,849                              |       | 495,347                |       |
|                              |       |                                 |       |                   |       |
| Total liabilities                 |       | 624,642                              |       | 655,716                |       |
|                              |       |                                 |       |                   |       |
| Capital:                          |       |                                 |       |                   |       |
| Retained  earnings                |       | 253,690                              |       | 230,244                |       |
|                              |       |                                 |       |                   |       |
| Total liabilities and capital     |       | $                                    | 878,332    |                   | $          | 885,960 |   |

 

See accompanyingnotes to consolidated financial statements.

 

1

----

 

**SENECAGAMING CORPORATION**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                              | ** ** | **Three Months Ended  March 31,** | ** ** | **Six Months Ended  March 31,** | ** ** |
|-----------------------------------------|------------|--------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                              | ** ** | **2008**                                         | ** ** | **2007**                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)**             | ** ** |
| ** **                              | ** ** | ** **                                       | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Revenues**                            | ** ** | ** **                                       | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | ** **                                       | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Gaming                                  |       | $                                                | 154,366    |                                           | $          | 138,404 |   | $ | 304,446 |   | $ | 279,677 |   |
| Food and beverage                       |       | 15,568                                           |       | 12,759                                         |       | 30,382 |   | 26,028 |   |
| Lodging                                 |       | 6,910                                            |       | 4,587                                          |       | 14,224 |   | 9,245 |   |
| Retail, entertainment and other         |       | 5,646                                            |       | 4,352                                          |       | 12,317 |   | 9,597 |   |
| Less: Promotional allowances            |       | (31,473                                          | )          | (24,228                                        | )          | (60,151 | ) | (48,495 | ) |
| Net revenues                            |       | 151,017                                          |       | 135,874                                        |       | 301,218 |   | 276,052 |   |
|                                    |       |                                             |       |                                           |       |   |   |   |   |
| **Expenses**                            | ** ** | ** **                                       | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | ** **                                       | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Gaming                                  |       | 41,509                                           |       | 36,440                                         |       | 82,947 |   | 69,421 |   |
| Food and beverage                       |       | 12,098                                           |       | 10,848                                         |       | 24,715 |   | 22,145 |   |
| Lodging                                 |       | 3,788                                            |       | 2,229                                          |       | 7,550 |   | 4,596 |   |
| Retail, entertainment and other         |       | 3,305                                            |       | 2,242                                          |       | 7,149 |   | 5,811 |   |
| Advertising, general and administrative |       | 47,310                                           |       | 36,871                                         |       | 96,832 |   | 72,129 |   |
| Pre-opening costs                       |       | 131                                              |       | 5,903                                          |       | 224 |   | 10,582 |   |
| Depreciation and amortization           |       | 12,287                                           |       | 11,534                                         |       | 25,929 |   | 22,610 |   |
|                                    |       |                                             |       |                                           |       |   |   |   |   |
| Total operating expenses                |       | 120,428                                          |       | 106,067                                        |       | 245,346 |   | 207,294 |   |
|                                    |       |                                             |       |                                           |       |   |   |   |   |
| Operating income                        |       | 30,589                                           |       | 29,807                                         |       | 55,872 |   | 68,758 |   |
| Other non-operating expenses            |       | (150                                             | )          | —                                         |       | (3,900 | ) | (286 | ) |
| Interest income                         |       | 374                                              |       | 1,087                                          |       | 1,122 |   | 2,491 |   |
| Interest expense                        |       | (9,872                                           | )          | (7,959                                         | )          | (19,743 | ) | (16,522 | ) |
|                                    |       |                                             |       |                                           |       |   |   |   |   |
| Net income                              |       | $                                                | 20,941     |                                           | $          | 22,935 |   | $ | 33,351 |   | $ | 54,441 |   |

 

See accompanyingnotes to consolidated financial statements.

 

2

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**SENECAGAMING CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Six Months Ended**       | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                         | ** ** | **March 31,**                   | ** ** |
| ** **                                                                         | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **                                                                         | ** ** | **(Dollars in Thousands)** | ** ** |
| **Cash flows relating to  operating activities:**                                  | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                                    | 33,351     |   | $ | 54,441 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |                                 |       |   |   |
| Depreciation and amortization                                                      |       | 25,929                               |       | 22,610 |   |
| Amortization of deferred financing costs and debt  discount                        |       | 1,619                                |       | 1,615 |   |
| Other than temporary decline in investments                                        |       | 3,900                                |       | — |   |
| Provision for bad debts                                                            |       | 22                                   |       | 91 |   |
| Loss on disposal of assets                                                         |       | 71                                   |       | — |   |
|                                                                               |       |                                 |       |   |   |
| Change in operating assets and liabilities:                                        |       |                                 |       |   |   |
| Current assets                                                                     |       | 828                                  |       | (1,923 | ) |
| Long-term assets                                                                   |       | (289                                 | )          | — |   |
| Current liabilities                                                                |       | (143                                 | )          | 3,313 |   |
|                                                                               |       |                                 |       |   |   |
| Net cash provided by operating activities                                          |       | 65,288                               |       | 80,147 |   |
|                                                                               |       |                                 |       |   |   |
| **Cash flows relating to  investing activities:**                                  | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Purchases of property and equipment                                                |       | (58,237                              | )          | (114,264 | ) |
| Land acquisition costs                                                             |       | (3,706                               | )          | (15,250 | ) |
| Sales of investments, net                                                          |       | 14,600                               |       | 37,700 |   |
| (Deposit to) withdrawal from restricted cash                                       |       | (2,074                               | )          | 11,221 |   |
|                                                                               |       |                                 |       |   |   |
| Net cash used in investing activities                                              |       | (49,417                              | )          | (80,593 | ) |
|                                                                               |       |                                 |       |   |   |
| **Cash flows relating to  financing activities:**                                  | ** ** | ** **                           | ** ** | ** ** | ** ** |
| ** **                                                                         | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Distributions paid to the Nation                                                   |       | (33,905                              | )          | (22,837 | ) |
|                                                                               |       |                                 |       |   |   |
| Net cash used in financing activities                                              |       | (33,905                              | )          | (22,837 | ) |
|                                                                               |       |                                 |       |   |   |
| Net decrease in cash                                                               |       | (18,034                              | )          | (23,283 | ) |
|                                                                               |       |                                 |       |   |   |
| Cash balances:                                                                     |       |                                 |       |   |   |
| Beginning of period                                                                |       | 78,662                               |       | 78,195 |   |
| End of period                                                                      |       | $                                    | 60,628     |   | $ | 54,912 |   |

 

See accompanying notes toconsolidated financial statements.

 

3

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**SENECAGAMING CORPORATION**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**(Unaudited)**

 

**1.**                                      Organizationand Basis of Presentation

** **

The consolidatedfinancial statements include the accounts of Seneca Gaming Corporation, or SGC,and its wholly owned subsidiaries, or, collectively, the Company.  In consolidation, all intercompany balancesand transactions have been eliminated. The accompanying unaudited consolidated financial statements have beenprepared in accordance with U.S. generally accepted accounting principles forinterim financial information. Accordingly, they do not include all of the information and notesrequired by generally accepted accounting principles for complete financialstatements.  In the opinion of SGC’smanagement, all adjustments, consisting of normal recurring accruals,considered necessary for a fair presentation have been included.  Operating results for the three months andsix months ended March 31, 2008 are not necessarily indicative of theresults that may be expected for the year ending September 30, 2008.  For further information, reference is made tothe consolidated financial statements and notes thereto included in SGC’sAnnual Report on Form 10-K for the fiscal year ended September 30,2007, or 2007 Form 10-K, as well as SGC’s other filings with theSecurities and Exchange Commission, or SEC, pursuant to the Securities ExchangeAct of 1934, as amended, and the Securities Act of 1933, as amended.

 

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

 

The Nation’s Council, orthe Council, acts as the Nation’s legislative authority, and acts on the Nation’sbehalf with respect to SGC.  The Councilenacted a gaming ordinance which established the Seneca Gaming Authority, orSGA, to regulate the gaming activities of SGC under the Compact.

 

The Council, at therequest of the SGC Board of Directors, chartered three subsidiary corporationsof SGC to develop and operate the three sites authorized by the Compact. Inaddition, the SGC Board of Directors hired the executive management of SGC,including the President and Chief Executive Officer, to oversee and manage theoperations at the three sites. The subsidiary corporations that operate thethree sites authorized by the Compact are as follows:

 

·              Seneca Niagara Falls GamingCorporation, or SNFGC

 

·              Seneca Territory GamingCorporation, or STGC; and

 

·              Seneca Erie Gaming Corporation, orSEGC

 

4

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SNFGC was formed on August 1,2002 to operate the Nation’s Class III gaming facilities in Niagara Falls,New York.  Operations at SNFGC’s casino, theSeneca Niagara Casino, commenced December 31, 2002.  On March 31, 2006, SNFGC officially completedthe phased opening of its luxury hotel expansion, which included a 604 roomluxury hotel with 118 suites of various sizes, a full-service spa, salon, andfitness center, 35,000 square feet of additional gaming space, three newrestaurants, three new retail stores, and a 25,200 square-foot multi-purposeroom and events center.  The luxury hotelis adjacent and connected to the Seneca Niagara Casino.  The entire complex, including the luxuryhotel and the Seneca Niagara Casino, is referred to as the Seneca NiagaraCasino and Hotel.

 

STGC was formed on September 20,2003 to operate the Nation’s Class III gaming facilities near Salamanca,New York on its existing territorial land. Operations at STGC’s casino, theSeneca Allegany Casino, commenced May 1, 2004.  On March 30, 2007, the phased opening ofthe permanent gaming facility and resort hotel was completed, which included apermanent 92,000 square foot gaming facility (providing 37,000 square feet moregaming space than the original 55,000 square foot temporary gaming facility), a212-room resort hotel, two fine dining restaurants, a 24 hour casualrestaurant, a spa and fitness center, and retail and other amenities.  As of March 31, 2008, the conversion ofthe former approximate 120,000 square foot temporary casino structure into anevents center with a seating capacity for 1,700 people, along with additionaladministrative and support space, was complete.  The entire complex, including the SenecaAllegany Casino and resort hotel, is referred to as the Seneca Allegany Casinoand Hotel.

 

SEGC was formed on August 9,2003 to operate the Nation’s Class III gaming facility in Erie County, NewYork.  On October 3, 2005, theNation acquired approximately nine acres of land in the inner-harbor districtof downtown Buffalo.  SEGC commencedconstruction of its Seneca Buffalo Creek Casino on those nine acres on December 8,2005 and on July 3, 2007 commenced Class III gaming on such property,in a temporary facility, in fulfillment of the requirement set forth in theNation’s Compact with the State of New York. The Nation’s exclusive right,under the Compact, to establish and operate a third Class III gamingfacility in Erie County, New York may have terminated if the Nation or SEGC hadfailed to commence Class III gaming operations in Erie County by December 9,2007.

 

The Nation’s Council has alsochartered, at the request of the SGC Board of Directors, two additionalsubsidiary corporations, Lewiston Golf Course Corporation, or LGCC, asubsidiary of SNFGC and Seneca Massachusetts Gaming Corporation, or SMGC, asubsidiary of SGC.

 

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

 

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

 

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

 

Short-term investments are classified as available forsale as defined in SFAS No. 115, *Accountingfor Certain Investments in Debt and Equity Securities*. Investments are stated at fair value.  The Company evaluates investmentsfor conditions that may indicate that an other-than-temporary decline in marketvalue has occurred. In conducting this review, numerous factors are consideredwhich, individually or in combination, may indicate that a decline isother-than-temporary. Based on this evaluation, an other-than-temporary loss onone specific investment of $3.9 million was recorded in the first half of fiscal2008 as other non-operating expense. The cost basis of this investment has beenreduced by the amount of the other-than-temporary loss recorded.

 

**3.**                                      Long-TermDebt

** **

Long-term debt, as describedbelow, consists of the 2004 and 2005 71⁄4% senior notes.

 

**71⁄4% Senior Notes**

** **

On May 5, 2004, SGCissued $300.0 million in 71⁄4% senior notes due 2012, or the 2004 seniornotes.  On May 23, 2005, SGC issued an additional $200.0 million in71⁄4% senior notes due 2012, Series B, or the 2005 senior notes.

 

5

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The 2004 and 2005 seniornotes are guaranteed by SNFGC, STGC, SEGC and LGCC. The 2005 senior notes aretreated as a single class with the 2004 senior notes and are identical to the2004 senior notes, except for certain tax attributes and prior to November 1,2005 the amount of interest accrued thereon.   Interest on the 2004and 2005 senior notes is payable semi-annually on May 1 and November 1. The 2004 and 2005 senior notes are unsecured and rank equally.  As of March 31,2008, aggregate accrued interest on the 2004 and 2005 senior notes was $15.1 million.The senior notes, which mature on May 1, 2012, are redeemable at SGC’soption in whole or in part at any time after May 1, 2008 at the redemptionprices set forth in SGC’s Indenture, are subject to redemption requirementsimposed by gaming laws and regulations and are required to be repurchased bySGC at the option of holders upon certain change of control events.

 

The Indenture governingthe 2004 and 2005 senior notes contains certain financial and non-financialcovenants.  The financial covenants include limitations on restrictedpayments, the incurrence of indebtedness and affiliate transactions, while thenon-financial covenants include reporting obligations and compliance with lawsand regulations.  As of March 31, 2008, SGC was in compliance withall covenants in the Indenture.

 

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

 

**Operating Lease Agreements with the Nation**

** **

The Nation has enteredinto operating lease agreements (each a Head Lease) with each of SNFGC, STGCand SEGC.  Due to the related partynature of these leases, which can be effectively modified by the Nation, SGCrecords monthly lease expense equal to the required payment amount for therespective month.  Lease paymentincreases under the Head Leases are restricted under the terms of the Indenturegoverning the senior notes and the Distribution Agreement referenced in Note 5.  These leases contain no renewal options orescalation clauses.

 

The Amended and Restated SNFGCHead Lease (effective October 1, 2007) has a term expiring on December 31,2023, and covers use of all land owned or to be owned by the Nation within the50 acre “footprint” described in Appendix I of the Compact, together with allNation-owned improvements thereon, including the structures formerly known asthe Niagara Falls Convention Center and Lackey Plaza, and the office buildingcurrently known as the Seneca Office Building. As of October 1, 2005, monthly lease payments under the SNFGC HeadLease were $1,287,500.  The leasepayments were increased by 3%, effective October 1, 2006, to $1,326,125per month, and an additional 3%, effective October 1, 2007, to $1,365,909per month, in each case as approved by the board of directors of each of SGCand SNFGC.  Pursuant to the terms of theAmended and Restated SNFGC Head Lease entered into on March 27, 2008, andeffective as of October 1, 2007, lease payments were further increased to$2,033,333 per month,  with such increaseeffective as of October 1, 2007.  Rentmay be further increased upon agreement of the parties, provided that noincrease may contravene, or constitute a default under, any agreement,indenture, instrument or other commitment legally binding upon the Nation orSNFGC, or to which the premises (described in the lease) are subject.

 

The STGC and SEGC HeadLeases were entered into effective as of May 1, 2004 and April 1,2006 respectively.  Both of these HeadLeases have terms expiring on December 31, 2023, and cover use of the landwhich is currently being used in operating the Seneca Allegany Casino and Hoteland Seneca Buffalo Creek Casino, respectively.  With respect to the STGC Head Lease, as of October 1,2005 monthly lease payments were $1,287,500. Payments were increased by 3%, effective October 1, 2006, to$1,326,125 per month, and by an additional 3%, effective October 1, 2007,to $1,365,909 per month in each case as approved by the board of directors ofSTGC.  Pursuant to an amendment to theSTGC Head Lease entered into on March 27, 2008, and effective as of October 1,2007, the lease payments were increased to $1,691,667 per month.  With respect to the SEGC Head Lease, for thefirst six months of the term, SEGC made monthly lease payments of $520,000 tothe Nation.  Payments were increased, effectiveOctober 1, 2006, to $1,250,000, and by an additional 3%, effective October 1,2007, to $1,287,500, in each case as approved by the board of directors of SEGC. Pursuant to an amendment to the SEGCHead Lease entered into on March 27, 2008, and effective as of October 1,2007, the lease payments were increased to $1,441,667 per month. Rent under theSTGC and SEGC Head Leases may be further increased upon agreement of the parties,provided that no increase may contravene, or constitute a default under, anyagreement, indenture, instrument or other commitment legally binding upon theNation, STGC or SEGC, respectively, or to which the premises (described in theleases) are subject.

 

6

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In connection with thelease payment increases effective as of October 1, 2007 described aboveand as required by the senior notes Indenture, an opinion of an independentfinancial advisor was obtained and delivered to the senior notes IndentureTrustee.  The opinion related to the fairmarket rental value of the leased properties. Because the Company intended(subject to compliance with the senior notes Indenture and all other applicablecommitments) that effective October 1, 2007 its aggregate rent under theHead Lease agreements would increase by $14 million for fiscal 2008, theCompany commenced recording rent expense utilizing the expected annual rentalamount during the quarter ended December 31, 2007.

 

Lease expense resultingfrom the above agreements was as follows for the three and six month periodsended March 31, 2008 and 2007:

 
| ** ** | ** ** | **Three Months Ended  March 31,** | ** ** | **Six Months Ended  March 31,** | ** ** |
|------------|------------|--------------------------------------------------|------------|------------------------------------------------|------------|
| ** ** | ** ** | **2008**                                         | ** ** | **2007**                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** ** | ** ** | **(In Millions of Dollars)**      | ** ** |
| ** ** | ** ** | ** **                                       | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| SNFGC      |       | $                                                | 5.7        |                                           | $          | 4.0 |   | $ | 12.2 |   | $ | 8.0 |   |
|       |       |                                             |       |                                           |       |   |   |   |   |
| STGC       |       | 5.0                                              |       | 4.0                                            |       | 10.1 |   | 8.0 |   |
|       |       |                                             |       |                                           |       |   |   |   |   |
| SEGC       |       | 4.8                                              |       | 3.8                                            |       | 8.7 |   | 7.5 |   |
|       |       | $                                                | 15.5       |                                           | $          | 11.8 |   | $ | 31.0 |   | $ | 23.5 |   |

 

SNFGC, STGC, and SEGC recordthe lease costs as a component of advertising, general and administrative costsin the accompanying consolidated statements of operations.  Prior to opening the temporary facility, SEGCrecorded the lease cost as a component of pre-opening costs in the accompanyingconsolidated statements of operations.

 

**OtherRelated Party Transactions**

 

SNFGC, STGC and SEGC haveeach entered into construction management agreements with Seneca ConstructionManagement Corporation, or SCMC, for certain renovations and capitalimprovements at Seneca Niagara Casino and Hotel, Seneca Allegany Hotel and Casino,and Seneca Buffalo Creek Casino, respectively. SCMC is wholly owned by the Nation. For the three and six-month periods ended March 31, 2008, SNFGC,STGC and SEGC have collectively made payments to SCMC for constructionmanagement and related fees of $0.8 million and $1.5 million, respectively.  Such fees reflect the amounts earned by SCMCfor the performance of construction management services. Additionalamounts paidto SCMC are passed-through and used to pay subcontractors, reimbursements forout-of-pocket expenses and similar costs.

 

SNFGC and STGC leasespace within both Seneca Niagara Casino and Hotel and Seneca AlleganyCasino and Hotel, respectively, for operation of poker rooms by Seneca Gaming &Entertainment, a Class II business enterprise of the Nation.  For the three-month periods ended March 31,2008 and 2007, SGC recorded $0.2 million and $0.2 million of poker room rentalincome and fees, respectively, and for the six-month periods ended March 31,2008 and 2007, SGC recorded $0.4 million and $0.4 million of rental income andfees, respectively.  At March 31,2008 and September 30, 2007, SGC has recorded $0.1 million and $0.1million, respectively, as a receivable from the Nation relating to poker roomrentals and fees.

 

Effective September 1,2006, SGC declared cash distributions to the Nation totaling $26 million,payable in thirteen equal monthly payments of $2 million beginning September 2006.  Effective December 1, 2006, SGC declaredadditional cash distributions to the Nation totaling $20 million, payable inten equal monthly payments of $2 million beginning December 2006.  Effective September 27, 2007, SGCdeclared cash distributions to the Nation totaling $48 million, payable intwelve equal monthly payments of $4 million beginning October 2007.   During the six months ended March 31,2008, SGC paid cash distributions of $24 million to the Nation pursuant to theforegoing distribution declarations. The remaining declared cash distributionsof $24 million which are payable on future payment dates are shown as ‘Distributionspayable to Nation’ on the accompanying consolidated balance sheets.  In addition to the declared cashdistributions, SGC distributed $9.7 million to the Nation under the DistributionAgreement, dated April 27, 2007, relating to the Seneca Nation of IndiansCapital Improvements Authority’s special obligation bonds during the six monthsended March 31, 2008.

 

7

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During the sixmonths ended March 31, 2008 and 2007, SGC distributed to the Nationacquired real property of $0 and $1.4 million, respectively, for use in itscasino and other related entertainment operations.  Such distribution amounts were based on theacquisition cost of the real property.

 

In addition, SGChas recorded approximately $49.6 million in land and related acquisition costsas ‘Other long-term assets’ in the accompanying consolidated balance sheets asof March 31, 2008, which are expected to be transferred to the Nation.

 

SGC is charged bythe Nation for SGA gaming regulatory services, which costs are incurred by theNation.  SGA costs charged to SGC wereapproximately $3.3 million and $2.6 million for the three months ended March 31,2008 and 2007, respectively, and $5.8 million and $5.0 million for the sixmonths ended March 31, 2008 and 2007, respectively.  SGC also incurs costs, which are passedthrough to the Nation, for New York State gaming regulatory services, New YorkState Police, Seneca Nation of Indians Marshals, Buffalo Police****and Cattaraugus County Sheriff Department services.  SGC recorded costs of approximately $2.2million and $2.0 million for the three-month periods ended March 31, 2008and 2007, respectively, and $5.1 million and $4.0 million for the six monthsended March 31, 2008 and 2007, respectively, in connection with theseservices.  At March 31, 2008 and September 30,2007, approximately $25.7 million and $23.2 million, respectively, of SGA,other regulatory, and police costs were recorded as current liabilities.

 

STGC leases office spacein a building owned by the brother of a member of SGC’s board ofdirectors.  For the three-month periodsended March 31, 2008 and 2007, such lease expense totaled $63,000 and $61,000,respectively, and for the six month periods ended March 31, 2008 and 2007,such lease expense totaled $128,000 and $123,000, respectively.

 

SNFGC, STGC, and SEGC,through a competitive bidding process, have purchased goods and services fromDRJ Enterprises, which is owned by the brother-in-law of the SGC Chairman.  Payments to DRJ Enterprises for thethree-month periods ended March 31, 2008 and 2007 totaled $211,000 and $455,000,respectively, and $397,000 and $531,000 for the six month periods ended March 31,2008 and 2007, respectively.

 

**5.**                                      Commitmentsand Contingencies

** **

**The Seneca Nation Compact**

** **

As part of its Compact,the Nation agrees to contribute to the State of New York a portion of theproceeds from the operation and conduct of each category of gaming device forwhich exclusivity exists, based on the win of such machines (cash dropped intomachines, after payouts but before expenses) and totaled on a cumulativequarterly basis to be adjusted annually at the end of the relevant calendaryear.  The exclusivity fee to the Stateof New York for years 1-4 (through December 31, 2006) was 18% payable onan annual basis.  Thereafter, theexclusivity fee is 22% for years 5-7 (through December 31, 2009) payableon a semi-annual basis, and 25% for years 8-14 (through December 31, 2016)payable on a quarterly basis.

 

Pursuant to the Compact,amounts due to New York State are payable by the Nation.  In February 2005, SNFGC and STGCcommenced monthly payments to the Nation of each entity’s prior month’sexclusivity fees.  For the three monthsended March 31, 2008 and 2007, total exclusivity fees paid to the Nation were$27.8 million and $25.1 million, respectively. Of the $27.8 million exclusivity fee for the three months ended March 31,2008, $19.1 million was attributable to SNFGC, $7.1 million was attributable toSTGC, and $1.6 million was attributable to SEGC.  For the six months ended March 31, 2008and 2007, total exclusivity fees paid to the Nation were $54.9 million and$45.8 million, respectively.  Of the $54.9million exclusivity fee for the six months ended March 31, 2008, $37.6million was attributable to SNFGC, $14.3 million was attributable to STGC, and$3.0 million was attributable to SEGC.

 

8

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**Expansion and Development Projects**

** **

As described inNote 1, the Compact provides the Nation the right to conduct Class IIIgaming activities at three sites in the western region of the State of NewYork.  The conversion of the formertemporary casino at the Seneca Allegany Casino and Hotel into a 120,000 squarefoot events center, and additional administration space was substantiallycomplete on December 31, 2007, with an official opening occurring on March 14,2008.  Exterior landscaping and façadeenhancements are expected to be performed in Summer 2008 and 2009. Theestimated cost of this project, including exterior landscaping and façadeenhancements, is approximately $40.0 million. The Company has also commenced pre-constructionand site work activities relating to additional planned development at SenecaAllegany Casino and Hotel, consisting principally of the construction of anadditional hotel tower (adding 179 to 204 additional rooms), and up to 31,000square feet of additional gaming space and related amenities, for a totalestimated cost of up to $130 million, with completion of this expansion projecttargeted for Fall 2009.

 

The Company hasbegun site preparation and is also finalizing the design and construction bidpackages for a permanent Class III gaming facility and hotel on the SenecaBuffalo Creek Territory.  Such expansionproject is targeted for completion in Summer 2010. The cost to construct andequip the Seneca Buffalo Creek Casino and Hotel is currently expected to beapproximately $333 million.  The Company hasexpanded the current temporary gaming facility to include an additional 109slot machines at a cost of approximately $1.5 million including equipment andfurnishings.  This expansion project wascompleted in late March 2008.

 

The Company also commenced construction in July 2007of an 18 hole Robert Trent Jones II designed golf course in Lewiston, New York.The total cost to construct the golf course, club house and related amenitiesis estimated to be approximately $25.5 million.  The Nation formed theLewiston Golf Course Corporation to develop, own and operate the golfcourse.  Completion of construction istargeted for Fall 2008, with an official opening planned for Summer 2009.

 

The planned expansionprojects at Allegany and Buffalo Creek, and the golf course development inLewiston, New York, will require significant capital outlays.  The ability to complete these projects by thetargeted dates, or at all, will depend on various factors including cash flowfrom operations, the availability of external financing with regard to one ormore of the projects, certain Nation and other governmental approvals, theeffects of legal and/or administrative proceedings, and adherence to projected constructiontimelines.

 

**DistributionAgreement Obligations**

 

On April 27, 2007,SGC entered into a Distribution Agreement among the Nation, the Seneca Nationof Indians Capital Improvements Authority, or the Authority, SGC and WellsFargo Bank, as Trustee, in connection with the Authority’s issuance in twoseries (one tax exempt and the other taxable) of an aggregate principal amountof $159,495,000 special obligation bonds, or the 2007 Bonds.  TheDistribution Agreement obligates SGC, subject to any contractual restrictionsapplicable to SGC (including, but not limited to, those contained in theIndenture governing SGC’s 2004 and 2005 senior notes), to make monthlydistributions to the Nation at the times and in the amounts necessary to enablethe Authority to pay the debt service on the 2007 Bonds as required under theAuthority’s indenture.  At the direction of the Nation and the Authority,SGC will pay such distributions directly to the Trustee.  The Authority’sdebt service commenced on June 1, 2007.  For the period from June 1,2007 through December 1, 2007, the Authority’s debt service averaged approximately$0.9 million per month. For the period from January 1, 2008 through December 1,2013, the Authority’s debt service averages approximately $1.8 million permonth. For the period from June 1, 2014 through December 1, 2023, theAuthority’s debt service averages approximately $1.2 million per month.The foregoing debt service averages are based on scheduled payments of interestand principal under the Authority’s indenture and bonds and do not address theeffects of any earlier call for redemption, by acceleration or otherwise. The Distribution Agreement provides that neither the Trustee nor the Authority’sbondholders will have any recourse under the Distribution Agreement to anyrevenues, assets or property of SGC or its subsidiaries should SGC fail tocomply with its distribution obligations. For the six months ended March 31, 2008, SGC distributed to theNation $9.7 million for the Authority’s debt service on the special obligationbonds.

 

9

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

** **

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

 

**Forward-Looking Statements**

 

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

 

**Overview**

** **

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

 

Asof March 31, 2008, Seneca Niagara Casino and Hotel featured over 147,000square feet of gaming space, 4,207 slot machines, 102 table games and 604 hotelrooms, and Seneca Allegany Casino and Hotel featured over 68,000 square feet ofgaming space, 2,340 slot machines, 40 table games and 212 hotel rooms.

 

OurSeneca Buffalo Creek Casino temporary facility had 244 Class III slotmachines, and no table games at March 31, 2008.  We plan to open our permanent Class IIIgaming facility and hotel on this site in 2010. See “Executive Summary – Seneca Buffalo Creek Casino,” “Part II.Item 1. — Legal Proceedings,” and “2007 Form 10-K Item 3. – LegalProceedings” for information regarding the status of, and litigation relatedto, our Seneca Buffalo Creek Casino.

 

**Executive Summary**

 

*Our Current Operations.*   We currently operate three Class III gaming facilities, SenecaNiagara Casino and Hotel on the Nation’s Niagara Territory, Seneca AlleganyCasino and Hotel on the Nation’s Allegany Territory, and the Seneca BuffaloCreek Casino (slots only temporary facility) on the Nation’s Buffalo CreekTerritory.  Our casino operations includegaming, dining, lodging, entertainment and retail.  For the three and six months ended March 31,2008, approximately 93% and 92%, respectively, of our net revenue was derivedfrom our gaming activities.

 

*Key Performance Indicators.*   Our operating results are dependent on the volume of patrons at ourcasinos and our ability to attract them for repeat visits.

 

10

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*Seneca Niagara Casino andHotel. *   Priorto the opening of our luxury hotel, Seneca Niagara Casino primarily relied ondrive-in and bus patrons from the Buffalo, Niagara Falls, and Rochester areasin New York and secondarily from the Erie, Pennsylvania area, Ohio and otherparts of New York.  Since completion ofthe phased  opening of our new luxuryhotel, expanded gaming floor and related amenities in March 2006, SenecaNiagara Casino and Hotel has experienced continuous growth in its patronbase.  The expansion of Seneca NiagaraCasino and Hotel, including the addition of our luxury hotel and otheramenities, has enabled us to increase higher-end patron volume, gaming activityand length of stay, and extend our geographic penetration and appeal to a morediverse demographic base.  The total costof the luxury hotel expansion project was approximately $234 million.

 

*Seneca Allegany Casino and Hotel.*   Since opening on May 1, 2004, Seneca Allegany Casino and Hotel hasexperienced steady growth in its patron base and net revenue.  Seneca Allegany Casino and Hotel hasattracted patrons from the southern portion of Western New York, Erie andPittsburgh, Pennsylvania, and Ohio.  Fromopening through March 31, 2008, approximately 50% of the casino’s patronbase has come from outside of the State of New York.

 

InMarch 2007 we opened a 212-room resort hotel, including two fine diningrestaurants, a 24-hour casual restaurant and other certain amenities, at SenecaAllegany Casino and Hotel after officially opening the new permanent gamingfloor in December 2006.  In March 2008we completed the conversion of the former approximate 120,000 square foottemporary casino structure into an events center with a seating capacity for1,700 people, along with additional administrative and support space.  The total cost to renovate and equip theevents center was approximately $29.0 million. We believe the new resort hotel, permanent casino and events center willprovide a first-class gaming experience for our patrons, increase their lengthof stay and maintain the competitive position of this facility in light ofcompetition in Pennsylvania, consisting principally of a new gaming facilitythat opened in late February 2007 in Erie, Pennsylvania (Presque IsleDowns), approximately 80 miles from the Seneca Allegany Casino and Hotel and120 miles from the Seneca Niagara Casino and Hotel.  Presque Isle Downs does not provide tablegames or lodging, but currently provides approximately 2,000 slot machines anddining and entertainment options that include a steakhouse, a buffet and fourlounges.

 

Asthe next phase of development at Seneca Allegany Casino and Hotel, we havecommenced design, development and pre-construction of an additional hotel tower(adding 179 to 204 new rooms), up to 31,000 square feet of additional gamingspace and related amenities, for an estimated cost of up to $130 million. Thecompletion date for this phase of construction is targeted for Fall 2009.

 

*Seneca Buffalo Creek Casino.    *On October 3, 2005, the Nation acquiredapproximately nine acres of land in the inner-harbor district of Buffalo, NewYork.  On July 3, 2007 we beganoperating a temporary Class III gaming facility (approximately 6,000square feet) featuring 135 slot machines and a snack bar.  The total cost to construct and equip thetemporary facility was approximately $6.8 million.  During the quarter ended March 31, 2008,the temporary facility was expanded to include an additional 109 slot machinesat a cost of approximately $1.5 million including equipment and furnishings. Thecurrent temporary facility is approximately 8,600 square feet, and features 244slot machines and a snack bar.

 

InOctober 2007, we formally announced our plans for a permanent casino andhotel complex on the Buffalo Creek Territory for an estimated cost of $333million.  The permanent Seneca BuffaloCreek Casino and Hotel is expected to initially feature 90,000 square feet ofgaming space, 2,000 slot machines, 45 table games, four restaurants, a 22-storyall suite hotel with approximately 200 rooms, a full-service spa and salon, a2,500-space parking garage and retail and other amenities.  Completion of the permanent Seneca BuffaloCreek Casino and Hotel is targeted for Summer 2010.  We intend to operate the permanent SenecaBuffalo Creek Casino and Hotel in a manner that will complement both SenecaNiagara Casino and Hotel and Seneca Allegany Casino and Hotel.

 

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

 

*Seneca Hickory Stick Golf Course – Lewiston, NewYork. *In March 2006,we acquired 257 acres of land with the intent to design and build achampionship level golf course in Lewiston, New York, approximately eight milesfrom 

 

11

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Seneca Niagara Casino and Hotel.  We selected theRobert Trent Jones II firm to design the golf course.  Construction of thegolf course commenced in July 2007, with an opening targeted for Summer2009.  The total cost to construct thegolf course, club house and related amenities is estimated to be approximately$25.5 million.  The Nation formed the Lewiston Golf Course Corporation, asa wholly-owned subsidiary of the Seneca Niagara Falls Gaming Corporation, todevelop, own and operate the golf course.

 

*Marketing.    *We use an integrated marketing strategy toattract and retain our patrons and to brand the Seneca name.  We coordinate our marketing events tomaximize the quality and length of stay of patron visits and to minimize competitionamong our gaming facilities.  With theopening of the luxury hotel and related amenities at the Seneca Niagara Casinoand Hotel and the resort hotel and related amenities at Seneca Allegany Casinoand Hotel, we have increased and intend to further increase our marketingefforts in the region, including areas of New York outside of the Niagara Fallsand Salamanca areas, in Pennsylvania, Ohio, and Toronto, Canada and in areasoutside the region including Michigan, Massachusetts, and Connecticut.

 

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

 

*OverallOutlook.*     SGCbelieves that it is the premier gaming operator in Western New York State andin the areas of Northern Pennsylvania and Ohio located within its primary andsecondary markets. Since the December 31, 2002 opening of the SenecaNiagara Casino, SGC has invested significantly in the development, expansionand maintenance of its gaming facilities, including investments made in thecompleted hotel and gaming expansion projects at Seneca Niagara Casino andHotel and Seneca Allegany Casino and Hotel, and the opening of the temporarycasino on the Seneca Buffalo Creek Territory. Investments are planned tocontinue in the remainder of 2008 with the landscape and façade improvements atthe Seneca Allegany Casino and Hotel, and the continuation of construction activitiesassociated with the second hotel tower at Seneca Allegany Casino and Hotel, thepermanent gaming facility on the Seneca Buffalo Creek Territory and the SenecaHickory Stick Golf Course in Lewiston, New York. These planned investments areexpected to enable SGC to maintain its position as the premier gaming operatorin the region described above.  Tofurther that objective, and to provide for expanded opportunities in theconvention and tourism markets, we continue to proceed with a master planningprocess with respect to the Niagara Falls, Allegany and Buffalo gaming andrelated facilities. A principal goal is for the facilities to complement eachother, offering diverse hotel, entertainment and gaming experiences for ourguests.

 

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

 

Although a generalweakening in the economy and external factors including higher fuel, food andcommodity prices have had a negative impact on gaming demand, SGC continues to believethat the Western New York hotel, entertainment and gaming markets areunderserved, and that the exclusivity provided by the Compact continues to giveSGC the opportunity to serve these markets by providing patrons with uniqueentertainment and gaming experiences.

 

**CriticalAccounting Policies and Estimates**

** **

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

 

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**OperatingResults - Three Months Ended March 31, 2008 Compared to the Three MonthsEnded March 31, 2007**

** **

*Operating Results*

 
| ** **                              | ** ** | **Three Months Ended**     | ** ** |
|-----------------------------------------|------------|--------------------------------------|------------|
| ** **                              | ** ** | **March 31,**                   | ** ** |
| ** **                              | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)** | ** ** |
| ** **                              | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Net revenue                             |       | $                                    | 151,017    |   | $ | 135,874 |   |
| ** **                              | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Operating expenses:                     |       |                                 |       |   |   |
| Gaming                                  |       | 41,509                               |       | 36,440 |   |
| Food and beverage                       |       | 12,098                               |       | 10,848 |   |
| Lodging                                 |       | 3,788                                |       | 2,229 |   |
| Retail,  entertainment and other        |       | 3,305                                |       | 2,242 |   |
| Advertising, general and administrative |       | 47,310                               |       | 36,871 |   |
| Pre-opening costs                       |       | 131                                  |       | 5,903 |   |
| Depreciation                            |       | 12,287                               |       | 11,534 |   |
|                                    |       |                                 |       |   |   |
| Operating income                        |       | $                                    | 30,589     |   | $ | 29,807 |   |

 

Importantfactors or trends impacting our operating results during the three months endedMarch 31, 2008 and 2007 were:

 

·                  The opening of our temporary gaming facility onthe Buffalo Creek Territory on July 3, 2007.

 

·                  Our opening of the resort hotel and permanentgaming floor at Seneca Allegany Casino and Hotel in March 2007.

 

·                  Our ability to enroll approximately 1.4million patrons in our cross-property Seneca Link Player’s Card program, whichhas enhanced our ability to use effective direct mail and targeted marketingprograms to establish patron loyalty to the Seneca brand at a profitable level.

 

·                  Our mix of slot machines, which we believe issuperior to our competition and includes the latest product introductions byleading United States and international slot manufacturers, and the on-goingdevelopment of a Seneca brand inter-property progressive link.

 

·                  Our continued expansion at and reinvestmentin both our Niagara Falls and Allegany properties.

 

·                  Smoking bans in New York and Canada whichhave helped to distinguish our properties from competitors, in addition to thestrong Canadian dollar, which has further helped to increase the number ofpatrons from Canada.

 

·                  Our opening of the Seneca Events Center atSeneca Allegany Casino and Hotel, resulting in increased entertainmentofferings for our guests, and the opening of an expanded buffet.

 

·                  The opening in February 2007 of acompeting gaming facility at Presque Isle Downs in Erie, Pennsylvania approximately  80 miles from the Seneca Allegany Casino andHotel and 120 miles from the Seneca Niagara Casino and Hotel, offeringapproximately 2,000 slot machines.

 

·                  Increases in advertising, general andadministrative expenses, including head lease expense, promotional expenses andregulatory costs.

 

·                  The effects of higher fuel prices and ageneral downturn in the broader economy, which have softened demand for ourgaming and related entertainment offerings.

 

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*Detailed Revenue Information*

 
| ** **                              | ** ** | **Three Months Ended**                     | ** ** |
|-----------------------------------------|------------|------------------------------------------------------|------------|
| ** **                              | ** ** | **March 31,**                                   | ** ** |
| ** **                              | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Unaudited, Dollars in Thousands)** | ** ** |
|                                    |       |                                                 |       |   |   |
| Gaming revenue:                         |       |                                                 |       |   |   |
| Slots                                   |       | $                                                    | 137,120    |   | $ | 121,487 |   |
| Table games                             |       | 17,132                                               |       | 16,801 |   |
| Keno                                    |       | 114                                                  |       | 116 |   |
|                                    |       |                                                 |       |   |   |
| Gaming revenue                          |       | 154,366                                              |       | 138,404 |   |
|                                    |       |                                                 |       |   |   |
| Non-gaming revenue:                     |       |                                                 |       |   |   |
| Food and beverage                       |       | 15,568                                               |       | 12,759 |   |
| Lodging                                 |       | 6,910                                                |       | 4,587 |   |
| Retail, entertainment and other         |       | 5,646                                                |       | 4,352 |   |
|                                    |       |                                                 |       |   |   |
| Non-gaming revenue                      |       | 28,124                                               |       | 21,698 |   |
| Less promotional allowances and credits |       | (31,473                                              | )          | (24,228 | ) |
|                                    |       |                                                 |       |   |   |
| Net revenue                             |       | $                                                    | 151,017    |   | $ | 135,874 |   |

 

Ourgaming revenue for the three months ended March 31, 2008 increasedrelative to the comparable period in the prior year, due to (a) theopening of our Buffalo Creek temporary gaming facility (b) higher numberof occupied rooms for the three months ended March 31, 2008 compared tothe same period ended March 31, 2007, (c) the opening of our SenecaAllegany Casino and Hotel gaming floor on December 28, 2006 and hotel on March 30,2007, (d) additional marketing programs to attract more higher levelgaming patrons, and (e) continued growth of our player database.  As of March 31, 2008, our gamingoperations featured an aggregate 142 table games and 6,791 slot machines,representing a net increase of 292 slot machines from March 31, 2007.  The number of patrons enrolled in our SenecaPlayer’s Club program increased to approximately 1.4 million  as of March 31, 2008, compared to 1.3 millionpatrons enrolled at March 31, 2007, an increase of 0.1 million or 8%.

 

Ournet gaming revenue, which includes a reduction for promotional slot credits of$14.4 million and $10.6 million in the quarters ended March 31, 2008 and2007, respectively, increased $12.1 million, or 9%.  The $3.8 million increase in promotional slotcredits was principally due to increased slot play, along with substantiallyhigher redemptions resulting from our *“Great Exchange”*marketing promotion which alternated between our Seneca Niagara and SenecaAllegany casinos and hotels each month during the three months ended March 31,2008, and allowed patrons to exchange a portion of Seneca Player’s Club pointsfor promotional slot credits.  During thethree months ended March 31, 2008, Seneca Niagara Casino and Hotel’s netgaming revenue increased $5.2 million, or 6%. This increase reflected a $4.8million increase in net slot revenue, and a $0.4 million increase in net tablegames revenue**,**attributable to higher slot volumeand higher table hold percentage in relation to the comparable quarter in theprior year.** **SenecaAllegany Casino and Hotel’s net gaming revenue for the quarter ended March 31,2008 was $35.2 million, a decrease of $0.2 million, or 1%, from the quarterended March 31, 2007.  This was dueto a $0.1 million decrease in net slot revenue, and a $0.1 million decrease innet table games revenue during the 2008 quarter, reflecting the impact of thecurrent economic downturn, including higher gas prices, on gaming demand.  Seneca Buffalo Creek Casino, which opened July 3,2007, generated $7.2 million in net gaming revenue, all attributable to slotplay.

 

Ourfood and beverage revenue has increased in direct relation to our increase ingaming revenue.  There is a direct relationshipbetween our food and beverage revenue and our gaming revenue because asignificant portion of this revenue is generated from players’ pointredemptions.

 

Forthe three months ended March 31, 2008 and 2007, 58% and 58%, respectively,of our food and beverage revenue and 78% and 83% of our retail revenue,respectively, represented players’ point redemptions.  For the three months ended March 31, 2008,our consolidated food and beverage revenue increased $2.8 million, or 22% overthe same period in 2007, to $15.6 million.

 

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SenecaNiagara Casino and Hotel’s food and beverage revenue for the quarter ended March 31,2008 increased $1.8 million, or 18%, in relation to the comparable prior yearperiod.  Seneca Allegany Casino and Hotel’sfood and beverage revenue for the quarter ended March 31, 2008 increased $1.0million, or 30% compared to the same period in 2007, reflecting the opening oftwo fine dining restaurants and a twenty-four hour casual restaurant on March 30,2007.

 

Lodgingrevenue represents rentals of rooms in the luxury hotel in Niagara Falls, whichpartially opened in late December 2005, and completely opened in late March 2006,and includes revenue from the resort hotel at Seneca Allegany Casino and Hotel,which officially opened on March 30, 2007**. **For the three months ended March 31,2008 and 2007, 17% and 15%, respectively, of our lodging revenue wasattributable to cash payments by patrons (as compared to revenue attributable to patron complimentaries).

 

Forthe three months ended March 31, 2008, our retail, entertainment and otherrevenue increased $1.3 million, or 30%, in relation to the comparable 2007period.  This increase was primarilyattributable to higher commissions received on ATM and credit cash advance services.

 

*Detailed Operating ExpensesInformation*

 
| ** **                              | ** ** | **Three Months Ended**     | ** ** |
|-----------------------------------------|------------|--------------------------------------|------------|
| ** **                              | ** ** | **March 31,**                   | ** ** |
| ** **                              | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)** | ** ** |
|                                    |       |                                 |       |   |   |
| Operating expenses:                     |       |                                 |       |   |   |
| Gaming                                  |       | $                                    | 41,509     |   | $ | 36,440 |   |
| Food and beverage                       |       | 12,098                               |       | 10,848 |   |
| Lodging                                 |       | 3,788                                |       | 2,229 |   |
| Retail, entertainment and other         |       | 3,305                                |       | 2,242 |   |
| Advertising, general and administrative |       | 47,310                               |       | 36,871 |   |
| Pre-opening costs                       |       | 131                                  |       | 5,903 |   |
| Depreciation and amortization           |       | 12,287                               |       | 11,534 |   |
| Total Operating expenses                |       | $                                    | 120,428    |   | $ | 106,067 |   |

 

Gamingexpenses principally consist of costs incurred from operating our table gamesand slot machines, of which the primary components are related payroll andemployee benefit costs, and the slot exclusivity fee due to New York Statepursuant to the Compact.   The slotexclusivity fee increased $2.7 million from $25.1 million for the threemonths ended March 31, 2007 to $27.8 million for the three months ended March 31,2008, due to higher net slot revenues.

 

Foodand beverage expenses are costs we incur for the operation of our restaurants,snack bars and beverage outlets.  Theprimary components of these expenses are the cost of food and beverage productsand related payroll and employee benefit expenses.  For the quarter ended March 31, 2008,food and beverage costs increased $1.3 million, due primarily to an increase inthe volume and cost of required food and beverage products.  Food and beverage labor increased $0.6 milliondue to additional outlets opened on March 30, 2007 as part of the resort hotelexpansion at Seneca Allegany Casino and Hotel.

 

Lodgingexpenses primarily represent our costs to operate Seneca Niagara Casino andHotel’s luxury hotel and the resort hotel at Seneca Allegany Casino andHotel.  The components of these expensesinclude payroll and other employee benefit expenses, guest amenity supplies,laundry and other expenses.  For thethree months ended March 31, 2008, lodging expenses increased $1.6million, or 70%, as compared to the three month period ended March 31,2007, with $0.5 million of the increase due to higher occupancy at the luxuryhotel in Niagara Falls, and $1.0 million of the increase in expenses due to theopening of the resort hotel at Seneca Allegany Casino on March 30, 2007.

 

Retail,entertainment and other expenses represent our costs to operate our retailshops and entertainment offerings.  Thecomponents of these expenses include related payroll and employee benefitcosts, the cost of products offered for sale in our retail outlets, andcontract costs for entertainers.  For thethree months ended March 31, 2008, these costs increased approximately $1.1million, or 47%, over the comparable 2007 period, due principally to anincrease 

 

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inheadline entertainment costs in the current year’s quarter of $0.9 million atthe Seneca Niagara Casino and Hotel and $0.3 million at the Seneca AlleganyCasino and Hotel.

 

Advertising,general and administrative expenses are incurred to support our operations.   These expenses consist primarily of relatedpayroll and employee benefits costs, regulatory, advertising, lease, marketing,insurance, legal and energy costs.  Forthe three months ended March 31, 2008 and 2007, such costs were $47.3million and $36.9 million, respectively, an increase of $10.4 million, or 28%.  The increase was mainly attributable to a $7.5million increase in Head Lease expense,  a $2.0 million increase in promotionalexpenses, a $1.1 million write off of external development costs, a $0.9million increase in regulatory costs and a $0.6 million increase in utilities,offset by a favorable adjustment in employee benefit accruals of $2.7 million.

 

Pre-openingexpenses are non-recurring costs incurred to support the expected opening ofnew facilities.  For the three monthsended March 31, 2008 and 2007, such costs were $0.1 million and $5.9million, respectively, a decrease of $5.8 million.  The decrease was primarily due to the $3.8million of Head Lease payments related to our Buffalo Creek Casino for thethree months ended March 31, 2007, and $2.0 million of pre-openingexpenses for the three months ended March 31, 2007 related to thepreparation for the opening of the resort hotel on March 30, 2007 at the SenecaAllegany Casino, each being treated as pre-opening expenses for such periods.

 

Forthe three months ended March 31, 2008 and 2007, depreciation expense was $12.3million and $11.5 million, respectively, an increase of $0.8 million, or 7%.  This increase was attributable to the openingof our resort hotel at Seneca Allegany Casino and Hotel on March 30, 2007,****and the opening of the temporary gaming floor at SenecaBuffalo Creek Casino on July 3, 2007.

 

*Non-Operating Expenses*

 

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

 
| ** **       | ** ** | **Three Months Ended**     | ** ** |
|------------------|------------|--------------------------------------|------------|
| ** **       | ** ** | **March 31,**                   | ** ** |
| ** **       | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **       | ** ** | **(Dollars in Thousands)** | ** ** |
|             |       |                                 |       |   |   |
| Interest expense |       | $                                    | 9,872      |   | $ | 7,959 |   |
|                  |            |                                      |            |  |  |  |  |

 

Ourinterest expense for the three months ended March 31, 2008 increased $1.9million over the three months ended March 31, 2007.  This increase was attributable to a $1.9million reduction in the amount of interest capitalized in the quarter ended March 31,2008 in relation to the 2007 quarter. Capitalized interest relating to construction projects for the quartersended March 31, 2008 and 2007 was $0 and $1.9 million, respectively, and isrecorded as a component of net property and equipment within the accompanyingconsolidated balance sheets.

 

16

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**Operating Results - Six Months Ended March 31,2008 Compared to the Six Months Ended March 31, 2007**

 

*Operating Results*

 
| ** **                              | ** ** | **Six Months Ended  March 31,** | ** ** |
|-----------------------------------------|------------|------------------------------------------------|------------|
| ** **                              | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)**           | ** ** |
| ** **                              | ** ** | ** **                                     | ** ** | ** ** | ** ** |
| Net revenue                             |       | $                                              | 301,218    |   | $ | 276,052 |   |
|                                    |       |                                           |       |   |   |
| Operating expenses:                     |       |                                           |       |   |   |
| Gaming                                  |       | 82,947                                         |       | 69,421 |   |
| Food and beverage                       |       | 24,715                                         |       | 22,145 |   |
| Lodging                                 |       | 7,550                                          |       | 4,596 |   |
| Retail,  entertainment and other        |       | 7,149                                          |       | 5,811 |   |
| Advertising, general and administrative |       | 96,832                                         |       | 72,129 |   |
| Pre-opening costs                       |       | 224                                            |       | 10,582 |   |
| Depreciation and amortization           |       | 25,929                                         |       | 22,610 |   |
|                                    |       |                                           |       |   |   |
| Operating income                        |       | $                                              | 55,872     |   | $ | 68,758 |   |

 

The most importantfactors and trends contributing to our operating performance during the sixmonths ended March 31, 2008 and 2007 were similar to those noted above forthe three month periods ended March 31, 2008 and 2007.

 

*Detailed Revenue Information*

 
| ** **                              | ** ** | **Six Months Ended  March 31,** | ** ** |
|-----------------------------------------|------------|------------------------------------------------|------------|
| ** **                              | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
|                                    | ** ** | **(Dollars in Thousands)**           | ** ** |
|                                    |       |                                           |       |   |   |
| Gaming revenue:                         |       |                                           |       |   |   |
| Slots                                   |       | $                                              | 268,765    |   | $ | 242,672 |   |
| Table games                             |       | 35,457                                         |       | 36,803 |   |
| Keno                                    |       | 224                                            |       | 202 |   |
|                                    |       |                                           |       |   |   |
| Gaming revenue                          |       | 304,446                                        |       | 279,677 |   |
|                                    |       |                                           |       |   |   |
| Non-gaming revenue:                     |       |                                           |       |   |   |
| Food and beverage                       |       | 30,382                                         |       | 26,028 |   |
| Lodging                                 |       | 14,224                                         |       | 9,245 |   |
| Retail, entertainment and other         |       | 12,317                                         |       | 9,597 |   |
|                                    |       |                                           |       |   |   |
| Non-gaming revenue                      |       | 56,923                                         |       | 44,870 |   |
| Less promotional allowances and credits |       | (60,151                                        | )          | (48,495 | ) |
|                                    |       |                                           |       |   |   |
| Net revenue                             |       | $                                              | 301,218    |   | $ | 276,052 |   |

 

Our gaming revenue for the six months ended March 31, 2008increased relative to the comparable period in the prior year due to (a) theopening of the Seneca Buffalo Creek Casino temporary facility, which added 135slot machines to our operations, and (b) continued growth in our patronbase.  As of March 31, 2008, ourgaming operations featured an aggregate of 142 table games and 6,791 slotmachines available to our patrons, representing a net increase of 292slot machines from March 31, 2007. During these periods, the number of patrons enrolled in our SenecaPlayer’s Club program has steadily increased. As of March 31, 2008, we had approximately 1.4 million patronsenrolled, an increase of approximately 0.1 million patrons, or 8% over thenumber of enrolled patrons at March 31, 2007.

 

17

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Our net gamingrevenue, which includes a reduction for promotional credits of $26.5 millionand $20.0 million in the six month periods ended March 31, 2008 and 2007,respectively, increased $18.2 million, or 7%, for the six months ended March 31,2008 relative to the comparable six month period ended March 31, 2007.  During the six months ended March 31,2008, Seneca Niagara Casino and Hotel’s net gaming revenue increased $4.1million, or 2%, principally attributable to higher net slot revenue offset by adecrease in table games revenue.  SenecaAllegany Casino and Hotel’s net gaming revenue for the six months ended March 31,2008 was $71.2 million, an increase of $0.4 million or 1% from the six monthsended March 31, 2007.  This minimalincrease reflects flat net slot revenue offset by an increase in table gamesrevenue.

 

Our food andbeverage revenue and retail revenue have increased in direct relation to ourincrease in gaming revenue.  There is adirect relationship between our food and beverage revenue and our gamingrevenue because a significant portion of this revenue is generated from players’point redemptions.  For the six monthsended March 31, 2008 and 2007, 56% and 58%, respectively, of our food andbeverage revenue represented Seneca Player’s Club point redemptions.  For the six months ended March 31, 2008,food and beverage revenue increased $4.4 million, or 17% to $30.4 millionversus the same period ended March 31, 2007.  Seneca Niagara Casino and Hotel’s food andbeverage revenue for the six months ended March 31, 2008 increased $2.4million, or 12%, versus the comparable period ended March 31, 2007,primarily due to the opening of an additional restaurant during the 2008 periodand volume associated with the increase in gaming revenue.  Seneca Allegany Casino and Hotel’s food andbeverage revenue for the six months ended March 31, 2008 increased $1.8million, or 29%, in relation to the comparable period ended March 31, 2007,primarily due to the effect of the opening of two fine dining restaurants andone additional bar in late March 2007, in conjunction with the hotelexpansion at Seneca Allegany Casino and Hotel.

 

Lodging revenuerepresents rentals of rooms in the luxury hotel in Niagara Falls, which openedon March 31, 2006, and the rentals of rooms in the resort hotel on theAllegany Territory, which opened on March 30, 2007.

 

For the six monthsended March 31, 2008, our retail, entertainment and other revenueincreased by $2.7 million, or 28%, in relation to the comparable 2007period.  This increase was primarilyattributable to higher commissions received on ATM and credit cash advanceservices.  For the six months ended March 31,2008 and 2007, 75% and 85% of our retail revenue, respectively, representedSeneca Player’s Club point redemptions.

 

*Detailed Operating Expenses Information*

 
| ** **                              | ** ** | **Six Months Ended  March 31,** | ** ** |
|-----------------------------------------|------------|------------------------------------------------|------------|
| ** **                              | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Dollars in Thousands)**           | ** ** |
| ** **                              | ** ** | ** **                                     | ** ** | ** ** | ** ** |
| Operating expenses                      |       |                                           |       |   |   |
| Gaming                                  |       | $                                              | 82,947     |   | $ | 69,421 |   |
| Food and beverage                       |       | 24,715                                         |       | 22,145 |   |
| Lodging                                 |       | 7,550                                          |       | 4,596 |   |
| Retail, entertainment and other         |       | 7,149                                          |       | 5,811 |   |
| Advertising, general and administrative |       | 96,832                                         |       | 72,129 |   |
| Pre-opening costs                       |       | 224                                            |       | 10,582 |   |
| Depreciation and amortization           |       | 25,929                                         |       | 22,610 |   |
| Total Operating expenses                |       | $                                              | 245,346    |   | $ | 207,294 |   |

 

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.  The slot exclusivity feeincreased by $9.1 million from $45.8 million for the six months ended March 31,2007 to $54.9 million for the six months ended March 31, 2008.  This was due to increased slot revenue, alongwith the four percentage point increase in the slot exclusivity fee effective January 1,2007 pursuant to the Compact. Approximately $4.7 million of the $9.1 millionincrease in slot exclusivity fees was due to the 4% increase in the fee rateunder the Compact.  In addition,gaming-related payroll and benefits costs increased $0.5 million in relation tothe prior year six month period primarily due to the addition of the expandedgaming floor at Seneca Allegany Casino and Hotel, which opened in December 2006.

 

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Food and beverageexpenses are costs incurred for the operation of our restaurants, snack barsand beverage outlets.  The primarycomponents of these expenses are the cost of food and beverages and relatedpayroll and employee benefit expenses. For the six months ended March 31, 2008, food and beverage costsincreased $2.6 million due to an increase in required food and beverageproducts, and food and beverage payroll and benefits accounted for $1.6 millionof this increase due to the increased staffing related to the opening of threeadditional restaurants and one additional bar, in conjunction with the hotelexpansion at Seneca Allegany Casino and Hotel.

 

Lodging expensesprimarily represent our costs to operate SNFGC’s luxury hotel, and STGC’s resorthotel, which completely opened on March 30, 2007.  The components of these expenses includepayroll and other employee benefit expenses, guest amenity supplies, utilities,laundry and other expenses.   For the sixmonths ended March 31, 2008, lodging expenses increased $3.0 million, or64%, compared to the same period in 2007, primarily due to the resort hotel atSeneca Allegany being open for the full six months in the 2008 period.

 

Retail,entertainment and other expenses represent our costs to operate our retailshops and entertainment offerings.  Thecomponents of these expenses include related payroll and employee benefitcosts, the cost of products offered for sale in our retail outlets, andcontract costs for entertainers.  For thesix months ended March 31, 2008, retail, entertainment and other expensesincreased $1.3 million, or 23%, over the comparable period in 2007, primarilydue to the increase in headline entertainment costs at Seneca Niagara Casinoand Hotel and at the new events center at the Seneca Allegany Casino and Hotel.

 

Advertising,general and administrative expenses are incurred to support ouroperations.   These expenses consistprimarily of related payroll and employee benefits costs, regulatory,advertising, lease, marketing, insurance, legal and energy costs.  For the six months ended March 31, 2008and 2007, such costs were $96.8 million and $72.1 million, respectively, a $24.7million increase, or 34%.  The increasewas mainly attributable to a $15.1 million increase in Head Lease expense, a$1.1 million write off of costs relating to exploration of potential external(off-territory) development projects, a $1.4 million increase in energy costsreflecting the full six month impact of the expanded facilities at Seneca AlleganyCasino and Hotel, a $1.8 million increase in regulatory costs, a $3.4 millionincrease in labor and related costs, and a $3.8 million increase in otheroperational costs in support of expanded facilities at both casinos, offset bya $1.9 million favorable adjustment in employee benefit accruals.

 

*Non-Operating Expenses*

 

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

 
| ** **       | ** ** | **Six Months Ended  March 31,** | ** ** |
|------------------|------------|------------------------------------------------|------------|
| ** **       | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
| ** **       | ** ** | **(Dollars in Thousands)**           | ** ** |
| ** **       | ** ** | ** **                                     | ** ** | ** ** | ** ** |
| Interest expense |       | $                                              | 19,743     |   | $ | 16,522 |   |
|                  |            |                                                |            |  |  |  |  |

 

Ourinterest expense for the six months ended March 31, 2008 increased $3.2million over the six months ended March 31, 2007.  This increase was attributable to lowercapitalized interest related to our construction of the luxury hotel at SenecaNiagara Casino and the resort hotel at Seneca Allegany Casino during the sixmonths ended March 31, 2008 and 2007, which totaled $0 million and $3.2million, respectively, and is recorded as a component of net property andequipment within the accompanying consolidated balance sheets.

 

19

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**Liquidity and Capital Resources**

 

*Cash Flows*

 
| ** **                                    | ** ** | **Six Months Ended**       | ** ** |
|-----------------------------------------------|------------|--------------------------------------|------------|
| ** **                                    | ** ** | **March 31,**                   | ** ** |
| ** **                                    | ** ** | **2008**                             | ** ** | **2007** | ** ** |
| ** **                                    | ** ** | **(Dollars in Thousands)** | ** ** |
| ** **                                    | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Net cash provided by operations               |       | $                                    | 65,288     |   | $ | 80,147 |   |
|                                          |       |                                 |       |   |   |
| Cash flows relating to investing  activities: |       |                                 |       |   |   |
| Capital expenditures                          |       | (58,237                              | )          | (114,264 | ) |
| Payments for land acquisitions                |       | (3,706                               | )          | (15,250 | ) |
| (Deposit to) withdrawal from restricted  cash |       | (2,074                               | )          | 11,221 |   |
| Sales of short-term investments, net          |       | 14,600                               |       | 37,700 |   |
| Net cash used in investing activities         |       | (49,418                              | )          | (80,593 | ) |
|                                          |       |                                 |       |   |   |
| Cash flows relating to financing  activities: |       |                                 |       |   |   |
|                                          |       |                                 |       |   |   |
| Distributions paid to the Nation              |       | (33,905                              | )          | (22,837 | ) |
| Net cash used in financing activities         |       | (33,905                              | )          | (22,837 | ) |
|                                          |       |                                 |       |   |   |
| Net decrease in cash and cash equivalents     |       | $                                    | (18,034    | ) | $ | (23,283 | ) |

 

*Cash Flows—Operating Activities.*   The $14.9 million decrease in cash flows from operations during the sixmonths ended March 31, 2008 compared to the comparable period in 2007resulted principally from a $21.1 million decrease in net income compared to theprior year, offset by a $3.3 million increase in depreciation expense and a $3.9million other than temporary decline in the value of a specific short-term investment.

 

*Cash Flows—Investing Activities.*   Our capital expenditures of $58.2 million during the six monthsended March 31, 2008****were mainlycomprised of $7.3 million of costs associated with the construction andequipping of the resort hotel, permanent gaming floor and amenities at theSeneca Allegany Casino and Hotel, $22.3 million for the conversion of thetemporary gaming facility at Seneca Allegany Casino and Hotel into an eventscenter, with related amenities, $2.1 million associated with pre-construction costsrelating to the additional hotel tower at the Seneca Allegany Casino and Hotel,$11.4 million relating to pre-construction and site work for the permanentSeneca Buffalo Creek Casino and Hotel on the Nation’s Buffalo Creek Territory,and $3.1 million relating to construction of the Seneca Hickory Stick GolfCourse.  The remaining $12 million incapital expenditures were principally for the acquisition of equipment forexisting casino operations.  Sales ofshort-term investments represent transactions in short-term investments ofexcess cash in instruments having a maturity of more than 90 days.

 

*Cash Flows—Financing Activities.*     Effective September 1, 2006, SGCdeclared a cash distribution of $26.0 million to the Nation, payable inthirteen equal installments of $2.0 million, beginning in September 2006.  Effective December 11, 2006, SGCdeclared an additional cash distribution of $20.0 million to the Nation,payable in ten equal installments of $2.0 million, beginning in December 2006.  Effective September 27, 2007, SGCdeclared cash distributions to the Nation totaling $48 million, payable intwelve equal monthly payments of $4.0 million beginning October 2007.   During the six months ended March 31,2008, SGC paid cash distributions of $24.0 million to the Nation pursuant tothe foregoing distribution declarations. The remaining declared cashdistributions of $24.0 million which are payable on future payment dates areshown as ‘Distributions payable to Nation’ on the accompanying consolidatedbalance sheets.  In addition to thedeclared cash distributions, SGC distributed $9.7 million to the Nation under theDistribution Agreement, dated April 27, 2007, relating to the SenecaNation of Indians Capital Improvements Authority’s special obligation bonds,for the six months ended March 31, 2008. During the six months ended March 31, 2008 and 2007, SGCdistributed to the Nation acquired real property of $0 and $1.4 million,respectively, for use in its casino and other related entertainmentoperations.  Such distribution amountswere based on the acquisition cost of the real property.

 

*Principal Debt Arrangements.*   As of March 31, 2008, our long-term debt consists of $300.0 millionin 2004 senior notes and $200.0 million in 2005 senior notes.  The senior notes carry a fixed annualinterest rate of 71⁄4% and semi-annual interest payments are due on May 1and November 1.

 

The 2004 and 2005 senior notes are unsecured andrank equally.  As of March 31, 2008,aggregate accrued interest 

 

20

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on the 2004 and 2005 senior notes was $15.1 million.  The senior notes mature on May 1, 2012,are redeemable at our option in whole or in part at any time after May 1,2008 at the redemption prices set forth in our Indenture, are subject toredemption requirements imposed by gaming laws and regulations and are requiredto be repurchased by us at the option of the holders upon certain change ofcontrol events.

 

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

 

In March 2008, we completed the conversion ofthe former temporary casino facility at Seneca Allegany Casino and Hotel intoan approximate 1,700 seat events center with additional administrative andsupport space.  The total cost of thetemporary casino conversion and related improvements was approximately $29million.  We are now proceeding withcertain exterior improvements to the casino, resort hotel and parking garage,including landscaping and other cosmetic improvements, at an estimated cost of$11 million, with completion targeted for Summer 2009.

 

We have commenced pre-construction and site work forour permanent Seneca Buffalo Creek Casino and Hotel on the Buffalo CreekTerritory, at an estimated cost of $333 million.  The Seneca Buffalo Creek Casino permanentfacility is expected to initially feature 90,000 square feet of gaming space,2,000 slot machines, 45 table games, four restaurants, a 22-story all suitehotel with approximately 200 rooms, a full-service spa and salon, a 2,500-spaceparking garage and retail and other amenities. Reference is made to our Annual Report on Form 10-K for the yearended September 30, 2007 for a description of certain legal proceedingsrelating to our planned Seneca Buffalo Creek Casino.  See also “Part II. Item 1 – LegalProceedings” for material developments regarding certain of these proceedings.

 

We have also commenced pre-construction andpreliminary site work for the next phase of construction at the Seneca AlleganyCasino and Hotel, which involves the design, development and construction of anadditional hotel tower (adding 179 to 204 new hotel rooms) and up to 31,000square feet of additional gaming space and related amenities, for an estimated costof up to $130 million. Completion of this phase of construction is targetedfor Fall 2009.

 

We commenced construction in July 2007 of aRobert Trent Jones II design golf course in Lewiston, New York, at an estimatedcost of $25.5 million.  Construction isprojected to be completed in Fall 2008, with an opening targeted for Summer2009.

 

With the exception of funding requirements for oneor more of our expansion and development projects, which are expected torequire obtaining external financing on acceptable terms, we expect cashgenerated from our operations, available cash and cash equivalents andshort-term investments as of March 31, 2008 to be sufficient to serviceour debt, satisfy our other financial obligations, and to meet our workingcapital requirements for the remainder of the current fiscal year.

 

Our ability to fund our operations, make plannedcapital expenditures, service our debt and satisfy our other financialobligations depends on our future operating performance and cash flow, which arein turn subject to prevailing economic conditions and to financial, businessand other factors, some of which are beyond our control. Additionally, unliketraditional corporations, we are prohibited by law from generating cash throughan offering of equity securities and our ability to incur additionalindebtedness is limited under the terms of the Indenture governing the seniornotes and the Distribution Agreement. Reference is made to our Annual Report onForm 10-K for the year ended September 30, 2007 for a description ofcertain risk factors discussing SGC’s ability to generate cash flow to completeits expansion projects.

 

We are highly leveraged and have significantinterest payment requirements under the senior notes, and distributionobligations under the Distribution Agreement. As such, limitations on ourcapital resources could force us to delay or abandon capital projects as wellas the construction and development of proposed expansion projects.

 

*Distribution Agreement Obligations*

 

On April 27, 2007, we entered into aDistribution Agreement among the Nation, the Seneca Nation of Indians CapitalImprovements Authority, or the Authority, SGC and Wells Fargo Bank, as Trustee,in connection with the Authority’s issuance in two series (one tax exempt andthe other taxable) of an aggregate principal amount of 

 

21

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$159,495,000 special obligation bonds, or the 2007Bonds.  The Distribution Agreementobligates us, subject to any contractual restrictions applicable to us(including, but not limited to, the Indenture governing our 2004 and 2005senior notes) to make monthly distributions to the Nation at the times and inthe amounts necessary to enable the Authority to pay the debt service on the2007 Bonds as required under the Authority’s indenture. At the direction of theNation and the Authority, we will pay such distributions directly to theTrustee. The Authority’s debt service commenced on June 1, 2007.  For the period from June 1, 2007 throughDecember 1, 2007, the Authority’s debt service averaged approximately$0.9 million per month. For the period from January 1, 2008 through December 1,2013, the Authority’s debt service averages approximately $1.8 million permonth. For the period from June 1, 2014 through December 1, 2023, theAuthority’s debt service averages approximately $1.2 million per month.The foregoing debt service averages are based on scheduled payments of interestand principal under the Authority’s indenture and bonds and do not address theeffects of any earlier call for redemption, by acceleration or otherwise.  The Distribution Agreement provides thatneither the Trustee nor the Authority’s bondholders will have any recourseunder the Distribution Agreement to any revenues, assets or property of SGC orits subsidiaries should we fail to comply with our distribution obligations.

 

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

 

*Other Commitments – Niagara Falls Condemnation Proceedings*

 

We have acquired approximately 45 acres in the Cityof Niagara Falls, New York of the approximate 50 acres designated by New YorkState under the Compact for ownership by the Nation, and intend to acquireapproximately three additional acres. Under the Compact, the Nation is requiredto fund the acquisition of this property, including all related costs andexpenses. As initial security for the Nation’s obligations to pay siteacquisition costs and in furtherance of the ongoing condemnation proceeding,the Nation was required to deliver, and has delivered, to the Empire StateDevelopment Corporation (ESDC) a letter of credit in the amount of $33.5million representing 150% of the then estimate of the total remaining siteacquisition costs not yet paid by the Nation. On July 13, 2006, we acquired, through the condemnation process,approximately 18 acres of land and improvements (including fixtures) fromFallsite, LLC, or Fallsite and Fallsville, LLC, or Fallsville, for an aggregateinitial advance payment of $18.0 million, which land is a portion of the landin the City of Niagara Falls, New York designated under the Compact forownership by the Nation. Of this amount, $7.7 million was drawn on the letterof credit as part of the consideration for the purchase.  In March 2007, an additional $11.5million was drawn under the letter of credit to fund the acquisition of 18additional parcels of land and certain improvements.    In December 2007, an additional $3.0million was drawn under the letter of credit to fund the acquisition of sevenadditional parcels of land owned by the City of Niagara Falls.  The current letter of credit amount has beenreduced to approximately $11.3 million. If the estimate of such siteacquisition costs increases or if certain other events occur, the Nation mayhave to provide an additional letter of credit or replace the existing one withone for a larger monetary amount or, if acceptable to the ESDC, provide asupplemental cash escrow amount.  Thisoutstanding letter of credit is 100% cash collateralized (with cash and cashequivalents) by us.

 

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

 

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

 

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fees.

 

**Regulation**

 

Ouroperations are regulated by Nation laws, the Compact and federal statutes, mostnotably the Indian Gaming Regulatory Act, or IGRA. Several bills have beenproposed during past sessions of Congress that could affect Indiangaming.  Most notably Senator McCain’s S. 2078, the Indian GamingRegulatory Act Amendments of 2006 and Congressman Pombo’s(R-CA) H. 4893, Restricting Indian Gaming to Homelands of Tribes Act of 2006,proposed additional regulations for tribes and more restrictions on “off-reservation”gaming.   With new leadership in the committees of jurisdiction overIndian Affairs in the 110th Congress, Indian gaming has received very limitedattention.  In fact, fewer Indian gaming related bills have beenintroduced and few committee hearings have been held related to Indian gaming.

 

Theadministration also has published proposed regulations relative tooff-reservation gaming.  Certain of such bills and regulations, ifenacted, could impair the ability of the Nation and SGC to expand its gamingoperations and adversely impact the future growth of the Nation’s revenue base.In addition, from time to time, various government officials have proposedtaxing Indian casino gaming or otherwise limiting or restricting the conduct ofgaming operations by Indian tribes. No assurance can be given that suchlegislation, if and when enacted by Congress, would not have a material adverseeffect on the operations of SGC. If Congress were to enact comprehensiveamendments to the IGRA, such legislation could have a material adverse effecton the operations of SGC. In addition, under federal law, gaming on the Nation’slands may be dependent upon the permissibility under New York law of certainforms of gaming or similar activities. If New York State were to make variousforms of gaming illegal or against public policy (or the courts were tosimilarly rule), or otherwise to take a legal position adverse to SGC, suchactions could have a material adverse effect on our ability to conduct ourgaming operations as currently conducted. Moreover, a 1996 U.S. Supreme Courtdecision may permit a state to avoid or refuse to negotiate amendments toexisting compacts such as the Compact.

 

**New Accounting Pronouncements**

** **

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

 

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

** **

Reference is made to our 2007 Annual Report on Form 10-Kfor a complete discussion of our market risk. This market risk information has not materially changed in the interimperiod.

 

**Item 4T.          Controlsand Procedures**

 

**Evaluation of Disclosure Controls and Procedures**

 

We maintain disclosure controls and procedures (asthat term is defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934, or the Exchange Act) that are designed toensure that information required to be disclosed in our Exchange Act reports isrecorded, processed, summarized and reported within the time periods specifiedin the SEC’s rules and forms, and that such information is accumulated andcommunicated to our management, including our President and Chief ExecutiveOfficer and principal financial officer, as appropriate, to allow timelydecisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures,management recognized that any controls and procedures, no matter how welldesigned and operated, have inherent limitations due to cost issues, thepossibility of human error, judgments and assumptions regarding the likelihoodof future events, and the circumvention and overriding of the controls andprocedures.   Accordingly, even effectivedisclosure of controls and procedures can provide only reasonable assurance ofachieving the desired control objectives.

 

SGC’s management, under the supervision of our Presidentand Chief Executive Officer, and with the participation of our President andChief Executive Officer and our Executive Director of Finance (as our principalexecutive officer and principal financial officer, respectively), has evaluatedthe effectiveness of the design and operation of our disclosure controls andprocedures.  Based on that evaluation,our President and Chief Executive Officer and 

 

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Executive Director of Finance have concluded thatthe design and operation of our disclosure controls and procedures as of March 31,2008 provided reasonable assurance that the disclosure controls and proceduresare effective to accomplish their objectives.

 

**Changes in InternalControl over Financial Reporting**

** **

There has not been any change in our internalcontrol over financial reporting identified in connection with the evaluationrequired by Exchange Act Rules 13a-15 or 15d-15 or otherwise that occurredduring the quarter ended March 31, 2008 that has materially affected, oris reasonably likely to materially affect, our internal control over financialreporting.

 

**Part II.     OTHERINFORMATION**

 

**Item 1.**            Legal Proceedings

** **

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

 

On November 6, 2006,a suit was brought in New York Supreme Court, County of Erie, by the County ofErie, New York, Joel Giambra (as County Executive), and Andrew Eszak (asCommissioner of the County of Erie Department of Environment and Planning),against the City of Buffalo, Mayor Byron Brown and the Buffalo Common Councilseeking to invalidate the agreement pursuant to which SEGC acquired the twoblock section of Fulton Street (bisecting the Buffalo Creek Territory) on thebasis that the City failed to refer the agreement to the County under Section 239-mof the New York State General Municipal Law. If the plaintiffs are successful, the Nation could be unable to conductany gaming upon lands acquired by the Nation pursuant to the SNLCSA.

 

As a material developmentfor the quarter ended March 31, 2008, upon taking office on January 1,2008, the newly elected Erie County Executive withdrew the County of Erie fromthe suit, and the action was dismissed on January 4, 2008.

 

***Warrenv. United States (1:06-c-00226-JTE (WDNY))***

 

On or about April 6,2006, an action was filed in the United States District Court, Western Districtof New York, by Daniel T. Warren, a pro se plaintiff, against the United Statesof America, the United States Department of the Interior, the National IndianGaming Commission, and five individuals in their official capacities as ActingSecretary of the Interior, Acting Assistant Secretary of the Interior forIndian Affairs and Chairman of the National Indian Gaming Commission, as wellas Governor George E. Pataki, as Governor of the State of New York, and CherylRitchko-Buley, as Chairwoman of the New York State Racing and WageringBoard.    The action initially soughtdeclaratory and injunctive relief as to numerous matters including declaringthat IGRA is unconstitutional, that the Compact violates IGRA, that the NewYork Constitution is not preempted by IGRA, that New York does not have theauthority under state law to enter into a tribal state compact under IGRA, thatcertain actions of the defendants were not in accordance with law, and thatcertain lands purchased by the Nation were not subject to being taken intotrust or restricted fee status under the SNLCSA or were not pursuant tosettlement of a land claim within the meaning of IGRA; and enjoining thedefendants from taking actions which would further casino gambling in the Stateof New York under IGRA or on any lands acquired by the Nation pursuant toSNLCSA. On August 16, 2006, the plaintiff amended his complaint bringing:a Tenth Amendment challenge to IGRA; a claim that the Compact violates IGRA byproviding for gaming which is not otherwise lawful in New York; a claim thatboth the Compact and the statute authorizing the Governor of New York to enterinto the Compact violate various provisions of the New York State Constitution;and a claim that the United States has failed to promulgate regulations forgaming on off-reservation territory, in violation of its statutory duties.  The effect of such amendment was to limit theclaims remaining in the case, by dropping many of the federal law claims in theoriginal complaint.

 

On December 1, 2006,the court heard argument on the plaintiff’s motion to join (1) Barry E.Snyder, Sr., as President of the Seneca Nation of Indians; (2) JohnPasqualoni, as President and CEO of the Seneca Gaming Corporation; (3) theSeneca Nation of Indians; and/or (4) the Seneca Gaming Corporation, asadditional defendants.

 

On October 5, 2007,the plaintiff filed a motion to further amend the complaint to include asdefendants (1) Maurice

 

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John, as President of theSeneca Nation of Indians; (2) E. Brian Hansberry, as the new President andCEO of the Seneca Gaming Corporation (replacing John Pasqualoni); (3) theSeneca Nation of Indians; and (4) the Seneca Gaming Corporation.  On October 25, 2007, the Seneca Nationof Indians filed a response in opposition to that motion asserting that (1) themotion to amend the complaint was not properly before the court because it ispremised upon a finding that the Nation is a necessary and indispensible party,and (2) the motion to amend is futile because the Nation and its officersare protected by sovereign immunity.  Asof May 1, 2008, the court had not ruled on this motion.

 

Dispositive motions todismiss on behalf of both the plaintiff and the defendants have not yet beenheard by the court.  In addition, stillpending before the court is the motion on behalf of the Seneca entities andofficers in opposition to being joined as defendants to the lawsuit on, amongother things, sovereign immunity grounds. If the plaintiff is successful in this lawsuit, the Nation would beunable to conduct any gaming upon lands acquired pursuant to SNLCSA.

 

**Item 1A.**                                                  RiskFactors

** **

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

 

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

** **

Not applicable.

 

**Item 3.**                                                           DefaultsUpon Senior Securities

** **

Not applicable.

 

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

** **

Not applicable.

 

**Item 5.**                                                           OtherInformation

** **

Not applicable.

 

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

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

 
| Exhibit  No. | ** ** | **Description**                                                                                                                                                                                                                                                                                 |
|--------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         |       |                                                                                                                                                                                                                                                                                            |
| 10.1         |       | Amended and Restated  Head Lease Agreement between Seneca Niagara Falls Gaming Corporation and the  Seneca Nation of Indians effective as of October 1, 2007 (incorporated  by reference to Exhibit 10.1 to SGC’s Current Report on Form 8-K  filed on April 1, 2008). |
|         |       |                                                                                                                                                                                                                                                                                            |
| 10.2         |       | First Amendment to Head  Lease Agreement between Seneca Territory Gaming Corporation and the Seneca  Nation of Indians effective as of October 1, 2007 (incorporated by reference  to Exhibit 10.2 to SGC’s Current Report on Form  8-K filed on April 1, 2008).            |
|         |       |                                                                                                                                                                                                                                                                                            |
| 10.3         |       | First Amendment to Head  Lease Agreement between Seneca Erie Gaming Corporation and the Seneca Nation  of Indians effective as of October 1, 2007 (incorporated by reference to  Exhibit 10.3 to SGC’s Current Report on Form 8-K filed on  April 1, 2008).            |
|         |       |                                                                                                                                                                                                                                                                                            |
| 10.4         |       | Separation Agreement  between Seneca Gaming Corporation and Patrick M. Fox dated April 8, 2008  and effective as of April 11, 2008 (incorporated by reference to Exhibit 10.1  to SGC’s Current Report on Form 8-K filed on April 8, 2008).                       |
|         |       |                                                                                                                                                                                                                                                                                            |
| 10.5         |       | Employment Agreement  between Seneca Gaming Corporation and Catherine A. Walker, dated as of  March 16, 2008 (incorporated by reference to Exhibit 10.1 to SGC’s  Current Report on Form 8-K filed on May 1, 2008).                                                    |
|         |       |                                                                                                                                                                                                                                                                                            |
| 31.1         |       | Certification of E. Brian Hansberry, principal  executive officer, pursuant to Rule 13a-14 and 15d-14 of the Securities  Exchange Act of 1934 (filed herewith).                                                                                                                            |
|         |       |                                                                                                                                                                                                                                                                                            |
| 31.2         |       | Certification of Erik T. Palmer, principal financial  officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange  Act of 1934 (filed herewith).                                                                                                                                |
|         |       |                                                                                                                                                                                                                                                                                            |
| 32.1         |       | Certification of E. Brian Hansberry, principal  executive officer and Erik T. Palmer, principal financial officer, pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 (filed herewith).                                       |

 

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**SIGNATURES**

**SENECAGAMING CORPORATION**

** **

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

 

DatedMay 15, 2008

 
| /s/ E. Brian Hansberry                       |   |
|----------------------------------------------|--------|
| E. Brian Hansberry                           |   |
| President and Chief Executive Officer        |   |
| (Principal Executive Officer)                |   |
|                                         |   |
|                                         |   |
| /s/  Erik T.  Palmer                    |   |
| Erik T. Palmer                               |   |
| Executive Director of Finance                |   |
| (Principal Financial and Accounting Officer) |   |

 

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