Table ofContents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D. C.  20549**

 

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**FORM 10-Q**

 

**(Mark One)**

 

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

 

**For thequarterly period ended March 31, 2010**

 

**OR**

 

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

 

**For thetransition period from to**

 

**CommissionFile Number: 333-115186**

 

**RIVER ROCKENTERTAINMENT AUTHORITY**

(Exact name of registrantas specified in its charter)

 

| **Not  Applicable**              | ** ** | **68-0490898**      |
|----------------------------------|------------|---------------------|
| (State or other  jurisdiction of |       | (I.R.S. Employer    |
| incorporation or  organization)  |       | Identification No.) |

 

**3250Highway 128 EastGeyserville, California 95441(707) 857-2777**

(Address, including zipcode, and telephone number,including area code, of registrant’s principal executive offices)

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes  x   No  o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate website, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  oYes  o  No

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See definitions of “large accelerated filer,” “acceleratedfiler,” and “smaller reporting 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 mark whether the Registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o No x

 

 

 

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**RIVER ROCK ENTERTAINMENT AUTHORITY**

**INDEX TO FORM 10-Q**

 
| **Item**           | ** ** | **Description**                                                                                                                              | ** ** |
|--------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------|------------|
|               |       |                                                                                                                                         |       |
| ** **         | ** ** | **PART I  — FINANCIAL INFORMATION**                                                                                                | ** ** |
|               |       |                                                                                                                                         |       |
| 1.                 |       | Unaudited  Condensed Financial Statements                                                                                                    | 4          |
|               |       | Condensed Balance Sheets-March 31, 2010  (unaudited) and December 31, 2009                                                         | 4          |
|               |       | Unaudited Condensed  Statements of Revenues, Expenses and Changes in Net Assets (Deficit) - Three  Months ended March 31, 2010 and 2009 | 5          |
|               |       | Unaudited  Condensed Statements of Cash Flows - Three Months ended March 31, 2010  and 2009                                             | 6          |
|               |       | Notes to Unaudited Condensed Financial Statements                                                                                            | 8          |
| 2.                 |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                  | 18         |
| 3.                 |       | Quantitative  and Qualitative Disclosures About Market Risk                                                                                  | 25         |
| 4T.                |       | Controls and  Procedures                                                                                                                     | 25         |
|               |       |                                                                                                                                         |       |
| ** **         | ** ** | **PART II —  OTHER INFORMATION**                                                                                                   | ** ** |
|               |       |                                                                                                                                         |       |
| 1.                 |       | Legal  Proceedings                                                                                                                           | 26         |
| 1A.                |       | Risk Factors                                                                                                                                 | 26         |
| 6.                 |       | Exhibits                                                                                                                                     | 29         |
|               |       |                                                                                                                                         |       |
| Signatures         | 30         |
|               |       |
| Exhibit Index | 30         |

 

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**CAUTIONARY STATEMENT**

 

*Except for the historical financialinformation contained herein, the matters discussed in this report on Form 10-Q(as well as documents incorporated herein by reference) may be consideredforward-looking statements within the meaning of Section 27A of the SecuritiesAct of 1933, as amended, and Section 21E of the Securities Exchange Act of1934, as amended (the “Exchange Act”). Such forward-looking statements are based upon current expectations thatinvolve risks and uncertainties and include declarations regarding the intent,belief or current expectations of us and our management and may be signified bythe words “believes,” “anticipates,” “plans,” “expects,” “intends” and similarexpressions. Our actual results and the timing of certain events may differ significantlyfrom the results discussed in the forward-looking statements. Allforward-looking statements in this document are based on information availableto us as of the date hereof, and we assume no obligation to update any suchforward-looking statements, whether as a result of new information, futureevents, or otherwise. All discussion in this report should be read inconjunction with our financial statements and the accompanying notes containedin this report.*

 

*References in this Form 10-Q tothe “Authority” and the “Tribe” are to the River Rock Entertainment Authorityand the Dry Creek Rancheria Band of Pomo Indians, respectively. The terms “we,”“us” and “our” refer to the Authority.*

 

*Our key risks are described in ourannual report on Form 10-K filed with the Securities and ExchangeCommission.*

 

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**PART I. FINANCIAL INFORMATION**

**ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)**

** **

**RIVER ROCKENTERTAINMENT AUTHORITY**

**(A Governmental Instrumentality ofthe Dry Creek Rancheria Band of Pomo Indians)**

 

**CONDENSEDBALANCE SHEETS**

 
| ** **                                      | ** ** | **March 31, 2010** | ** **  | **December 31, 2009** | ** ** |
|-------------------------------------------------|------------|-------------------------|-------------|----------------------------|------------|
| ** **                                      | ** ** | **(Unaudited)**         | ** **  | ** **                 | ** ** |
| **ASSETS**                                      | ** ** | ** **              |        |                       |       |
| CURRENT ASSETS:                                 |       |                    |        |                       |       |
| Cash and cash  equivalents                      |       | $                       | 35,860,929  |                       | $          | 31,617,507 |   |
| Accounts receivable                             |       | 225,934                 |        | 266,146                    |       |
| Inventories                                     |       | 65,992                  |        | 77,643                     |       |
| Prepaid expenses and  other current assets      |       | 1,197,413               |        | 1,379,133                  |       |
|                                            |       |                    |        |                       |       |
| Total Current Assets                            |       | 37,350,268              |        | 33,340,429                 |       |
|                                            |       |                    |        |                       |       |
| RESTRICTED CASH                                 |       | 7,099,276               |        | 7,097,526                  |       |
|                                            |       |                    |        |                       |       |
| CAPITAL ASSETS:                                 |       |                    |        |                       |       |
| Buildings and building  improvements            |       | 131,561,640             |        | 131,361,604                |       |
| Furniture, fixtures and  equipment              |       | 35,296,083              |        | 35,102,290                 |       |
| Accumulated  depreciation                       |       | (62,580,068             | )           | (60,121,221                | )          |
| Construction in progress                        |       | 74,326,761              |        | 59,588,618                 |       |
|                                            |       |                    |        |                       |       |
| Capital assets - net                            |       | 178,604,416             |        | 165,931,291                |       |
|                                            |       |                    |        |                       |       |
| DEPOSITS AND OTHER  ASSETS                      |       | 1,723,198               |        | 1,936,623                  |       |
|                                            |       |                    |        |                       |       |
| TOTAL ASSETS                                    |       | $                       | 224,777,158 |                       | $          | 208,305,869 |   |
|                                            |       |                    |        |                       |       |
| **LIABILITIES  AND NET ASSETS (DEFICIT)**       |       |                    |        |                       |       |
|                                            |       |                    |        |                       |       |
| CURRENT LIABILITIES:                            |       |                    |        |                       |       |
| Accounts payable                                |       | $                       | 2,441,212   |                       | $          | 6,060,663 |   |
| Payable to Tribe                                |       | 11,086,054              |        | —                     |       |
| Accrued liabilities                             |       | 13,028,949              |        | 7,695,373                  |       |
| Current maturities of  long-term debt           |       | 188,176                 |        | 492,203                    |       |
| Total current  liabilities                      |       | 26,744,391              |        | 14,248,239                 |       |
|                                            |       |                    |        |                       |       |
| LONG-TERM DEBT - net of  current maturities     |       | 199,466,024             |        | 199,381,712                |       |
|                                            |       |                    |        |                       |       |
| TOTAL LIABILITIES                               |       | 226,210,415             |        | 213,629,951                |       |
|                                            |       |                    |        |                       |       |
| COMMITMENTS AND  CONTINGENCIES                  |       |                    |        |                       |       |
|                                            |       |                    |        |                       |       |
| NET ASSETS (DEFICIT)                            |       |                    |        |                       |       |
| Invested in capital  assets-net of related debt |       | (21,049,784             | )           | (33,942,624                | )          |
| Restricted for capital  projects                |       | 7,099,276               |        | 7,097,526                  |       |
| Unrestricted                                    |       | 12,517,251              |        | 21,521,016                 |       |
|                                            |       |                    |        |                       |       |
| Total net assets  (deficit)                     |       | (1,433,257              | )           | (5,324,082                 | )          |
|                                            |       |                    |        |                       |       |
| TOTAL LIABILITIES AND  NET ASSETS (DEFICIT)     |       | $                       | 224,777,158 |                       | $          | 208,305,869 |   |

 

The accompanying notesare an integral part of these unaudited interim financial statements.

 

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**RIVER ROCKENTERTAINMENT AUTHORITY**

**(A Governmental Instrumentality of the Dry CreekRancheria Band of Pomo Indians)**

 

**CONDENSED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NETASSETS (DEFICIT)**

**(Unaudited)**

 
| ** **                                  | ** ** | **Three-Month Period Ended** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|
| ** **                                  | ** ** | **March 31,**                | ** ** |
| ** **                                  | ** ** | **2010**                     | ** ** | **2009** | ** ** |
| OPERATING  REVENUES:                        |       |                         |       |   |   |
|                                        |       |                         |       |   |   |
| Casino                                      |       | $                            | 30,935,377 |   | $ | 29,952,516 |   |
| Food, beverage  and retail                  |       | 1,439,312                    |       | 1,425,886 |   |
| Other                                       |       | 257,020                      |       | 128,836 |   |
|                                        |       |                         |       |   |   |
| Gross revenues                              |       | 32,631,709                   |       | 31,507,238 |   |
|                                        |       |                         |       |   |   |
| Promotional  allowances                     |       | (378,915                     | )          | (219,911 | ) |
|                                        |       |                         |       |   |   |
| Net revenues                                |       | 32,252,794                   |       | 31,287,327 |   |
|                                        |       |                         |       |   |   |
| OPERATING  EXPENSES:                        |       |                         |       |   |   |
| Casino                                      |       | 3,833,008                    |       | 4,172,882 |   |
| Food, beverage  and retail                  |       | 1,803,753                    |       | 2,062,378 |   |
| Selling, general  and administrative        |       | 10,563,323                   |       | 10,084,895 |   |
| Depreciation                                |       | 2,458,847                    |       | 2,374,610 |   |
| Gaming  commission and surveillance expense |       | 767,973                      |       | 865,501 |   |
| Compact revenue  sharing trust fund         |       | 333,750                      |       | 333,750 |   |
|                                        |       |                         |       |   |   |
| Total Operating  expenses                   |       | 19,760,654                   |       | 19,894,016 |   |
|                                        |       |                         |       |   |   |
| INCOME FROM  OPERATIONS                     |       | 12,492,140                   |       | 11,393,311 |   |
|                                        |       |                         |       |   |   |
| NON-OPERATING EXPENSE-Net:                  |       |                         |       |   |   |
| Interest expense                            |       | (5,214,736                   | )          | (5,215,500 | ) |
| Interest income                             |       | 11,400                       |       | 8,438 |   |
|                                        |       |                         |       |   |   |
| Non-operating  expense-net                  |       | (5,203,336                   | )          | (5,207,062 | ) |
|                                        |       |                         |       |   |   |
| INCOME BEFORE  DISTRIBUTIONS TO TRIBE       |       | 7,288,804                    |       | 6,186,249 |   |
|                                        |       |                         |       |   |   |
| DISTRIBUTIONS TO  TRIBE                     |       | (3,397,979                   | )          | (3,324,979 | ) |
|                                        |       |                         |       |   |   |
| CHANGE IN NET  ASSETS                       |       | 3,890,825                    |       | 2,861,270 |   |
|                                        |       |                         |       |   |   |
| NET ASSETS  (DEFICIT) - Beginning of period |       | (5,324,082                   | )          | (15,669,154 | ) |
|                                        |       |                         |       |   |   |
| NET ASSETS  (DEFICIT) - End of period       |       | $                            | (1,433,257 | ) | $ | (12,807,884 | ) |

 

The accompanying notesare an integral part of these unaudited interim financial statements.

 

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**RIVER ROCK ENTERTAINMENT AUTHORITY**

**(A Governmental Instrumentality of the Dry Creek Rancheria Band of PomoIndians)**

 

**CONDENSED STATEMENTS OF CASHFLOWS**

**(Unaudited)**

 
| ** **                                                     | ** ** | **Three-Month  Period Ended  March 31,** | ** ** |
|----------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                     | ** ** | **2010**                                 | ** ** | **2009** | ** ** |
| **CASH  FLOWS FROM OPERATING ACTIVITIES:**                     |       |                                     |       |   |   |
| Cash received  from gaming winnings and concessions            |       | $                                        | 32,195,520 |   | $ | 31,264,476 |   |
| Cash paid for  salaries and benefits                           |       | (6,625,429                               | )          | (8,030,206 | ) |
| Cash paid to  suppliers                                        |       | (10,858,616                              | )          | (10,198,251 | ) |
| Cash paid for  compact revenue sharing trust fund              |       | (333,750                                 | )          | (333,750 | ) |
|                                                           |       |                                     |       |   |   |
| Net cash provided  by operating activities                     |       | 14,377,725                               |       | 12,702,269 |   |
|                                                           |       |                                     |       |   |   |
| **CASH  FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:** |       |                                     |       |   |   |
| Payments of debt                                               |       | (304,027                                 | )          | (56,577 | ) |
| Purchases of  capital assets                                   |       | (2,899,948                               | )          | (3,908,054 | ) |
| Transfers to the  Tribe for development costs                  |       | (3,500,000                               | )          | — |   |
| Change in  restricted cash                                     |       | (1,750                                   | )          | (1,747 | ) |
| Interest paid                                                  |       | —                                   |       | (762 | ) |
| Other                                                          |       | (41,999                                  | )          | 48,294 |   |
|                                                           |       |                                     |       |   |   |
| Net cash used in  capital and related financing activities     |       | (6,747,724                               | )          | (3,918,846 | ) |
|                                                           |       |                                     |       |   |   |
| **CASH  FLOWS PROVIDED BY INVESTING ACTIVITIES:**              |       |                                     |       |   |   |
| Interest Income                                                |       | 11,400                                   |       | 8,438 |   |
|                                                           |       |                                     |       |   |   |
| **CASH  FLOWS USED IN NON-CAPITAL FINANCING ACTIVITIES:**      |       |                                     |       |   |   |
|                                                           |       |                                     |       |   |   |
| Distribution to Tribe                                          |       | (3,397,979                               | )          | (3,324,979 | ) |
|                                                           |       |                                     |       |   |   |
| **CHANGE  IN CASH AND CASH EQUIVALENTS**                       |       | 4,243,422                                |       | 5,466,882 |   |
|                                                           |       |                                     |       |   |   |
| **CASH  AND CASH EQUIVALENTS, Beginning of the period**        |       | 31,617,507                               |       | 27,348,392 |   |
|                                                           |       |                                     |       |   |   |
| **CASH  AND CASH EQUIVALENTS, End of the period**              |       | $                                        | 35,860,929 |   | $ | 32,815,274 |   |

 

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**RIVERROCK ENTERTAINMENT AUTHORITY**

**(AGovernmental Instrumentality of the Dry Creek Rancheria Band of Pomo Indians)**

 

**CONDENSED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                                  | ** ** | **Three-Month  Period Ended  March 31,** | ** ** |
|---------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                                  | ** ** | **2010**                                 | ** ** | **2009** | ** ** |
| **RECONCILIATION  OF INCOME FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:** |       |                                     |       |   |   |
|                                                                                        |       |                                     |       |   |   |
| Income From  Operations                                                                     |       | $                                        | 12,492,140 |   | $ | 11,393,311 |   |
|                                                                                        |       |                                     |       |   |   |
| Adjustments to  reconcile operating income to net cashprovided by operating activities:     |       |                                     |       |   |   |
| Depreciation                                                                                |       | 2,458,847                                |       | 2,374,610 |   |
| Changes in  operating assets and liabilities:                                               |       |                                     |       |   |   |
| Accounts  receivable                                                                        |       | 40,212                                   |       | (197,020 | ) |
| Inventories                                                                                 |       | 11,651                                   |       | 25,204 |   |
| Prepaid expenses                                                                            |       | 181,720                                  |       | 199,760 |   |
| Accounts payable                                                                            |       | (1,265,421                               | )          | (921,353 | ) |
| Accrued  liabilities                                                                        |       | 458,576                                  |       | (172,243 | ) |
| Total  adjustments                                                                          |       | 1,885,585                                |       | 1,308,958 |   |
|                                                                                        |       |                                     |       |   |   |
| **NET  CASH PROVIDED BY OPERATING ACTIVITIES**                                              |       | $                                        | 14,377,725 |   | $ | 12,702,269 |   |
|                                                                                        |       |                                     |       |   |   |
| **SUPPLEMENTARY  SCHEDULE OF NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES:**            |       |                                     |       |   |   |
|                                                                                        |       |                                     |       |   |   |
| Acquisition of  property and equipment through accounts payable                             |       | $                                        | 225,102    |   | $ | — |   |
| Acquisition of  property and equipment through transfers to Tribe for development costs     |       | $                                        | 11,086,054 |   | $ | — |   |

 

The accompanying notesare an integral part of these unaudited interim financial statements.

 

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**NOTES TO UNAUDITED CONDENSEDFINANCIAL STATEMENTS**

 

**1.****                         ****DESCRIPTION OF BUSINESS**

 

River Rock Entertainment Authority (the “Authority”)is a governmental instrumentality of the Dry Creek Rancheria Band of PomoIndians (the “Tribe”), a federally recognized Indian tribe. River Rock Casino(the “Casino”) is a governmental development project of the Authority. TheCasino offers Class III gaming (as defined by the Indian Gaming RegulatoryAct of 1988, as amended) on tribal land located in Geyserville, California. Thelegal authority for slot machines and table games is provided by the Tribe’sgaming compact with the State of California (the “Compact”), which was enteredinto in September 1999 and became effective upon approval by the Secretaryof Interior on May 5, 2000.  The Compact expires on December 31,2020.

 

The Authority was formed as an unincorporatedinstrumentality of the Tribe on November 5, 2003 pursuant to a reorganizationwhereby the Tribe’s gaming business became owned and operated by the Authority.This reorganization was accounted for as a reorganization of entities undercommon control. Accordingly, after the reorganization, the assets andliabilities of the Casino’s operating property were presented by the Authorityon a historical-cost basis.

 

The Authority operates as a separate, wholly ownedoperating unit of the Tribe and is not a separate legal entity. These financialstatements reflect the financial position and activity of the Authority onlyand do not purport to represent the financial position and activity of theTribe.

 

**2.****                               ****BASIS OF PRESENTATION,UNAUDITED INTERIM FINANCIAL STATEMENTS**

 

The unaudited condensed financial statements of theAuthority, presented herein are presented on the same basis and can be comparedto the audited financial statements reported in the Authority’s annualinformation in the Authority’s 2009 Annual Report on Form 10-K, filed withthe SEC. The accompanying condensed balance sheet as of December 31, 2009has been derived from the audited financial statements included in theAuthority’s Annual Report on Form 10-K for the year ended December 31,2009.

 

River Rock Entertainment Authority has made itsdisclosures in accordance with accounting principles generally accepted in theUnited States of America as they apply to interim reporting, but condensed oromitted certain information and disclosures normally included in notes tofinancial statements in accordance with the Securities and Exchange Commission’srules and regulations. The unaudited condensed financial statements shouldbe read in conjunction with the financial statements and the notes thereto inRiver Rock Entertainment Authority’s Annual Report on Form 10-K for theyear ended December 31, 2009.

 

In the opinion of the Authority’s management, theaccompanying unaudited interim condensed financial statements contain alladjustments (consisting of normal recurring adjustments) to fairly present theAuthority’s condensed financial position as of March 31, 2010 and thecondensed statements of revenues, expenses and changes in net assets (deficit)for the three month periods ended March 31, 2010 and 2009, and condensedstatements of cash flows for the three months ended March 31, 2010 and2009, as applicable. The condensed statements of revenues, expenses and changesin net assets (deficit) and condensed cash flows for all periods presented arenot necessarily indicative of the results of operations or cash flows expectedfor the year or any other period.

 

**3.****                   ****SUMMARY OF SIGNIFICANTACCOUNTING POLICIES**

 

*Accounting Standards*—The Authority prepares its financialstatements in accordance with accounting principles generally accepted in theUnited States of America (“GAAP”) applicable to State and local governmentagencies and, as such, the Authority is accounted for as a proprietary fund.The financial statements presented are prepared on the accrual basis ofaccounting from the accounts and financial transactions of the Authority. GAAPrequires the Authority to apply all applicable pronouncements of theGovernmental Accounting Standards Board (“GASB”). The Authority is alsorequired to follow the Accounting Standards Codification issued by theFinancial Accounting Standards Board (“FASB”) for topics 

 

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issued on or before November 30, 1989,unless those topics conflict with or contradict GASB pronouncements.  TheAuthority is given the option whether to apply the FASB topics issued after November 30,1989, except for those that conflict with or contradict GASB pronouncements.Accordingly, the Authority has elected to implement non-conflicting FASB topicsissued after November 30, 1989.

 

There are differences between financial statementsprepared in accordance with GASB pronouncements and those prepared inaccordance with the FASB Codification. The statements of revenues, expenses andchanges in net assets (deficit) are a combined statement under GASBpronouncements. The FASB Codification allow a statement of income or operationsand a separate statement of owners’ or shareholders’ equity (deficit), which iswhere distributions to owners would be presented under the FASBCodification.  The amount shown as income before distributions to Tribewould be the most comparable amount to net income computed under the FASBCodification.  The Authority is a separate enterprise fund of the Tribe, agovernmental entity, and as such there is no owners’ or shareholders’ equity(deficit) as traditionally represented under the FASB Codification.  Themost comparable measure of owners’ equity (deficit) is presented on theAuthority’s balance sheet as net assets (deficit).

 

During the third quarter of 2009, the Authorityadopted the new Accounting Standards Codification (“ASC”) as issued by theFASB.  The ASC has become the source ofauthoritative U.S. GAAP recognized by the FASB to be applied by nongovernmentalentities.  Rules and interpretivereleases of the Securities and Exchange Commission (“SEC”) under authority offederal securities laws are also sources of authoritative GAAP for SECregistrants.  The ASC is not intended tochange or alter existing GAAP.  The adoptionof the ASC did not have a material impact on the Authority’s financialstatements.

 

FASB has issued Accounting Standards Update (“ASU”) No. 2010-06,“*Fair Value Measurements and Disclosures(Topic 820) - Improving Disclosures about Fair Value Measurements*.”This ASU requires certain new disclosures and clarifies some existingdisclosure requirements about fair value measurement as set forth inCodification Subtopic 820-10. The FASB’s objective is to improve thesedisclosures and, thus, increase the transparency in financial reporting.Specifically, ASU 2010-06 amends Codification Subtopic 820-10 to now require: (A) Areporting entity should disclose separately the amounts of significanttransfers in and out of Level 1 and Level 2 fair value measurements anddescribe the reasons for the transfers; and (B) In the reconciliation forfair value measurements using significant unobservable inputs, Level 3, areporting entity should present separately information about purchases, sales,issuances, and settlements.  In addition, ASU 2010-06 clarifies therequirements of the following existing disclosures: (A) For purposes ofreporting fair value measurement for each class of assets and liabilities, areporting entity needs to use judgment in determining the appropriate classesof assets and liabilities; and (B) A reporting entity should providedisclosures about the valuation techniques and inputs used to measure fairvalue for both recurring and nonrecurring fair value measurements.  ASU2010-06 is effective for interim and annual reporting periods beginning after December 15,2009, except for the disclosures about purchases, sales, issuances, andsettlements in the roll forward of activity in Level 3 fair value measurements.Those disclosures are effective for fiscal years beginning after December 15,2010, and for interim periods within those fiscal years. As this update is only“disclosure-related,” it does not have an impact on the Authority’s financialposition and results of revenues, expenses and changes in net assets (deficit).

 

FASB has issued ASU No. 2010-16, “*Entertainment — Casinos (Topic 924) — Accruals forCasino Jackpot Liabilities.*” This ASU addresses the accounting for casino base jackpot liabilities,specifically, whether an entity accrues liabilities for a base jackpot beforeit is won if the entity is not required to award the base jackpot.  This ASU clarifies that an entity should notaccrue jackpot liabilities (or portions thereof) before a jackpot is won if theentity can avoid paying that jackpot. Jackpots should be accrued and charged to revenue when an entity has theobligation to pay the jackpot.  Thisguidance applies to both base and progressive jackpots.  This ASU is effective for fiscal yearsbeginning after December 15, 2010, and for interim periods within thosefiscal years.  The adoption of this newstandard is not expected to have any effect on the Authority’s financialposition or result of operations.

 

*Use ofEstimates*—Thepreparation of financial statements in conformity with GAAP requires managementto make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosures of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expensesduring the reporting period. Significant estimates include legal and othercontingencies, obligations under players’ club programs and useful lives

 

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and recoverability of long-lived assets.Actual results could differ from these estimates.

 

*Cashand Cash Equivalents*— The Authority considers all highly liquid investments with a maturityof three months or less at date of purchase as cash equivalents. The carryingamount of cash and cash equivalents approximates its fair value. Cash and cashequivalents include cash on hand, cash on deposit with banks and highly liquidinvestments.  The Federal DepositInsurance Corporation (“FDIC”) has insured $250,000 of the cash on deposit atan FDIC member bank. The Authority believes that there is little risk of lossregarding the uninsured amounts of cash and cash equivalents on deposit withthe banks.

 

*Restricted Cash*— Restricted cash consists of netproceeds from the Notes Offering and investment earnings thereon set aside inconstruction financing accounts, for construction costs for relatedinfrastructure improvements and construction contingencies. It also includes fundsthat are reserved for construction contingencies and the funds for thedevelopment of the Dugan Property, an approximately 18-acre parcel of landadjacent to the Tribe’s reservation. The restricted cash is held in escrowaccounts that can only be used for authorized construction disbursements untilthe related projects are completed.  These escrow accounts are invested inmoney market accounts, which generate interest on a monthly basis. The FDIC hasinsured $250,000 of this balance. The Authority believes that there is littlerisk of loss regarding the uninsured amounts of restricted cash held in theescrow account. Restricted cash was $7,099,276 and $7,097,526 at March 31,2010 and December 31, 2009, respectively.  As of March 31, 2010,restricted cash includes amounts available for construction of $2,772,694 andland development funds of $4,326,582.

 

*Inventories*— Inventories,consisting principally of gaming supplies and food and beverage items, arestated at the lower of cost (first-in, first-out) or market value.

 

*Capital Assets*— Capital Assets are stated at cost.Depreciation and amortization are computed using the straight-line method overthe estimated useful lives of the assets as follows:

 
| Buildings and improvements:        |   | 5-21 years |
|------------------------------------|--------|------------|
| Furniture, fixtures and equipment: |   | 5 years    |

 

The costs of normal maintenance and repairs that donot add to the value of the asset or materially extend the life of the assetare not capitalized.

 

Major outlays of capital assets and improvements arecapitalized as construction-in-progress as projects are constructed.

 

*Evaluation of Long-Lived Assets* — Accounting pronouncement GASB No. 42,“*Accounting and Financial Reporting forImpairment of Capital Assets and for Insurance Recoveries,*”established accounting and financial reporting standards for impairment ofcapital assets.  The Authority’s capitalassets include building and improvements, furniture, fixtures andequipment.  A capital asset is consideredimpaired if both the decline in service utility of the capital asset is largein magnitude and the event or change in circumstances is outside the normallife cycle of the capital asset.  TheAuthority is required to evaluate prominent events or changes in circumstancesaffecting capital assets to determine whether impairment of a capital asset hasoccurred.  Common indicators ofimpairment include evidence of physical damage where restoration efforts areneeded to restore service utility, enactment or approval of laws or regulationssetting standards that the capital asset would not be able to meet,technological development or evidence of obsolescence, a change in the manneror expected duration of use of a capital asset or construction stoppage.  This Statement will require the Authority toreport the effects of capital asset impairment in its financial statements whenthey occur, rather than as part of the ongoing depreciation expense for thecapital asset or upon disposal of the capital asset, and to account forinsurance recoveries in the same manner. The Authority’s management has determined that no impairment of capitalassets currently exists.

 

*Capitalized interest*—**Theinterest cost associated with major development and construction projects iscapitalized and included in the cost of the asset.  Capitalization of interest ceases when theproject is substantially complete or when development activity issuspended.  The Authority did notcapitalize any interest for the three months ended March 31, 2010 and2009.

 

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*Prepaid Expenses and OtherCurrent  Assets*— Prepaid expenses and other current assets were $1,197,413 and $1,379,133 asof March 31, 2010 and December 31, 2009, respectively, which includesprepaid insurance, prepaid uniforms and prepaid supplies.

 

*Deposits and Other Assets*— As of March 31, 2010 and December 31,2009, respectively, deposits and other assets mainly represent $1,620,024 and$1,875,448 in unamortized legal fees and other issuance costs related to theissuance of the Authority’s 9 3⁄4% Senior Notes due 2011 (the “Senior Notes”)under the Indenture, dated November 7, 2003 (the “Indenture”).

 

*Accrued Liabilities*— Accrued liabilities consist of accruedinterest, accrued payroll and other accrued liabilities.

 

*Progressive Jackpots Liabilities*—The Casino has a number of progressivejackpot slot machines.  As coins are played, the amount available to winincreases and will be paid out when the appropriate winning combinationoccurs.  The Casino has recorded the progressive jackpots as a liability,with a corresponding charge against gaming revenue, of $1,582,336 and$1,587,748 as of March 31, 2010 and December 31, 2009,respectively.  Also, the Casino has available for customer play, wide areaprogressive slot machines that are interlinked with other unrelatedcasinos.  These machines are monitored and maintained by the vendor andthe Casino is required to remit a percentage of coin-in to the respective vendor. The Casino records a charge against revenue for the portion of the fee appliedto the wide area progressive jackpots.  Amounts recorded against revenuefor the portion of the fee applied to the wide area progressive jackpots wereapproximately $218,218 and $350,744 for the three months ended March 31,2010 and 2009, respectively.  All other administrative charges arerecorded in operating expenses.

 

*Accrued Slot Players Club*— The Authority has recorded a liabilityrelated to free play, prizes and cash incentives earned by the members of ourPlayers Club. The Authority has recorded the estimated redemption of theliability as contra-revenue in the accompanying statements of revenues,expenses and changes in net assets (deficit).

 

*Contingencies* — The Authority assesses its exposure toloss contingencies, including legal matters, and provides for an exposure if itis judged to be probable and estimable. If the actual loss from a contingencydiffers from management’s estimate, operating results could be materiallyimpacted. As of March 31, 2010, management determined that no accruals forclaims and legal actions are required. If circumstances surrounding claims andlegal actions change materially, the addition of accruals for such items infuture periods may be required.

 

*Authority net assets* — Investments in capital assets, net ofrelated debt, consists of capital assets, net of accumulated depreciation,reduced by the outstanding balances of any borrowings used for the acquisition,construction or improvement of those assets.  Invested in capital assets,net of related debt, excludes unspent debt proceeds.  Restricted netassets represent amounts that are appropriated or are legally segregated for aspecific purpose.  The Authority’s net assets are reported as restrictedwhen there are limitations imposed on its use, either through the enablinglegislation adopted by the Authority or through external restrictions imposedby creditors, grantors, laws or regulations of other governments.

 

*Casino Revenues*—The Authority recognizes as casinorevenue the net win from gaming activities, which is the difference betweengaming wins and losses. Casino revenues are net of accruals for anticipatedpayouts of progressive slot jackpots and certain player incentives, when earnedby the customer.

 

*Food, Beverage and Retail Revenues*— The Authority recognizes as food,beverage and retail revenues the proceeds from its food, beverage and gift shopsales. The Authority continues to distribute non-alcoholic beverages withoutcost in the gaming area for playing guests.  In December 2009, theAuthority replaced the gift shop with vending machines.  The vendingmachines are owned and operated by a third party.  The Authority receivesa commission from the vending machine sales and such commission are recorded asOther Revenues.

 

*Other Revenues*— Other revenues are comprised ofcommissions on ATM and vending machine transactions.

 

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*Promotional Allowances*— The retail value of food and beveragesprovided to customers without charge or at a discount is included in food,beverage and retail revenues and then deducted as promotional allowances. Suchamounts that are included in food, beverage, and retail revenues for the threemonths ended March 31, 2010 and 2009 were $378,915 million and $219,911,respectively.

 

*Food and Beverage Expenses*— Food and beverage expenses include costof goods sold related to providing food and beverage to our customers. Theestimated costs of providing complimentary products and services are reflectedin Casino expenses.

 

*Advertising Costs*— Advertising costs are expensed asincurred or when an advertisement is first aired or circulated. Advertisingcosts included in selling, general and administrative expenses for the threemonths ended March 31, 2010 and 2009 were $1,522,876 and $841,976,respectively.

 

*Gaming Commission andSurveillance Expenses*— The Authority pays for various expenses for the Tribal GamingCommission and Surveillance.  Such expenses include salaries and wages andrelated benefits for Regulatory, Surveillance and office staff, training, auditfees, background checks and licensing.

 

*Income Taxes*—As a governmental instrumentality of theTribe, the Authority is a non-taxable entity for purposes of federal and stateincome taxes.

 

*Distributions to Tribe*— Distributions to Tribe are made up ofpermitted and service payments under the covenants of the Indenture.  Theyare included in the statements of Revenues, Expenses and Changes in Net Assets(deficit) as distributions to Tribe allowed pursuant to the Indenture. Total distributions to the Tribe for the three months ended March 31, 2010and 2009 were $3,397,979 and $3,324,979, respectively.

 

*Reclassifications*— Certain prior period balances in theStatement of Cash Flows, have been reclassified to be consistent with currentperiod presentation with no impact on cash provided by operating activities,cash used in capital and related financing activities, cash provided byinvesting activities or cash used in non-capital financing activities. Inaddition, approximately $174,000 of promotional allowances for the three monthperiod ended March 31, 2009 was reclassified from selling, general andadministrative expenses to promotional allowances with no impact on income fromoperations.

 

**4.****                         ****CERTAIN RISKS ANDUNCERTAINTIES**

 

The Authority’s operations are dependent on thecontinued licensing and qualification of the Authority by the Tribal GamingCommission. Such licensing and qualification are reviewed periodically by theTribal Gaming Commission and regulatory agencies of the State of California.The Authority believes that no events or circumstances have arisen that would havean adverse effect on the Casino’s ability to continue its licensing andqualification by the Tribal Gaming Commission or regulatory agencies of theState of California to operate the Authority.

 

**5.****                         ****RELATED PARTIES**

 

The Casino has been constructed on federal landbeneficially owned by the Tribe. The Authority does not pay the Tribe for theuse of the land.

 

The Authority pays for various expenses for thefollowing departments operated by the Tribe: Tribal Gaming Commission including surveillance, and plant operationsand human resources.  These departmentalexpenses include but are not limited to payroll and related expenses, legal,and other operational expenses.  TheTribe had been operating the warehouse. However, in 2010, the Authority began operating the warehousedepartment.

 

Total amounts billed by the Tribe to the Casino forthese departments, excluding Tribal Gaming Commission and surveillance, for thethree months ended March 31, 2010 and 2009 were $986,065 and $879,915,respectively.  These amounts are recordedas a component of selling, general and administrative expenses.

 

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The Authority pays for various expenses for the TribalGaming Commission and surveillance. Tribal Gaming Commission andsurveillance expenses are recorded in Gaming Commission and surveillanceexpenses on the Statements of Revenues, Expenses and Changes in Net Assets(deficit).  Gaming Commission and surveillance expenses for the threemonths ended March 31, 2010 and 2009 were $767,973 and $865,501,respectively.

 

The Tribe incurred approximately $67.0 million intotal expenses on the Authority’s behalf for master planning of the proposedresort and infrastructure improvements on the reservation that benefits theCasino, of which almost all of such expenditures were incurred prior to 2009before the construction was suspended.  The Authority reimbursed the Tribeapproximately $52.4 million through 2009. On January 8, 2010, the Authority’s Board of Directors authorizedthe reimbursement of the Tribe in an amount not to exceed approximately $14.9million of construction costs.  The approval included a paymentschedule according to which the Authority reimbursed the Tribe $2,700,000 on January 18,2010, $400,000 on each of February 1, 2010 and March 1, 2010.  The Authority has agreed to reimburse theTribe $400,000 on April 1, 2010 and $700,000 monthly through November 1,2010 without exceeding $14.9 million.  When the reimbursement payments aremade or accrued, the related expenses are capitalized and reflected inconstruction-in-progress. The reimbursed costs consist of engineering anddesign costs related to the proposed master plan development, includingelectrical, HVAC, landscaping, interior design services and consulting fees forlegal, branding, feasibility, and public relations services, as well as theconstruction costs of the lower Acorn Road. During the three months ended March 31, 2010, the Authorityreimbursed the Tribe $3.5 million for development expenditures and accrued theremaining $11.1 million, which is included in Payable to Tribe in the CondensedBalance Sheet at March 31, 2010.

 

The Authority reserved 50recreational vehicle spaces and 10 campsite spaces at Alexander RV Park andCampground for casino guests.  AlexanderRV Park and Campground is a wholly owned subsidiary of the Tribe.  The cost of reserving the parking spaces andcampsite spaces for the three months ended March 31, 2010 was $69,458compared to $66,150 for the same prior year period.

 

**6.****                         ****CASH AND CASHEQUIVALENTS AND RESTRICTED CASH**

 

Cash and cash equivalents and restricted cashconsisted of the following as of March 31, 2010 and December 31,2009:

 
| ** **                                           | ** ** | **March 31,********2010** | ** ** | **December 31,********2009** | ** ** |
|------------------------------------------------------|------------|--------------------------------|------------|-----------------------------------|------------|
| ** **                                           | ** ** | **(Unaudited)**                | ** ** | ** **                        | ** ** |
|                                                 |       |                           |       |                              |       |
| Operating  accounts                                  |       | $                              | 9,372,581  |                              | $          | 16,281,764 |   |
| Money  market accounts*                              |       | 22,104,300                     |       | 10,095,039                        |       |
| Cash  on hand                                        |       | 4,384,048                      |       | 5,240,704                         |       |
|                                                 |       |                           |       |                              |       |
| Cash  and cash equivalents                           |       | 35,860,929                     |       | 31,617,507                        |       |
| Restricted  cash                                     |       | 7,099,276                      |       | 7,097,526                         |       |
|                                                 |       |                           |       |                              |       |
| Total  cash and cash equivalents and restricted cash |       | $                              | 42,960,205 |                              | $          | 38,715,033 |   |

 

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*Represents level 1 fairvalue measurement, quoted prices in active markets for identical items.

 

*Deposits* — Custodial credit risk is the risk thatin the event of a bank failure, the Authority’s deposits (cash in checking,sweep, and money market accounts held with its third-party administrator) maynot be returned to it.  The Authority does not have a deposit policy forcustodial credit risk.  As of March 31, 2010 and December 31,2009, approximately $38,017,617 and $34,009,525, respectively, of the Authority’sbank balance for these deposits of $38,533,335 and $34,580,666, respectively,was exposed to custodial credit risk, as it was uninsured and uncollateralized.

 

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**7.****        ****CAPITAL ASSETS**

 

Capital Assets at March 31,2010 and December 31, 2009 consisted of the following:

 
| ** **                         | ** ** | **Balance, as of********December 31, 2009** | ** **  | **Additions** | ** ** | **Dispositions** | ** ** | **Transfers********In(Out)** | ** ** | **Balance, as of********March 31, 2010** | ** ** |
|------------------------------------|------------|--------------------------------------------------|-------------|---------------|------------|------------------|------------|------------------------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | ** **                                       | ** **  | ** **    | ** ** | ** **       | ** ** | ** **                   | ** ** | **(Unaudited)**                               | ** ** |
| ** **                         | ** ** | ** **                                       | ** **  | ** **    | ** ** | ** **       | ** ** | ** **                   | ** ** | ** **                                    | ** ** |
| Building and  improvements         |       | $                                                | 131,361,604 |          | $          | 3,976            |       | $                            | —     |                                          | $          | 196,060 |   | $ | 131,561,640 |   |
| Furniture, fixtures and  equipment |       | 35,102,290                                       |        | 127,946       |       | —           |       | 65,847                       |       | 35,296,083                                    |       |
| Less accumulated  depreciation     |       | (60,121,221                                      | )           | (2,458,847    | )          | —           |       | —                       |       | (62,580,068                                   | )          |
|                               |       | 106,342,673                                      |        | (2,326,925    | )          | —           |       | 261,907                      |       | 104,277,655                                   |       |
| Construction in  Progress          |       | 59,588,618                                       |        | 15,000,050    |       | —           |       | (261,907                     | )          |                                          | 74,326,761 |   |
| Capital assets - net               |       | $                                                | 165,931,291 |          | $          | 12,673,125       |       | $                            | —     |                                          | $          | — |   | $ | 178,604,416 |   |

 

Construction in progress consists of payments to theTribe and various vendors related to the Authority’s master plan developmentand land improvements.  Substantially allof the Authority’s personal property is pledged as collateral to secure itsdebt.

 

**8.****        ****ACCRUED LIABILITIES**

 

Accrued liabilitiesconsisted of the following as of March 31, 2010 and December 31,2009:

 
| ** **                                  | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                  | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| ** **                                  | ** ** | **(Unaudited)**    | ** ** | ** **            | ** ** |
|                                        |       |               |       |                  |       |
| Accrued in-house  progressive slot jackpots |       | $                  | 1,582,336  |                  | $          | 1,587,748 |   |
| Accrued payroll and  related benefits       |       | 2,091,458          |       | 1,514,557             |       |
| Accrued interest                            |       | 8,125,000          |       | 3,250,000             |       |
| Accrued other expenses                      |       | 1,230,155          |       | 1,343,068             |       |
| Total accrued  liabilities                  |       | $                  | 13,028,949 |                  | $          | 7,695,373 |   |

 

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**9.****            ****LONG-TERM DEBT**

 

Long-term debt consisted ofthe following as of March 31, 2010 and December 31, 2009:

 
| ** **                                                                                                | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                                                                                                | ** ** | **2010**           | ** **  | **2009**              | ** ** |
| ** **                                                                                                | ** ** | **(Unaudited)**    | ** **  | ** **            | ** ** |
|                                                                                                      |       |               |        |                  |       |
| 9-3/4%  Senior Notes, net of unamortized issue discount of $533,976 and $618,288. Due  November 2011 |       | $                  | 199,466,024 |                  | $          | 199,381,712 |   |
| Vehicle  and Slot Notes                                                                                   |       | 188,176            |        | 492,203               |       |
|                                                                                                      |       |               |        |                  |       |
| Total  Long-Term Debt                                                                                     |       | 199,654,200        |        | 199,873,915           |       |
| Less:  current portion                                                                                    |       | (188,176           | )           | (492,203              | )          |
|                                                                                                      |       |               |        |                  |       |
| Total  long-term-debt - net of current maturities                                                         |       | $                  | 199,466,024 |                  | $          | 199,381,712 |   |

 

On November 7, 2003, the Authority issued theSenior Notes. The proceeds were utilized to fund an expansion project, whichincluded three parking structures, related infrastructure improvements,repayment of various debt and advances and fund payment of various accruals andpayables, as well as to increase cash on hand. The proceeds were also utilizedto fund a land purchase and settle litigation.  The Senior Notes arecollateralized by a first priority pledge of the Authority’s revenue andsubstantially all of the existing and future tangible and intangible personalproperty. The Authority may redeem the Senior Notes, in whole or in part, at aredemption price that is at a premium to the principal amount of the SeniorNotes (expressed as percentages of principal amount), plus accrued and unpaidinterest.  Interest on the Senior Notesis due semi-annually in May and November.

 

The Authority’s long-term debt is recorded at anamortized historical cost basis.  The fair value of the Senior Notes wasapproximately $188.3 million as of March 31, 2010 based on level oneinputs, quoted prices in active markets.

 

**10.****                  ****EMPLOYEE BENEFIT PLAN**

 

The Authority participates in a 401(k) Plan, aretirement plan (the “Plan”), which is qualified under Section 401(k) ofthe Internal Revenue Code.  The Plan is a defined contribution planadministered by an insurance company and is available to all eligible employeesof the Casino who have attained age 21 and have at least three months ofeligible service as defined in the Plan.  The Plan participants maycontribute up to 50 percent of their eligible pretax compensation, subject tolegal limitations.  The Authority at its discretion, will make matchingcontributions.  Any forfeiture due to employee terminations reduces futureCasino contributions.  Participants become vested in employercontributions, as well as any earnings thereon, over a three-year period at therate of 30 percent, 60 percent and 100 percent at the end of each year,respectively.  Employee contributions to the Plan were $127,413 and$141,151 for the three months ended March, 31, 2010, and 2009,respectively.  The Casino made matching contributions to the Plan of$11,968 and $41,637 during the three months ended March 31, 2010, and2009, respectively.  The Casino temporarily suspended its matchingcontribution in January 2009 and reinstated it in March 2010.

 

**11.          RISK MANAGEMENT**

 

The Casino is exposed to various risks of loss relatedto worker’s compensation and torts; theft of, damage to or destruction ofassets; and errors or omissions.  The Casino has purchased commercialinsurance policies for said risks.  There has been no significantreduction of insurance coverage, and settlements have not exceeded coverage inthe past three years.  The Casino retains the risk of dental claimssubject to individual limits of $1,500 per employee.

 

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**12.****                  ****LEASES**

 

The Authority extended its operating lease of thesprung structure that houses the casino operations.  The amended leaseexpires on June 17, 2012.  The agreement calls for monthly paymentsof $25,395.  During the three months ended March 31, 2010 and 2009,total rental expense was $76,185, and $108,690, respectively.

 

Other operating leases include leases for officespaces and copiers.

 

**13.****                  ****LEGAL MATTERS AND SUBSEQUENT EVENTS**

 

*Runyan Litigation*

 

On March 7, 2008, Norman Runyan, the Authority’sformer Chief Operations Officer, filed a wrongful termination suit against theAuthority, the Casino and Mr. Harvey Hopkins, the Chairman of the Tribeand a member of the Authority’s Board, in the Sonoma County SuperiorCourt.  The Authority believed the case lacked merit and moved todismiss.  On October 17, 2008, the Court issued an Order dismissingthe lawsuit.  On December 3, 2008, the Court entered an Ordergranting the Authority’s motion and dismissed the case.

 

On January 14, 2009, Mr. Runyan filed aPetition for Order Compelling Arbitration with the Sonoma County SuperiorCourt, and on January 30, 2009, he filed a Motion for Order CompellingArbitration.  In both the Petition and the Motion, Mr. Runyan soughtto have the Court issue an order compelling arbitration of the claims assertedin the complaint that was dismissed by the court in December 2008. The Authority believed, based on fact that Mr. Runyan entered into aSeverance Agreement and General Release with the Casino, and other releasedparties, that there was no basis for Mr. Runyan to seek arbitration. On April 13, 2009, the Authority, the Casino, and Mr. Hopkins filed ahybrid motion to quash summons and dismiss the Petition and Motion.  On June 1,2009, the Court granted the motion in its entirety, holding that the Courtlacked personal and subject matter jurisdiction, that Mr. Runyanterminated and extinguished his purported employment agreement (which containedthe arbitration clause he attempted to rely on) and that he waived any right toarbitration he might have had by settling and releasing all claims. Finally, the Court held that the Authority and the other respondents havetribal sovereign immunity from service of process.

 

Mr. Runyan filed a Notice ofAppeal of the Superior Court’s Order on July 27, 2009 and filedhis opening brief in the First District Court of Appeal on December 11,2009.  The Authority’s respondents brief was filed on January 8,2010, Mr. Runyan’s reply brief was filed on February 26, 2010, andoral argument has been set for May 11, 2010.  The Authority continuesto believe that there was no basis for Mr. Runyan to seek arbitration andwill argue vigorously in favor of upholding the Superior Court’s Order grantingthe motion to quash summons and dismissing Mr. Runyan’s petition andmotion for an order compelling arbitration.

 

*Other Legal Matters*

 

The Authority is involved in other litigation anddisputes from time to time in the ordinary course of business with vendors andpatrons. The Authority believes that the aggregate liability, if any, arisingfrom such litigation or disputes will not have a material adverse effect on itsresults of operations, financial condition or cash flows.

 

**14.****                  ****COMPACT REVENUE SHARING TRUST FUND**

 

Under the Compact as entered into with the State ofCalifornia in September 1999, the Tribe must pay annual license fees of$900-$4,350 per Class III gaming device, based on the number of gamingdevice licenses approved by the state gaming commission.  The Compact doesnot require a license for the first 350 Class III gaming devices in useand does not require a license fee for an additional 350machines. Payments are due on a quarterly basis and are remitted into astate revenue sharing trust fund.  License fees expense totaled $333,750for each of the three months ended March 31, 2010, and 2009.

 

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**15.****                  ****COMMITMENTS AND CONTINGENCIES**

 

The Authority is an unincorporated instrumentality ofthe Tribe formed pursuant to an adopted law of the Tribe. While the Authorityis not a separate corporation or other legal entity distinct from the Tribe,this tribal law allows the Authority to own and operate its business. Thistribal law also provides that the Authority’s obligations and other liabilitiesare not those of the Tribe and that the obligations and liabilities of theTribe are not those of the Authority. This law is untested and generally has nodirect counterpart in other areas of the law. If this law should prove to beineffective at limiting the Authority’s liability, the Authority’s business andassets could become subject to claims asserted against the Tribe or its assets.Similarly, the Authority would be liable for such claims if the Tribe waivedits sovereign immunity to an extent that allowed enforcement of such claimsagainst the Authority’s business or assets.

 

On March 18, 2008, the Tribe and the SonomaCounty Board of Supervisors entered into a memorandum of agreement (“MOA”)which settled several long-standing legal disputes between Sonoma County (the “County”)and the Tribe and provides a binding framework for resolving futuredisputes.  Pursuant to the MOA, the Tribe has agreed to pay the County upto $75 million in mitigation fees over the next 12 years to offset thepotential losses and impacts to the County resulting from the Tribe’s variousongoing projects and to support the services being provided by theCounty.  In addition to the mitigation fees, the Tribe will pay a fee inlieu of the County’s Transient Occupancy Tax in the amount of 9% of the rentalcollected on occupied hotel rooms, to be paid quarterly and continuing for fiveyears after the later to occur of the termination of the MOA, as may beextended, or the Tribe’s Compact with the State (which is now terminable in2020 at the earliest), which fees may be applied to programs and services thatserve to promote tourism in the County. Such in lieu fees could total as muchas $25 million during the term of the MOA.  The Tribe has not made anydeterminations to seek reimbursement or direct payment from the Authority ofamounts due to the County pursuant to the MOA.

 

**16.****                  ****SUBSEQUENT EVENTS**

 

On April 9, 2010, the Authority entered into anemployment agreement with Mr. David F. Fendrick as its Chief ExecutiveOfficer and General Manager of the Casino. The agreement is effective as of April 9, 2010, and continuesthrough April 8, 2013, unless terminated earlier by the parties under theterms of the agreement. The agreement provides for the payment to Mr. Fendrickof an initial annual base salary of $300,000.  Mr. Fendrick will alsobe eligible to receive an annual bonus at the discretion of the Authority’sBoard of Directors not to exceed thirty percent (30%) of his annual basesalary.

 

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**ITEM 2.  MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

 

The following discussion and analysis of our financialcondition and results of operations should be read in conjunction with theaccompanying unaudited condensed financial statements and related notesincluded in Item 1 of this report.

 

**Overview**

 

We are an unincorporated governmental instrumentalityof the Tribe that owns and operates the Casino. We offer Class III slot and video poker gaming machines, housebanked table games (including Blackjack, Three card poker, Mini-baccarat andPai Gow poker), Poker, featuring Texas Hold’em, and comprehensive food andbeverage offerings.

 

**FASB Codification Discussion**

 

Over the years, the Financial Accounting StandardsBoard (“FASB”) and other designated GAAP-setting bodies, have issued standardsin the form of FASB Statements, Interpretations, FASB Staff Positions, EITFconsensuses, AICPA Statements of Position, etc. The FASB recognized the complexity of its standard-setting process andembarked on a revised process in 2004 resulting in the release of the FASBAccounting Standards Codification (the “ASC”) on July 1, 2009.  The ASC was effective for financialstatements for interim or annual reporting periods ending after September 15,2009.

 

The ASC became the source of authoritative U.S.generally accepted accounting principles (GAAP) recognized by the FASB to beapplied by nongovernmental entities.  Rules andinterpretive releases of the Securities and Exchange Commission (SEC) underauthority of federal securities laws are also sources of authoritative GAAP forSEC registrants.  On the effective dateof this Statement, the ASC superseded all then-existing non-SEC accounting andreporting standards.  All othernon-grandfathered non-SEC accounting literature not included in the ASC willbecome nonauthoritative. This Statement was effective for financial statementsissued for interim and annual periods ending after September 15, 2009.

 

Following the ASC, FASB will not issue new standardsin the form of Statements, FASB Staff Positions, or Emerging Issues Task ForceAbstracts. Instead, it will issue Accounting Standards Updates. FASB will notconsider Accounting Standards Updates as authoritative in their own right.  Accounting Standards Updates will serve onlyto update the ASC, provide background information about the guidance, andprovide the bases for conclusions on the change(s)  in the ASC.

 

The ASC does not change how we account for ourtransactions or the nature of related disclosures made.  However, when referring to guidance issued bythe FASB, we will refer to topics in the ASC rather than FASB Statements, forexample.  We have updated references toGAAP in this Form 10-Q to reflect the guidance in the ASC.

 

**Critical Accounting Policies andEstimates**

 

We have identified certain critical accountingpolicies and estimates that affect our more significant judgments and estimatesused in the preparation of our financial statements. The preparation of ourfinancial statements, in conformity with GAAP, requires that we make estimatesand judgments that affect the reported amounts of assets and liabilities,revenues and expenses, and related disclosures of contingent assets andliabilities. On an on-going basis, we evaluate those estimates, including thoserelated to asset impairment, accruals for our promotional slot club,compensation and related benefits, revenue recognition, contingencies andlitigation. These estimates are based on the information that is currentlyavailable to us and on various other assumptions that we believe to bereasonable under the circumstances. Actual results could vary from thoseestimates under different assumptions or conditions. We believe that thefollowing critical accounting policies affect significant judgments andestimates used in the preparation of our financial statements:

 

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·                              Casino Revenues — Casino revenue is recognized as thenet win from gaming activities, which is the difference between gaming wins andlosses. Casino revenues are net of accruals for anticipated payouts ofprogressive slot jackpots and certain player incentives, when earned by thecustomer.

 

·                              Capital Assets — Capital assets are stated at cost.Depreciation and amortization are computed using the straight-line method overthe estimated useful lives of the assets as follows:

 
| Buildings and improvements:        |   | 5-21 years |
|------------------------------------|--------|------------|
| Furniture, fixtures and equipment: |   | 5 years    |

 

We evaluate our capital assets for impairment inaccordance with the Accounting pronouncement GASB No. 42, “*Accounting and Financial Reporting for Impairment ofCapital Assets and for Insurance Recoveries.*”  This Statement establishes accounting andfinancial reporting standards for impairment of capital assets.  Our capital assets include building andimprovements, furniture, fixtures and equipment.  A capital asset is considered impaired ifboth the decline in service utility of the capital asset is large in magnitudeand the event or change in circumstances is outside the normal life cycle ofthe capital asset.  We are required toevaluate prominent events or changes in circumstances affecting capital assetsto determine whether impairment of a capital asset has occurred.  Common indicators of impairment includeevidence of physical damage where restoration efforts are needed to restoreservice utility, enactment or approval of laws or regulations setting standardsthat the capital asset would not be able to meet, technological development orevidence of obsolescence, a change in the manner or expected duration of use ofa capital asset or construction stoppage. This Statement requires us to report the effects of capital assetimpairment in its financial statements when they occur, rather than as part ofthe ongoing depreciation expense for the capital asset or upon disposal of thecapital asset, and to account for insurance recoveries in the same manner.

 

· Accrued Progressive Slot Jackpots — Accruedprogressive slot jackpots consist of estimates for prizes relating to variousgames that have accumulated jackpots. We have recorded the anticipated payoutsas a reduction of casino revenues and as a component of accruedliabilities.  We do not accrue for thebase jackpot.

 

· Contingencies — We assess our exposure to losscontingencies, including legal matters, and provide for an exposure if it isjudged to be probable and estimable. If the actual loss from a contingencydiffers from management’s estimate, operating results could be materiallyimpacted. As of March 31, 2010, we have determined that no accruals forclaims and legal actions are required. If circumstances surrounding claims andlegal actions change materially, the addition of accruals for such items infuture periods may be required.

 

Codification — There are differences between financialstatements prepared in accordance with GASB pronouncements and those preparedin accordance with the Codification issued by the FASB. The statements ofrevenues, expenses and changes in net assets (deficit) are a combined statementunder GASB pronouncements. The FASB Codification allow a statement of income oroperations and a separate statement of owners’ or shareholders’ equity(deficit), which is where distributions to owners would be presented under theFASB Codification. The amount shown as income before distributions to the Tribewould be the most comparable amount to net income computed under the FASBCodification. We are a separate enterprise fund of the Tribe, a governmentalentity, and as such there is no owners’ or shareholders’ equity (deficit) astraditionally represented under the FASB Codification.  The mostcomparable measure of owners’ equity (deficit) is presented on our balancesheet as net assets (deficit).

 

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**RIVER ROCK ENTERTAINMENT AUTHORITY**

**(A governmental Instrumentality of the Dry Creek Rancheria Band of PomoIndians)**

 

**RESULTS OF OPERATIONS**

**For the Three Months Ended March 31, 2010 and 2009**

(Dollars in Millions)

 
| ** **                                  | ** ** | **March 31,** | ** ** | **Dollar  Variance** | ** ** | **Percentage  Variance** | ** ** |
|---------------------------------------------|------------|--------------------|------------|----------------------|------------|--------------------------|------------|
| ** **                                  | ** ** | **2010**           | ** ** | **2009**             | ** ** | **2010 vs. 2009**        | ** ** | **2010 vs. 2009** | ** ** |
|                                        |       |               |       |                 |       |                     |       |   |   |
| OPERATING REVENUES:                         |       |               |       |                 |       |                     |       |   |   |
| Casino                                      |       | $                  | 30.9       |                 | $          | 30.0                     |       | $ | 1.0 |   | 3.3 | % |
| Food, beverage and  retail                  |       | 1.4                |       | 1.4                  |       | 0.0                      |       | 0.9 | % |
| Other                                       |       | 0.3                |       | 0.1                  |       | 0.1                      |       | 99.5 | % |
|                                        |       |               |       |                 |       |                     |       |   |   |
| Gross revenues                              |       | 32.6               |       | 31.5                 |       | 1.1                      |       | 3.6 | % |
|                                        |       |               |       |                 |       |                     |       |   |   |
| Promotional allowances                      |       | (0.4               | )          | (0.2                 | )          | (0.2                     | )          | 72.3 | % |
|                                        |       |               |       |                 |       |                     |       |   |   |
| Net revenues                                |       | 32.3               |       | 31.3                 |       | 1.0                      |       | 3.1 | % |
|                                        |       |               |       |                 |       |                     |       |   |   |
| OPERATING EXPENSES:                         |       |               |       |                 |       |                     |       |   |   |
| Casino                                      |       | 3.8                |       | 4.2                  |       | (0.3                     | )          | -8.1 | % |
| Food, beverage and  retail                  |       | 1.8                |       | 2.1                  |       | (0.3                     | )          | -12.5 | % |
| Selling, general and  administrative        |       | 10.6               |       | 10.1                 |       | 0.5                      |       | 4.7 | % |
| Depreciation                                |       | 2.5                |       | 2.4                  |       | 0.1                      |       | 3.5 | % |
| Gaming commission and  surveillance expense |       | 0.8                |       | 0.9                  |       | (0.1                     | )          | -11.3 | % |
| Compact revenue sharing  trust fund         |       | 0.3                |       | 0.3                  |       | —                   |       | 0.0 | % |
|                                        |       |               |       |                 |       |                     |       |   |   |
| Total operating  expenses                   |       | 19.8               |       | 19.9                 |       | (0.1                     | )          | -0.7 | % |
|                                        |       |               |       |                 |       |                     |       |   |   |
| INCOME FROM OPERATIONS                      |       | 12.5               |       | 11.4                 |       | 1.1                      |       | 9.6 | % |
|                                        |       |               |       |                 |       |                     |       |   |   |
| NON-OPERATING  EXPENSE-Net                  |       |               |       |                 |       |                     |       |   |   |
| Interest expense                            |       | (5.2               | )          | (5.2                 | )          | 0.0                      |       | 0.0 | % |
| Interest income                             |       | 0.0                |       | 0.0                  |       | 0.0                      |       | 35.1 | % |
|                                        |       |               |       |                 |       |                     |       |   |   |
| Non-operating  expense-net                  |       | (5.2               | )          | (5.2                 | )          | 0.0                      |       | -0.1 | % |
|                                        |       |               |       |                 |       |                     |       |   |   |
| INCOME BEFORE  DISTRIBUTIONS TO TRIBE       |       | $                  | 7.3        |                 | $          | 6.2                      |       | $ | 1.1 |   | 17.8 | % |

 

**Results of Operations**

 

**Comparison of the three months ended March 31,2010 and 2009**

 

*Netrevenues*. Netrevenues for the three months ended March 31, 2010 increased by $1.0million to $32.3 million, from $31.3 million, for the three months ended March 31,2009.  We believe the increase in net revenues is attributable to anincrease in customer satisfaction levels resulting from the casino renovationproject.  Our renovation project hasresulted in better customer retention, longer stays, and an increase in thenumber of visits.  Approximately 95.9% ofour net revenues were from our gaming activities in the first quarter of 2010,as compared to 95.7% in the comparable prior year period.  We generated $28.0 million or 86.7% of ournet revenues from gaming devices, and $3.0 million, or 9.2% of our net revenues

 

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from table games and poker for the threemonths ended March 31, 2010, compared to $27.0 million from gaming devicesor 86.2% of our net revenues, and $3.0 million or 9.6% of net revenues fromtable games and poker for the three months ended March 31, 2010.  Our win per slot machine per day was $257 forthe three monthsended March 31, 2010, which increased by $66 from $191 for the threemonths ended March 31, 2009.  Theincrease in net win per machine per day is primarily attributable to thedecrease in the average number of slot machines on the floor.  We have been reconfiguring our gaming floorin an effort to enhance our overall appeal. As part of this effort, we reduced the average number of slot machinesto 1,211 for the three  months ended March 31,2010, compared to 1,569 for the three months ended March 31, 2009.

 

We generated $1.1 million, net of promotionalallowance of $0.4 million, in food, beverage and retail sales for the threemonths ended March 31, 2010, compared to $1.2 million, net of promotionalallowances of $0.2 million, in food, beverage and retail sales for the threemonths ended March 31, 2009.

 

*Promotional allowances*. Promotional allowances for the threemonths ended March 31, 2010 were $0.4 million, or 1.2% of net revenues,compared to $0.2 million, or 0.7% of net revenues, for the three months ended March 31,2009.

 

*Operating expenses*. Operating expenses for the three monthsended March 31, 2010 were $19.8 million, or 61.3% of net revenues,compared to $19.9 million, or 63.6% of net revenues, for the three months endedMarch 31, 2009.

 

Casino expense includes costs associated with ourgaming operations and the allocation of food and beverage expense related tothe cost of complimentary activities. Casino expense for the three months ended March 31, 2010 was $3.8million compared to $4.2 million for the three months ended March 31,2009.  Casino expense as a percentage ofCasino revenues decreased to 12.4% from 13.9% for the three months ended March 31,2009.  The decrease in Casino expenses isdue to the decrease in payroll, contract and consulting services.

 

Food, beverage and retail expense for the three monthsended March 31, 2010 was $1.8 million, or 170.1% of food, beverage andretail revenue, net of promotional allowances, compared to $2.1 million, or171.0% of food, beverage and retail revenue, net of promotional allowances forthe three months ended March 31, 2009. Our food, beverage and retail expense ratio is significantly higher thanthe industry average because we have utilized these amenities as an opportunityto build customer loyalty rather than as a source of income.

 

Selling, general and administrative expense for thethree months ended March 31, 2010 was $10.6 million, or 32.8% of netrevenues, from $10.1 million, or 32.2% of net revenues, for the three monthsended  March 31, 2009.

 

Depreciation expense for the three months ended March 31,2010 was $2.5 million compared to $2.4 for the three months ended March 31,2009.  Depreciation expense was computedusing the straight-line method over the useful life of property, plant andequipment.

 

Gaming Commission and surveillance expense for thethree months ended March 31, 2010 was $0.8 million compared to $0.9million for the three months ended March 31, 2009.

 

The Compact requires us to pay a quarterly fee to theState of California’s revenue sharing trust fund, based on the number oflicensed gaming devices we are allowed to operate.  Revenue sharing trust fund fees assessed were$0.3 million for each of the three months ended March 31, 2010 and 2009.

 

*Income from operations.* Income from operations for the threemonths ended March 31, 2010 was $12.5 million, or 38.7% of net revenues,compared to $11.4 million, or 36.4% of net revenues, for the three months endedMarch 31, 2009.  The increase in income from operations isattributable to the increase in business volumes as a result of the Casinorenovation project as well as the ongoing marketing efforts and the decrease inoperating expenses from our cost saving measures.

 

*Non-Operating expense, net.* Non-operating expense, net for the threemonths ended March 31, 2010 was $5.2 million, or 16.1% of net revenues, compared to $5.2 million or 16.6% ofnet revenues, for the three months ended March 31, 2009. Non-operating expense, net, includes $5.2 million of interest expense for eachof the three months ended March 31, 2010 and 2009.  No interest costs were capitalized in thethree months ended March 31, 2010 and 2009.

 

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*Income before distributions to Tribe*. Income before distributions to theTribe for the three months ended March 31, 2010 was $7.3 million, or 22.6%of net revenues, compared to $6.2 million, or 19.8% of net revenues, for thethree months ended March 31, 2009.

 

*Distributions to the Tribe*. Distributions to the Tribe for thethree months ended March 31, 2010 were $3.4 million, compared to $3.3million for the three months ended March 31, 2009.

 

**Liquidity and Capital Resources**

 

Since our inception, we have funded our capitalexpenditures and working capital requirements primarily through debt financing,gaming equipment supplier financing, other financing, and operating cash flow.

 

Our capital expenditures for the three months ended March 31,2010 and 2009 were $6.4 million and $3.9 million, respectively.  The addition to capital expenditures for thethree months ended March 31, 2010 consisted primarily ofconstruction-in-progress related to the master plan development of our plannedresort of which $3.5 million was reimbursed to the Tribe as well as costsrelating to remodels of our Casino and restaurants.  We have reflected the expenditures relatingto the master plan development which we reimbursed the Tribe asconstruction-in-progress in our balance sheet.

 

As of March 31, 2010, we had cash and cashequivalents, net of restricted cash of $35.9 million, compared to $31.6million, as of December 31, 2009. We had restricted cash of $7.1 millionas of March 31, 2010 and December 31, 2009.  Our principal source of liquidity during thethree months ended March 31, 2010 consisted of cash flow from operatingactivities.

 

Restricted cash consists of net proceeds from theSenior Notes and investment earnings thereon set aside in constructionfinancing accounts for construction costs for the three parking structures,related infrastructure improvements and construction contingencies. It alsoincludes funds that are reserved for additional construction contingencies andthe funds for the development of the Dugan Property.  Our restricted cash is held in escrowaccounts that can only be used for authorized construction disbursements untilthe related projects are completed.  Theconstruction of the three parking structures has been completed and theremaining funds are expected to be released from the restricted account.

 

Net cash used for capital and related financing activitiesfor the three months ended March 31, 2010 was $6.7 million, compared to$3.9 million, for the three months ended March 31, 2009.  This increase was primarily attributable tothe increase in transfers to the Tribe for development costs.

 

Cash flows provided by investing activities consistingof interest income for the three months ended March 31, 2010 was $11,400,compared to $8,438 for the three months ended March 31, 2009.

 

Cash flows used in non-capital financing activitiesfor the three months ended March 31, 2010 was $3.4 million, compared to$3.3 million, for the three months ended March 31, 2009.  Cash flowsused in non-capital financing activities consist of distributions to the Tribe.

 

We believe that existing cash balances, cash fromoperations, as well as permitted disbursements from our restricted cash escrowaccounts will provide adequate funds for our working capital needs, plannedcapital expenditures and debt service requirements for the foreseeable future.However, our ability to fund our operations, make planned capital expenditures,make scheduled debt payments and refinance our indebtedness depends on ourfuture operating performance and cash flow, which, in turn, are subject toprevailing economic conditions and to financial, business and other factors,some of which are beyond our control. Additionally, the Indenture limits our ability to incur additionalindebtedness.

 

The Senior Notes mature on November 1, 2011. Weare actively reviewing our options.  We have remained in contact withvarious financial institutions regarding the maturing debt to explore ouroptions, which may include refinancing the Senior Notes.

 

The Tribe announced plans to build a destinationresort, which plans are more fully described in our Form 8-K dated June 28,2007, and exhibits listed therein.  Theproposed project includes the construction of a casino, hotel and spa, several

 

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food and beverage venues, administrativefacilities, a garden and terrace plaza, a retail area, and back of housefacilities. The proposed project includes three above-ground levels and a hoteltower (up to eight levels) and two below-ground levels.  The construction of our expansion project hastemporarily been postponed due to inadequate liquidity or cash flow to financethe project as proposed.  We willconsider various sources of liquidity to finance the first phase of theproposed project, although it cannot be assured that we will be able to obtainfinancing or that the interest rates on any financings will be favorable.

 

The Tribe incurred approximately $67.0 million intotal expenses on our behalf for master planning of the proposed resort andinfrastructure improvements on the reservation that benefits the Casino, ofwhich almost all of such expenditures were incurred prior to 2009 before theconstruction was suspended.  We reimbursed the Tribe approximately $52.4million through 2009.  On January 8,2010, our Board of Directors authorized the reimbursement of the Tribe in anamount not to exceed approximately $14.9 million of construction costs. The approval included a payment schedule according to which we reimbursed theTribe $2,700,000 on January 18, 2010 and $400,000 on February 1, 2010and on March 1, 2010. We will reimburse the Tribe $400,000 on April 1,2010 and $700,000 monthly thereafter without exceeding $14.9 million. When the reimbursement payments are made or accrued, the related expenses are capitalizedand reflected in construction-in-progress on our balance sheet. The reimbursedcosts consist of engineering and design costs related to the proposed masterplan development, including electrical, HVAC, landscaping, interior designservices and consulting fees for legal, branding, feasibility, and publicrelations services, as well as the construction costs of the lower AcornRoad.  During the three months ended March 31,2010, we reimbursed the Tribe $3.5 million for development expenditures andaccrued the remaining $11.1 million, which is included in Payable to Tribe inthe Condensed Balance Sheet at March 31, 2010.

 

On March 18, 2008, the Tribe and the SonomaCounty Board of Supervisors entered into a memorandum of agreement (“MOA”)that, among other things, settled several long-standing legal disputes betweenSonoma County and the Tribe and provides a binding framework for resolvingfuture disputes.  We believe the MOA has had significant positive impactson the conduct of our business and the Tribe’s ability to develop ourexpansions plans and construct our proposed hotel and casino resort. Pursuant to the MOA, the Tribe has agreed to pay the County up to $75 millionin mitigation fees over a 12 year period to offset impacts of the potentiallosses and impacts to the County resulting from the Tribe’s various ongoingprojects and is intended to support the services being provided by theCounty.  In addition to the mitigation fees, the Tribe will pay a fee inlieu of the County’s Transient Occupancy Tax in the amount of 9% of the rentalcollected on occupied hotel rooms, to be paid quarterly and continuing for fiveyears after the later to occur of the termination of the MOA, as may beextended, or the Tribe’s Compact with the State (which is now terminable in2020 at the earliest), which fees may be applied to programs and services thatserve to promote tourism in the County. Such in lieu fees could total as muchas $25 million during the term of the MOA. The Tribe has not made any determinations to seek reimbursement ordirect payment from us of amounts due to the County pursuant to the MOA.

 

As part of the effort to enhance the overall appeal ofour product, we have been reconfiguring our gaming floor.  This effort hasresulted in the reduction of approximately 372 slot machines since June 2009and 2 table games since August 2009.  We will maintain ourcontractual rights under the Compact to operate a total of 1,600 slot machinesin our Casino and pay the related Revenue Sharing Trust Fund (“RSTF”)payments.  We considered many factors such as peak period demand, per unitproductivity, and player comfort in our analysis to ensure that the reductionof gaming devices will not adversely impact our revenues.  The reductionof gaming units on the Casino floor has provided us an opportunity to upgradecurrent amenities, improve player comfort and enhance entertainment value. Weare confident that these improvements, targeted at improving product appeal,will ultimately open up a greater spectrum of potential consumers within ourdesignated market area.  In combination with our continuing effort toimprove operational efficiency, upgrading our gaming technology, and refocusingour marketing efforts, we are confident that we will have set a solidfoundation for improved and sustained cash flows.

 

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**Contractual Obligations as of March 31,2010**

 

The following table summarizes our contractualobligations and commitments as of March 31, 2010:

 
| ** **                      | ** ** | **Total** | ** **  | **1 Year** | ** ** | **1-3 Years** | ** ** | **3-5 Years** | ** **  |
|---------------------------------|------------|-----------|-------------|------------|------------|---------------|------------|---------------|-------------|
| Long-term debt  obligations (a) |       | $         | 200,188,176 |       | $          | 188,176       |       | $             | 200,000,000 |   | — |   |
| Operating lease  obligations    |       | 1,594,241 |        | 610,396    |       | 843,133       |       | 140,712       |        |
| Total obligations (b)           |       | $         | 201,782,417 |       | $          | 798,572       |       | $             | 200,843,133 |   | $ | 140,712 |   |
|                                 |            |           |             |            |            |               |            |               |             |  |  |  |  |

 

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(a)           Excluded from long-term debtobligations above are interest payments of $14.6 million in 1 year and $16.3million in 2-3 years.

(b)           The Compact requires us to pay aquarterly fee of $0.3 million to the RSTF based on the number of our licensedgaming devices. Total obligations do not include the RSTF payments.

 

**Regulation and Taxes**

 

We are subject to extensive regulation by the Tribe’sGaming Commission, the California Gambling Control Commission and the NationalIndian Gaming Commission. Changes in applicable laws or regulations could havea significant impact on our operations.

 

On March 18, 2008, the Tribe and the SonomaCounty Board of Supervisors entered into the MOA that, among other things,settled several long-standing legal disputes between Sonoma County and theTribe, and provides a binding framework for resolving futuredisputes.   Under the MOA, the County agreed to drop its oppositionto the Tribe’s application for a liquor license.  In a related action, theAlexander Valley Association (“AVA”), a local business and residentsassociation which has long objected to the issuance of a liquor license, agreedto withdraw its objections to the license and has persuaded its members and anumber of other protestors to do likewise.

 

In May 2008, the California Department ofAlcoholic Beverage Control (“ABC”) issued a liquor license to our gaming andentertainment facility.  However, theTribe has agreed to restrict the sale of alcohol to wine and beer between thehours of 11 a.m. and 5 p.m. on weekdays, and to stop serving alcoholaltogether at midnight except for Friday and Saturday nights and the nightsbefore holidays. The Tribe has also agreed not to serve liquor on the Casinofloor, although patrons may bring drinks purchased at the restaurant or bar onto the Casino floor. The restrictions may be renegotiated following the firstto occur of the three year anniversary of the MOA or the opening of a hotel,which is anticipated to occur within the next two to three years.

 

In addition, the MOA commits the County Sheriff’sDepartment and Fire Marshall to providing public safety and fire services tothe Casino and the Tribe’s future gaming projects on the Rancheria, providesdetailed agreements on off reservation impact mitigation measures, and permitsthe Tribe’s application to take the Dugan Property into trust, which hasalready been approved by the Department of the Interior (“DOI”) but wasappealed by the DOI, to move forward without further County opposition.

 

The Tribe has agreed to pay the County up to $75million in mitigation fees over a 12 year period to offset impacts of thepotential losses and impacts to the County resulting from the Tribe’s variousongoing projects and is intended to support the services being provided by theCounty.  In addition to the mitigation fees, the Tribe will pay a fee inlieu of the County’s Transient Occupancy Tax in the amount of 9% of the rentalcollected on occupied hotel rooms, to be paid quarterly and continuing for fiveyears after the later to occur of the termination of the MOA, as may beextended, or the Tribe’s Compact with the State (which is now terminable in2020 at the earliest), which fees may be applied to programs and services thatserve to promote tourism in the County. Such in lieu fees could total as muchas $25 million during the term of the MOA.  The Tribe has not made anydeterminations to seek reimbursement or direct payment from us of amounts dueto the County pursuant to the MOA.

 

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We believe the MOA has had significant positiveimpacts on the conduct of our business and our and the Tribe’s ability todevelop our expansions plans and construct our proposed hotel and casinoresort.

 

Since we are an unincorporated governmentalinstrumentality of the Tribe located on reservation land held in trust by theUnited States of America, we are not subject to federal or state income taxes.Various efforts have been made in Congress over the past several years to enactlegislation that would subject the income of tribal governmental businessentities, such as us, to federal income tax. Although no such legislation hasbeen enacted, similar legislation could be passed in the future. It is notpossible to determine with certainty the likelihood of possible changes in taxlaw or in the administration of such law. Such changes, if adopted, could havea material adverse effect on our operating results and cash flow fromoperations.

 

**Impact of Inflation**

 

Absent changes in competitive and economic conditionsor in specific prices affecting the casino industry, we do not expect thatinflation will have a significant impact on our gaming facility operations.Since many of our patrons drive up from Santa Rosa and San Francisco, changesin specific prices, such as fuel and transportation prices, relative to thegeneral rate of inflation may have a material adverse effect on the casinoindustry in general.

 

**Seasonality**

 

We anticipate that activity at our gaming facility maybe modestly seasonal with stronger results expected during the summer due inpart to the relatively higher levels of tourism during such times of the year.In addition, our operations may be impacted by adverse weather conditions andfluctuations in the tourism business. Accordingly, our results may fluctuatefrom quarter to quarter and the results of one quarter may not be indicative ofresults expected from future quarters.

 

**ITEM3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Market risk is the risk of loss arising from adversechanges in market rates and prices, such as interest rates, foreign currencyexchange rates and commodity prices.

 

Through March 31, 2010, we had not invested inderivative or foreign currency-based financial instruments.  We primarilyhave invested in money markets.  As such, we do not believe we havematerial exposure to market risk.

 

**ITEM4T.  CONTROLS AND PROCEDURES**

 

**Evaluation of Disclosure Controls andProcedures**

 

We maintain disclosure controls and procedures thatare designed to ensure that the information required to be disclosed in ourreports filed with, or furnished to the Securities Exchange Commission (the “SEC”)pursuant to the Exchange Act, is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules, regulations and forms,and that such information is accumulated and communicated to our management,including our Chief Executive Officer and Chief Financial Officer, asappropriate, to allow timely decisions regarding required disclosure based onthe definition of “disclosure controls and procedures” in Rule 13a-15(e) and15d-15(e) of the Exchange Act.

 

Management has performed,with the participation of our Chief Executive Officer and Chief FinancialOfficer, an evaluation of the effectiveness of our disclosure controls andprocedures as defined in Rules 13a-15(e) and 15d-15(e) of theExchange Act.  Based on the evaluation,our Chief Executive Officer and Chief Financial Officer concluded that, asof March 31, 2010, our disclosure controls and procedures wereeffective.

 

**Changes to Internal Controls OverFinancial Reporting**

 

We continue to test our internal controls so as tomake improvements to the weaknesses that we have identified and to determinewhether there are other procedures that we can implement to improve ourfinancial reporting processes.  For the

 

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three month period ended March 31, 2010,there have been no changes in the internal control over financial reportingthat have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting.

 
| **PART II.** | **OTHER INFORMATION** |
|-------------------|-----------------------|
| ** **        | ** **            |
| **ITEM  1.**      | **LEGAL PROCEEDINGS** |

 

*Runyan Litigation*

 

On March 7, 2008, Norman Runyan, our former ChiefOperations Officer, filed a wrongful termination suit against us, the Casinoand Mr. Harvey Hopkins, the Chairman of the Tribe and a member of ourBoard, in the Sonoma County Superior Court.  We believed the case lackedmerit and moved to dismiss.  On October 17, 2008, the Court issued anOrder dismissing the lawsuit.  On December 3, 2008, the Court enteredan Order granting our motion and dismissed the case.

 

On January 14, 2009, Mr. Runyan filed aPetition for Order Compelling Arbitration with the Sonoma County SuperiorCourt, and on January 30, 2009, he filed a Motion for Order CompellingArbitration.  In both the Petition and the Motion, Mr. Runyan soughtto have the Court issue an order compelling arbitration of the claims assertedin the complaint that was dismissed by the court in December 2008. We believed, based on fact that Mr. Runyan entered into a SeveranceAgreement and General Release with the Casino, and other released parties, thatthere was no basis for Mr. Runyan to seek arbitration.  On April 13,2009, we, along with the Casino and Mr. Hopkins, filed a hybrid motion toquash summons and dismiss the Petition and Motion.  On June 1, 2009,the Court granted the motion in its entirety, holding that the Court lackedpersonal and subject matter jurisdiction, that Mr. Runyan terminated andextinguished his purported employment agreement (which contained thearbitration clause he attempted to rely on) and that he waived any right toarbitration he might have had by settling and releasing all claims.  Finally,the Court held that we have tribal sovereign immunity from service of process.

 

Mr. Runyan filed a Notice ofAppeal of the Superior Court’s Order on July 27, 2009 and filedhis opening brief in the First District Court of Appeal on December 11,2009.  Our respondents brief was filed on January 8, 2010, Mr. Runyan’sreply brief was filed on February 26, 2010, and oral argument has been setfor May 11, 2010.  We continue to believe that there was no basis forMr. Runyan to seek arbitration and will argue vigorously in favor ofupholding the Superior Court’s Order granting the motion to quash summons anddismissing Mr. Runyan’s petition and motion for an order compellingarbitration.

 

*Other Legal Matters*

 

We are involved in other litigation and disputes fromtime to time in the ordinary course of business with vendors and patrons. Webelieve that the aggregate liability, if any, arising from such litigation ordisputes will not have a material adverse effect on its results of operations,financial condition or cash flows.

 
| **ITEM  1A.** | **RISK FACTORS** |
|---------------|------------------|

 

There have been no material changes from the riskfactors previously disclosed in our most recent Form 10-K other than thefollowing:

 

***We face competitionfrom other California Indian casinos, casinos located in Nevada and elsewhereand other forms of gaming.***

 

The gaming industry is very competitive. We face orwill face competition from existing and proposed Indian gaming facilities inthe surrounding area, and elsewhere in California, and with casino gaming inNevada, including gaming facilities that could be located closer to the SanFrancisco Bay area. We also compete with card rooms located in the surroundingarea, and other forms of gaming that are legal in California, including on andoff-track wagering and the California State Lottery, as well as with non-gamingleisure activities. The availability of such alternative gaming and non-gamingactivities may increase in the future. Many of our competitors havesubstantially greater resources and name recognition than our Casino. Inaddition, we may also face competition in our market from new facilities thatmay be built by other Indian tribes in the future.

 

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Federal and California law currently permits Class IIIcasino gaming only on federally recognized tribal lands pursuant to compactsnegotiated with the State of California and approved by the U.S. Secretary ofthe Interior. Class II gaming for tribes is permitted only on federallyrecognized tribal lands. There are currently 55 tribes operating 56 compactedgaming facilities in the State of California. The closest existing competitorsare the Hopland Sho-ka-wah Casino, located approximately 35 miles and 40minutes north of the Tribe’s reservation; the Konocti Vista Casino, locatedapproximately 45 miles and one hour and ten minutes northeast of the Tribe’sreservation; the Thunder Valley Casino, located approximately 124 miles and twohours and forty-five minutes east of the Tribe’s reservation; and Cache CreekIndian Casino and Bingo, located approximately 95 miles and two hours andfifteen minutes east of the Tribe’s reservation. In addition, several potentialcompetitors are attempting to develop and open casinos near our Casino.

 

The greatest competition may come from the proposedGraton Rancheria casino. In April 2003, the Federated Indians of theGraton Rancheria, also known as the Coast Miwoks, announced plans to purchaseland in Sonoma County near Highway 37 and Lakeville Highway, approximately 20miles south of our gaming facility and closer to San Francisco than ourreservation. The proposed location would lie directly between our Casino andthe majority of the 7 million population base of the San Francisco Bay area.The announced plans include construction of a casino-hotel complex that will bemanaged by Station Casinos, Inc. based in Las Vegas, Nevada. The proposedfacility would house approximately 2,000 slot machines, 120 card tables andbingo, as well as a 300-room hotel, five restaurants and a theater with up to2,000 seats. As a result of environmental opposition to the development of suchlocation, the Federated Indians of the Graton Rancheria announced plans to movethe proposed casino-hotel complex to a site near Rohnert Park, California. TheRohnert Park City Council has approved an agreement with the Federated Indiansof the Graton Rancheria to share revenues with Rohnert Park and variouscommunity groups, approximately $200.0 million over 20 years, to offset theimpact of the proposed project.

 

In May 2008, the U.S. Department of Interiorpublished in the Federal Register a notice to take the proposed Rohnert Parksite into federal trust on behalf of the Graton Rancheria. This represents asignificant step towards the development of a casino at Rohnert Park, as do theseparate agreements negotiated between the Graton Rancheria and Sonoma Countyand Marin County, whereby the counties pledged to not challenge theland-into-trust decision and the Graton Rancheria agreed not to build anyadditional casinos in Sonoma or Marin counties. The U.S. Department of Interior’sland-into-trust decision has, however, been challenged by citizens groupopposed to a casino in Rohnert Park. The federal district court dismissed thecitizens group’s lawsuit on April 21, 2009, but the group has appealed thedecision to the Ninth Circuit Court of Appeals.  The Department of theInterior has agreed to withhold action on taking the land into trust pendingthe appeal.  A spokesperson for the citizen’s group has also statedpublicly that the group will challenge the adequacy of the environmental impactstatement for the proposed Graton casino, which was issued in February 2009. Another obstacle facing the proposed Graton Rancheria casino is the ability toobtain financing for the project.  In addition, the Graton Rancheria willalso need to enter into a tribal-state compact with the State of Californiabefore it can operate Class III gaming at the Rohnert Park site.

 

The Hopland Sho-ka-wah Casino is located several mileseast of Highway 101 on Route 175. The facility features a 40,000 square footcasino offering 570 slot machines and eight table games. The facility offerspoker, pai gow, blackjack, card-based roulette, and card-based craps tablegames.  The facility contains a Mexican food taqueria, a small cafe-typefood and beverage area, a fine-dining steak house and a bar. Hopland operates asmall bus program but does not operate a hotel.

 

East of the Sho-ka-wah Casino is the Konocti Casino inLakeport, California. Lakeport is located approximately 37 miles fromCloverdale with access off Highway 20.  The casino currently houses 349slot machines and 6 table games. The facility also offers an 80-room hotel andmarina with small pool as well as a 74-space recreational vehicle park. Thefood and beverage program includes a small restaurant, buffet and a newlyremodeled steakhouse restaurant serving liquor.

 

The Thunder Valley Casino opened in June 2003 andis located at the intersection of Highway 65 and Interstate 80 just outside ofSacramento, California. The Nevada-style property offers over 2,400 slotmachines and 98 table games that include blackjack, baccarat, and a variety ofpoker games including Let It Ride and Pai Gow. The facility features a salon,private dining rooms, bars and butler service. In addition, it houses a500-seat buffet and various fast food options. The facility also features anightclub.  In 2008, the Thunder Valley Casino announced plans to build anew 650-room, 23-story hotel featuring a spa, family center and otheramenities.  Thunder Valley also planned to construct a 3,000-seatperforming arts center, and to expand the casino to include three new restaurants,more gaming space and new poker room, and a parking

 

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structure capable of holding 5,000cars.  Thunder Valley obtained financing for the expansion, which began inJuly 2008 but was halted in November 2008.  In May 2009,the casino resumed work on the expansion, but the project has been scaled downto include a 12-story hotel with 297 rooms; a 700-seat, 10,000-square-feetmultipurpose entertainment center in place of the performing arts center; and a7-story parking structure with approximately 3,800 spaces. Thunder Valleyexpects to open the hotel in July 2010.

 

The Cache Creek Casino is located approximately 50 mileswest of Sacramento. The Cache Creek Casino offers over 2,400 slot machines. Thecasino recently added a 14-table poker room and houses 122 table gamesincluding blackjack, Texas Hold’em, Pai Gow and Caribbean Stud. The facilityalso includes a 200-room luxury hotel, 9 restaurant outlets, an entertainmentpavilion with seating for 600, a spa and outdoor pool, an 18-hole golf courseand a 1,883 spot parking structure. In 2007, Cache Creek announced plans to addmore shops and parking and expand its gaming floor, and to add a 10-story hoteltower with 467 rooms, and a 62,500 square-foot convention center capable ofseating 2,300 people.  These expansion plans were put on hold in early October 2009but were resumed in January 2010 when the Cache Creek Casino announcedplans to resume the expansion, proposing to add over 20,000 square-feet ofcasino space, a 52,000 square-foot convention center, and a 900-cargarage.  The expansion is expected to be completed by 2013.

 

The Lytton Band of Pomo Indians currently operate a70,000 square-foot casino with over 1,100 Class II electronic bingomachines and over 30 table games on a 9-acre site in a card room in San Pablo,near Oakland, California, on land that was placed in trust for the tribethrough congressional legislation. The Lytton Band signed a compact withGovernor Arnold Schwarzenegger for operating Class III casino gaming onthe San Pablo site, but the state legislature withheld its approval. In May 2007,legislation was introduced in the U.S. Senate, which has the support of theLytton Band, that would require the Lytton Band to forego any Class IIImachines at the San Pablo site and instead limit itself to operating itsexisting Class II machines. This legislation was passed by the Senate in November 2007and referred to the Committee on Natural Resources of the U.S. House ofRepresentatives, but no further action was taken.  The legislation wasagain introduced in the U.S. Senate in January 2009, and the Senate passedthe bill on March 12, 2009.

 

The Twin Pine Casino and Hotel, owned and operated bythe Middletown Rancheria of Pomo Indians, is located approximately 4 miles offHighway 29 in Napa County, approximately 34 miles from our gaming andentertainment facility. The Middletown Rancheria has recently completed anexpansion of the Twin Pine Casino and Hotel which includes a 60-room hotel,three food areas and a wine tasting room, as well as 50,000 square feet ofgaming space with approximately 520 slot machines and 12 table games consistingof blackjack and poker.  The Twin PineCasino and Hotel recently announced plans to add a fourth restaurant offering,a 40-seat café with a mid-priced menu.

 

There are a number of other Indian tribes, includingthe Scotts Valley Band of Pomo Indians and the Guidiville Band of Pomo Indians,that have announced preliminary plans to develop gaming projects in the SanFrancisco Bay area.

 

The Guidiville Band hopes to have transferred to itland at the former Point Molate Naval Base in Richmond, California on which ithopes to operate a 240,000 square-foot casino with 124,000 square-feet ofgaming space, along with two hotels, a conference center, retail shops,restaurants and two parking structures.  The project is still in its earlystages, as the land transfer has not been approved and environmental reviewsmust be completed.  In January 2009, two environmental groups filed alawsuit against the City of Richmond, the Guidiville Band and its financialbacker and developer in an effort to stop the transfer of the land.  TheGuidiville Band released the draft environmental impact study for the proposedproject in July 2009, and the Bureau of Indian Affairs held a publichearing on the draft study in August 2009 and took public comments on thestudy until September 23, 2009.

 

The Scotts Valley Band hopes to build a 225,000square-foot casino complex and five-story parking garage on a 29.87-acre sitein unincorporated Contra Costa County, near Richmond, California.  In March 2008,the Bureau of Indian Affairs announced the filing of the Final EnvironmentalImpact Statement for the proposed project.  In August 2008, theContra Costa County Superior Court struck down a municipal services agreementbetween the City of Richmond and the Scotts Valley Band on the ground that theCity failed to conduct the proper environmental reviews before signing theagreement but the superior court’s decision was overturned in February 2010.

 

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The Cloverdale Rancheria has announced preliminaryplans to build a 596,000 square-foot hotel/spa and casino resort some ten milesnorth of our Casino on U.S. Highway 101, and they and their financial backershave purchased approximately 79 acres for the proposed facility. Theenvironmental review process for the proposed Cloverdale Rancheria projectbegan in July 2008, and in December 2008 the U.S. Department of theInterior issued an opinion stating that if the lands were taken into trust,they would be eligible for gaming under the Indian Gaming Regulatory Act.

 

Each of these proposed projects face numerousobstacles in addition to environmental approvals, including the negotiation andapproval of a compact with the State of California, approval from the U.S.Department of the Interior to take the land on which the project would belocated into federal trust on behalf of the tribe, and, for the Guidiville andScotts Valley projects, determinations from appropriate federal agencies thatthe tribes may conduct gaming on these lands pursuant to IGRA.

 

In June 2009, the Mishewal Wappo Tribe ofAlexander Valley, a tribe with aboriginal lands and a former rancheria locatedin Sonoma County that was terminated by the federal government under the 1958California Rancheria Act, filed suit against the United States Secretary of theInterior seeking to have their federally-recognized status restored.  TheChairman of the Mishewal Wappo Tribe has stated publicly that the tribe has noplans for casino, but the tribe could have the right to conduct gaming underIGRA if their federally-recognized status is restored.

 

We also compete with other forms of gaming such asstatewide lotteries, live and simulcast pari-mutuel wagering and card rooms.

 

In May 2007, Governor Schwarzenegger proposedthat the California State Lottery be leased to a private concessionaire toincrease its revenue and efficiency. Part of the Governor’s proposalincludes authorizing the use of instant lottery video terminals that resembleand operate like slot machines at locations including horse racing tracks andcard rooms. Approval of this proposal would require a two-thirds affirmativevote of the state legislature and could require a constitutional amendment tothe Constitution of the State of California. While it is uncertain whether orwhen this proposal will be approved, implementation of such a proposal couldadversely affect our and other Indian casinos’ competitive positions.  Aproposal that would have allowed the California State Lottery to dedicate ahigher percentage of its revenues to player winnings (with the hope of boostinglottery sales in California), securitize California State Lottery revenues, andchange the amount of California Lottery revenues dedicated to education wasdefeated in a statewide ballot referendum in May 2009.

 

Other initiatives expanding competitive forms ofgaming have been approved and may, from time to time, be approved by state orlocal authorities. Examples include the passage in California of recentlegislation expanding off-site betting on horse races through expanded advancedeposit wagering and increased satellite wagering sites, and a legislativeproposal in the California Assembly in February 2007 to amend theCalifornia Penal Code to expand permitted bingo games by charitableorganizations to include electronic bingo cards.

 

In August 2009, a federal district court judgeissued an order, in ongoing litigation regarding the proper number of totalslot machines allowed under the 1999 tribal-state gaming compacts, requiringthat the State of California issue an additional 10,549 slot machinelicenses.  A drawing was held on October 5, 2009, and 3,548 licenseswere awarded to eleven different Indian tribes.  The only one of our competitorsto receive licenses in the draw was the Middletown Rancheria of Pomo Indians,which operates the Twin Pine Casino and Hotel and received 100 additionallicenses through the draw.  As with the licenses awarded to other tribesin the draw, the licenses awarded to the Middletown Rancheria will revert backto the State if the machines are not put into operation within one year of thedraw.  The licenses could also be withdrawn if the State of California issuccessful in its appeal of the district court’s ruling to the United StatesCourt of Appeals for the Ninth Circuit.

 
| **ITEM  6. ** | **EXHIBITS** |
|--------------------|--------------|

 

The Exhibit Indexfiled herewith is incorporated herein by reference.

 

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**SIGNATURE**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
| Dated: May 17, 2010 | RIVER ROCK ENTERTAINMENT AUTHORITY |
|--------------------------|------------------------------------|
|                     | (Registrant)                       |
|                     |                               |
|                     | By:                                | /s/ David Fendrick |
|                     |                               | David Fendrick, |
|                     |                               | Chief Executive Officer |

 

**EXHIBIT INDEX**

 
| **Exhibit No.** | ** ** | **Exhibit**                                                                                                                                                                                                                                              |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                 |       | Certification by David Fendrick, Chief Executive  Officer, pursuant to Exchange Act Rules 13a-14(a) and  15d-14(a) (filed herewith)                                                                                                       |
|                 |       |                                                                                                                                                                                                                                                     |
| 31.2                 |       | Certification by Joseph R. Callahan, Chief Financial  Officer, pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) (filed  herewith)                                                                                                   |
|                 |       |                                                                                                                                                                                                                                                     |
| 32*                  |       | Certification by David Fendrick, Chief Executive  Officer, and by Joseph R. Callahan, Chief Financial Officer, pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 (furnished herewith) |

 

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*               This certification is being furnished solely toaccompany this quarterly report pursuant to 18 U.S.C. Section 1350, and isnot being filed for purposes of Section 18 of the Exchange Act and is notto be incorporated by reference into any filing of River Rock EntertainmentAuthority whether made before or after the date hereof, regardless of anygeneral incorporation language in such filing.

 

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