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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D. C. 20549**

 

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**FORM 10-K**

 

**(MarkOne)**

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

 

**for the fiscal year ended December 31,2009**

 

**OR**

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

 

**for the transition period from            to            **

 

**Commission File Number: 333-115186**

 

**RIVER ROCK ENTERTAINMENT AUTHORITY**

(Exact name of registrant as specified in its charter)

 

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

 

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

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

 

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Securities registered pursuant to Section 12(b) ofthe Act:

 

| **Title of Each Class** | ** ** | **Name of Each Exchange  On Which Registered** |
|----------------------------------------|------------|-------------------------------------------------------------------------|
| **NONE**                               | ** ** | **NONE**                                                                |

 

Securities registered pursuant to Section 12(g) ofthe Act: 

 

Title of Class**NONE**

 

Indicate by check mark ifregistrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act. Yes o No x

 

Indicate by check mark ifregistrant is not required to file reports pursuant to Rule 13 or Section 15(d) ofthe Act. Yes x No o

 

Indicate by check markwhether the registrant: (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the precedingtwelve months (or such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x No o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateweb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T during the preceding 12months (or for such shorter period that the registrant was required to submitand post such files):    Yes o No o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. x

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company (as defined in ExchangeAct Rule 12b-2).

 

| Large  Accelerated Filer o |   | Accelerated  Filer o         |
|----------------------------|--------|------------------------------|
|                       |   |                         |
| Non-accelerated  Filer x   |   | Smaller  reporting company o |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act) Yes o No x

 

The aggregate marketvalue of common stock held by non-affiliates of the registrant was $0 on thelast business day of the registrant’s most recently completed second fiscalquarter (June 30, 2009).

 

The registrant has nooutstanding common equity.

 

**DocumentsIncorporated By Reference**

 

None.

 

 

 

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**RIVER ROCK ENTERTAINMENT AUTHORITY**

 

**INDEX TO FORM 10-K**

 
| ** ** | ** **                                                                                                          | **Page Number** |
|------------|---------------------------------------------------------------------------------------------------------------------|----------------------|
|       |                                                                                                                |                 |
|       | PART I                                                                                                         |                 |
|       |                                                                                                                |                 |
| Item 1.    | Business                                                                                                            | 4                    |
| Item 1A.   | Risk Factors                                                                                                        | 16                   |
| Item 1B.   | Unresolved  Staff Comments                                                                                          | 20                   |
| Item 2.    | Properties                                                                                                          | 20                   |
| Item 3.    | Legal Proceedings                                                                                                   | 20                   |
| Item 4.    | Reserved                                                                                                            | 21                   |
|       |                                                                                                                |                 |
|       | PART II                                                                                                        |                 |
|       |                                                                                                                |                 |
| Item 5.    | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities | 21                   |
| Item 6.    | Selected  Financial Data                                                                                            | 21                   |
| Item 7.    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                         | 24                   |
| Item 7A.   | Quantitative  and Qualitative Disclosure About Market Risk                                                          | 34                   |
| Item 8.    | Financial  Statements and Supplementary Data                                                                        | 34                   |
| Item 9.    | Changes in  and Disagreements with Accountants on Accounting and Financial Disclosure                               | 34                   |
| Item 9A.   | Controls and  Procedures                                                                                            | 34                   |
| Item 9B.   | Other Information                                                                                                   | 35                   |
|       |                                                                                                                |                 |
|       | PART III                                                                                                       |                 |
|       |                                                                                                                |                 |
| Item 10.   | Directors  and Executive Officers of the Registrant                                                                 | 35                   |
| Item 11.   | Executive  Compensation                                                                                             | 37                   |
| Item 12.   | Security  Ownership of Certain Beneficial Owners and Management                                                     | 41                   |
| Item 13.   | Certain  Relationships and Related Transactions, and Director Independence                                          | 41                   |
| Item 14.   | Principal  Accountant Fees and Services                                                                             | 42                   |
|       |                                                                                                                |                 |
|       | PART IV                                                                                                        |                 |
|       |                                                                                                                |                 |
| Item 15.   | Exhibits,  Financial Statement Schedules and Reports on Form 8-K                                               | 43                   |

 

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**CAUTIONARY STATEMENT**

 

*Except for the historical financial information containedherein, the matters discussed in this report on Form 10-K (as well asdocuments incorporated herein by reference) may be considered forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933,as amended, and Section 21E of the Securities Exchange Act of 1934, asamended. Such forward-looking statements are based upon current expectationsthat involve risks and uncertainties and include declarations regarding theintent, belief or current expectations of us and our management and may besignified by the words “believes,” “anticipates,” “plan,” “expects,” “intends”and similar expressions. Our actual results and the timing of certain eventsmay differ significantly from the results discussed in the forward-lookingstatements. Factors that might cause such a discrepancy include, but are notlimited to, those discussed in “Risk Factors” and elsewhere in this report. Allforward-looking statements in this document are based on information available tous 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.*

 

*Referencesin this Form 10-K to the “Authority” and the “Tribe” are to the River RockEntertainment Authority and the Dry Creek Rancheria Band of Pomo Indians,respectively. The terms “we,” “us” and “our” refer to the Authority.*

 

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**PART I**

 

**Item 1. Business.**

 

**OVERVIEW**

 

River RockEntertainment Authority (“we,” “us,” “our” or the “Authority”) is agovernmental instrumentality of the Dry Creek Rancheria Band of Pomo Indians ofCalifornia (the “Tribe”). The Tribe is a federally recognized Indian tribe with1,002 enrolled members, with an approximately 75-acre reservation in SonomaCounty, California (“Sonoma County” or the “County”). We were formed in 2003 asan unincorporated governmental instrumentality of the Tribe, to own and operatethe River Rock Casino in Sonoma County, California. The River Rock Casino hadpreviously operated as a wholly-owned governmental operating property of theTribe.

 

The Indian GamingRegulatory Act of 1988, as amended (“IGRA”), permits federally recognizedIndian tribes to conduct casino gaming operations on certain Indian lands, subjectto, among other things, the negotiation of a compact with the affected state.The Tribe and the State of California entered into a compact (the “Compact”) inSeptember 1999 which became legally effective when it was approved by theU.S. Department of the Interior and notice of approval was published in theFederal Register in May 2000. The Compact authorizes certain forms of Class IIIcasino gaming, including slot machines and house-banked card games.

 

Our address is3250 Highway 128 East, Geyserville, California 95441 and our telephone numberis (707) 857-2777.

 

**OurRiver Rock Casino**

 

We own and operatethe River Rock Casino, a gaming and entertainment facility located on the Tribe’sreservation, approximately 75 miles north of San Francisco, California. Our62,000 square-foot gaming and entertainment facility, which is located in theAlexander Valley, has views of the surrounding countryside, is open 24-hours aday, seven days a week, and currently features:

 

·                  35,500 square feet of gaming space containing 1,212slot and video poker gaming machines, 18 table games featuring Blackjack, ThreeCard Poker, Mini Baccarat and Pai Gow Poker, and 6 tables featuring Texas Hold’emPoker. We offer state-of-the-art gaming devices including video poker, videokeno, progressive slots and guest favorites, such as Red Hot 7’s, Hot Shot,Jackpot Party, Quick Hits, Mystery Temple, Quick Strike and other variousthemes;

 

·                  both smoking and non-smoking gaming rooms in order to satisfy customerpreferences;

 

·                  the Players Club, a player tracking system whichoffers our guests incentives for additional play;

 

·                  the Quail Run Restaurant, offering a buffet menu, with152 indoor seats and 96 outdoor seats that overlook the Alexander Valley wineregion and the Russian River;

 

·                  the all new Center Stage Bar & Grill with 64seats, offering “bar top” video poker games, recently expanded to include acasual dining area and an upgraded stage and sound system;

 

·                  the all new Fortune Café, recently constructed tooffer a quick service Asian-themed menu, with 24 seats;

 

·                  two snack bars, and a historic and contemporary Pomobasketry and art display;

 

·                  alcohol service, as a result of the May 2008issuance of our liquor license;

 

·                  three parking structures and an adjacent parking lotallows us to accommodate approximately 1,584 self-parked customer vehicles andvalet;

 

·                  an Arts and Crafts California Bungalow-style design and furnishings,incorporating Native American elements, that feature a cultural arts collectionof traditional and contemporary Pomo art, including historical basketry forwhich the Tribe is known. The interior of our gaming facility utilizes anextensive amount of wooden casework and natural rock to emphasize thearchitectural style found throughout California wine country. In keeping withthis motif, our gaming facility’s counters are constructed of natural stone andwood, and oak wainscoting grace the food and beverage facilities; and

 

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·                  a location in the heart of the beautiful Alexander Valley withspectacular views of the surrounding countryside. Guests entering our gamingfacility are treated to a large, open-beamed Porte cochere that faces outtowards sweeping vistas of Alexander Valley vineyards. Our gaming facility wasdesigned to capitalize on the scenic vistas with the food and beveragefacilities strategically placed to feature the expansive views.

 

In addition, toenhance the comfort of our guests, we have installed a state-of-the-artventilation system that greatly reduces cigarette smoke and impurities,circulates air from the ground level and provides 100% fresh-air return. Ourgaming facility also incorporates other environmentally sensitive engineeringfeatures, including irrigation using surplus wastewater and non-intrusivelighting in the parking lot. Furthermore, our state-of-the-art back-up andredundant generators are designed to provide electricity in the event of apower failure.

 

We maintain adigital surveillance system that tracks the entire casino floor to secure ourfacility and operations. We employ a 57 officer security force.

 

**Competitive** Strengths

 

We believe thefollowing strengths have and will continue to contribute to our success:

 

*AttractiveLocation with Convenient Access. *Our gamingfacility is conveniently located off of Highway 101, a four-lane highwaythrough Sonoma County that serves as a major thoroughfare between Los Angelesand Oregon.  Highway 101 travels directly through the nearby cities of SanFrancisco, San Rafael, Petaluma and Santa Rosa. CALTRANS estimates of Average Annual Daily Traffic (AADT) on Highway 101at the exit to Dry Creek Road to be around 66,000 north and south bound vehicles.  In addition, the nearby airport in Santa Rosaprovides easy access for patrons traveling to wine country.

 

*StrongMarket Demographics. *Pursuant tothe 2006-2008 American Community Survey, our gaming facility is easilyaccessible by all the approximately 7.0 million residents of the SanFrancisco Bay area market which include the major metropolitan cities of SanFrancisco, Oakland and the smaller cities of San Rafael, Berkeley, Santa Rosa,and Petaluma. We also benefit from the 7 million annual visitors to SonomaCounty and 5 million annual visitors to Napa County which is known fortheir world-renowned wineries and related tourist attractions.

 

*LimitedCompetitive Environment and High Barriers to Entry.* Class III casino gaming maynot be conducted in California other than on certain lands held for the benefitof federally recognized Indian tribes and pursuant to negotiated compacts withCalifornia and approved by the U.S. Secretary of the Interior. We believe theserestrictions significantly limit potential future competition. We are notsubject to any betting limits on Indian gaming activities.

 

*HighQuality Products and Amenities.*  Our gamingfacility offers state-of-the-art gaming devices and table games in an upscale,relaxed gaming environment. Our gaming devices feature comprehensive,integrated cashless technology permitting faster wagering and payouts. Inaddition, our restaurant offers premium food and beverages and was designed tocapitalize on the spectacular views of the Alexander Valley. Our gaming andfood and beverage facilities emphasize a high level of customer service,created and maintained through comprehensive employee training.

 

*Emphasison Gaming Devices.*  Ourgaming facility emphasizes slot and video poker gaming devices, which we believe,based on industry studies, represents the most consistently profitable andlowest risk segment of the gaming business. We offer a wide variety of gamesnot only to attract guests but also to encourage them to play for longerperiods of time.

 

*TaxFree Cash Flow from Operations.*  We currently generate significant cashflow from operations.  In addition,because these are governmental operations, they are not subject to any local,state or federal income taxes.

 

*ExperiencedSenior Management Team and Staff.*  Our managementteam is led by seasoned executives who have significant industry experience,leadership and expertise in operations, marketing, finance anddevelopment.  Members of this team havepreviously worked at premier local and destination casinos for commercial andtribally owned casinos.  We believe ourmanagement team and our experienced staff provide superior employee andcustomer care, and an in-depth understanding of the target market and how to maintainreturn business which enhances our competitive position.

 

**Businessand Marketing Strategies**

 

Our businessstrategy is to grow our business to not only capture a greater share of ourgrowing market, but also expand our target patron base to a broader demographicwith the following competitive business strategies:

 

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*Marketing &Promotions:* Ouradvertising methods include radio, billboards, TV, newspaper, magazines, onlineand email blasts, plus bus billboards, signature shuttles, rack cards anddirect mail.  The direct mail program istiered based on player status and will be enhanced next year to include more levelsof offers.  The program includes couponsand information regarding upcoming promotions, food and entertainment.  We will also send out mailers specificallytailored to our high end players. Over the years, we have analyzed promotionsand player demand and have continued with successful promotions which have ledto increased revenues.  Promotions thathave proven successful and increased revenues are car and cash giveaways, cashwheel spins, and mortgage and rent promotions. Along with continued promotions, we will also be adding slot and tablegames tournaments.  We will also beputting more emphasis on direct mail to the ethnic markets, including Latinoand Asian signature markets in the Bay area. With giveaways and promotions throughout the year, we will be able tocontinue to provide cutting edge entertainment for our guests.

 

*Capitalizeon Our Prime Location and Appeal of Sonoma County*. We market our Casino to our localcustomer base and to our broader regional market and international patronstraveling to the area as part of the Sonoma Valley resort destination.  The picturesque Alexander Valley region inthe heart of Sonoma County is a world-renowned tourist destination. We intendto capitalize on its appeal, including its reputation as one of California’spremier wine producing regions, to further expand our customer base. SonomaCounty receives approximately 7 million tourists annually and over5 million tourists visit Napa County annually.  Our marketing message emphasizes the convenientaccess to our gaming facility.

 

*PartnersProgram.*Wecontinue to partner with local businesses and have created strong communityrelations with wineries, hotels, restaurants and Chambers of Commerce.  We believe that promoting one another willhelp increase tourism and bring in new potential customers to Sonoma County andour Casino.

 

*IncreasedTime on Device and Win Per Unit*.  We utilizestate-of-the-art technology and sophisticated player tracking software whichprovides a customized and tailored gaming environment that generates increasedtime spent on a device and enhances the likelihood of return business.  This data base helps us determine our premierplayers and target their favorite games, and also helps us create arelationship with those patrons.

 

*Continueto Develop our Appeal to the Asian Market*.  The Asianmarket constitutes 22% of the Bay Area population and 31% of the San Franciscopopulation.  We continue cultivating ourAsian market customer base through our bus program from San Francisco’sChinatown with our targeted gaming promotions.  In an effort to further increase our marketexposure, we have increased our Asian targeted media and we have begunparticipating in Asian community events. We will also increase our direct mail program to targeted ethnic groups.

 

*ExpandMarketing and Promotion Programs*.  We willmonitor the effectiveness of our advertising and brand awareness effortsthrough an extensive research analysis program and evaluate it againstmeasurable objectives such as first name recall for our gaming facility andsatisfied resident response rates. From our database, we are able to track ourrepeat business. Our database also provides us with information on new playersign-ups, which in 2009, has grown by 41,000. We have also promoted morefrequent and longer visits and increased wagering at off-peak demand periodsthrough promotions such as our “House is Rockin”, “Lucky Envelope” and “HotNights Cool Cash” . These promotions offer customers cash rewards on weekdaynights and has resulted in increased net revenue whenever offered.

 

*Supplement Demand with Our Bus Program*.    Weintend to supplement our overall demand with our line and charter bus programto provide customer transportation to our gaming facility. We believe that thisprogram enabled us to maximize our number of guests during the off-peaktimes.  Our guests have appreciated the convenience offered by thisprogram and we have experienced an increase in the use of our busprogram.  We operated an average of approximately 32 buses a day in 2009.Our bus program brings guests from San Francisco, San Mateo, Contra Costa,Alameda and Marin Counties.  On our River Rock line runs, guests paybetween $10 to $15 roundtrip to and from our Casino. Upon arrival, they receivean incentive package in the range of $15 to $25 towards use on gaming in ourCasino. Our special charter bus guests also receive $20 towards use on gamingin our Casino.

 

**COMPETITION**

 

The gaming industry is very competitive. We face orwill face competition from existing and proposed California Indian gaming facilitiesin the 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 our reservation.The proposed location would lie directly between our Casino and the majority ofthe 7 million population base of the San Francisco Bay area. The announcedplans include construction of a casino-hotel complex that will be managed byStation Casinos, Inc. based in Las Vegas, Nevada. The proposed facilitywould house approximately 2,000 slot machines, 120 card tables and bingo, aswell as a 300-room hotel, five restaurants and a theater with up to 2,000seats. 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 the Interior has agreed to withhold action on takingthe land into trust pending the appeal. A spokesperson for the citizen’s group has also stated publicly that thegroup will challenge the adequacy of the environmental impact statement for theproposed Graton casino, which was issued in February 2009.  Another obstacle facing the proposed GratonRancheria casino is the ability to obtain financing for the project.  In addition, the Graton Rancheria will alsoneed to enter into a tribal-state compact with the State of California beforeit 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 Mexicanfood taqueria, a small cafe-type food and beverage area, a fine-dining steakhouse and a bar. Hopland operates a small bus program but does not operate ahotel.

 

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 349 slot machines and 6 table games. Thefacility also offers an 80-room hotel and marina with small pool as well as a74-space recreational vehicle park. The food and beverage program includes asmall restaurant, buffet and a newly remodeled steakhouse restaurant servingliquor.

 

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 ValleyCasino announced plans to build a new 650-room, 23-story hotel featuring a spa,family center and other amenities.  Thunder Valley also planned toconstruct a 3,000-seat performing arts center, and to expand the casino toinclude three new restaurants, more gaming space and new poker room, and aparking structure capable of holding 5,000 cars.  Thunder Valley obtained financing for theexpansion, which began in July 2008 but was halted in November 2008.  In May 2009, the casino resumed work onthe expansion, but the project has been scaled down to include a 12-story hotelwith 297 rooms; a 700-seat, 10,000-square-feet multipurpose entertainmentcenter in place of the performing arts center; and a 7-story parking structurewith approximately 3,800 spaces. Thunder Valley expects to open the hotel in July 2010.

 

The Cache Creek Casino is located approximately 50miles west of Sacramento. The Cache Creek Casino offers over 2,400 slotmachines. The casino recently added a 14-table poker room and houses 122 tablegames including blackjack, Texas Hold’em, Pai Gow and Caribbean Stud. Thefacility also includes a 200-room luxury hotel, 9 restaurant outlets, anentertainment pavilion with 

 

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seating for 600, a spa and outdoor pool, an 18-holegolf course and a 1,883 spot parking structure. In 2007, Cache Creek announcedplans to add more shops and parking and expand its gaming floor, and to add a10-story hotel tower with 467 rooms, and a 62,500 square-foot convention centercapable of seating 2,300 people.  Theseexpansion plans were put on hold in early October 2009 but were resumed inJanuary 2010 when the Cache Creek Casino announced plans to resume theexpansion, proposing to add over 20,000 square-feet of casino space, a 52,000square-foot convention center, and a 900-car garage.  The expansion is expected to be completed by2013.

 

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 was again introduced in theU.S. Senate in January 2009, and the Senate passed the 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.

 

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 early stages, as the land transfer has notbeen approved and environmental reviews must be completed.  In January 2009, two environmentalgroups filed a lawsuit against the City of Richmond, the Guidiville Band andits financial backer and developer in an effort to stop the transfer of theland.  The Guidiville Band released thedraft environmental impact study for the proposed project in July 2009,and the Bureau of Indian Affairs held a public hearing on the draft study in August 2009and took public comments on the study 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, the Contra Costa County Superior Court struck downa municipal services agreement between the City of Richmond and the ScottsValley Band on the ground that the City failed to conduct the properenvironmental reviews before signing the agreement but the superior court’sdecision was overturned in February 2010.

 

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.  The Chairman of the Mishewal Wappo Tribe hasstated publicly that the tribe has no plans for casino, but the tribe couldhave the right to conduct gaming under IGRA if their federally-recognizedstatus is restored.

 

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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.  A proposal that would have allowed theCalifornia State Lottery to dedicate a higher percentage of its revenues toplayer winnings (with the hope of boosting lottery sales in California),securitize California State Lottery revenues, and change the amount ofCalifornia Lottery revenues dedicated to education was defeated in a statewideballot referendum in May 2009.

 

Other initiativesexpanding competitive forms of gaming have been approved and may, from time totime, be approved by state or local authorities. Examples include the passagein California of recent legislation expanding off-site betting on horse racesthrough expanded advance deposit wagering and increased satellite wageringsites, and a legislative proposal in the California Assembly in February 2007to amend the California Penal Code to expand permitted bingo games bycharitable organizations to include electronic bingo cards.

 

In August 2009, afederal district court judge issued an order, in ongoing litigation regardingthe proper number of total slot machines allowed under the 1999 tribal-stategaming compacts, requiring that the State of California issue an additional10,549 slot machine licenses.  A drawingwas held on October 5, 2009, and 3,548 licenses were awarded to elevendifferent Indian tribes.  The only one ofour competitors to receive licenses in the draw was the Middletown Rancheria ofPomo Indians, which operates the Twin Pine Casino and Hotel and received 100additional licenses through the draw.  Aswith the licenses awarded to other tribes in the draw, the licenses awarded tothe Middletown Rancheria will revert back to the State if the machines are notput into operation within one year of the draw. 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.

 

**EMPLOYEEAND LABOR RELATIONS**

 

As of December 31,2009, we had 588 full and part-time employees. Our employees are not covered byany collective bargaining agreements. We believe that our relations with ouremployees are good. However, as part of the 1999 compact agreement, the Tribewas required to adopt labor ordinance provisions permitting opportunities forunions to attempt to organize our labor force. In addition, a decision by theUnited States Court of Appeals for the District of Columbia upheld a finding bythe National Labor Relations Board that the National Labor Relations Act isapplicable to tribal casinos.

 

**REGULATION**

 

**General**

 

We are subject tospecial federal and tribal laws applicable to commercial relationships withtribes and the management and financing of casinos owned by an Indian tribe. Inaddition, we are regulated by certain federal laws applicable to the gamingindustry generally, with respect to the use of certain gaming equipment, andspecifically applicable to the Indian gaming market. We are also regulated bythe provisions of the Compact, which have been ratified under state law and arebased in part on the California constitution and other state laws and policies.The following description of the regulatory environment, in which Indian gamingtakes place and in which we operate our gaming facility, is only a summary andnot a complete recitation of all applicable law. Moreover, our regulatoryenvironment is more susceptible to changes in public policy considerations thanothers. Changes in these laws could have a material adverse impact on ouroperations.

 

**Applicabilityof Federal Law**

 

Federallyrecognized Indian tribes are independent governments, subordinate to the UnitedStates, with sovereign powers, except as to those powers that may have beenlimited by Congress, by treaty, or, in certain instances, by the public policyof the state in which the tribe’s lands are located. The power of Indian tribesto enact their own laws to regulate gaming derives from their sovereign rightto govern and regulate their own affairs, particularly where it is consistentwith federal law and the state’s public policy. Indian tribes maintain theirown governmental systems and often their own judicial systems. Indian tribeshave the right to tax persons and businesses conducting business on Indianlands and also have the right to require licenses and to impose other forms ofregulations and regulatory fees on persons and businesses operating on theirlands.

 

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**TheIndian Gaming Regulatory Act of 1988**

 

*RegulatoryAuthority.*     Since1988, the sovereign right of tribes to operate and regulate gaming on theirlands has been subjected to the provisions of IGRA. IGRA is administered by theNational Indian Gaming Commission (“NIGC”), an independent agency within theU.S. Department of Interior that exercises certain regulatory responsibilitiesin connection with Indian gaming on behalf of the United States. The NIGC hasauthority to issue regulations governing tribal gaming activities, approvetribal ordinances for regulating Class II and Class III gaming (asdescribed below), approve management agreements for gaming facilities, conductinvestigations and generally monitor tribal gaming. The Bureau of IndianAffairs, which is a bureau of the U.S. Department of the Interior, retainscertain responsibilities under IGRA, such as the approval of per capitadistribution plans of gaming revenues to individual tribal members and theapproval of transfers of lands into trust status for gaming. The Bureau ofIndian Affairs also has responsibility to review and approve land leases andother agreements relating to Indian lands. Criminal enforcement is a sharedresponsibility of the U.S. Department of Justice, and, depending on the termsof a tribal-state compact that is in effect, the state in which the tribe islocated, and the tribe.

 

The NIGC is empoweredto inspect and audit all Indian gaming facilities, conduct background checks oncertain persons associated with Indian gaming, hold hearings, issue subpoenas,take depositions, adopt regulations, assess fees and impose civil penalties forviolations of IGRA. IGRA also provides for federal criminal penalties forillegal gaming on Indian land and for theft from Indian gaming facilities. TheNIGC has adopted rules implementing certain provisions of IGRA. These rules govern,among other things, the submission and approval of tribal gaming ordinances orresolutions and the maintenance of minimum internal control standards for theoperation of gambling games and equipment. IGRA and the NIGC regulationsrequire an Indian tribe to have the sole proprietary interest in, and tomaintain a high level of responsibility for, the conduct of any gaming on itslands. Tribes are required to issue gaming licenses under articulatedstandards, conduct or commission financial audits of their gaming enterprises,perform or commission background investigations for primary managementofficials and key employees, and maintain facilities in a manner thatadequately protects the environment and the public health and safety. These rules alsoset out review and reporting procedures for tribal licensing and backgroundactivities.

 

*Classesof Gaming.*     IGRAclassifies gaming that may be conducted on Indian lands into three categories: Class Igaming includes social games solely for prizes of minimal value or traditionalforms of Indian gaming engaged in by individuals as part of, or in connectionwith, tribal ceremonies or celebrations. Class II gaming includes bingoand pull tabs, lotto, punch boards, tip jars, instant bingo and other gamessimilar to bingo if those games are played at the same location as bingo isplayed, and non-banked card games (such as poker) if permitted within thestate. Class III gaming includes all other forms of gaming, such as slotmachines, table games, lotteries, sports betting and pari-mutuel wagering.

 

Class Igaming on Indian lands is within the exclusive jurisdiction of Indian tribesand is not subject to federal regulation under IGRA. Class II gaming ispermitted on Indian lands if:

 

·                  the state in which the Indian lands lie permits thatgaming for any purpose by any person, organization or entity;

·                  the gaming is not otherwise specifically prohibited onIndian lands by federal law;

·                  the gaming is conducted in accordance with a tribalordinance or resolution that has been approved by the NIGC;

·                  an Indian tribe has sole proprietary interest andresponsibility for the conduct of gaming; and

·                  the primary management officials and key employees aretribally licensed and several other requirements are met.

 

Class IIIgaming is permitted on Indian lands if the conditions applicable to Class IIgaming are met and, in addition, the gaming is conducted in conformity with theterms of a tribal-state compact (a written agreement between a tribe and thegovernment of the state within whose boundaries the tribe’s lands lie).

 

*Tribal-StateCompacts.*     IGRArequires Indian tribes to enter into tribal-state compacts in order to conduct Class IIIgaming. These tribal-state compacts may include provisions for the allocationof criminal and civil jurisdiction between the state and the Indian tribenecessary for the enforcement of these laws and regulations, taxation by theIndian tribe of the Class III gaming activity, remedies for breach,standards for the operation of the Class III gaming activity andmaintenance of the gaming facility, including licensing, and certain othersubjects that are directly related to the operation of gaming activities.

 

Tribal-statecompacts usually specify the types of permitted games, establish technicalstandards for gaming devices, entitle the state to inspect casinos, requirebackground investigations and licensing of casino employees, and require thetribe to pay a portion of the state’s expenses for establishing and maintainingagencies that participate in the regulatory process provided in the compact.Some tribal-state compacts are for set terms, while others are for indefinitedurations.

 

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The Tribe enteredinto a Compact with the State of California in September 1999, whichbecame effective in May 2000, that permits the Tribe to engage in somelevels of Class III gaming. The Compact will expire on December 31,2020. For additional information see “Part I. Item 1. Business—Descriptionof Material Agreements—The Compact.”

 

*TribalOrdinances.*     UnderIGRA, except to the extent otherwise provided in a tribal-state compact asdescribed below, and subject to certain oversight and enforcement authority bythe NIGC, Indian tribal governments have primary regulatory authority overgaming on land within a tribe’s jurisdiction. Therefore, our gaming operationsand persons engaged in gaming activities are subject to the provisions of theTribe’s ordinances and regulations regarding gaming. The Tribe maintains afully staffed tribal gaming agency (“TGA”), known as the Dry Creek GamingCommission, to carry out the Tribe’s regulatory responsibilities under IGRA,its ordinances and the compact.

 

IGRA requires thatthe NIGC review tribal gaming ordinances and authorizes the NIGC to approvethese ordinances only if they meet requirements relating to:

 

·                  the ownership, security, personnel background,recordkeeping and auditing of a tribe’s gaming enterprises;

·                  the use of the revenues from that gaming; and

·                  the protection of the environment and the publichealth and safety.

 

**Licensing and Registration Requirements of the Compact andState Regulation**

 

*Compact.*     TheCompact requires that any person who directly or indirectly extends financingto the Tribe’s gaming facility or gaming operation must be licensed as a “financialsource” by the TGA. However, as permitted by the Compact, the TGA has exemptedfederally- and state-regulated banks and savings and loan associations, as wellas persons who hold less than 10% of our $200.0 million of 9-3/4% Senior Notesdue 2011 (the “Senior Notes”). For an applicant who is a non-exempt businessentity, these licensing provisions also apply to the entity’s officers,directors, principal management employees, owners (if an unincorporatedentity), partners and greater than 10% shareholders. Under the Compact, apermanent license cannot be issued unless the TGA has conducted aninvestigation as to the suitability of the applicant. Any application for agaming license may be denied, and any license issued may be revoked, if the TGAdetermines the applicant to be unsuitable or otherwise unqualified for a gaminglicense. Each license is subject to review for compliance at least every twoyears.

 

Prior to receivinga license, an applicant must apply to the California Gambling ControlCommission (“CGCC”) for a determination of suitability. If the TGA receivesnotice that the CGCC has determined that a person is unsuitable, the Compactrequires that the TGA revoke any license it has issued to such person.

 

The Compact statesthat any agreement between the Tribe and a “financial source” terminates uponrevocation or non-renewal of the financial source’s license because of adetermination of unsuitability by the CGCC. Upon such a termination, the Tribe’sonly liability is for repayment of all outstanding sums owed as of thetermination date, exclusive of unpaid accrued interest. Further, the Tribe isnot permitted to enter into, or continue to make payments under, any financingagreement with anyone whose application to the CGCC for a determination ofsuitability has been denied or has expired without renewal.

 

*Stateand Tribal Regulation.*     The CGCC and the TGA, pursuant to theauthority created in a tribal-state joint powers board known as the “Association,”have both adopted regulations that simplify the licensing and registrationprocess for certain large institutional investors, both in the initialdistribution of certain debt securities and the secondary market.

 

Under theseregulations, certain regulated financial institutions with at least$100.0 million invested in non-affiliated securities may take advantage ofan abbreviated licensing and certification process. The regulations do notrequire any licensing or registration for persons purchasing debt securities ofa tribe subject to a compact with the State of California in the secondarymarket. However, as required by the regulations, the indenture for the SeniorNotes provides that unless a holder of the Senior Notes is licensed or exemptfrom licensing, neither the holder nor the Trustee on the holder’s behalf willhave any right to enforce any payment obligation relating to the Senior Notes.In addition, neither the Trustee nor the Tribe or we may make any payment ofprincipal or interest on the Senior Notes as a result of any enforcement actionor default acceleration of security payments, except to a person who islicensed or exempt from licensing.

 

**GamingDevice Licenses**

 

The Compactpermits the Tribe to operate up to 350 gaming devices without licenses.  From March 2000 through December 2001,the Tribe obtained 1,250 gaming device licenses through a process conducted bya public accounting firm retained by a number of tribes under the Compact, thuspermitting the Tribe to operate up to a total of 1,600 gaming devices.Following the allocation, the California Attorney General opined that only theCGCC has the authority to issue gaming device licenses under the 

 

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compacts, and theGovernor of California ordered the CGCC to control and monitor the gamingdevice licensing process. In June 2002, the CGCC ratified all gamingdevice license issued to the Tribe and the other tribes in the earlier process.

 

In accordance withthe Compact and California law, the Tribe is obligated to remit certain fees tothe CGCC on a quarterly basis for inclusion in a Revenue Sharing Trust Fund (“RSTF”)maintained by the State of California. The RSTF is for the benefit of tribesthat have no or limited gaming. The RSTF fees are fixed amounts per device,calculated on an annual basis and paid quarterly. We pay these fees on behalfof the Tribe. RSTF fees for the years ended December 31, 2009 and 2008were $1.3 million for each year.

 

In the summer of 2006, Governor Schwarzenegger renegotiated compactswith five Southern California tribes. Four of these amended compacts took effect in January 2008; theother one has not been ratified by the tribe, which is required for it to takeeffect. These amended compacts allow the tribes to have additional slotmachines, while imposing additional significant annual payments to the State ofCalifornia and requiring extensive mitigation and compensation to impactedlocal communities and provisions affecting customers and employees.  In the summer of 2008, the State entered intoa compact with a tribe in Central California that contains similar terms andprovisions.  In 2009, the State enteredinto compacts with two tribes in Northern California that have similarprovisions regarding mitigation and compensation to local communities andrelations with customers and employees, but which require that a lesserpercentage of revenues be shared with the State.  The Tribe has not sought or entered into anamendment of its Compact.

 

**Issuanceof Liquor License**

 

In March 2008,the Tribe and the Sonoma County Board of Supervisors entered into a Memorandumof Agreement (the “MOA”) that, among other things, settled severallong-standing legal disputes between Sonoma County and the Tribe, and providesa binding framework for resolving future disputes.  Under the MOA, the County agreed to drop itsopposition to the Tribe’s application for a liquor license.  In a related action, the Alexander ValleyAssociation (“AVA”), a local business and residents association which has longobjected to the issuance of a liquor license, agreed to withdraw its objectionsto the license and has persuaded its members and a number of other protestorsto do likewise.

 

In May 2008,the California Department of Alcoholic Beverage Control issued a liquor licenseto our gaming and entertainment facility. However, the Tribe has agreed to restrict the sale of alcohol to wineand beer between the hours of 11 a.m. and 5 p.m. on weekdays, and tostop serving alcohol altogether at midnight except for Friday and Saturdaynights and the nights before holidays. The Tribe has also agreed not to serveliquor on the Casino floor, although patrons may bring drinks purchased at therestaurant or bar on to the Casino floor. The restrictions may be renegotiatedfollowing the first to occur of the three year anniversary of the MOA or theopening of a hotel, which is anticipated to occur within the next two to threeyears.

 

**DRYCREEK RANCHERIA BAND OF POMO INDIANS**

 

**TribalAdministration**

 

The Dry CreekRancheria Band of Pomo Indians is a federally recognized, self-governing Indiantribe with 1,002 enrolled members. The reservation was established in 1915under the authority of an Executive Order dated January 12, 1891. Pursuantto the Tribe’s Articles of Association, the Tribe is governed by a TribalCouncil composed of all voting members. Certain authority is delegated toelected tribal officers who comprise the Board of Directors, consisting of aChairperson, a Vice Chairperson, a Secretary/Treasurer and twomembers-at-large.  The members of theBoard of Directors of the Tribe are the same members as our Board of Directorsand serve in the same capacity.

 

**TheTribal Gaming Commission**

 

The Tribe enacteda tribal gaming ordinance in April 1997, which was approved by the NIGC inSeptember 1997. Among other matters, the gaming ordinance created andestablished the TGA, known as the Dry Creek Gaming Commission, as agovernmental subdivision of the Tribe. The TGA consists of three commissionersand supporting staff and is vested with the authority to regulate all gamingactivity conducted on the Tribe’s lands. TGA is responsible under our Compact to hire, monitor the performance ofand, if necessary, replace the independent auditors and to approve any significantnon-audit relationship with the independent auditors and assess the independentauditor’s qualifications and independence. We do not have a separate audit committee of our Board of Directors. Ourfull Board of Directors has assumed the audit committee functions and the TGAparticipates in the process.

 

Each TGA GamingCommissioner is appointed by the Tribal Council to serve a four-year term. Thetribal gaming ordinance and the Compact require that each Commissioner undergoa comprehensive background check prior to his or her assuming office. Pursuantto the tribal gaming ordinance, the TGA is responsible for, among othermatters, inspection of all gaming operations within 

 

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the Tribe’s reservationboundaries, enforcement of all provisions of the tribal gaming ordinance,investigation of all allegations of violations of the tribal gaming ordinance,conducting or arranging for background investigations of all applicants fortribal gaming licenses and issuing gaming licenses in accordance with thetribal gaming ordinance and the Compact. Under law, our Casino cannot operatewithout TGA regulation. Therefore, the costs of such regulation, including thecost of operating the TGA have, since commencement of operations of the RiverRock Casino, been paid by us and will continue to be paid by us.

 

**DESCRIPTIONOF MATERIAL AGREEMENTS**

 

*Thefollowing is a summary of the material terms of our material agreements andmaterial agreements of the Tribe relating to our Casino. This summary does notrestate these agreements in their entirety. We urge you to read theseagreements because they, and not these summaries, define our rights andobligations, and the rights and obligations of the Tribe, contained in theagreements. Copies of these agreements are included as exhibits to this Form 10-K.*

 

**TheCompact**

 

In September 1999,the State of California and the Tribe entered into a Compact. Under its terms,the Compact was not effective until ratified by statute and a supporting stateconstitutional amendment was passed by the California voters. On March 7,2000, the California voters amended the state constitution and enacted the IndianSelf-Reliance Amendment. The Amendment permits federally recognized Indiantribes to conduct Class III gaming in California, in accordance withcompacts between such tribes and the State of California, subject to approvalby the Secretary of the Interior. In May 2000, the Secretary of theInterior approved the Compact, and that approval became effective when it waspublished in the Federal Register on May 16, 2000.

 

Under the Compact,the gaming activities that may be offered by the Tribe include up to 2,000 Class IIIgaming devices, banked and percentage card games, and any devices or games thatare authorized by the California State Lottery, provided that the Tribe doesnot offer such games through use of the Internet unless others in Californiaare permitted to do so.

 

The Compactestablishes limitations on Class III gaming that may restrict our gamingactivities. Among those, which are of importance to our gaming facility, arethose that require the Tribe to adopt and comply with standards that are noless stringent than California laws, if any, prohibiting: cashing any checkdrawn against a federal, state, county, or city fund, including but not limitedto Social Security, unemployment insurance, disability payments, or publicassistance payments; free or reduced price alcoholic beverages, food or lodgingas an incentive; the extension of credit for gaming activities; and personsunder 18 (or under 21 if alcohol may be consumed) to be present in any roomwhere Class III gaming is offered, other than simply to pass through theroom.

 

The Compactrequires the State of California and the Tribe to establish a method forlicensing all key employees of a gaming entity and issuing work permits forother service employees. While the Tribe, as a sovereign governmental entity,is not required to be licensed, the California Gambling Control Act applies toall others associated with Class III gaming at our gaming facility. Tofacilitate that licensing and comply with all other provisions of IGRA, in 1997the Tribe adopted a tribal gaming ordinance establishing the TGA. The Chairmanof the NIGC approved the Tribe’s gaming ordinance in 1997.

 

Under the Compact,all persons connected with our gaming facility are required to be licensed orto submit to a background investigation under IGRA. All “Gaming Employees” and “GamingResource Suppliers” (as defined in the Compact) and certain other persons mustbe licensed by the TGA. Licenses granted by the TGA are subject to review andrenewal every two years. Holders of licenses granted by the TGA must, except inlimited circumstances, also be determined suitable by the CGCC to be employedby us.

 

The Compactrequires the Tribe to adopt and enforce regulations to ensure the physicalsafety of casino patrons, to prevent illegal activity, to maintain theregularity and integrity of gaming operations, and to require an annual auditconducted by an independent certified public accountant.

 

The Compactrequires the Tribe to carry public liability insurance with initial limits ofat least $5.0 million for personal injury and property damage claims. TheTribe is required to waive its sovereign immunity to the extent of the$5.0 million liability insurance limits.

 

The Compact alsorequires the Tribe to adopt and comply with standards no less stringent thanfederal workplace and occupational health and safety standards, and to adoptand comply with standards no less stringent than federal and state lawsprohibiting employment discrimination. However, our tribal gaming ordinancepermits us to give preference to Indians in employment matters.

 

The Compact alsomandates that the Tribe must follow certain procedures to assess theoff-reservation environmental impact of any reservation construction expansionprojects. The procedures require the Tribe to give notice of a covered project,to determine 

 

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whether a project willhave any significant adverse environmental impact, to accept and respond tocomments, to consult with the county board of supervisors, and to hold a publicmeeting.

 

**TheSenior Notes and the Indenture**

 

On November 7,2003, we issued and sold notes (the “Prior Notes”) in a private placement tocertain “qualified institutional buyers” pursuant to Regulation 144A of theSecurities Act of 1933, as amended (the “Notes Offering”). On June 21,2004, pursuant to a registration rights agreement entered into in connectionwith the issuance of the Prior Notes, we consummated an offer to exchange allof the Prior Notes for our Senior Notes registered with the Securities andExchange Commission. The terms of the Senior Notes are substantially identicalto the terms of the Prior Notes, except that the transfer restrictions andregistration rights applicable to the Prior Notes do not apply to the SeniorNotes. We did not receive any additional proceeds from the exchange offer. TheSenior Notes and the Prior Notes were issued under an Indenture, dated as of November 7,2003 (the “Indenture”), among us, the Tribe and U.S. Bank National Association,as trustee. The terms of the Senior Notes include those stated in theIndenture, as well as those made part of the Indenture by reference to theTrust Indenture Act of 1939, as amended.

 

The net proceedsfrom the Notes Offering were used to repay a majority of our outstandingindebtedness, to fund the completion of three parking structures and relatedinfrastructure improvements, to fund the settlement of litigation involving theTribe, to fund the acquisition of real property adjacent to the Tribe’sreservation, to build an additional access road to the Tribe’s reservationthrough such property, and to repay outstanding indebtedness of the Tribe.

 

The Senior Notesbear interest at a fixed rate of 9-3/4% per year, and mature on November 1,2011. The Senior Notes are secured by a first priority pledge of our revenuesand substantially all of our existing and future tangible and intangiblepersonal property. The Senior Notes are senior debt.  As further described in the Indenture, theSenior Notes are subject to optional and mandatory redemption, and in somecases, holders of the Senior Notes may be required to surrender them forredemption by us (or to otherwise dispose of the Senior Notes) if certaingaming regulations are not satisfied.

 

The Indentureincludes affirmative and negative covenants that limit our ability to borrowmoney, create liens, sell assets, engage in transactions with affiliates,engage in other businesses, open other gaming facilities, engage in certainmergers and consolidations, make certain investments, make certain acceleratedpayments on our indebtedness that is subordinated to the Senior Notes, and makepayments to the Tribe.

 

**CashCollateral and Disbursement Agreement**

 

Pursuant to theCash Collateral and Disbursement Agreement among U.S. Bank National Associationand Wells Fargo Bank, N.A. as disbursement agents, U.S. Bank NationalAssociation, as the trustee for the holders of the Senior Notes, Merritt &Harris, our independent construction consultant, the Tribe and us, a portion ofthe net proceeds of the Notes Offering was placed into a constructiondisbursement account, a construction escrow account, the Dugan Propertyimprovements account, and an operating account, all to be disbursed by thedisbursement agents pursuant to the Cash Collateral and Disbursement Agreement.

 

*ConstructionDisbursement Account.*     Approximately $61.1 million of thenet proceeds of the Notes Offering was deposited into a constructiondisbursement account and was used to fund the design and construction of ourexpansion project. All funds in the construction disbursement account arepledged to the trustee for the benefit of itself, and the holders of the SeniorNotes, until disbursed by U.S. Bank National Association in accordance with theCash Collateral and Disbursement Agreement. The construction disbursementaccount had $2.6 million remaining as of December 31, 2009.

 

*ConstructionEscrow Account.*     $10.0 millionof the net proceeds of the Notes Offering was deposited into a constructionescrow account to fund qualifying construction cost overruns.  All funds in the construction escrow accountare pledged to the trustee for the benefit of itself and the holders of theSenior Notes until disbursed by U.S. Bank National Association in accordancewith the Cash Collateral and Disbursement Agreement.  The construction escrow account had $0.1 millionremaining as of December 31, 2009.

 

*DuganProperty Improvements Account.*     $5.0 million of thenet proceeds of the Notes Offering was deposited into the Dugan Propertyimprovements account and will be used to build an additional access road to theTribe’s reservation. All such funds will be held in the Dugan Propertyimprovements account and pledged to the trustee for the benefit of itself andthe holders of the Senior Notes until disbursed by U.S. Bank NationalAssociation in accordance with the Cash Collateral and Disbursement Agreement.Subject to certain exceptions, U.S. Bank National Association, as thedisbursement agent, will disburse funds from the Dugan Property improvementsaccount only upon certification by us that we have adequate funds to completethe road project, and upon the satisfaction of the other disbursementconditions set forth in the Cash Collateral and Disbursement Agreement. TheDugan Property improvements account had $4.3 million remaining as of December 31,2009.

 

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*OperatingAccount.*     Wedeposit all of our cash and cash equivalents in excess of $2.0 millioninto our operating account.  Regularly,deposits are made Monday through Thursday of each week.  All such funds are held in the operatingaccount and pledged to the Trustee for the benefit of itself and the holders ofthe Senior Notes until disbursed in accordance with the terms of the CashCollateral and Disbursement Agreement. Funds may generally be disbursed by ourbank from the operating account for all purposes permitted by theIndenture.  Until recently, Bank ofAmerica, N.A. had maintained our operating account.  We recently transferred our operating accountto The Bank of the West.

 

*Investments;Pledge of Accounts.*     Ourdisbursement agent is required to invest any money held by it in the collateralaccounts established pursuant to the Cash Collateral and DisbursementAgreement, in cash equivalents and such government securities, as may bedirected in writing by us from time to time. Any income or gain realized as aresult of such investment is required to be held as part of the applicableaccount and reinvested as provided in the Cash Collateral and DisbursementAgreement. All funds, securities and other assets in the collateral accountsestablished pursuant to the Cash Collateral and Disbursement Agreement arepledged to the Trustee for the benefit of the holders of the Senior Notes.  Unrestricted cash is available foroperations, except in the event of a default as defined in the Indenture.

 

**Memorandumof Agreement between the Tribe and Sonoma County, California**

 

On March 18,2008, the Tribe and the Sonoma County Board of Supervisors entered into amemorandum of agreement (“MOA”) that, among other things, settled severallong-standing legal disputes between Sonoma County and the Tribe and provides abinding framework for resolving future disputes.  The MOA enables the Tribe to move forwardwith its proposed resort development project, including a new and expanded “Tuscan-themed”casino and hotel with luxury resort amenities.  Under the MOA, the Countyagreed to drop its opposition to the Tribe’s application for a liquor licenseand we obtained our liquor license for the casino on May 29, 2008.

 

Under the MOA, theTribe agreed to restrict the sale of alcohol to wine and beer between the hoursof 11 a.m. and 5 p.m. on weekdays, and to stop serving alcohol atmidnight except for Friday and Saturday nights and the nights before holidays.The restrictions may be renegotiated following the first to occur of threeyears or the opening of a hotel, which is projected to occur within the nexttwo to three years.

 

In addition, theMOA commits the County Sheriff’s Department and Fire Marshall to provide publicsafety and fire investigation services to the casino and the Tribe’s futuregaming projects on the reservation and provides detailed agreements onoff-reservation impact mitigation measures.  Pursuant to the MOA, theCounty withdrew its opposition to the Tribe’s application to take into trust anapproximately 18-acre parcel of land adjacent to the Tribe’s reservation (the “DuganProperty”).  Previously, the trust application had been approved by theDepartment of the Interior, which approval had been opposed by the County.

 

Pursuant to theMOA, the Tribe has agreed to pay the County $75 million in mitigation fees overa 12 year period, subject to adjustment under certain circumstances describedin the MOA, to offset the potential losses and impacts to the County resultingfrom the Tribe’s various ongoing projects and to support the services beingprovided by the County.  The Tribe paid$7.5 million in 2008 and $2.8 million in 2009. Future payments are scheduled to take place as follows: $5.0 million uponthe earlier of March 18, 2011 or the opening of phase one of the resortproject; $5.0 million in the subsequent year but no later than July 1,2011; and $5.0 million plus 4% compounded annually on July 1 of eachsubsequent year until the entire $75.0 million has been paid.  The Tribe has not made any determinations toseek reimbursement or direct payment from us of amounts due to the Countypursuant to the MOA.

 

In addition, theTribe has agreed to pay a fee in lieu of the County’s Transient Occupancy Taxin the amount of 9% of the rental charges collected on occupied hotelrooms.  Such fees are required to be paid quarterly until five years afterthe later to occur of the termination of the MOA, as may be extended, or theTribe’s Compact with the State.

 

We believe the MOAhas had significant positive impacts on the conduct of our business and our andthe Tribe’s ability to develop our expansions plans and construct our proposedhotel and casino resort.

 

**Leasefor Casino**

 

In May 2002,the Tribe entered into a lease with Sprung Instant Structures, Inc. fortwo dome-shaped structures that house our gaming facility. The lease agreementwas assigned to us and was renewed through August 17, 2007. Monthlypayments were $36,230. At the end of the lease term, at our option, 100% of thefirst four lease payments or, if all such payments have been timely made, 40%of the first twenty four lease payments will be credited towards the$1.5 million purchase price, resulting in a purchase price of$1.1 million.  Upon expiration ofthe lease on August 17, 2007, we opted to maintain the lease payments on amonth- to- month basis.  On June 18,2009, the lease agreement was renewed through June 17, 2012 at a reducedmonthly rate of $25,395.

 

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**Item1A.  Risk Factors**

 

*Thefollowing is a description of what we consider our key challenges and risks:*

 

**Risks Related to Our Business**

 

***We have a substantial amount of indebtedness that couldadversely affect our financial condition and prevent us from fulfilling ourobligations under the Senior Notes.***

 

As of December 31,2009, we have approximately $199.4 million, net of unamortized issuediscount of $0.6 million, of senior indebtedness outstanding, represented byour Senior Notes. We also have approximately $0.5 million in other debt.  Our substantial indebtedness could haveimportant consequences and significant effects on our business and futureoperations. For example, it could:

 

·                  increase our vulnerability to general adverse economicand industry conditions or a downturn in our business;

 

·                  limit our ability to fund future working capital,capital expenditures and other general operating requirements;

 

·                  require us to dedicate a substantial portion of ourcash flow from operations to repay our outstanding indebtedness, therebyreducing the availability of our cash flow to fund working capital, capitalexpenditures, development and other general operating requirements;

 

·                  place us at a competitive disadvantage compared to ourcompetitors that have less debt or greater resources; and

 

·                  limit our ability to borrow additional funds.

 

The occurrence ofany one of these events or conditions could have a material adverse effect onour business, financial condition, results of operations, prospects, ability toservice or otherwise satisfy our obligations under the Senior Notes. Inaddition, the Indenture permits us to incur debt in addition to the SeniorNotes in certain circumstances. If we were to incur additional debt, therelated risks could intensify.

 

***We will require a significant amount of cash to service ourindebtedness and fund our gaming operations. Our ability to generate cashdepends on many factors beyond our control.***

 

Our ability tomake payments on and refinance our debt, including the Senior Notes, and tofund our gaming operations, will depend on our ability to generate cash flowfrom our gaming operations. Our ability to generate sufficient cash flow tosatisfy our debt obligations will depend on our future operating performancethat is subject to many economic, competitive, regulatory and business factorsthat are beyond our control. If we are not able to generate sufficient cash flowto service our debt obligations, we may need to refinance or restructure ourdebt, sell assets, reduce or delay capital investments or seek to raiseadditional capital. These measures may not be available to us or, if available,they may not be sufficient to enable us to satisfy our obligations under theSenior Notes and may restrict our ability to pay operating expenses. If ourcash flow is insufficient and we are unable to implement one or more of thesealternatives, we may not be able to service our debt obligations or fund ourgaming operations.

 

***Since we depend on operations in a single location, certainevents that we cannot control may adversely affect the business performance ofour gaming facility.***

 

We rely primarilyon guests living within 100 miles of our Casino. We rely exclusively on cashflow from our Casino to service our obligations, including our obligationsunder the Senior Notes. Therefore, we are subject to greater risks than moregeographically diversified gaming operations, including:

 

·                  a decline in the economies of the local areas whereour guests are located or a decline in the number of gaming guests from theseareas for any reason;

 

·                  a downturn in regional or local economic conditions;

 

·                  an increase in competition in the local areas whereour guests reside;

 

·                  inaccessibility due to road construction or closuresof primary access routes; and

 

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·                  natural and other disasters and climate conditions inthe surrounding area.

 

The occurrence ofany of the events or conditions described above could cause a materialdisruption in our business and cause us to be unable to generate sufficientcash flow to make payments on the Senior Notes.

 

***We have experienced landslides and may not be insuredagainst damage resulting from landslides.***

 

Although wemaintain insurance customary in our industry, including earthquake insurance,our insurance coverage may not be adequate to cover all the risks to which ourbusiness and assets may be subject to. Although we have experienced twolandslides since our operations began, our landslide-related insurance islimited to events incident to earthquakes. Although neither landslide disruptedour operations or our expansion project, including the excavation, retainingwall and parking structures, the insurance is intended for futurelandslides.  A landslide could occur inthe future that could materially disrupt our operations and materially affectour financial condition.

 

***We face competition from other California Indian casinos,casinos located in Nevada and elsewhere and other forms of gaming.***

 

The gamingindustry is very competitive. We face or will face competition from existingand proposed Indian gaming facilities in the surrounding area, and elsewhere inCalifornia, and with casino gaming in Nevada, including gaming facilities thatcould be located closer to the San Francisco Bay area. We also compete withcard rooms located in the surrounding area, and other forms of gaming that arelegal in California, including on and off-track wagering and the CaliforniaState Lottery, as well as with non-gaming leisure activities.  The availability of such alternative gamingand non-gaming activities may increase in the future.  Many of our competitors have substantiallygreater resources and name recognition than our Casino. In addition, we mayalso face competition in our market from new facilities that may be built byother Indian tribes in the future.  SeeItem 1 — “ Business - Competition.”

 

***Restrictive covenants in the Indenture may limit our abilityto expand our operations and to pursue our business strategies.***

 

The Indentureincludes covenants that limit our ability to borrow money, make investments,create liens, sell assets, engage in transactions with affiliates, engage inother businesses, open other gaming facilities and engage in mergers orconsolidations. These restrictive covenants may limit our ability to expand ouroperations and to pursue our business strategies. If we are unable tocapitalize on business opportunities, we may be unable to make payments on theSenior Notes. Additionally, a violation of any of these restrictive covenantswould constitute a default under the Indenture.

 

***Risks related to environmental matters could have an adverseeffect on us.***

 

We are subject to various federal laws and tribal ordinances andregulations, and the Compact which governs activities or operations that mayhave adverse environmental effects, such as discharges to air and water, aswell as handling and disposal of hazardous material or solid or hazardouswaste. Environmental laws enacted in the future may create material obligationsor liabilities which may have a material adverse effect on us. In addition,certain provisions of the Compact regarding environmental matters may be thesubject of renegotiation with the State of California and could limit anyfuture physical expansion of our gaming facility. If so, such limitations mayhave a material adverse effect on our operations.

 

Pursuant to and inaccordance with the Compact, the Tribe adopted an ordinance and prepared andcirculated by the Tribe an environmental study concerning potentialoff-reservation environmental impacts of any renovation, modification, andconstruction or development project relating to or associated with the gamingfacility. Among other things, as required by the Compact in fashioning theordinance, the Tribe made a good faith effort to incorporate the policies andpurposes of the National Environmental Policy Act and the CaliforniaEnvironmental Quality Act consistent with the Tribe’s governmental interests.The Compact’s environmental provisions are identical to such provisions incompacts for all other California tribes that entered into compacts in oraround 1999. The Tribe believes it has complied, and intends to continue tocomply, with all applicable requirements in its environmental ordinance. TheState could claim the Tribe is in breach of the Compact and seek to have theCompact terminated.

 

***Our business and assets could become liable for claimsasserted against the Tribe if the Tribe waives its sovereign immunity withrespect to our business or assets or if tribal law intended to limit such liabilityis ineffective.***

 

We are anunincorporated instrumentality of the Tribe, formed pursuant to a law of theTribe. This tribal law also provides that our obligations and other liabilitiesare not those of the Tribe and that the obligations and liabilities of theTribe are not ours. This law is untested and generally has no directcounterpart in other areas of the law. If this law should prove to beineffective at limiting our liability, our business and assets could becomesubject to claims asserted against the Tribe or its assets. Similarly, we wouldbe liable for such claims if the Tribe waived its sovereign immunity (withrespect to which we have no control) to an extent that allowed enforcement ofsuch claims against our business or assets.

 

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##### ***Changes in U.S. or regional economic conditions could adversely affectthe profitability of our business.***

 

A decrease in economic activity in theUnited States, particularly in the State of California, could adversely affectdemand for our business, thus reducing our revenue and earnings.  A decline in economic conditions could reduceattendance and spending at our Casino. In addition, an increase in price levels generally, or in price levelsin a particular sector, could result in a shift in consumer demand away fromthe entertainment we offer, which could also adversely affect our revenues and,at the same time, increase our costs.

 

***Our business is subject to contingencies beyond our control, includingthe aftermath of terrorist acts and wars, which may significantly and adverselyaffect our business, financial condition, results of operations and ability tomake payments on the Notes.***

 

The United States’ ongoing militarycampaign against terrorism and continued violence, conflicts and instability inother areas of the world have created many economic and politicaluncertainties, some of which may affect our ability to attract customersoutside our current primary market as well as our operations andprofitability.  The potential short-termand long-term effects that these and other similar situations and events mayhave for our customers, our primary and secondary markets and the U.S. economyin general are uncertain.  These andother similar future events could have a significant impact on the number ofcustomers visiting our Casino and, as a result, may have a material adverseeffect on our business, financial condition, results of operations and abilityto make payments on the Senior Notes.

 

***Acts of terrorism may negatively impact our future profits.***

 

Terrorist attacks and other acts of war orhostility have created many economic and political uncertainties.  We cannot predict the extent to whichterrorism, security alerts, war, or hostilities throughout the world, willcontinue to directly or indirectly impact our business and results.  As a consequence of the threat of terroristattacks and other acts of war or hostility in the future, premiums for avariety of insurance products have increased, and some types of insurance areno longer available.  Given currentconditions in the global insurance markets, we are predominantly uninsured forlosses and interruptions caused by terrorist acts and acts of war.  If any such event were to affect ourproperties, we likely would be adversely impacted.

 

***A variety of uncontrollable events and natural disasters may reducedemand for our Casino.***

 

Demand for our Casino is partly dependenton the general environment for travel and tourism.  The environment for travel and tourism can besignificantly adversely affected in the United States or in specific regions asa result of a variety of factors beyond our control, including adverse weatherconditions or natural disasters (such as excessive heat or rain, hurricanes andearthquakes); health concerns; and international, political or militarydevelopments.  These events, and otherssuch as fluctuations in travel and energy costs, may also damage our ability toprovide our services or to obtain insurance coverage with respect to theseevents.

 

***Highway and bridge construction projects have impacted the length oftravel to our Casino by certain customers.***

 

On January 7,2008, Caltrans began construction on a 3.3-mile stretch of Highway 101 fromSanta Rosa (Steele Lane) to Windsor (River Road), California, approximately 20miles south of our Casino.  The project is intended to widen Highway 101resulting in an additional third lane in each direction.  The projectrequires the closure of one lane of Highway 101 in both directions from 11 p.m.to 5 a.m., Monday through Thursday, and from 12:00 a.m. to 5 a.m.on Fridays.  All lanes will be open during daylight hours and weekends.The project will also involve the closure of certain freeway entrance and exitramps and some local streets.  The lane widening project is expected to becompleted in the summer of 2010. There currently has been no major impact fromthis project on our operations.  However,potentially there may be future risks that could have an impact on ouroperations as a result of this project.

 

***The loss of management and otherkey personnel could significantly harm our business.***

 

Our ability tomaintain our competitive position is dependent to a large degree on the effortsand skills of the senior management team. In addition to the senior management team, the operation of our Casinowill require other qualified and skilled employees with gaming and hospitalityindustry experience and qualifications. Currently, there is a shortage of skilled labor in the gaming industryin general.  In addition, we are subjectto the policy of Tribal hiring preference that requires us to give preferenceto members of the Tribe. Despite these limitations, our future success dependsupon, among other things, our ability to attract and retain senior managementand highly qualified employees. Currently, approximately 94 percent of the employees at the Casino arenot members of the Tribe. We compete with other potential employers foremployees, and we may not succeed in hiring or retaining the executives andother employees that we may need, particularly due to the very small number ofworkers skilled in the gaming industry that reside in the immediate vicinity ofour businesses.

 

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Currently, we have vacancies in the officesof the Chief Executive Officer and General Manager of our Casino and areconducting a search to fill the vacancies. We do not have employment agreements with any key executives oremployees other than with our Chief Financial Officer.  We do not maintain key-man life insurancepolicies for any of our executives.  Asudden loss or inability to replace key employees could have a material adverseeffect on our financial condition and results of operation.

 

***A federal court decision couldlead to unionization in the tribal gaming industry*****.**

 

A decision by the United States Court ofAppeals for the District of Columbia upheld a finding by the National LaborRelations Board that the National Labor Relations Act is applicable to tribalcasinos.  This decision could lead tounionization activities, which could adversely affect our operations.

 

***Energy price increases mayadversely affect our costs of operations and our revenues.***

 

Our Casino uses significant amounts ofelectricity, natural gas and other forms of energy.  While we have not experienced any shortages ofenergy to date, the recent substantial increases in the cost of energy in theUnited States could negatively impact our operating results.  In addition, energy price increases couldresult in a decline in disposable income of potential customers and a correspondingdecrease in visitation to our gaming and hotel facilities, which couldnegatively impact our revenues.

 

***Our business is particularly sensitive to reductions in discretionaryconsumer spending as a result of downturns in the economy*****.**

 

Consumer demandfor gaming properties, such as ours, are particularly sensitive to downturns inthe economy and the corresponding impact on discretionary spending on leisureactivities. Changes in discretionary consumer spending or consumer preferencesbrought about by factors such as perceived or actual general economicconditions, the current housing crisis and the credit crisis, the impact ofhigh energy and food costs, the increased cost of travel, the potential forcontinued bank failures, perceived or actual disposable consumer income andwealth, effects of the current recession and changes in consumer confidence inthe economy, or fears of war and future acts of terrorism could further reducecustomer demand for the amenities that we offer, thus imposing practical limitson pricing and harming our operations.

 

The currenthousing crisis and economic slowdown in the United States has resulted in asignificant decline in the amount of tourism and spending on gaming operations.If this decline continues, our financial condition, results of operations andcash flows may be adversely affected.

 

**Risks Relating to the Indian GamingIndustry**

 

***Our gaming operations are extensively regulated by federallaws and the Compact, and non-compliance with these laws or the Compact by usor the Tribe, as well as changes in the laws or future interpretations of thelaws or the Compact, could have a material adverse effect on our gamingoperations.***

 

Gaming on theTribe’s reservation is regulated extensively by federal, state and tribalregulatory bodies, including the NIGC, the CGCC, the California Department ofJustice and the TGA. The Compact imposes ongoing compliance obligations on us.Our failure to observe any of these obligations could result in a breach of theCompact and the loss of our right to conduct gaming.

 

Changes inapplicable laws or regulations, or future interpretation of these laws orregulations could limit or materially affect the types of gaming that we mayoffer and, consequently, our revenue. Congress has regulatory authority overIndian affairs and can establish and change the terms upon which Indian tribesmay conduct gaming. Currently, the operation of all gaming on Indian lands issubject to IGRA. For the past several years, legislation has been introduced inCongress designed to amend IGRA, including proposed legislation limiting thescope of gaming that can be offered and the conditions under which gaming maybe offered. While none of the substantive proposed amendments to IGRA haveproceeded very far in the legislative process, we cannot predict theramifications of future congressional legislative acts. It is possible thatfuture legislation may result in a material adverse effect on our operations.

 

***Tribal-state compacts are renegotiable and the outcome ofany renegotiation may negatively impact our competitive position or otherwiseadversely affect our financial condition, results of operations or cash flows.***

 

In March 2003,the State of California requested renegotiations with the Tribe and othertribes with respect to matters related to the number of slot machines permittedat tribal casinos under tribal-state gaming compacts, the way in which slotmachine licenses are allocated within the state under those compacts, and thefees charged for slot machine licenses. We did not renegotiate the terms of ourcompact, although some other tribes in California have done so. Thoserenegotiations, plus the addition of new compacts the State may be enteringinto with tribes in our market area that were not previously engaged in gaming,may have negative effects on our 

 

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competitive position, andour results of operations could be materially and adversely affected. Even ifour negotiations with the State of California were to result in an increase inthe number of slot machines we could operate, the State has indicated that anyincrease could result in higher license fees being imposed, which, in light ofpossible other competition, could result in lower revenues. In addition, theState’s willingness to renegotiate over slot machine limits has been tied toits imposition of further regulations on Indian gaming, particularly on thesubject of greater County involvement, provisions favoring negotiatingopportunities for organized labor, and other non-economic issues. The effect ofthe State’s injection of those issues into the renegotiation process, and theresistance of some tribes to renegotiate because of those issues, could have anegative impact on the public’s view of Indian gaming, the effect of which wecannot predict. Finally, any amendment to our compact or any other compact inthe State requires the approval of the tribe, the Governor, the Californialegislature and the U.S. Secretary of the Interior. Some renegotiated (and new)compacts have been approved through that process, but the public debate thathas surrounded those renegotiations and the approval process could have anegative impact on Indian gaming generally within the State and on a nationallevel, the likelihood or extent of which cannot be predicted.

 

***A change in our current non-taxable status could have amaterial adverse effect on our cash flow and ability to fulfill our obligationsunder the Senior Notes.***

 

Based on currentinterpretations of U.S. tax laws, we are not now, and it is anticipated that wewill not be, a taxable entity for U.S. federal income tax purposes. If theseinterpretations are reversed or modified, or if the federal tax law changes inthis regard, our cash flow, results of operations, financial conditions and ourability to fulfill our obligations under the Senior Notes would be adverselyaffected.

 

Efforts have beenmade in Congress over the past several years to tax the income of tribalbusiness enterprises. These have included a House of Representatives bill thatwould have taxed gaming income earned by Indian tribes as business incomesubject to corporate tax rates. Although such legislation was not enacted,similar legislation could be passed in the future. Future legislation in thisarea could materially adversely affect our ability to fulfill our obligationsunder the Senior Notes.

 

**Item 1B. Unresolved Staff Comments.**

 

None.

 

**Item 2. Properties.**

 

Our Casino islocated on the Tribe’s 75-acre reservation near Geyserville, located in theheart of the Alexander Valley in Sonoma County, California. We do not own theland on which our gaming business is located. The use of tribal land is providedto us free of rent by the Tribe. The United States government holds all thereal property underlying our facility in trust for the benefit of the Tribe.

 

We made adistribution to the Tribe from the net proceeds of the Notes Offering to enablethe Tribe to acquire and develop the Dugan Property. Title to the DuganProperty is held by the Tribe, although the Tribe is seeking to have the parceltaken into trust for the Tribe’s benefit. The Tribe has granted us access toany benefits the property may have for our Casino, including road access andwater rights. As of December 31, 2009, we had $4.3 million remainingin an improvements account which was funded from proceeds from the NotesOffering to be used primarily to build an additional access road to the Tribe’sreservation through the Dugan Property. The Dugan Property may be subject tocertain zoning, use, environmental and other restrictions, permits andprocesses under county and state law, including but not limited to certainagreements that have been made relative to the Dugan Property regardingagricultural use limitations and related property tax benefits. We havecompleted the initial planning on the road from the Dugan Property to the Tribe’sreservation.  The improvements to theDugan Property are being recorded to construction in progress.

 

On June 28,2007, we along with the Tribe announced plans to build a destination resort asmore fully described in the press release furnished as an exhibit to our Form 8-Kdated June 28, 2007. We do not currently have adequate liquidity or cashflow to finance the project as proposed. We will consider various sources ofliquidity to finance the first phase of the proposed project.

 

**Item 3. Legal Proceedings.**

 

*Runyan Litigation*

 

On March 7, 2008,Norman Runyan, our former Chief Operations Officer, filed a wrongfultermination suit against us, the Casino and Mr. Harvey Hopkins, theChairman of the Tribe and a member of our Board, in the Sonoma County SuperiorCourt.  We believed the case lacked meritand moved to dismiss.  On October 17,2008, the Court issued an Order dismissing the lawsuit.  On December 3,2008, the Court entered an Order granting our motion and dismissed the case.

 

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On January 14, 2009,Mr. Runyan filed a Petition for Order Compelling Arbitration with theSonoma County Superior Court, and on January 30, 2009, he filed a Motionfor Order Compelling Arbitration.  In both the Petition and the Motion, Mr. Runyansought to have the Court issue an order compelling arbitration of the claimsasserted in 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 us, the Casino, and other released parties,that there was no basis for Mr. Runyan to seek arbitration.  On April 13,2009, we, the Casino, and Mr. Hopkins filed a hybrid motion to quashsummons and dismiss the Petition and Motion.  On June 1, 2009, theCourt 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 and the otherrespondents have tribal sovereign immunity from service of process.

 

Mr. Runyan fileda Notice of Appeal of the Superior Court’s Order on July 27,2009 and filed his opening brief in the First District Court of Appeal on December 11,2009.  Our respondents brief was filed onJanuary 8, 2009, and Mr. Runyan’s reply brief was filed on February 26,2010.  We are now awaiting a date to beset for oral arguments.  We continue tobelieve 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*

 

We areinvolved in other litigation and disputes from time to time in the ordinarycourse of business with vendors and patrons. The Authority believes that theaggregate liability, if any, arising from such litigation or disputes will nothave a material adverse effect on its results of operations, financialcondition or cash flows.

 

**Item 4. Reserved.**

 

**PART II**

 

**Item 5. Market for Registrant’s Common Equity, RelatedStockholder Matters and Issuer Purchases of Equity Securities.**

 

We have not issuedor sold any equity securities.

 

**Item 6. Selected Financial Data**.

 

River Rock Casinohas historically operated as a separate wholly owned operating property of theTribe. We were formed as an unincorporated instrumentality of the Tribe to ownand operate the River Rock Casino. Upon the issuance of our Notes, the Tribereorganized so that its gaming business became owned and operated by us. Thisreorganization was accounted for as a reorganization of entities under commoncontrol. As a result, the assets and liabilities of the casino operatingproperty are presented by us on a historical cost basis.

 

The followingtable presents summary historical statements of revenues and expenses, balancesheet and other data for the periods presented and should be read inconjunction with Item 7 — “Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” our financial statements and the relatednotes thereto, all included elsewhere in this Form 10-K. The historicalfinancial data for the years ended December 31, 2009, 2008 and 2007 andbalance sheet data at December 31, 2009 and 2008 have been derived fromour audited historical financial statements included elsewhere in this report.

 

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**SUMMARY HISTORICAL FINANCIAL ANDOTHER DATA**

 

**RIVER ROCK ENTERTAINMENTAUTHORITY**

**(A Governmental Instrumentalityof the Dry Creek Rancheria Band of Pomo Indians)**

 
| ** **                                     | ** ** | **Year Ended**             | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** |
|------------------------------------------------|------------|----------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                     | ** ** | **December 31,**      | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                     | ** ** | **2009**                   | ** ** | **2008**              | ** ** | **2007**              | ** ** | **2006**              | ** ** | **2005**              | ** ** |
| ** **                                     | ** ** | **(Dollars in Thousands)** | ** ** |
| Statements of Revenues  and Expenses           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| OPERATING REVENUES:                            |       |                       |       |                  |       |                  |       |                  |       |                  |       |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| Casino                                         |       | $                          | 117,731    |                  | $          | 124,481               |       | $                     | 134,171    |                  | $          | 125,912 |   | $ | 128,801 |   |
| Food, beverage and  retail                     |       | 5,851                      |       | 6,273                 |       | 5,366                 |       | 4,417                 |       | 4,132                 |       |
| Other                                          |       | 912                        |       | 598                   |       | 615                   |       | 623                   |       | 663                   |       |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| Gross revenues                                 |       | 124,494                    |       | 131,352               |       | 140,152               |       | 130,952               |       | 133,596               |       |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| Promotional allowances                         |       | (426                       | )          | (779                  | )          | (774                  | )          | (333                  | )          | (38                   | )          |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| Net revenues                                   |       | 124,068                    |       | 130,573               |       | 139,378               |       | 130,619               |       | 133,558               |       |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| OPERATING EXPENSES:                            |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| Casino                                         |       | 16,146                     |       | 20,787                |       | 23,376                |       | 20,454                |       | 19,187                |       |
| Food, beverage and  retail                     |       | 7,329                      |       | 7,063                 |       | 4,640                 |       | 5,997                 |       | 6,311                 |       |
| Selling, general and  administrative           |       | 41,342                     |       | 43,506                |       | 43,978                |       | 39,903                |       | 46,174                |       |
| Depreciation                                   |       | 9,554                      |       | 10,025                |       | 11,801                |       | 11,503                |       | 11,012                |       |
| Credit enhancement fee                         |       | —                     |       | —                |       | 11,349                |       | 8,079                 |       | 7,669                 |       |
| Gaming commission and  surveillance expense    |       | 3,791                      |       | 3,695                 |       | 3,023                 |       | 3,154                 |       | 2,773                 |       |
| Compact revenue sharing  trust fund            |       | 1,335                      |       | 1,335                 |       | 1,335                 |       | 1,335                 |       | 1,335                 |       |
| Loss on sale of assets                         |       | 116                        |       | —                |       | —                |       | —                |       | —                |       |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| Total operating  expenses                      |       | 79,613                     |       | 86,411                |       | 99,502                |       | 90,425                |       | 94,461                |       |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| INCOME FROM OPERATIONS                         |       | 44,455                     |       | 44,162                |       | 39,876                |       | 40,194                |       | 39,097                |       |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| NON-OPERATING  EXPENSE-Net:                    |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| Interest expense                               |       | (20,860                    | )          | (20,865               | )          | (20,872               | )          | (20,884               | )          | (21,047               | )          |
| Interest income                                |       | 74                         |       | 1,006                 |       | 1,701                 |       | 1,046                 |       | 332                   |       |
| Other gain                                     |       | —                     |       | —                |       | 4                     |       | (126                  | )          | (104                  | )          |
| Other income (expense),  net                   |       | —                     |       | —                |       | 1                     |       | (1                    | )          | (2                    | )          |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| Non-operating  expense-net                     |       | (20,786                    | )          | (19,859               | )          | (19,166               | )          | (19,965               | )          | (20,821               | )          |
|                                           |       |                       |       |                  |       |                  |       |                  |       |                  |       |
| ***Income before Distributions to Tribe (a)*** |       | $                          | 23,669     |                  | $          | 24,303                |       | $                     | 20,710     |                  | $          | 20,229 |   | $ | 18,276 |   |

 

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| ** **                                                 | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** |
|------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                 | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                 | ** ** | **2009**              | ** ** | **2008**              | ** ** | **2007**              | ** ** | **2006**              | ** ** | **2005**              | ** ** |
| Net  cash provided by operating activities                 |       | $                     | 53,957     |                  | $          | 54,617                |       | $                     | 65,215     |                  | $          | 60,550 |   | $ | 55,749 |   |
| Net  cash used in capital and related financing activities |       | $                     | (36,438    | )                     | $          | (60,888               | )          | $                     | (40,505    | )                     | $          | (32,557 | ) | $ | (45,870 | ) |
| Net  cash provided by investing activities                 |       | $                     | 74         |                  | $          | 1,006                 |       | $                     | 1,701      |                  | $          | 1,046 |   | $ | 332 |   |
| Net  cash used in non-capital financing activities         |       | $                     | (13,324    | )                     | $          | (13,919               | )          | $                     | (12,427    | )                     | $          | (14,140 | ) | $ | (11,180 | ) |
| Adjusted  EBITDA (b)                                       |       | $                     | 54,391     |                  | $          | 55,193                |       | $                     | 53,383     |                  | $          | 52,615 |   | $ | 50,335 |   |
| Capital  Expenditures                                      |       | $                     | 16,768     |                  | $          | 41,698                |       | $                     | 8,193      |                  | $          | 4,475 |   | $ | 17,456 |   |
| Ratio  of earnings to fixed charges                        |       | 2.15X                 |       | 2.18X                 |       | 2.01X                 |       | 1.98X                 |       | 1.88X                 |       |
| Distributions  to Tribe                                    |       | $                     | 13,324     |                  | $          | 13,919                |       | $                     | 12,427     |                  | $          | 15,521 |   | $ | 11,180 |   |

 

**Summary of Assets and Long-TermLiabilities:**

 
| ** **             | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------|------------|-----------------------|------------|-----------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **             | ** ** | **2009**              | ** ** | **2008**              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total  Assets          |       | $                     | 208,306    |                  | $          | 194,570    |       |       |       |       |       |   |   |
| Long-term  liabilities |       | $                     | 199,382    |                  | $          | 199,046    |       |       |       |       |       |   |   |

 

The following table reconciles EBITDA and netcash provided by operating activities for the periods indicated:

 
| ** **                                                        | ** ** | **Year Ended**   | ** ** | **Year Ended**   | ** ** | **Year Ended**   | ** ** | **Year Ended**   | ** ** | **Year Ended**   | ** ** |
|-------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                        | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                        | ** ** | **2009**              | ** ** | **2008**              | ** ** | **2007**              | ** ** | **2006**              | ** ** | **2005**              | ** ** |
| Net  cash provided by operating activities                        |       | $                     | 53,957     |                  | $          | 54,617                |       | $                     | 65,215     |                  | $          | 60,550 |   | $ | 55,749 |   |
| (Increase)  decrease in accounts receivable                       |       | 198                   |       | (239                  | )          | 104                   |       | 110                   |       | 39                    |       |
| (Increase)  decrease inventories                                  |       | (91                   | )          | 16                    |       | (7                    | )          | 1                     |       | (224                  | )          |
| (Increase)  decrease in prepaid expenses and other current assets |       | 141                   |       | (190                  | )          | 32                    |       | (32                   | )          | 654                   |       |
| Increase  (decrease) in accounts payable trade credit             |       | 435                   |       | 518                   |       | (1,062                | )          | (322                  | )          | 1,220                 |       |
| Increase  (decrease) in accrued liabilities                       |       | (207                  | )          | (535                  | )          | (1,256                | )          | (533                  | )          | 338                   |       |
| Gain/(Loss)  on sale of assets                                    |       | (116                  | )          | —                |       | 5                     |       | (126                  | )          | (104                  | )          |
| Interest  income received                                         |       | 74                    |       | 1,006                 |       | 1,701                 |       | 1,046                 |       | 332                   |       |
| Credit  enhancement fee                                           |       | —                |       | —                |       | (11,349               | )          | (8,079                | )          | (7,669                | )          |
|                                                              |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| **Adjusted EBITDA (b)**                                           |       | $                     | 54,391     |                  | $          | 55,193                |       | $                     | 53,383     |                  | $          | 52,615 |   | $ | 50,335 |   |

 

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(a) Ourfinancial statements are prepared in accordance with Governmental AccountingStandards Board (“GASB”) pronouncements. There are differences betweenfinancial statements prepared in accordance with GASB pronouncements and thoseprepared in accordance with the Accounting Standards Codification (the “Codification”)issued by the Financial Accounting Standards Board (“FASB”). The Statements ofrevenues, expenses and changes in net assets (deficit) are a combined statementunder GASB pronouncements. FASB Codification allows 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 above as income before distributions toTribe would be the most comparable amount to net income computed under the FASBCodification. River Rock Entertainment Authority is a separate enterprise fundof the Tribe, a governmental entity, and as such there is no owners’ orshareholders’ equity (deficit) as traditionally represented under the FASBCodification. The most comparable measure of owners’ equity (deficit) ispresented on the River Rock Entertainment Authority balance sheet as net assets(deficit).

 

(b) AdjustedEBITDA, as calculated above, does not represent and should not beconsidered an alternative to net income or cash flow from operations, asdetermined by Generally Accepted Accounting Principles.  Moreover, our methodologies and practices indetermining adjusted EBITDA may not be comparable tothose used by other companies. Adjusted EBITDA is included inthis Form 10-K because it is a basis upon which we assess our liquidityand because certain covenants in the Indenture are tied to similar measures. Adjusted EBITDA is alsoincluded in this Form 10-K because we believe that it presents usefulinformation regarding our ability to service and incur indebtedness. Adjusted EBITDA does not takeinto account our debt service requirements and, accordingly, is not necessarilyindicative of amounts that may be available for debt service.

 

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**Item 7.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.**

 

The followingdiscussion and analysis of our financial condition and results of operationsshould be read in conjunction with the accompanying financial statements andrelated notes beginning on page 21 of this Annual Report on Form 10-K,Item 6 — “Selected Financial Data” and Part I. Item 1. “Business.”

 

**Overview**

 

*CurrentYear Highlights*

 

As part of the effort toenhance the overall appeal of our product, we have reconfigured our gamingfloor.  This effort has resulted in the reduction of approximately 358slot machines and 4 table games, for the year ended December 31, 2009.  Wewill maintain our contractual rights under the Compact to operate a total of1,600 slot machines in our Casino.  We considered many factors such aspeak period demand, per unit productivity, and player comfort in our analysisto ensure that the reduction of gaming devices will not adversely impact ourrevenues.

 

A renovation wascompleted by December 31, 2009 as part of an overall strategic operatingplan for the Casino.  In anticipation of building a new casino resort, thecurrent facility had not been upgraded for several years.  In addition tothe physical plant of the gaming operation, furniture, fixtures, equipment andgaming software was either not replaced or repaired to adequately service theneeds of the business. The overall appearance and appeal of the Casino wasinsufficient to meet basic customer requirements.  Major components of the renovation projectincluded upgrading slot accounting software, slot and table player trackingsoftware, adding new carpeting, new slot chairs, interior and exterior signageand the replacement of paint and wall paper.  To additionally enhance theoverall gaming experience and appeal to a broader spectrum of potential gamers,two additional food amenities were constructed.  The Fortune Café is aquick service Asian-themed restaurant designed to be a high-margin,high-volume, quick turn restaurant.  Additionally, the Center Stage Bar &Grill encompass a casual dining experience combined with the existing bar andan upgraded stage and sound system.

 

The constructionof our expansion project has temporarily been postponed due to lack ofavailable financing.  We are activelyreviewing our financing options and remain “shovel ready” to proceed.

 

The Senior Notesmature on November 1, 2011. We are actively reviewing our options.  We have remained in contact with variousfinancial institutions regarding the maturing debt to explore our options,which may include refinancing the Senior Notes.

 

*General*

 

We havehistorically operated as a separate wholly-owned operating property of theTribe. We were formed as an unincorporated governmental instrumentality of theTribe to own and operate the River Rock Casino. Upon the issuance of our PriorNotes, the Tribe reorganized so that its gaming business became owned andoperated by us. This reorganization was accounted for as a reorganization ofentities under common control. As a result, the assets and liabilities of theCasino are presented by us on a historical cost basis.

 

We offer Class IIIslot and video poker gaming machines, house banked table games (includingBlackjack, Three card poker, Mini-baccarat and Pai Gow poker), Poker, featuringTexas Hold’em, comprehensive food and beverage offerings, and goods for sale invending machines.

 

On November 7,2003, we issued the Prior Notes. A portion of the net proceeds from the sale ofthe Prior Notes was used to fund three new parking structures, and relatedinfrastructure improvements, to repay various debts and accrued expenses of theTribe, as well as to increase our cash on hand. The balance of the net proceedswas used to fund a land purchase by the Tribe and settle litigation of theTribe. In June 2004, we consummated our exchange offer of our Senior Notesfor the Prior Notes.  The Senior Notesare secured by a first priority pledge of our revenues and substantially all ofour existing and future tangible and intangible personal property.

 

At the beginningof 2003, we started our infrastructure projects, including the excavation of ahillside and the construction of retaining walls. In April 2003, we beganthe design process for the three new parking structures. The parking structureportion of the expansion project was completed in two phases and our existinggaming facility remained open during construction. On October 29, 2004, weobtained a temporary certificate of occupancy to open the entire first parkingstructure with 437 spaces. On December 1, 2004, we received a certificateof substantial completion on the first parking structure. The second phase,which included our second and third parking structures with 476 and 471 spaces,respectively, opened on December 29, 2004. Since December 31, 2006,we have had enough parking spaces available to accommodate a total ofapproximately 1,384 customer parked vehicles.

 

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**CriticalAccounting Policies and Estimates**

 

We have identifiedcertain critical accounting policies and estimates that affect our moresignificant judgments and estimates used in the preparation of our financialstatements. The preparation of our financial statements, in conformity withaccounting principles generally accepted in the United States of America,requires that we make estimates and judgments that affect the reported amountsof assets and liabilities, revenues and expenses, and related disclosures ofcontingent assets and liabilities. On an on-going basis, we evaluate thoseestimates, including those related to asset impairment, accruals for ourpromotional club, compensation and related benefits, revenue recognition,contingencies and litigation. These estimates are based on the information thatis currently available to us and on various other assumptions that we believeto be reasonable under the circumstances. Actual results could vary from thoseestimates under different assumptions or conditions. We believe that the followingcritical accounting policies affect significant judgments and estimates used inthe preparation of our financial statements:

 

·                  Casino Revenues — Casino revenue is recognized as the net win fromgaming activities, which is the difference between gaming wins and losses.Casino revenues are net of accruals for anticipated payouts of progressive slotjackpots and certain player incentives, when earned by the customer.

 

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

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

 

We evaluate our capital assets for impairment in accordance with theAccounting pronouncement GASB No. 42, “*Accountingand Financial Reporting for Impairment of Capital Assets and for InsuranceRecoveries.*”  This Statement establishes accounting andfinancial reporting standards for impairment of capital assets.  Ourcapital assets include building and improvements, furniture, fixtures andequipment.  A capital asset is considered impaired if both the decline inservice utility of the capital asset is large in magnitude and the event orchange in circumstances is outside the normal life cycle of the capitalasset.  We are required to evaluate prominent events or changes incircumstances affecting capital assets to determine whether impairment of acapital 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 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.

 

·                  Accrued Progressive Slot Jackpots — Accrued progressive slot jackpotsconsist of estimates for prizes relating to various games that have accumulatedjackpots. We have recorded the anticipated payouts as a reduction of casinorevenues and as a component of accrued liabilities.  We do not accrue for the base jackpots.

 

·                  Contingencies — We assess our exposure to loss contingencies, includinglegal matters, and provide for an exposure if it is judged to be probable andestimable. If the actual loss from a contingency differs from management’sestimate, operating results could be materially impacted. As of December 31,2009, we have determined that no accruals for claims and legal actions arerequired. If circumstances surrounding claims and legal actions change, theaddition of accruals for such items in future periods may be required, whichaccruals may be material.

 

Codification —There are differences between financial statements prepared in accordance withGASB pronouncements and those prepared in accordance with the Codificationissued by the FASB. The statements of revenues, expenses and changes in netassets (deficit) are a combined statement under GASB pronouncements. The FASBCodification allow a statement of income or operations and a separate statementof owners’ or shareholders’ equity (deficit), which is where distributions toowners would be presented under the FASB Codification. The amount shown asincome before distributions to the Tribe would be the most comparable amount tonet income computed under the FASB Codification. We are a separate enterprisefund of the Tribe, a governmental entity, and as such there is no owners’ orshareholders’ equity (deficit) as traditionally represented under the FASBCodification.  The most comparable measure of owners’ equity (deficit) ispresented on our balance sheet as net assets (deficit).

 

Reclassifications —Certain prior year amounts in the statements of revenues, expenses and changesin net assets (deficit) have been reclassified to be consistent with currentyear presentation with no change to net revenues or net income as reflected in ourprior Forms 10-K, including the reclassification of e-coupons and cashincentives from promotional allowances to contra-revenues. Certain cash flowstatements amounts and footnote disclosures have been adjusted to be consistentwith current year presentation.

 

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**Resultsof Operations**

 

**QuarterlyResults of Operations**

 

The followingtable sets forth unaudited quarterly operations data for each full quarter forthe past three years. In our opinion, this data reflects all adjustments,consisting only of normal recurring adjustments, necessary for a fairpresentation of the data. The results of operations for any quarter are notnecessarily indicative of the results of operations for a full year or anyfuture period. Certain amounts from prior quarters have been reclassified to beconsistent with our current presentation, i.e. promotional allowances are nowcontra-revenue.  We expect our quarterlyoperating results to vary significantly in future periods.

 

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| ** **                                    | ** ** | **December 31,**     | ** ** | **September 30,** | ** ** | **June 30,** | ** ** | **March 31,** | ** ** | **December 31,** | ** ** | **September 30,** | ** ** | **June 30,** | ** ** | **March 31,** | ** ** |
|-----------------------------------------------|------------|---------------------------|------------|------------------------|------------|-------------------|------------|--------------------|------------|-----------------------|------------|------------------------|------------|-------------------|------------|--------------------|------------|
| ** **                                    | ** ** | **2009**                  | ** ** | **2009**               | ** ** | **2009**          | ** ** | **2009**           | ** ** | **2008**              | ** ** | **2008**               | ** ** | **2008**          | ** ** | **2008**           | ** ** |
|                                          |       | **Dollars  in Thousands** |       |
| OPERATING REVENUES:                           |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
|                                          |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| Casino                                        |       | $                         | 30,158     |                   | $          | 28,152            |       | $                  | 29,469     |                  | $          | 29,952                 |       | $                 | 29,789     |               | $          | 31,090 |   | $ | 31,728 |   | $ | 31,874 |   |
| Food, beverage and  retail                    |       | 1,485                     |       | 1,459                  |       | 1,481             |       | 1,426              |       | 1,772                 |       | 1,308                  |       | 1,874             |       | 1,319              |       |
| Other                                         |       | 225                       |       | 224                    |       | 334               |       | 129                |       | 265                   |       | 30                     |       | 154               |       | 149                |       |
|                                          |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| Gross revenues                                |       | 31,868                    |       | 29,835                 |       | 31,284            |       | 31,507             |       | 31,826                |       | 32,428                 |       | 33,756            |       | 33,342             |       |
|                                          |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| Promotional allowances                        |       | (106                      | )          | (101                   | )          | (173              | )          | (46                | )          | (385                  | )          | (127                   | )          | (97               | )          | (170               | )          |
|                                          |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| Net revenues                                  |       | 31,762                    |       | 29,734                 |       | 31,111            |       | 31,461             |       | 31,441                |       | 32,301                 |       | 33,659            |       | 33,172             |       |
|                                          |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| OPERATING EXPENSES:                           |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| Casino                                        |       | 4,378                     |       | 3,670                  |       | 3,925             |       | 4,173              |       | 5,714                 |       | 5,173                  |       | 4,862             |       | 5,038              |       |
| Food, beverage and  retail                    |       | 1,752                     |       | 1,812                  |       | 1,703             |       | 2,062              |       | 1,144                 |       | 1,689                  |       | 2,505             |       | 1,725              |       |
| Selling, general and  administrative          |       | 11,237                    |       | 9,739                  |       | 10,108            |       | 10,258             |       | 11,529                |       | 9,778                  |       | 11,781            |       | 10,418             |       |
| Depreciation                                  |       | 2,410                     |       | 2,388                  |       | 2,381             |       | 2,375              |       | 2,338                 |       | 2,337                  |       | 2,410             |       | 2,940              |       |
| Gaming commission and  surveillance expense   |       | 889                       |       | 986                    |       | 1,050             |       | 866                |       | 1,032                 |       | 807                    |       | 854               |       | 1,002              |       |
| Compact revenue sharing  trust fund           |       | 333                       |       | 334                    |       | 334               |       | 334                |       | 333                   |       | 334                    |       | 334               |       | 334                |       |
| (Gain)/loss on sale of  assets                |       | 149                       |       | —                 |       | (33               | )          | —             |       | —                |       | —                 |       | —            |       | —             |       |
|                                          |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| Total Operating  expenses                     |       | 21,148                    |       | 18,929                 |       | 19,468            |       | 20,068             |       | 22,090                |       | 20,118                 |       | 22,746            |       | 21,457             |       |
|                                          |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| INCOME FROM OPERATIONS                        |       | 10,614                    |       | 10,805                 |       | 11,643            |       | 11,393             |       | 9,351                 |       | 12,183                 |       | 10,913            |       | 11,715             |       |
|                                          |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| NON-OPERATING  EXPENSE-Net:                   |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| Interest expense                              |       | (5,215                    | )          | (5,215                 | )          | (5,215            | )          | (5,215             | )          | (5,215                | )          | (5,216                 | )          | (5,217            | )          | (5,217             | )          |
| Interest income                               |       | 21                        |       | 21                     |       | 24                |       | 8                  |       | 25                    |       | 227                    |       | 266               |       | 488                |       |
| Other income (expense),  net                  |       | —                    |       | —                 |       | —            |       | —             |       | 10                    |       | —                 |       | (1                | )          | (9                 | )          |
|                                          |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| Non-operating  expense-net                    |       | (5,194                    | )          | (5,194                 | )          | (5,191            | )          | (5,207             | )          | (5,180                | )          | (4,989                 | )          | (4,952            | )          | (4,738             | )          |
|                                          |       |                      |       |                   |       |              |       |               |       |                  |       |                   |       |              |       |               |       |
| ***Income before Distribution to Tribe (a)*** |       | $                         | 5,420      |                   | $          | 5,611             |       | $                  | 6,452      |                  | $          | 6,186                  |       | $                 | 4,171      |               | $          | 7,194 |   | $ | 5,961 |   | $ | 6,977 |   |

 

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(a) Ourfinancial statements are prepared in accordance with Governmental AccountingStandards Board (“GASB”) pronouncements. There are differences betweenfinancial statements prepared in accordance with GASB pronouncements and thoseprepared in accordance with the Codification issued by the FASB. The statementsof revenues, expenses and changes in net assets (deficit) are a combinedstatement under GASB pronouncements. The FASB Codification allows a statementof income or operations and a separate statement of owners’ or shareholders’equity (deficit), which is where distributions to owners would be presentedunder the FASB Codification. The amount shown above as income beforedistributions to the Tribe would be the most comparable amount to net incomecomputed under the FASB Codification. River Rock Entertainment Authority is aseparate enterprise fund of the Tribe, a governmental entity, and, as such,there is no owners’ or shareholders’ equity (deficit) as traditionallyrepresented under the FASB Codification. The most comparable measure of owners’equity (deficit) is presented on the River Rock Entertainment Authority balancesheet as net assets (deficit).

 

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**RIVER ROCK ENTERTAINMENT AUTHORITY**

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

 

**RESULTS OF OPERATIONS**

**For the Years Ended December 31,2009, 2008 and 2007**

 
| ** **                                  | ** ** | **Years Ended December 31,** | ** ** | **Dollar Variance** | ** ** | **Percentage Variance** | ** ** |
|---------------------------------------------|------------|-----------------------------------|------------|---------------------|------------|-------------------------|------------|
| ** **                                  | ** ** | **2009**                          | ** ** | **2008**            | ** ** | **2007**                | ** ** | **2009 vs. 2008** | ** ** | **2008 vs. 2007** | ** ** | **2009 vs. 2008** | ** ** | **2008 vs. 2007** | ** ** |
| ** **                                  | ** ** | **(Dollars in Thousands)**        | ** ** |
| OPERATING  REVENUES:                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| Casino                                      |       | $                                 | 117,731    |                | $          | 124,481                 |       | $ | 134,171 |   | $ | (6,750 | ) | $ | (9,690 | ) | -5.4 | % | -7.2 | % |
| Food,  beverage and retail                  |       | 5,851                             |       | 6,273               |       | 5,366                   |       | (422 | ) | 906 |   | -6.7 | % | 16.9 | % |
| Other                                       |       | 912                               |       | 598                 |       | 615                     |       | 314 |   | (17 | ) | 52.6 | % | -2.8 | % |
|                                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| Gross  revenues                             |       | 124,494                           |       | 131,352             |       | 140,152                 |       | (6,858 | ) | (8,801 | ) | -5.2 | % | -6.3 | % |
|                                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| Promotional  allowances                     |       | (426                              | )          | (779                | )          | (774                    | )          | 354 |   | (4 | ) | -45.4 | % | 0.5 | % |
|                                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| Net  revenues                               |       | 124,068                           |       | 130,573             |       | 139,378                 |       | (6,504 | ) | (8,805 | ) | -5.0 | % | -6.3 | % |
|                                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| OPERATING  EXPENSES:                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| Casino                                      |       | 16,146                            |       | 20,787              |       | 23,376                  |       | (4,641 | ) | (2,589 | ) | -22.3 | % | -11.1 | % |
| Food,  beverage and retail                  |       | 7,329                             |       | 7,063               |       | 4,640                   |       | 266 |   | 2,423 |   | 3.8 | % | 52.2 | % |
| Selling,  general and administrative        |       | 41,342                            |       | 43,506              |       | 43,978                  |       | (2,164 | ) | (473 | ) | -5.0 | % | -1.1 | % |
| Depreciation                                |       | 9,554                             |       | 10,025              |       | 11,801                  |       | (470 | ) | (1,777 | ) | -4.7 | % | -15.1 | % |
| Credit  Enhancement Fee                     |       | —                            |       | —              |       | 11,349                  |       | — |   | (11,349 | ) | 0.0 | % | -100.0 | % |
| Gaming  commission and surveillance expense |       | 3,791                             |       | 3,695               |       | 3,023                   |       | 96 |   | 672 |   | 2.6 | % | 22.2 | % |
| Compact  revenue sharing trust fund         |       | 1,335                             |       | 1,335               |       | 1,335                   |       | — |   | — |   | 0.0 | % | 0.0 | % |
| Loss on  sale of assets                     |       | 116                               |       | —              |       | —                  |       | 116 |   | — |   | 100.0 | % | 0.0 | % |
|                                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| Total  operating expenses                   |       | 79,613                            |       | 86,411              |       | 99,502                  |       | (6,798 | ) | (13,091 | ) | -7.9 | % | -13.2 | % |
|                                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| INCOME  FROM OPERATIONS                     |       | 44,455                            |       | 44,162              |       | 39,876                  |       | 294 |   | 4,286 |   | 0.7 | % | 10.7 | % |
|                                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| NON-OPERATING  EXPENSE-Net                  |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| Interest  expense                           |       | (20,860                           | )          | (20,865             | )          | (20,872                 | )          | 5 |   | 7 |   | 0.0 | % | 0.0 | % |
| Interest  income                            |       | 74                                |       | 1,006               |       | 1,701                   |       | (932 | ) | (695 | ) | -92.6 | % | -40.9 | % |
| Other  gain                                 |       | —                            |       | —              |       | 4                       |       | — |   | (4 | ) | 0.0 | % | -100.0 | % |
| Other  income, net                          |       | —                            |       | —              |       | 1                       |       | — |   | (1 | ) | 0.0 | % | -100.0 | % |
|                                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| Non-operating  expense-net                  |       | (20,786                           | )          | (19,859             | )          | (19,166                 | )          | (927 | ) | (694 | ) | -4.7 | % | -3.6 | % |
|                                        |       |                              |       |                |       |                    |       |   |   |   |   |   |   |   |   |
| INCOME  BEFORE DISTRIBUTIONS TO TRIBE       |       | $                                 | 23,669     |                | $          | 24,303                  |       | $ | 20,710 |   | $ | (633 | ) | $ | 3,592 |   | -2.6 | % | 17.3 | % |

 

**Resultsof Operations — Fiscal Years ended December 31, 2009 and 2008**

 

*NetRevenues*. Netrevenues for the fiscal year ended December 31, 2009 (“FY 2009”) decreasedby $6.5 million to $124.1 from $130.6 million for the fiscal year ended December 31,2008 (“FY 2008”). The decrease is attributed to a national and regionaleconomic slowdown.  Approximately 94.9%of our net revenues, net of player incentives, were from gaming activities forFY 2009.  We generated $106.1 million, or85.5% of net revenues, net of respective player incentives of $10.2 million,from gaming devices, and $11.6 million, or 9.4% of net revenues, net ofrespective player incentives of $0.1 million, from table games and poker for FY2009, as compared to $110.2 million, or 84.4% of our net revenues, net ofrespective player incentives of $12.0 million, from gaming devices and $14.3million, or 11.0% of our net revenues, net of respective player incentives of$0.2 million, from table games and poker for FY 2008.  Our win per slot machine per day was $218 forFY 2009, which increased by $26 from $192 for FY 2008.  The increase innet win per machine per day is primarily attributable to the decrease in theaverage number of slot machines on the floor.  We have been reconfiguringour gaming floor in an effort to enhance our overall appeal.  As part ofthis effort, we reduced the average number of slot machines to 1,333 for FY2009, compared to an average of 1,570 for FY 2008.  At December 31, 2009, we had 1,212 slotmachines on the gaming floor.

 

We generated $5.4million in food, beverage and retail sales for FY 2009, compared to $5.5million for FY 2008 net of promotional allowances.  The retail value of our food and beverageprovided to customers without charge is included in gross revenues and thendeducted as promotional allowances. Such allowances for FY 2009 and FY 2008were $0.4 million and $0.8 million, respectively.  We do not provide complimentary alcoholicbeverages to our patrons.

 

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*PromotionalAllowances*.Promotional allowances for FY 2009 were $0.4 million, or 0.3% of net revenues,compared to $0.8 million, or 0.6% of net revenues, for FY 2008.

 

*Operatingexpenses*.Operating expenses for FY 2009 were $79.6 million, or 64.2% of net revenues,compared to $86.4 million, or 66.2% of net revenues, for FY 2008. The decreasein operating expenses is attributable to expense reductions due to cost savingmeasures we adopted to adjust for the decline in customer demand, as describedbelow under Casino expense, food, beverage and retail expense, and selling,general and administrative expense.

 

Casino expenseincludes costs associated with our gaming operations and an allocation of foodand beverage expense related to the costs of complimentary activities. Casinoexpense for FY 2009 decreased to $16.1 million, or 13.7% of Casino revenuesfrom $20.8 million, or 16.7% of Casino revenues for FY 2008. The decrease inCasino expense is attributable to decreases in salaries and wages and relatedbenefits, temporary suspension of our 401K matching contribution, participationfees, and wide-area progressive commissions.

 

Food, beverage andretail expense for FY 2009 was $7.3 million, or 135.1% of food, beverage andretail revenue net of promotional allowances, increasing from $7.1 million, or128.6% of food, beverage and retail revenue net of promotional allowances forFY 2008.  Our food and beverage expenseratio is still significantly higher than industry average because we haveutilized these amenities as an opportunity to build customer loyalty ratherthan as a source of income.

 

Selling, generaland administrative expense for FY 2009 decreased by $2.2 million to $41.3million, or 33.3% of net revenues, from $43.5 million, or 33.3% of netrevenues, for FY 2008. The decrease in selling, general and administrativeexpense is attributable to the decrease in advertising, bus expense, and anallocation of expenses paid for by the Tribe that we reimburse, including humanresources and warehouse.

 

Depreciationexpense for FY 2009 was $9.6 million compared to $10.0 million for FY2008.  Depreciation expense was computedusing the straight-line method over the useful lives of property, plant andequipment. The decrease in depreciation expense is due to an increase in theamount of our assets becoming fully depreciated.

 

Gaming Commissionand surveillance expenses for FY 2009 were $3.8 million compared to $3.7million for FY 2008.   The increase isdue to hiring new positions in preparation for the anticipated continuation ofthe expansion project and those new hires remained in place throughout 2009.

 

Compact revenuesharing trust fund expense remained the same at $1.3 million for both FY 2009and 2008. Compact revenue sharing trust fund expense includes paymentsassociated with licenses for 1,600 gaming devices. These fees became payable bythe Tribe when we commenced operations in September 2002, and are based onthe number of our gaming device licenses. Compact revenue sharing trust fundexpense includes payments to the Revenue Sharing Trust Fund (“RSTF”) asrequired by our Compact with the State of California. The Tribe is obligated toremit certain fees to the California Gambling Control Commission on a quarterlybasis for inclusion in the RSTF.  TheRSTF is for the benefit of tribes that have no or limited gaming. We pay thesefees on behalf of the Tribe.

 

*Incomefrom operations.*Income from operations for FY 2009 was $44.5 million, or 35.8% of net revenues,compared to $44.2 million, or 33.8% of net revenues, for FY 2008.

 

*Otherexpense, net.*Other expense, net for FY 2009 increased to $20.8 million, or 16.8% of netrevenues, from $19.9 million, or 15.2% of net revenues, for FY 2008, primarilyrepresenting interest expense for both periods. Other expense, net, included $74,172 of interest income for FY 2009compared to $1.0 million of interest income for FY 2008.  The decrease in interest income was due to asignificant drop in interest rates and the decline of invested funds.

 

*Incomebefore distributions to the Tribe*. Income before distributions to the Tribe for FY 2009decreased by $0.6 million to $23.7 million, or 19.1% of net revenues, from$24.3 million, or 18.6% of net revenues, for FY 2008.

 

**Resultsof Operations — Fiscal Years ended December 31, 2008 and 2007**

 

*NetRevenues*. Netrevenues for the fiscal year ended December 31, 2008 (“FY 2008”) decreasedby $8.8 million to $130.6 from $139.4 million for the fiscal year ended December 31,2007 (“FY 2007”). The decrease is attributed to a national and regionaleconomic slowdown.  Approximately 95.3%of our net revenues, net of player incentives, were from gaming activities forFY 2008.  We generated $110.2 million, or84.4% of net revenues, net of respective player incentives of $12.0 million,from gaming devices, and $14.3 million, or 11.0% of net revenues, net ofrespective player incentives of $0.2 million, from table games and poker for FY2008, as compared to $119.0 million, or 85.3% of our net revenues, net ofrespective player incentives 

 

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of $11.3 million, fromgaming devices and $15.2 million, or 10.9% of our net revenues, net ofrespective player incentives of $0.2 million, from table games and poker for FY2007.  Our win per slot machine per daywas $192 for FY 2008, which decreased by $15 from $207 for FY 2007.  Therewere an average number of slot machines of 1,570 for FY 2008, compared to anaverage of 1,566 for FY 2007.

 

We generated $5.5million in food, beverage and retail sales for FY 2008, compared to $4.6million for FY 2007, net of promotional allowances.  In part, the increase is due to the May 2008issuance of our alcohol license resulting in alcohol sales that werenon-existent in 2007 and the decrease of promotional allowances as a result ofa strategic reduction to narrow our marketing focus on higher revenuegenerating players.  The retail value ofour food and beverage provided to customers without charge is included in grossrevenues and then deducted as promotional allowances. Such allowances for FY 2008and FY 2007 were $0.8 million and $0.8 million, respectively.  We do not provide complimentary alcoholicbeverages to our patrons.

 

*PromotionalAllowances*.Promotional allowances for the FY 2008 were $0.8 million, or 0.6% of netrevenues, compared to $0.8 million, or 0.6% of net revenues, for FY 2007.

 

*Operatingexpenses*.Operating expenses for FY 2008 were $86.4 million, or 66.2% of net revenues,compared to $99.5 million, or 71.4% of net revenues, for FY 2007. The decreasein operating expenses is primarily attributable to the elimination of theCredit Enhancement Fee in FY 2008 which totaled $11.3 million in FY 2007, alongwith the decrease in depreciation of original equipment that was placed intoservice when the Casino first commenced operations and has fully depreciated.

 

Casino expense includescosts associated with our gaming operations and an allocation of food andbeverage expense related to the costs of complimentary activities. Casinoexpense for FY 2008 decreased to $20.8 million, or 16.7% of Casino revenues,from $23.4 million, or 17.4% of Casino revenues for FY 2007. The decrease inCasino expense is attributable to decreases in participation fees, andwide-area progressive commission.

 

Food, beverage andretail expense for FY 2008 was $7.1 million, or 128.6% of food, beverage andretail revenue net of promotional allowances, increasing from $4.6 million, or101.1% of food, beverage and retail revenue net of promotional allowances forFY 2007.  The increase in food, beverageand retail expense is primarily attributed to the increase in costs of goods,salaries and wages and related benefits. Our food and beverage expense ratio is still significantly higher thanindustry average because we have utilized these amenities as an opportunity tobuild customer loyalty rather than as a source of income.

 

Selling, generaland administrative expense for FY 2008 decreased by $0.5 million to $43.5million, or 33.3% of net revenues, from $44.0 million, or 31.6% of netrevenues, from FY 2007.

 

Depreciationexpense for FY 2008 was $10.0 million compared to $11.8 million for FY2007.  Depreciation expense was computedusing the straight-line method over the useful lives of property, plant andequipment. The decrease in depreciation expense is due to original equipmentthat was placed into service when the Casino commenced operation and has fullydepreciated.

 

Credit EnhancementFee expense was no longer applicable in FY 2008 compared to $11.3 million in FY2007.  We began paying the creditenhancement fee to Dry Creek Casino (“DCC”) in June 2003. We had the rightto terminate the Development Agreement by exercising a buy-out option and didso on January 31, 2007.

 

Gaming Commissionand surveillance expenses for FY 2008 were $3.7 million compared to $3.0million for FY 2007.   The increase isprimarily due to an increase in wages and new positions, along with an increasein audit and legal fees due to financing activities.

 

Compact revenuesharing trust fund expense remained the same at $1.3 million for both FY 2008and 2007. Compact revenue sharing trust fund expense includes paymentsassociated with operating 1,600 gaming devices. These fees became payable bythe Tribe when we commenced operations in September 2002, and are based onthe number of our gaming device licenses. Compact revenue sharing trust fundexpense includes payments to the RSTF as required by our Compact with the Stateof California. The Tribe is obligated to remit certain fees to the CaliforniaGambling Control Commission on a quarterly basis for inclusion in the RSTF.  The RSTF is for the benefit of tribes thathave no or limited gaming. We pay these fees on behalf of the Tribe.

 

*Incomefrom operations.*Income from operations for FY 2008 was $44.2 million, or 33.8% of net revenues,compared to $39.9 million, or 28.6% of net revenues, for FY 2007.

 

*Otherexpense, net.*Other expense, net for FY 2008 increased to $19.9 million, or 15.2% of netrevenues, from $19.2 million, or 13.8% of net revenues, for FY 2007.  Other expense, net, included $1.0 million ofinterest income for FY 2008 compared to $1.7 

 

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million of interestincome for FY 2007.  The decrease ininterest income was due to a drop in interest rates and the decline of investedfunds.

 

*Incomebefore distributions to the Tribe*. Income before distributions to the Tribe for FY 2008increased by $3.6 million to $24.3 million, or 18.6% of net revenues, from$20.7 million, or 14.9% of net revenues, for FY 2007.

 

**Liquidityand Capital Resources**

 

Since ourinception, we have funded our capital expenditures and working capitalrequirements primarily through operating cash flow, debt financing, gamingequipment supplier financing, and other financing.

 

Construction ofour Casino and infrastructure improvements commenced on April 1, 2002. Thefirst portion of our gaming facility was completed in September 2002. Asof December 31, 2009, we had spent approximately $166.5 million, net ofdisposals, on the planning, development and construction of our gamingfacility, infrastructure and furniture, fixtures and equipment, excluding theproposed future expansion project. We financed the development with borrowingsand development advances.

 

In FY 2009, we spent$12,800 on the development of land adjacent to the Tribe’s reservation (the “DuganProperty”) which is expected to include an additional access road to ourCasino. We have $4.3 million remaining in a restricted account funded from theproceeds of our Notes Offering for the development of the Dugan Property.

 

Our capitalexpenditures for FY 2009 and 2008 were $16.8 million and $41.7 million,respectively. Our capital expenditures in 2009 consisted primarily of slotmachines and master plan development.  Themaster plan development related expenditures totaled $11.8 million of relatedexpenditures reimbursed to the Tribe they had incurred on our behalf and $0.3million of related expenditures paid by the Casino. Our 2008 capitalexpenditures consisted primarily of work contracted for by the Tribe on ourbehalf and completed in 2008 for master plan development costs for our proposedexpansion project and infrastructure improvements, which includes theconstruction of the lower Acorn Road.

 

As of December 31,2009, we had cash and cash equivalents of $31.6 million, as compared to $27.3million as of December 31, 2008.  Asof December 31, 2009 and 2008, respectively, we had restricted cash of$7.1 million.

 

Restricted cashconsists of net proceeds from the Notes Offering and investment earningsthereon set aside in construction financing accounts, for construction costsfor the three parking structures, infrastructure improvements and constructioncontingencies. It also includes funds that are reserved for additionalconstruction contingencies and the funds for the development of the DuganProperty. Our restricted cash is held in escrow accounts that can only be usedfor authorized construction disbursements until the related projects arecompleted.  Additionally, our operatingaccount is pledged to the Trustee for the benefit of itself and the holders ofthe Senior Notes until disbursed in accordance with the terms of the CashCollateral and Disbursement Agreement. Funds may generally be disbursed by ourbank from the operating account for all purposes permitted by the Indenture.

 

Our principalsource of liquidity for uses other than our expansion project during FY 2009consisted of cash flow from operating activities.  Net cash provided by operating activities forFY 2009 was $54.0 million, a decrease of $0.7 million, from $54.6 million forFY 2008. Net cash provided by operating activities for FY 2008 decreased by$10.6 million, from $65.2 million for FY 2007.

 

Net cash used incapital and related financing activities for FY 2009 was $36.4 million, ascompared to $60.9 million for FY 2008. Cash flow used in capital and related financing activities was primarilyfor the purchase of property and equipment and interest paid on the SeniorNotes.  The decrease was primaryattributable to the decrease in reimbursements to the Tribe for property andequipment as a result of completed work contracted for on our behalf by theTribe for master plan development for our proposed expansion project andinfrastructure improvements, which includes the construction of the lower AcornRoad, decreasing cash used in capital and related financing activities by $24.4million.

 

Net cash used innon-capital financing activities for FY 2009 was $13.3 million, a decrease of$0.6 million from $13.9 million for FY 2008. Net cash used in non-capital financing activities consist ofdistributions to the Tribe.

 

We believe that existingcash balances, cash from operations, as well as permitted disbursements fromour restricted cash escrow accounts will provide adequate funds for our workingcapital needs, planned capital expenditures and debt service requirements forthe foreseeable future. However, our ability to fund our operations, makeplanned capital expenditures, make scheduled debt payments and refinance ourindebtedness depends on our future operating performance and cash flow, which,in turn, are subject to prevailing economic conditions and to financial,business and other factors, some of which are beyond our control. 

 

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Additionally, theIndenture limits our ability to incur additional indebtedness. See Item 1 — “Business— Material Agreements — The Senior Notes and the Related Indenture.”

 

The Senior Notesmature on November 1, 2011. We are actively reviewing our options.  We have remained in contact with variousfinancial institutions regarding the maturing debt to explore our options,which may include refinancing the Senior Notes.

 

On June 28,2007, we and the Tribe announced plans to build a destination resort as morefully described in the press release furnished as an exhibit to our Form 8-Kdated June 28, 2007. We do not currently have adequate liquidity or cashflow to finance the project as proposed. We will consider various sources ofliquidity to finance the first phase of the proposed project.

 

The Tribe has incurredexpenses on our behalf that relate to the master planning of the proposedresort and an allocable portion of infrastructure improvements on the Tribe’sreservation that benefit us.  Totalexpenses incurred and subsequently reimbursed to the Tribe for the year ended December 31,2009 were $11.8 million.   On January 8,2010, our Board of Directors authorized the reimbursement of the Tribe in anamount not to exceed $14.9 million for expenses that the Tribe incurred onour behalf for master planning of the proposed resort and our allocable shareof infrastructure improvements on the reservation.  The approval included a payment scheduleunder which we will reimburse the Tribe $400,000 monthly from February 1,2010 through April 1, 2010, and $700,000 monthly thereafter withoutexceeding $14.9 million. We believe that the $14.9 million of reimbursementsrepresents the balance of master planning expenses and related infrastructurepaid by the Tribe.  When thereimbursement payments are made, the related expenses will be capitalized andreflected in construction-in-progress. The reimbursed costs consist ofengineering and design costs related to the proposed master plan development,including electrical, HVAC, landscaping, interior design services andconsulting fees for legal, branding, feasibility, and public relationsservices, as well as the construction costs of the lower Acorn Road.

 

The constructionof our expansion project has temporarily been postponed due to lack offunding.  We are actively reviewing ourfinancing options and remain “shovel ready” to proceed.

 

On March 18,2008, the Tribe and the Sonoma County Board of Supervisors entered into amemorandum of agreement (“MOA”) that, among other things, settled severallong-standing legal disputes between Sonoma County and the Tribe and provides abinding framework for resolving future disputes.  We believe the MOA hashad significant positive impacts on the conduct of our business and the Tribe’sability to develop our expansions plans and construct our proposed hotel andcasino resort.  Pursuant to the MOA, the Tribe has agreed to pay theCounty up to $75 million in mitigation fees over a 12 year period to offsetimpacts of the potential losses and impacts to the County resulting from theTribe’s various ongoing projects and is intended to support the services beingprovided by the County.  In addition to the mitigation fees, the Tribewill pay a fee in lieu of the County’s Transient Occupancy Tax in the amount of9% of the rental collected on occupied hotel rooms, to be paid quarterly andcontinuing for five years after the later to occur of the termination of theMOA, as may be extended, or the Tribe’s Compact with the State (which is nowterminable in 2020 at the earliest), which fees may be applied to programs andservices that serve to promote tourism in the County. Such in lieu fees couldtotal as much as $25 million during the term of the MOA. The Tribe has not madeany determinations to seek reimbursement or direct payment from us of amountsdue to the County pursuant to the MOA.

 

As part of the effort toenhance the overall appeal of our product, we have been reconfiguring ourgaming floor.  This effort has resulted in the reduction of approximately372 slot machines since June 2009 and 2 table games since August 2009. We will maintain our contractual rights under the Compact to operate a total of1,600 slot machines in our Casino and pay the related RSTF payments.  Weconsidered many factors such as peak period demand, per unit productivity, andplayer comfort in our analysis to ensure that the reduction of gaming deviceswill not adversely impact our revenues.  The reduction of gaming units onthe Casino floor has provided us an opportunity to upgrade current amenities,improve player comfort and enhance entertainment value. We are confident thatthese improvements, targeted at improving product appeal, will ultimately openup a greater spectrum of potential consumers within our designated marketarea.  In combination with our continuing effort to improve operationalefficiency, upgrading our gaming technology, and refocusing our marketingefforts, we are confident that we will have set a solid foundation for improvedand sustained cash flows.

 

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**ContractualObligations as of December 31, 2009**

 

The followingtable summarizes our contractual obligations and commitments as of December 31,2009:

 
| ** **                      | ** ** | **Total** | ** **  | **1 year** | ** ** | **1-3 years** | ** ** | **3-5 years** | ** **  |
|---------------------------------|------------|-----------|-------------|------------|------------|---------------|------------|---------------|-------------|
| Long-term  debt obligations (a) |       | $         | 200,492,203 |       | $          | 492,203       |       | $             | 200,000,000 |   | $ | — |   |
| Operating  lease obligations    |       | 1,384,634 |        | 548,808    |       | 831,551       |       | 4,275         |        |
|                            |       |           |        |       |       |          |       |          |        |
| Total  obligations (b)          |       | $         | 201,876,837 |       | $          | 1,041,011     |       | $             | 200,831,551 |   | $ | 4,275 |   |

 

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(a)                                  Excluded fromlong-term debt obligations above are interest payments of $19.5 million in 1year and $16.3 million in 2-3 years.

(b)                                 The Compactrequires us to pay a quarterly fee of $0.3 million to the RSTF based on thenumber of our licensed gaming devices. Total obligations do not include theRSTF payments.  On January 8, 2010, our Board ofDirectors authorized the reimbursement of the Tribe in an amount not to exceed$14.9 million for expenses that the Tribe incurred on our behalf formaster planning of the proposed resort and our allocable share ofinfrastructure improvements on the reservation. The approval included a payment schedule under which we will reimbursethe Tribe $400,000 monthly from February 1, 2010 through April 1,2010, and $700,000 monthly thereafter without exceeding $14.9 million (see Note 4 ofour financial statements) which are not included in total obligations.

 

**Regulationand Taxes**

 

We are subject toextensive regulation by the TGA, the California Gambling Control Commission andthe National Indian Gaming Commission. Changes in applicable laws orregulations could have a significant impact on our operations.

 

On March 18,2008, the Tribe and the Sonoma County Board of Supervisors entered into the MOAthat, among other things, settled several long-standing legal disputes betweenSonoma County and the Tribe, and provides a binding framework for resolvingfuture disputes.   Under the MOA,the County agreed to drop its opposition to the Tribe’s application for aliquor 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.

 

On May 29,2008, the California Department of Alcoholic Beverage Control issued a liquorlicense to our gaming and entertainment facility.  However, the Tribe has agreed to restrict thesale of alcohol to wine and beer between the hours of 11 a.m. and 5 p.m.on weekdays, and to stop serving alcohol altogether at midnight except forFriday and Saturday nights and the nights before holidays. The Tribe has alsoagreed not to serve liquor on the Casino floor, although patrons may bringdrinks purchased at the restaurant or bar on to the Casino floor. Therestrictions may be renegotiated following the first to occur of the three yearanniversary of the MOA or the opening of a hotel, which is anticipated to occurwithin the next two to three years.

 

In addition, theMOA commits the County Sheriff’s Department and Fire Marshall to providingpublic safety and fire services to the Casino and the Tribe’s future gamingprojects on the Rancheria, provides detailed agreements on off reservationimpact mitigation measures, and permits the Tribe’s application to take theDugan Property into trust, which has already been approved by the Department ofthe Interior (“DOI”) but was appealed by the DOI, to move forward withoutfurther County opposition.

 

The Tribe hasagreed to pay the County up to $75 million in mitigation fees over a 12 yearperiod to offset impacts of the potential losses and impacts to the Countyresulting from the Tribe’s various ongoing projects and is intended to supportthe services being provided by the County. In addition to the mitigation fees, the Tribe will pay a fee in lieu ofthe 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.

 

We believe the MOAhas had significant positive impacts on the conduct of our business and our andthe Tribe’s ability to develop our expansions plans and construct our proposedhotel and casino resort.

 

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Since we are anunincorporated governmental instrumentality of the Tribe located on reservationland held in trust by the United States of America, we are not subject tofederal or state income taxes. Various efforts have been made in Congress overthe past several years to enact legislation that would subject the income oftribal governmental business entities, such as us, to federal income tax.Although no such legislation has been enacted, similar legislation could bepassed in the future. It is not possible to determine with certainty thelikelihood of possible changes in tax law or in the administration of such law.Such changes, if adopted, could have a material adverse effect on our operatingresults and cash flow from operations.

 

**Impactof Inflation**

 

Absent changes incompetitive and economic conditions or in specific prices affecting the casinoindustry, we do not expect that inflation will have a significant impact on ourgaming facility operations. Changes in specific prices, such as fuel andtransportation prices, relative to the general rate of inflation may have amaterial adverse effect on the casino industry in general.

 

**Seasonality**

 

We anticipate thatactivity at our gaming facility may be modestly seasonal with stronger resultsexpected during the summer due in part to the relatively higher levels oftourism during such times of the year. In addition, our operations may beimpacted by adverse weather conditions and fluctuations in the tourismbusiness. Accordingly, our results may fluctuate from quarter to quarter andthe results of one quarter may not be indicative of results expected fromfuture quarters.

 

**Item 7A. Quantitative and Qualitative Disclosure About MarketRisk.**

 

Market risk is therisk of loss arising from adverse changes in market rates and prices, such asinterest rates, foreign currency exchange rates and commodity prices.

 

Through December 31,2009, we had not invested in derivative or foreign currency-based financialinstruments. Additionally, we primarily have fixed rate debt. As such, we donot believe we have material exposure to market risk.

 

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

 

Our financialstatements and notes thereto, referred to in Item 15(A) (1) of this Form 10-K,are filed as part of this report and appear in this Form 10-K beginning onpage 43.

 

**Item 9. Changes in and Disagreements with Accountants onAccounting and Financial Disclosure.**

 

None.

 

**Item 9A. Controls and Procedures.**

 

**Evaluationof Disclosure Controls and Procedures**

 

As of the end ofthe period covered by this Annual Report, management performed, with theparticipation of our Acting Chief Executive Officer and our 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. Our disclosure controls and procedures are designed to providereasonable assurance that information required to be disclosed in the report wefile or submit under the Exchange Act is recorded, processed, summarized, andreported within the time periods specified in the SEC’s forms, and that suchinformation is accumulated and communicated to our management including ourActing Chief Executive Officer and our Chief Financial Officer, to allow timelydecisions regarding required disclosures.  Based on the evaluation, ourActing Chief Executive Officer and our Chief Financial Officer concluded that,as of December 31, 2009, our disclosure controls and procedures wereeffective.

 

**Management’s Report on Internal Control OverFinancial Reporting**

 

Management isresponsible for establishing and maintaining adequate internal control overfinancial reporting, as defined in Rules 13a-15(f) and 15d-15(f) ofthe Exchange Act.  Internal control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements in accordance withaccounting principles generally accepted in the U.S.  Because of itsinherent limitations, internal control over financial reporting may not preventor detect misstatements.   Also,projection of any evaluation of effectiveness to future periods is subject tothe risk that controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures maydeteriorate.

 

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A materialweakness is a deficiency, or a combination of deficiencies, in internal controlover financial reporting, such that there is a reasonable possibility that amaterial misstatement of our annual or interim financial statements will not beprevented or detected on a timely basis.

 

Management hasconducted, with the participation of our Acting Chief Executive Officer andChief Financial Officer, an assessment, including testing of the effectivenessof our internal control over financial reporting as of December 31,2009.  Management’s assessment of internal control over financialreporting was conducted using the criteria in Internal Control—IntegratedFramework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (“COSO”). Based on that assessment, management has concluded thatour internal control over financial reporting was effective as of December 31,2009.

 

This Annual Reportdoes not include an attestation report of our registered public accounting firmregarding internal control over financial reporting. Management’s report wasnot subject to attestation by our registered public accounting firm pursuant totemporary rules of the Securities and Exchange Commission that permit usto provide only management’s report in this Annual Report.

 

**Changesin Internal Control Over Financial Reporting**

 

There have been nochanges in our internal control over financial reporting during the year ended December 31,2009 that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 

**Item 9B. Other Information.**

 

None.

 

**PART III**

 

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

 

We were formed in2003 as an unincorporated instrumentality of the Tribe. We are governed by afive-member Board of Directors consisting of the same five members as those ofthe Tribe’s Board of Directors. The Tribe’s Board of Directors is electedbiennially by the Tribal Council (the approximately 553 voting members of theTribe), and consists of five members, including a Chairperson, a ViceChairperson, a Secretary-Treasurer. The elections for our Board of Directorstake place in late fall, every two years. Our last election was postponed pending the resolution of the status ofcertain voting members of the Tribe.  TheTribe resolved these issues and the election proceeded on May 16,2009.  The members of our Board of Directors will serve for so long asthey serve on the Tribe’s Board of Directors.

 

**OurBoard of Directors**

 

The table belowsets forth information about the current members of our Board of Directors:

 
| **Name**                     | ** ** | **Age** | ** ** | **Position(s) Held** |
|------------------------------|------------|---------|------------|---------------------------|
|                         |       |    |       |                      |
| Harvey Hopkins               |       | 61      |       | Chairperson               |
| Augusto “Gus” Pina |       | 66      |       | Vice Chairperson          |
| Salvina Norris               |       | 31      |       | Secretary/Treasurer       |
| Marina Nojima                |       | 28      |       | Board Member              |
| Gabe Nevarez                 |       | 46      |       | Board Member              |

 

*HarveyHopkins* serves asour Chairperson.  Mr. Hopkins hasserved as Chairperson of the Tribe’s Board of Directors since November 20,2004.  Mr. Hopkins served as ourChairperson from November 20, 2004 to July 14, 2006. Thereafter, Mr. Hopkinsserved as a Board Member until May 16, 2009.  Mr. Hopkins began a professional careerin construction in 1970 and has been a licensed excavating contractor for 29years.  He grew up in Santa Rosa, California, and has been a lifelongmember of the Dry Creek Rancheria Band of Pomo Indians.  He and his wifehave also been in the trucking business for the last 16 years and currently ownAmerican Indian Management Inc. Trucking Company.  Additionally, Mr. Hopkinsworked for American Civil Constructors West Coast for the past 15 years.

 

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*Augusto“Gus” Pina* servesas our Vice Chairperson.  Mr. Pinahad served as a Board Member since November 20, 2004. Mr. Pinaretired as vice president of the Santa Rosa office of Bank of the West. Priorto joining Bank of the West in 1992, Mr. Pina served in various managerialpositions at Crocker Bank and Bank of America. Mr. Pina was honorablydischarged from the US Navy in 1964. Except during his service to the US Navy, Mr. Pinahas lived in Sonoma County his entire life. He has been a member of RotaryInternational, Cotati Planning Commissioner, Cotati Chamber President, formerboard member of KRCB channel 22 and a former member of the Petaluma Boys &Girls Club.

 

*SalvinaNorris* serves asour Secretary/Treasurer.  Ms. Norrishas served as a Board member since May 16, 2009.  Mrs. Norris worked for the Casino from2005 through 2008, starting in the security department and later in to the slotdepartment.  Mrs. Norris worked forthe Tribe’s Project Development Department from 2008 to 2009 specializing indocument control.  Additionally, Mrs. Norrisserves on the Tribe’s Code of Conduct Committee.

 

*MarinaNojima*has servedas a Board Member since May 16, 2009. Mrs. Nojima worked for the Tribe from 2003 through 2006, as anIndian Child Welfare Advocate.  Mrs. Nojimaleft her employment with the Tribe to obtain her Bachelor of Arts in psychologyfrom Sonoma State University.  Ms. Nojimahas been employed at Anova Center for Education since 2008, in the capacity ofschool secretary.  Additionally, Mrs. Nojimawas a member of the Tribe’s Education and Peace Protection Committee.

 

*GabeNevarez* hasserved as a Board Member since October 7, 2006. Mr. Nevarez hadserved on the Tribe’s Board of Directors as a member-at-large from 1998 through2004. He had previously served on our Board of Directors as a member-at-largefrom its inception through November 2004. Mr. Nevarez has beenemployed in retail sales in Santa Rosa, CA since 1986. Mr. Nevarez haspreviously served as a member of the Enrollment, Personnel, Housing andLegislative Committees of the Tribe.

 

**ExecutiveOfficers**

 

The table belowsets forth information about certain key executive officers as of December 31,2009.

 
| **Name**           | ** ** | **Age** | ** ** | **Position(s) Held**                                                      |
|--------------------|------------|---------|------------|--------------------------------------------------------------------------------|
|               |       |    |       |                                                                           |
| John Cirrincione   |       | 47      |       | Chief Operations  Officer and Acting Chief  Executive Officer, General Manager |
|               |       |    |       |                                                                           |
| Joseph R. Callahan |       | 57      |       | Chief Financial  Officer                                                       |

 

On January 22,2009, Mr. Shawn S. Smyth left the position of Chief Executive Officer andGeneral Manager of the Casino to pursue other interests.  Upon Mr. Smyth’s departure, our ChiefOperations Officer, Mr. John Cirrincione, was appointed as Acting ChiefExecutive Officer and General Manager. From August 2009 through November 2009, Mr. ScottGarawitz served as our Chief Executive Officer and General Manager.  Upon Mr. Garawitz’s departure, Mr. Cirrincioneagain assumed the titles of Acting Chief Executive Officer and GeneralManager.  On January 22, 2010, Mr. JohnCirrincione left the positions of Chief Operations Officer and Acting ChiefExecutive Officer and General Manager to pursue other interests.  Mr. Joseph Callahan was immediatelyappointed as the Acting Chief Executive Officer and General Manager.  Additionally, Mr. Hans Winkler assumedthe role of Acting Assistant Chief Financial Officer.  Mr. Winkler has been the Chief FinancialOfficer of the Tribe since 2004 and will continue to act in that capacity.  Mr. Winkler served as our ChiefFinancial Officer from April through July 2006.  From 2002 to 2004, Mr. Winkler wasController of the Tribe.  Prior to hisemployment by the Tribe, Mr. Winkler worked for the accounting firm ofRalph J. Ricciardi for 14 years.  Mr. Winkleris 47 years old.  We are currentlyconducting a search for a new Chief Executive Officer and General Manager.

 

Set forth below isa brief description of the business experience of our key executive officers.The following descriptions for our officers include employment by River RockCasino as our predecessor.

 

*John Cirrincione*was our Chief Operations Officer from October 7, 2008 until January 22,2010.  Mr. Cirrincione has 23 years experience in the gamingindustry, most recently as General Manager of Downstream Casino Resort, ahigh-end casino facility with 2,100 slots, 45 games, 5 restaurants, 226 hotelrooms and a 36 hole golf course in Quapaw, Oklahoma.  Mr. Cirrincionewas part of the project team credited with bringing the resort fromgroundbreaking to operation within 10 months and 26 days. Prior positionsinclude serving as General Manager of Gila River Gaming Enterprises, Inc.in Chandler, Arizona, Director of Operations for the Sands Hotel Casino inReno, Nevada from 1999 through 2003 and as a Casino Manager and start up teamwith Thunder Valley Casino Resort in Lincoln, California. Additionally, Mr. Cirrincionewas employed by Mystic Lake Hotel Casino in Prior Lake, Minnesota, as Directorof Table Games Operations, and as Assistant Director of Table Games for theAtlantis Casino Resort in Reno, Nevada. He graduated with a BS inCommunications from the State University of New York College at Fredonia in1984, and became certified in gaming management at the University of Nevada in1994.

 

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**Joseph R. Callahan**has been our Chief Financial Officer since August 8,2007.  Mr. Callahan has a diverseCasino Executive background in Finance and Accounting, Hotel, Food and Beverageand Gaming Operations. Most recently, Mr. Callahan worked for FantasySprings Casino in Indio, California where he had been the Director ofAccounting and Finance since 2005.  Prior to that he spent 5 years withMohegan Sun where he was Finance Director specializing in Strategic Planningand Analysis and Labor and Productivity. Mr. Callahan has spent several years working for Station Casinos inLas Vegas, Nevada as an Analyst, Finance Director and also Director ofHotel Operations.  In 1994, Colonel Callahan retired from the U.S. AirForce after 20 years of service.

 

**Code ofEthics**

 

We have adopted acode of ethics that applies to all of our executive officers, including ourChief Executive Officer and Chief Financial Officer. Our code of ethics isavailable on our website at *www.riverrockcasino.com*under “Contact Us/Investor Relations/Corporate Governance.” We will provide acopy of our code of ethics to any person upon request in writing to us at ouraddress.

 

**AuditCommittee of the Board of Directors; Financial Expert**

 

We do not have aseparate audit committee of our Board of Directors. Our full Board of Directorshas assumed the audit committee functions of our casino except that our TGA isresponsible under our Compact to hire, monitor the performance of and, ifnecessary, replace the independent auditors and to approve any significantnon-audit relationship with the independent auditors and assess the independentauditor’s qualifications and independence.

 

Our Board ofDirectors has determined that it does not have an audit committee financialexpert.

 

**Item 11. Executive Compensation**

 

**CompensationDiscussion and Analysis**

 

**Philosophy**

 

Our compensation policiesare designed to attract and retain key employees, motivating them to achieveand rewarding them for superior performance.  We choose to pay competitivelevels of base compensation and discretionary bonuses in order to attract andretain the necessary executive talent, reward annual performance and provideincentive for their balanced focus on long-term strategic goals as well asshort-term performance. Since we believe the performance of every employee is importantto our success, we are mindful of the effect of executive compensation on allof our employees.

 

We believe that thecompensation of our officers should reflect their success as individuals and asmembers of a management team, in attaining key operating objectives, such asgrowth of revenues and operating earnings. We believe that the performance ofthe officers in managing our company, considered in light of general economicand specific company, industry and competitive conditions, should be the basisfor determining their overall compensation. In setting our officers’compensation, we intend to be competitive with other gaming companies. Ourdiscretionary cash bonuses are an important element of our ability to recruitand retain talented employees and reward achievement since we do not pay anyequity-based compensation.

 

**Overviewof Compensation and Process**

 

In lieu of a compensationcommittee, our Board of Directors acts as a whole to make determinationsregarding compensation of our executive officers. Elements of compensation forour executives include: salary, incentive bonus, and benefits such as health,disability, life insurance and perquisites. Base salaries for ournon-contracted executives and discretionary bonuses for all executives are setfor our officers annually by the Board of Directors.

 

As part of its annualreview of officer compensation, our Board of Directors takes into account eachofficer’s total compensation from prior years, as well as information containedin compensation surveys. After reviewing the above factors, our Board ofDirectors makes the ultimate compensation determinations.  Compensation determinations relating toincentive bonuses to our executive officers and managers, as well as basecompensation, are determined solely by our Board of Directors.

 

The following are certainfactors that our Board of Directors will also take into account in determiningthe various components of our executive officers’ total compensation package:

 

·                  Performance against corporate and individualobjectives for the previous year;

·                  Difficulty of achieving desired results in the comingyear;

 

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·                  Value of their unique skills and capabilities tosupport our long-term performance;

·                  Performance of their management responsibilities;

·                  Responsibility and authority of each position relativeto other positions within the Casino; and

·                  Contributions as a member of the senior managementteam.

 

These elements fit intoour overall compensation objectives by helping to secure the future potentialof our operations, providing proper compliance and regulatory guidance, andhelping to create a cohesive team.

 

In addition to wages, wenormally provide all employees including executives with 401(k) match at100% up to 3% of gross annual pay, as well as paid medical, dental, vision andlife insurance.  We also provideinsurance for dependents while paying for 50% of employee dependent premiums.

 

**Overviewof Director Compensation and Procedures**

 

We review the level ofcompensation of our directors on an annual basis. To determine how appropriatethe current level of compensation for our directors is, we have historicallyobtained data from a number of different sources such as salary surveys andindustry standards.

 

**RetentionAgreements**

 

We do not have individualretention agreements with any employee except for severance arrangements withour former Chief Operations Officer and with our Chief Financial Officer, whonow also serves as our Assistant General Manager, contained in their respectiveemployment contracts that are discussed in Item 11 - “ Executive Compensation -Employment Agreements.”

 

**Compensation Committee Interlocks and InsiderParticipation**

 

No member of the Board ofDirectors has served as one of our officers or employees at any time. None ofour executive officers serve as a member of the Board of Directors of any othercompany that has an executive officer serving as a member of our Board.

 

**Board of Directors**Report**

 

Our Board of Directorshas reviewed the Compensation Discussion and Analysis and discussed thatanalysis with management. Based on its review and discussions with management,the Board of Directors has approved the Compensation Discussion and Analysis andit is to be included in our Annual Report on Form 10-K for 2009. Thisreport is provided by our full Board of Directors:

 

Harvey Hopkins,Chairperson

Gus Pina, ViceChairperson

Salvina Norris,Secretary/Treasurer

Marina Nojima, Member

Gabe Nevarez, Member

 

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**ExecutiveOfficers**

 

The followingtables provide summary compensation information for each of the fiscal yearsended December 31, 2009, 2008 and 2007:

 
| **Executive Officers serving during 2009** | ** ** | **Year**         | ** ** | **Salary** | ** ** | **Bonus (a)** | ** ** | **Other  Compensation (b)** | ** ** | **Total**  | ** ** |
|--------------------------------------------|------------|------------------|------------|------------|------------|---------------|------------|-----------------------------|------------|------------|------------|
| ** **                                 | ** ** | **(In Dollars)** | ** ** |
| ** **                                 | ** ** | ** **       | ** ** | ** ** | ** ** | ** **    | ** ** | ** **                  | ** ** | ** ** | ** ** |
| Shawn  S. Smyth (c)                        |       | 2009             |       | 126,396    |       | 75,000        |       | 4,661                       |       | 206,057    |       |
| Chief  Executive Officer                   |       | 2008             |       | 298,268    |       | 75,000        |       | 12,979                      |       | 386,247    |       |
|                                       |       | 2007             |       | 324,038    |       | 51,500        |       | 18,753                      |       | 394,291    |       |
|                                       |       |             |       |       |       |          |       |                        |       |       |       |
| Scott  Garawitz                            |       | 2009             |       | 100,833    |       | —        |       | 2,302                       |       | 103,135    |       |
| Chief  Executive Officer (d)               |       | 2008             |       | —     |       | —        |       | —                      |       | —     |       |
|                                       |       | 2007             |       | —     |       | —        |       | —                      |       | —     |       |
|                                       |       |             |       |       |       |          |       |                        |       |       |       |
| Joseph  R. Callahan                        |       | 2009             |       | 246,310    |       | 58,750        |       | 7,194                       |       | 312,254    |       |
| Chief  Financial Officer (e)               |       | 2008             |       | 225,702    |       | 25,000        |       | 6,808                       |       | 257,510    |       |
|                                       |       | 2007             |       | 78,346     |       | 19,587        |       | 2,182                       |       | 100,115    |       |

 

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(a) Dollaramounts for bonuses are not guaranteed and represent the maximum amount thatthe principal officer may receive.

(b) “OtherCompensation” includes medical, dental, vision and other health benefitsprovided.

(c) ShawnS. Smyth began serving as our Chief Executive Officer in April 2006 andleft the office in January 2009.

(d) ScottGarawitz began serving as our Chief Executive Officer in August 2009 andleft the office in November 2009.

(e) JosephR. Callahan began serving as our Chief Financial Officer as of August 8,2007.  As of January 22, 2010, Mr. Callahanalso serves as our Acting Chief Executive Officer.  On March 12, 2010, we entered into anemployment agreement with Mr. Callahan to continue serving as our ChiefFinancial Officer and to begin serving as our Assistant General Manager.

(f) JohnCirricione began serving as our Chief Operations Officer in October 7,2008 and left the office in January 2010. He also served as Acting Chief Executive Officer from January 2009until August 2009 and from November 2009 until January 2010.

 

**EmploymentAgreements**.

 

We entered into an employment agreement with Mr. JosephR. Callahan on October 17, 2007 effective as of August 8, 2007 toserve as our Chief Financial Officer. This three year employment agreementcommenced on August 8, 2007, and provides Mr. Callahan an annualsalary of $225,000 and a discretionary bonus, as determined by our Board, ofnot more than 25% of his annual salary based on various criteria.  If Mr. Callahan’s employment isterminated for other reasons set forth in the employment agreement includingdeath or disability, Mr. Callahan will be entitled to his salary for threemonths.  Either party may terminate theagreement with a 30 day written notice. Effective March 12, 2010, we entered into a new employmentagreement with Mr. Callahan whereby Mr. Callahan will continue toserve as our Chief Financial Officer and will become the Assistant GeneralManager of the Casino.  The term of Mr. Callahan’sagreement is three years, unless terminated earlier by the parties under theterms of the agreement. The agreement provides for the payment to Mr. Callahanof an initial annual base salary of $250,000. Mr. Callahan will also be eligible to receive an annual bonus atthe discretion of the Authority’s Board of Directors not to exceed thirtypercent (30%) of his annual base salary. This agreement supersedes Mr. Callahan’s employment agreement datedOctober 17, 2007 that was scheduled to terminate on August 7, 2010.

 

We entered into an employment agreement with Mr. John Cirrincioneon October 8, 2008 effective as of October 7, 2008 to serve as ourChief Operations Officer.  This threeyear employment agreement commenced on October 7, 2008, and provides Mr. Cirrincionean annual salary of $275,000 and a discretionary bonus, as determined by ourBoard, of not more than 25% of his annual salary based on variouscriteria.  If Mr. Cirrincione’semployment is terminated for other reasons set forth in the employmentagreement including death or disability, Mr. Cirrincione will be entitledto his salary for three months.  Eitherparty may terminate the agreement with a 30 day written notice.  Mr. Cirrincione resigned on January 22,2010 and was paid severance in accordance with his employment agreement in theamount of $78,202.

 

We have no other employment agreements with our principal executiveofficers.

 

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**PotentialPayments to Named Executive Officers Upon Termination**

 

Pursuant to hisemployment agreements, Mr. Callahan is entitled to potential severancepayments upon certain terminations of employment.   The terms andconditions for when severance payments are triggered, how payment amounts aredetermined, and what conditions are attached to the executive’s receipt ofseverance payments are substantially similar for all of our executive officers.

 

Triggering Events: Mr. Callahan is entitled to receive severancepayments in the event of any termination of his employment as a result of thefollowing events:

 

·                  The executive dies or becomes unable to perform theduties and responsibilities set forth in his employment agreement by reason oflong-term physical or mental disability, defined as a period of disability thatexceeds three (3) months;

·                  We, for any reason, cease to operate the Casino; or

·                  We give the executive ninety (90) days’ written noticeof executive’s termination.

 

If severance isowed to Mr. Callahan, we will be obligated to continue to pay theexecutive his base compensation in effect as of the date of termination for aseverance period following termination equal to three months. Additionally, wewill be obligated, to the extent elected by the executive, to continue allemployee benefits for that three month period.

 

The followingtable sets forth a summary of the estimated payments required to be made by usas if severance had been triggered under our employment agreements on December 31,2009:

 
| **Name and  Principal Position**             | ** ** | **Continued  Payment of  Base  Compensation** | ** ** | **Continued  PTO  Accrual** | ** ** | **Employee  Benefits** | ** ** | **Total Severance  Compensation** | ** ** |
|----------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------|------------|------------------------|------------|-----------------------------------|------------|
| John  Cirrincione, Chief Operating Officer   |       | $                                             | 68,750     |                        | $          | 7,529                  |       | $                                 | 1,923      |   | $ | 78,202 |   |
| Joseph  R. Callahan, Chief Financial Officer |       | $                                             | 56,250     |                        | $          | 6,361                  |       | $                                 | 1,708      |   | $ | 64,319 |   |

 

Mr. Cirrincioneleft as our Chief Operations Officer and Acting Chief Executive Officer andGeneral Manager on January 22, 2010.  Mr. Cirrinione’s severancepackage was $78,202.

 

**Compensationof Our Board**

 

We are governed by a five-member Board of Directors consisting of thesame five members as those of the Tribe’s Board of Directors. The Tribecompensates members of each Board of Directors for the services they render. In2009, we reimbursed the Tribe for 50% of the total compensation of the Boardmembers reflecting an estimate of the total time allocable to our Board’smatters. The members of the Board of Directors received the following amountsfor their service as members of the Tribe’s Board of Directors and as membersof our Board of Directors for the fiscal year 2009:

 
| **Name**                      | ** ** | **Title**                  | ** ** | **Annual Fees  Paid in Cash** | ** ** | **All Other  Compensation** | ** ** | **Total** | ** ** |
|-------------------------------|------------|----------------------------|------------|-------------------------------|------------|-----------------------------|------------|-----------|------------|
|                          |       |                       |       |                          |       |                        |       |      |       |
| Harvey  Hopkins               |       | Chairperson                |       | $                             | 100,000    |                        | $          | —    |       | $ | 100,000 |   |
| Betty  Arterberry (a)         |       | Chairperson (former)       |       | 28,885                        |       | —                      |       | 28,885    |       |
| Augusto  “Gus” Pina |       | Vice Chairperson           |       | 56,319                        |       | —                      |       | 56,319    |       |
| Margie  Rojes (a)             |       | Vice Chairperson  (former) |       | 24,761                        |       | —                      |       | 24,761    |       |
| Salvina  Norris               |       | Secretary/Treasurer        |       | 36,371                        |       | —                      |       | 36,371    |       |
| Marina  Nojima                |       | Board Member               |       | 24,243                        |       | —                      |       | 24,243    |       |
| Gabe  Nevarez                 |       | Board Member               |       | 40,000                        |       | —                      |       | 40,000    |       |
|                               |            |                            |            |                               |            |                             |            |           |            |  |  |  |

 

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(a) BettyArterberry and Margie Rojes completed their term on May 15, 2009 and werenot re-elected.

 

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**Item 12. Security Ownership of Certain Beneficial Owners andManagement.**

 

We have nooutstanding equity securities.

 

**Item 13.****CertainRelationships and Related Transactions, and Director Independence.**

 

Distributionsto the Tribe were $13.3 million, $13.9 million and $12.4 million for the yearsended December 31, 2009, 2008 and 2007, respectively. Under the Indenture,we currently are restricted from making payments to the Tribe other thanpayments specifically permitted by our Indenture.

 

TheTribe incurred $67.1 million in total expenses on our behalf for masterplanning of the proposed resort and infrastructure improvements on thereservation that benefit us.  Almost allof said expenditures were incurred prior to 2009 before construction wassuspended.  We reimbursed the Tribe $40.6million through 2008 and $11.8 million during 2009.  On January 8, 2010, our Board of Directorsauthorized the reimbursement of the Tribe in an amount not to exceed $14.9million in additional related expenses. The approval included a payment schedule according to which we willreimburse the Tribe $400,000 monthly from February 1, 2010 through April 1,2010, and $700,000 monthly thereafter without exceeding $14.9 million. Webelieve that the $14.9 million of reimbursements represents the balance ofmaster planning and related infrastructure expenses paid by the Tribe.  When the reimbursement payments are made, therelated expenses will be capitalized and reflected in construction-in-progress.The reimbursed costs consist of engineering and design costs related to theproposed master plan development, including electrical, HVAC, landscaping,interior design services and consulting fees for legal, branding, feasibility,and public relations services, as well as the construction costs of the lowerAcorn Road.

 

The Tribe has incurred expenses on our behalf that relate to thedevelopment of land adjacent to the Tribe’s reservation, the Dugan Property,which is expected to include an additional access road to our Casino.  Total expenses previously incurred andsubsequently reimbursed to the Tribe for the twelve months ended December 31,2009, 2008 and 2007 were $12,800, $0.3 million and $0, respectively.

 

The Tribe enacteda tribal gaming ordinance in April 1997, which, among other matters,created and established the TGA as a governmental subdivision of the Tribe. TheTGA is responsible for the regulation of all gaming activities conducted by theTribe or us on tribal lands. We pay for various expenses of the TGA (gamingcommission expense), surveillance, plant operations, human resources, andwarehouse. All of these departments are operated by the Tribe. These expensesinclude but are not limited to payroll and related expenses, legal and otheroperational expenses.  These expenseswere $7.2 million, $7.9 million and $7.2 million for the years ended December 31,2009, 2008 and 2007, respectively.  In2007, the purchasing department was operated by the Tribe.  However, in 2008, we began operating our ownpurchasing department.

 

The Tribe isobligated to remit certain fees to the CGCC on a quarterly basis for inclusionin the RSTF. The RSTF is for the benefit of tribes in California that have noor limited gaming. We pay these fees on behalf of the Tribe. Compact revenuesharing trust fund expense remained the same at $1.3 million for the yearsended December 31, 2009, 2008 and 2007. Compact revenue sharing trust fundexpense includes payments associated with operating 1,600 gaming devices. Thesefees became payable by the Tribe when we commenced operations in September 2002,and are based on the number of our gaming device licenses. Compact revenuesharing trust fund expense includes payments to the RSTF as required by ourCompact with the State of California.

 

We 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 was $0.3 million for 2009, 2008 and 2007, respectively.

 

Pursuant to the MOA, the Tribe has agreed to pay theCounty up to $75 million in mitigation fees over a 12 year period to offsetimpacts of the potential losses and impacts to the County resulting from theTribe’s various ongoing projects and are intended to support the services beingprovided by the County.  In addition tothe mitigation fees, the Tribe will pay a fee in lieu of the County’s TransientOccupancy Tax in the amount of 9% of the rental collected on occupied hotelrooms, to be paid quarterly and continuing for five years after the later tooccur of the termination of the MOA, as may be extended, or the Tribe’s Compactwith the State (which is now terminable in 2020 at the earliest), which feesmay be applied to programs and services that serve to promote tourism in theCounty. Such in lieu fees could total as much as $25 million during the term ofthe MOA.  The Tribe has not made anydeterminations to seek reimbursement or direct payment from us of amounts dueto the County pursuant to the MOA.

 

**Review,Approval or Ratification of Transactions with Related Persons**

 

Our Board ofDirectors reviews and approves or disapproves all related party transactions,and our written Code of Business Conduct and Ethics further requires that anytransaction involving a potential conflict of interest involving an executiveor an employee must be disclosed and approved by our full Board of Directors.

 

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**DirectorIndependence**

 

We are agovernmental instrumentality of the Tribe and are managed by a board ofdirectors of five members, all of whom are enrolled members of the Tribe. OurBoard of Directors is constituted by the same persons who constitute the Boardof Directors of the Tribe.  The Board ofDirectors of the Tribe is elected biannually by the enrolled members of theTribe, who alone have the power to appoint and remove our directors. Mr. HarveyHopkins, the Chairperson our Board of Directors, has been serving as theChairperson of the Board of Directors of the Tribe since 2004.

 

We are 100% ownedby the Tribe and have issued only debt securities which are not listed on anational securities exchange or in an inter-dealer quotation system. As aresult, we are not a listed issuer and a majority of the directors on our Boardof Directors are not required to be independent.

 

**Item 14.  PrincipalAccounting Fees and Services.**

 

The followingtable sets forth the aggregate fees billed for professional services renderedby our Independent Registered Public Accounting Firm, for the audit of ourannual financial statements as well as the aggregate fees billed foraudit-related services and all other services rendered for the years ended December 31,2009 and 2008.

 
| ** **                        | ** ** | **Fiscal Year** | ** ** | **Fiscal Year** | ** ** |
|-----------------------------------|------------|----------------------|------------|----------------------|------------|
| ** **                        | ** ** | **2009**             | ** ** | **2008**             | ** ** |
|                              |       |                 |       |                 |       |
| McGladrey &  Pullen, LLP |       |                 |       |                 |       |
| Audit  Fees                       |       | $                    | 460,722    |                 | $          | — |   |
| Audit-Related  Fees               |       | $                    | 28,766     |                 | $          | — |   |
| All  Other Fees                   |       | $                    | —     |                 | $          | — |   |
|                              |       |                 |       |                 |       |
| Deloitte &  Touche LLP   |       |                 |       |                 |       |
| Audit  Fees                       |       | $                    | 243,844    |                 | $          | 388,396 |   |
| Audit-Related  Fees               |       | $                    | —     |                 | $          | 27,478 |   |
| All  Other Fees                   |       | $                    | 7,864      |                 | $          | — |   |

 

The category of “AuditFees” includes fees for our annual audit, quarterly reviews and servicesrendered in connection with statutory and regulatory filings, or engagementsfor those fiscal years.

 

The category of “Audit-RelatedFees” includes aggregate fees billed in each of the last two fiscal years, forassurance and related services by the principal accountant, that are reasonablyrelated to the performance of the audit or review of the Authority’s financialstatements.

 

The category of “AllOther Fees” includes aggregate fees billed in each of the last two fiscal yearswhich are not covered by the above categories.

 

All above auditservices were pre-approved by the TGA, which, under the Compact, has responsibilityfor ensuring that the audit is performed. The TGA concluded that the provisionof such services by McGladrey & Pullen, LLP and Deloitte &Touche LLP were compatible with the maintenance of such firms’ independence inthe conduct of auditing functions. The TGA’s outside auditor independencepolicy provides for pre-approval of all services performed by the outsideauditors.

 

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**PART IV**

 

**Item 15. Exhibits and Financial Statement Schedules.**

 

**A.Financial Statements**

 

(a) *Documents filed as part of this report.*

 

1. The followingfinancial statements of the Authority and the Report of McGladrey &Pullen LLP, an independent registered public accounting firm, appear on pages 47through 60 of this Form 10-K and are incorporated by reference in Part II,Item 8:

 

Report of IndependentRegistered Public Accounting Firm

 

Balance Sheets of theRiver Rock Entertainment Authority as of December 31, 2009 and 2008

 

Statements of Revenues,Expenses and Changes in Net Assets (Deficit) for the Years Ended December 31,2009, 2008 and 2007

 

Statements of Cash Flowsfor the Years Ended December 31, 2009, 2008 and 2007

 

Notes to FinancialStatements

 

2. List of financialstatement schedules. All schedules are omitted because they are not applicableor the required information is shown in the financial statements or notesthereto.

 

3. List of exhibitsrequired by Item 601 of Regulation S-K. See part (c) below.

 

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**B.Exhibits.**

 

The exhibits to this Form 10-Kare listed on the exhibit index, which appears elsewhere herein and isincorporated herein by reference.

 

**EXHIBIT INDEX**

 
| **Exhibit No.** | ** ** | **Exhibit**                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|----------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                  |       | Dry Creek Rancheria  Band of Pomo Indians Ordinance No. 03-10-25-003 setting forth the River  Rock Entertainment Authority Act of 2003 (filed as Exhibit 3.1 to the  Authority’s Registration Statement on Form S-4 (the “Form S-4”),  filed with the SEC on May 5, 2004 (SEC File No. 333-115186), and  incorporated by reference herein)                                                                                |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.2                  |       | Dry Creek Rancheria  Band of Pomo Indians Tribal Council Resolution No. 03-10-25-002 (the  River Rock Entertainment Authority and Bond Resolution Act) approving, among  other things, creation of the River Rock Entertainment Authority (filed as  Exhibit 3.2 to the Authority’s Registration Statement on Form S-4,  filed with the SEC on May 5, 2004) (SEC File No. 333-115186), and  incorporated by reference herein)            |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.3                  |       | Dry Creek Rancheria  Band of Pomo Indians Ordinance No. 97-08-04, as amended October 25,  2003, authorizing and regulating gaming on the Dry Creek Band of Pomo Indians  Rancheria (filed as Exhibit 3.3 to the Form S-4, and incorporated  by reference herein)                                                                                                                                                                                   |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.1                  |       | Indenture, dated as of  November 7, 2003, by and among the Authority, the Tribe and U.S. Bank  National Association, as trustee (the “Trustee”), together with the Exhibits  attached thereto (filed as Exhibit 4.1 to the Form S-4, and  incorporated by reference herein)                                                                                                                                                                   |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.2                  |       | Form of Global 9  3⁄4% Senior Note due 2011 (contained in the Indenture filed as Exhibit 4.1  herewith) (filed as Exhibit 4.2 to the Form S-4, and incorporated  by reference herein)                                                                                                                                                                                                                                                           |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.1                 |       | Tribal-State Compact  between the Dry Creek Rancheria Band of Pomo Indians and the State of  California, effective May 2000 (filed as Exhibit 10.1 to the  Form S-4, and incorporated by reference herein)                                                                                                                                                                                                                                              |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.2                 |       | Cash Collateral and  Disbursement Agreement, dated as of November 7, 2003 (the “Cash  Collateral Agreement”), by and among the Trustee, U.S. Bank National  Association, as USB disbursement agent, Wells Fargo Bank, N.A., as  disbursement agent, Merritt & Harris, Inc., as independent  construction consultant, the Authority and the Tribe (filed as  Exhibit 10.2 to the Form S-4, and incorporated by reference herein) |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.3                 |       | Amendment No. 1 to  Cash Collateral Agreement, dated as of November 17, 2003, by and among  the Trustee, U.S. Bank National Association, as USB disbursement agent, Wells  Fargo Bank, N.A., as disbursement agent, Merritt &  Harris, Inc., as independent construction consultant, the Authority and  the Tribe (filed as Exhibit 10.3 to the Form S-4, and incorporated  by reference herein)                                     |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.4                 |       | U.S. Bank National  Association Control Agreement, dated as of November 7, 2003, by and  among the Trustee, U.S. Bank National Association, as disbursement agent,  securities intermediary and depository bank, the Authority and the Tribe  (filed as Exhibit 10.4 to the Form S-4, and incorporated by  reference herein)                                                                                                                            |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.5                 |       | Wells Fargo Bank, N.A.  Control Agreement, dated as of November 7, 2003, by and among the  Trustee, Wells Fargo Bank, N.A., as depository bank, the Authority and the  Tribe (filed as Exhibit 10.5 to the Form S-4, and incorporated by  reference herein)                                                                                                                                                                                             |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.6                 |       | Wells Fargo Bank, N.A.  side letter dated December 1, 2003, from Wells Fargo Bank, N.A. to the  Trustee (filed as Exhibit 10.6 to the Form S-4, and incorporated by  reference herein)                                                                                                                                                                                                                                                                  |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.7                 |       | Pledge and Security  Agreement, dated as of November 7, 2003, by and among the Authority, the  Tribe and the Trustee (filed as Exhibit 10.7 the Form S-4, and  incorporated by reference herein)                                                                                                                                                                                                                                                        |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.8                 |       | Employment Agreement,  dated as of March 12, 2010, by and between the Authority and Joseph R.  Callahan (filed as Exhibit 10.1 to the Form 8-K filed with the SEC  on March 15, 2010, and incorporated by reference herein)                                                                                                                                                                                                                        |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.9                 |       | Agreement, dated as of  April 1, 2004, by and between the Authority and Swinerton Builders  (filed as Exhibit 10.19 to the Form S-4, and incorporated by  reference herein)                                                                                                                                                                                                                                                                             |

 

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| 10.10  |   | Lease Agreement, dated  as of May 30, 2002, by and between the Tribe and Sprung Instant  Structures, Inc. (filed as Exhibit 10.20 to the Form S-4, and  incorporated by reference herein)                                                                             |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                      |
| 10.11  |   | Amendment No. 1 to  Lease Agreement, dated as of February 26, 2004, by and between the Tribe  and Sprung Instant Structures, Inc. (filed as Exhibit 10.21 to the  Form S-4, and incorporated by reference herein)                                                |
|   |   |                                                                                                                                                                                                                                                                                      |
| 10.12  |   | Amendment No. 2 to  Lease Agreement, dated as of August 29, 2005, by and between the Tribe  and Sprung Instant Structures, Inc. (filed as Exhibit 10.20 to the  Form 10-K filed with the SEC on April 17, 2007, and incorporated by  reference herein)      |
|   |   |                                                                                                                                                                                                                                                                                      |
| 10.13  |   | Amendment No. 1 to  Lease Agreement, dated as of June 10, 2009, by and between the Tribe and  Sprung Instant Structures, Inc.                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                      |
| 10.14  |   | Memorandum of Agreement  between the Dry Creek Rancheria Band of Pomo Indians and the County of  Sonoma, California, together with exhibits thereto (filed as  Exhibit 10.22 to the Form 10-K filed with the SEC on April 14,  2008, and incorporated by reference herein) |
|   |   |                                                                                                                                                                                                                                                                                      |
| 12.1   |   | Statement of  Calculation of Ratio of Earnings to Fixed Charges (filed herewith as  Exhibit 12.1)                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                      |
| 14.1   |   | Code of Ethics (filed  as Exhibit 14.1 to the Form 10-K filed with the SEC on  March 30, 2006, and incorporated herein by reference)                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                      |
| 31.1   |   | Certification by Joseph  R. Callahan, Acting Chief Executive Officer and Chief Financial Officer,  pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) (filed  herewith)                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                      |
| 32.1*  |   | Certification by Joseph  R. Callahan, Acting Chief Executive Officer and 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)                                               |

 

----

*               These certifications are being furnishedsolely to accompany this annual report pursuant to 18 U.S.C. Section 1350,and are not being filed for purposes of Section 18 of the SecuritiesExchange Act of 1934 and are not to be incorporated by reference into anyfiling of River Rock Entertainment Authority whether made before or after thedate hereof, regardless of any general incorporation language in such filing.

 

**C.Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) ofthe Act by Registrants Which Have Not Registered Securities Pursuant to Section 12of the Act**

 

The registrant has notsent an annual report or proxy statement to security holders. The registrantwill not be sending an annual report or proxy statement to its security holderssubsequent to the filing of this Form 10-K.

 

 

 

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**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

The Board of Directors ofRiver Rock Entertainment Authority

 

We have audited theaccompanying balance sheet of the River Rock Entertainment Authority (the“Authority”), a governmental instrumentality of the Dry Creek Rancheria Band ofPomo Indians (the “Tribe”), as of December 31, 2009 and the relatedstatements of revenues, expenses and changes in net assets (deficit) and ofcash flows for the year ended December 31, 2009.  These financial statements are theresponsibility of the Authority’s management. Our responsibility is to expressan opinion on the financial statements based on our audit.

 

We conducted our audit inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements.  An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.  We believe that our audit provides areasonable basis for our opinion.

 

In our opinion, suchfinancial statements present fairly, in all material respects, the financialposition of the River Rock Entertainment Authority as of December 31, 2009and the revenues, expenses and changes in net assets (deficit) and the cashflows for the year ended December 31, 2009 in conformity with accountingprinciples generally accepted in the United States of America.

 

River Rock EntertainmentAuthority is an unincorporated instrumentality of the Tribe and is not aseparate legal entity. These financial statements reflect the financialposition of the River Rock Entertainment Authority, its revenues, expenses andchanges in net assets (deficit) and its cash flows and do not purport torepresent the financial position and activity of the Tribe as a whole.

 

We were not engaged toexamine management’s assessment of the effectiveness of the Authority’sinternal control over financial reporting as of December 31, 2009, included inthe accompanying Management’s Report on Internal Control Over FinancialReporting and, accordingly, we do not express an opinion thereon.

 
| /s/  McGladrey & Pullen, LLP |   |
|---------------------------------------|--------|
|                                  |   |
| San Diego, CA                         |   |
| March 31, 2010                   |   |

 

 

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**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

The Board of Directors ofRiver Rock Entertainment Authority

 

We have audited theaccompanying balance sheet of the River Rock Entertainment Authority (the“Authority”), a governmental instrumentality of the Dry Creek Rancheria Band ofPomo Indians (the “Tribe”), as of December 31, 2008 and the relatedstatements of revenues, expenses and changes in net assets (deficit) and ofcash flows for each of the two years in the period ended December 31,2008.  These financial statements are theresponsibility of the Authority’s management. Our responsibility is to expressan opinion on the financial statements based on our audits.

 

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. The Authority is not required to have, nor werewe engaged to perform, an audit of its internal control over financialreporting. Our audit included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in thecircumstances but not for the purpose of expressing an opinion on theeffectiveness of the Authority’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

 

In our opinion, suchfinancial statements present fairly, in all material respects, the financialposition of the River Rock Entertainment Authority as of December 31,2008, and the revenues and expenditures and changes in net assets (deficit) andthe cash flows for each of the two years in the period ended December 31,2008 in conformity with accounting principles generally accepted in the UnitedStates of America.

 

River Rock EntertainmentAuthority is an unincorporated instrumentality of the Tribe and is not aseparate legal entity. These financial statements reflect the financial positionof the River Rock Entertainment Authority, its revenues and expenditures andchanges in net assets and its cash flows and do not purport to represent thefinancial position and activity of the Tribe as a whole.

 

/s/  Deloitte & Touche LLP

 

San Francisco, CA

March 30, 2008

 

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**RIVER ROCK ENTERTAINMENT AUTHORITY**

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

 

**BALANCE SHEETS**

**December 31, 2009 and 2008**

 
| ** **                                      | ** ** | **December 31, 2009** | ** **  | **December 31 2008** | ** ** |
|-------------------------------------------------|------------|----------------------------|-------------|---------------------------|------------|
|                                            |       |                       |        |                      |       |
| **ASSETS**                                      |       |                       |        |                      |       |
|                                            |       |                       |        |                      |       |
| CURRENT  ASSETS:                                |       |                       |        |                      |       |
| Cash  and cash equivalents                      |       | $                          | 31,617,507  |                      | $          | 27,348,392 |   |
| Accounts  receivable                            |       | 266,146                    |        | 68,486                    |       |
| Inventories                                     |       | 77,643                     |        | 169,022                   |       |
| Prepaid  expenses and other current assets      |       | 1,379,133                  |        | 1,238,195                 |       |
|                                            |       |                       |        |                      |       |
| Total  Current Assets                           |       | 33,340,429                 |        | 28,824,095                |       |
|                                            |       |                       |        |                      |       |
| RESTRICTED  CASH                                |       | 7,097,526                  |        | 7,090,273                 |       |
|                                            |       |                       |        |                      |       |
| CAPITAL  ASSETS:                                |       |                       |        |                      |       |
| Buildings  and building improvements            |       | 131,361,604                |        | 130,357,841               |       |
| Furniture,  fixtures and equipment              |       | 35,102,290                 |        | 34,143,554                |       |
| Accumulated  depreciation                       |       | (60,121,221                | )           | (54,484,916               | )          |
| Construction  in progress                       |       | 59,588,618                 |        | 45,599,195                |       |
|                                            |       |                       |        |                      |       |
| Capital  Assets                                 |       | 165,931,291                |        | 155,615,674               |       |
|                                            |       |                       |        |                      |       |
| DEPOSITS  AND OTHER ASSETS                      |       | 1,936,623                  |        | 3,039,529                 |       |
|                                            |       |                       |        |                      |       |
| TOTAL  ASSETS                                   |       | $                          | 208,305,869 |                      | $          | 194,569,571 |   |
|                                            |       |                       |        |                      |       |
| **LIABILITIES AND NET ASSETS (DEFICIT)**        |       |                       |        |                      |       |
|                                            |       |                       |        |                      |       |
| CURRENT  LIABILITIES:                           |       |                       |        |                      |       |
| Accounts  payable                               |       | $                          | 6,060,663   |                      | $          | 3,045,712 |   |
| Accrued  liabilities                            |       | 7,695,373                  |        | 8,102,078                 |       |
| Current  maturities of long-term debt           |       | 492,203                    |        | 45,011                    |       |
|                                            |       |                       |        |                      |       |
| Total  current liabilities                      |       | 14,248,239                 |        | 11,192,801                |       |
|                                            |       |                       |        |                      |       |
| LONG-TERM  DEBT - net of current maturities     |       | 199,381,712                |        | 199,045,924               |       |
|                                            |       |                       |        |                      |       |
| COMMITMENTS  AND CONTINGENCIES                  |       |                       |        |                      |       |
|                                            |       |                       |        |                      |       |
| NET  ASSETS (DEFICIT)                           |       |                       |        |                      |       |
| Invested  in capital assets-net of related debt |       | (33,942,624                | )           | (43,475,261               | )          |
| Restricted  for capital projects                |       | 7,097,526                  |        | 7,090,273                 |       |
| Unrestricted                                    |       | 21,521,016                 |        | 20,715,834                |       |
|                                            |       |                       |        |                      |       |
| Total  net assets (deficit)                     |       | (5,324,082                 | )           | (15,669,154               | )          |
|                                            |       |                       |        |                      |       |
| TOTAL  LIABILITIES AND NET ASSETS (DEFICIT)     |       | $                          | 208,305,869 |                      | $          | 194,569,571 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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**RIVER ROCK ENTERTAINMENT AUTHORITY**

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

 

**STATEMENTSOF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (DEFICIT)**

**YEARS ENDED DECEMBER 31, 2009, 2008AND 2007**

 
| ** **                                  | ** ** | **2009**    | ** **  | **2008**    | ** ** | **2007**    | ** ** |
|---------------------------------------------|------------|-------------|-------------|-------------|------------|-------------|------------|
| ** **                                  | ** ** | ** **  | ** **  | ** **  | ** ** | ** **  | ** ** |
| OPERATING  REVENUES:                        |       |        |        |        |       |        |       |
|                                        |       |        |        |        |       |        |       |
| Casino                                      |       | $           | 117,731,589 |        | $          | 124,481,281 |       | $ | 134,171,244 |   |
| Food,  beverage and retail                  |       | 5,850,582   |        | 6,272,869   |       | 5,366,896   |       |
| Other                                       |       | 911,633     |        | 597,458     |       | 614,939     |       |
|                                        |       |        |        |        |       |        |       |
| Gross  revenues                             |       | 124,493,804 |        | 131,351,608 |       | 140,153,079 |       |
|                                        |       |        |        |        |       |        |       |
| Promotional  allowances                     |       | (425,433    | )           | (779,067    | )          | (775,123    | )          |
|                                        |       |        |        |        |       |        |       |
| Net  revenues                               |       | 124,068,371 |        | 130,572,541 |       | 139,377,956 |       |
|                                        |       |        |        |        |       |        |       |
| OPERATING  EXPENSES:                        |       |        |        |        |       |        |       |
| Casino                                      |       | 16,145,839  |        | 20,787,385  |       | 23,375,622  |       |
| Food,  beverage and retail                  |       | 7,329,444   |        | 7,063,259   |       | 4,640,121   |       |
| Selling,  general and administrative        |       | 41,341,631  |        | 43,506,106  |       | 43,978,609  |       |
| Depreciation                                |       | 9,554,176   |        | 10,024,251  |       | 11,800,855  |       |
| Credit  enhancement fee                     |       | —      |        | —      |       | 11,348,897  |       |
| Gaming  commission and surveillance expense |       | 3,790,797   |        | 3,694,674   |       | 3,023,303   |       |
| Compact  revenue sharing trust fund         |       | 1,335,000   |        | 1,335,000   |       | 1,335,000   |       |
| Loss  on sale of assets                     |       | 116,333     |        | —      |       | —      |       |
|                                        |       |        |        |        |       |        |       |
| Total  Operating expenses                   |       | 79,613,220  |        | 86,410,675  |       | 99,502,407  |       |
|                                        |       |        |        |        |       |        |       |
| INCOME  FROM OPERATIONS                     |       | 44,455,151  |        | 44,161,866  |       | 39,875,549  |       |
|                                        |       |        |        |        |       |        |       |
| NON-OPERATING  EXPENSE-Net:                 |       |        |        |        |       |        |       |
| Interest  expense                           |       | (20,860,003 | )           | (20,864,558 | )          | (20,871,677 | )          |
| Interest  income                            |       | 74,174      |        | 1,005,517   |       | 1,700,885   |       |
| Other  gain                                 |       |        |        |        |       | 4,547       |       |
| Other  income, net                          |       | —      |        | —      |       | 869         |       |
|                                        |       |        |        |        |       |        |       |
| Non-operating  expense-net                  |       | (20,785,829 | )           | (19,859,041 | )          | (19,165,376 | )          |
|                                        |       |        |        |        |       |        |       |
| INCOME  BEFORE DISTRIBUTIONS TO TRIBE       |       | 23,669,322  |        | 24,302,825  |       | 20,710,173  |       |
|                                        |       |        |        |        |       |        |       |
| DISTRIBUTIONS  TO TRIBE                     |       | (13,324,250 | )           | (13,919,060 | )          | (12,427,200 | )          |
|                                        |       |        |        |        |       |        |       |
| NET  INCOME AFTER DISTRIBUTIONS TO TRIBE    |       | 10,345,072  |        | 10,383,765  |       | 8,282,973   |       |
|                                        |       |        |        |        |       |        |       |
| NET  ASSETS (DEFICIT) - Beginning of period |       | (15,669,154 | )           | (26,052,919 | )          | (34,335,892 | )          |
|                                        |       |        |        |        |       |        |       |
| NET  ASSETS (DEFICIT) - End of period       |       | $           | (5,324,082  | )           | $          | (15,669,154 | )          | $ | (26,052,919 | ) |

 

The accompanyingnotes are an integral part of these financial statements.

 

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**RIVERROCK ENTERTAINMENT AUTHORITY**

**(A Governmental Instrumentality of the Dry Creek RancheriaBand of Pomo Indians)**

 

**STATEMENTSOF CASH FLOWS**

**YEARS ENDED DECEMBER 31, 2009, 2008AND 2007**

 
| ** **                                                                                  | ** ** | **2009**    | ** **  | **2008**    | ** ** | **2007**    | ** ** |
|---------------------------------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|-------------|------------|
|                                                                                        |       |        |        |        |       |        |       |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                                  |       |        |        |        |       |        |       |
| Cash received from gaming winnings and concessions                                          |       | $           | 124,039,976 |        | $          | 130,811,441 |       | $ | 139,274,125 |   |
| Cash paid for salaries and benefits                                                         |       | (29,148,212 | )           | (30,864,008 | )          | (28,936,485 | )          |
| Cash paid to suppliers                                                                      |       | (39,599,319 | )           | (43,995,801 | )          | (43,787,259 | )          |
| Cash paid for compact revenue sharing trust fund                                            |       | (1,335,000  | )           | (1,335,000  | )          | (1,335,000  | )          |
|                                                                                        |       |        |        |        |       |        |       |
| Net cash provided by operating activities                                                   |       |        | 53,957,445  |        |       | 54,616,632  |       |   | 65,215,381 |   |
|                                                                                        |       |        |        |        |       |        |       |
| **CASH FLOWS USED IN CAPITAL AND  RELATED FINANCING ACTIVITIES:**                           |       |        |        |        |       |        |       |
| Payments of debt                                                                            |       | (269,769    | )           | (207,125    | )          | (835,207    | )          |
| Purchases of capital assets                                                                 |       | (4,975,655  | )           | (5,688,022  | )          | (7,876,958  | )          |
| Transfers to Tribe for development costs                                                    |       | (11,792,445 | )           | (36,010,304 | )          | —      |       |
| Change in restricted cash                                                                   |       | (7,253      | )           | 245,200     |       | (87,220     | )          |
| Interest paid                                                                               |       | (19,507,344 | )           | (19,505,613 | )          | (19,512,732 | )          |
| Credit enhancement fee                                                                      |       | —      |        | —      |       | (12,131,967 | )          |
| Proceeds from sale of assets                                                                |       | 33,000      |        | —      |       | 33,445      |       |
| Other                                                                                       |       | 81,212      |        | 277,778     |       | (94,039     | )          |
|                                                                                        |       |        |        |        |       |        |       |
| Net cash used in capital and related financing  activities                                  |       |        | (36,438,254 | )           |       | (60,888,086 | )          |   | (40,504,678 | ) |
|                                                                                        |       |        |        |        |       |        |       |
| **CASH FLOWS PROVIDED BY INVESTING  ACTIVITIES:**                                           |       |        |        |        |       |        |       |
| Interest Income                                                                             |       |        | 74,174      |        |       | 1,005,517   |       |   | 1,700,885 |   |
|                                                                                        |       |        |        |        |       |        |       |
| **CASH FLOWS USED IN NON-CAPITAL  FINANCING ACTIVITIES:**                                   |       |        |        |        |       |        |       |
|                                                                                        |       |        |        |        |       |        |       |
| Distributions to Tribe                                                                      |       |        | (13,324,250 | )           |       | (13,919,060 | )          |   | (12,427,200 | ) |
|                                                                                        |       |        |        |        |       |        |       |
| **CHANGE IN CASH AND CASH EQUIVALENTS**                                                     |       | 4,269,115   |        | (19,184,997 | )          | 13,984,388  |       |
|                                                                                        |       |        |        |        |       |        |       |
| **CASH AND CASH EQUIVALENTS,  Beginning of the period**                                     | ** ** | 27,348,392  |        | 46,533,389  |       | 32,549,001  |       |
|                                                                                        |       |        |        |        |       |        |       |
| **CASH AND CASH EQUIVALENTS, End of  the period**                                           |       | $           | 31,617,507  |        | $          | 27,348,392  |       | $ | 46,533,389 |   |
|                                                                                        |       |        |        |        |       |        |       |
| **RECONCILIATION OF INCOME FROM  OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:** |       |        |        |        |       |        |       |
|                                                                                        |       |        |        |        |       |        |       |
| Income from Operations                                                                      |       | $           | 44,455,151  |        | $          | 44,161,866  |       | $ | 39,875,549 |   |
|                                                                                        |       |        |        |        |       |        |       |
| Adjustments to reconcile operating income to net  cash provided by operating activities:    |       |        |        |        |       |        |       |
| Depreciation                                                                                |       | 9,554,176   |        | 10,024,251  |       | 11,800,855  |       |
| Credit enhancement fee                                                                      |       | —      |        | —      |       | 11,348,897  |       |
| Gain on sale of fixed assets                                                                |       | (33,000     | )           | —      |       | —      |       |
| Other income - net                                                                          |       | —      |        | —      |       | 869         |       |
| Changes in operating assets and liabilities:                                                |       |        |        |        |       |        |       |
| Accounts receivable                                                                         |       | (197,660    | )           | 238,900     |       | (103,831    | )          |
| Inventories                                                                                 |       | 91,379      |        | (15,807     | )          | 7,386       |       |
| Prepaid expenses                                                                            |       | (140,938    | )           | 189,696     |       | (31,602     | )          |
| Accounts payable                                                                            |       | 435,819     |        | (517,531    | )          | 1,061,537   |       |
| Accrued liabilities                                                                         |       | (207,482    | )           | 535,257     |       | 1,255,721   |       |
| Total adjustments                                                                           |       | 9,502,294   |        | 10,454,766  |       | 25,339,832  |       |
|                                                                                        |       |        |        |        |       |        |       |
| **NET CASH PROVIDED BY OPERATING  ACTIVITIES**                                              |       | $           | 53,957,445  |        | $          | 54,616,632  |       | $ | 65,215,381 |   |
|                                                                                        |       |        |        |        |       |        |       |
| **SUPPLEMENTARY SCHEDULE OF NONCASH  CAPITAL AND RELATED FINANCING ACTIVITIES:**            |       |        |        |        |       |        |       |
| ** **                                                                                  |       |        |        |        |       |        |       |
| Acquisition of property and equipment through  accounts payable                             |       | $           | 2,579,132   |        | $          | —      |       | $ | 316,080 |   |
| Acquisition of property and equipment through short  term debt                              |       | $           | 715,500     |        | $          | —      |       | $ | — |   |

 

The accompanying notes are an integral part of these financialstatements

 

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

 

**NOTES TO THE FINANCIAL STATEMENTS**

 

**1.****                            ****DESCRIPTIONOF BUSINESS**

 

RiverRock Entertainment Authority (the “Authority”) is a governmentalinstrumentality of the Dry Creek Rancheria Band of Pomo Indians (the “Tribe”),a federally recognized Indian tribe. River Rock Casino (the “Casino”) is agovernmental development project of the Authority. The Casino offers Class IIIgaming (as defined by the Indian Gaming Regulatory Act of 1988, as amended) ontribal land located in Geyserville, California. The legal authority for slotmachines and table games is provided by the Tribe’s gaming compact with theState of California (the “Compact”), which was entered into in September 1999and became effective upon approval by the Secretary of Interior on May 5,2000.  The Compact expires on December 31, 2020.

 

TheAuthority was formed as an unincorporated instrumentality of the Tribe on November 5,2003 pursuant to a reorganization whereby the Tribe’s gaming business becameowned and operated by the Authority. This reorganization was accounted for as areorganization of entities under common control. Accordingly, after thereorganization, the assets and liabilities of the Casino’s operating propertywere presented by the Authority on a historical-cost basis.

 

TheAuthority operates as a separate, wholly owned operating unit of the Tribe andis not a separate legal entity. These financial statements reflect thefinancial position and activity of the Authority only and do not purport torepresent the financial position and activity of the Tribe.

 

**2.****                            ****SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES**

 

*Accounting Standards*—The Authorityprepares its financial statements in accordance with accounting principlesgenerally accepted in the United States of America (“GAAP”) applicable to Stateand local government agencies and, as such, the Authority is accounted for as aproprietary fund. The financial statements presented are prepared on theaccrual basis of accounting from the accounts and financial transactions of theAuthority. GAAP requires the Authority to apply all applicable pronouncementsof the Governmental Accounting Standards Board (“GASB”). The Authority is alsorequired to follow the Accounting Standards Codification issued by theFinancial Accounting Standards Board (“FASB”) for topics issued on or before November 30,1989, unless those topics conflict with or contradict GASBpronouncements.  The Authority is given the option whether to apply theFASB topics issued after November 30, 1989, except for those that conflictwith or contradict GASB pronouncements. Accordingly, the Authority has electedto implement non-conflicting FASB topics issued after November 30, 1989.

 

Thereare differences between financial statements prepared in accordance with GASBpronouncements and those prepared in accordance with the FASB Codification. Thestatements of revenues, expenses and changes in net assets (deficit) are acombined statement under GASB pronouncements. The FASB Codification allow astatement of income or operations and a separate statement of owners’ orshareholders’ equity (deficit), which is where distributions to owners would bepresented under the FASB Codification.  The amount shown as income beforedistributions to Tribe would be the most comparable amount to net incomecomputed under the FASB Codification.  The Authority is a separateenterprise fund of the Tribe, a governmental entity, and as such there is noowners’ or shareholders’ equity (deficit) as traditionally represented underthe FASB Codification.  The most comparable measure of owners’ equity (deficit)is presented on the Authority’s balance sheet as net assets (deficit).

 

Duringthe third quarter of 2009, we adopted the new Accounting Standards Codification(“ASC”) as issued by the FASB.  The ASC has become the source ofauthoritative U.S. GAAP recognized by the FASB to be applied by nongovernmentalentities.  The ASC is not intended to change or alter existing GAAP. The adoption of the ASC did not have a material impact on the Authority’s financialstatements.

 

TheASC has become the source of authoritative U.S. GAAP recognized by the FASB tobe applied by nongovernmental entities.  Rules and interpretivereleases of the Securities and Exchange Commission (SEC) under authority offederal securities laws are also sources of authoritative GAAP for SECregistrants. On the effective date of this Statement, the ASC superseded allthen-existing non-SEC accounting and reporting standards. All othernon-grandfathered non-SEC accounting literature not included in the ASC becamenon-authoritative. This Statement is effective for financial statements issuedfor interim and annual periods ending after September 15, 2009.

 

Followingthe ASC, FASB will not issue new standards in the form of Statements, FASBStaff Positions, or Emerging Issues Task Force Abstracts. Instead, it willissue Accounting Standards Updates (“ASU”).  FASB does not considerAccounting Standards 

 

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Updates as authoritativein their own right.  Accounting Standards Updates will serve only toupdate the ASC, provide background information about the guidance, and providethe bases for conclusions on the change(s) in the ASC.

 

In May 2009,the FASB issued ASC 855-10 (formerly SFAS Statement No. 165), “*Subsequent Events.*”  The objective ofASC 855 is to establish general standards of accounting and disclosure ofevents that occur after the balance sheet date but before financial statementsare issued or are available to be issued.  ASC 855 provides the periodafter the balance sheet date during which management of a reporting entityshould evaluate events or transactions that may occur for potential recognitionor disclosure in the financial statements; the circumstances under which anentity should recognize events or transactions occurring after the balancesheet date in its financial statements; and the disclosures that an entityshould make about events or transactions that occurred after the balance sheetdate.  The Authority adopted this new accounting guidance in that samequarter.

 

In February 2010,the FASB issued ASU No. 2010-09, *SubsequentEvents (Topic 855), “Amendments to Certain Recognition and DisclosureRequirements.”* The amendments in the ASU remove the requirement fora SEC filer to disclose a date through which subsequent events have beenevaluated in both issued and revised financial statements. Revised financialstatements include financial statements revised as a result of either correctionof an error or retrospective application of U.S. GAAP. The FASB believes theseamendments remove potential conflicts with the SEC’s literature. All of theamendments in the ASU were effective upon issuance except for the use of theissued date for conduit debt obligors. That amendment is effective for interimor annual periods ending after June 15, 2010.

 

In April 2009,the FASB issued ASC 820-10, “*Fair Value Measurement andDisclosure*” guidance related to FSP FAS 157-4, *“DeterminingFair Value When the Volume and Level of Activity for the Asset or LiabilityHave Significantly Decreased and Identifying Transactions That Are Not Orderly.”*ASC 820 provides additional guidance for estimating fair value when the volumeand level of activity for the asset or liability have significantly decreasedand includes guidance on identifying circumstances that indicate a transactionis not orderly.  ASC 820 emphasizes that even if there has been asignificant decrease in the volume and level of activity for the asset orliability and regardless of the valuation technique(s) used, the objectiveof fair value measurement remains the same.  Fair value is the price thatwould be received to sell an asset or paid to transfer a liability in anorderly transaction (that is, not a forced liquidation or distressed sale)between market participants at the measurement date under current marketconditions.  The Authority adopted this new accounting guidance in thesame quarter.

 

FASBhas issued ASU No. 2009-12, “*Fair Value Measurementsand Disclosures (Topic 820)—Investments in Certain Entities That Calculate NetAsset Value per Share (or Its Equivalent)”.* This Update amendsSubtopic 820-10, *“Fair Value Measurements andDisclosures—Overall”*, to permit a reporting entity to measure thefair value of certain investments on the basis of the net asset value per shareof the investment (or its equivalent). This Update also requires newdisclosures, by major category of investments, about the attributes ofinvestments included within the scope of this amendment to the Codification.The guidance in this Update is effective for interim and annual periods endingafter December 15, 2009. Early application is permitted.

 

In July 2007,the GASB issued Statement No. 51, “*Accountingand Financial Reporting for Intangible Assets*.”  This Statementprovides guidance regarding how to identify, account for and report intangibleassets.  The new standard characterizes an intangible asset as an assetthat lacks physical substance, is nonfinancial in nature and has an initialuseful life extending beyond a single reporting period.  Examples ofintangible assets include easements, computer software, water rights, timberrights, patents and trademarks.  Statement No. 51 requires thatintangible assets be classified as capital assets (except for those explicitlyexcluded from scope of the new standard).  The requirements of thisStatement are effective for financial statements for periods beginning after June 15,2009.  The Authority adopted thisStatement on July 1, 2009.

 

In April 2009,the GASB issued Statement No 55, “*TheHierarchy of Generally Accepted Accounting Principles for State and LocalGovernments*.”  The Statement incorporates the hierarchy of GAAPfor state and local governments into the GASB’s authoritative literature. This Statement is intended to make it easier for preparers of state and localgovernment financial statements to identify and apply the “GAAP hierarchy,”which consists of accounting principles used in the preparation of financialstatements so that they are presented in conformity with GAAP and the frameworkfor selecting those principles.  The Statement will improve financialreporting by contributing to the GASB’s efforts to codify all GAAP for stateand local governments so that they derive from a single source.  Therequirements of Statement No. 55 are effective immediately.

 

In April 2009,the GASB issued Statement No 56, *“Codificationof Accounting and Financial Reporting Guidance Contained in the AICPAStatements on Auditing Standards.”*  The Statement incorporatesaccounting and financial reporting guidance previously only contained in theAICPA auditing literature into the GASB’s accounting and financial reportingliterature for state and local governments.  The Statement 56 guidanceaddresses three issues from the AICPA’s literature:  (1) related-partytransactions, (2) going concern considerations and (3) subsequentevents.  Statement No. 56 is part of the GASB’s effort to codify allgenerally accepted accounting principles for state and local governments sothat they derive from a single source.  This is intended to make it easierfor 

 

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preparers of state andlocal government financial statements to identify and apply relevant accountingguidance.  The requirements of Statement No. 56 are effectiveimmediately.

 

Theadoption of the new standards had no effect on the Authority’s financialposition or result of operations.

 

FASBhas issued ASU No. 2010-06, “*Fair Value Measurementsand Disclosures (Topic 820) - Improving Disclosures about Fair ValueMeasurements*.” This ASU requires some new disclosures and clarifiessome existing disclosure requirements about fair value measurement as set forthin Codification 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 the requirements of the following existing disclosures: (A) Forpurposes of reporting fair value measurement for each class of assets andliabilities, a reporting entity needs to use judgment in determining theappropriate classes of assets and liabilities; and (B) A reporting entityshould provide disclosures about the valuation techniques and inputs used tomeasure fair value for both recurring and nonrecurring fair valuemeasurements.  ASU 2010-06 is effectivefor 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. Early application ispermitted.

 

*Use of Estimates*—The preparationof financial statements in conformity with GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosures of contingent assets and liabilities at the date ofthe 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 andrecoverability of long-lived assets. Actual results could differ from theseestimates.

 

*Cash and Cash Equivalents*—The Authorityconsiders all highly liquid investments with a maturity of three months or lessat date of purchase as cash equivalents. The carrying amount of cash and cashequivalents approximates its fair value. Cash and cash equivalents include cashon hand, cash on deposit with banks and highly liquid investments.  The Federal Deposit Insurance Corporation (“FDIC”)has insured $250,000 of the cash on deposit at an FDIC member bank. TheAuthority believes that there is little risk of loss regarding the uninsuredamounts of cash and cash equivalents on deposit with the banks.

 

*Restricted Cash*— Restricted cash consists of net proceedsfrom the Notes Offering and investment earnings thereon set aside inconstruction financing accounts, for construction costs for relatedinfrastructure improvements and construction contingencies. It also includesfunds that are reserved for construction contingencies and the funds for thedevelopment of the Dugan Property. The restricted cash is held in escrowaccounts that can only be used for authorized construction disbursements untilthe related projects are completed.  These escrowaccounts are invested in money market accounts, which generate interest on amonthly basis. The FDIC has insured $250,000 of this balance. The Authoritybelieves that there is little risk of loss regarding the uninsured amounts ofrestricted cash held in the escrow account. Restricted cash was $7,097,526 and$7,090,273 at December 31, 2009 and December 31, 2008,respectively.  As of December 31,2009, restricted cash includes amounts available for construction of $2,772,011and land development funds of $4,325,515.

 

*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 Assetsare stated at cost. Depreciation and amortization are computed using thestraight-line method over the estimated useful lives of the assets as follows:

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

 

The cost of normal maintenance and repairs that do not add to the valueof the asset or materially extend the life of the asset are not capitalized.

 

Major outlays of capital assets and improvements are capitalized asconstruction-in-progress as projects are constructed.

 

*Evaluationof Long-Lived Assets*— Accounting pronouncement GASB No. 42, “*Accountingand Financial Reporting for Impairment of Capital Assets and for InsuranceRecoveries,*” was effective for the Authority for the year ended December 31,2005.  This Statement established accounting and financial reportingstandards for impairment of capital assets.  The Authority’s capital 

 

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assets consist ofbuilding and improvements, and furniture, fixtures and equipment, includingslot machines.  A capital asset is considered impaired if both the declinein service utility of the capital asset is large in magnitude and the event orchange in circumstances is outside the normal life cycle of the capitalasset.  The Authority is required to evaluate prominent events or changesin circumstances affecting capital assets to determine whether impairment of acapital 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 will require theAuthority to report the effects of capital asset impairment in its financialstatements when they occur, rather than as part of the ongoing depreciationexpense for the capital asset or upon disposal of the capital asset, and toaccount for insurance recoveries in the same manner.  The Authority’smanagement has determined that no impairment of capital assets currentlyexists.

 

*Capitalized Interes*t—The interestcost associated with major development and construction projects is capitalizedand included in the cost of the asset. Capitalization of interest ceases whenthe project is substantially complete or development activity is suspended.  The Authority did not capitalize interest forthe years ended December 31, 2009, 2008 or 2007.

 

*Prepaid Expenses and Other Current  Assets* — Prepaidexpenses and other current assets were $1,379,133 and $1,238,195 as of December 31,2009 and 2008, respectively, which includes prepaid insurance, prepaid uniformsand prepaid supplies.

 

*Deposits and Other Assets*—As of December 31,2009 and 2008, respectively, deposits and other assets mainly represents$1,875,448 and $2,897,142, respectively, in unamortized legal fees and otherissuance costs related to the issuance of the Authority’s 9 3⁄4% Senior Notes due2011 (the “Senior Notes”) under the Indenture, dated November 7, 2003 (the“Indenture”).

 

*Accrued Liabilities*—Accruedliabilities consist of accrued interest, accrued payroll and other accruedliabilities.

 

*Progressive Jackpots Liabilities*—The Casino hasa number of progressive jackpot slot machines. As coins are played, the amount available to win increases and will bepaid out when the appropriate winning combination occurs.  The Casino has recorded the progressivejackpots as a liability, with a corresponding charge against gaming revenue, of$1,587,748 and $1,531,747 as of December 31, 2009 and 2008,respectively.  Also, the Casino hasavailable for customer play, wide area progressive slot machines that areinterlinked with other unrelated casinos. These machines are monitored and maintained by the vendor and the Casinois required to remit a percentage of coin-in to the respective vendor.  The Casino records a charge against revenuefor the portion of the fee applied to the wide area progressive jackpots.  Amounts recorded against revenue for theportion of the fee applied to the wide area progressive jackpots were approximately$1,054,428, $1,748,622 and $2,287,191 for the years ended December 31,2009, 2008 and 2007, respectively.  Allother administrative charges are recorded in operating expenses.

 

*AccruedPlayers Club*—The Authority has recorded a liability related to free play, prizes and cashincentives earned by the members of our Players Club. The Authority hasrecorded the estimated redemption of the liability as contra-revenue in theaccompanying 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 materially impacted.As of December 31, 2009, management determined that no accruals for claimsand legal actions are required. If circumstances surrounding claims and legalactions change, the addition of accruals for such items in future periods maybe required, which accruals may be material.

 

*Authoritynet assets* —Investments in capital assets, net of related debt, consists of capital assets,net of accumulated depreciation, reduced by the outstanding balances of anyborrowings used for the acquisition, construction or improvement of thoseassets.  Invested in capital assets, net of related debt, excludes unspentdebt proceeds.  Restricted net assetsrepresent 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.

 

*Reclassifications*— Certain prior year amountsin the statements of revenues, expenses and changes in net assets (deficit)have been reclassified to be consistent with current year presentation with nochange to net revenues or net income as reflected in our prior Forms 10-K,including the reclassification of e-coupons and cash incentives frompromotional allowances to contra-revenues. The prior year reclassifications included player club point amounts of$1,847,259 and $2,007,431 from promotional allowance to casino contra-revenuefor the years ended December 31, 2008 and 2007, respectively.  In addition, e-coupons in the amounts of$10,398,776 and $9,535,460 were reclassified from promotional allowance tocasino contra-revenue for years ended December 31, 2008 and 2007.  Food, beverage and retail promotionalallowance of $1,607,105 and $2,149,516 for food were reclassified to food,beverage and retail contra-revenue for years ended December 31, 2008 and 2007.  Certain cash flow statements amounts andfootnote disclosures have been adjusted to be consistent with current yearpresentation.

 

*Casino Revenues*—The Authorityrecognizes as casino revenue the net win from gaming activities, which is thedifference between gaming wins and losses. Casino revenues are net of accrualsfor anticipated payouts of progressive slot jackpots and certain playerincentives, when earned by the customer.

 

*Food,Beverage and Retail Revenues*— The Authority recognizes as food, beverage andretail revenues the proceeds from its food, beverage and gift shop sales. TheAuthority continues to distribute non-alcoholic beverages without cost in thegaming area for playing guests.  In December 2009,the Authority replaced the gift shop with vending machines.  The vending machines are owned 

 

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and operated by a thirdparty.  The Authority receives acommission from the vending machine sales and such commission will be recordedunder Other Revenues.

 

*Other Revenues*— Otherrevenues are comprised of commissions on ATM and vending machine transactions.

 

*Promotional Allowances*—The retailvalue of food and beverages provided to customers without charge or at a discountis included in food, beverage and retail revenues and then deducted aspromotional allowances. Such amounts that are included in food, beverage, andretail revenues for the years ended December 31, 2009, 2008 and 2007 were$425,433, $779,067 and $775,123, 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 as incurred or when anadvertisement is first aired or circulated. Advertising costs included inselling, general and administrative expenses were $5,525,697, $6,310,057 and$7,910,198 for the years ended December 31, 2009, 2008 and 2007,respectively.

 

*Gaming Commission and Surveillance Expenses*—The Authoritypays for various expenses of the Tribal Gaming Commission includingsurveillance.  Such expenses include salaries and wages and related benefits forRegulatory, Surveillance and office staff, training, audit fees, backgroundchecks and licensing.

 

*Income Taxes*—As agovernmental instrumentality of the Dry Creek Rancheria Band of Pomo Indians, afederally recognized Indian tribe, the Authority is a nontaxable entity forpurposes of federal and state income taxes.

 

*Distributions to Tribe*—Distributionsto Tribe are made up of permitted and service payments under the covenants ofthe Indenture.  They are included in the statements of Revenues, Expensesand Changes in Net Assets (deficit) as distributions to Tribe allowed pursuantto the Indenture.  Total distributions to the Tribe for the years ended December 31,2009, 2008 and 2007 were $13,324,250, $13,919,060 and $12,427,200,respectively.

 

**3.**                                      CERTAIN RISKS AND UNCERTAINTIES

** **

The Authority’s operations are dependent onthe continued 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 wouldhave an 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.

 

**4.****                                     ****RELATEDPARTIES**

 

The Casino has been constructed on federalland beneficially owned by the Tribe. The Authority does not pay the Tribe forthe use of the land.

 

The Authority pays for various expenses for thefollowing departments operated by the Tribe:  Tribal Gaming Commissionincluding surveillance, and plant operations, human resources andwarehouse.  These departmental expenses include but are not limited topayroll and related expenses, legal, and other operational expenses.

 

Total amounts billed by the Tribe to the Casino forthese departments, excluding Tribal Gaming Commission and surveillance, were$3,373,427 $4,158,064 and $4,178,576 for the years ended December 31,2009, 2008 and 2007, respectively. They are recorded as a component of selling,general and administrative expenses.

 

The Authority pays for various expenses forthe Tribal Gaming Commission and surveillance. The Tribal Gaming Commission and surveillance expenses are recorded inGaming Commission and surveillance expenses on the Statement of Revenues,Expenses and Changes in Net Assets (Deficit). Gaming Commission and surveillance expenses were $3,790,797, $3,694,674and $3,023,303 for the years ended December 31, 2009, 2008 and 2007,respectively.

 

The Tribe has incurred expenses on behalf of the Authority that relateto the development of land adjacent to the Tribe’s reservation, the DuganProperty, which is expected to include an additional access road to the Casino.  Total expenses previously incurred andsubsequently reimbursed to the Tribe during the years ended December 31,2009 and 2008 were $12,800 and $0.3 million, respectively.

 

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TheTribe incurred approximately $67.1 million in total expenses on behalf of theAuthority for master planning of the proposed resort and infrastructureimprovements on the reservation that benefits the Casino.  Almost all of such expenditures were incurredprior to 2009 before the construction was suspended.  The Authority reimbursed the Tribeapproximately $40.6 million through 2008 and approximately $11.8 million during2009.  On January 8, 2010, the Authority’s Board ofDirectors authorized the reimbursement of the Tribe in an amount not to exceedapproximately $14.9 million in expenses. The approval included a payment schedule according to which theAuthority will reimburse the Tribe $400,000 monthly from February 1, 2010through April 1, 2010, and $700,000 monthly thereafter without exceeding$14.9 million.  When the reimbursementpayments are made, the related expenses will be 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.

 

The Authority reserved 50recreational vehicle spaces and 10 campsite spaces at Alexander RV Park andCampground for casino guests.  Alexander RV Park and Campground is awholly owned subsidiary of the Tribe.  The cost of reserving the parkingspaces and campsite spaces was $271,215, $258,300 and $266,000 for the yearsended December 31, 2009, 2008 and 2007, respectively.

 

**5.****                                     ****CASHAND CASH EQUIVALENTS AND RESTRICTED CASH**

 

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

 
| ** **                                           | ** ** | **2009**   | ** ** | **2008**   | ** ** |
|------------------------------------------------------|------------|------------|------------|------------|------------|
|                                                 |       |       |       |       |       |
| Operating  accounts                                  |       | $          | 16,281,764 |       | $          | 9,221,163 |   |
| Money  market accounts                               |       | 10,095,039 |       | 12,157,902 |       |
| Cash  on hand                                        |       | 5,240,704  |       | 5,969,327  |       |
|                                                 |       |       |       |       |       |
| Cash  and cash equivalents                           |       | 31,617,507 |       | 27,348,392 |       |
| Restricted  cash                                     |       | 7,097,526  |       | 7,090,273  |       |
|                                                 |       |       |       |       |       |
| Total  cash and cash equivalents and restricted cash |       | $          | 38,715,033 |       | $          | 34,438,665 |   |

 

*Deposits* — Custodialcredit risk is the risk that in the event of a bank failure, the Authority’sdeposits (cash in checking, sweep, and money market accounts held with itsthird-party administrator) may not be returned to it.  The Authority does not have a deposit policyfor custodial credit risk.  As of December 31,2009 and 2008, approximately $34,009,525 and $28,479,636, respectively, of theAuthority’s bank balance for these deposits of $34,580,666 and $28,979,636,respectively, was exposed to custodial credit risk, as it was uninsured anduncollateralized.

 

**6.**                                      CAPITAL ASSETS

** **

Capital assets at December 31, 2009 and December 31, 2008consisted of the following:

 
| ** **                         | ** ** | **Balance, as of**    | ** **  | ** **    | ** ** | ** **       | ** ** | ** **    | ** ** | **Balance, as of**    | ** ** |
|------------------------------------|------------|-----------------------|-------------|---------------|------------|------------------|------------|---------------|------------|-----------------------|------------|
| ** **                         | ** ** | **December 31,** | ** **  | ** **    | ** ** | ** **       | ** ** | **Transfers** | ** ** | **December 31,** | ** ** |
| ** **                         | ** ** | **2008**              | ** **  | **Additions** | ** ** | **Dispositions** | ** ** | **In(Out)**   | ** ** | **2009**              | ** ** |
| Buildings  and improvements        |       | $                     | 130,357,841 |          | $          | 131,248          |       | —        |       | $                     | 872,515    |   | $ | 131,361,604 |   |
| Furniture,  fixtures and equipment |       | 34,143,554            |        | 4,816,845     |       | (4,077,810       | )          | 219,701       |       | 35,102,290            |       |
| Less  accumulated depreciation     |       | (54,484,916           | )           | (9,554,176    | )          | 3,917,871        |       | —        |       | (60,121,221           | )          |
|                               |       | 110,016,479           |        | (4,606,083    | )          | (159,939         | )          | 1,092,216     |       | 106,342,673           |       |
| Construction  in progress          |       | 45,599,195            |        | 15,081,639    |       |             |       | (1,092,216    | )          | 59,588,618            |       |
| Capital  assets — net         |       | $                     | 155,615,674 |          | $          | 10,475,556       |       | $             | (159,939   | )                     | $          | — |   | $ | 165,931,291 |   |
|                                    |            |                       |             |               |            |                  |            |               |            |                       |            |  |  |  |  |  |

 

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Capital assets as of December 31,2008 and December 31, 2007 consisted of the following:

 
| ** **                         | ** ** | **Balance, as of**    | ** **  | ** **    | ** ** | ** **       | ** ** | ** **    | ** ** | **Balance, as of**    | ** ** |
|------------------------------------|------------|-----------------------|-------------|---------------|------------|------------------|------------|---------------|------------|-----------------------|------------|
| ** **                         | ** ** | **December 31,** | ** **  | ** **    | ** ** | ** **       | ** ** | **Transfers** | ** ** | **December 31,** | ** ** |
| ** **                         | ** ** | **2007**              | ** **  | **Additions** | ** ** | **Dispositions** | ** ** | **In(Out)**   | ** ** | **2008**              | ** ** |
| Buildings  and improvements        |       | $                     | 129,642,521 |          | $          | 715,320          |       | —        |       | —                |       | $ | 130,357,841 |   |
| Furniture,  fixtures and equipment |       | 29,969,430            |        | 4,174,124     |       | —           |       | —        |       | 34,143,554            |       |
| Less  accumulated depreciation     |       | (44,460,665           | )           | (10,024,251   | )          | —           |       | —        |       | (54,484,916           | )          |
|                               |       | 115,151,286           |        | (5,134,807    | )          | —           |       | —        |       | 110,016,479           |       |
| Construction  in progress          |       | 9,256,830             |        | 36,342,365    |       | —           |       | —        |       | 45,599,195            |       |
| Capital  assets — net         |       | $                     | 124,408,116 |          | $          | 31,207,558       |       | $             | —     |                  | $          | — |   | $ | 155,615,674 |   |
|                                    |            |                       |             |               |            |                  |            |               |            |                       |            |  |  |  |  |  |

 

Construction in progressconsists of payments to the Tribe and various vendors related to the Authority’smaster plan development and land improvements. Substantially all of theAuthority’s personal property is pledged as collateral to secure its debt.

 

**7.**                           ACCRUEDLIABILITIES

 

Accrued liabilities consisted of thefollowing as of December 31, 2009 and December 31, 2008:

 
| ** **                                  | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                  | ** ** | **2009**              | ** ** | **2008**              | ** ** |
|                                        |       |                  |       |                  |       |
| Accrued  in-house progressive slot jackpots |       | $                     | 1,587,748  |                  | $          | 1,531,747 |   |
| Accrued  payroll and related benefits       |       | 1,514,557             |       | 2,285,481             |       |
| Accrued  interest                           |       | 3,250,000             |       | 3,250,000             |       |
| Accrued  other expenses                     |       | 1,343,068             |       | 1,034,850             |       |
| Total  accrued liabilities                  |       | $                     | 7,695,373  |                  | $          | 8,102,078 |   |

 

**8.**                           LONG-TERMDEBT

** **

Long-term debt consisted of the following asof December 31, 2009 and December 31, 2008:

 
| ** **                                                                                                | ** ** | **December 31,** | ** **  | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|-----------------------|-------------|-----------------------|------------|
| ** **                                                                                                | ** ** | **2009**              | ** **  | **2008**              | ** ** |
| ** **                                                                                                | ** ** | ** **            | ** **  | ** **            | ** ** |
| 9-3/4%  Senior Notes, net of unamortized issue discount of $618,288 and $955,538. Due  November 2011 |       | $                     | 199,381,712 |                  | $          | 199,044,462 |   |
| Vehicle  and Slot Notes                                                                                   |       | 492,203               |        | 12,291                |       |
| Other                                                                                                     |       | —                |        | 34,182                |       |
|                                                                                                      |       |                  |        | —                |       |
| Total  Long-Term Debt                                                                                     |       | 199,873,915           |        | 199,090,935           |       |
| Less:  current portion                                                                                    |       | (492,203              | )           | (45,011               | )          |
|                                                                                                      |       |                  |        |                  |       |
| Total  long-term debt - net of current maturities                                                         |       | $                     | 199,381,712 |                  | $          | 199,045,924 |   |

 

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Annualrequirements to retire long-term debt at December 31, 2009:

 
| ** ** | ** ** | **Principal** | ** **  | **Interest** | ** ** | **Total**   | ** ** |
|------------|------------|---------------|-------------|--------------|------------|-------------|------------|
| 2010       |       | $             | 492,203     |         | $          | 19,500,000  |       | $ | 19,992,203 |   |
| 2011       |       | 200,000,000   |        | 16,250,000   |       | 216,250,000 |       |
| 2012       |       | —        |        | —       |       | —      |       |
| 2013       |       | —        |        | —       |       | —      |       |
| 2014       |       | —        |        | —       |       | —      |       |
|       |       | $             | 200,492,203 |         | $          | 35,750,000  |       | $ | 236,242,203 |   |

 

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 (the Dugan Property) and settle litigation.  TheSenior Notes are collateralized by a first priority pledge of the Authority’srevenue and substantially all of the existing and future tangible andintangible personal property. The Authority may redeem the Senior Notes priorto maturity, in whole or in part, at a redemption price that is equal to par,plus accrued and unpaid interest.

 

The Authority’s long-termdebt is recorded at an amortized historical cost basis.  The fair value ofthe Senior Notes was approximately $195.0 million as of December 31, 2009based on level one inputs, quoted prices in active markets.

 

**9.**                           EMPLOYEEBENEFIT PLAN

** **

TheAuthority participates in a 401(k) Plan, a retirement plan (the “Plan”),which is qualified under Section 401(k) of the Internal RevenueCode.  The Plan is a defined contributionplan administered by an insurance company and is available to all eligibleemployees of the Casino who have attained age 21 and have at least three monthsof eligible service as defined in the Plan. The Plan participants may contribute up to 100 percent of their eligiblepretax compensation, subject to legal limitations.  In 2008, a change was made to allow employeesto contribute up to 50 percent of their eligible pretax compensation.  The Authority at its discretion, will makematching contributions.  Any forfeituredue to employee terminations reduces future Casino contributions.  Participants become vested in employer contributions,as well as any earnings thereon, over a three-year period at the rate of 30percent, 60 percent and 100 percent at the end of each year, respectively.  Employee contributions to the Plan were$912,734, $1,203,749 and $1,121,297 for the years ended December 2009,2008 and 2007, respectively.  The Casinomade matching contributions to the Plan of $41,449, $711,746 and $646,223during the years ended December 31, 2009, 2008 and 2007,respectively.  The Casino temporarilysuspended its matching contribution in January 2009 and reinstated it in March 2010.

 

**10.**                    RISKMANAGEMENT

** **

TheCasino is exposed to various risks of loss related to worker’s compensation andtorts; theft of, damage to or destruction of assets; and errors oromissions.  The Casino has purchasedcommercial insurance policies for said risks. There has been no significant reduction of insurance coverage, andsettlements have not exceeded coverage in the past three years.  Effective April 2006, the Casino retainsthe risk of dental claims subject to individual limits of $1,500 per employee.

 

**11.**                    OPERATINGLEASES

** **

The Authority extendedits operating lease of the sprung structure that houses the casinooperations.  The amended lease expires onJune 17, 2012.  The agreement calls for monthly payments of $25,395.  During the years ended December 31,2009, 2008 and 2007, total rental expense was $358,915, $434,760 and $434,760,respectively.

 

Other operating leasesinclude leases for office spaces and copiers.

 

The approximate aggregateminimum rental commitments under non-cancelable operating leases are asfollows:

 
| **Year Ending December 31,** | ** ** | **Amount** | ** ** |
|-----------------------------------|------------|------------|------------|
| 2010                              |       | $          | 548,808    |   |
| 2011                              |       | 530,993    |       |
| 2012                              |       | 300,558    |       |
| 2013                              |       | 4,275      |       |
|                              |       | $          | 1,384,634  |   |

 

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**12.**                    LEGALMATTERS

** **

*Runyan Litigation*

 

On March 7, 2008,Norman Runyan, the Authority’s former Chief Operations Officer, filed awrongful termination suit against the Authority, the Casino and Mr. HarveyHopkins, the Chairman of the Tribe and a member of the Authority’s Board, inthe Sonoma County Superior Court.  TheAuthority believed the case lacked merit and moved to dismiss.  On October 17, 2008, the Court issued anOrder dismissing the lawsuit.  On December 3, 2008, the Court enteredan Order granting the Authority’s motion and dismissed the case.

 

On January 14, 2009,Mr. Runyan filed a Petition for Order Compelling Arbitration with theSonoma County Superior Court, and on January 30, 2009, he filed a Motionfor Order Compelling Arbitration.  In both the Petition and the Motion, Mr. Runyansought to have the Court issue an order compelling arbitration of the claimsasserted in 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 Authorityand the other respondents have tribal sovereign immunity from service ofprocess.

 

Mr. Runyan fileda Notice of Appeal of the Superior Court’s Order on July 27,2009 and filed his opening brief in the First District Court of Appeal on December 11,2009.  The Authority’s respondents briefwas filed on January 8, 2009, and Mr. Runyan’s reply brief was filedon February 26, 2010.  The Authorityis awaiting a date to be set for oral arguments.  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*

 

TheAuthority is involved in other litigation and disputes from time to time in theordinary course of business with vendors and patrons. The Authority believesthat the aggregate liability, if any, arising from such litigation or disputeswill not have a material adverse effect on its results of operations, financialcondition or cash flows.

 

**13.****                   ****COMPACTREVENUE SHARING TRUST FUND**

 

Under the Compact asentered into with the State of California in September 1999, the Tribemust pay annual license fees of $900-$4,350 per Class III gaming device,based on the number of gaming device licenses approved by the state gamingcommission.  The Compact does not requirea license for the first 350 Class III gaming devices in use and does notrequire a license fee for an additional 350 machines.  Payments are due on a quarterly basis and areremitted into a state revenue sharing trust fund.  License fees expense totaled $1,335,000 foreach of the years ended December 31, 2009, 2008 and 2007.

 

**14.****                   ****COMMITMENTSAND CONTINGENCIES**

 

The Authority is anunincorporated instrumentality of the Tribe formed pursuant to an adopted lawof the Tribe. While the Authority is not a separate corporation or other legalentity distinct from the Tribe, this tribal law allows the Authority to own andoperate its business. This tribal law also provides that the Authority’sobligations and other liabilities are not those of the Tribe and that theobligations and liabilities of the Tribe are not those of the Authority. Thislaw is untested and generally has no direct counterpart in other areas of thelaw. If this law should prove to be ineffective at limiting the Authority’sliability, the Authority’s business and assets could become subject to claimsasserted against the Tribe or its assets. Similarly, the Authority would beliable for such claims if the Tribe waived its sovereign immunity to an extentthat allowed enforcement of such claims against the Authority’s business orassets.

 

On March 18, 2008,the Tribe and the Sonoma County Board of Supervisors entered into a memorandumof agreement (“MOA”) which settled several long-standing legal disputes betweenSonoma County (the “County”) and the Tribe and provides a binding framework forresolving future disputes.  Pursuant to the MOA, the Tribe has agreed topay the County up to $75 million in mitigation fees over the next 12 years tooffset the potential losses and impacts to the County resulting from the Tribe’svarious ongoing 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 

 

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State (which is nowterminable in 2020 at the earliest), which fees may be applied to programs andservices that serve to promote tourism in the County. Such in lieu fees couldtotal as much as $25 million during the term of the MOA.  The Tribe has not made any determinations toseek reimbursement or direct payment from the Authority of amounts due to theCounty pursuant to the MOA.

 

**15.****                   ****SUBSEQUENTEVENTS**

 

On January 22, 2010,the Acting Chief Executive Officer and Chief Operating Officer of the Authorityand acting General Manager of the Casino left to pursue other interests. The Chief Operating Officer’s departure will have no impact on the financialreporting of the Authority. Effective immediately, the Chief Financial Officerbecame the Acting Chief Executive Officer of the Authority and the ActingGeneral Manager of the Casino.  Also,effective immediately, the Chief Financial Officer of the Tribe assumed therole of Acting Assistant Chief Financial Officer for the Authority.  The Authority is conducting a search for apermanent Chief Executive Officer and General Manager.

 

On March 12, 2010, the Authority entered into anemployment agreement with Mr. Joseph Callahan whereby Mr. Callahanwill continue to serve as the Chief Financial Officer of the Authority and willbecome the Assistant General Manager of the Casino. The agreement is effectiveas of March 12, 2010, and continues through March 11, 2013, unlessterminated earlier by the parties under the terms of the agreement. Theagreement provides for the payment to Mr. Callahan of an initial annualbase salary of $250,000.  Mr. Callahanwill also be eligible to receive an annual bonus at the discretion of theAuthority’s Board of Directors not to exceed thirty percent (30%) of his annualbase salary.

 

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**SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized, on March 31, 2010.

 
|   | RIVER  ROCK ENTERTAINMENT AUTHORITY |
|--------|-------------------------------------|
|   |                                |   |
|   | By:                                 | /s/  Joseph R, Callahan |
|   |                                | Name: | Joseph  R. Callahan |
|   |                                | Title: | Acting  Chief Executive Officer and |
|   |                                |   | Chief  Financial Officer |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed by the following persons on behalf of River Rock EntertainmentAuthority and in the capacities and on the dates indicated.

 
| By:    | /s/  Harvey Hopkins         |   |
|--------|-----------------------------|--------|
|   | Name:  Harvey Hopkins       |   |
|   | Title:  Chairperson         |   |
|   | Date:  March 31, 2010  |   |
|   |                        |   |
| By:    | /s/  Augusto (Gus) Pina     |   |
|   | Name:  Gus Pina             |   |
|   | Title:  Vice Chairperson    |   |
|   | Date:  March 31, 2010  |   |
|   |                        |   |
| By:    | /s/  Salvina Norris         |   |
|   | Name:  Salvina Norris       |   |
|   | Title:  Secretary/Treasurer |   |
|   | Date:  March 31, 2010  |   |
|   |                        |   |
| By:    | /s/  Marina Nojima          |   |
|   | Name:  Marina Nojima        |   |
|   | Title:  Member              |   |
|   | Date:  March 31, 2010  |   |
|   |                        |   |
| By:    | /s/  Gabe Nevarez           |   |
|   | Name:  Gabe Nevarez         |   |
|   | Title:  Member              |   |
|   | Date:  March 31, 2010  |   |

 

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