**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,DC 20549**

 

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**FORM 10-KSB**

 

| **(Mark  One)** | ** **                                                                                                                                                                                                                          |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **x**           | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934.**                                                                                                                               |
| ** **      | ** **                                                                                                                                                                                                                          |
| ** **      | **For  the fiscal year ended December 31, 2007**                                                                                                                                                                               |
| ** **      | ** **                                                                                                                                                                                                                          |
| ** **      | **OR**                                                                                                                                                                                                                              |
| ** **      | ** **                                                                                                                                                                                                                          |
| **o**           | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934.**                                                                                                                                 |
| ** **      | ** **                                                                                                                                                                                                                          |
| ** **      | **For  the transition period from                   to                ** |

 

**Commissionfile number 0-52042**

 

**OCMHOLDCO, LLC**

(Name of smallbusiness issuer in its charter)

 

| **Delaware**                                                          | ** ** | **20-3673772**                        |
|-----------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization)      |       | (I.R.S. Employer  Identification No.) |
|                                                                  |       |                                  |
| **333  South Grand Avenue, 28th Floor, Los Angeles, California** | ** ** | **90071**                             |
| (Address of  principal executive offices)                             |       | (Zip Code)                            |

 

**(213)830-6300**

Issuer’s telephonenumber

 

Securities registeredunder Section 12(b) of the Exchange Act:**None**

 

Securities registeredunder Section 12(g) of the Exchange Act:

 

**Class AMembership Units**

(Title of class)

 

Check whether the issueris not required to file reports pursuant to Section 13 or 15(d) ofthe Exchange Act.  o

 

Check whether the issuer:(1) filed all reports required to be filed by Section 13 or 15(d) ofthe Exchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes  x   No  o

 

Check if there is nodisclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to the best of theRegistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or anyamendment to this Form 10-KSB.  o

 

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

 

Revenues for the fiscalyear ended December 31, 2007 were approximately $1,107,214.

 

**DOCUMENTSINCORPORATED BY REFERENCE**

 

None.

 

Transitional SmallBusiness Disclosure Format (check one): Yes  o   No  x

 

 

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SPECIAL NOTEREGARDING FORWARD-LOOKING STATEMENTS

 

Certain informationincluded in this annual report on Form 10-KSB and other filings of OCMHoldCo, LLC, a Delaware limited liability company (the “*Company*”) under the Securities Act of1933, as amended (the “*Securities Act*”),and the Securities Exchange Act of 1934, as amended (the “*Exchange Act*”), as well as informationcommunicated orally or in writing between the dates of such filings, containsor may contain “forward-looking statements.” Such statements are subject tocertain risks, trends and uncertainties that could cause actual results todiffer materially from expected results. Among these risks, trends anduncertainties are economic conditions generally and in the industries in whichthe Company may participate; competition within the Company’s chosenindustries, including competition from much larger competitors; technologicaladvances; available capital; regulatory approvals; and failure by the Companyto successfully develop or acquire products and form new businessrelationships.

 

When used in this report,the words “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,”“estimates,” “may,” “seeks,” and similar expressions are generally intended toidentify forward-looking statements. You should not place undue reliance onthese forward-looking statements, which reflect our opinions only as of thedate of this annual report on Form 10-KSB. We undertake no obligation topublicly release any revisions to the forward-looking statements after the dateof this document. You should carefully review the information described in thisannual report on Form 10-KSB. You should also carefully review the riskfactors described in the previously filed Form 10-SB and subsequentamendments thereto, and those described from time to time in our future reportsfiled with the Securities and Exchange Commission (the “*Commission*”).

 

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**OCMHOLDCO, LLC**

 

**INDEXTO FORM 10-KSB**

 
| **PART I**      |                                                                                                                        |   |
|----------------------|-----------------------------------------------------------------------------------------------------------------------------|--------|
|                 |                                                                                                                        |   |
| Item 1.              | Description of Business                                                                                                     | 1      |
|                 |                                                                                                                        |   |
| Item 2.              | Description of Property                                                                                                     | 15     |
|                 |                                                                                                                        |   |
| Item 3.              | Legal Proceedings                                                                                                           | 15     |
|                 |                                                                                                                        |   |
| Item 4.              | Submission of Matters to a Vote of Security  Holders                                                                        | 15     |
|                 |                                                                                                                        |   |
| **PART II**     |                                                                                                                        |   |
|                 |                                                                                                                        |   |
| Item 5.              | Market for Common Equity, Related  Stockholder Matters and Small Business Issuer Purchases of Equity Securities             | 15     |
|                 |                                                                                                                        |   |
| Item 6.              | Management’s Discussion and Analysis                                                                                   | 16     |
|                 |                                                                                                                        |   |
| Item 7.              | Financial Statements                                                                                                        | 19     |
|                 |                                                                                                                        |   |
| Item 8.              | Changes In and Disagreements With  Accountants on Accounting and Financial Disclosure                                       | 19     |
|                 |                                                                                                                        |   |
| Item 8A.             | Controls and Procedures                                                                                                     | 19     |
|                 |                                                                                                                        |   |
| Item 8B.             | Other Information                                                                                                           | 20     |
|                 |                                                                                                                        |   |
| **PART III**    |                                                                                                                        |   |
|                 |                                                                                                                        |   |
| Item 9.              | Directors,  Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of  the Exchange Act | 21     |
|                 |                                                                                                                        |   |
| Item 10.             | Executive  Compensation                                                                                                     | 22     |
|                 |                                                                                                                        |   |
| Item 11.             | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                            | 23     |
|                 |                                                                                                                        |   |
| Item 12.             | Certain  Relationships and Related Transactions                                                                             | 25     |
|                 |                                                                                                                        |   |
| Item 13.             | Exhibits                                                                                                                    | 27     |
|                 |                                                                                                                        |   |
| Item 14.             | Principal  Accountant Fees and Services                                                                                     | 27     |
|                 |                                                                                                                        |
| SIGNATURES           | S-1                                                                                                                         |
|                 |                                                                                                                        |
| INDEX OF  EXHIBITS   | E-1                                                                                                                         |
|                 |                                                                                                                        |
| FINANCIAL STATEMENTS | F-1                                                                                                                         |

 

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**PART I**

 

**Item1.  Description of Business**

 

**THECOMPANY**

 

***Overview of the Company***

 

The Company was initiallyformed on July 22, 2005, at the direction of OCM Principal OpportunitiesFund III, L.P. and OCM Principal Opportunities Fund IIIA, L.P. (the “*Oaktree Fund*s”), each of which is aDelaware limited partnership and an affiliate of Oaktree Capital Management,L.P., a Delaware limited partnership (formerly Oaktree Capital Management, LLC)(“*Oaktree*”). The Company was formed forthe primary purpose of participating in various activities relating to thegaming industry.

 

In 2006, the Company,through a wholly-owned subsidiary, OCM AcquisitionCo, LLC, a Nevada limitedliability company (“*AcquisitionCo*”),acquired a 42% equity interest in Cannery Casino Resorts, LLC, a Nevada limitedliability company (“*CCR*”), and a33-1⁄3% equity interest in NP Land, LLC, a Nevada limited liability company(“*NP Land*”). The Company’scurrent business consists primarily of its ownership of these equity interests.CCR, through wholly-owned subsidiaries:

 

·        owns and operates the Cannery Hotel and Casino (“*The Cannery*”) located in North Las Vegas,Nevada;

 

·        owns and operates a temporary casino atThe Meadows, located in North Strabane Township, Washington County,Pennsylvania, and is currently constructing a larger, permanent casinofacility;

 

·        operates the Rampart Casino (the “*Rampart Casino*”) located in the Summerlinarea of northwest Las Vegas; and

 

·        operated the Nevada Palace Hotel andCasino (the “*Nevada Palace*”) (until February 29,2008) which is being replaced with a new casino hotel (the “*Eastside Cannery*”) that is currently under construction.

 

On December 11,2007, the Company entered into a definitive purchase agreement (the “*Purchase Agreement*”) by and among (i) CrownLimited, an Australian company (“*Crown*”),(ii) Crown CCR Group Investments One, LLC (“*Crown One*”) and Crown CCR Group Investments Two, LLC (“*Crown Two*” and collectively with CrownOne, the “*Crown Buyers*”, each aDelaware limited liability company and an indirect wholly owned subsidiary ofCrown), (iii) Millennium Gaming, Inc., a Nevada corporation (“*Millennium*”), (iv) the Company (theCompany and Millennium each a “*Seller*”, andcollectively, the “*Sellers*”), and(v) CCR.  Upon the consummation ofthe transactions contemplated by the Purchase Agreement, the Crown Buyers wouldcollectively own, directly or indirectly, 100% of the issued and outstandingunits of CCR, and the Company would be completely divested of its indirectinterest in CCR.  We expect that thetransactions contemplated by the Purchase Agreement will be consummated withineighteen months of entry into the Purchase Agreement upon satisfaction ofcustomary closing conditions, including regulatory approvals.

 

***Ownership of the Company***

 

All of the Company’sissued and outstanding voting equity, the Class A Membership Units, areheld by OCM VoteCo, LLC, a Delaware limited liability company (“*VoteCo*”), and all of the Company’s issuedand outstanding non-voting equity, the Class B Membership Units, are heldby OCM InvestCo, LLC, a Nevada limited liability company (“*InvestCo*”). VoteCo is owned equally byeight individuals, seven of whom are principals of Oaktree and one of whom is amanaging director of Oaktree (collectively, the “*VoteCo Equityholders*”). InvestCo is owned principally by theOaktree Funds, which hold all of InvestCo’s issued and outstanding votingsecurities. At present, the Company has no plans to issue any additional Class AMembership Units or Class B Membership Units.

 

The VoteCo Equityholders,through VoteCo, control all matters of the Company that are subject to the voteof members, including the appointment and removal of the Company’s managers(the “*Managers*”). The Company hasissued Class B Membership Units to InvestCo, which units do not entitlethe holders thereof to any voting rights (except as otherwise required byapplicable law). The Class B Membership Units allow InvestCo and itsinvestors, including the Oaktree Funds, to invest in the Company without havingany voting power or power to control the operations or affairs of the Company(except as 

 

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required by law). IfInvestCo and its investors, including the Oaktree Funds, had any power tocontrol the operations or affairs of the Company, they and their respectiveconstituent equityholders would generally be required to be licensed or foundsuitable pursuant to the gaming laws and liquor codes of the jurisdictions inwhich CCR’s properties are located.

 

VoteCo, InvestCo, theCompany and each of the Company’s wholly-owned subsidiaries are managed byStephen Kaplan, a Principal of Oaktree, and Ronald Beck, a Managing Director ofOaktree.  Oaktree is a Los Angeles-basedinvestment management firm with over $52 billion in assets committed tomanagement in specialized investment strategies. These strategies includedistressed debt, high yield bonds, convertible securities, emerging marketequities, power infrastructure investments, principal investments for corporatecontrol, real estate investments, mezzanine financing and Japanese equity securities.Oaktree has approximately 465 employees, with offices in Los Angeles, New York,Stamford (Connecticut), London, Frankfurt, Beijing, Hong Kong, Seoul, Shanghai,Singapore, Tokyo and, through affiliates of Oaktree-managed funds, Luxembourg.  Oaktree is led by Howard Marks, Chairman, andBruce Karsh, President and is registered with the Securities and ExchangeCommission as an investment adviser under the Investment Advisers Act of 1940,as amended. The Oaktree Funds are the fourth closed-end “principal” funds thatthe professionals who invest and manage the Oaktree Funds have organized since1994 for the purpose of making control-oriented equity investments.

 

***Business Developments***

 

*2007Highlights*

 

On December 11,2007, the Company entered into the PurchaseAgreement by and among the Crown Buyers, Sellers and CCR.

 

The Company indirectlyholds 42% of the issued and outstanding units of CCR (“*CCR Units*”).  The Company owns more than 99.99% of thecapital interest in OCM Blocker, LLC, a Delaware limited liability company (“*Blocker*”), and Blocker owns all of the issued andoutstanding units of AcquisitionCo. AcquisitionCo holds 42% of the CCR Units, and Millennium holds 58% ofthe CCR Units.  The Company and Blockerare also parties to an Option to Purchase dated January 5, 2006 ascorrected on March 17, 2006 (the “*Option Agreement*”),whereby the Company has the option to purchase all of the issued andoutstanding units of AcquisitionCo from Blocker.  GLCP Nevada LLC, a Delaware limited liabilitycompany and a third-party entity unaffiliated with the Company (“*GLCP*”), owns less than 0.01% of the capital interest inBlocker.

 

Pursuant and subject tothe terms and conditions of the Purchase Agreement, (i) Crown One hasagreed to purchase from Millennium, all of Millennium’s CCR Units, (ii) CrownTwo has agreed to purchase from the Company, all of the Company’s interest inBlocker, and (iii) Crown One has agreed to purchase from the Company, allof the Company’s right, title and interest in the Option Agreement.  Pursuant and subject to the terms andconditions of a separate Purchase Agreement dated December 11, 2007 (the “*GLCP Purchase Agreement*”), by and among the Crown, CrownTwo, Blocker and GLCP, Crown Two has agreed to purchase from GLCP, all of GLCP’sinterest in Blocker.  Upon theconsummation of the transactions contemplated by the Purchase Agreement and theGLCP Purchase Agreement, Buyers would collectively own, directly or indirectly,100% of the CCR Units, and the Company would be completely divested of itsindirect interest in CCR.

 

AcquisitionCo, anindirect subsidiary of the Company, indirectly owns a minority interest in NPLand, through a wholly-owned subsidiary, OCM LandCo, LLC, a Delaware limitedliability company (“*LandCo*”).  The primary assets of NP Land areapproximately 22 acres of land (the former site of the Nevada Palace and thecurrent site of the Eastside Cannery), which land is currently leased to awholly-owned subsidiary of CCR.  Inconnection with the transactions contemplated by the Purchase Agreement,AcquisitionCo will sell its wholly-owned subsidiary, LandCo, to Nevada PalaceInc., an entity owned by William Wortman, a principal of Millennium.

 

The aggregate purchaseprice payable by the Crown Buyers to Sellers (the “*PurchasePrice*”) for (i) Millennium’s CCR Units, (ii) the Company’sinterest in Blocker, (iii) the Company’s right, title and interest in theOption Agreement and (iv) GLCP’s interest in Blocker, is approximately$1.7522 billion in cash (debt free), subject to certain adjustments, including,but not limited to, certain adjustments to the Purchase Price related to thedate the transactions contemplated by the Purchase Agreement are consummatedand adjustments based on the costs necessary (if any) to complete constructionof certain building projects after closing.

 

The Purchase Agreementprovides that, upon termination under specified circumstances of the PurchaseAgreement related to, among other things, the Crown Buyers’ breach of thePurchase Agreement or the failure to obtain regulatory approval, the CrownBuyers would be required to pay a termination fee of $50 million to Sellers.

 

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The Purchase Agreementprovides that the Crown Buyers be indemnified for damages resulting frombreaches of Sellers’ representations, warranties and covenants, certain taxliabilities and other matters.  The sumof $25 million of the Purchase Price is to be placed in escrow as the exclusivesource, subject to certain exceptions, for satisfaction of such damages as towhich claims are made.   The amountdeposited in the indemnity escrow is to be held for three years after theclosing date, subject to limited exceptions.

 

The closing of thetransactions contemplated by the Purchase Agreement are subject to customaryclosing conditions, including receipt of all necessary gaming approvals by theCrown Buyers.  The Company expects thatthe process of obtaining regulatory approvals will take between twelve to eighteenmonths.

 

*2006Highlights*

 

In September 2006,the Company, through a subsidiary, acquired a 33-1⁄3% equity interest inCCR and a 33-1⁄3% equity interest in NP Land, both Nevada limited liabilitycompanies. The Company’s acquisition of the 33-1⁄3% equity interest in CCRand a 33-1⁄3% equity interest in NP Land was completed pursuant to theterms and conditions of a Contribution and Unit Purchase Agreement, dated as ofMay 10, 2005, as amended and restated in its entirety by the FirstAmendment and Restatement of Contribution and Unit Purchase Agreement, dated asof September 23, 2005 (the “*CUPAgreement*”). The parties to the CUP Agreement were Messrs Paulos andWortman, Millennium, CCR, AcquisitionCo, and other entities named therein.  In November 2006, the Company, through asubsidiary, contributed an additional $50 million to CCR, increasing its equityinterest in CCR from 33-1⁄3% to 42%.

 

Key features of thetransactions completed during 2005 and 2006 pursuant to the CUP Agreementinclude the following:

 

·        In September 2005, the first seriesof transactions contemplated by the CUP Agreement were consummated. The Company’saffiliates loaned an aggregate of $10,607,245 (the “*InvestCo NP Loans*”) and $4,282,454 (the “*LandCo Loan*”) to entities controlled by Mr. Wortmanto enable Mr. Wortman, and entities controlled by him, to acquire from anunrelated third party all of the interests not otherwise owned by him in theentities which own the land and assets relating to the Nevada Palace.

 

·        In January 2006, the second seriesof transactions contemplated by the CUP Agreement were consummated. The Company’saffiliates loaned to MGIM, LLC, a Nevada limited liability company controlledby Messrs. Paulos and Wortman, $64 million (the “*AcquisitionCo Loan* “) and $5,125,000 (the “*InvestCo/MGIM Loan*”) to enable MGIM, LLCto acquire from an unrelated third party a 33-1⁄3% interest in CCR for atotal purchase price of $70 million.

 

·        In September 2006, the last of theseries of transactions contemplated by the CUP Agreement was completed, and theCompany acquired a 33-1⁄3% interest in each of CCR and NP Land in exchangefor cancellation of loans of $64 million and $4,282,454, plus accrued interestof $5,470,685 and $502,631, respectively.

 

·        The InvestCo NP Loans, the LandCo Loan,the AcquisitionCo Loan and the InvestCo/MGIM Loan each accrued interest at 12%,but in the case of the LandCo Loan and the AcquisitionCo Loan, interest waswaived and considered additional investment upon the final closing of the equitypurchase pursuant to the CUP Agreement. The loans were financed by capitalcontributions from InvestCo.

 

In July 2006, CCR,through a wholly-owned subsidiary, PA Meadows, LLC, a Delaware limitedliability company (“*PA Meadows*”),acquired all of the capital stock in entities owning and operating The Meadowsharness racetrack and issued to the seller a note for $175 million to secure acash purchase price obligation, and a note for $25 million to secure a holdbackobligation. The acquisition was pursuant to two agreements: (i) a StockPurchase Agreement between PA Meadows and Magna Entertainment Corp., a Delawarecorporation (“*MEC*”), dated November 8,2005, as amended by a first amendment dated July 26, 2006, and (ii) aPost-Closing and Note Issuance Agreement dated July 26, 2006 by andbetween PA Meadows, MEC and the parties named therein. On November 14,2006, PA Meadows paid $175 million in cash and delivered a $25 million holdbackagreement to MEC, in full satisfaction of the notes issued to MEC on July 26,2006. The acquisition was financed by a $50 million equity contribution fromthe Company to CCR and proceeds from two syndicated credit facilities.  In exchange for the $50 million equitycontribution to CCR, CCR issued additional equity interests to AcquisitionCo,causing the Company’s percentage ownership in CCR to increase from 33-1⁄3%to 42%.

 

Messrs. Paulos andWortman, through Millennium, own the remaining 58% of the equity interests inCCR and continue to play a substantial role in the management of the business. Mr. Wortmanalso owns the remaining 66-2/3% of the equity interests in NP Land.

 

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***Employees***

 

The Company has noemployees, other than its two managers, Mr. Kaplan and Mr. Beck, whoreceive no compensation from the Company for their services.

 

***Environmental Issues***

 

The Company has nophysical assets.

 

**CANNERYCASINO RESORTS, LLC**

 

CCR was organized on May 22,2001.  In December 2002, CCRcommenced casino operations at the Rampart Casino. In January 2003, CCRcompleted construction of The Cannery and commenced its operations.  In July 2006, CCR acquired The Meadows,where it currently owns and operates a temporary gaming facility and where itis constructing a permanent casino.  In September 2006,CCR acquired the gaming assets of and commenced temporary operations at theNevada Palace, which ceased operation on February 29, 2008 as planned inconnection with the construction of the Eastside Cannery, which will replacethe Nevada Palace.

 

The Cannery and theRampart Casino are both currently managed by Millennium Management Group II,LLC, a Nevada limited liability company (“*MMGII*”), which is 95% owned by Messrs. Paulos and Mr. Wortman.  MMG II also managed the Nevada Palace untilit closed as planned on February 29, 2008 in connection with theconstruction of the Eastside Cannery, and will manage the Eastside Cannery whenconstruction is completed and the facility is opened.

 

On May 18, 2007, CCRentered into two new syndicated credit facilities totaling $860 million: a $745million first lien facility and a $115 million second lien term loanfacility.  The proceeds were usedprimarily to retire existing debt, including the then-existing $250 millioncredit facility.  The remainder of theproceeds from the borrowing will be used to partially fund the construction ofthe permanent casino facility at The Meadows and the completion of the EastsideCannery.  For more information about thesyndicated credit facilities, see the Company’s periodic filing on Form 8-Kfiled with the SEC on May 24, 2007.

 

***The Cannery***

 

The Cannery, located inNorth Las Vegas, Nevada, commenced operations in January 2003, and is anapproximately 28-acre casino hotel, entertainment and parking complex owned byCCR. In 2006, The Cannery completed a $40 million expansion project and nowfeatures approximately 72,000 square feet of casino space, including 1,961slot/video poker machines, 37 table games (including 12 poker tables), a pokerroom, and a race and sports book. The attached three-story hotel is designed tobe compatible with The Cannery’s World War II industrial theme and includes 201hotel rooms.  In addition, The Cannery’sfacilities include a sports-themed restaurant and bar, a buffet restaurant, aMexican-themed restaurant, an Italian restaurant, a steakhouse and a franchiseddonut shop; a 14 screen movie theatre; an indoor/outdoor multi-purposeentertainment venue used to host events such as boxing matches and communityfestivals; an entertainment lounge; a pool and jacuzzi; and parking forapproximately 3,600 vehicles (including a 1,900-space parking garage), withvalet options and additional off-site parking for large events, along withshuttle bus service to and from the casino.

 

The Cannery has beendesigned to promote traffic at its full-service casino facility and to providecustomers with a wide variety of gaming alternatives. To accentuate The Cannery’sWorld War II industrial theme and resemblance of a 1940’s era cannery, thecasino includes an approximately 120-foot high smokestack that is visible forseveral miles from all directions and provides signage for the facility. TheCannery is located near I-15 and I-95 and targets local residents and visitorsto the nearby Nellis Air Force Base and Las Vegas Motor Speedway.

 

***The Rampart Casino***

 

In December 2002,CCR, through a subsidiary, commenced operations at the Rampart Casino under a10-year sublease agreement with Hotspur Casinos Nevada, Inc., a Nevadacorporation (“*Hotspur*”).

 

The Rampart Casino issituated within the JW Marriott Las Vegas Resort, Spa & Golf at theResort at Summerlin, located in the Summerlin area of northwest Las Vegas. TheRampart Casino’s facilities consist of approximately 50,000 square feet ofcasino space, over 1,200 slot machines, 26 table games, a race and sports book,three restaurants, multiple bars, and an 

 

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entertainment lounge. TheJW Marriott Las Vegas Resort is located on over 50 acres of land and consistsof a hotel with over 500 guest rooms and suites, a spa, and severalrestaurants.

 

The Rampart Casinotargets frequent local gaming patrons living in Summerlin, a 22,500-acremaster-planned community with approximately 60,000 households, adjacent to theSummerlin Parkway and within close proximity to six golf courses. In addition,due to its central location within the JW Marriott Las Vegas Resort, theRampart Casino benefits from resort and conference visitor traffic.

 

The Resort at Summerlin,which included the Regent Hotel and Casino, was originally constructed in 1997.In November 2000, the hotel and casino filed for bankruptcy. The RegentHotel and Casino was acquired out of bankruptcy in November 2001 byHotspur Resorts Nevada, Inc., the parent of Hotspur, and, in December 2001,was renamed the JW Marriot Las Vegas Resort, Spa & Golf at the Resortat Summerlin.

 

***The Eastside Cannery/Nevada Palace***

 

On September 22,2006, CCR, through a subsidiary, acquired the gaming assets of the NevadaPalace and entered into a 35-year lease of the Nevada Palace land with NP Land.In May 2007, CCR commenced construction of the Eastside Cannery, a new,much larger, modern casino hotel complex to replace the Nevada Palace, whichwas operated through February 29, 2008 when it closed as planned inconnection with the construction of the Eastside Cannery.  The anticipated completion date for theconstruction at the Eastside Cannery is August 1, 2008.

 

The Eastside Cannery isbeing constructed on the current site of the Nevada Palace on the Boulder Stripin east Las Vegas, eight miles from McCarran International Airport. TheEastside Cannery will target frequent local gaming patrons, the samedemographic targeted by The Cannery and the Rampart Casino. The EastsideCannery is expected to be similar in nature to The Cannery, featuring asignificantly larger complex and complement of amenities and services than thecurrent Nevada Palace, including improved casino, hotel, entertainment,restaurant and other amenities. The Eastside Cannery will have approximately2,000 slot machines and 26 table games, and will include a 308-room hotel, fiverestaurants, six bars and a nightclub.

 

The primary assets of NPLand are approximately 22 acres of land, the site of the Eastside Cannery,which land is leased to a wholly-owned subsidiary of CCR.

 

***The Meadows***

 

In 2006, CCR, through itsindirect subsidiary, PA Meadows, acquired from MEC all of the capital stock ofentities owning and operating The Meadows harness racetrack.  Concurrently with the acquisition, PA Meadowsand its wholly-owned subsidiaries entered into a Racing Services Agreement,whereby a wholly-owned subsidiary of MEC (the “*MECOperator*”) would continue to operate The Meadows for a minimum termof five years unless terminated earlier under certain circumstances. Under theRacing Services Agreement, the MEC Operator receives all revenues from and isliable for all of the costs associated with the racing operations, after payingPA Meadows a fixed fee of $50,000 per year, and generally indemnifies CCR and itsaffiliates against losses arising from all obligations and liabilities of theracing operations, subject to certain exceptions. In addition, MEC agreed toguarantee the financial obligations of the MEC Operator. As a result, duringthe term of the Racing Services Agreement, CCR’s principal economic interest inthe racing operations will consist of the $50,000 in annual fixed fees paid bythe MEC Operator.

 

The Pennsylvania GamingControl Board (the “*Pennsylvania Board*”)approved Washington Trotting Association (“*WTA*”),a wholly-owned subsidiary of PA Meadows, to receive a Category 1 Slot MachineLicense to operate a casino at The Meadows in December 2006.  In June 2007, PA Meadows opened an82,000 square-foot temporary casino at The Meadows, which houses over 1,800slot machines, a 360-seat all-you-can-eat restaurant, a snack bar, and sportsbar with 23 bar-top video poker games. The Meadows is also the first casino in Pennsylvania to offer patronsKeno, video roulette and a version of Monopoly.    PA Meadows began construction of a 350,000square-foot permanent casino in late 2007. PA Meadows expects that the permanent casino will be completed in early2009 and will house approximately 4,000 slot machines.

 

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***Gaming Markets***

 

*LasVegas Locals Gaming Market*

 

Las Vegas and North LasVegas, which are part of Clark County, Nevada, are located within a rapidlygrowing metropolitan area in the United States. According to recent data of the U.S. Census Bureau, between 1995 and2005 Clark County’s population grew approximately 66%, more than five times theU.S. population growth of approximately 12% over the same period of time.According to Clark County demographers, county population growth slowedsomewhat to approximately 5% between 2005 and 2006 but still remained above thenational average. The Cannery, the Rampart Casino and the Nevada Palace are alllocated in Clark County. CCR’s management believes that the growth in ClarkCounty’s population has been driven, in part, by Nevada’s favorable climate andtax structure and relatively low unemployment.

 

CCR competes primarily inthe Las Vegas locals gaming market, which is defined as the Clark County gamingmarket excluding the Las Vegas Strip, downtown Las Vegas and Laughlin. TheNevada Commission estimates that two-thirds of the local Las Vegas adultpopulation participates in casino gaming on a regular basis.  In conjunction with the growth of the ClarkCounty population, gaming revenues for the Las Vegas locals gaming market hasexperienced steady increases.  Accordingto the Nevada Commission, total win from nonrestricted gaming operations in theLas Vegas locals gaming market grew from approximately $1.86 billion in 2003 toapproximately $2.41 billion in 2005 and approximately $2.8 billion in 2007,representing an annual growth rate between 2003 and 2005 of 15% and between2005 and 2007 of 8%.

 

The specific submarketsfor The Cannery, the Rampart Casino and the Eastside Cannery (once open) areNorth Las Vegas, Summerlin, and the Boulder Strip, respectively.

 

*NorthLas Vegas*

 

The Cannery is located inNorth Las Vegas, a rapidly growing city in the United States.  According to the Nevada Commission, total winfrom nonrestricted gaming operations grew in North Las Vegas from approximately$302 million in 2005 to approximately $314 million in 2006, an approximately 4%annual increase over 2005.  From 2006 to2007, total win decreased slightly to approximately $303 million, an approximately4% annual decrease from 2006.  The Cannery is located off of I-15 and a few miles from I-95, and targets localresidents and visitors to the nearby Nellis Air Force Base and Las Vegas MotorSpeedway.

 

*Summerlin*

 

The Rampart Casino islocated in the Summerlin area of northwest Las Vegas, a 22,500-acre,master-planned community with approximately 60,000 households, adjacent to theSummerlin Parkway and within close proximity to six golf courses. Because theSummerlin area is categorized with the balance of Clark County in the Nevada Commission’srevenue reports, specific annual gaming revenues for the Summerlin area cannotbe determined. CCR management believes that the Rampart Casino’s primary marketconsists of frequent local gaming patrons who seek a friendly atmosphere andconvenience, as well as higher-than-average payout rates for slot machines andvideo poker games. In addition, due to its central location within the JWMarriott Resort, the Rampart Casino benefits from resort and conference visitortraffic.

 

*TheBoulder Strip*

 

The Nevada Palace islocated and the Eastside Cannery will be located along the Boulder Highway,known as the “Boulder Strip.” According to the Nevada Commission, the BoulderStrip, which includes casinos within the city limits of Henderson, Nevada, hasseen win from nonrestricted gaming operations grow from approximately $690million in 2003 to approximately $890 million in 2005 and approximately $930million in 2006 and 2007.  This growthrepresents an annual growth rate of 14% between 2003 and 2005, and 8% between2005 and 2007.  The growth rate for 2006and 2007, however, was flat.  CCRmanagement believes that the Boulder Strip has become and is likely to remainpopular with Las Vegas locals. The Boulder Strip is known as a popular “offStrip” gaming destination for visitors to Las Vegas who are looking for a lesscostly gaming experience than that offered on the Las Vegas Strip. Many of thecasinos along the Boulder Strip offer entertainment amenities beyond gambling,including movie theaters, bowling alleys and dining establishments.

 

*PennsylvaniaGaming Market*

 

The Meadows is located inNorth Strabane Township, Washington County, Pennsylvania. North StrabaneTownship is part of the greater Pittsburgh metropolitan area and is locatedapproximately twenty-five miles from the city of Pittsburgh.  The Meadows competes in a large market thatincludes western Pennsylvania, eastern Ohio and northern West Virginia,although its primary market is the greater Pittsburgh metropolitan area.  Of the states in The Meadows casino’s greatermarket, only 

 

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West Virginia hasestablished slot machine gaming and recently added table games.  Slot machine gaming is relatively new toPennsylvania.  Pennsylvania has approvedfor licensure 11 slot machine gaming facilities throughout the state, 6racetrack-based casino facilities and 5 stand alone slot machine gamingfacilities.  Of the 11 facilitiesapproved for licensure, 6 racetrack facilities are open and 1 stand alone slotmachine gaming facility, Mt. Airy Casino Resort, is open.  The closest licensed in-state racetrack-basedcasino is Presque Isle Downs & Casino, in Erie, Pennsylvania, which isapproximately 146 miles from The Meadows. Ohio does not permit slot machine gaming.

 

***Competition***

 

The casino hotel industryis a highly fragmented and competitive industry. The gaming industry includesland-based casinos, dockside casinos, riverboat casinos, casinos located onNative American reservations and other forms of legalized gaming. CCRmanagement believes that the primary competition to CCR’s casinos currentlycomes from other casinos that cater to the Las Vegas locals gaming market. Inaddition, to a lesser extent, CCR’s casinos face competition from casinoslocated on the Las Vegas Strip and in downtown Las Vegas.  Competition with the Company’s casino at TheMeadows currently comes from racetrack-based casinos in West Virginia and willalso likely come from the PITG Gaming, LLC d/b/a Majestic Star Casino, locatedin Pittsburgh, Pennsylvania, and anticipated to open in the spring 2009. Thecompetition among companies in the gaming industry is intense and many of CCR’scompetitors have significantly greater resources than CCR.

 

Under the terms of CCR’samended and restated operating agreement, Millennium and its affiliates, on theone hand, and AcquisitionCo and its affiliates (including the Company), on theother, must offer gaming opportunities first to CCR prior to pursuing any suchopportunity outside CCR. Generally, no manager of CCR may serve as a manager,officer, director or employee of any casino operating or holding company,except that a manager may serve in such capacities with respect to CCR or itssubsidiaries or entities that hold equity in the Company (other than Oaktree orinvestors in the Oaktree Funds). Nevertheless, a manager may serve as amanager, officer, director or employee of a casino operating or holding companyformed to pursue a gaming opportunity offered to but not accepted by CCR and acasino operating or holding company formed to pursue certain opportunities inMexico.

 

*LasVegas Locals Gaming Market*

 

The growth in gamingrevenue in the Las Vegas locals gaming market has led to a highly competitivemarket to attract business of Las Vegas locals. In addition to establishedcasinos, CCR faces competition from smaller casinos, supermarkets, bars andconvenience stores that offer gaming.

 

The closest casinocompetitors to The Cannery are Aliante Station (which, as of March 31,2008, is still under construction) and Santa Fe Station, which areapproximately five and six miles, respectively, from the site of the casino,although outside of The Cannery’s primary market area. Other competitors (eachmore than six miles from The Cannery) include Texas Station Gambling Hall andFiesta Rancho.  Each of these fourcompetitors is owned by Station Casinos, Inc., a publicly tradedcompany.  Together, they account for over6,500 slots, over 100 tables and over 500 hotel rooms and suites.  The closest competitor to the Rampart Casinois Suncoast Casino, which is within close proximity to the Rampart Casino.  In addition, a nearby Red Rock Station casinois a significant competitor of the Rampart Casino.  The next closest competitors, Texas Station,Fiesta Station, and Arizona Charlie’s — Decatur, are each more than five milesaway, outside of the Rampart Casino’s primary market area.  The Boulder Strip, where Nevada Palace islocated and the Eastside Cannery will be located, is home to manycompetitors.  Prominent casinos along theBoulder Strip include Sam’s Town Hall & Gambling Hall, operated byBoyd Gaming Corporation; and Sunset Station, Boulder Station, Green ValleyRanch and Fiesta Henderson, each owned by Station Casinos, Inc.  These competitors generally have from 1,500to over 3,100 slots, 25 to 70 tables (including poker) and 200 to over 600hotel rooms and suites.  Nevada Palaceand a few other smaller casinos along the Boulder Strip lack the necessaryfacilities and other amenities to effectively compete in this prominentsub-market.

 

*LasVegas Strip and Downtown Las Vegas Gaming Market*

 

The Las Vegas Strip isthe location of dozens of casinos, including the largest and newestmega-casinos that Las Vegas has to offer. In addition, the downtown Las Vegasarea includes approximately 15 casinos on or near Fremont Street in old LasVegas. Casinos located on the Las Vegas Strip or in downtown Las Vegas aretypically tourist destinations and generally do not target the locals gamingmarket.

 

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*TheNeighborhood Casino Act*

 

In 1997, the NevadaLegislature passed Senate Bill No. 208 (the “*Neighborhood Casino Act*”), enacting laws which possiblycreate significant barriers to new competition in CCR’s local gaming markets bylimiting future casino development in certain areas of Clark County,Nevada.  Those laws were amended in2001.  With certain specified exemptions,the Neighborhood Casino Act restricts non-restricted gaming to certaindesignated gaming enterprise districts, and imposes potentially burdensomerequirements on applicants proposing to have new locations designated as gamingenterprise districts by the applicable county, city or town body withjurisdiction.

 

*PennsylvaniaGaming Market*

 

The primary establishedcompetition for the casino at The Meadows are two racetrack-based casinoslocated in West Virginia: the Wheeling Island Racetrack and Gaming Center inWheeling, West Virginia, and the Mountaineer Racetrack and Gaming Resort inChester, West Virginia.  The WheelingIsland Racetrack and Gaming Center is approximately 34 miles from The Meadowsand is an established racetrack and slot machine gaming center withapproximately 2,400 slots.  TheMountaineer Casino is approximately 50 miles from The Meadows and is an establishedracetrack and slot machine gaming center with approximately 3,200 slots.  Both facilities recently added tablegames.  Pennsylvania has approved forlicensure 11 slot machine gaming facilities throughout the state, 6racetrack-based casino facilities and 5 stand alone slot machine gamingfacilities.  The 6 racetrack facilitiesare open and 1 stand alone slot machine gaming facility, Mt. Airy CasinoResort, is open.  The closest licensedin-state racetrack-based casino is Presque Isle Downs & Casino,located in Erie, Pennsylvania, which is approximately 146 miles from TheMeadows.  In addition to the 6  racetrack casinos currently in operation, the  Valley View Downs in Lawrence County isexpected to begin operations in 2009 pending licensing approval by thePennsylvania Board in 2008.  Valley ViewDowns is approximately 75 miles from The Meadows.  The Pennsylvania Board has also approved forlicensure a stand alone slot machine facility in Pittsburgh, Pennsylvania, PITGGaming, LLC d/b/a Majestic Star Casino. PITG Gaming will be approximately 25 miles from The Meadows and isexpected to open in the spring of 2009. The Pennsylvania Board has a mission of opening and regulating 14world-class slot machine facilities.

 

***Business and Marketing Strategy***

 

CCR aims to target thelocals gaming market and capitalize on strong demographic trends. In addition,CCR seeks to position its gaming assets to cater to the propensity of the localresidents to participate in casino-style gaming in proximity to where they live.CCR management believes that CCR’s Las Vegas casinos also benefit from Nevadaregulatory restrictions that have the effect of limiting competition in thegaming industry, including the Neighborhood Casino Act. For more information onthe Neighborhood Casino Act, see “Item 1. Cannery CasinoResorts—Competition—The Neighborhood Casino Act” above.

 

*StrongManagement Team*.

 

The day-to-day operationsof CCR are managed by Messrs. Paulos and Wortman, each of whom have hadsignificant gaming industry experience. Mr. Paulos previously served asPresident of Primadonna Resorts, Inc., which through subsidiaries ownedand operated various casino-hotel properties, including Buffalo Bill’s, WhiskeyPete’s, the Primm Valley Inn and Resort, and New York-New York Casino Resort,where he also served on the board of directors. Mr. Paulos has served asChief Operating Officer of Crown Casino Limited, where he was responsible forthe construction and opening of its casino in Melbourne, Australia, and asSenior Vice President of Circus Circus Enterprises, Inc., where he hadprimary responsibility for the development of the Excalibur and Luxor casinos. Mr. Wortmanpreviously served as Chairman and Chief Executive Officer of Palace Casinos, Inc.In addition to Nevada Palace, he previously owned and operated the FallonNugget and Bonanza Inn in Fallon, Nevada and Renata’s/Sunset Lanes inHenderson, Nevada. Mr. Wortman held various senior positions at CaesarsPalace Las Vegas, including Treasurer, Chief Financial Officer, Vice Presidentof Administration and Vice President of Hotel Operations, and served asPresident and Chief Operating Officer of Caesars Tahoe.

 

*TargetedCustomer Base*.

 

CCR’s operating strategyaims to attract and retain customers primarily from the locals market throughinnovative, frequent and high-profile promotional programs, focused marketingefforts and convenient locations.  CCR’sprimary customers are located within a five-mile radius of its casinos, and CCRfocuses its marketing efforts on those patrons.

 

*High-ValueCustomer Experience*.

 

In order to provide ahigh-value gaming experience, CCR focuses on slot and video poker machine play.CCR management believes that by offering a wide variety of high quality slotand video poker games, its casinos attract locals and repeat visitors.  

 

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CCR management iscommitted to providing a high-value entertainment experience throughrestaurant, hotel and other entertainment amenities to attract local gamingpatrons.

 

*CreativeMarketing and Promotional Programs*.

 

CCR management believesthat promotions and promotional events are one of the primary factors tosuccess in the locals gaming market.  CCRemploys a marketing strategy that utilizes innovative, frequent and high-profilepromotional programs in order to attract and retain customers and establish ahigh level of name recognition for CCR’s casinos.  In addition to aggressive marketing throughtelevision, radio and newspaper advertising, CCR creates and sponsors promotionalevents and has established and promotes an exclusive players club.

 

*OperatingEfficiencies*.

 

By operating its Nevadacasinos with a similar marketing focus and target customer, CCR realizescertain operating efficiencies.  Forexample, The Cannery and the Rampart Casino participate in the same playersclub, which provides casino patrons with the opportunity to win points ateither location and enables management to run larger joint promotions. CCR alsobenefits from joint purchasing programs for food and other supplies andavailable quantity discounts.  Inaddition, CCR realizes equipment cost savings from, among other things,identical player tracking systems in its casinos.  These player tracking systems provide CCRwith access to a larger database of customers for purposes of cross-marketingand promotions.  Finally, the accounting,personnel and other administrative functions of CCR’s casinos are centralizedto reduce costs.

 

***Employees***

 

As of December 31,2007, CCR and its subsidiaries had approximately 2,462 active employees andapproximately 2,187 full-time equivalent employees. Of these employees, 56 areunionized. CCR recognizes that its employees are critical to its success andhas sought to foster a productive work culture. Employees are offered competitive salaries and a benefits package.

 

***Environmental Matters***

 

The operations andproperties of The Cannery, the Rampart Casino and the Nevada Palace (and, whenconstructed, the Eastside Cannery) are and will continue to be subject to awide variety of complex and stringent environmental laws. CCR management and NPLand management believe that their respective operations and properties are incompliance in all material respects with all applicable environmental laws.  Based upon their experience to date, CCRmanagement and NP Land management believe that the future cost of compliancewith and liability under existing environmental laws will not have a materialadverse effect on their respective financial condition or results ofoperations.

 

The operations andproperties of The Meadows also are and will continue to be subject to a widevariety of complex and stringent environmental laws.  CCR management believes that these operationsand properties are in compliance in all material respects with allenvironmental laws.  In addition,pursuant to the terms of the Stock Purchase Agreement between PA Meadows andMEC and related agreements, MEC and the MEC Operator have agreed to indemnifyPA Meadows against certain losses arising from liabilities under theenvironmental laws and related to acts, omissions, conduct or circumstancesoccurring prior to the closing of the transactions contemplated by such stockpurchase agreement.  As a result, CCRmanagement believes that the future cost of compliance with and liability underexisting environmental laws applicable to The Meadows will not have a materialadverse effect on PA Meadows’s financial condition or results of operations.

 

**REGULATORYMATTERS**

 

The Company is subject togaming regulation in Nevada and gaming and harness racing regulation inPennsylvania. The ownership and operation of casino gaming facilities in Nevadaare subject to the gaming laws and regulations of the State of Nevada,including the Nevada Gaming Control Act (such laws and regulations, the “*Nevada Act*”), and the licensing andregulatory control of the Nevada Gaming Control Board (the “*Nevada Board*”), the Nevada GamingCommission (the “*Nevada Commission*”),the Clark County Liquor and Gaming Licensing Board, the City of Las Vegas andthe City of North Las Vegas (collectively, the “*Nevada Gaming Authorities*”). The ownership and operation ofslot machine facilities in Pennsylvania are subject to the Pennsylvania RaceHorse Development and Gaming Act (such laws and regulations, the “*Pennsylvania Act*”) and the licensing andregulatory control of the Pennsylvania Board. The ownership and operation ofharness racing tracks in Pennsylvania are subject to the harness racing lawsand regulations of the Commonwealth of Pennsylvania, including the Race HorseIndustry Reform Act (such laws and regulations, the “*RHIRA*”), and the licensing and regulatory control of the

 

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Pennsylvania StateHarness Racing Commission (“*PennsylvaniaCommission*”).

 

***Nevada Gaming Laws and Regulations***

 

The Nevada Act and theregulations and supervisory procedures of the Nevada Gaming Authorities arebased upon declarations of public policy that are concerned with, among otherthings, the prevention of unsavory or unsuitable persons from having a director indirect involvement with gaming at any time or in any capacity and thestrict regulation of all persons, locations, practices, associations andactivities related to the operation of licensed gaming establishments. Changesin such laws, regulations and procedures could have an adverse effect on CCR’sgaming operations and the Company’s indirect investment in CCR.

 

*LicensingRequirements and Approvals*

 

In 2006, certain requiredapprovals were obtained from the Nevada Gaming Authorities in connection withthe Company’s acquisition of its equity interests in CCR and NP Land. Suchapprovals included (i) the Company was registered as a “publicly tradedcorporation” as that term is defined by the Nevada Act (a “*Registered Company*”); (ii) theCompany, VoteCo, and AcquisitionCo were registered as holding or intermediarycompanies and found suitable; and (iii) the VoteCo Equityholders receivedvarious approvals including licensure as members and managers, as applicable,of VoteCo and findings of suitability as controlling members and managers, asapplicable, of the Company.

 

While the direct andindirect holders of Class B Membership Units of the Company were notrequired to be found suitable in connection with the Company’s acquisition ofequity interests in CCR and NP Land, they remain subject to the discretionaryauthority of the Nevada Gaming Authorities and can be required to file anapplication and have their suitability determined, or to dispose of theirinvestment in the Company.

 

The Nevada GamingAuthorities may require additional licensing or suitability applications. Afinding of suitability is comparable to licensing, and both require submissionof detailed personal and financial information followed by a thoroughinvestigation. An applicant for licensing or an applicant for a finding ofsuitability must pay or must cause to be paid all the costs of theinvestigation. Changes in licensed positions must be reported to the NevadaGaming Authorities and, in addition to their authority to deny an applicationfor a finding of suitability or licensing, the Nevada Gaming Authorities havethe jurisdiction to disapprove a change in a corporate position.

 

*Consequencesof Being Found Unsuitable or Violating Gaming Laws*

 

If the Nevada GamingAuthorities were to find an officer, manager or key employee of CCR, theCompany, VoteCo or AcquisitionCo unsuitable to continue having a relationshipwith these entities, the companies involved would have to sever allrelationships with such person.  TheNevada Gaming Authorities may deny an application for any cause which they deemreasonable.  Determinations ofsuitability or of questions pertaining to licensing are not subject to judicialreview in Nevada.

 

If it were determinedthat the Nevada Act was violated by CCR, the Company, VoteCo or AcquisitionCo,the gaming licenses held by CCR’s subsidiaries and affiliates could be limited,conditioned, suspended or revoked, subject to compliance with certain statutoryand regulatory procedures. In addition, any such violator and the personsinvolved could be subject to substantial fines for each separate violation ofthe Nevada Act, or of the regulations of the Nevada Commission, at thediscretion of the Nevada Commission. Furthermore, the Nevada Commission could appoint a supervisor to operateThe Cannery, the Rampart Casino, the Nevada Palace or, when constructed, theEastside Cannery and, under specified circumstances, earnings generated duringthe supervisor’s appointment (except for the reasonable rental value of thepremises) could be forfeited to the State of Nevada. Limitation, conditioningor suspension of any gaming license or the appointment of a supervisor could(and revocation of any gaming license would) impact casino revenues and causethe Company to suffer financial loss.

 

*OngoingObligations of Gaming Licensees and Beneficial Securities Holders*

 

On September 21,2006, the Nevada Commission issued an order of registration of the Company (the“*Final Order*”), which wasimmediately effective. The Final Order prohibited (1) VoteCo, InvestCo ortheir respective affiliates from selling, assigning, transferring, pledging orotherwise disposing of the Company’s Class A Membership Units or Class BMembership Units or any other security convertible into or exchangeable for Class AMembership Units or Class B Membership Units, without the prior approvalof the Nevada Commission, and (2) the Company from declaring cash dividendsor distributions on 

 

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any class of membershipunit of the Company beneficially owned in whole or in part by InvestCo, VoteCo,or their respective affiliates, without the prior approval of the NevadaCommission.

 

After the Final Order wasissued, the Company, VoteCo and AcquisitionCo became subject to detailedongoing financial and operating reporting requirements to the Nevada GamingAuthorities. Substantially all material loans, leases, sales of securities andsimilar financing transactions by the Company, VoteCo and AcquisitionCo must bereported to, or approved by, the Nevada Commission.

 

Regardless of the numberof shares held, any beneficial holder of a Registered Company’s voting ornon-voting securities may be required to file an application, be investigatedand have that person’s suitability as a beneficial holder of voting securitiesdetermined if the Nevada Commission has reason to believe that the ownershipwould otherwise be inconsistent with the declared policies of the State ofNevada. If the beneficial holder of such securities who must be found suitableis a corporation, partnership, limited partnership, limited liability companyor trust, it must submit detailed business and financial information, includinga list of its beneficial owners.  Theapplicant must pay all costs of the investigation incurred by the Nevada GamingAuthorities in conducting any investigation.

 

The Nevada Act requiresany person who individually or in association with others acquires, directly orindirectly, beneficial ownership of more than 5% of a Registered Company’svoting securities to report the acquisition to the Nevada Commission, and suchperson may be required to be found suitable. The Nevada Act requires that eachperson who, individually or in association with others, acquires, directly orindirectly, beneficial ownership of more than 10% of a Registered Company’svoting securities to apply to the Nevada Commission for a finding ofsuitability within 30 days after the Chairman of the Nevada Board mails thewritten notice requiring such filing. Under certain circumstances, an “institutionalinvestor,” as defined in the Nevada Act, which acquires more than 10%, but notmore than 15%, of a Registered Company’s voting securities may apply to theNevada Commission for a waiver of a finding of suitability if the institutionalinvestor holds the voting securities for investment purposes only. Also undercertain circumstances, an institutional investor that has obtained a waiver mayhold up to 19% of a Registered Company’s voting securities for a limited periodof time and maintain the waiver. An institutional investor will not be deemedto hold voting securities for investment purposes unless the voting securitieswere acquired and are held in the ordinary course of business as aninstitutional investor and not for the purpose of causing, directly orindirectly, the election of a majority of the members of the board of directorsof a Registered Company, a change in the corporate charter, bylaws, management,policies or operations of a Registered Company, or any of its gamingaffiliates, or any other action which the Nevada Commission finds to beinconsistent with holding a Registered Company’s voting securities forinvestment purposes only. Activities which are not deemed to be inconsistentwith holding voting securities for investment purposes only include:

 

·                        voting on all matters voted on bystockholders or interest holders;

 

·                        making financial and other inquiries ofmanagement of the type normally made by securities analysts for informationalpurposes and not to cause a change in management, policies or operations; and

 

·                        other activities that the NevadaCommission may determine to be consistent with such investment intent.

 

Any person who fails orrefuses to apply for a finding of suitability or a license within 30 days afterbeing ordered to do so by the Nevada Commission or the Chairman of the NevadaBoard may be found unsuitable. The same restrictions apply to a record owner ofequity securities if the record owner, after request, fails to identify thebeneficial owner. Any member found unsuitable and who holds, directly orindirectly, any beneficial ownership of the equity securities of a RegisteredCompany beyond such period of time as may be prescribed by the NevadaCommission may be guilty of a criminal offense. A Registered Company is subjectto disciplinary action if, after it receives notice that a person is unsuitableto be a member or hold a voting security or other equity security issued by theRegistered Company or to have any other relationship with the RegisteredCompany, the Registered Company:

 

·                  pays that person any dividend or interestwith respect to voting securities of the Registered Company;

 

·                  allows that person to exercise, directlyor indirectly, any voting right conferred through securities held by thatperson;

 

·                  pays remuneration in any form to thatperson for services rendered or otherwise; or

 

·                  fails to pursue all lawful efforts torequire such unsuitable person to relinquish his or her voting securities,including, 

 

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if necessary, theimmediate purchase of said voting securities for cash at fair market value.

 

The Nevada Commissionmay, in its discretion, require the holder of any debt or non-voting securityof a Registered Company to file applications, be investigated and be foundsuitable to own the debt or non-voting security of a Registered Company. If theNevada Commission determines that a person is unsuitable to own such security,then pursuant to the Nevada Act, the Registered Company can be sanctioned,including by revocation of its approvals, if without the prior approval of theNevada Commission, the Registered Company:

 

·                  pays to the unsuitable person anydividend, interest, or any distribution whatsoever;

 

·                  recognizes any voting right by suchunsuitable person in connection with such securities;

 

·                  pays the unsuitable person remunerationin any form; or

 

·                  makes any payment to the unsuitableperson by way of principal, redemption, conversion, exchange, liquidation orsimilar transaction.

 

A Registered Company maynot make a public offering of its securities without the prior approval of theNevada Commission if the securities or the proceeds therefrom are intended tobe used to construct, acquire or finance gaming facilities in Nevada, or toretire or extend obligations incurred for such purposes.

 

The Nevada Act providesthat changes in control of a Registered Company through merger, consolidation,stock or asset acquisitions, management or consulting agreements, or any act orconduct by a person whereby the person obtains control, may not occur withoutthe prior approval of the Nevada Commission. Entities and persons seeking toacquire control of a Registered Company must satisfy the Nevada Commission withrespect to a variety of stringent standards prior to assuming control of suchRegistered Company. The Nevada Commission may also require controllingstockholders, members, partners, officers, directors and other persons havingan ownership interest in or a material relationship or involvement with theentity proposing to acquire control to be investigated and licensed as part ofthe approval process relating to the transaction.

 

Any person who islicensed, required to be licensed, registered, required to be registered, orunder common control with such persons, and who proposes to become involved oris involved in a gaming venture outside of Nevada (“*Foreign Gaming*”), is required to deposit certain funds withthe Nevada Board in order to pay the expenses of investigation of the NevadaBoard of their participation in such Foreign Gaming. Thereafter the licenseesare required to comply with certain reporting requirements imposed by theNevada Act. A licensee is also subject to disciplinary action by the NevadaCommission if it knowingly violates any laws of the foreign jurisdictionpertaining to the Foreign Gaming operation, fails to conduct the Foreign Gamingoperation in accordance with the standards of honesty and integrity required ofNevada gaming operations, engages in activities or enters into associationsthat are harmful to the State of Nevada or its ability to collect gaming taxesand fees, or employs, contracts with, or associates with, a person in theForeign Gaming operation who has been denied a license or finding ofsuitability in Nevada on the ground of personal unsuitability.

 

***Pennsylvania Gaming Laws and Regulations***

 

The ownership andoperation of slot machine facilities in Pennsylvania are subject to extensivestate regulation by the Pennsylvania Board under the Pennsylvania Act and theregulations of the Pennsylvania Board. The Pennsylvania Board has broad discretion regarding the issuance,renewal, revocation and suspension of slot machine licenses.  The Pennsylvania Act, and the regulationspromulgated thereunder, concern primarily the good character, honesty,integrity and financial stability of slot machine licensees, their intermediaryand holding companies, their employees, their security holders and othersfinancially interested in slot operations.

 

On December 20,2006, the Pennsylvania Board approved WTA to receive a Category 1 Slot MachineLicense. The Category 1 Slot Machine License was approved upon completion of abackground investigation and initial satisfaction of certain conditions set bythe Pennsylvania Board. The holder of a Category 1 Slot Machine License mayoperate up to 3,000 slot machines and, with the approval of the PennsylvaniaBoard, up to an additional 2,000 slot machines after six months of operation.Prior to the commencement of slot machine operations, WTA obtained additionalapprovals from the Pennsylvania Board, such as approval of internal controlsand equipment, licensing of employees and the successful completion of gamingtest days.

 

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As pre-conditions toreceiving its license, WTA had to demonstrate, by clear and convincing evidenceto the satisfaction of the Pennsylvania Board, that WTA and its affiliates arepersons of good character, honesty, integrity and that their prior activities,reputation, habits and associations do not pose a threat to the public interestor the effective regulation and control of slot machine operations or create orenhance the danger of unsuitable, unfair or illegal practices, methods andactivities in the conduct of slot machine operations or in the carrying on ofthe business and financial arrangements incidental thereto. WTA also had todemonstrate by clear and convincing evidence the adequacy of its financialresources, the financial stability, integrity and responsibility of it and itsaffiliates, and the integrity of all financial backers, investors, mortgagees,bondholders and holders of indentures, notes or other evidences ofindebtedness, either in effect or proposed, except that banking or licensedlending institutions and certain institutional investors may be waived from thequalification requirements. WTA had to show by clear and convincing evidencethat it has sufficient business ability and experience to create and maintain asuccessful, efficient operation.

 

As a licensee, WTA isobligated to develop and implement a diversity plan to assure that all personsare accorded equality of opportunity in employment and contracting, which ithas done. WTA is also required to maintain certain records, which it has done,which shall be made available to the Pennsylvania Board upon request. Inaddition, WTA is required to hold a license issued by the PennsylvaniaCommission to conduct harness racing meets. WTA holds a license from thePennsylvania Commission to conduct harness racing meets.

 

As a licensee, WTA isobligated to fully cooperate with the Pennsylvania Board in the conduct of anyinquiry or investigation and provide any supplementary information as may berequested. Currently, there are no known inquiries or investigations, exceptlicense renewal investigations that are in the normal course, being conductedabout WTA or its affiliates.

 

No executive-levelPennsylvania state employee, public official or party officer, or any of theirimmediate family members, may knowingly or intentionally have a financialinterest in a licensed gaming entity, be employed by any gaming entity oraffiliate thereof or solicit or accept any service or discount not offered tothe general public from a gaming entity or affiliate. No applicant, affiliate,intermediary, subsidiary or holding company may possess a greater thanone-third ownership or financial interest in another slot machine licensee orperson eligible to apply for a Category 1 Slot Machine License. A licensedentity or officer, director, principal employee or key employee of a licenseemay not make any contribution to a candidate for nomination or election to anypublic office in Pennsylvania.

 

The Pennsylvania Boardmay deny an application or suspend or revoke a license of a person or applicantwho has failed to prove to the satisfaction of the Pennsylvania Board that theperson or applicant is qualified in accordance with the Pennsylvania Act, whohas violated the Pennsylvania Act, who is disqualified under the criteria setforth in the Pennsylvania Act, who provided false or misleading information tothe Pennsylvania Board, who has materially departed from a representation madein the application for a license or who has failed to comply with applicableFederal or state laws or regulations. If the Pennsylvania Board does notapprove a slot machine license application based on a finding that anindividual who is a principal or has an interest in the entity applying forlicensure does not meet the character requirements or any other eligibilityrequirement or is in violation of the change in ownership and controlprovisions of the Pennsylvania Act, the Pennsylvania Board may permit theindividual or entity the opportunity to divest completely his or her interestin the entity and related entities. The Pennsylvania Board must approve theterms and conditions of divestiture, but the Pennsylvania Act requires that thecompensation for the divested interest not exceed the cost of the interest.

 

On February 27,2007, WTA paid a one-time license fee in the amount of $50 million. As aCategory 1 Slot Machine licensee, WTA is subject to a daily tax of 34%, a localcounty share assessment of 2%, a local municipality share assessment of 2% butno less than $10 million, an additional daily assessment of 5% of its dailygross terminal revenue, and a 1.5% tax on gross terminal revenue. A licenseeshall also pay a daily assessment to the Pennsylvania Race Horse DevelopmentFund in a maximum amount of 12% of daily gross terminal revenue as determinedby the Department of Revenue. WTA is also responsible for the costs ofinvestigation and regulation.

 

A license or permitissued by the Pennsylvania Board is a privilege and, except as set forth below,may not be sold, transferred or assigned to any person, nor shall a licensee orpermittee pledge or otherwise grant a security interest in a license. Alicensee must notify the Pennsylvania Board prior to or immediately uponbecoming aware of any proposed or contemplated change of ownership by a groupor person which involves (i) more than 5% of the licensee’s ownershipinterests, (ii) more than 5% of the ownership interests of an entity thatowns, directly or indirectly, at least 20% of the voting or other ownershipinterests of the licensee, (iii) a sale, other than in the ordinary courseof business, of a licensee’s assets, or (iv) any other transaction oroccurrence deemed to be relevant by the Pennsylvania Board. A purchaser of theassets of a licensee other than in the ordinary course of business or of morethan 20% of the licensee’s ownership interests must independently qualify for alicense and pay a 

 

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new license issuance feeof $50 million. However, the fee is subject to reduction in the discretion ofthe Pennsylvania Board. WTA notified the Pennsylvania Board of the proposedtransfer to Crown in December 2007.

 

Slot machine licensesmust be renewed annually. If a completed renewal application is received in atimely manner, the license shall remain in effect unless and until thePennsylvania Board denies or renews the license.

 

***Pennsylvania Harness Racing Laws and Regulations***

 

The ownership andoperation of pari-mutuel harness racing facilities in Pennsylvania is subjectto extensive state regulation by the Pennsylvania Commission under the RHIRAand the regulations of the Pennsylvania Commission.  Pursuant to the RHIRA, the PennsylvaniaCommission is empowered to issue no more than five licenses for the conduct ofpari-mutuel harness racing (each, a “*HarnessRacing License*”).  Twosubsidiaries of PA Meadows, WTA and Mountain Laurel Racing, Inc., eachholds one of the five Harness Racing Licenses. In June 2007, the Pennsylvania Commission granted the soleremaining Harness Racing License to Valley View Downs, LP.

 

Once a Harness RacingLicense has been issued, the RHIRA provides that such license shall remain ineffect so long as the licensee complies with all conditions, rules, regulationsand provisions of the RHIRA.  HarnessRacing Licenses are not transferable. The RHIRA requires that each holder of a Harness Racing License shall,within ten days after any transfer of stock comprising an interest of 5% ormore of such licensee, notify the Pennsylvania Commission of suchtransfer.  Such licensee must also filewith the Pennsylvania Commission affidavits from the proposed transfereessetting forth certain required information regarding the proposed transfer andthe proposed transferee.  WTA and MLRhave sent appropriate notice to the Pennsylvania Commission regarding the proposedtransfer to Crown.

 

Since PA Meadowspurchased the stock of the entities that own and operate The Meadows, the MECOperator has continued to conduct harness racing at the site of The Meadows andoperate the racing operations. As such, and in connection with such activities,the MEC Operator has made appropriate application to the PennsylvaniaCommission and maintains an appropriate license.

 

If the PennsylvaniaCommission determines that it is inconsistent with the public interest,convenience or necessity, or with the best interest of racing generally, forany person to continue as the holder of an equity interest in a licensee or anyparent or affiliate of a licensee, the Pennsylvania Commission may order suchperson to dispose of such interest in a licensee within a period of timespecified by the Pennsylvania Commission.

 

The PennsylvaniaCommission may refuse to grant a Harness Racing License or may suspend orrevoke a Harness Racing License without a prior hearing if it determines by apreponderance of the evidence that (i) a licensee, its officers, employeesor agents have not complied with the conditions, rules, regulations andprovisions of the RHIRA and (ii) it would be in the public interest,convenience or necessity to revoke or suspend the subject license. Suchrefusal, suspension or revocation may be premised upon, among other things, adetermination by the Pennsylvania Commission that (a) any officer,director, member or stockholder of the licensee or any parent or affiliate ofthe licensee (1) has been convicted of a crime involving moral turpitude, (2) hasengaged in bookmaking or other forms of illegal gambling, (3) has beenfound guilty of any fraud or misrepresentation in connection with racing orbreeding, (4) has been found guilty of any violation or attempt to violateany law, rule or regulation of any racing jurisdiction for whichsuspension from racing might be imposed in such jurisdiction or (5) hasviolated any rule, regulation or order of the Pennsylvania Commission, or (b) theexperience, character or fitness of any officer, director, member orstockholder of the licensee or any parent or affiliate of the licensee is suchthat the participation of the person in horse racing or related activitieswould be inconsistent with the public interest, convenience or necessity orwith the best interest of racing. Upon receiving notice of any suchdetermination by the Pennsylvania Commission, a licensee may, within ten daysafter such notice, demand a hearing before the Pennsylvania Commission.However, the action of the Pennsylvania Commission in refusing to grant or insuspending or revoking a Harness Racing License shall remain in full forcepending such hearing and final determination.

 

In addition to its powerto suspend or revoke Harness Racing Licenses, the Pennsylvania Commission isauthorized and empowered to impose fines upon persons and entities thatparticipate in any way in any horse race meet at which pari-mutuel wagering isconducted and violate the RHIRA or the rules and regulations promulgatedby the Pennsylvania Commission, in an amount not to exceed $5,000 for eachviolation.

 

Each entity participatingin the management of a licensee and each licensee must provide the PennsylvaniaCommission on an annual basis with a complete list of all holders of anownership interest in such entity or licensee, indicating the interest of each 

 

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such owner.

 

***Reports to Security Holders***

 

The Company is requiredto file annual, quarterly and other current reports and information with theCommission. You may read and copy any materials filed by the Company with theCommission at its Public Reference Room at 100 F Street, NE, Room 1580,Washington, D.C. 20549. You may obtain information on the operation of thePublic Reference Room by calling the Commission at 1-800-SEC-0330. TheCompany’s filings are also available to the public from commercial documentretrieval services and at the World Wide Web site maintained by the Commissionat http://www.sec.gov.

 

**Item2.    Description of Property.**

 

Neither the registrantnor any of its consolidated subsidiaries owns real property.

 

**Item3.    Legal Proceedings.**

 

As of March 31,2008, neither the Company nor any of its consolidated subsidiaries is a partyto any pending legal proceeding, and to their knowledge, no action, suit orproceeding against it or any of its consolidated subsidiaries has beenthreatened by any person.

 

As of March 31,2008, no director, officer, affiliate or security holder of the Company, and noowner of record or beneficially of more than five percent of the Company’s Class AMembership Units, is adverse to the Company or has a material interest adverseto the Company, in any material proceeding to which such person is a party.

 

**Item4.**  **Submission ofMatters to a Vote of Security Holders.**

 

No matters were submittedto a vote of security holders during the quarter ended December 31, 2007.

 

**PART II**

 

**Item5.    Market for Common Equity,Related Stockholder Matters and Small Business Issuer Purchases of EquitySecurities.**

 

On September 23,2005, the Company issued all of its Class A Membership Units to VoteCowithout registration pursuant to Section 4(2) of the Securities Actin exchange for an aggregate capital contribution of $100. On that same date,the Company issued all of its Class B Membership Units to InvestCo withoutregistration pursuant to Section 4(2) of the Securities Act inexchange for subsequent contributions by InvestCo of (1) all themembership units in LandCo, whose primary asset is its one-third equityinterest in NP Land, and (2) $64 million. Except as described immediatelyabove, the Company has not issued any other securities.

 

No established publictrading market exists for the Company’s membership units. There are no plans,proposals, arrangements or understandings with any person with regard to thedevelopment of a trading market in any of the Company’s membership units.  In addition, the Final Order prohibitsVoteCo, InvestCo and their respective affiliates from selling, assigning,transferring, pledging or otherwise disposing of the Company’s Class AMembership Units or Class B Membership Units or any other securityconvertible into or exchangeable for Class A Membership Units or Class BMembership Units, without the prior approval of the Nevada Commission.

 

There are no outstandingoptions or warrants to purchase, or securities convertible into, the Company’smembership units.  The Company’scurrently outstanding Class A Membership Units are “restricted,” whichmeans that they were originally sold in offerings that were not subject to aregistration statement filed with the Commission.  Accordingly, the Company’s membership unitsare subject to sale in the public market pursuant to Rule 144 under theSecurities Act, including the limitations set forth therein. Effective February 15,2008, Rule 144 generally permits a person or persons whose membershipunits are aggregated and who has beneficially owned restricted membership unitsfor at least six months to sell in the public market within any three-monthperiod a number of membership units that does not exceed the greater of:

 

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·                  1% of the then outstanding membershipunits of the class of membership units to be sold; or

 

·                  if applicable, the average weekly tradingvolume of the class of membership units to be sold on all national securitiesexchanges and/or reported through the automated quotation system of aregistered securities association during the four calendar weeks preceding thedate on which notice of sale is filed with the Commission.

 

Sales pursuant to Rule 144under the Securities Act are subject to restrictions relating to the manner ofsale, notice and availability of current public information about theCompany.  The Company has not agreed withany security holder to register any of its membership units for sale by anysecurity holder.  The Company does notcurrently propose to publicly offer any membership interests of its commonequity.

 

As of March 31,2008, VoteCo was the only holder of record of the Company’s Class AMembership Units and InvestCo was the only holder of record of the Company’s Class BMembership Units.

 

The Company does not pay,and does not expect to pay in the foreseeable future, any dividends or otherdistributions with respect to its membership units.

 

The Company does not haveany equity compensation plans and does not expect to authorize securities forissuance pursuant to any equity compensation plans in the foreseeable future.

 

**Item6.    Management’s Discussion andAnalysis.**

 

***Overview***

 

Thefollowing management’s discussion and analysis of the Company’s financialcondition and results of operations should be read in conjunction with theaudited financial statements and the notes thereto included in Part II,Item 7 of this Annual Report on Form 10-KSB.

 

TheCompany’s current business consists primarily of its ownership of a 42% equityinterest in CCR and a 33-1⁄3% equity interest in NP Land. CCR operatestwo Las Vegas casinos, The Cannery and the Rampart Casino, and The Meadows, aharness racetrack in Pennsylvania where it is constructing a more permanentcasino. In addition, CCR operated the Nevada Palace until February, 29,2008.  NP Land owns the land of thecurrent site of the Nevada Palace.

 

***OperationsAnalysis***

 

OnSeptember 22, 2006, the Company, through a subsidiary, acquired a 33-1⁄3% equity interest in CCR and a 33-1⁄3% equity interest in NP Land, in exchange for cancellation of loans of$64 million and $4,282,454, and accrued interest of $5,470,685 and$502,631, respectively.  The Company’s acquisition of the 33-1⁄3% equity interest in CCR and a 33-1⁄3% equity interest in NP Land was completedpursuant to the terms and conditions of the CUP Agreement.  For more information about the CUP Agreement,see “Item 1 — Description of the Business — The Company — Acquisition of EquityInterest in CCR and NP Land; Acquisition of The Meadows.”

 

OnNovember 14, 2006, the Company, through a subsidiary, contributed anadditional $50 million to CCR in exchange for additional equity interests,increasing its equity interest in CCR from 33-1⁄3% to42%.  For the year ended December 31,2006, the Company’s equity in the earnings of CCR and NP Land totaled $722,184and $136,544, respectively.  For the yearended December 31, 2007, the Company’s equity in earnings of CCR and NPLand totaled $578,420 and $508,663, respectively.  Also in the year ended December 31,2007, the Company received distributions from CCR and NP Land of $1,030,000 and$405,000, respectively.

 

Monthlyrental expense paid by the Nevada Palace to NP Land increased from $163,600 to$192,500 as of June 30, 2007, due to the acquisition of land adjacent tothe existing facility.

 

Consolidatednet income of CCR and its subsidiaries for 2007 decreased $11.5 million (89.3%)to $1.4 million as compared to $12.9 million for the year ended December 31,2006.  The decrease is a result of, amongother items, increases in loss on the extinguishment of debt ($12.1 million)and interest expense ($15.6 million), primarily related to refinancing creditfacilities that occurred in May 2007, and estimated income tax expense forfederal and state income taxes ($4.5 million), offset by increases in operatingincome ($16.6 million), gain on disposition of an investment ($2.7 million) andincreased interest 

 

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income($2.3 million).

 

Consolidatedrevenues of CCR and its subsidiaries for 2007 increased $138.2 million (73.1%)to $327.3 million as compared to $189.1 million for the year ended December 31,2006.  The increase is primarily theresult of opening a temporary casino facility at The Meadows on June 16,2007, and to a lesser extent, from a full year of operations at the NevadaPalace.  Such increases were partiallyoffset by an 8.9% decline in revenues at the Rampart Casino.  Revenues from the Rampart Casino continue tobe negatively impacted by increased competition.

 

Consolidatedoperating income of CCR and its subsidiaries for 2007 increased $16.6 million(66.7%) to $41.4 million as compared to $24.8 million for the year ended December 31,2006.  The increase in consolidatedoperating income is a result of increased consolidated net revenue as notedabove offset by operating expenses as well as pre-opening expenses of $4.6million at The Meadows.

 

***Liquidity andCapital Resources***

 

Forthe years ended December 31, 2006 and 2007, the Company incurred costsassociated with the CUP Agreement totaling $2.7 million and $1.7 million,respectively.  These costs were partiallyfunded by in-substance distributions from CCR of $3.0 million in 2006.

 

At the request and forthe convenience of the Company, substantially all of the disbursements of theCompany and its consolidated subsidiaries for operating expenses through June 30,2007 were made by InvestCo and/or its beneficial owners directly to vendors andinvestees, and distributions from the Company’s investees are received directlyby the Company’s members.

 

***Off BalanceSheet Arrangements***

 

*Credit Agreements*

 

On May 18 2007, CCR entered into two newsyndicated credit facilities totaling $860 million: a $745 million first lienfacility and a $115 million second lien term loan facility (collectively, the “*Credit Agreements*”). The proceeds were used primarily to retire existing debt, including thethen-existing $250 million credit facility. The remainder of the proceeds from the borrowing are being used topartially fund the construction of the permanent casino facility at The Meadowsand the completion of the Eastside Cannery. For more information about the syndicated credit facilities, see theCompany’s periodic filing on Form 8-K filed with the SEC on May 24,2007.

 

CCR’s obligations under theCredit Agreements are guaranteed by its subsidiaries on a secured basis and aresecured by substantially all of the real and personal property of CCR and itssubsidiaries, except that certain gaming-related accounts and assets will notbe pledged under the Credit Agreements.

 

*AdditionalConditional Commitment - PA Meadows Transaction*

 

Until May 18, 2007, the Company was conditionallycommitted to make up to an additional $25 million of equity investment in CCRto support the operational needs of CCR’s subsidiary, PA Meadows, but only incertain limited circumstances and only to the extent not previously funded.

 

By way of background, on July 26,2006, CCR, through PA Meadows, acquired all of the capital stock in entitiesowning and operating The Meadows harness racetrack and issued to the seller anote for $175 million to secure a cash purchase price obligation, and a notefor $25 million to secure a holdback obligation. The acquisition was pursuantto two agreements: (i) a Stock Purchase Agreement between PA Meadows andMEC, dated November 8, 2005, as amended by a first amendment dated July 26,2006, and (ii) a Post-Closing and Note Issuance Agreement dated July 26,2006 by and between PA Meadows, MEC and the parties named therein.  On November 14, 2006, PA Meadows paid$175 million in cash and delivered a $25 million holdback agreement to MEC, infull satisfaction of the notes issued to MEC on July 26, 2006.  The acquisition was financed by a $50 millionequity contribution from the Company to CCR and proceeds from two syndicatedcredit facilities.  In exchange for theCompany’s $50 million equity contribution, CCR issued additional equityinterests, causing the Company’s percentage ownership in CCR to increase from33-1⁄3% to 42%.

 

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***CriticalAccounting Estimates and Policies***

 

Althoughthe Company’s consolidated financial statements necessarily make use of certainaccounting estimates by management, we believe no matters are the subject ofsuch estimates that are so highly uncertain or susceptible to change or requirethe exercise of substantial judgment by management as to present a significantrisk of a material impact on its financial condition or results of operations.Moreover, except as discussed below, the Company does not now employ anycritical accounting policies that are selected from among availablealternatives or require the exercise of significant management judgment toselect or apply.

 

*Gamingand related licenses*

 

Professionalfees and other costs associated with the applications for licensure of theCompany and its consolidated subsidiaries and certain of its beneficial owners,including payments to regulatory agencies, have been capitalized pursuant toguidelines contained in para. 2.06 of the American Institute of CertifiedPublic Accountants’ Audit and Accounting Guide, *Audits ofCasinos*.  These fees and costshave been treated as indefinite life intangible assets pursuant to Statement ofFinancial Accounting Standard No. 142, *Goodwill and OtherIntangible Assets*, based on expectations at the time the costs wereincurred and capitalized that such licenses would be granted (as theysubsequently have been), that they would enable the Company and/or itsconsolidated subsidiaries to hold direct and indirect ownership interests ingaming enterprises, and, therefore, that it was and is probable that they willbenefit future periods through continued profitable operations of its investeeentities and resultant expected increases in the value of its investmentstherein and cash distributions therefrom.

 

Suchassets are evaluated at least annually (and more frequently when circumstanceswarrant) to determine if events or changes in circumstances indicate that theprobability that such assets will continue to benefit future periods might havebeen impaired. Examples of such events or changes in circumstances that mightindicate impairment of these assets might include an active or likelyregulatory threat to the availability or viability of a license, specifically,as a result of (i) non-compliance with regulations, (ii) an adversechange in the legal, regulatory or business climate relative to gamingnationally or in the jurisdiction, or (iii) a significant long termdecline in historical or forecasted earnings or cash flows of the investee orthe fair value of its property or business possibly as a result of competitiveor other economic or political factors. As of December 31, 2007, based on our evaluation, there has been noimpairment to these assets.

 

***RecentAccounting Pronouncements***

 

In September 2006,the Financial Accounting Standards Board (“*FASB*”) issuedSFAS No. 157, *Fair Value Measurements*,which address how companies should measure fair value when they are required touse a fair value measure for recognition or disclosure purposes under generallyaccepted accounting principals (GAAP) and provides a consistent definition offair value throughout accounting standards. SFAS No. 157 is effective forfinancial assets for fiscal years beginning after November 15, 2007, andis effective for non-financial assets, one year later.  In February 2007, the FASB issued SFAS159, *The Fair Value Option for Financial Assets and FinancialLiabilities—Including an amendment of FASB Statement No. 115,*whichwill permit the option of choosing to measure certain eligible items at fairvalue at specified election dates (but only for assets for which SFAS 157 isbeing applied) and report unrealized gains and losses in earnings.  Additional disclosures maybe required aboutthe input used to develop the measurements and the effect of certain of themeasurements on changes in net assets for the period.  Accordingly, the Company has determined theadoption of SFAS Nos. 157 and 159 will not have material effect on itsfinancial statements.

 

In December 2007,the FASB issued SFAS No. 160, *“Noncontrolling Interests in ConsolidatedFinancial Statements—an amendment of ARB No. 51”*. SFAS 160 requires companies withnoncontrolling interests to disclose such interests clearly as a portion ofequity but separate from the parent’s equity. The noncontrolling interest’sportion of net income must also be clearly presented on the Income Statement.SFAS 160 is effective for financial statements issued for fiscals yearsbeginning after December 15, 2008. Since we do not now have nor do we contemplate any arrangements withsubsidiaries or consolidated variable interest entities with non controllinginterest, we do not expect that the adoption of SFAS 160 will have a materialimpact on our financial condition or results of operation.

 

InDecember 2007, the FASB issued SFAS No. 141 (R), *“Business Combinations (revised 2007)”* (“*SFAS No. 141 (R)*”). SFAS 141 (R) appliesthe acquisition method of accounting for business combinations established inSFAS 141 to all acquisitions where the acquirer gains a controlling interest,regardless of whether consideration was exchanged. Consistent with SFAS 141,SFAS 141 (R) requires the acquirer to fair value the assets andliabilities of the acquiree and record goodwill on bargain purchases, with maindifference the application to all acquisitions where control is achieved. SFAS141 (R) is effective for financial statements issued for fiscal yearsbeginning after December 15, 2008 and will be adopted by the Company inthe first quarter of fiscal year 2009. We do not expect that the adoption of SFAS No. 141 (R) willhave a material 

 

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impacton our financial condition or results of operation, however, since we do notpresently contemplate any business combinations or other covered transactions.

 

**Item7.** **FinancialStatements.**

 

The financial statementsand supplementary data of the Company called for by this item are submittedunder a separate section of this annual report. Reference is made to the Index of Financial Statements contained on page F-1hereof.

 

**Item8.** **Changes In andDisagreements With Accountants on Accounting and Financial Disclosure.**

 

None.

 

**Item8(A)T. Internal Control over Financial Reporting.**

 

**Evaluationof Disclosure Controls and Procedures**

 

As of the end of theperiod covered by this annual report, the Company carried out an evaluation,under the supervision and with the participation of the Company’s management,including the Company’s principal executive officer and principal financialofficer, of the effectiveness of the design and operation of the Company’sdisclosure controls and procedures pursuant to Rule 13a-15(b) of theExchange Act. Based upon that evaluation, the principal executive officer andprincipal financial officer concluded that the Company’s disclosure controlsand procedures are effective.

 

**Management’sAnnual Report on Internal Control Over Financial Reporting**

 

Management is responsiblefor establishing and maintaining adequate internal control over financialreporting as defined in Rule 13a-15(f) under the Exchange Act.  This rule defines internal control overfinancial reporting as a process designed by, or under the supervision of, theCompany’s principal executive officer and principal financial officer, toprovide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordancewith U.S. GAAP. Our internal control over financial reporting includes thosepolicies and procedures that:

 

·                  Pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the Company;

 

·                  Provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financialstatements in accordance with U.S. GAAP, and that receipts and expenditures ofthe Company are being made only in accordance with authorizations of managementof the Company; and

 

·                  Provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use or dispositionof the Company’s assets that could have a material effect on the financialstatements.

 

The Company’s management,including the Company’s principal executive officer and principal financialofficer, does not expect that its disclosure controls and procedures, or itsinternal controls will prevent all error and all fraud.  A control system, no matter how wellconceived and operated, can provide only reasonable, not absolute, assurancethat the objectives of the control system are met.  The effectiveness of any system of internalcontrol over financial reporting is subject to inherent limitations, includingthe exercise of judgment in designing, implementing, operating and evaluatingthe controls and procedures.  Because ofits inherent limitations, internal control over financial reporting may notprevent or detect misstatements. In addition, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may becomeinadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.

 

Management has evaluatedthe effectiveness of its internal control over financial reporting as of December 31,2007, based on the control criteria established in a report entitled *Internal Control—Integrated Framework*,issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO).  That framework defines amaterial weakness as a control deficiency, or combination of controldeficiencies, that results in more than a remote likelihood that a materialmisstatement of the annual or interim financial statements will not beprevented or detected. Based upon that evaluation, our management concludedthat the Company’s internal control over financial reporting is effective.

 

This annual report doesnot include an attestation report of the Company’s registered public accountingfirm regarding internal control over financial reporting.  Management’s report was not subject toattestation by the Company’s registered public 

 

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accounting firm pursuantto temporary rules of the Commission that permit the Company to provideonly management’s report in this annual report.

 

**Changesin Internal Control over Financial Reporting**

 

We have made nosignificant change in our internal control over financial reporting during themost recent fiscal quarter covered by this annual report on Form 10-KSBthat has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

 

**Item8B.** **Other Information.**

 

Not Applicable.

 

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**PART III**

 

**Item9.** **Directors, Executive Officers, Promoters and ControlPersons; Compliance with Section 16(a) of the Exchange Act.**

 

As of March 31,2008, the managers of the Company and of CCR are as follows:

 
| **Name**          | ** ** | **Age** | ** ** | **Position**                           |
|-------------------|------------|---------|------------|----------------------------------------|
| Stephen A. Kaplan |       | 49      |       | Manager of the  Company & CCR |
| Ronald N. Beck    |       | 52      |       | Manager of the  Company & CCR |
| William Paulos    |       | 60      |       | Manager of CCR                         |
| William Wortman   |       | 61      |       | Manager of CCR                         |

 

STEPHEN KAPLAN has servedas a Manager of the Company since its inception and as manager of CCR and a memberof its management committee since September 2006, and is expected tocontinue in these roles. Mr. Kaplan is a Principal at Oaktree and is theworldwide head of Oaktree’s Principal Group. In 1995, Mr. Kaplan foundedOaktree along with six other principals. Mr. Kaplan graduated with a B.S.degree in Political Science summa cum laude from the State University of NewYork at Stony Brook and a J.D. from the New York University School of Law.

 

RONALD BECK has served asa Manager of the Company since its inception and as manager of CCR and a memberof its management committee since September 2006, and is expected tocontinue in these roles.  Mr. Beckis a Managing Director of Oaktree and joined Oaktree in 2000.  Mr. Beck is a co-portfolio manager ofOaktree’s Principal Group.  Mr. Beckgraduated with a B.A. degree in Economics from Stanford University, a J.D. fromStanford Law School and an M.B.A. from Stanford’s Graduate School of Business.

 

WILLIAM J. PAULOS hasserved as manager of CCR and a member of its management committee since May 2001.Mr. Paulos established Millennium Management Group, LLC in September 1996with Mr. Wortman and has served as its Chief Executive Officer since itsinception. Millennium Management Group, LLC is currently a consultant to theGreektown Casino in Detroit. From January 1995 to September 1996, Mr. Pauloswas President of Primadonna Resorts, Inc. which, through subsidiaries,owned and operated various casino hotel properties including Buffalo Bill’s,Whiskey Pete’s, the Primm Valley Inn and Resort and New York-New York CasinoResort. From March 1994 to January 1995, Mr. Paulos was theChief Operating Officer of Crown Casino Limited.

 

WILLIAM C. WORTMAN hasserved as manager of CCR and a member of its management committee since May 2001.Mr. Wortman established Millennium Management Group, LLC in September 1996with Mr. Paulos and has served as its President since its inception. In1985, Mr. Wortman became an owner in the Nevada Palace, which he continuesto own. Mr. Wortman has also served as President of Nevada First Bankcorpsince 1999, and has served as Vice-Chairman of the Board of Nevada 1st Banksince 1997. From 1993 to 1994, Mr. Wortman served as Chairman and ChiefExecutive Officer of Palace Casinos, Inc.

 

The Company’s namedexecutive officers are Mr. Kaplan and Mr. Beck, who receive nocompensation for their services as Managers. The Company has no directors.

 

The Company was foundedby the VoteCo Equityholders for the primary purpose of participating in variousactivities relating to the gaming industry. Seven of the VoteCo Equityholdersare principals of Oaktree and one is a managing director of Oaktree. None wouldbe considered independent under the NASDAQ Stock Market listing standards. TheVoteCo Equityholders did not receive any direct consideration or othercompensation in connection with their activities in founding the Company.

 

***Corporate Governance***

 

*TheCompany*

 

Pursuant to the Company’slimited liability company agreement, the Company is managed by two Managers, eachof whom is appointed, and may be removed, by VoteCo as the holder of Class AMembership Units. The two current Managers of the Company are Messrs. Kaplanand Beck. The Company’s Managers cannot take and cannot cause the Company totake the 

 

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following actions withoutthe approval of VoteCo as the holder of Class A Membership Units:

 

·                  any material change in the business purpose of theCompany or the nature of the business;

 

·                  any action that would render it impossible to carry onthe ordinary business of the Company;

 

·                  any removal or appointment of any Manager of theCompany;

 

·                  any voluntary withdrawal of any member from theCompany;

 

·                  any assignment for the benefit of creditors, anyvoluntary bankruptcy of the Company, or any transaction to dissolve, wind up orliquidate the company, or

 

·                  any transaction between the Company and any member orManager of the Company, or any affiliate or direct family member of any memberor Manager of the Company, that is not made on an arm’s-length basis.

 

Generally, in all otherrespects, VoteCo has no power or authority to participate in the management ofthe Company or to bind or act on behalf of the Company in any way or to renderit liable for any purpose.  Except asotherwise expressly required by applicable law, InvestCo as the sole holder ofthe Company’s Class B Membership Units has neither any right to vote onany matters to be voted on by the members of the Company, nor any power orauthority to participate in the management of the Company or bind or act onbehalf of the Company in any way or render it liable for any purpose.

 

Because the Company hasconducted no operations other than in connection with the ownership of equityinterests in CCR and NP Land, the Company currently has no separatelydesignated audit, nominating or compensation committee or committee performingsimilar functions, and the Company does not have an audit committee financialexpert.  Preparation of the Company’sfinancial statements is performed by an outside consultant, on a contractualbasis, and supervised by the Company’s Managers.

 

*CCR*

 

In connection with theCompany’s acquisition of its equity interest in CCR, AcquisitionCo andMillennium executed an amended and restated form of operating agreement. Underthe terms of the amended and restated operating agreement, CCR has a managementcommittee composed of four managers, two designated by AcquisitionCo and twodesignated by Millennium. AcquisitionCo designated Messrs. Kaplan and Beckas its initial managers, and Millennium designated Messrs. Paulos andWortman as its initial managers. Other than powers expressly delegated to MMGII in its management of CCR’s casino properties, all powers to control andmanage the business and affairs of CCR are vested in the Management Committee.Managers are required to be licensed or found suitable by the relevant Nevadagaming authorities in order to engage in the management of CCR. For furtherinformation about licensing and suitability requirements, see “Item 1.Regulatory Matters—Nevada Gaming Laws and Regulations”.

 

***Compliance with Section 16(a) of the Exchange Act***

 

The Company voluntarilyregistered its Class A Membership Units pursuant to Section 12(g) ofthe Securities Exchange Act of 1934 by filing a registration statement on Form 10-SBon June 9, 2006.  The registrationbecame effective automatically 60 days later on August 8, 2006. StephenKaplan, Ronald Beck, John Frank, Bruce Karsh, David Kirchheimer, Howard Marks,Richard Masson and Sheldon Stone each filed an Initial Statement of BeneficialOwnership of Securities on Form 3 on August 16, 2006, which filingwas not timely.

 

***Code of Ethics.***

 

We have adopted a code ofethics as described in Item 406 of Regulation S-B.  We will provide to any person without charge,upon request, a copy of our code of ethics. Requests may be sent to OCM HoldCo,L.P., c/o Oaktree Capital Management, L.P., 333 South Grand Avenue, 28th Floor,Los Angeles, California  90071.

 

**Item10. Executive Compensation.**

 

Messrs. Kaplan andBeck, the Company’s named executive officers, are not entitled to compensationfrom the Company for 

 

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any services rendered toor on behalf of the Company, or otherwise, in their capacities as Managers ofthe Company, and since the inception of the Company have received no suchcompensation.  The Company’s Managers areentitled to reimbursement from the first available funds of the Company fordirect out-of-pocket costs and expenses incurred on behalf of the Company thatdirectly relate to the business and affairs of the Company.

 

The VoteCo Equity holdersdid not receive any direct consideration or other compensation in connectionwith their activities in founding the Company.

 

**Item11. Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters**

 

The Company has no equitycompensation plans.

 

The following table setsforth, as of March 31, 2008, information regarding the beneficialownership of the Company’s voting securities by all persons known to be thebeneficial owners of more than 5% of any voting class of Company securities.

 
| **Title of Class of Securities** | ** ** | **Name of  Beneficial Owner (1)** | ** ** | **Amount and Nature of  Beneficial Ownership** | ** ** | **Percent of Class** | ** ** |
|------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------------------------|------------|--------------------------------|------------|
| Class A Units                                   |       | OCM VoteCo, LLC                                  |       | .100 Units                                                         | (3)        | 100                            | %(3)       |
| Class A Units                                   |       | Stephen Kaplan(4)                                |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A Units                                   |       | Ronald Beck(4)                                   |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A Units                                   |       | John Frank                                       |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A Units                                   |       | Bruce Karsh                                      |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A Units                                   |       | David Kirchheimer                                |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A Units                                   |       | Howard Marks                                     |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A Units                                   |       | Richard Masson                                   |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A Units                                   |       | Sheldon Stone                                    |       | .100 Units                                                         | (5)        | 100                            | %(5)       |

 

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(1)                The address for each beneficial owner is:

 

c/o OaktreeCapital Management, L.P.

333 South GrandAve, 28th  Floor

Los Angeles, CA90071

 

(2)                Beneficial ownership is determined in accordance withthe Exchange Act, as amended, and the rules and regulations promulgatedthereunder.

 

(3)                VoteCo directly owns 100% of the Company’s Class AMembership Units.

 

(4)                Messrs. Kaplan and Beck are the managers ofVoteCo and the Company.

 

(5)                Stephen Kaplan, Ronald Beck, John Frank, Bruce Karsh,David Kirchheimer, Howard Marks, Richard Masson and Sheldon Stone are each avoting member of VoteCo holding 12.5 VoteCo units. These individuals may bedeemed to form a “group” holding all 100 VoteCo units and, as a result, eachsuch individual may be deemed to be a beneficial owner of the .100 Class AMembership Units of the Company directly held by VoteCo.

 

None of the Class AMembership Units beneficially owned by the persons listed in the table abovehave been pledged as security.

 

The following table setsforth, as of March 31, 2008, information regarding the beneficialownership by all Managers of the Company, named individually and as a group, ofany class of equity securities of the Company, the Company’s parent or theCompany’s subsidiaries.

 

23

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| **Title of Class of Securities** | ** ** | **Name of  Executive  Officer Holding  Securities(1)** | ** ** | **Amount and Nature of  Beneficial Ownership(2)** | ** ** | **Percent of Class** | ** ** |
|------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|--------------------------------|------------|
| VoteCo Units                                         |       | Stephen Kaplan(3)                                                          |       | 12.5 Units                                                            | (4)        | 12.5                           | %(4)       |
| Company Class A  Units                          |       |                                                                       |       | .100 Units                                                            | (5)        | 100                            | %(5)       |
| Blocker Class A Units                                |       |                                                                       |       | 126,896.317 Units                                                     | (6)        | 100                            | %(6)       |
| AcquisitionCo  Class A Units                    |       |                                                                       |       | 1,000 Class A  Units                                             | (7)        | 100                            | %(7)       |
| LandCo Units                                         |       |                                                                       |       | 1,000 Units                                                           | (8)        | 100                            | %(8)       |
| AcquisitionCo II                                     |       |                                                                       |       | 100% equity interest                                                  | (9)        | 100                            | %(9)       |
| VoteCo Units                                         |       | Ronald Beck(3)                                                             | ** ** | 12.5 Units                                                            | (10)       | 12.5                           | %(10)      |
| Company Class A  Units                          |       |                                                                       |       | .100 Units                                                            | (5)        | 100                            | %(5)       |
| Blocker Units                                        |       |                                                                       |       | 126,896.317 Units                                                     | (6)        | 100                            | %(6)       |
| AcquisitionCo  Class A Units                    |       |                                                                       |       | 1,000 Class A  Units                                             | (7)        | 100                            | %(7)       |
| LandCo Units                                         |       |                                                                       |       | 1,000 Units                                                           | (8)        | 100                            | %(8)       |
| AcquisitionCo II                                     |       |                                                                       |       | 100% equity interest                                                  | (9)        | 100                            | %(9)       |
| VoteCo Units                                         |       | Executive Officers of the Company as a Group                               |       | 25 Units                                                              | (11)       | 25                             | %(11)      |
| Company Class A  Units                          |       |                                                                       |       | .100 Units                                                            | (5)        | 100                            | %(5)       |
| Blocker Units                                        |       |                                                                       |       | 126,896.317 Units                                                     | (6)        | 100                            | %(6)       |
| AcquisitionCo  Class A Units                    |       |                                                                       |       | 1,000 Class A  Units                                             | (7)        | 100                            | %(7)       |
| LandCo Units                                         |       |                                                                       |       | 1,000 Units                                                           | (8)        | 100                            | %(8)       |
| AcquisitionCo II                                     |       |                                                                       |       | 100% equity interest                                                  | (9)        | 100                            | %(9)       |

 

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(1)                The address for each beneficial owner is:

 

c/o OaktreeCapital Management, L.P.

333 South GrandAve, 28th  Floor

Los Angeles, CA90071

 

(2)                                  Beneficial ownership is determined inaccordance with the Exchange Act, as amended, and the rules andregulations promulgated thereunder.

 

(3)                                  Messrs. Kaplan and Beck are themanagers of VoteCo, the Company, OCM Blocker, LLC (“*Blocker*”), AcquisitionCo, LandCo and AcquisitionCo II.  Blocker is a direct subsidiary of the Companyand owns nothing other than its interest in AcquisitionCo.

 

(4)                                  Mr. Kaplan is the listed owner ofthe securities.

 

(5)                                  VoteCo is the listed owner of all .100Company Class A Membership Units.  Messrs. Kaplanand Mr. Beck each may be deemed to be a member of a “group” holding all100 VoteCo Units and, as a result, each of Mr. Kaplan and Mr. Beckmay be deemed to be a beneficial owner of all .100 Company Class AMembership Units directly held by VoteCo.

 

(6)                                  The Company is the listed owner of all126,896.317 Blocker Class A Units. Each of Messrs. Kaplan and Beckmay be deemed to be a member of a “group” holding all 100 VoteCo Units and, asa result, each of Mr. Kaplan and Beck may be deemed to be a beneficialowner of all 126,896.317 Blocker Class A Units directly held by theCompany.

 

(7)                                  Blocker is the listed owner of all 1,000AcquisitionCo Class A Membership Units. Mr. Kaplan and Mr. Beckeach may be deemed to be a member of a “group” holding all 100 VoteCo Unitsand, as a result, each of Messrs. Kaplan and Beck may be deemed to be abeneficial owner of all 1,000 AcquisitionCo Class A Membership Unitsdirectly held by Blocker.

 

(8)                                  AcquisitionCo is the listed owner of all1,000 LandCo Units.  Each of Messrs. Kaplanand Beck may be deemed to be a member of a “group” holding all 100 VoteCo unitsand, as a result, each of Messrs. Kaplan and Beck may be deemed to be abeneficial owner of all 1,000 LandCo Units directly held by AcquisitionCo.

 

24

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(9)                                  The Company is the listed owner of all ofthe equity interests of AcquisitionCo II. Each of Messrs. Kaplan and Beck may be deemed to be a member of a “group”holding all 100 VoteCo units and, as a result, each of Messrs. Kaplan andBeck may be deemed to be a beneficial owner of all of the equity interests ofAcquisitionCo II directly held by the Company.

 

(10)                            Mr. Beck is the listed owner of thesecurities.

 

(11)                            Messrs. Kaplan and Beck are each alisted owner of 50% of these securities.

 

None of the securitieslisted in the table above as beneficially owned by the Company’s Managers hasbeen pledged as security.

 

**Item12. Certain Relationships and Related Transactions.**

 

***Limited Liability and Indemnification under the Company’sLimited Liability Company Agreement and CCR’s Operating Agreement***

 

The Company’s limited liabilitycompany agreement provides that no member or Manager of the Company has anyliability for the obligations of the Company, except to the extent required bylaw. To the maximum extent authorized by law, the Company indemnifies anyperson from any loss, damage, claim or liability incurred by him, her or it asa result of any act or failure to act (other than as a result of fraud, grossnegligence or willful misconduct) performed or not performed by such person asa member, Manager, employee, agent or representative of the Company, includingattorneys’ fees, judgments, fines and amounts paid in settlement actually andreasonably incurred.

 

In addition, a Manager ofthe Company who performs his or her duties in good faith, in a manner he or shereasonably believes to be in the best interests of the Company and with suchcare as an ordinarily prudent person in a like position would use under similarcircumstances, does not have any liability by reason of being or having been aManager of the Company. Furthermore, a Manager of the Company is not liable, asManager of the Company, under any judgment, decree or order of court, or in anyother manner, for any debt, obligation or liability of the Company.

 

CCR’s operating agreementprovides that under certain circumstances CCR will indemnify any person who isan affiliate of AcquisitionCo who was or is a party or is threatened to be madea party to any threatened, pending or completed action, suit or proceeding, byreason of the fact that he, she or it was serving at the request of CCR as amanager, officer, employee or agent of CCR. CCR’s operating agreement alsoprovides that CCR will reimburse AcquisitionCo and its affiliates in connectionwith the development of gaming opportunities for CCR, at a cap of $250,000 perfiscal year of CCR, and will reimburse the expenses of managers of CCR servingon CCR’s management committee, including those managers who are affiliates ofAcquisitionCo, for certain out-of-pocket expenses reasonably attributable toCCR.

*** ***

***Other Transactions***

 

In February 2007, the Oaktree Funds, beneficial owners of the Company’snon-voting equity interests, agreed to support, through member contributions toCCR, letters of credit issued in favor of the Pennsylvania Department ofTransportation for an aggregate stated amount of approximately $18.3million.  Such support was transferred toPA Meadows during the second quarter of 2007. The Oaktree Funds received $382,000 from CCR as consideration forsupporting the letters of credit.

 

Until May 18,2007, the Company was conditionally committed to make up to an additional $25million of equity investment in CCR to support the operational needs of CCR’ssubsidiary, PA Meadows, but only in certain limited circumstances and only tothe extent not previously funded.

 

CCR has a receivable ofapproximately $16.2 million from NH Downs Holdings, LLC, a subsidiary ofInvestCo (“*NH Downs*”), in connection with thedevelopment of certain gaming opportunities in New Hampshire.

 

***Company’s Parent***

 

The Company’s only parentis VoteCo, which holds 100% of the voting securities of the Company.

 

***Transactions between CCR and its Promoters***

 

*Transactionsrelating to the Company’s Acquisition of its Equity Interests in CCR and NPLand*

 

The Company entered into certain transactions with Messrs. Paulosand Wortman in order to consummate the transactions contemplated by the CUPAgreement.  On September 30, 2005,the Company’s affiliates loaned the InvestCo NP Loans and the LandCo Loan toentities controlled by Mr. Wortman to enable Mr. Wortman, andentities controlled by him, to acquire from an unrelated third party all of theinterests not otherwise owned by him in the entities which own the land andassets relating to the Nevada Palace.  OnJanuary 5, 2006, the Company’s affiliates loaned to MGIM, LLC, a Nevadalimited liability company controlled by Messrs. Paulos and Wortman, theAcquisitionCo Loan and the InvestCo/MGIM Loan to enable MGIM, LLC to acquirefrom an unrelated third party a 331/3% interest in CCR for a total purchase price of $70 million.  All of these

 

25

----

 

 

 

loans, while outstanding,accrued interest at 12%, but in the case of the LandCo Loan and theAcquisitionCo Loan, interest was waived and considered additional investmentupon the consummation of the Company’s acquisition of its initial 331/3% equity interest in CCR and NP Land.  The InvestCo NP Loans were secured by all ofthe membership interests in NP Land and a related entity controlled by Mr. Wortman,and were also secured by the land and assets of the Nevada Palace.  The LandCo Loan was secured by pledges of themembership interests in an entity controlled by Mr. Wortman.  The AcqusitionCo Loan and the InvestCo/MGIMLoan were secured by pledges of all of the membership interests in CCR held byMGIM, LLC and Millennium, which pledges were subordinated to the pledge of suchinterests securing CCR’s then-existing credit agreement.  When the transactions contemplated by the CUPAgreement were consummated, all of the related security interests werereleased.

 

In September 2006,the Company, through its subsidiaries, acquired MGIM, LLC’s 331/3% equity interest in CCR in exchange for thecancellation of the $64 million AcquisitionCo Loan to MGIM, LLC, and a 331/3% equity interest in NP Land in exchange for thecancellation of the $4,282,454 LandCo Loan. The $10,607,245 InvestCo NP Loans and the $5,125,000 InvestCo/MGIM Loanwere repaid.  In addition, a wholly-ownedsubsidiary of CCR, Nevada Palace, LLC, entered into a lease with NP Land of the22 acres on which the Nevada Palace sits and will construct the EastsideCannery.  Nevada Palace, LLC alsoacquired from entities affiliated with Mr. Wortman gaming equipment andother operating assets for approximately $8 million and assumed approximately$1,340,000 of slot machine lease liabilities and $156,000 (accrued as part ofthe purchase price) of certain other liabilities directly associated with thecontinuation of operations of the Nevada Palace at the time its gaming assetswere sold to CCR.  The NP Land lease isfor a 35-year term at a fixed rental rate of $192,500 per month (as of June 30,2007), subject to periodic inflationary adjustments, and required a $3 millionsecurity deposit.

 

In addition to the loansand the NP Land lease, certain payments were made to Messrs. Paulos andWortman in connection with the transactions contemplated by the CUPAgreement.  The Company and Millenniumare generally responsible for their respective expenses in connection with theCUP Agreement.  Each agreed to takein-substance equalizing distributions from CCR of $3 million and $6 million,respectively, which were applied by the Company to the Company’s obligations,including consulting fees ($1,996,155) and amounts due to beneficial owners($1,003,845), and by Millennium to pre-existing indebtedness.  In addition, in 2006 entities controlled by Mr. Wortmanwere reimbursed for approximately $2.3 million, respectively, of costs andexpenses incurred by them primarily in connection with the development of theEastside Cannery.   In 2006, these costsand expenses included $1.9 million of expenses incurred in connection withmoving certain power lines relating to the development of the Eastside Cannery,$265,000 in legal and professional fees relating to the CUP Agreement, $155,000in title fees and approximately $80,000 in architectural and similar fees inconnection with construction of the Eastside Cannery.

 

Other than the $6 milliondistribution to Millennium and the $2.3 million reimbursement to entitiescontrolled by Mr. Wortman, there have been no payments by CCR or itsaffiliates to Messrs. Paulos or Wortman or their affiliates for fees,expenses or other amounts paid or payable in connection with the transactionsrelating to the CUP Agreement, except amounts paid for business expensesreimbursed in the ordinary course.

 

For additionalinformation concerning the transactions relating to the CUP Agreement, see “Item1. Description of Business — The Company — Acquisition of Equity Interests inCCR and NP Land; Acquisition of The Meadows.”

 

*OtherTransactions*

 

Relatives of Messrs. Paulosand Wortman provide CCR with Automated Teller Machines (“*ATM*”) processing services.  CCR received combined commissions of$2,042,528, $1,178,384, $1,032,805 and $843,953 in 2007, 2006, 2005 and 2004respectively, pursuant to separate agreements with CCR’s casinos.  Under these agreements, the providers receivethe exclusive 

 

26

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right to provide cashadvance and ATM processing services at predetermined customer rates in returnfor providing, maintaining and keeping supplied ATMs at each location.  Each agreement has an initial term thatexpires in 2011, followed by five one-year renewals that are automatic unlesseither party gives 90 days’ notice.

 

CCR has purchasedpromotional merchandise utilized for casino marketing and as customerincentives from an affiliate of Millennium and a company where a relative of Mr. Pauloshas a financial interest.  CCR incurredaggregate costs of $2,635,801 and $4,285,463 in 2007 and 2006, respectively, inconnection with such purchases.

 

CCR has contracted withMGIM II, an affiliate of Millennium, to operate and manage the Rampart Casinoand The Cannery.  Under the terms ofthese agreements, which expire in 2012, MGIM II receives $2 million and $1 million,respectively, for managing the Rampart Casino and The Cannery.  In addition, CCR is responsible for alldirect costs, fees or expenses incurred by MGIM II on behalf of the casinos forthe provision of management services. CCR paid MGIM II $3 million in 2007, 2006 and 2005 in connection withthese arrangements.  Under the terms ofthe current management agreement, MGIM II is paid annually $1 million formanagement services with respect to The Cannery, $2 million for management serviceswith respect to the Rampart Casino, and an amount equal to 4% of EBITDA, but inno event less than $750,000, with respect to the Nevada Palace and any othernew casino operations that CCR may in the future open, including the EastsideCannery.

 

During the Company’s lastfiscal quarter of 2007, Mr. Wortman incurred certain obligations inconnection with the development of certain gaming opportunities in NewHampshire.  In connection with pursuingsuch opportunities, NH Downs has a receivable of approximately $8.4 millionfrom Mr. Wortman.

 

On July 15, 2006,CCR executed with Millennium a 10-year lease of an executive office buildingand adjacent parking spaces. The lease is for a fixed rental rate of $32,000per month, subject to periodic inflationary adjustments, and grants Millenniumtwo 5-year renewals.

 

The management of CCRbelieves that the transactions relating to the ATM processing services, theprovision of promotional merchandise, the executive office lease and theoperation and management of the Rampart Casino and The Cannery, are on termsthat are substantially similar to terms that would be available to unaffiliatedthird parties and are expected to continue in the future.

 

Effective January 1,2006, an affiliate of one of the Company’s members provides the Company withcertain administrative support services for an annual fee of $75,000, based onhourly rates of assigned personnel.

 

**Item13. Exhibits.**

 

Please see the Index ofExhibits beginning on page E-1 herein.

 

**Item14. Principal Accountant Fees and Services.**

 

***Audit Fees:***

 

For 2007 and 2006, weincurred audit and financial statement review fees totaling $135,749 and$76,276, respectively, to Piercy Bowler Taylor & Kern, our independentregistered public accounting firm.

 

***Audit-Related Fees:***

 

For 2007 and 2006, weincurred fees totaling $135,749 and $73,246, respectively, to Piercy BowlerTaylor & Kern, Certified Public Accountants, for assurance and relatedservices reasonably related to the performance of audit and financial statementreview.

 

***Tax Fees:***

 

For 2007 and 2006, weincurred no tax preparation fees to Piercy Bowler Taylor & Kern,Certified Public Accountants.

 

***All Other Fees:***

 

For 2007 and 2006, weincurred no other fees to Piercy Bowler Taylor & Kern, CertifiedPublic Accountants, for products and 

 

27

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services other than theservices reported above.

 

***Audit Committee Policies and Procedures:***

 

We do not currently havean audit committee. The foregoing services were pre-approved by our Managers.

 

28

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** **

**SIGNATURES**

 

In accordance with Section 13or 15(d) of the Exchange Act, the registrant has caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.

 
| **DATE:**           | **OCM  HoldCo, LLC** |
|---------------------|----------------------|
| ** **          | ** **           | ** ** |
| March 31, 2008 | By:                  | /s/*Stephen A. Kaplan* |
|                |                 |   |
|                |                 | Stephen A. Kaplan |
|                |                 | Manager |

 

In accordance with theExchange Act, this report has been signed below by the following persons onbehalf of the registrant and in the capacities and on the dates indicated.

 
| **Signatures**         | ** ** | **Title**  | ** ** | **Date**            |
|------------------------|------------|------------|------------|---------------------|
| ** **             | ** ** | ** ** | ** ** | ** **          |
| /s/*Stephen A. Kaplan* |       | Manager    |       | March 31, 2008 |
| Stephen A. Kaplan      |       |       |       |                |
|                   |       |       |       |                |
| /s/*Ronald N. Beck*    |       | Manager    |       | March 31, 2008 |
| Ronald N. Beck         |       |       |       |                |

 

S-1

----

 
| **EXHIBIT NUMBER** | ** ** | **INDEX OF  EXHIBITS**                                                                                                                                                                                                                        |
|--------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1                |       | First Amendment and  Restatement of Contribution and Unit Purchase Agreement, dated as of  December 23, 2005 (1)                                                                                                                         |
| 3.1                |       | Amended and Restated  Certificate of Formation, dated as of December 1, 2005 (1)                                                                                                                                                         |
| 3.2                |       | Limited Liability  Company Agreement, dated as of September 23, 2005 (1)                                                                                                                                                                 |
| 10.1               |       | Rampart Casino Sublease  Agreement, dated April 1, 2002 (2)                                                                                                                                                                              |
| 10.2               |       | Rampart Management  Agreement, dated April 1, 2002 (3)                                                                                                                                                                                   |
| 10.3               |       | Cannery Management  Agreement, dated May 2002 (3)                                                                                                                                                                                        |
| 10.4               |       | LandCo Loan Agreement,  dated as of September 30, 2005 (1)                                                                                                                                                                               |
| 10.5               |       | InvestCo/Esquire Loan  Agreement, dated as of September 30, 2005 (2)                                                                                                                                                                     |
| 10.6               |       | InvestCo/Nevada Palace  Loan Agreement, dated as of September 30, 2005 (2)                                                                                                                                                               |
| 10.7               |       | Stock Purchase  Agreement, dated as of November 8, 2005, between Magna Entertainment Corp.  and PA Meadows, LLC (1)                                                                                                                      |
| 10.8               |       | AcquisitionCo Loan  Agreement, dated as of January 5, 2006 (1)                                                                                                                                                                           |
| 10.9               |       | InvestCo/MGIM Loan  Agreement, dated January 5, 2006 (2)                                                                                                                                                                                 |
| 10.10              |       | Limited Continuing  Guarantee, dated January 5, 2006 (2)                                                                                                                                                                                 |
| 10.11              |       | Credit Agreement, dated  as of January 5, 2006 (2)                                                                                                                                                                                       |
| 10.12              |       | Lease Agreement, dated  July 15, 2006, between Millennium Gaming, Inc. and Cannery Casino  Resorts, LLC (4)                                                                                                                         |
| 10.13              |       | Rampart Financial  Services Agreement, dated June 18, 2006 (3)                                                                                                                                                                           |
| 10.14              |       | Cannery Financial  Services Agreement, dated June 18, 2006 (3)                                                                                                                                                                           |
| 10.15              |       | First Amendment to  Stock Purchase Agreement, dated July 26, 2006 (2)                                                                                                                                                                    |
| 10.16              |       | Racing Services  Agreement, dated July 26, 2006 (2)                                                                                                                                                                                      |
| 10.17              |       | Post-Closing and Note  Issuance Agreement, dated July 26, 2006 (2)                                                                                                                                                                       |
| 10.18              |       | Equity Commitment  Letter Agreement, dated July 26, 2006 (2)                                                                                                                                                                             |
| 10.19              |       | Form of Amended  and Restated Operating Agreement for Cannery Casino Resorts, LLC (1)                                                                                                                                                    |
| 10.20              |       | Form of Ground  Lease between Nevada Palace, LLC and NP Land, LLC (2)                                                                                                                                                                    |
| 10.21              |       | Form of Omnibus  Management Agreement between Cannery Casino Resorts, LLC, and Millennium  Management Group II, LLC (2)                                                                                                                  |
| 10.22              |       | Amendment to Continuing  Guaranty, dated as of September 22, 2006 (4)                                                                                                                                                                    |
| 10.23              |       | First Lien Credit  Agreement, dated as of November 14, 2006 (5)                                                                                                                                                                          |
| 10.24              |       | Second Lien Credit  Agreement, dated as of November 14, 2006 (5)                                                                                                                                                                         |
| 10.25              |       | First Amendment to  Post-Closing and Note Issuance Agreement, dated as of November 14, 2006  (5)                                                                                                                                         |
| 10.26              |       | Pledge Agreement, dated  June 5, 2006 (6)                                                                                                                                                                                                |
| 10.27              |       | Amendment to Pledge  Agreement, dated April 2, 2007 (6)                                                                                                                                                                                  |
| 10.28              |       | First Lien Credit  Agreement, dated as of May 18, 2007 (7)                                                                                                                                                                               |
| 10.29              |       | Second Lien Credit  Agreement, dated as of May 18, 2007 (7)                                                                                                                                                                              |
| 10.30              |       | Purchase Agreement, by  and among Crown Limited, Crown CCR Group Investment One, LLC, Crown CCR Group  Investment Two, LLC, Millennium Gaming, Inc., OCM HoldCo, LLC and  Cannery Casino Resorts, LLC dated as of December 11, 2007 |
| 21.1               |       | Subsidiaries of OCM  HoldCo, LLC (1)                                                                                                                                                                                                          |
| 31.1               |       | Section 302  Certification of Principal Executive Officer                                                                                                                                                                                |
| 31.2               |       | Section 302  Certification of Principal Financial Officer                                                                                                                                                                                |
| 32.1               |       | Certification pursuant  to 18 U.S.C. Section 1350                                                                                                                                                                                        |
| 32.2               |       | Certification pursuant  to 18 U.S.C. Section 1350                                                                                                                                                                                        |

 

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(1) Filed previouslywith the Company’s Form 10-SB on June 9, 2006.

(2) Filed previouslywith the Company’s Amendment No. 1 to Form 10-SB on July 26,2006.

(3) Filed previouslywith the Company’s Post-Effective Amendment No. 1 to Form 10-SB on September 8,2006.

(4) Filed previouslywith the Company’s Current Report on Form 8-K on September 27, 2006

(5) Filed previouslywith the Company’s Current Report on Form 8-K on November 20, 2006

(6) Filed previouslywith Company’s Current Report on Form 8-K on April 8, 2007

(7) Filed previouslywith Company’s Current Report on Form 8-K on May 24, 2007

 

E-1

----

 

**OCMHoldCo, LLC and Subsidiaries**

 

**Consolidated Financial Statements**

 

**December 31,2007**

 

**Table ofContents**

 
| Report of Independent Registered Public Accounting  Firm | F-2    |
|----------------------------------------------------------|--------|
|                                                     |   |
| Consolidated  Balance Sheet                              | F-3    |
|                                                     |   |
| Consolidated Statements of Operations                    | F-4    |
|                                                     |   |
| Consolidated Statements of Members’ Equity          | F-5    |
|                                                     |   |
| Consolidated Statements of Cash Flows                    | F-6    |
|                                                     |   |
| Notes  to Consolidated Financial Statements              | F-8    |

 

F-1

----

** **

**Report of Independent Registered Public AccountingFirm**

** **

Managers of

OCM HoldCo, LLC

 

We have auditedthe accompanying consolidated balance sheet of OCM HoldCo, LLC and itssubsidiaries (collectively the Company) as of December 31, 2007 and 2006,and the related consolidated statements of operations, members’ equity and cashflows for the years then ended.  Thesefinancial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinionon these financial statements based on our audit.

 

We conducted ouraudit in accordance with the standards of the Public Company AccountingOversight Board (United States).  Thosestandards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. The Company is not required to have, nor were we engaged toperform, an audit of its internal control over financial reporting.  Our audit included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for ouropinion.

 

In our opinion,the financial statements referred to above present fairly, in all materialrespects, the consolidated financial position of the Company as of December 31,2007 and 2006, and its consolidated results of operations and cash flows forthe years then ended, in conformity with accounting principles generallyaccepted in the United States.

 

/s/ Piercy BowlerTaylor & Kern, Certified Public Accountants

 

Las Vegas, Nevada

March 25,2008

 

F-2

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**OCMHoldCo, LLC and Subsidiaries**

 

**Consolidated Balance Sheets**

 

**December 31, 2007 and 2006**

 
| ** **                                                                           | ** ** | **2007**    | ** **  | **2006**    | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|
| **ASSETS**                                                                           | ** ** | ** **  | ** **  | ** **  | ** ** |
| **Current assets:**                                                                  | ** ** | ** **  | ** **  | ** **  | ** ** |
| Cash                                                                                 |       | $           | 1,012,906   |        | $          | 306 |   |
| Other assets                                                                         |       | 475         |        | —      |       |
|                                                                                 |       | 1,013,381   |        | 306         |       |
|                                                                                 |       |        |        |        |       |
| **Other assets:**                                                                    | ** ** | ** **  | ** **  | ** **  | ** ** |
| Investment in  Cannery Casino Resorts, LLC                                           |       | 120,723,395 |        | 123,232,875 |       |
| Investment in NP  Land, LLC                                                          |       | 5,025,292   |        | 4,921,629   |       |
| Gaming and  related licenses                                                         |       | 805,698     |        | 816,944     |       |
| Deferred tax  asset                                                                  |       | 2,126,000   |        | —      |       |
|                                                                                 |       | $           | 129,693,766 |        | $          | 128,971,754 |   |
|                                                                                 |       |        |        |        |       |
| **LIABILITIES AND MEMBERS’ EQUITY**                                             | ** ** | ** **  | ** **  | ** **  | ** ** |
| **Current liabilities:**                                                             | ** ** | ** **  | ** **  | ** **  | ** ** |
| Accounts payable  and accrued expenses, including $75,000 to a related party in 2006 |       | $           | 40,695      |        | $          | 110,805 |   |
| Deferred tax  liabilities                                                            |       | 243,000     |        | 247,043     |       |
|                                                                                 |       | 283,695     |        | 357,848     |       |
|                                                                                 |       |        |        |        |       |
| **Deferred tax liabilities**                                                         |       | —      |        | 970,394     |       |
|                                                                                 |       |        |        |        |       |
| **Members’ equity**                                                             |       | 129,410,071 |        | 127,643,512 |       |
|                                                                                 |       | $           | 129,693,766 |        | $          | 128,971,754 |   |

 

*Seenotes to consolidated financial statements.*

 

F-3

----

 

**OCMHoldCo, LLC and Subsidiaries**

 

**Consolidated Statements of Operations**

 

**For the Years Ended December 31,2007 and 2006**

 
| ** **                                                                             | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|----------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                                             | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Income:**                                                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest income                                                                        |       | $          | 20,180     |       | $          | 5,842,378 |   |
| Equity in  earnings of unconsolidated investees                                        |       | 1,087,034  |       | 858,728    |       |
|                                                                                   |       | 1,107,214  |       | 6,701,106  |       |
|                                                                                   |       |       |       |       |       |
| **Costs and expenses:**                                                                | ** ** | ** ** | ** ** | ** ** | ** ** |
| Professional  fees                                                                     |       | 222,719    |       | 147,816    |       |
| Other  administrative expenses, including $75,000 to a related party in 2007 and  2006 |       | 107,767    |       | 182,349    |       |
|                                                                                   |       | 330,486    |       | 330,165    |       |
|                                                                                   |       |       |       |       |       |
| **Income before income tax benefit**                                                   |       | 776,728    |       | 6,370,941  |       |
|                                                                                   |       |       |       |       |       |
| **Income tax benefit**                                                                 |       | 3,100,437  |       | 495,563    |       |
|                                                                                   |       |       |       |       |       |
| **Net income**                                                                         |       | $          | 3,877,165  |       | $          | 6,866,504 |   |

 

*Seenotes to consolidated financial statements.*

 

F-4

----

 

**OCMHoldCo, LLC and Subsidiaries**

 

**Consolidated Statements of Members’Equity**

 

**Forthe Years Ended December 31, 2007 and 2006**

 
| ** **                                                       | ** ** | **2007**   | ** **  | **2006**    | ** ** |
|------------------------------------------------------------------|------------|------------|-------------|-------------|------------|
| ** **                                                       | ** ** | ** ** | ** **  | ** **  | ** ** |
| **Members’ equity, beginning of year**                      |       | $          | 127,643,512 |        | $          | 5,164,041 |   |
|                                                             |       |       |        |        |       |
| Net income                                                       |       | 3,877,165  |        | 6,866,504   |       |
|                                                             |       |       |        |        |       |
| Distribution                                                     |       | —     |        | (3,000,000  | )          |
|                                                             |       |       |        |        |       |
| Capital  contributions                                           |       | 7,641      |        | 118,612,967 |       |
|                                                             |       |       |        |        |       |
| Equity in other  comprehensive income of unconsolidated investee |       | (2,118,247 | )           | —      |       |
|                                                             |       |       |        |        |       |
| **Members’ equity, end of year**                            |       | $          | 129,410,071 |        | $          | 127,643,512 |   |

 

*Seenotes to consolidated financial statements.*

 

F-5

----

 

**OCMHoldCo, LLC and Subsidiaries**

 

**Consolidated Statements of Cash Flows**

 

**For the Years Ended December 31,2007 and 2006**

 
| ** **                                                                                                                                | ** ** | **2007**   | ** ** | **2006**     | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|--------------|------------|
| **Operating activities:**                                                                                                                 | ** ** | ** ** | ** ** | ** **   | ** ** |
| Net income                                                                                                                                |       | $          | 3,877,165  |         | $          | 6,866,504 |   |
| Equity in  earnings of unconsolidated investees                                                                                           |       | (1,087,034 | )          | (858,728     | )          |
| Adjustments to  reconcile net income to net cash used by operating activities consisting of  increases in operating (assets) liabilities: |       |       |       |         |       |
| Interest  receivable                                                                                                                      |       | —     |       | (5,842,378   | )          |
| Deferred income  tax benefit                                                                                                              |       | (3,100,437 | )          | (495,563     | )          |
| Other assets                                                                                                                              |       | (475       | )          | —       |       |
| Accounts payable  and accrued expenses                                                                                                    |       | (70,110    | )          | (285,851     | )          |
|                                                                                                                                      |       |       |       |         |       |
| Net cash used in  operating activities                                                                                                    |       | (380,891   | )          | (616,016     | )          |
|                                                                                                                                      |       |       |       |         |       |
| **Investing activities:**                                                                                                                 | ** ** | ** ** | ** ** | ** **   | ** ** |
| Investment in  note receivable                                                                                                            |       | —     |       | (64,000,000  | )          |
| Investment in Contribution  and Unit Purchase Agreement                                                                                   |       | —     |       | (2,702,999   | )          |
| Distribution  from Cannery Casino Resorts, LLC                                                                                            |       | 1,030,000  |       | 3,000,000    |       |
| Distribution  from NP Land, LLC                                                                                                           |       | 405,000    |       | —       |       |
| Investment in  Cannery Casino Resort, LLC                                                                                                 |       | (60,396    | )          | (50,000,000  | )          |
| Gaming and  related licenses                                                                                                              |       | 11,246     |       | 99,520       |       |
|                                                                                                                                      |       |       |       |         |       |
| Net cash  provided by (used in) investing activities                                                                                      |       | 1,385,850  |       | (113,603,479 | )          |
|                                                                                                                                      |       |       |       |         |       |
| **Financing activities:**                                                                                                                 | ** ** | ** ** | ** ** | ** **   | ** ** |
| Repayment of  borrowings to beneficial owner                                                                                              |       | —     |       | (1,275,000   | )          |
| Distribution                                                                                                                              |       | —     |       | (3,000,000   | )          |
| Capital contributions                                                                                                                     |       | 7,641      |       | 118,494,701  |       |
|                                                                                                                                      |       |       |       |         |       |
| Net cash  provided by financing activities                                                                                                |       | 7,641      |       | 114,219,701  |       |
|                                                                                                                                      |       |       |       |         |       |
| **Net increase in cash**                                                                                                                  |       | 1,012,600  |       | 206          |       |
|                                                                                                                                      |       |       |       |         |       |
| **Cash, beginning of year**                                                                                                               |       | 306        |       | 100          |       |
|                                                                                                                                      |       |       |       |         |       |
| **Cash, end of year**                                                                                                                     |       | $          | 1,012,906  |         | $          | 306 |   |

 

*Seenotes to consolidated financial statements.*

 

F-6

----

 

**OCMHoldCo, LLC and Subsidiaries**

 

**ConsolidatedStatements of Cash Flows**

 

**For the Years Ended December 31,2007 and 2006**

 

*(continued)*

 
| ** **                                                                                                                                                                                                                                      | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Supplemental cash flow information:**                                                                                                                                                                                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Conversion of  $64,000,000 in notes receivable, $5,470,685 in interest receivable and  $1,072,111 in Investment in CUP Agreement, for a 331/3% interest in Cannery Casino Resort, LLC and  assumption of deferred tax liabilities of $1,713,000 |       |       |       | $          | 72,255,796 |   |
|                                                                                                                                                                                                                                            |       |       |       |       |       |
| Conversion of  $4,282,454 in notes receivable and $502,631 in interest receivable for a 331/3 interest in NP Land, LLC                                                                                                                          |       |       |       | $          | 4,785,085  |   |
|                                                                                                                                                                                                                                            |       |       |       |       |       |
| Contribution to capital of $118,266 due to Member                                                                                                                                                                                               |       |       |       | $          | 118,266    |   |
|                                                                                                                                                                                                                                            |       |       |       |       |       |
| Equity in other comprehensive income of  unconsolidated investees                                                                                                                                                                               |       | $          | 2,118,247  |       |       |   |
|                                                                                                                                                                                                                                                 |            |            |            |            |            |  |  |

 

*Seenotes to consolidated financial statements**.*

 

F-7

----

 

**OCMHoldCo, LLC and Subsidiaries**

 

**Notes to Financial Statements**

 

**December 31,2007**

 

**NOTE 1 - Organization:**

 

***BusinessActivities***

 

OCMHoldCo, LLC (the “*Company*”) was formed at thedirection of the OCMPrincipal Opportunities Fund III, L.P. and OCM Principal Opportunities FundIIIA, L.P. (the “*Oaktree Fund*s”), each of which is an affiliate of Oaktree,for the purpose of participating in various activities relating to the gamingindustry.

 

In 2006, the Company,through a wholly-owned subsidiary, OCM AcquisitionCo, LLC (“*AcquisitionCo*”), acquired a 42% equityinterest in Cannery Casino Resorts, LLC (“*CCR*”),and a 331/3% equity interest in NP Land, LLC (“*NP Land*”). The Company’s current business consists primarily of its ownership ofthese equity interests. CCR, through wholly-owned subsidiaries, owns andoperates the Cannery Hotel and Casino (“*TheCannery*”), located in North Las Vegas, Nevada, and operates theRampart Casino (the “*Rampart Casino*”),located in the Summerlin area of northwest Las Vegas. CCR also operated theNevada Palace Hotel and Casino (the “*NevadaPalace*”), located in Las Vegas, Nevada, until February 29, 2008when it closed as planned in connection with the construction of  the Eastside Cannery.  The primary assets of NP Land areapproximately 22 acres of land, the planned site of the Eastside Cannery, whichland is leased to a wholly-owned subsidiary of CCR.  In addition, CCR, through a wholly-ownedsubsidiary, PA Meadows, LLC (“*PA Meadows*”),owns The Meadows (“*The Meadows*”),an operating harness racetrack located in North Strabane Township, WashingtonCounty, Pennsylvania, where it is has opened a temporary casino and isconstructing a permanent casino.

 

Allof the Company’s issued and outstanding Class A Units are held by OCM VoteCo, LLC (“*VoteCo*”), and all of the Company’s issued and outstanding non-voting Class BUnits are held by OCM InvestCo, LLC (“*InvestCo*”,together with VoteCo, the “*Members*”), both of which are affiliates of Oaktree.VoteCo is responsible for the operations of the Company, including theappointment and removal of its Managers. VoteCo has a *de**minimus* economic interest in theCompany, and its total equity contributions were limited to $100.

 

On December 11,2007, the Company entered into a definitive purchase agreement (the “*Purchase Agreement*”) by and among (i) CrownLimited (“*Crown*”), (ii) CrownCCR Group Investments One, LLC (“*Crown One*”)and Crown CCR Group Investments Two, LLC (“*CrownTwo*” and collectively with Crown One, the “*Crown Buyers*”, each an indirect wholly ownedsubsidiary of Crown), (iii) Millennium Gaming, Inc. (“*Millennium*”), (iv) the Company (theCompany and Millennium each a “*Seller*”, andcollectively, “*Sellers*”), and (v) CCR.  Upon the consummation of the transactionscontemplated by the Purchase Agreement, the Crown Buyers would collectivelyown, directly or indirectly, 100% of the issued and outstanding units of CCR,and the Company would be completely divested of its indirect interest in CCR.

 

The aggregate purchaseprice payable by the Buyers to the Sellers for 100% of the issued andoutstanding units of CCR is approximately $1.75 billion, on a debt-free basis,subject to certain adjustments.

 

The closing of thetransactions contemplated by the Purchase Agreement are subject to customaryclosing conditions, including receipt of all necessary gaming approvals by theCrown Buyers.  The Company expects thatthe process of obtaining regulatory approvals will take between twelve toeighteen months.  In addition,AcquisitionCo will sell its wholly owned subsidiary, OCM LandCo, LLC, to NevadaPalace, Inc., an entity owned by William Wortman, a principal ofMillennium.

 

***Concentrations***

 

The Company and itsconsolidated subsidiaries are economically dependent upon relatively fewinvestments in the gaming industry. In addition, the United States is involvedin a war against terrorism that is likely to have far-reaching effects on theeconomic activity in the country for an indeterminable period.  The long-term impact on the gaming industrygenerally, specific gaming jurisdictions in which the Company’s investee’soperate, cannot be predicted at this time, but may be substantial.

 

F-8

----

 

**NOTE 2 - Significant AccountingPolicies:**

 

***Useof estimates***

 

Timely preparation of financialstatements in accordance with generally accepted accounting principles requiresmanagement to make estimates that affect the reported amounts of assets andliabilities at the date of the financial statements, as well as the reportedamounts of income and expenses during the reporting periods. Actual resultscould differ from those estimates.

 

***Basisof presentation***

 

The accompanyingconsolidated financial statements include the accounts of the Company and itswholly-owned subsidiaries (OCM Blocker, LLC (“*Blocker*”),AcquisitionCo, OCM AcquisitionCo II, LLC, and OCM LandCo, LLC).  All significant inter-company accounts andtransactions have been eliminated. Investments in CCR and NP Land (Note 3) are accounted for using theequity method of accounting.

 

***Statementof cash flows***

 

Through June 30,2007, at the request and solely for the convenience of the Company and itsconsolidated subsidiaries, substantially all disbursements for operatingexpenses were made by InvestCo and/or its beneficial owners directly to vendorsand investees, and distributions from the investees were received directly byInvestCo.  Accordingly, these activitiesare treated as constructive cash inflows and outflows in the statement of cash flows.

 

***GamingLicenses***

 

Professionalfees and other costs associated with the applications for licensure of theCompany and its consolidated subsidiaries and certain of its beneficial owners,including payments to regulatory agencies, have been capitalized pursuant toguidelines contained in para. 2.06 of the American Institute of CertifiedPublic Accountants’ Audit and Accounting Guide, *Audits ofCasinos*. These fees and costs have been treated as indefinite lifeintangible assets pursuant to Statement of Financial Accounting Standard No. 142,*Goodwill and Other Intangible Assets*,based on expectations at the time the costs were incurred and capitalized thatsuch licenses would be granted, as they subsequently were, that they wouldenable the Company and/or its consolidated subsidiaries to hold direct andindirect ownership interests in gaming enterprises, and, therefore, that it wasand is probable that they will benefit future periods through continuedprofitable operations of its investee entities and resultant expected increasesin the value of its investments therein and cash distributions therefrom.

 

Such assets are evaluatedat least annually (and more frequently when circumstances warrant) to determineif events or changes in circumstances indicate that the probability that suchassets will continue to benefit future periods might have been impaired.Examples of such events or changes in circumstances that might indicateimpairment of these assets might include an active or likely regulatory threatto the availability or viability of a license, specifically, as a result of (i) non-compliancewith regulations, (ii) an adverse change in the legal, regulatory orbusiness climate relative to gaming nationally or in the jurisdiction, or (iii) asignificant long term decline in historical or forecasted earnings or cashflows of the investee or the fair value of its property or business possibly asa result of competitive or other economic or political factors.  As of December 31, 2007, based onmanagement’s evaluation, there has been no impairment to these assets.

 

***Members’capital***

 

Allocations of net incomeand distributions to the Members’ are determined in accordance with anoperating agreement.

 

***Interesttax penalties and interest***

 

Income tax relatedpenalties and interest, if any, are classified as a component of income taxexpense (benefit) (Note 4).

 

**NOTE 3 - UnconsolidatedInvestees:**

 

OnSeptember 22, 2006, the Company, through a subsidiary, acquired itsoriginal 331/3% equity interest in CCR and a 331/3% equity interest in NP Land in exchange forcancellation of loans of $64 million and $4,282,454, and accrued interest of $5,470,685 and $502,631, respectively.  The acquisition of the 331/3% equity interest in CCR anda 331/3% equity interest in NP Land was completed pursuant to the terms and conditionsof a Contribution andUnit Purchase Agreement, dated as of May 10, 2005, as amended and restatedin its entirety by the First Amendment and Restatement of Contribution and UnitPurchase Agreement, dated as of September 23, 2005 (the “*CUP Agreement*”). On November 14, 2006, the Company, also through a subsidiary,contributed an additional $50 million to CCR, increasing its equity interest inCCR from 331/3% to 

 

F-9

----

 

42%.  For 2007 and 2006, the Company’s equity innet income of CCR totaled $578,420 and $722,184, respectively, and its equityin net income of NP Land totaled $508,663 and 136,544, respectively.  During 2007, the Company receiveddistributions from CCR and NP Land of $1,030,000 and $405,000, respectively.

 

**Key features of transactions completed during 2006 pursuantto the CUP Agreement include the following:**

** **

·                  On January 5, 2006, the second series oftransactions contemplated by the CUP Agreement were consummated. The Company’saffiliates loaned to MGIM, LLC, a Nevada limited liability company controlledby Messrs. Paulos and Wortman, $64 million (the “*AcquisitionCoLoan*”) and $5,125,000 (the “*InvestCo/MGIM Loan*”)to enable MGIM, LLC to acquire from an unrelated third party a 331/3% interest in CCR for a total purchase price of $70million.

 

·                  The InvestCo NP Loans, the LandCo Loan, theAcquisitionCo Loan and the InvestCo/MGIM Loan each accrued interest at 12%, butin the case of the LandCo Loan and the AcquisitionCo Loan, interest was waivedand considered additional investment upon the final closing of the equitypurchase pursuant to the CUP Agreement.

 

·                  On January 5, 2006, the Company, though asubsidiary, received a $3 million in-substance distribution from CCR from theproceeds of the then-existing credit facilities, which distribution was used topay Company obligations, including consulting fees ($1,996,155) and amounts dueto beneficial owners ($1,003,845). At that time, the remaining amount due tobeneficial owners ($271,155) was contributed to members’ equity.

 

The following tablespresent condensed consolidated financial information of CCR and itssubsidiaries for the years ended December 31, 2007 and 2006:

 

| **Balance Sheet**      | ** ** | **December 31, 2007** | ** **  | **December 31, 2006** | ** ** |
|-----------------------------|------------|---------------------------------|-------------|---------------------------------|------------|
| Current assets              |       | $                               | 92,088,000  |                            | $          | 70,598,000 |   |
| Property and equipment, net |       | 483,988,000                     |        | 317,768,000                     |       |
| Other                       |       | 145,477,000                     |        | 130,417,000                     |       |
|                        |       | $                               | 721,553,000 |                            | $          | 518,783,000 |   |
|                        |       |                            |        |                            |       |
| Current liabilities         |       | $                               | 89,701,000  |                            | $          | 34,684,000 |   |
| Long-term liabilities       |       | 554,221,000                     |        | 394,611,000                     |       |
| Member’s equity        |       | 77,631,000                      |        | 89,488,000                      |       |
|                        |       | $                               | 721,553,000 |                            | $          | 518,783,000 |   |

 

| **Statement of Operations** | ** ** | **2007** | ** **  | **2006** | ** ** |
|-----------------------------|------------|----------|-------------|----------|------------|
| Revenue                     |       | $        | 325,394,000 |     | $          | 189,086,000 |   |
| Net Income                  |       | $        | 1,377,309   |     | $          | 12,914,000 |   |

 

***The unaudited total assets of NP Land at December 31,2007 and 2006 was approximately $4,400,000 and $2,000,000, respectively.  The unaudited net income for both of theyears ended December 31, 2007 and 2006 was approximately $1,500,000. ***

*** ***

***F-10***

----

*** ***

**NOTE 4**- IncomeTaxes:

** **

Prior to the election byBlocker to be taxable as a corporation, effective January 1, 2006, neitherthe parent nor its subsidiaries were tax paying entities for federal or stateincome tax purposes.

 

Except for Blocker, eachentity included in this consolidation is treated as a partnership for federalincome tax purposes with the tax effect of their activities recognized in theincome tax returns of their members. The Company owns 100% of Blocker, which,in turn, owns 100% of the other subsidiaries included in this consolidation.Accordingly, equity in the flow-through earnings of CCR and NP Land is taxed toBlocker. Blocker also incurs interest expense ($2,612,702 for 2007 and$2,395,208 for 2006) on inter-company indebtedness ($23,218,683 at December 31,2007 and 2006) with the parent company that is deductible for tax purposes (apermanent difference) but which is eliminated, along with the related debt, inthis consolidation. The Company incurs certain other costs, primarilyassociated with being a public company, including professional and other fees,which, for tax purposes, flow through to its members.

 

The following tablepresents a reconciliation of the provision (benefit) for income tax benefitwith that determined by applying the statutory U.S. federal income tax rate toincome before income taxes:

 
| ** **                                                                                 | ** ** | **December 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|--------------------------------------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **                                                                                 | ** ** | **Dollars**                | ** ** | **Percentage**             | ** ** | **Dollars** | ** ** | **Percentage** | ** ** |
| Statutory  federal rate                                                                    |       | $                          | 271,856    |                       | 35.0       | % | $ | 2,229,829 |   | 35.0 | % |
| Miscellaneous  CCR attributes                                                              |       | (1,863,817                 | )          | (240.0                     | )%         | 74,340 |   | 1.2 | % |
| Intercompany  interest expense, deductible but eliminated for financial reporting purposes |       | (914,446                   | )          | (117.7                     | )%         | (838,323 | ) | (13.2 | )% |
| Non-taxable  interest income                                                               |       | —                     |       | —                     | %          | (2,044,832 | ) | (32.1 | )% |
| Attributes  passed through to members                                                      |       | 330,487                    |       | 42.5                       | %          | 115,558 |   | 1.8 | % |
| CCR income not  taxable to the Company                                                     |       | (924,517                   | )          | (119.0                     | )%         | — |   | — | % |
| Other                                                                                      |       | —                     |       | —                     | %          | (32,135 | ) | (0.5 | )% |
|                                                                                       |       |                       |       |                       |       |   |   |   |   |
| Tax benefit at  effective rate                                                             |       | $                          | (3,100,437 | )                          | (399.2     | )% | $ | (495,563 | ) | (7.8 | )% |

 

As of December 31,2007, Blocker had approximately $17,500,000 in federal net operating losscarryforwards expiring in 2021 and 2022.

 

Deferred income taxesreflect the net tax effects of temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and theamounts used to determine taxable income for Blocker’s income tax reportingpurposes. The following table presents the significant components of thecurrent and non-current deferred tax assets (liabilities) of the Company andits consolidated subsidiaries related to its investments in CCR and NP Land.

 
| ** **                                      | ** ** | **December 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|-------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Basis adjustment (Section 754 elections)   |       | $                               | (2,954,685 | )                               | $          | (336,862 | ) |
| Other CCR attributes                            |       | (1,309,421                      | )          | (1,634,048                      | )          |
| Other NP Land attributes                        |       | 18,263                          |       | 19,544                          |       |
| Net operating loss carryforwards                |       | 6,128,843                       |       | 733,929                         |       |
|                                            |       | 1,883,000                       |       | (1,217,437                      | )          |
|                                            |       |                            |       |                            |       |
| Net deferred tax liability, current             |       | (243,000                        | )          | (247,043                        | )          |
|                                            |       |                            |       |                            |       |
| Net deferred tax asset (liability), non-current |       | $                               | 2,126,000  |                            | $          | (970,394 | ) |

 

The other CCR attributesshown above consist primarily of depreciation and amortization.

 

The Company adoptedFinancial Accounting Standards Board Financial Interpretation No. 48, *Accounting for Uncertainty in Income Taxes*(“*FIN 48*”) as required on January 1,2007.  Although FIN 48 applies in some respects to “flow-through”entities, management determined that the Company and its consolidatedsubsidiaries have no “uncertain tax positions” as defined in FIN 48, andtherefore the adoption had no effect on opening retained earnings or thecurrent period’s results of operations.

 

F-11

----

 

**NOTE 5 - Related partytransactions:**

 

UntilMay 18, 2007, theCompany also conditionally committed to make up to an additional $25 million ofequity investment in CCR to support the operational needs of a subsidiary ofCCR, but only in certain limited circumstances and only to the extent notpreviously funded.

 

In February 2007,the Oaktree Funds, beneficial owners of the Company’s non-voting equity interests,agreed to support, through member contributions to CCR, letters of creditissued in favor of the Pennsylvania Department of Transportation for anaggregate stated amount of approximately $18.3 million.  Such support was transferred to a subsidiary ofCCR during the second quarter of 2007. The Oaktree Funds received $382,000 from CCR as consideration forsupporting the letters of credit.

 

Effective January 1,2006, an affiliate of one of the Company’s members provides the Company withcertain administrative support services for an annual fee of $75,000, based onhourly rates of assigned personnel.

 

F-12

----