UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June~~December 3031, 2009

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

For the transition period from to

Commission File Number: 333-117633

SENECA GAMING CORPORATION

(Exact name of registrant as specified in its charter)

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

310 Fourth Street

Niagara Falls, New York (Seneca Nation Territory) 14303

(716) 299-1100

(Address, including zip code, and telephone number,

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

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

(Note: As a voluntary filer, not subject to the filing requirements, the registrant filed all reports under Section 13 or 15(d) of the Exchange Act during the preceding 12 months.)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o

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

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

At ~~August~~February 144, ~~2009~~2010, the registrant had no outstanding shares of common stock. The registrant is wholly owned by the Seneca Nation of Indians.

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TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of June 30, 2009 (Unaudited) and September 30, 2008	1
	Consolidated Balance Sheets as of December 31, 2009 (Unaudited) and September 30, 2009	1
	Consolidated Statements of Operations and Changes in Capital for the three months and nine months ended June 30, 2009 and 2008 (Unaudited)	2
	Consolidated Statements of Income and Changes in Capital for the three months ended December 31, 2009 and 2008 (Unaudited)	2
	Consolidated Statements of Cash Flows for the nine months ended June 30, 2009 and 2008 (Unaudited)	3
	Consolidated Statements of Cash Flows for the three months ended December 31, 2009 and 2008 (Unaudited)	3
	Notes to Condensed Consolidated Financial Statements	4
	Notes to Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1613
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3828
Item 4T.	Controls and Procedures	3828
PART II. OTHER INFORMATION
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3929
Item 1A.	Risk Factors	4230
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4230
Item 3.	Defaults Upon Senior Securities	4230
Item 4.	Submission of Matters to a Vote of Security Holders	4230
Item 5.	Other Information	4230
Item 6.	Exhibits	4230
	Signatures	4331

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PART I. FINANCIAL INFORMATION

Item I. Financial Statements

SENECA GAMING CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,		September 30,
	December 31,		September 30,
	2009		~~2008~~2009
	(Dollars in Thousands)
Assets
Current assets:
Cash and cash equivalents	$	5391,~~082~~235	$	5383,~~305~~230
Short-term investments	~~125~~—		~~300~~113
Receivables, net	2,722		2,705
Receivables from the Nation	586		6,201
Inventories	3,854		4,196
Other receivables, net	2,539		2,539
Other current assets	11,260		9,127
Inventories	4,110		4,046
Total current assets	71,043		69,633
Other current assets	9,322		10,369
Property and equipment, net	674,977		799,335
Total current assets	107,792		106,498
Other long-term assets	66,015		66,750
Property and equipment, net	662,642		670,111
Total assets	$	812,035	$	935,718
Other long-term assets	64,844		65,319
Total assets	$	835,278	$	841,928
Liabilities and Capital
Current liabilities:
Trade payables	$	12,~~874~~975	$	32,~~368~~328
Construction payables	116,~~153~~194		299,~~619~~373
Distributions payable to Nation	—		24,000
Distributions payable to the Nation	—		3,727
Exclusivity fees payable	87,~~656~~396		98,~~234~~220
Accrued interest payable	6,042		15,104
Accrued regulatory costs	3237,~~618~~417		2733,~~888~~683
Accrued gaming liabilities	14,~~936~~380		15,~~657~~113
Accrued payroll and related liabilities	1410,~~638~~060		109,~~138~~652
Other current liabilities	75,~~704~~961		136,~~511~~722
Senior secured revolving loan payable	—		—
Total current liabilities	90,425		103,922
Total current liabilities	97,621		148,519
Long-term debt	497,616		497,363
Long-term debt	497,110		496,353
Other long-term liabilities	834		834
Total liabilities	~~594~~588,~~731~~875		~~644~~602,~~872~~119
Capital:
Retained earnings	~~217~~246,~~304~~403		~~290~~239,~~846~~809
Total liabilities and capital	$	~~812~~835,~~035~~278	$	~~935~~841,~~718~~928

See accompanying notes to consolidated financial statements.

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SENECA GAMING CORPORATION

CONSOLIDATED STATEMENTS OF ~~OPERATIONS AND~~INCOME AND CHANGES IN CAPITAL

(Unaudited)

Three Months Ended June 30,

Nine Months Ended June 30,

Three Months Ended December 31,

2009

2008

~~2009~~

~~2008~~

(Dollars in Thousands)

Revenues

Revenues:

Gaming

~~153~~135,~~162~~377

~~164~~137,~~693~~023

~~431,505~~

~~469,139~~

Food and beverage

1413,~~739~~254

1614,~~295~~204

~~43,174~~

~~46,677~~

Lodging

5,~~928~~204

76,~~277~~296

~~17,800~~

~~21,501~~

Retail, entertainment and other

5,~~353~~892

6,~~169~~440

~~17,619~~

~~18,486~~

Gross Revenue

~~179~~159,~~182~~727

~~194~~163,~~434~~963

~~510,098~~

~~555,803~~

Less: Promotional allowances

(30,150

)

(28,763

)

(82,309

)

(88,914

)

Promotional allowances

(24,565

)

(25,244

)

Net revenues

~~149~~135,~~032~~162

~~165~~138,~~671~~719

~~427,789~~

~~466,889~~

Expenses

Expenses:

Gaming

3835,~~884~~722

4337,~~742~~225

~~112,534~~

~~126,689~~

Food and beverage

1110,~~126~~600

1211,~~435~~207

~~33,030~~

~~37,150~~

Lodging

32,~~084~~985

3,~~274~~032

~~9,243~~

~~9,800~~

Retail, entertainment and other

34,~~307~~171

43,~~185~~978

~~10,752~~

~~12,357~~

Advertising, general and administrative

4547,~~084~~101

4749,~~934~~500

~~140,949~~

~~144,766~~

Pre-opening costs

~~110~~72

7058

~~246~~

~~294~~

Depreciation

1110,~~668~~730

12,~~604~~587

~~36,838~~

~~38,533~~

Impairment of property and equipment

~~109,036~~55

—

~~109,036~~

—

Total operating expenses

~~222~~111,~~299~~436

~~124~~117,~~244~~587

~~452,628~~

~~369,589~~

Operating (loss) income

(73,267

)

41,427

(24,839

)

97,300

Operating income

23,726

21,132

Other non-operating expense

(25

)

(250

)

(188

)

(4,150

)

Other non-operating expenses

(112

)

(113

)

Interest income

~~118~~11

~~129~~58

~~199~~

~~1,251~~

Interest expense

(9,~~500~~541

)

(9,~~089~~603

)

~~(28,777~~

)

~~(28,833~~

)

Net income (loss)

(82,674

)

32,217

(53,605

)

65,568

Net income

14,084

11,474

Beginning capital balance

$239,809

~~312,676~~

$290,846

~~253,690~~

~~290,846~~

~~230,244~~

Cash distributions declared to the Nation

(127,~~698~~490

)

(516,~~253~~506

)

~~(19,937~~

)

~~(15,158~~

)

Ending capital balance

~~217~~246,~~304~~403

~~280~~285,~~654~~814

~~217,304~~

~~280,654~~

See accompanying notes to consolidated financial statements.

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SENECA GAMING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009			2008
	(Dollars in Thousands)
Cash flows relating to operating activities:
Net (loss) income	$	(53,605	)	$	65,568
Net income	$	14,084		$	11,474
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	3610,~~838~~730			3812,~~533~~587
Loss on disposal of assets	~~155~~—			2624
Amortization of deferred financing costs, debt discount	~~2,432~~811			~~2,429~~810
Other than temporary decline in investments	~~175~~113			~~4,150~~100
Provision for bad debts	~~296~~85			~~227~~75
Write-off of acquisition costs	—			1,100
Impairment of property and equipment	109,036			—
Change in operating assets and liabilities:
Current assets	(21,~~104~~412		)	1(101		)
Long-term assets	82			(1,235		)
Current liabilities	(9,562		)	(4,054		)
Current liabilities	(8,432		)	(4,948		)
Net cash provided by operating activities	17,673			20,915
Net cash provided by operating activities	84,873			105,851
Cash flows relating to investing activities:
Purchases of property and equipment	(403,~~137~~469		)	(9421,~~254~~909		)
Land acquisition costs	(~~1,022~~83		)	(~~5,408~~497		)
Decrease in restricted cash	—			14,579
Net cash used in investing activities	(3,552		)	(22,406		)
Sale of investments, net	—			14,600
Net cash used in investing activities	(41,159		)	(70,483		)
Cash flows relating to financing activities:
Proceeds from senior secured revolving loan agreement	20,000			—
Contribution received from the Nation	5,101			—
Payments on senior secured revolving loan agreement	(20,000		)	—
Proceeds from senior secured revolving loan agreement	—			20,000
Distributions paid to the Nation	(4311,~~937~~217		)	(5120,~~158~~506		)
Net cash used in financing activities	(436,~~937~~116		)	(~~51,158~~506		)
Net decrease in cash	(223		)	(15,790		)
Net increase (decrease) in cash	8,005			(1,997		)
Cash balances:
Beginning of period	5383,~~305~~230			7853,~~662~~305
End of period	$	5391,~~082~~235		$	6251,~~872~~308

See accompanying notes to consolidated financial statements.

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SENECA GAMING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Basis of Presentation

The consolidated financial statements include the accounts of Seneca Gaming Corporation, or SGC, and its wholly owned subsidiaries, or collectively, the Company. In consolidation, all intercompany balances and transactions have been eliminated. The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of SGC’s management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ months ended ~~June~~December 3031, 2009 are not necessarily indicative of the results that may be expected for SGC’s fiscal year ending September 30, ~~2009~~2010. For further information, reference is made to the consolidated financial statements and notes thereto included in SGC’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2008~~ 2009, or ~~2008~~2009 Form 10-K, as well as SGC’s other filings with the Securities and Exchange Commission, or SEC, pursuant to the Securities Exchange Act of 1934, as amended.

Certain prior year amounts have been reclassified to conform to current year presentation.

SGC, which was formed on August 1, 2002, is wholly owned by the Seneca Nation of Indians, or the Nation. The Nation is a federally recognized Indian tribe with total territorial land comprising ~~approximately~~ approximately 54,000 acres in the Western New York region. SGC was organized by the Nation to operate and manage its Class III gaming activities on the Nation’s territories pursuant to the Indian Gaming Regulatory Act of 1988, or IGRA. Under IGRA, federally recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal land, subject to, among other things, the negotiation of a compact with the affected state. Pursuant to IGRA, in August 2002, ~~the~~ the Nation entered into the Nation-State Gaming Compact with the State of New York, or the Compact, which has been approved by the Federal Bureau of Indian Affairs, Department of the Interior. The Compact became effective in December 2002, ~~and~~ expires in December 2016 and automatically renews for an additional seven year period unless either the Nation or the State of New York objects in writing, in which case the parties are required to negotiate in good faith to address the objecting party’s concerns, with only the issue of a party’s good faith subject to third party dispute resolution. The Compact provides that its terms will remain in effect during the pendency of such negotiations. The Compact provides the Nation with the exclusive right to conduct Class III gaming activities at ~~three~~ three sites in the western region of the State of New York.

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

The Council, at the request of the SGC Board of Directors, chartered three subsidiary corporations of SGC to operate the three sites authorized by the Compact. In addition, the SGC Board of Directors hired the executive management of SGC to oversee, develop and manage the three sites. The subsidiary corporations that operate the three sites authorized by the Compact are as follows:

· Seneca Niagara Falls Gaming Corporation, or SNFGC;

· Seneca Territory Gaming Corporation, or STGC; and

· Seneca Erie Gaming Corporation, or SEGC.

SNFGC was formed on August 1, 2002 to operate the Nation’s Class III gaming activities on the Nation’s territory in Niagara Falls, New York. Operations at SNFGC’s casino, or Seneca Niagara Casino, commenced December 31, 2002. On March 31, 2006, SNFGC officially completed the phased opening of its luxury hotel expansion, which included a permanent 147,000 square foot gaming facility (adding 35,000 square feet of gaming space to the original 112,000 square-foot facility), a 604 -room luxury hotel with 118 suites of various sizes, a full-service spa, salon, and fitness center, three fine dining restaurants and a 24-hour casual restaurant, three new retail stores, and a 25,200 square-foot multi-purpose room and events center. The luxury hotel is adjacent and connected to the Seneca

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salon, and fitness center, three fine dining restaurants (two additional) and a 24 hour casual restaurant, three new retail stores, and a 25,200 square-foot multi-purpose room and events center. The luxury hotel is adjacent and connected to the Seneca Niagara Casino. The entire complex, including the luxury hotel and the Seneca Niagara Casino, is referred to as the Seneca Niagara Casino and Hotel.

STGC was formed on September 20, 2003 to operate the Nation’s Class III gaming activities in Salamanca, New York on the Nation’s then-existing territorial land. Operations at STGC’s casino, or Seneca Allegany Casino, commenced May 1, 2004 utilizing an ~~approximate~~approximately 120,000 square foot ~~temporary~~ temporary structure. On March 30, 2007, the phased opening of the permanent gaming facility and resort hotel was completed, which included a permanent 63,500 square foot gaming facility (adding 12,000 square feet of additional gaming space to the original temporary ~~gaming~~ gaming facility), a 212-room resort hotel, two fine dining restaurants, a 24 ~~hour~~ hour casual restaurant, a spa and fitness center, and retail and other amenities. In March 2008, STGC ~~completed~~ completed a conversion of the former ~~approximate~~approximately 120,000 square foot temporary ~~casino~~ casino structure into an events center and multi-purpose room with a seating ~~capacity~~ capacity for 2,200 people, along with additional administrative and support space. The entire complex, including the ~~Seneca~~ Seneca Allegany Casino, resort hotel, and events center, is referred to as the ~~Seneca~~ Seneca Allegany Casino and Hotel.

SEGC was formed on August 9, 2003 to operate the Nation’s Class III gaming activities in Erie County, New York. On October 3, 2005, the Nation acquired approximately nine acres of land in the inner-harbor district of downtown Buffalo, New York. SEGC commenced construction of its Seneca Buffalo Creek Casino on those nine acres on December 8, 2005, and on July 3, 2007 commenced Class III gaming on such property in a temporary facility, in fulfillment of the ~~requirement~~ requirement set forth in the Nation’s Compact with the State of New York. The temporary facility features approximately 8,600 square feet and includes 244 slot machines and a snack bar. Various plaintiffs have filed suit in federal and state court challenging the Nation’s right to conduct Class III gaming on the Nation’s nine acre Buffalo Creek Territory. On July 8, 2008, in a federal suit captioned Citizens Against Casino Gambling in Erie County (CACGEC) v. Hogen, the Court issued its decision and order finding that, although the Nation’s Buffalo Creek Territory is “Indian country”,” the determination by the National Indian Gaming Commission, or NIGC’s, determination that the Nation’s Buffalo Creek Territory is gaming-eligible land pursuant to the IGRA’s settlement of a land claim exception was “arbitrary, capricious, and not in accordance with the law”.” The Court’s decision did not provide for injunctive relief, and SEGC has continued its operations at the Seneca Buffalo Creek Casino. Plaintiffs ~~subsequently~~ subsequently filed a motion on July 14, 2008 to force the court to enforce ~~its~~ its judgment.

On January 20, 2009, the NIGC approved an amended Class III Gaming Ordinance that had been submitted by the Nation and concluded that, based upon new Department of the Interior regulations, IGRA’s general prohibition against gaming on on after-acquired lands did not apply to lands such as the Buffalo Creek ~~Territory~~ Territory that are held in restricted fee, and that gaming on the Nation’s Buffalo Creek Territory is not precluded by IGRA. Subsequently, on January 30, 2009, the District Court denied the plaintiffs’ motion to enforce, and further concluded that the NIGC’s new analysis is presumed valid unless it becomes the subject of a successful legal challenge.

On March 31, 2009, plaintiffs in the litigation noted in the foregoing paragraph filed suit to challenge the NIGC’s approval of the amended Class III ~~Gaming~~ Gaming Ordinance. On June 15, 2009, the Nation moved to intervene as a defendant in the litigation known as CACGEC III , for certain limited claims. The plaintiffs are opposing the Nation’s motion ~~and~~which as of ~~August~~February 144, ~~2009~~2010, ~~the Nation’s~~ ~~motion~~remains ~~was still~~ pending before the Court. ~~See “Note 6 — Legal Proceedings,” for additional information regarding the status of, and litigation related to, our Seneca Buffalo Creek Casino.~~

If the plaintiffs are successful in any of the Buffalo Creek-related legal proceedings, ~~the~~ SEGC ~~may~~ may be unable to continue Class III gaming at the existing Seneca Buffalo Creek Casino.

The Nation’s Council has also chartered, at the request of the SGC Board of Directors, an additional subsidiary corporation, Lewiston Golf Course Corporation, or LGCC, as a wholly-owned subsidiary of SNFGC. LGCC was formed on July 18, 2007 by the Nation’s Council, ~~as a new wholly-owned subsidiary of SNFGC~~ to own, develop and operate ~~SGC~~SNFGC’s ~~planned~~ golf course in Lewiston, New York.

~~Seneca Massachusetts~~Recent ~~Gaming~~Accounting Corporation, a wholly-owned subsidiary of SGC, formed on August 11, 2007 to explore development opportunities related to gaming in the Commonwealth of Massachusetts, was dissolved by the Nation’s Council on April 11, 2009, and its assets transferred to SGC.Pronouncements

~~New~~A ~~Accounting~~variety ~~Pronouncements~~of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, SGC has not yet determined the effect, if any, that the implementation of such proposed standards would have on the consolidated financial statements.

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No. 168 stipulates the FASB Accounting Standards Codification is the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. SFAS No. 168 is effective for the financial statements issued for interim and annual reporting periods ending after September 15, 2009. The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165 establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before financial statements are available to be issued (“subsequent events”). More specifically, SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition in the financial statements, identifies the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that should be made about events or transactions that occur after the balance sheet date. SFAS 165 provides largely the same guidance on subsequent events which previously existed only in auditing literature. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. The Company adopted SFAS 165 on April 5, 2009. We have evaluated subsequent events through August 14, 2009, the date this quarterly report on Form 10-Q was filed with the U.S. Securities and Exchange Commission. We made no significant changes to our condensed consolidated financial statements as a result of our subsequent events evaluation. See Note 7 for subsequent event disclosure.

On April 5, 2009, the Company adopted the provisions of FSP SFAS No. 107-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP SFAS 107-1”), which amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” and APB Opinion No. 28, “Interim Financial Reporting.” FSP SFAS No. 107-1 requires disclosures about fair value of financial instruments in financial statements for interim reporting periods and in annual financial statements of publicly-traded companies. This FSP also requires entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments in financial statements on an interim and annual basis and to highlight any changes from prior periods. The adoption of FSP SFAS 107-1 did not have a material impact on the Company’s consolidated financial position or results of operations. Disclosures required by SFAS 107 are included in Note 4.

2. Short-Term Investments

Short-term investments are classified as available for sale as defined in ~~SFAS~~the ~~No. 115~~Financial Accounting Standards Board, or FASB, Accounting ~~for~~Standards ~~Certain~~Codification, ~~Investments~~or inASC, 320, Investments — Debt and Equity Securities. Investments are stated at fair value. The Company evaluates investments for conditions that may indicate that an other-than-temporary decline in market value has occurred. In conducting this review, numerous factors are considered which, individually or in combination, may indicate that a decline is other-than-temporary. Based on this evaluation, an other-than-temporary loss on one specific investment of $~~25,000 and $~~0.3 1 million was recorded in the three months ended ~~June~~December 3031, ~~2009 and 2008,~~ ~~respectively, and an other-than-temporary loss on one specific investment of $0.2 million and $4.2 million was recorded in the nine months ended June 30,~~ 2009 and 2008, ~~respectively,~~ as a component of other non-operating expense. The cost basis of this investment has been reduced by the amount of the other-than-temporary loss recorded.

3. Property and Equipment

In accordance with ~~the~~ASC ~~Financial~~360, ~~Accounting~~Property, ~~Standard~~Plant ~~Board’s Statement of~~and ~~Financial Accounting Standards No. 144~~Equipment, ~~Accounting for~~ the ~~Impairment or Disposal of Long-Lived Assets (SFAS 144), the~~ carrying value of the Company’s assets are reviewed when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment loss has occurred based on current and future levels of income and expected future cash flows as well as other factors, then an impairment loss is recognized as a deduction in determining operating income.

OnDuring ~~August 27, 2008,~~ the ~~construction~~three ~~activities~~months atended Seneca Allegany Casino and Hotel and Seneca Buffalo Creek Casino and Hotel were suspended for various reasons including: the economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash, such as our payments to the Nation. As of JuneDecember 3031, 2009, ~~due to the continuation of weak economic conditions~~$55,000 ~~adverse~~was ~~credit market~~recorded ~~conditions~~as ~~and~~ an ~~uncertain economic outlook, it is unlikely~~ ~~construction~~impairment ~~will resume in the foreseeable future. Furthermore, certain master planning efforts related to the future expansion~~ of ~~the Niagara Falls~~ property ~~have~~and ~~been suspended~~equipment ~~for~~in ~~the~~addition ~~foreseeable~~to ~~future for~~ the ~~same reasons~~$107. As6 ~~a result of these circumstances and in~~million ~~accordance with SFAS 144, an~~ impairment ~~charge of $109.0 million was~~ recognized at ~~June 30,~~during ~~2009~~Fiscal ~~based upon an estimate of the net realizable value based on an estimate of undiscounted cash flows that projected no future benefit~~2009. ~~The reported fair value of zero is considered to be level three within the fair value hierarchy as established~~

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by SFAS No. 157 “Fair Value Measurements”. Level three is defined as inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available data, some of which is internally developed and considers risk premiums that a market participant would require. The impairment charge relates to the construction and design activities of the following entities:

	Three Months Ended June 30,
	2009		2008
	(In Millions of Dollars)
SNFGC	$	3,500	$	—
STGC	18,182		—
SEGC	87,354		—
	$	109,036	$	—

4. Principal Debt Arrangements

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

	As of
	June 30, 2009		September 30, 2008
	December 31, 2009		September 30, 2009
	(In Thousands of Dollars)
2004 71/4% senior notes due 2012	$	300,000	$	300,000
2004 7¼% senior notes due 2012	$	300,000	$	300,000
2005 71/4% senior notes due 2012 net of unamortized discount of $2,890 and $3,647, respectively	197,110		196,353
2005 7¼% senior notes due 2012 net of unamortized discount of $2,384 and $2,637, respectively	197,616		197,363
Long-term debt	$	497,~~110~~616	$	~~496~~497,~~353~~363

~~71/4~~7¼% Senior Notes due 2012

On May 5, 2004, SGC issued $300.0 million in ~~71/4~~7¼% senior notes due 2012, or the 2004 senior notes. On May 23, 2005, SGC issued an additional $200.0 million in ~~71/4~~ 7¼% senior notes due 2012, Series B, or the 2005 senior notes, and together with the 2004 senior notes, the Senior Notes.

The 2005 senior notes were issued at a discount of $7.0 million. The discount is being amortized ~~on a straight-line basis~~ over the term of the 2005 senior notes, which amounted to $0.3 million for the three months ~~ended~~ ~~June 30, 2009 and 2008, and $0.8 million for the nine months~~ ended ~~June~~December 3031, 2009 and 2008.

The Senior Notes are guaranteed by SNFGC, STGC, SEGC and LGCC. The 2005 senior notes are treated as a single class with the 2004 senior notes and are identical to the 2004 senior notes, except for certain tax attributes, and prior to November 1, 2005 ~~the~~, the amount of interest accrued thereon. Interest on the Senior Notes is payable semi-annually on May 1 and November 1. The Senior Notes are unsecured and rank equally. As of ~~June~~December 3031, 2009 and September 30, ~~2008~~ 2009, aggregate accrued and unpaid interest on the Senior Notes was $6.0 million and $15.1 million, respectively. The Senior Notes, which mature on May 1, 2012, are redeemable at SGC’s option in whole or in part at any time after May 1, 2008 at the redemption prices set forth in the Senior Notes Indenture, are subject to redemption requirements imposed by gaming laws and regulations and are required to be repurchased by SGC at the option of holders upon certain change of control events.

The Senior Notes Indenture contains certain negative and affirmative covenants. The negative covenants include limitations on restricted payments and the incurrence of indebtedness, while the affirmative covenants include reporting obligations and compliance with laws. As of ~~June~~December 3031, 2009, SGC was in compliance with all covenants in the Indenture. Reference is made to “Note 6 — Legal Proceedings — Seneca Gaming Authority Proposed Notices of Violation issued to the Seneca Gaming Corporation and Employees dated July 13, 2009” regarding certain alleged violations of the Class III Gaming Ordinance, Compact and Charter.

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Senior Secured Revolving Loan Agreement

~~Effective~~On ~~June~~December 1918, ~~2008~~ 2009, SGC ~~entered~~amended ~~into~~its a $50.0 million Senior Secured Revolving Loan Agreement, ~~which matured on June 19, 2009, subject~~ to ~~extension by SGC at its election (at any time after the six~~ ~~months~~extend ~~anniversary of~~ the ~~closing~~maturity date ~~and~~from ~~prior to June~~December 19, 2009) ~~for~~to ~~an additional period of six months provided that no default or event of default existed at the time of election. On June~~December 1131, ~~2009,~~ ~~SGC exercised this election~~2011. Amounts borrowed under the Amended Senior Secured Revolving Loan Agreement continue to bear interest at either one, three or six-month LIBOR plus one and one quarter percent (1.25%), or the prime rate (as reported in The Wall Street Journal) plus one quarter percent (0.25%)~~. Any~~, with any outstanding principal balance ~~shall~~to be paid by, or on, the new maturity date. The $50.0 million commitment under the Amended Senior Secured Revolving Loan Agreement reduces in tandem with any reduction in the letter of credit requirement imposed by the Empire State Development Corporation, or ESDC, (relating to the ESDC’s efforts on behalf of SGC in connection with ongoing condemnation proceedings in Niagara Falls, NY), up to an aggregate reduction of $10.0 million. The Amended Senior Secured Revolving Loan Agreement requires that SGC maintain all of its deposit and investment accounts with the lender, subject to limited exceptions for certain existing accounts.

SGC’s obligations under the Amended Senior Secured Revolving Loan Agreement ~~are~~continue to be secured by substantially all gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements. SGC’s obligations are guaranteed by SNFGC, STGC, SEGC and LGCC~~. The~~, and the guarantors’ obligations ~~are~~continue to be secured by substantially all of each guarantor’s gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements. The Amended Senior Secured Revolving Loan Agreement modifies certain of the financial covenants contained in the Senior Secured Revolving Loan Agreement, including reducing the minimum consolidated EBITDA covenant from $160 million to $145 million (on a rolling 12 month basis) as well as modifying the total leverage ratio (of total funded debt to EBITDA) to a limit of 3.5 to 1.0. The Amended Senior Secured Revolving Loan Agreement also continues to contain additional customary covenants, including covenants restricting the incurrence of additional indebtedness, the creation of additional liens and the disposition of assets. As of December 31, 2009, SGC was in compliance with all covenants in the Amended Senior Secured Revolving Loan Agreement.

~~The Senior~~As ~~Secured Revolving Loan Agreement contains certain financial covenants requiring minimum consolidated EBITDA~~ of ~~$160 million (on a rolling 12 month~~December 31, ~~basis)~~2009, ~~and~~at ~~compliance~~SGC’s ~~with~~request, ~~certain~~the ~~leverage~~lender ~~and~~under ~~coverage~~the ~~ratios.~~Amended ~~The~~ Senior Secured Revolving Loan Agreement ~~also~~had ~~contains~~issued ~~additional~~letters ~~customary covenants, including covenants restricting the incurrence~~ of ~~additional~~credit ~~indebtedness,~~(as ~~the creation~~required ofby ~~additional liens and~~ the ~~disposition~~ESDC) ~~of assets~~totaling $19. ~~Reference~~6 ismillion, ~~made~~$13.2 tomillion ~~“Note~~of 6which —may ~~Legal~~be ~~Proceedings~~drawn -upon ~~Seneca Gaming~~to ~~Authority~~fund ~~Proposed~~the ~~Notices~~purchase of certain ~~Violation~~parcels ~~issued~~within to the ~~Seneca~~50 ~~Gaming Corporation~~acre ~~and~~“footprint” ~~Employees~~described ~~dated,~~in ~~July 13,~~the ~~2009.”~~Compact ~~As of June 30,~~with ~~2009,~~New ~~SGC~~York ~~was~~State inand ~~compliance~~designated ~~with~~for ~~all~~ownership ~~covenants~~by in the ~~Senior~~Nation, ~~Secured~~with ~~Revolving Loan~~the ~~Agreement~~remaining $6.4 ~~Reference~~million isissued ~~made~~in toconnection ~~“Note~~with 6worker’s —compensation ~~Legal~~policies ~~Proceedings~~and certain -other ~~Seneca~~contracts, ~~Gaming~~as ~~Corporation and~~required. ~~Employees~~As ~~dated~~of ~~July 13~~December 31, 2009”, ~~regarding~~there ~~certain~~were no ~~alleged~~amounts ~~violations~~outstanding ofon the ~~Class~~ ~~III~~Amended ~~Gaming~~Senior ~~Ordinance,~~Secured ~~Compact~~Revolving ~~and~~Loan ~~Charter~~Agreement.

~~As of June 30, 2009, at SGC’s request, the lender under the Senior Secured Revolving Loan Agreement had issued letters of credit totaling $19~~5.6 Fair ~~million,~~Value ~~$13.2 million~~ of ~~which may be drawn upon to fund the~~Financial purchase of certain parcels within the 50 acre “footprint” described in the Compact with New York State and designated for ownership by the Nation, with the remaining $6.4 million issued in connection with worker’s compensation policies and certain other contracts, as required. On October 29, 2008, SGC borrowed $20.0 million under the Senior Secured Revolving Loan Agreement. During the third quarter of fiscal year 2009, SGC paid $20.0 million on the Senior Secured Revolving Loan Agreement, leaving no outstanding balance at June 30, 2009.Instruments

~~Fair~~The ~~Value~~fair values of ~~Debt~~certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and other current liabilities, approximate their recorded carrying amounts because of their short-term nature.

The fair value of long term debt is estimated based on the current rates offered to SGC for debt of the same remaining maturities. As of ~~June~~December 3031, 2009 ~~and September 30~~, ~~2008,~~ the carrying amount ~~of long-term debt is approximately $497,110,000~~ and ~~$496,353,000,~~ ~~respectively. As of June 30, 2009 and September 30, 2008, the~~ fair value of long- term debt is ~~approximately~~ approximately $~~430,000,000~~498 million and $~~420~~490 million,~~000,000,~~ respectively.

56. Related-Party Transactions

Distributions

Distributions to the Nation, as described below, consist of the following:

	Nine Months Ended June 30,
	Three Months Ended December 31,
	2009		2008
	(In Millions of Dollars)
Cash distributions	$	337.25	$	3617.32
Distribution Agreement distributions	103.7		143.93
	$	4311.92	$	5120.25

~~Cash Distributions~~7

· SGC paid cash distributions to the Nation in the amount of $4 million per month from October 2008 through February 2009, and $3 million per month from March 2009 through June 2009, totaling $32 million. In addition, in November 2008, SGC paid an additional $1.2 million distribution to the Nation.

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~~· In July 2008, SGC declared cash distributions to the Nation totaling~~Cash $20 million, of which $10 million was payable in each of fiscal year 2009 and 2010. These amounts were to be payable in ten equal monthly payments of $1 million beginning October 1, 2008 and 2009, respectively. During the nine months ended June 30, 2009, SGC paid cash distributions of $5 million to the Nation pursuant to the foregoing distribution declarations. In February 2009, the Nation passed a resolution rescinding its July 2008 distribution request, and SGC rescinded its related distribution declaration. Distributions paid in accordance with SGC’s July 2008 resolution were then applied toward future distributions. In March and April 2009, SGC applied $3 million and $2 million, respectively, previously distributed to the Nation pursuant to the SGC’s July 2008 declaration toward the regular monthly distributions that would otherwise have been made during those months.

· SGC paid cash distributions to the Nation in the amount of $42.5 million per month from October ~~2007~~2009 through ~~June~~December ~~2008~~2009, totaling $~~36 million~~7. ~~In addition, SGC paid an~~5 ~~additional $0.3~~ million ~~in distributions to the Nation during the nine months ended June 30, 2008~~.

· SGC paid cash distributions to the Nation in the amount of $4 million per month from October 2008 through December 2008, totaling $12 million. Also, during the three months ended December 31, 2008, SGC paid $4 million pursuant to distribution declarations made in July 2008. In addition, in November 2008, SGC paid an additional $1.2 million distribution to the Nation.

Distribution Agreement Obligations

· During the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, SGC distributed $103.7 million and $143.93 million, respectively, to the Nation under the Distribution Agreement, dated April 27, 2007, relating to the Seneca Nation of Indians Capital Improvements Authority’s special obligation bonds. (See “Note 6)7 — Commitments and Contingencies” for additional information regarding SGC’s Distribution Agreement obligations.

SGC has recorded approximately $59.21 million in land and related acquisition costs as ‘Other long-term assets’ in the accompanying consolidated balance sheets as of ~~June~~December 3031, 2009 and September 30, 2009, which are expected to be transferred to the Nation ~~in the future at cost~~.

Operating Lease Agreements

Head Leases:

The Nation has entered into operating lease agreements (each, a Head Lease) with each of SNFGC, STGC and SEGC. Due to the related party nature of these Head Leases, which can be effectively modified by the Nation, SGC records monthly Head Lease expense equal to the required payment amount for the respective month. Payment increases under the Head Leases are restricted under the terms of the Indenture governing the Senior Notes and the Distribution Agreement referenced in “Note 67 — Commitments and Contingencies”. The Head Leases contain no renewal options or escalation clauses.

Expenses resulting from the above Head ~~Lease~~Leases ~~agreements~~ were as follows for the three ~~and~~ ~~nine~~ months ended ~~June~~ December 3031, 2009 and 2008:

	Three Months Ended June 30,				Nine Months Ended June 30,
	Three Months Ended December 31,
	2009		2008		~~2009~~		~~2008~~
	(Dollars in Millions)
	(In Millions of Dollars)
SNFGC	$	9.0	$	69.13	$	~~27.1~~	$	~~18.3~~
STGC	6.0		56.15		~~18.0~~		~~15.2~~
SEGC	4.0		4.35		~~11.9~~		~~13.0~~
	$	19.0	$	1520.53	$	~~57.0~~	$	~~46.5~~

SNFGC, STGC and SEGC record the Head Lease costs as a component of advertising, general and administrative costs in the accompanying consolidated statements of income.

Seneca Niagara Falls Gaming Corporation

The SNFGC Head Lease (dated October 25, 2002) ~~which~~ expires on December 31, 2023 and covers use of the land and certain improvements existing at the commencement of such Head Lease, principally including structures formerly known as the Niagara Falls Convention Center and Lackey Plaza. Effective October 1, 2007, the monthly payments were approximately $1~~,365,909~~.4 million per month, as approved by the ~~board~~Board of ~~directors~~Directors of SGC and SNFGC. Pursuant to the terms of the Amended and Restated SNFGC Head Lease entered into on March 27, 2008, and effective October 1, 2007, payments were further increased, at the request of the Nation, to approximately $2~~,033,333~~.0 million per month, with such increase effective as of October 1, 2007. On August 1, 2008, at the request of the Nation, SGC approved an increase in the SNFGC Head Lease to approximately $3.1 million per month, effective October 1, 2008, and to approximately $3.7 million per month, effective October 1, 2009. On March 19, 2009 SNFGC entered into an amendment to the foregoing Head Lease agreement with the

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SNFGC Head Lease to $3,083,333 per month, effective October 1, 2008, and to $3,666,667 per month, effective October 1, 2009. On March 19, 2009 SNFGC entered into an amendment to the foregoing Head Lease agreement with the Nation, which reduced payments to approximately $3~~,007,208~~.0 million per month effective October 1, 2008 and eliminated the increase that would have taken effect as of October 1, 2009.

Seneca Territory Gaming Corporation

The STGC Head Lease (effective as of May 1, 2004) ~~which~~ expires on December 31, 2023 and covers use of the land which is currently being used in operating the Seneca Allegany Casino and Hotel. Effective October 1, 2007, the monthly payments were approximately $1.4 million,~~365,909,~~ as approved by the ~~board~~Board of Directors ~~directors~~ of STGC. Pursuant to an amendment to the STGC Head Lease entered into on March 27, 2008, and effective as of October 1, 2007, the payments were increased, at ~~the~~ the request of the Nation, to approximately $1~~,691,667~~.7 million per month. On August 1, 2008, at the request of the Nation, SGC approved increases in the payments under the STGC Head Lease to approximately $2~~,166,666~~.1 million per month effective October 1, 2008, and to approximately $2~~,666,667~~.7 million per month effective October 1, 2009. On March 19, 2009 STGC entered into an amendment to the foregoing Head Lease agreement with the Nation, which reduced payments to $2.0 million per month effective October 1, 2008 and eliminated the increase that would have taken effect as of October 1, 2009.

Seneca Erie Gaming Corporation

The SEGC Head Lease (effective as of April 1, 2006) ~~which~~ expires on December 31, 2023 and covers use of the land which is currently being used in operating the Seneca Buffalo Creek Casino. Effective October 1, 2007, the monthly payments were approximately $1.3 million,~~287,500,~~ as approved by the ~~board~~Board of ~~directors~~Directors of SEGC. Pursuant to an amendment to the SEGC Head Lease entered into on March 27, 2008, and ~~effective~~ effective as of October 1, 2007, the payments were increased, at the request of the Nation, to approximately $1~~,441,667~~.4 million per month. On August 1, 2008, at the request of the Nation, SGC approved an increase in the payments under the SEGC Head Lease to $1~~,500,000~~.5 million per month effective October 1, 2008 and thereafter. On March 19, 2009 SEGC entered into an amendment to the foregoing Head Lease agreement with the Nation, which reduced payments to approximately $1~~,326,125~~.3 million per month effective October 1, 2008.

In connection with the March 19, 2009, Head Lease amendments described above, for purposes of compliance with its Indenture governing the Senior Notes and the Distribution Agreement, SGC obtained and delivered to Wells Fargo, N.A. (as trustee under the Indenture governing the Senior Notes) written fair market value rent opinions from an independent financial advisor with regard to the SNFGC and STGC Head Lease amendments (as required by the Indenture). The SEGC Head Lease amendment reflects a 3% per annum (for two years) increase in rent as permitted by the Indenture. ~~The Corporation~~SGC also delivered to Wells Fargo, N.A. (as trustee under the indenture governing the Nation’s municipal bonds and a party to the Distribution Agreement) an additional certification required pursuant to the Distribution Agreement. Further or additional increases in rent payable under the Head Lease agreements are restricted under the terms of ~~the Corporation~~SGC’s Indenture governing its Senior Notes and the Distribution Agreement, and are subject to compliance with all applicable contractual commitments of ~~the~~SGC ~~Corporation~~ and the Nation, such that no increase may contravene, or constitute a default under any agreement, indenture, instrument or other commitment legally binding upon the Nation, SNFGC, STGC or SEGC, respectively, or to which the premises (described in the Head Leases) are subject.

Class II Poker Leases:

~~SNFGC~~As of January 1, ~~and~~2005, ~~STGC~~the ~~lease~~Company ~~space~~transferred ~~within~~all Class II operations to the Nation, including its poker operations. The Company leases space within Seneca Niagara Casino ~~and~~& Hotel ~~and~~to Seneca ~~Allegany~~Gaming ~~Casino~~ and ~~Hotel~~Entertainment, ~~respectively,~~which operates the Nation’s Class II facilities, for operation of the poker ~~rooms~~room. byOn ~~Seneca Gaming~~November &9, ~~Entertainment~~2009, aSeneca ~~Class II~~Gaming ~~business~~and Entertainment ~~enterprise~~relocated ofits ~~the~~poker ~~Nation. For~~operations ~~the~~in ~~three~~Seneca ~~months~~Allegany ~~ended~~Casino ~~June 30,~~to ~~2009~~a new ~~and~~facility ~~2008~~located within one mile of the Allegany Casino property., SGC recorded $0.2 million of ~~poker room~~ rental income ~~and~~during ~~fees,~~each ~~and for~~of the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, ~~SGC~~respectively, ~~recorded~~and ~~$0.6 million~~at ofDecember 31, ~~rental~~2009 ~~income~~ and ~~fees. At June~~September 30, 2009, SGC ~~has~~ recorded $0.36 million asand a$0.5 ~~receivable~~million, ~~from~~respectively, ~~the~~as ~~Nation~~a ~~relating to~~receivable ~~poker~~from ~~room~~Seneca ~~rentals~~Gaming and ~~fees~~Entertainment asrelating ato ~~component~~poker ofroom ~~receivables, net in the accompanying consolidated balance sheets~~rentals.

Other Lease:

STGC leases office space in a building owned in part by the brother of a former member of SGC’s Board of Directors~~. For~~, who ~~the~~served ~~three~~on ~~months~~the ~~ended~~Board ~~June~~until September ~~30,~~ 2009. For ~~and 2008, such operating lease expense totaled $63,000,and for~~ the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, such operating lease expense ~~totaled~~ totaled $~~189~~44,000 and $~~191~~63,000, respectively.

~~Other Related Party Transactions~~9

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Other Related Party Transactions

Construction Services:

SNFGC, STGC and SEGC have each entered into construction management agreements with Seneca Construction Management Corporation, or SCMC, for certain renovations and capital improvements at Seneca Niagara Casino and Hotel, Seneca Allegany Casino and Hotel, and Seneca Buffalo Creek Casino, respectively. SCMC is wholly owned by the Nation. For the three months ended ~~June~~December 3031, ~~2009~~ 2009 and 2008, SNFGC, STGC and SEGC have collectively made payments to SCMC for construction management and related fees of $0.2 ~~million~~ and $1.5 million, respectively, and for the nine months ended June 30, 2009 and 2008, SNFGC, STGC and SEGC have collectively made payments to SCMC for construction management and related fees of $1.8 million and $3.0 million, respectively. Such fees reflect the amounts earned by SCMC for the performance of construction management services. Additional amounts paid to SCMC are passed- through and used to pay subcontractors, reimbursements for out-of-pocket expenses and similar costs.

Regulatory Services:

SGC is charged by the Nation for its costs incurred related to the operation of SGA gaming regulatory services. These include: a) costs incurred solely and directly in connection with regulatory services and oversight of SGC’s gaming operations and which are therefore 100% allocable to SGC; and b) an an administration fee, assessed by the Nation for costs indirectly incurred in conjunction with the operation and regulation of ~~the Corporation~~SGC, which is fixed as a percentage of direct costs, currently ~~set at 29.56~~20%, as determined by the Nation in its performance of administration of the SGA and its oversight of the Company. ~~Such~~ Such costs were approximately $2.52 million ~~for the three months ended June 30, 2009~~ and ~~2008,~~ ~~and~~ $72.6 million, ~~and~~respectively, ~~$8.3 million~~ for the three ~~nine~~ months ended ~~June~~December 3031, 2009 and 2008~~, respectively~~.

SGC is also charged by the Nation for its costs incurred related to services provided by the New York State Racing and Wagering Board, New York State Police, Seneca Nation of Indians Marshals, Buffalo Police and Cattaraugus County Sheriff Department solely and directly in connection with SGC’s operations, which costs were approximately $23.67 million and $32.16 million for the three months ended ~~June~~December 3031, 2009 ~~and~~ ~~2008, respectively,~~ and ~~$8.4 million and $8.1 million for the nine months ended June 30, 2009 and~~ 2008, respectively.

At ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, approximately $3237.6 4 million and $2733.97 million, respectively, were recorded as “accrued ~~regulatory~~ regulatory costs” in the accompanying consolidated balance sheets, for the payment of such New York State related regulatory costs.

~~Other:~~7. Commitments and Contingencies

SNFGC, STGC, and SEGC, through the Corporation’s competitive bidding process, have purchased goods and services from DRJ Enterprises, which is owned by the brother-in-law of Barry E. Snyder, Sr., who served as Chairman of SGC’s Board of Directors until March 13, 2009 and as a member of the Board of Directors until March 19, 2009. Payments to DRJ Enterprises totaled $7,000 and $238,000 for the three months ended June 30, 2009 and 2008, respectively, and $65,000 and $555,000 for the nine months ended June 30, 2009 and 2008, respectively.

6. Commitments and Contingencies

Distribution Agreement Obligations

On April 27, 2007, SGC entered into a Distribution Agreement among the Nation, the Seneca Nation of Indians Capital Improvements Authority, or the Authority, SGC and Wells Fargo Bank, as Trustee, in connection with the Authority’s issuance in two series (one tax exempt and the other taxable) of an aggregate principal amount of $159,495,000 special obligation bonds, or the 2007 Nation Bonds. The Distribution Agreement obligates SGC, subject to any contractual restrictions applicable to SGC (including, but not limited to, those contained in the Senior Notes Indenture), to make monthly distributions to the Nation at the times and in the amounts necessary to enable the Authority to pay the debt service on the 2007 Nation Bonds as required under the Authority’s indenture. At the direction of the Nation and the Authority, SGC pays such distributions directly to the Trustee. The Authority’s debt service commenced on June 1, 2007. For the period from June 1, 2007 through November 1, 2007, the Authority’s debt service averaged approximately $0.9 million per month. For the period from December 1, 2007 through June 1, 2008, the Authority’s debt service averaged approximately $1.7 million per month. In June 2008, it was determined that the amortization (debt service) schedule upon which the foregoing $1.7 million monthly payments was made, was incorrect. A corrected amortization schedule was provided and, after giving effect to a resulting credit for amounts overpaid, for the period from January 1, 2008 through December 1, 2023, the Authority’s debt service averages approximately $1.2 million per month. The foregoing debt service averages are based on scheduled payments of interest and principal under the Authority’s indenture and bonds and do not address the effects of any earlier call for redemption, by acceleration or otherwise. The Distribution Agreement provides that neither the Trustee nor the Authority’s bondholders will have any recourse under the Distribution Agreement to any revenues, assets or property of SGC or its subsidiaries should SGC fail to comply with its distribution obligations. For the three months ended December 31, 2009 and 2008, SGC distributed to the Nation $3.7 million and $3.3 million, respectively, for the Authority’s debt service on the special obligation bonds.

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amounts overpaid, for the period from January 1, 2008 through December 1, 2023, the Authority’s debt service averages approximately $1.2 million per month. The foregoing debt service averages are based on scheduled payments of interest and principal under the Authority’s indenture and bonds and do not address the effects of any earlier call for redemption, by acceleration or otherwise. The Distribution Agreement provides that neither the Trustee nor the Authority’s bondholders will have any recourse under the Distribution Agreement to any revenues, assets or property of SGC or its subsidiaries should SGC fail to comply with its distribution obligations. For the nine months ended June 30, 2009 and 2008, SGC distributed to the Nation $10.7 million and $14.9 million, respectively, for the Authority’s debt service on the special obligation bonds.

The Seneca Nation Compact

As part of its Compact, the Nation agrees to contribute to the State of New York a portion of the proceeds from the operation and conduct of each category of Gaming Device (as defined in the Compact) for which exclusivity exists, based on the win of such machines (cash dropped into machines, after payouts but before expenses) and totaled on a cumulative quarterly basis to be adjusted annually at the end of the relevant calendar year. However, beginning in February 2005, the Company began advancing to the Nation on a monthly basis the exclusivity fee due for the prior month. The exclusivity fee to the State of New York for years 1—–4 (through December 31, 2006), was 18.0%, payable on an annual basis. Thereafter, the exclusivity fee iswas 22% for years 5—–7 (through December 31, 2009), payable on a semi-annual basis and is 25.0% for years 8—–14 (through December 31, 2016), payable on a quarterly basis.

~~For the three months ended June 30, 2009 and 2008, total exclusivity fees were $27.6 million and $30.4 million, respectively.~~ The ~~$27.6~~following ~~million~~table ~~exclusivity fee incurred during the three months ended~~summarizes ~~June 30, 2009 consisted of $17.6 million attributable to~~ the ~~operation of SNFGC, $7.6 million attributable to the operation of STGC and $2.4 million attributable to the operation of SEGC. The $30.4 million~~ exclusivity ~~fee~~fees ~~incurred~~expense ~~during~~by the three months ended June 30, 2008 consisted of $20.2 million attributable to the operation of SNFGC, $8.2 million attributable to the operation of STGC and $2.0 million attributable to the operation of SEGC.property:

For the nine months ended June 30, 2009 and 2008, total exclusivity fees were $78.2 million and $85.3 million, respectively. The $78.2 million exclusivity fee incurred during the nine months ended June 30, 2009 consisted of $50.9 million attributable to the operation of SNFGC, $20.8 million attributable to the operation of STGC and $6.5 million attributable to the operation of SEGC. The $85.3 million exclusivity fee incurred during the nine months ended June 30, 2008 consisted of $57.7 million attributable to the operation of SNFGC, $22.5 million attributable to the operation of STGC and $5.1 million attributable to the operation of SEGC.

	Three Months Ended
	December 31,
	2009		2008
	(Dollars in Thousands)
Seneca Niagara Falls Casino and Hotel	$	15,937	$	16,573
Seneca Allegany Casino and Hotel	6,268		6,599
Seneca Buffalo Creek Casino	2,365		1,909
Total	$	24,570	$	25,081

Expansion and Development

As described in “Note 1 — Organization and Basis of Presentation,” the Compact provides the Nation with the exclusive right to conduct Class III gaming activities at three sites in the western region of the State of New York~~, subject to certain limited exceptions~~. The Company opened its third Class III ~~casino~~ casino on July 3, 2007 in a temporary facility in Buffalo, New York, and commenced construction of a permanent facility later that year. The Company also commenced construction in April 2008 of a second hotel tower at the Seneca Allegany Casino and Hotel.

OnIn August ~~27,~~ 2008, ~~the~~ construction activities at Seneca Allegany ~~Casino~~ Casino and Hotel and Seneca Buffalo Creek Casino, ~~each described below,~~ were suspended ~~for~~indefinitely for reasons including: the ~~economic~~ economic recession; inability to obtain construction financing at reasonable ~~interest~~ interest rates; and operating and other demands on ~~our~~ available cash, such as ~~our~~ payments to the Nation. As of ~~June~~December 3031, 2009, ~~due to the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook, it is unlikely~~ construction ~~will~~remained ~~resume~~suspended ~~in the foreseeable future~~indefinitely. Furthermore, certain planning efforts related to the future expansion of the Seneca Niagara Falls property ~~have~~were ~~been~~ suspended ~~for~~ for the same reasons. As a result of ~~these~~ these circumstances ~~and in accordance with SFAS 144,~~ an impairment charge of $~~109~~107.06 million was recognized atduring Fiscal ~~June~~2009. During the three months ended December 3031, 2009, an additional $55,000 was recorded as an impairment of property and equipment. Nonetheless, SGC will continue to explore alternative future expansion and development options.

~~Seneca~~The ~~Niagara~~construction ~~Falls~~of ~~Casino~~a ~~and~~permanent ~~Hotel. In~~casino ~~2006,~~at wethe ~~began~~Buffalo ~~master~~Creek ~~planning~~site, ~~activities for the~~as ~~remaining~~well ~~approximately~~as 24any ~~acres~~expansion ofby ~~undeveloped~~STGC ~~land~~at ~~contained~~Seneca inAllegany ~~the~~Casino ~~Niagara Falls~~and ~~footprint. As~~Hotel ~~discussed~~will ~~above,~~require ~~these~~significant ~~master~~capital ~~planning~~outlays. ~~activities~~The ~~have~~ability ~~been suspended due~~ to ~~the~~recommence ~~continuation~~these ofprojects will ~~weak~~depend ~~economic~~on ~~conditions,~~various ~~adverse~~factors ~~credit~~including ~~market~~cash ~~conditions~~flow ~~and~~from ~~an uncertain economic outlook. As of June 30~~operations, ~~2009,~~ the ~~Company~~availability of ~~had~~external ~~incurred~~financing ~~$3.5~~with ~~million~~regard ~~related~~ to ~~these~~one ~~master~~or ~~planning activities,~~more ~~for~~of ~~which~~the anprojects, ~~impairment charge was recognized in order to write off~~certain ~~these~~Nation ~~costs~~and asgovernmental ~~they~~approvals, doand ~~not~~the ~~currently~~effects ~~represent~~of ~~any~~legal ~~future value~~ and/or ~~provide~~ ~~future~~administrative ~~benefit to the Company~~proceedings.

Seneca ~~Allegany~~Niagara Falls Casino and Hotel. OnIn ~~March 30~~2006, ~~2007,~~SNFGC ~~STGC~~began ~~officially~~master ~~opened~~planning ~~its~~activities ~~212~~for ~~room~~the ~~resort~~remaining ~~hotel,~~approximately ~~including~~24 ~~two~~acres ~~fine~~of ~~dining~~undeveloped ~~restaurants,~~land acontained ~~24-hour~~in ~~casual~~the ~~restaurant~~Niagara Falls footprint. During August 2008, these master planning activities were suspended and ~~certain~~an ~~other~~impairment ~~amenities~~charge was recognized related to these activities in Fiscal 2009, atin the ~~Seneca~~amount ~~Allegany~~of approximately $3.5 million.

12Seneca Allegany Casino and Hotel. Construction on the next phase of development at Seneca Allegany Casino and Hotel, which was planned to include an additional 200-room hotel tower, and up to 30,000 square feet of additional gaming space and related amenities, for a total estimated cost of approximately $130 million, was suspended and an impairment charge was recognized for costs incurred related to these activities in Fiscal 2009, in the amount of approximately $17.1 million. During the three months ended December 31, 2009, an additional $38,000 was

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~~Casino~~recorded and Hotel. This expansion followed the December 28, 2006 official opening of the permanent gaming floor. The approximate cost of constructing and equipping the hotel and expansion project was $169.0 million. In March 2008, STGC completed the conversion of the former temporary casino at the Seneca Allegany Casino and Hotel into a 120,000 square foot events center, and additional administration space, at a cost of approximately $29.3 million. The next phase of construction, which commenced in April 2008 and was suspended as ~~noted above, provides for~~ an ~~additional~~impairment ~~200 room hotel, 31,000 square feet~~ of ~~additional~~property ~~gaming space~~ and ~~related amenities, and landscaping and exterior façade enhancements to the property as a whole~~equipment. As of June 30, 2009, the Company had incurred $18.2 million related to this phase of construction, for which an impairment charge was recognized in order to write off these costs as they do not currently represent any future value or provide future benefit to the Company.

Seneca Buffalo Creek Casino. On ~~July 3,~~Construction ~~2007,~~on the ~~Company~~next ~~opened~~phase ~~a temporary Class III~~of ~~gaming~~development ~~facility~~ at ~~the~~ Seneca Buffalo Creek Territory site (6,000 square feet including 135 slot machines and a snack bar) at a cost of approximately $6.8 million. In March 2008, the Company completed a 109 slot machine expansion (for a total of 244 slot machines) of the temporary Seneca Buffalo Creek Casino~~. The~~ ~~permanent Seneca Buffalo Creek Casino~~ and Hotel, ~~construction of~~ which ~~is currently suspended,~~ was ~~anticipated~~ toplanned ~~open in Summer 2010 and was expected~~ to include ~~initially~~approximately ~~feature~~ 90,000 square feet of gaming space; ~~with approximately~~ 2,000 slot machines, ; 45 table games; ~~and~~ a 22-story all -suite hotel; ~~with~~four ~~approximately~~restaurants; ~~206 rooms. Planned amenities included~~ a ~~pool,~~ full-service spa and salon,; ~~four~~retail ~~restaurants,~~and ~~meeting~~other ~~rooms,~~amenities; ~~a retail outlet~~ and a 2,200-space parking garage~~. As of June 30~~, ~~2009,~~for ~~the~~a ~~Company~~total ~~had~~estimated ~~incurred~~cost of approximately $~~87.4~~333 million, onwas ~~the~~suspended ~~construction~~and ~~of the~~an ~~permanent~~impairment ~~casino~~charge ~~and~~was ~~hotel,~~recognized ~~for~~related ~~which~~to anthese ~~impairment~~activities ~~charge~~in ~~was~~Fiscal ~~recognized~~2009, in ~~order~~the toamount ~~write~~of ~~off~~approximately ~~these~~$87.0 ~~costs~~million. asDuring ~~they~~the dothree ~~not~~months ~~currently~~ended ~~represent~~December 31, 2009, ~~any~~an ~~future value~~additional or$17,000 ~~provide~~was ~~future~~recorded ~~benefit~~as toan ~~the~~impairment ~~Company~~of property and equipment.

~~Seneca~~On ~~Hickory Stick Golf Club. In July~~October ~~2007~~19, ~~the~~2009 ~~Company~~SEGC ~~commenced~~began ~~construction of the Seneca Hickory Stick Golf Club,~~ an ~~18-hole~~expansion ~~Robert~~of ~~Trent~~the ~~Jones II~~temporary ~~designed golf course. The golf course is located in Lewiston~~facility, ~~New~~which ~~York~~will ~~and~~add is approximately eight miles from the Seneca Niagara Casino and Hotel. Completion of golf course construction is currently scheduled for late Summer 2009. To allow for contractor delays caused by various factors and proper grow-in of the course5,300 itsquare isfeet ~~anticipated that the official opening~~ of ~~the~~gaming ~~course~~space ~~will occur in Spring 2010. The decision as~~ to ~~when~~ ~~to open~~ the facility ~~golf~~and ~~course for play~~ will ~~depend~~accommodate ~~upon~~approximately ~~how~~an ~~well~~additional ~~the~~212 ~~course matures~~slot ~~throughout the 2009 growing season~~machines. ~~As of June 30, 2009, the~~ ~~Company~~The ~~has~~expansion ~~incurred~~is ~~$19.1~~due ~~million for the purchase of land and construction, with a total cost~~ to ~~construct~~be ~~the~~completed ~~golf~~in ~~course,~~Spring ~~clubhouse and related amenities estimated to be approximately $25~~2010.~~5 million.~~

Seneca Hickory Stick Golf Club. In July 2007, the Company commenced construction of the Seneca Hickory Stick Golf Club, an 18-hole Robert Trent Jones II designed golf course. The golf course is located in Lewiston, New York and is approximately eight miles from the Seneca Niagara Casino and Hotel. Completion of golf course construction and official course opening are currently scheduled for Summer 2010. As of December 31, 2009, the Company has incurred $22.1 million for the purchase of land and construction, with a total cost to construct the golf course, clubhouse and related amenities estimated to be approximately $25.5 million.

Legal Proceedings

~~Citizens~~Seneca ~~Against~~Gaming ~~Casino~~Corporation ~~Gambling in Erie County~~ v. ~~Hogen (1:2009-cv-00291~~Merrill ~~(WDNY))~~Lynch —Pierce Fenner & ~~CACGEC~~Smith ~~III~~Incorporated

On ~~March~~August 316, 2009 , ~~Citizens~~SGC ~~Against Casino Gambling in Erie County (CACGEC)~~ filed asuit ~~third action~~ in the United States District Court, ~~Western~~for the Southern District of New York, ~~against~~alleging ~~the~~fraudulent ~~Chairman~~conduct ofon the ~~National~~ ~~Indian~~part ~~Gaming Commission, or NIGC, the United States Department~~ of ~~Interior,~~Merrill ~~the~~Lynch ~~NIGC,~~in ~~the~~inducing ~~Secretary~~SGC ofto ~~the~~purchase ~~Interior~~auction-rate ~~and the President of the United States~~securities. The ~~action~~claim ~~seeks declaratory~~alleges ~~and~~that ~~injunctive~~Merrill ~~relief under the Administrative Procedure Act, the~~Lynch ~~Declaratory~~represented ~~Judgments Act, and~~ the ~~Indian~~securities ~~Regulatory~~as ~~Gaming~~highly ~~Act~~liquid and ~~is principally~~collateralized ~~directed at the decision~~ by ~~the NIGC Chairman, on January 20,~~residential ~~2009, to approve the Seneca Nation’s amendments to its Class III Gaming Ordinance regarding the Nation’s Buffalo Creek Territory~~mortgages. ~~The~~SGC ~~NIGC~~discovered ~~Chairman concluded~~ subsequently that ~~IGRA’s general~~the ~~prohibition~~securities ~~against~~were ~~gaming~~illiquid onand ~~lands~~not ~~acquired~~collateralized ~~after~~by ~~its enactment in~~residential ~~1988~~mortgages, ~~does~~but ~~not apply to lands~~rather, ~~such~~by ascomplex ~~the~~derivative ~~Buffalo Creek Territory~~instruments, and that ~~are~~the ~~held~~securities inhad ~~restricted~~become ~~fee~~worthless. ~~The plaintiffs claim that, in approving the Nation~~SGC’s ~~Class III Gaming ordinance on January 20,~~ ~~2009,~~suit ~~the~~seeks ~~NIGC~~$5 ~~Chairman~~million ignored the intention of Congress. The plaintiffs also make several claims that go beyond their prior lawsuits. Most notably, they challenge the constitutionality of the land purchase provisions contained in ~~the Seneca Nation Settlement Act of 1990 (“SNSA”), and attempt to challenge in a more extensive fashion than they had previously the validity of the Nation-State Gaming Compact~~damages.

On ~~June~~January 154, ~~2009~~2010, ~~the~~Merrill ~~Nation~~Lynch ~~moved~~filed ~~to intervene as~~ a ~~defendant~~motion into ~~CACGEC~~dismiss the ~~III~~complaint. ~~The Nation~~SGC’s ~~proposed~~counsel ~~intervention and~~is ~~participation~~preparing as a reply. No ~~defendant~~hearing ~~are~~date ~~expressly~~on ~~restricted to~~ the ~~three~~motion ~~claims~~has ~~for~~been ~~relief~~set. ~~specified~~At ~~in the plaintiffs’ complaint, namely: (1)~~December ~~whether~~31, ~~as restricted fee lands over which the Nation exerts governmental authority~~2009, ~~the~~no ~~Buffalo~~amounts ~~Creek Territory~~were ~~qualifies~~recorded ~~as “Indian lands” under IGRA; (2) whether the Buffalo Creek Territory is subject to the general prohibition found~~ in ~~section 2719 of IGRA against gaming on trust lands acquired after IGRA~~SGC’s ~~effective date even though~~ ~~the~~financial ~~Territory~~statements ~~consists~~related ~~of restricted fee, rather than trust, lands; and (3) whether, if the Buffalo Creek Territory is subject~~ to ~~Section 2719’s~~this ~~general prohibition, Class III gaming may nevertheless proceed on it because the Buffalo Creek Territory was acquired in settlement of a land claim~~proceeding.

138. Subsequent Events

On Friday, January 22, 2010, the SGC Board of Directors authorized the establishment of an internal senior note repayment reserve, which restricts the use of funds placed, or to be placed, into the reserve.

SGC has evaluated and appropriately disclosed all subsequent events from January 1, 2010 through February 4, 2010, the date the unaudited consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2009 were filed with the Securities and Exchange Commission.

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The plaintiffs are opposing the Nation’s motion and as of August 14, 2009, the Nation’s motion was still pending before the Court.

If the plaintiffs ultimately succeed in this action, or in their pending appeals in the CACGEC I and CACGEC II proceedings, the SGC may be unable to conduct any Class III gaming at its existing properties.

Seneca Gaming Authority Proposed Notices of Violation issued to the Seneca Gaming Corporation and Employees dated July 13, 2009.

Summary

On July 14, 2009, SGC received a proposed Notice of Violation dated July 13, 2009, or the 2009 NOV, from the Seneca Gaming Authority, or the SGA, alleging fifteen violations of certain sections of the Class III Gaming Ordinance and the Seneca Nation of Indians-State of New York Compact, (“Compact”), as well as our Charter. In addition to SGC, eleven employees received similar notices arising out of the same set of facts, alleging from five to twelve violations of the provisions noted above. Each of the alleged violations is attributable to SGC’s accounting treatment of an alleged table games inventory (i.e., gaming chips) discrepancy of $25,971 that arose due to a single human error during an ordinary course table games move on April 3, 2009. The notices from the SGA indicate that each of the alleged violations carries with it a potential fine of $500 per day per violation imposed from the date of the initial alleged infraction, April 3, 2009, or approximately $1,000,000 for the SGC and approximately $8,000,000 in the aggregate for the eleven individuals as of August 14, 2009.

As more fully described below, the alleged accounting discrepancy was properly documented in SGC’s accounting records and had a net effect of zero at the close of the reporting period and at no time was the applicable inventory unaccounted for or at risk of misappropriation or loss. Subsequent to receipt of the proposed NOVs, a review by PricewaterhouseCoopers, serving as our internal auditors, supports SGC’s conclusion that: (1) SGC’s internal controls immediately identified the alleged discrepancy; (2) the alleged discrepancy was documented and resolved through proper procedures and protocols (including notification of the SGA); (3) an appropriate audit trail was created for all adjustments that were made; (4) assets were appropriately safeguarded, and (5) duties were appropriately segregated. SGC is currently awaiting a response from the SGA with regard to whether final proposed NOVs will be issued, after which time each recipient will have 30 days to appeal. In the event final proposed NOVs are issued by the SGA, for the reasons noted above, and numerous additional substantive and procedural issues relating to the merits of the proposed violations, the scope of the recipients, and the amounts of the proposed fines, SGC intends to vigorously defend itself, and intends to fully support the defense of its employees in this matter. Notwithstanding SGC’s position that no violations occurred, given the potential significance of the actions taken by the SGA to date, we include below a more detailed description of this matter.

Supplemental Description of Facts

On April 3, 2009 an error occurred during the relocation of certain game tables at our Seneca Niagara Casino & Hotel in which the table games manager for such tables failed to remove inventory (i.e., gaming chips) from the tables involved in the relocation and transport the inventory to the cage prior to moving the tables. Rather, the inventory on the tables remained and in certain instances was subsequently assigned to new table numbers when the tables were relocated. As a result, the closing inventory of any given numbered table on the shift prior to the move did not match the opening inventory of the re-numbered tables subsequent to the move. In order to open the tables in our electronic accounting system, ACSC, the inventory for each table had to be adjusted such that the closing inventory for the prior shift and the opening inventory on the opening shift of relocation were the same. This adjustment resulted in a discrepancy of $25,791 in the recorded electronic inventory vis-a-vis the physical inventory on the tables at the time of the relocation. However, at no time were the gaming chips not under our control, nor were such assets at risk of misappropriation or loss. The effect of the discrepancy was an understatement of revenue on April 2, 2009 and a correcting and exactly corresponding overstatement on April 3, 2009, resulting in a net effect of zero at the close of the reporting period. Upon further review, and upon discussion with the SGA, the inventory of each table was again adjusted such that each table’s opening inventory matched the physical inventory on the tables at that time, and consequently did not match the closing inventory of the table prior to the relocation. This adjustment also resulted in a discrepancy of $25,791. These known, identified variances were appropriately documented in, and supported by, the accounting records.

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As a result of the events on April 3, 2009, the 2009 NOV alleges that we and the named employees violated certain provisions of the Class III Gaming Ordinance and the Compact as well as one provision of our charter. Specifically, the NOV alleges violations of provisions pertaining to:

(i) the maintenance of books and records (a) sufficient to establish the amount of gross and net income, deductions and expenses and other information required in any financial statement, report or other accounting prepared, (b) to accurately and fairly reflect each day’s transactions, including but not limited to the receipt of funds, expenses, prize claims, so as to permit preparation of monthly and annual financial statements in conformity with Generally Accepted Accounting Principles, or GAAP, (c) pertaining to the Class III gaming operation, including, but not limited to accounting records and (d) of all transactions pertaining to the company’s revenues and expenses, assets, liabilities and equity in conformance with GAAP;

(ii) the knowing submission of false or misleading information to the regulatory authorities in response to any provision of applicable law;

(iii) the maintenance of a system of internal controls designed to ensure that the assets of the company are safeguarded, that the accountability for assets is maintained in accordance with GAAP, that only authorized personnel have access to assets and that the functions, duties and responsibilities are appropriately segregated and performed in accordance with sound practices by competent, qualified personnel and the training of the company’s personnel in all accounting and internal control practices and procedures relevant to each employee’s function;

(iv) certain technical and procedural requirements pertaining to the storage of inventory when a table is not in use, the generation and storage of “fills” and “credits” in such a way that the data is not susceptible to change or removal after preparation and the maintenance of drop boxes corresponding to each gaming table; and

(v) the establishment and installation by the company’s board of directors of an accounting system (a) in conformity with accounting principles generally accepted in the gaming industry and (b) necessary and advisable, in the reasonable discretion of the board of directors, in order to manage the assets of the company and the gaming assets of the Nation, which accounting system shall ensure the availability of information as may be necessary to comply with the Compact and with applicable Nation and federal regulatory requirements.

The NOV alleges fifteen violations in total. As a result of the alleged violations, SGA proposed fines of $500.00 per day, per violation, from the date of the infraction, April 3, 2009, for each of our company and for four of the eleven employees named in the 2009 NOV. The remaining seven employees are cited for five to twelve of the fifteen alleged violations. Further, the 2009 NOV outlines six corrective measures to be taken, including establishing and implementing controls to prevent the manipulation of inventory accounting, segregating duties and limiting access to certain records, developing protocol for table game projects, implementing procedures and controls to ensure separation of duties within the income audit department and training all employees on policies for conducting table games projects.

We and the eleven named employees responded to the proposed NOVs in writing within the five days prescribed by the SGA’s Notice of Violation and Enforcement Procedures. In our response, we state that despite the isolated instance of human error, we maintain adequate internal controls and procedures and, in fact, such controls and procedures were effective in enabling us to address and rectify the error to the best of our ability. Accordingly, we dispute each of the fifteen violations cited in the NOV in our response.

We maintain in our response letter that once the error occurred, our internal control processes, which include appropriate segregation of duties, were followed diligently and effectively. Immediately upon detecting that the table closers for five of the tables were incorrect, our pit floor supervisors sent error notification slips/discrepancy reports to the appropriate parties, including the SGA, pursuant to our Internal Controls and Procedures. Also when the pit clerk could not open certain tables in ACSC due to the differing closing and opening inventories, discussions to correct the issue ensued among our Tables Game Manager, Cage Manager, the Casino Controller, the Casino Accountant and our Income Audit Department. Further, as discussed above, we self-reported to the SGA immediately upon discovering the error and met with the SGA following of the incident.

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Although we are confident that no violations occurred, and in the corresponding determination to the same effect by PricewaterhouseCoopers, we can provide no assurance that the SGA will agree with us. According to the SGA Notice of Violation and Enforcement Procedures, we may receive a proposed final assessment within 10 days of the issuance of the initial NOVs. Although such date has passed, according to the SGA Notice of Violation and Enforcement Procedures, “[f]ailure to serve the proposed final assessment timely shall not affect its validity”. In accordance with the SGA Notice of Violation and Enforcement Procedures, if a proposed final assessment is issued by the SGA instead of a withdrawal or dismissal of the 2009 NOVs, the Company and each of the individuals who receive a final proposed NOV will have thirty days to file an appeal. The appeal will be heard by the SGA Commission. It is unclear what appeal rights we may have, if any, from an adverse decision from the SGA Commission. We have been in continuous contact with the SGA since the issuance of the NOV and plan to vigorously defend the allegations set forth therein.

7. Subsequent Events

Unsecured Construction Loan from Seneca Nation

On August 8, 2009, the Nation offered SEGC a $9 million unsecured loan. The proceeds will be used for purposes of expanding the Buffalo Creek Casino temporary facility to include up to 250 additional slot machines. The loan carries an interest rate of 5% per annum with principal and interest payable monthly over a 12 month period commencing on the 15th day of the calendar month following the opening of the expansion, currently estimated to occur in February 2010. The note is prepayable at any time without penalty. The SEGC Board of Directors, on August 14, 2009, found such terms acceptable but SEGC has not yet executed a note for the loan. SEGC is currently in the initial design stage for this expansion, and therefore, the final budget, construction timeline and the number of machines for the expanded facility are being finalized.

Appointment of Acting Treasurer and Acting Audit Committee Chairman

On August 14, 2009, the Seneca Gaming Corporation’s Board of Directors appointed Director Kevin W. Seneca as Acting Treasurer of the Corporation and Acting Chairman of the Audit Committee.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with the section titled “Financial Statements” and the accompanying “Notes to Consolidated Financial Statements” included elsewhere in this Quarterly Report on Form 10-Q. References below to years are to fiscal years of Seneca Gaming Corporation, or SGC, unless otherwise noted. SGC’s fiscal year is from October 1 through September 30.

Forward-Looking Statements

When used in this Quarterly Report on Form 10-Q, in other filings with the SEC, in our press releases or in our other public communications, the words “believe,” “estimate,” “anticipate,” “expect,” “contemplate,” “may,” “will,” “plan,” “project,” “will continue,” “will be,” “will continue,” “likely will result” and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe our plans, business, strategy or goals are all forward-looking statements. Statements looking forward in time are included in this Quarterly Report on Form 10-Q pursuant to the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially, from ~~including~~those expressed in or implied by these forward-looking statements, including, but not limited to, the risk factors contained or referenced herein and in our other reports filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, including in Item 1A of our ~~2008~~2009 Form 10-K. ~~Readers~~In ~~are~~addition ~~cautioned~~to ~~not~~the torisk ~~place~~factors ~~undue~~described in ~~reliance~~Item on1A ~~these~~of our 2009 Form 10-K, the following important factors, among others, could affect our future financial condition or results of operations, causing actual results to differ materially from those expressed in the forward-looking statements: the local, ~~which~~regional, ~~speak~~national, ~~only~~or asglobal ofeconomic climate, ~~their~~our substantial indebtedness and ability to meet our financial ~~respective~~obligations ~~dates. We~~and ~~undertake~~operate noin accordance with the restrictions pursuant to such ~~obligation~~indebtedness, our incurrence of any additional indebtedness, the availability of financing, our failure to ~~update~~generate ~~these~~cash ~~forward~~flows, increased competition, changes in federal Indian law, issues relating to the Nation-~~looking~~State ~~statements~~Gaming Compact, or the Compact, between the Seneca Nation of Indians and New York State, the control of our company by the Seneca Nation of Indians, or the Nation, changes in the membership of the Nation’s Council (the Nation’s legislative body) or Nation policies, changes in gaming laws or regulations, ongoing or future litigation challenging our ability to ~~reflect~~conduct ~~events~~gaming operations, changes in federal or state tax laws or the administration of such ~~circumstances~~laws, ~~occurring~~our ~~after~~failure ~~their~~to ~~respective~~retain ~~dates~~existing management, fill current vacancies, and attract new personnel, our limited experience operating casinos, hotels, and the golf course we intend to open, seasonality and weather-related factors, investigative reviews by regulatory authorities relating to our gaming revenues, and acts of war or terrorism.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates. We undertake no obligation to update these forward-looking statements to reflect events or circumstances occurring after their respective dates.

Overview

SGC is wholly -owned by the Nation and chartered to develop, manage and direct all of the Nation’s Class III gaming operations on the Nation’s territories in Western New York. SGC was chartered by the Nation in August 2002. In August 2002, the Nation entered into the Compact with New York State that provides the Nation with the right to establish and operate three Class III gaming facilities in Western New York. Class III gaming, the most heavily regulated of the gaming classes includes, among other things, slot machines and table games. We currently operate three Class III gaming facilities in Western New York—Seneca Niagara Casino and Hotel, which is located in the City of Niagara Falls, New York (Niagara Territory) and operated by ~~SNFGC~~Seneca Niagara Falls Gaming Corporation, or SNFGC, approximately 20 miles north of Buffalo, New York; Seneca Allegany Casino and Hotel, which is located in the City of Salamanca, New York (Allegany Territory) and operated by Seneca Territory Gaming Corporation, or STGC, approximately 75 miles northeast of Erie, Pennsylvania; and Seneca Buffalo Creek Casino, which is located in the inner harbor district of Buffalo, New York (Buffalo Creek Territory) and operated by Seneca Erie Gaming Corporation, or SEGC. Seneca Niagara Casino and Hotel opened on December 31, 2002 (initially, as the Seneca Niagara Casino). Seneca Allegany Casino and Hotel opened on May 1, 2004 (initially, as the Seneca Allegany Casino). Seneca Buffalo Creek Casino commenced operations on July 3, 2007 in a temporary facility. Our three casinos are located on land held in restricted fee by the Nation, which, together with the rights under the Compact, allows us to conduct Class III gaming operations at these locations in New York State and are the only casino resort gaming facilities in Western New York State to offer both Class III slot machines and table games.

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Buffalo Creek Casino, which is located in the inner harbor district of Buffalo, New York (Buffalo Creek Territory) and operated by SEGC. Seneca Niagara Casino and Hotel opened on December 31, 2002 (initially, as the Seneca Niagara Casino). Seneca Allegany Casino and Hotel opened on May 1, 2004 (initially, as the Seneca Allegany Casino). Seneca Buffalo Creek Casino commenced operations on July 3, 2007 in a temporary facility. Our three casinos are located on land held in restricted fee by the Nation, which, together with the rights under the Compact, allows us to conduct Class III gaming operations at these locations in New York State and to operate the only casino gaming facilities in Western New York State to offer both Class III slot machines and table games.

Executive Summary

Our Current Operations. We currently operate three Class III gaming facilities: Seneca Niagara Casino and Hotel, in the City of Niagara Falls, New York (Niagara Territory), featuring over 147,000 square feet of gaming space, 4,~~095~~049 slot machines, ~~104~~102 table games and 604 hotel rooms; Seneca Allegany Casino and Hotel, in the City of Salamanca, New York (Allegany Territory), featuring over 63,500 square feet of gaming space, 2,~~310~~182 slot machines, 4132 table games and 212 hotel rooms; and the Seneca Buffalo Creek Casino (slots only temporary facility), in the City of Buffalo, New York (Buffalo Creek Territory), featuring 244 slot machines. See “Executive Summary — Seneca Buffalo Creek Casino,” “Part II. Item 1. — Legal Proceedings,” and “2008 Form 10-K Item 3. — Legal Proceedings” for information regarding the status of, and litigation related to, our Seneca Buffalo Creek Casino. Our operations also include dining, entertainment, retail and spa and salon services. For the three months ended ~~June~~December 3031, ~~2009~~ ~~and 2008, and the nine months ended June 30,~~ 2009 and 2008, approximately 92% of our net revenue was derived from our gaming activities.

Seneca Niagara Casino and Hotel. Upon opening on December 31, 2002, Seneca Niagara Casino primarily relied on drive-in and bus patrons from the Buffalo, Niagara Falls, and Rochester areas in New York and secondarily from Erie, Pennsylvania, Ohio and other parts of New York.

In March 2006, SNFGC officially completed the phased opening of its luxury hotel expansion, which included a permanent 147,000 square foot gaming facility (providing 35,000 square feet more gaming space than the original 112,000 square feet), a 604 -room luxury hotel with 118 suites of various sizes, a full-service spa, salon, and fitness center, three fine dining restaurants ~~(two additional)~~ and a 24 hour casual restaurant, three new retail stores, and a 25,200 square foot multi-purpose room and events center. The expansion of Seneca Niagara Casino and Hotel, including the addition of our luxury hotel and other amenities, has enabled us to attract higher-end patrons, increase length of stay, and extend our geographic market penetration and appeal to a more diverse ~~demographic~~ demographic base.

In 2006, we began master planning activities for the remaining approximately 24 acres of undeveloped land contained in the approximately 50 acre Niagara Falls footprint described in the Compact for ownership by the Nation. AsDuring ~~of June~~August 302008, ~~2009,~~ these master planning activities ~~have~~were ~~been~~ suspended due to the continuation of weak ~~economic~~ economic conditions, adverse credit market conditions and an uncertain economic ~~outlook. As~~ ~~a result of these~~outlook, ~~circumstances~~ and ~~in accordance with SFAS 144,~~ an impairment charge of $3.5 million was recognized during Fiscal 2009 related to these activities ~~as of June 30, 2009~~.

Seneca Allegany Casino and Hotel. Since opening on May 1, 2004, Seneca Allegany Casino and Hotel has attracted patrons from the southern portion of Western New York, Erie and Pittsburgh, Pennsylvania and Ohio. As of ~~June~~December 3031, 2009, approximately 7069% of the casino’s patron base is from outside of the State of New York.

In March 2007, we opened a 212-room resort hotel, including two fine dining restaurants, a 24-hour casual restaurant and certain other amenities after officially opening the new permanent gaming floor in December 2006. In March 2008, we completed the conversion of the former approximate 120,000 square foot temporary casino structure into an events center with a seating capacity for 2,200 people, along with additional administrative office space and amenities. We believe the ~~new~~ resort hotel, permanent ~~casino~~ casino and events center provide a first-class gaming experience for our patrons, encouraging ~~helping~~longer topatron ~~increase patrons’~~ length of stay and helping to maintain the ~~competitive~~ competitive position of the facility in light of our closest and most immediate ~~competition~~ competition in Pennsylvania, Presque Isle Downs, a relatively new gaming facility that opened in late February 2007 in Erie, Pennsylvania approximately 80 miles from the Seneca Allegany Casino and Hotel. Presque Isle Downs has approximately 2,000 slot machines and offers dining and entertainment options that include a steakhouse, a buffet and four lounges, but it does not offer table games or lodging.

Construction on our next phase of development at Seneca Allegany Casino and Hotel, which was planned to include an additional 200 room hotel tower, and up to 30,000 square feet of additional gaming space and related amenities, for a total estimated cost of up to $130 million, was suspended for reasons including: the ~~continuing~~ economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash, such as our payments and distributions to the Nation. As of December 31, 2009, construction remained suspended indefinitely. As a result of these circumstances an impairment charge was recognized related to these activities in Fiscal 2009, in the amount of approximately $17.1 million. During the three months ended December 31, 2009, an additional $38,000 was recorded as an impairment of property and equipment.

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our available cash, such as our payments and distributions to the Nation. As of June 30, 2009, due to the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook, it is unlikely construction will resume in the foreseeable future. As a result of these circumstances and in accordance with SFAS 144, an impairment charge was recognized for costs incurred related to this project as of June 30, 2009.

Seneca Buffalo Creek Casino. On October 3, 2005, the Nation acquired approximately nine acres of land in the inner-harbor district of Buffalo, New York. On July 3, 2007, we began operating a temporary Class III gaming facility (approximately 6,000 square feet) featuring 135 slot machines and a snack bar. During the quarter ended March 31, 2008, the temporary facility was expanded to include an additional 109 slot machines. The current temporary facility is approximately 8,600 square feet, and features 244 slot machines and a snack bar.

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On October 3, 2007, we formally announced our plans for a permanent casino and hotel complex on the Buffalo Creek Territory having an estimated cost of $333 million, featuring approximately 90,000 square feet of gaming space; 2,000 slot machines; 45 table games; a 22-story all suite hotel; four restaurants; a full-service spa and salon; retail and other amenities; and a 2,200-space parking garage.

We suspended construction on the permanent Seneca Buffalo Creek Casino and Hotel in August 2008 for reasons including: the ~~continuing~~ economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash, such as our payments to the Nation. As of ~~June~~December 3031, 2009, construction ~~due~~remained tosuspended ~~the~~indefinitely. ~~continuation~~As ofa ~~weak~~result ~~economic~~of ~~conditions, adverse credit~~these ~~market~~circumstances ~~conditions~~an ~~and~~impairment ancharge ~~uncertain~~was ~~economic~~recognized ~~outlook,~~related itto isthese ~~unlikely~~activities ~~construction~~in ~~will~~Fiscal ~~resume~~2009, in the ~~foreseeable~~amount ~~future. As a result~~ of ~~these~~approximately ~~circumstances~~$87.0 ~~and~~million. During ~~in accordance~~the ~~with~~three ~~SFAS~~months ~~144~~ended December 31, 2009, an ~~impairment~~additional ~~charge~~$17,000 was ~~recognized~~recorded ~~for~~as ~~costs incurred~~an ~~related~~impairment ~~to this project as~~ of ~~June 30,~~property ~~2009~~and equipment.

On ~~August~~October 819, 2009, ~~the~~we ~~Nation~~broke ~~offered~~ground ~~SEGC~~on aan $9expansion ~~million~~to ~~unsecured loan. The proceeds will be used for purposes of expanding~~ the ~~Buffalo~~existing ~~Creek Casino~~ temporary facility, towhich ~~include up to 250~~will ~~additional~~add ~~slot~~approximately ~~machines. The~~5,300 ~~loan carries~~square anfeet ~~interest rate~~ of 5%gaming ~~per~~space ~~annum with principal~~ and ~~interest~~will ~~payable over~~accommodate a200 ~~12 month period commencing on the 15th day of the calendar month following the~~to ~~opening~~250 ofadditional ~~the~~slot ~~expansion, currently estimated to occur in February 2010~~machines. The ~~note~~expansion is ~~prepayable~~due atto ~~any~~be ~~time~~completed ~~without penalty. The SEGC Board of Directors, on August 14, 2009, found such terms acceptable but SEGC has not yet executed a note for the loan. SEGC is currently~~ in ~~the~~spring ~~initial design stage for this expansion, and therefore, the final budget, construction timeline and the number of machines for the expanded facility are being finalized~~2010.

~~Furthermore,~~Our ~~our~~ ability to continue to operate the Seneca Buffalo Creek Casino temporary facility will depend on various factors, ~~including~~ including existing legal challenges. ~~and~~See ~~the~~“Item ~~availability of financing on~~3. ~~acceptable~~Legal ~~terms. Reference~~Proceedings,” isincluded ~~made~~in to our ~~2008~~2009 Form 10-K ~~and to our Quarterly Report on Form 10-Q~~ for ~~the quarter ended March 31, 2009, for~~ a description of the legal proceedings relating to the Seneca Buffalo Creek Casino. ~~See also “Part II. Item 1 - Legal Proceedings” for additional developments~~

Seneca Hickory Stick Golf Club — Lewiston, New York. In March 2006, we acquired 257 acres of land with the intent to design and build a championship level golf course in Lewiston, New York, approximately eight miles from Seneca Niagara Casino and Hotel. We selected the Robert Trent Jones II firm to design the golf course. Construction of the golf course commenced in July 2007, ~~with completion of construction scheduled for Summer 2009. To allow for contractor delays caused by various factors~~ and ~~proper grow-in of the course,~~ it is anticipated that the official opening of the course will occur in ~~Spring~~ Summer 2010. ~~The~~LGCC ~~decision~~has asengaged toKemper ~~when to open the golf~~Sports ~~course for play will depend upon how well the course matures throughout the 2009 growing season. As of June 30~~Management, ~~2009, the Company has incurred $19~~ Inc.1 ~~million~~to inmanage ~~connection~~and ~~with~~operate the ~~golf~~ course. The total cost to construct the golf course, clubhouse and related amenities is estimated to be ~~approximately~~ approximately $25.5 million.

Key Performance Indicators. Our operating results are dependent on the volume of patrons at our casinos, our ability to attract ~~them~~patrons for repeat visits and our ability to increase patron revenue per trip.

Marketing. We use an integrated marketing strategy to attract and retain our patrons and to brand the Seneca name. We coordinate our marketing events to maximize the quality and length of stay of patron visits and to minimize competition among our gaming facilities. The luxury hotel and related amenities at the Seneca Niagara Casino and Hotel and the resort hotel and related amenities at Seneca Allegany Casino and Hotel further enhance our marketing initiatives in the region, including areas of New York outside of the Niagara Falls and Salamanca areas, in Pennsylvania, Ohio, and Toronto, Canada and in areas outside the region including Michigan, Massachusetts, and Connecticut.

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Seasonality. We have generally observed seasonal increases in gaming activity during the spring and summer months and decreases in gaming activity during winter months associated with inclement weather.

Overall Outlook. SGC’s ~~believes~~financial ~~that~~performance itduring is the ~~premier~~three ~~gaming operator in Western New York~~months ~~State~~ended ~~and~~December 31, in2009 ~~the~~reflects ~~areas~~a ofmeasureable ~~Northern~~improvement ~~Pennsylvania~~over ~~and Ohio located within its~~the ~~primary~~quarter ~~and~~ended ~~secondary markets. Since the~~ December 31, ~~2002 opening of the Seneca Niagara Casino~~2008, ~~SGC~~as ~~has~~evidenced ~~invested~~by ~~significantly~~an increase in ~~the~~net ~~development,~~income ~~expansion~~of ~~and~~22.7%. ~~maintenance~~While ofnet ~~its~~revenues ~~gaming~~are ~~facilities,~~approximately ~~including~~2.6% ~~the~~lower ~~completion~~than ofthose generated in the ~~hotel~~comparable ~~and~~period ~~gaming~~in ~~expansion~~Fiscal ~~projects~~2009, atthis ~~Seneca~~percentage ~~Niagara~~decrease ~~Casino~~reflects ~~and Hotel and~~an ~~Seneca~~improvement ~~Allegany~~over ~~Casino~~the ~~and~~7.6% ~~Hotel,~~decrease ~~and~~during the ~~opening~~first quarter of ~~the~~Fiscal ~~temporary~~2009 ~~casino on~~(as compared to the ~~Seneca~~first ~~Buffalo~~quarter ~~Creek~~of ~~Territory~~Fiscal 2008). ~~These~~Additionally, ~~investments~~the ~~have~~three ~~enabled~~months ~~SGC~~ended toDecember 31, ~~maintain~~2009 ~~its position as the~~highlighted ~~premier gaming operator in~~ the ~~region~~cumulative ~~described~~effect ~~above. To~~of ~~further~~SGC’s ~~that~~ongoing ~~objective,~~cost ~~and~~savings ~~to provide for expanded opportunities in the convention~~ and ~~tourism~~efficiency ~~markets~~initiatives, with ~~SGC~~an ~~will~~improvement ~~continue to~~in ~~explore~~our ~~opportunities~~operating ~~with~~margins ~~respect~~ to ~~the Niagara Falls~~17.6%, ~~Allegany~~from ~~and Buffalo gaming and related facilities~~15.2% ~~A principal goal is~~ for the ~~facilities~~three tomonths ~~complement~~ended ~~each other~~December 31, ~~offering diverse hotel, entertainment and gaming experiences for our guests~~2008.

~~Although~~SGC ~~the current~~also ~~economic~~continues ~~recession and increased regional competition continue~~ to ~~present~~take ~~operational challenges~~steps, weand ~~believe our operating results continue~~ to ~~reflect~~ ~~our~~work ~~ongoing~~with ~~ability to weather such conditions, and on~~ the Nation~~’s efforts~~, to ~~work~~improve ~~with~~ SGC’s ~~to mitigate the impact of these adverse~~liquidity ~~developments~~position. WeIn ~~also~~October 2009, ~~continue to~~the ~~believe,~~Nation ~~notwithstanding~~reduced ~~these~~anticipated ~~challenges~~2010 monthly distributions, ~~the~~exclusive ~~Class III~~of ~~gaming~~amounts ~~exclusivity~~required ~~provided~~under by the ~~Compact~~Distribution ~~will~~Agreement, ~~continue~~ to ~~present~~$30.0 usmillion ~~with~~for aFiscal 2010, ~~competitive~~compared ~~advantage~~ to ~~serve~~$42.0 ~~the~~million ~~Western~~for ~~New~~Fiscal ~~York~~2009. ~~hotel,~~As ~~entertainment~~a ~~and~~result ~~gaming markets. As~~of ~~highlighted~~these ~~below~~efforts, in ~~“Recent~~ ~~Developments,”~~conjunction wewith ~~continue~~SGC’s efforts to ~~engage~~create inadditional ~~joint~~operating ~~financing~~efficiencies, ~~planning initiatives~~SGC’s ~~with~~depository ~~the~~cash ~~Nation~~balances increased to ~~assess~~approximately ~~our~~$60.5 ~~financial~~million ~~condition~~at ~~and~~December 31, 2009 ~~liquidity~~from ~~needs~~$7.0 million, ~~and~~net ~~to help~~of ~~ensure~~the ~~that~~$20.0 ~~appropriate~~million ~~strategic~~proceeds ~~plans~~drawn ~~are~~under ~~being~~the Senior ~~developed~~Secured ~~and implemented~~Revolving toLoan ~~meet~~Agreement, ~~our~~as ~~liquidity~~of ~~and~~December 31, ~~maintenance~~2008. ~~capital~~SGC ~~expenditure~~has ~~requirements~~also ~~and~~implemented ~~the~~a ~~ongoing~~strategy ~~challenges~~to ~~presented~~fund bya ~~the current economic environment~~$125. ~~Management~~0 ~~intends~~million toreserve ~~continue~~prior to ~~work closely with the~~May 2012 ~~Nation~~ to ~~help~~reduce ~~ensure~~its ~~cash~~future ~~generated~~borrowing ~~from operations~~costs, ~~available~~while ~~cash~~also ~~and~~maintaining ~~cash~~adequate operating ~~equivalents,~~cash ~~short-term~~reserves. ~~investments~~Furthermore, ~~and~~the ~~cash~~Company’s ~~available~~Board ~~under~~of ~~our~~Directors ~~Senior~~recently ~~Secured~~took ~~Revolving~~action ~~Loan Agreement are sufficient~~ to ~~service~~establish ~~our~~an ~~debt,~~internally ~~satisfy~~restricted ~~our~~senior ~~other financial~~note ~~obligations~~repayment ~~and~~reserve ~~commitments and meet our working capital requirements~~fund for ~~the~~this ~~remainder of the fiscal year~~purpose.

Recent Developments. The ongoing recession has continued to negatively impact our operating performance and results, primarily due to reduced consumer discretionary spending and visitation, which has negatively impacted consumer spending on gaming and entertainment. Over the past fifteen months, we have attempted to mitigate the effects of the economic recession through implementation of expense reduction measures and efforts to increase operational efficiencies. In December 2008, we implemented a multifaceted plan to further reduce expenses, including, but not limited to: an approximate five percent temporary workforce reduction; a wage freeze for all employees earning in excess of $70,000 per year; voluntary temporary salary reductions for senior management; and suspension of our bonus program in 2008, which had historically been paid in December of each year. While we have successfully reduced certain expenses and increased certain operational efficiencies, we anticipate continuing to take measures to help preserve SGC’s financial condition, maintain adequate liquidity and position us for future growth and success, and endeavor to do so in a manner that will not compromise the quality or levels of our offerings and services provided at each of our properties.15

Following discussions with the Nation, our payments and distributions to the Nation were reduced in an effort to enhance our liquidity position, provide cash for priority maintenance capital expenditures and fund a reserve for potential repurchase or repayment of our senior debt. The measures resulting from the joint planning initiatives with the Nation included principally, rescission of an earlier Council request for $20 million relating to certain capital improvement projects of the Nation, a reduction in monthly distributions to the Nation from the then-current level of $4 million per month to $3 million per month commencing in March 2009, the return of $5 million previously distributed to the Nation for the capital improvement projects described above (which has been used as a credit against SGC’s monthly distribution obligations), and a $5 million reduction in rent for fiscal 2009 under the Corporation’s Head Leases.

During the third quarter of fiscal 2009, SGC paid $20.0 million on the Senior Secured Revolving Loan Agreement, leaving no outstanding balance at June 30, 2009. SGC also exercised its election to extend the maturity date to December 19, 2009. As of June 30, 2009, at SGC’s request, the lender under the Senior Secured Revolving Loan Agreement had issued letters of credit totaling $19.6 million.

As previously noted, on August 27, 2008, the construction activities at Seneca Allegany Casino and Hotel and Seneca Buffalo Creek Casino and Hotel were suspended for reasons including: the economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash,

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~~such~~SGC ascontinues ~~our~~to believe ~~payments~~that toit is the ~~Nation. As~~premier gaming operator in Western New York State and in the areas of ~~June 30,~~Northern Pennsylvania and Ohio located within its primary and ~~2009,~~secondary ~~due~~markets. toSince the ~~continuation~~December 31, 2002 opening of ~~weak~~the ~~economic~~Seneca Niagara ~~conditions~~Casino, ~~adverse~~SGC ~~credit market~~has ~~conditions~~invested significantly in the development, expansion and anmaintenance ~~uncertain~~of ~~economic~~its ~~outlook~~gaming facilities, itincluding isthe ~~unlikely~~completion of the hotel ~~construction~~and ~~will~~gaming ~~resume~~expansion inprojects ~~the~~at ~~foreseeable~~Seneca ~~future. Furthermore,~~Niagara ~~certain~~Casino ~~planning~~and ~~efforts~~Hotel ~~related~~and Seneca toAllegany Casino and Hotel, and the ~~future~~opening and expansion of the temporary casino on the Seneca ~~Niagara~~Buffalo ~~property~~Creek Territory. These investments have ~~been~~helped ~~suspended~~enable ~~for~~SGC to maintain its position as the premier gaming operator in the ~~same~~region ~~reasons~~described above. AsTo ahelp ~~result~~maintain ofits ~~these circumstances~~current market position, and to provide for expanded opportunities in ~~accordance~~the ~~with~~convention ~~SFAS~~and ~~144~~tourism markets, anSGC ~~impairment~~intends ~~charge~~to continue to explore opportunities for its Niagara Falls, Allegany and Buffalo facilities, subject to the availability of necessary ~~$109~~funding.~~0 million~~ ~~was~~A ~~recognized~~principal atgoal ~~June 30~~is for the facilities to complement each other, ~~2009~~offering diverse hotel, entertainment and gaming experiences for our guests.

~~Although~~The ongoing economic werecession ~~have~~and ~~suspended~~increased ~~our~~regional ~~construction~~competition ~~for~~have ~~the~~continued ~~foreseeable~~to ~~future~~present operational onchallenges afor ~~number~~SGC ~~of permanent~~during ~~expansion~~the ~~plans,~~first asquarter ~~discussed~~of ~~above~~Fiscal 2010, onand ~~August 8,~~we expect ~~2009,~~that ~~the~~such ~~Nation~~challenges ~~offered~~may ~~SEGC~~continue. aDespite ~~$9 million~~these ~~unsecured~~challenges, ~~loan. The~~we ~~proceeds~~believe ~~will~~that bewe ~~used~~are ~~for~~positioned ~~purposes~~to ofweather ~~expanding~~such ~~the~~challenges ~~Buffalo~~and ~~Creek~~conditions, ~~Casino~~based ~~temporary~~in part ~~facility~~upon toour ~~include~~efforts, upand tothose ~~250~~of ~~additional~~the ~~slot~~Nation ~~machines. The~~in ~~loan~~working ~~carries~~with anSGC, ~~interest~~to ~~rate~~mitigate the impact of 5%these ~~per~~adverse developments. We ~~annum~~also ~~with~~continue ~~principal~~to ~~and~~believe, ~~interest~~notwithstanding ~~payable~~these ~~over~~challenges, athe 12Class III gaming ~~month~~exclusivity ~~period~~provided ~~commencing~~by on the ~~15th day~~Compact ofwill ~~the~~continue ~~calendar~~to ~~month~~present ~~following~~us ~~the~~with a ~~opening~~competitive ofadvantage to serve the ~~expansion,~~Western ~~currently~~New ~~estimated~~York tohotel, ~~occur~~entertainment inand gaming ~~February 2010~~markets. ~~The~~We ~~note~~continue isto ~~prepayable~~engage atin joint ~~any~~planning ~~time~~initiatives ~~without penalty. The~~with ~~SEGC~~the ~~Board~~Nation ofto ~~Directors,~~assess ~~on August~~our ~~14,~~financial ~~2009~~condition, and ~~found~~our ~~such~~liquidity ~~terms~~and ~~acceptable~~financing ~~but~~needs, ~~SEGC~~and ~~has~~to ~~not~~help ~~yet~~ensure ~~executed~~cash agenerated from ~~note~~operations, ~~for~~available ~~the~~cash, ~~loan. SEGC~~cash isequivalents ~~currently~~and ~~in the~~short-term ~~initial~~investments ~~design~~are ~~stage~~sufficient to ~~for~~service ~~this~~our ~~expansion~~debt, ~~and~~satisfy ~~therefore,~~our ~~the~~other ~~final~~financial ~~budget, construction~~obligations ~~timeline~~and commitments and ~~the~~meet ~~number~~our ofworking ~~machines~~capital requirements for the ~~expanded~~remainder ~~facility~~of ~~are being~~the ~~finalized~~fiscal year.

Recent Developments.

On October 19, 2009 we broke ground on a Buffalo Creek Casino temporary facility expansion, which will add approximately 5,300 square feet of gaming space to the facility and will accommodate approximately an additional 212 slot machines. The expansion is due to be completed in spring 2010.

Also, during the three months ended December 31, 2009, 577 new slot machines were installed at the Niagara Falls and Allegany properties furthering our goal of providing the best and newest entertainment experiences for our patrons.

Effective December 18, 2009, SGC amended its $50 million Senior Secured Revolving Loan Agreement to extend the maturity date from December 19, 2009 to December 31, 2011. Amounts borrowed under the Amended Senior Secured Revolving Loan Agreement continue to bear interest at either one, three or six-month LIBOR plus one and one quarter percent (1.25%), or the prime rate (as reported in The Wall Street Journal) plus one quarter percent (0.25%), with any outstanding principal balance to be paid by, or on, the new maturity date. The $50.0 million commitment under the Amended Senior Secured Revolving Loan Agreement reduces in tandem with any reduction in the letter of credit requirement imposed by the Empire State Development Corporation, or ESDC (relating to the ESDC’s efforts on behalf of SGC in connection with ongoing condemnation proceedings in Niagara Falls, NY), up to an aggregate reduction of $10.0 million. The Amended Senior Secured Revolving Loan Agreement requires that SGC maintain all of its deposit and investment accounts with the lender, subject to limited exceptions for certain existing accounts. The Amended Senior Secured Revolving Loan Agreement also modifies certain of the financial covenants contained in the Senior Secured Revolving Loan Agreement, including reducing the minimum consolidated EBITDA covenant from $160 million to $145 million (on a rolling 12-month basis) as well as modifying the total leverage ratio (of total funded debt to EBITDA) to a limit of 3.5 to 1.0.

On January 11, 2010, the Seneca Gaming Corporation’s Board of Directors appointed Kevin Seneca as the new Chairman of the Board, and voted to appoint Richard K. Nephew to fill the vacancy in the office of Treasurer created by Mr. Seneca’s appointment. Each will serve in their respective capacities until the Board’s next annual meeting and until their successors are elected, or appointed and qualified, or until their earlier resignation or removal. The appointments did not affect the composition of the Board, and the Directors each continue to serve on the Board for their respective terms as designated by the Nation’s Council.

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Critical Accounting Policies and Estimates

There have been no ~~changes~~ changes in critical accounting policies and estimates since the filing of our Annual ~~2008~~Report on Form 10-K for the fiscal year ended September 30, 2009, or 2009 Form 10-K.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation.

Operating Results - Three Months Ended ~~June~~December 3031, 2009 Compared to the Three ~~Months~~ Months Ended ~~June~~December 3031, 2008

Summary of Operating Results

As of ~~June~~December 3031, 2009, we own and operate the Seneca Niagara Casino and ~~Hotel~~ Hotel in Niagara Falls, New York; the Seneca Allegany Casino and Hotel in Salamanca, New York; and the Seneca Buffalo Creek Casino in Buffalo, New York. In addition, Lewiston Golf Course ~~Corporation~~ Corporation was established to operate a golf course which is currently under ~~construction~~ construction in Lewiston, New York. All of our revenues are derived from our operations at our completed facilities.

The following table summarizes our results from operations by corporation and/or facility:

	Three Months Ended
	June 30,
	December 31,
	2009			2008
	(Dollars in Thousands)
Net revenues:
Seneca Niagara Falls Casino and Hotel	$	9890,~~591~~045		$	~~112~~94,~~175~~307
Seneca Allegany Casino and Hotel	3934,~~338~~145			4435,~~094~~580
Seneca Buffalo Creek Casino	1110,~~103~~972			98,~~402~~832
Total	$	~~149~~135,~~032~~162		$	~~165~~138,~~671~~719
Operating expenses:
Seneca Niagara Falls Casino and Hotel	$	7169,~~942~~216		$	7672,~~310~~136
Seneca Allegany Casino and Hotel	5433,~~104~~772			3937,~~138~~059
Seneca Buffalo Creek Casino	958,~~391~~030			7,~~866~~913
Seneca Hickory Stick Golf Club	9672			~~169~~49
Seneca Gaming Corporation	~~766~~346			~~761~~430
Total	$	~~222~~111,~~299~~436		$	~~124~~117,~~244~~587
Operating income (loss):
Seneca Niagara Falls Casino and Hotel	$	2620,~~649~~830		$	3522,~~865~~171
Seneca Allegany Casino and Hotel	~~(14,766~~372		)	4(1,~~956~~479		)
Seneca Buffalo Creek Casino	~~(84~~2,~~288~~942		)	~~1,536~~919
Seneca Hickory Stick Golf Club	(9672		)	(~~169~~49		)
Seneca Gaming Corporation	(~~766~~346		)	(~~761~~430		)
Total	$	~~(73~~23,~~267~~726	)	$	4121,~~427~~132

20The most important factors or trends contributing to our operating performance during the three months ended December 31, 2009 were:

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The most important factors or trends contributing to our operating performance during the three months ended June 30, 2009 were:

· The reduction of expenses attributable to implementation of operating initiatives, which included: a continued focus on hotel yield management; reduced food and beverage costs as a percentage of food and beverage revenue; repricing of our food and beverage products; initiatives to increase our cash paying patrons; reduced marketing costs; and labor efficiencies achieved through active monitoring of scheduling activities and a reduction in workforce;

· The rescission of a Council request for $20 million, a reduction in monthly distributions to the Nation from the current level of $4 million per month to $3 million per month commencing in March 2009, and a reduction in Head Leases payments for Fiscal 2009 from $81 million to $76 million;17

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· A reduction in monthly distributions to the Nation from $4 million per month to $2.5 million per month, and a reduction in Head Leases payments for the three months ended December 31, 2009 from $20.3 million to $19.0 million;

· Extension of hours of operation of the Buffalo Creek facility, effective February 2009;

· ~~Increased~~Relatively ~~promotional~~temperate ~~room~~weather ~~rates~~at ~~offered to~~the ~~casino~~Niagara ~~hotel~~Falls ~~guests,~~and ~~designed to maintain occupancy levels to support gaming~~Buffalo ~~and~~Creek ~~non-gaming revenues~~properties;

· ~~The~~Selective ~~effects~~maintenance ofcapital ~~increased Head Lease~~investment ~~payments~~in toboth ~~the Nation from $62 million to $76 million, which have reduced~~ our ~~cash~~ ~~reserves~~Niagara ~~and~~Falls ~~funds available for construction, capital reinvestment~~ and ~~liquidity~~ ~~reserves~~Allegany properties;

· The ongoing economic recession, which has reduced consumer spending and encouraged an apparent transition to gaming of logistical convenience; and

· Adverse credit market conditions which have reduced the availability, and increased the cost, of capital for expansion projects to generate additional revenues;.

· Recognition of an impairment charge in the amount of $109 million related to costs incurred on certain construction and development projects;

· Limited maintenance capital investment in both our Niagara Falls and Allegany properties;

· Additional marketing by New York racinos which may be attributable, in part, to recent New York State legislation providing financial support for marketing to racinos; and

· Recruitment and retention issues pertaining to key members of the management team, including, but not limited to, the marketing department.

Gross Revenues

Gross revenues consisted of the following:

	Three Months Ended
	June 30,
	December 31,
	2009		2008
	(Dollars in Thousands)
Gaming	$	~~153~~135,~~162~~377	$	~~164~~137,~~693~~023
Food and beverage	1413,~~739~~254		1614,~~295~~204
Lodging	5,~~928~~204		76,~~277~~296
Retail, entertainment and other	5,~~353~~892		6,~~169~~440
Total	$	~~179~~159,~~182~~727	$	~~194~~163,~~434~~963

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The table below summarizes the percentage of gross revenues from each revenue source:

	Three Months Ended
	June 30,
	December 31,
	2009		2008
Gaming	8584.57	%	8483.76	%
Food and beverage	8.23	%	8.47	%
Lodging	3.3	%	3.78	%
Retail, entertainment and other	3.07	%	3.29	%
Total	100.0	%	100.0	%

Gaming Revenue

Our gaming revenue for the three months ended ~~June~~December 3031, 2009 decreased from $137.0 million to $135.4 million when compared to the same period in the prior year, primarily due to the ongoing impact of adverse economic conditions ~~which~~on ~~reduced~~ consumer demand for gaming and entertainment offerings.

Our net gaming revenue, net of promotional credits of $1611.03 million and $1210.0 million in the three months ended ~~June~~December 3031, 2009 and 2008, respectively, decreased $152.59 million, or 102%, when comparing these periods. During the three months ended ~~June~~December 3031, 2009, Seneca Niagara ~~Casino~~ Casino and Hotel’s net gaming revenue decreased $123.6 million, or 124%; Seneca ~~Allegany~~ Allegany Casino and Hotel’s net gaming revenue decreased $41.54 million, or 114%; ~~and~~ and Seneca Buffalo Creek Casino’s net gaming revenue increased $12.61 million, or ~~18%~~ 24% when comparing these same periods.

Revenues from slot machines are the largest component of our gaming revenues. The following table presents data related to slot revenues (in thousands, except where noted):

	Three Months Ended
	June 30,
	2009			2008
Slot handle	$	1,616,272		$	1,741,729
Gross slot revenue	$	142,005		$	150,930
Net slot revenue	$	122,711		$	135,578
Weighted average number of slot machines (in units)	6,653			6,760
Gross slot hold percentage	8.8		%	8.7		%
Gross slot win per unit per day (in dollars)	$	235		$	245

Net slot revenue decreased $12.9 million, or 10%, when comparing the three months ended June 30, 2009 to the three months ended June 30, 2008.

Slot promotional credits, which are recorded in gross slot revenues and promotional allowances, amounted to $9.7 million and $7.1 million at Seneca Niagara Casino and Hotel during the three months ended June 30, 2009 and 2008, respectively, and $6.3 million and $4.9 million at Seneca Allegany Casino and Hotel during the three months ended June 30, 2009 and 2008, respectively. The increase in slot promotional credit play during the three months ended June 30, 2009 was primarily due to increased marketing promotions offering slot promotional credits.

The following table presents data related to table game revenues (in thousands, except where noted):

	Three Months Ended
	June 30,
	2009			2008
Table games drop	$	91,845		$	102,526
Net table games revenue	$	14,345		$	16,965
Weighted average number of table games (in units)	145			142
Table games hold percentage	15.2		%	16.7		%
Gross table games revenue per unit per day (in dollars)	$	1,056		$	1,321

Net table games revenue decreased $2.6 million, or 15%, when comparing the three months ended June 30, 2009 to the three months ended June 30, 2008. The decrease was principally due to those factors previously noted, as well as a decrease in the table games hold percentage when comparing these same periods.

Food and Beverage Revenue

The following table presents data related to food and beverage revenue (in thousands, except where noted):

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	Three Months Ended
	June 30,
	December 31,
	2009			2008
Covers	1,013			1,125
Slot handle	$	1,454,334		$	1,472,236
Average check (in dollars)	$	14.55		$	14.49
Gross slot revenue	$	123,480		$	124,863
Net slot revenue	$	109,673		$	111,576
Weighted average number of slot machines (in units)	6,514			6,680
Gross slot hold percentage	8.5		%	8.5		%
Gross slot win per unit per day (in dollars)	$	206		$	203

~~During~~Net ~~the~~slot ~~three months ended June 30, 2009, our consolidated food and beverage~~ revenue ~~decreased~~ decreased $1.69 million, or 102%, when ~~compared~~comparing to the ~~same~~three ~~period~~months inended ~~2008~~December 31, 2009 ~~primarily due~~ to a ~~decrease in consumer spending, which resulted in a decrease in~~ the number of covers, offset by an increase in the average revenue per check. Seneca Niagara Casino and Hotel’s food and beverage revenue accounted for $1.4 million of the decrease; Seneca Allegany Casino and Hotel’s and food and beverage revenue accounted for $0.2 million of the decrease; and Seneca Buffalo Creek Casino’s food and beverage revenue approximated the revenue for the same quarter in the prior year. During the three months ended ~~June~~December 3031, ~~2009~~ ~~and~~ 2008~~, 52% and 54%, respectively, of our food and beverage revenue were the result of Seneca Link Player’s Card point redemptions~~.

~~Lodging~~Slot ~~Revenue~~promotional credits, which are recorded in gross slot revenues and promotional allowances, amounted to $7.5 million and $7.8 million at Seneca Niagara Casino and Hotel during the three months ended December 31, 2009 and 2008, respectively, and $3.7 million and $2.2 million at Seneca Allegany Casino and Hotel during the three months ended December 31, 2009 and 2008, respectively. The increase in slot promotional credit play at Seneca Allegany Casino and Hotel during the three months ended December 31, 2009 was primarily due to increased marketing promotions offering slot promotional credits. The decrease in slot promotional credit play at Seneca Niagara Casino and Hotel was due to slightly lower patron participation in slot promotional programs during the three months ended December 31, 2009, when compared to the three months ended December 31, 2008.

The following table presents data related to lodging revenue:

	Three Months Ended
	June 30,
	2009			2008
Occupied rooms	71,603			71,808
Average daily room rate (ADR)	$	82.78		$	101.34
Occupancy rate	96.7		%	97.2		%
Revenue per available room (REVPAR)	$	80.07		$	98.53

During the three months ended June 30, 2009, our lodging revenue decreased by $1.4 million, or 19%, when compared to the three months ended June 30, 2008, due to a decrease in average rate per occupied room. During the three months ended June 30, 2009, SGC continued to offer hotel room rates at discounted prices in an effort to continue to stimulate casino patron visitation and encourage longer trip duration. Seneca Niagara Casino and Hotel’s lodging revenue accounted for $1.1 million of the decrease and Seneca Allegany Casino and Hotel’s lodging revenue accounted for $0.3 million of the decrease. During the three months ended June 30, 2009 and 2008, 75% and 71%, respectively, of our lodging revenue were the result of Seneca Link Player’s Card point redemptions.

Retail, Entertainment and Other Revenue

During the three months ended June 30, 2009, our retail, entertainment and other revenue decreased $0.8 million, or 13%, when compared to the same period in 2008. During the three months ended June 30, 2009 and 2008, 72% and 77%, respectively, of our retail revenue, and 52% and 60% of our entertainment revenue, respectively, was attributable to Seneca Link Player’s Card point redemptions.

Promotional Allowances

SGC operates a complimentary program in which food and beverage, retail, entertainment, and other services are provided to patrons based on points earned through the Seneca Link Player’s Card. The retail value of these complimentary items is included in gross revenues and then deducted as promotional allowances to arrive at net revenues.

The retail value of providing such promotional allowances was included in revenues as follows:

	Three Months Ended
	June 30,
	2009		2008
	(Dollars in Thousands)
Gaming	$	15,987	$	12,047
Food and beverage	7,776		8,929
Lodging	4,313		5,038
Retail, entertainment and other	2,074		2,749
Total	$	30,150	$	28,763

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The estimated cost of providing such promotional allowances was as follows:

	Three Months Ended
	June 30,
	2009		2008
	(Dollars in Thousands)
Food and beverage	$	5,586	$	6,585
Lodging	2,365		2,361
Retail, entertainment and other	1,821		2,529
Total	$	9,772	$	11,475

Promotional allowances as a percentage of gaming revenue were 19.7% and 17.5% during the three months ended June 30, 2009 and 2008, respectively. Promotional allowances increased $1.4 million, or 5%, when comparing the three months ended June 30, 2009 to the same period in 2008.

Detailed Operating Expense Information

	Three Months Ended
	June 30,
	2009		2008
	(Dollars in Thousands)
Operating expenses:
Gaming	$	38,884	$	43,742
Food and beverage	11,126		12,435
Lodging	3,084		3,274
Retail, entertainment and other	3,307		4,185
Advertising, general and administrative	45,084		47,934
Pre-opening costs	110		70
Depreciation	11,668		12,604
Impairment of property and equipment	109,036		—
Total Operating expenses	$	222,299	$	124,244

Gaming Expenses

Gaming expenses principally consist of costs incurred from operating our table games and slot machines, of which the primary components are payroll and payroll related costs and the slot exclusivity fee paid to New York State pursuant to the Compact.

The following table summarizes the exclusivity fee incurred by property:

	Three Months Ended
	June 30,
	2009		2008
	(Dollars in Thousands)
Seneca Niagara Falls Casino and Hotel	$	17,617	$	20,170
Seneca Allegany Casino and Hotel	7,515		8,211
Seneca Buffalo Creek Casino	2,397		2,037
Total	$	27,529	$	30,418

The slot exclusivity fee decreased $2.9 million, from $30.4 million for the three months ended June 30, 2008 to $27.5 million for the three months ended June 30, 2009, due to lower net slot revenues. Gaming expenses as a percentage of gross gaming revenues were 25.4% and 26.6% for the three months ended June 30, 2009 and 2008, respectively.

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Food and Beverage Expenses

Food and beverage expenses represent those costs incurred for the operation of our restaurants, snack bars and beverage outlets. The primary components of these expenses are the cost of food and beverage products and payroll and payroll related expenses for team members providing the service. During the three months ended June 30, 2009, food and beverage costs decreased $1.3 million, or 11%, when compared to the same period in 2008, due primarily to a continued concerted effort to reduce all components of such costs, while maintaining superior product offerings to our patrons. Food and beverage expenses as a percentage of food and beverage revenues were 75.5% and 76.3% for the three months ended June 30, 2009 and 2008, respectively.

Lodging Expenses

Lodging expenses represent those costs incurred for the operation of our luxury hotel at Seneca Niagara Casino and Hotel and our resort hotel at Seneca Allegany Casino and Hotel. The components of these expenses include payroll and payroll related expenses, guest amenity supplies, laundry and other expenses. During the three months ended June 30, 2009, lodging expenses decreased $0.2 million, or 6%, as compared to the three months ended June 30, 2008. The decrease is primarily due to a $0.1 million decrease in payroll and benefit expenses and a $0.1 million decrease in laundry expense. Lodging expenses as a percentage of lodging revenues were 52.0% and 45.0% for the three months ended June 30, 2009 and 2008, respectively.

Retail, Entertainment and Other Expenses

Advertising, General and Administrative Expenses

Advertising, general and administrative expenses consist primarily of payroll and payroll related expenses, regulatory fees, advertising and marketing costs, Head Lease expense, insurance, legal and utility costs. For the three months ended June 30, 2009, such costs decreased $2.9 million, or 6%, from the same period in 2008. For the three months ended June 30, 2009, a $3.5 million increase in Head Lease expense over the comparative period in 2008, was offset by a $3.4 million decrease in payroll and payroll related expenses, $0.8 million decrease in promotional expenses, a $0.7 million decrease in utility costs, a $0.2 million decrease in advertising costs and a $1.3 million decrease in various other operating expenses. Advertising, general and administrative expenses as a percentage of gross revenues were 25.2% and 24.7%, for the three months ended June 30, 2009 and 2008, respectively.

Pre-opening Expenses

Pre-opening expenses are non-recurring costs incurred to support the expected opening of new facilities. During the three months ended June 30, 2009 and 2008, pre-opening expenses incurred were primarily related to the preparation of the Seneca Hickory Stick Golf Club, to be operated by the Lewiston Golf Course Corporation.

Depreciation Expense

During the three months ended June 30, 2009 and 2008, depreciation expense was $11.7 million and $12.6 million, respectively, a decrease of $0.9 million, or 7%.

Impairment charge

On August 27, 2008, the construction activities at Seneca Allegany Casino and Hotel and Seneca Buffalo Creek Casino, as previously described, were suspended for the foreseeable future for reasons including: the economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash, such as our payments and distributions to the Nation. As of June 30, 2009, due to the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook, it is unlikely construction will resume in the foreseeable future. Furthermore, certain master planning efforts related to the future expansion of the Seneca Niagara Falls property have been suspended for the same reasons. As a result of

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these circumstances and in accordance with SFAS 144, an impairment charge of $109.0 million was recognized at June 30, 2009 in order to write off these costs as they do not currently represent any future value or provide future benefit to the Company.

Other Non-Operating Expenses

The following table summarizes information related to other non-operating expenses:

	Three Months Ended
	June 30,
	2009		2008
	(Dollars in Thousands)
Non-operating expenses	$	25	$	250

During the three months ended June 30, 2009 and 2008, we recorded an other-than-temporary loss on one specific investment of $25,000 and $0.3 million, respectively, as other non-operating expense. The cost basis of this investment has been reduced by the amount of the other-than-temporary loss recorded.

Interest Income

Interest income was $0.1 million for the three months ended June 30, 2009 and June 30, 2008.

Interest Expense

The following table summarizes information related to interest on our long-term debt and Senior Secured Revolving Loan Agreement:

	Three Months Ended
	June 30,
	2009		2008
	(Dollars in Thousands)
Interest expense	$	9,500	$	9,089

During the three months ended June 30, 2009, interest expense consisted substantially of interest on our $500 million aggregate principal amount of 7¼% senior notes, including $0.8 million of amortization related to financing costs and discount, which was partially offset by $0.4 million of capitalized interest on our construction activities for our Seneca Hickory Stick Golf Club. During the three months ended June 30, 2008, there was $0.8 million interest capitalized in conjunction with our construction activities for our Seneca Hickory Stick Golf Club, the permanent casino at Seneca Buffalo Creek Casino and Phase V at Seneca Allegany Casino & Hotel.

Net (Loss) Income

Net loss for the three months ended June 30, 2009 was $82.7 million, compared to a $32.2 million net income for the three months ended June 30, 2008, a decrease of $114.9 million, for the reasons stated above.

Operating Results - Nine months ended June 30, 2009 Compared to the Nine months ended June 30, 2008

Summary of Operating Results

The following table summarizes our results from operations by corporation and/or facility:

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	Nine Months Ended
	June 30,
	2009			2008
	(Dollars in Thousands)
Net revenues:
Seneca Niagara Falls Casino and Hotel	$	286,851		$	322,355
Seneca Allegany Casino and Hotel	110,610			121,177
Seneca Buffalo Creek Casino	30,328			23,357
Total	$	427,789		$	466,889
Operating expenses:
Seneca Niagara Falls Casino and Hotel	$	213,379		$	228,057
Seneca Allegany Casino and Hotel	126,485			115,905
Seneca Buffalo Creek Casino	110,713			22,439
Seneca Hickory Stick Golf Club	198			169
Seneca Gaming Corporation	1,853			3,019
Total	$	452,628		$	369,589
Operating income (loss):
Seneca Niagara Falls Casino and Hotel	$	73,472		$	94,298
Seneca Allegany Casino and Hotel	(15,875		)	5,272
Seneca Buffalo Creek Casino	(80,385		)	918
Seneca Hickory Stick Golf Club	(198		)	(169		)
Seneca Gaming Corporation:	(1,853		)	(3,019		)
Total	$	(24,839	)	$	97,300

The most important factors or trends contributing to our operating performance during the nine months ended June 30, 2009 were similar to those noted above for the three months ended June 30, 2009.

Gross Revenues

Gross revenues consisted of the following:

	Nine Months Ended
	June 30,
	2009		2008
	(Dollars in Thousands)
Gaming	$	431,505	$	469,139
Food and beverage	43,174		46,677
Lodging	17,800		21,501
Retail, entertainment and other	17,619		18,486
Total	$	510,098	$	555,803

The table below summarizes the percentage of gross revenues from each revenue source:

	Nine Months Ended
	June 30,
	2009		2008
Gaming	84.6	%	84.4	%
Food and beverage	8.5	%	8.4	%
Lodging	3.5	%	3.9	%
Retail, entertainment and other	3.4	%	3.3	%
Total	100.0	%	100.0	%

Gaming Revenue

Our gaming revenue for the nine months ended June 30, 2009 decreased when compared to the same period in the prior year, primarily due to the impact of adverse economic conditions which reduced consumer demand for gaming and entertainment offerings.

Our net gaming revenue, net of promotional credits of $38.9 million and $38.6 million in the nine months ended June 30, 2009 and 2008, respectively, decreased $37.9 million, or 9%, when comparing these periods. During the nine months ended June 30, 2009, Seneca Niagara Casino and Hotel’s net gaming revenue decreased $34.5 million, or 12%; Seneca Allegany Casino and Hotel’s net gaming revenue decreased $10.2 million, or 9%; and Seneca Buffalo Creek Casino’s net gaming revenue increased $6.8 million, or 29% when comparing these same periods.

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The following table presents data related to slot revenues (in thousands, except where noted):

	Nine Months Ended
	June 30,
	2009			2008
Slot handle	$	4,609,068		$	4,987,383
Gross slot revenue	$	396,450		$	427,993
Net slot revenue	$	348,173		$	377,799
Weighted average number of slot machines (in units)	6,666			6,705
Gross slot hold percentage	8.6		%	8.6		%
Gross slot win per unit per day (in dollars)	$	218		$	233

Net slot revenue decreased $29.6 million, or 8%, when comparing the nine months ended June 30, 2009 to the nine months ended June 30, 2008.

Slot promotional credits, which are recorded in gross slot revenues and promotional allowances, amounted to $26.1 million and $23.1 million at Seneca Niagara Casino and Hotel during the nine months ended June 30, 2009 and 2008, respectively, and $12.8 million and $15.5 million at Seneca Allegany Casino and Hotel during the nine months ended June 30, 2009 and 2008, respectively. During the nine months ended June 30, 2009, slot promotional credit play increased at Seneca Niagara Falls Casino and Hotel due to increased marketing promotions offering slot promotional credits and decreased at Seneca Allegany Casino and Hotel primarily due to decreased slot play.

The following table presents data related to table game revenues (in thousands, except where noted):

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009			2008
Table games drop	$	~~274~~84,~~848~~665		$	~~316~~92,~~352~~355
Net table games revenue	$	4414,~~098~~348		$	5215,~~422~~297
Weighted average number of table games (in units)	~~143~~141			142
Table games hold percentage	1517.90		%	16.6		%
Gross table games revenue per unit per day (in dollars)	$	1,~~119~~111		$	1,~~348~~174

Net table games revenue decreased $80.39 million, or 166%, when comparing the ~~nine~~ three months ended ~~June~~December 3031, 2009 to the ~~nine~~three months ended ~~June~~December 3031, 2008. The decrease was principally due to those factors previously noted, asoffset ~~well~~by as a ~~decrease~~slight increase in the table games hold percentage when comparing these same periods.

Food and Beverage Revenue

The following table presents data related to food and beverage revenue (in thousands, except where noted):

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009		2008
Covers	~~2,904~~902		~~3,223~~934
Average check (in dollars)	$	14.8770	$	1415.4820

During the ~~nine~~three months ended ~~June~~December 3031, 2009, our consolidated food and beverage revenue decreased $31.50 million, or 87% when compared to the same period in 2008, due primarily to the ~~decrease~~ongoing ineconomic ~~consumer~~conditions ~~spending,~~causing ~~which~~a ~~resulted~~widespread ~~in a~~ decrease in ~~the~~overall consumer ~~number~~spending offor ~~covers,~~leisure ~~offset~~and byentertainment ~~an increase in the average revenue per check~~purposes. Seneca Niagara Casino and Hotel’s food and beverage revenue accounted for $30.28 million of the decrease; Seneca Allegany Casino and Hotel’s and food and beverage revenue accounted for $0.4 2 million of the decrease; and Seneca Buffalo Creek Casino’s food and beverage revenue approximated ~~increased~~the ~~$0.1~~revenue ~~million~~for ~~over~~ the same quarter in the prior year. During the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, 52% and 5553%, respectively, of our food and beverage revenue were the result of Seneca Link Player’s Card point redemptions.

Lodging Revenue

The following table presents data related to lodging revenue:

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	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009			2008
Occupied rooms	~~208~~62,~~644~~775			~~208~~68,~~577~~095
Average daily room rate (ADR)	$	8582.3189		$	~~103~~92.0845
Occupancy rate	9490.70		%	9492.08		%
Revenue per available room (REVPAR)	$	8074.7664		$	9685.9375

During the ~~nine~~three months ended ~~June~~December 3031, 2009, our lodging revenue decreased by $31.7 1 million, or 17%, when compared to the ~~nine~~three months ended ~~June~~December 3031, 2008, due to a decrease in ~~average~~the ~~rate~~number ~~per~~of occupied ~~room. During~~rooms ~~the~~and ~~nine~~average ~~months~~rate ~~ended~~per ~~June 30, 2009,~~occupied ~~SGC continued to offer hotel~~ room ~~rates at discounted prices in an effort~~ toresulting ~~continue~~from toongoing ~~stimulate~~economic ~~casino patron visitation and encourage longer trip duration~~conditions. Seneca Niagara Casino and Hotel’s lodging revenue accounted for $21.90 million of the decrease and Seneca ~~Allegany~~ Allegany Casino and Hotel’s lodging revenue accounted for $0.81 million of the decrease. During the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, 7671% and 74%, respectively, of our lodging revenue ~~was~~were the result of Seneca Link Player’s Card point redemptions.

Retail, Entertainment and Other Revenue

During the ~~nine~~three months ended ~~June~~December 3031, 2009, our retail, entertainment and other ~~revenue~~ revenue decreased $0.95 million, or 59%, when compared to the same period in 2008, primarily due to the impact of $0.4 million of other revenue from supplier refunds during the three months ended December 31, 2008. ~~During~~ Additionally, during the ~~nine~~three months ended ~~June~~December 3031, 2009, retail revenue decreased $0.2 million and entertainment revenue increased $0.1 million when compared to the same period in 2008. During the three months ended December 31, 2009 and 2008, 7779% and 7682%, respectively, of our retail revenue, and 50% and 54 61% of our entertainment revenue, respectively, was attributable to Seneca Link Player’s Card point redemptions.

Promotional Allowances

The retail value of providing such promotional allowances was included in revenues as follows:

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009		2008
	(Dollars in Thousands)
Gaming	$	3811,~~890~~264	$	3810,~~591~~037
Food and beverage	236,~~042~~920		267,~~274~~495
Lodging	133,~~050~~663		154,~~973~~650
Retail, entertainment and other	72,~~327~~718		83,~~076~~062
Total	$	8224,~~309~~565	$	8825,~~914~~244

The estimated cost of providing such promotional allowances was as follows:

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009		2008
	(Dollars in Thousands)
Food and beverage	$	165,~~782~~373	$	205,~~383~~782
Lodging	72,~~241~~240		72,~~762~~915
Retail, entertainment and other	62,~~229~~213		72,~~538~~620
Total	$	309,~~252~~826	$	3511,~~683~~317

Promotional allowances as a percentage of gaming revenue were 1918.1% and 1918.04% during the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, respectively. Promotional allowances decreased $60.6 7 million, or 73%, when comparing the ~~nine~~three months ended ~~June~~ December 3031, 2009 to the same period in 2008. As shown in the table above, gaming promotional allowances increased $1.2 million while food and beverage, lodging, and retail, entertainment

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and other promotional allowances decreased $0.6 million, $1.0 million and $0.3 million, respectively.

Detailed Operating Expense Information

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009		2008
	(Dollars in Thousands)
Operating expenses:
Gaming	$	~~112~~35,~~534~~722	$	~~126~~37,~~689~~225
Food and beverage	3310,~~030~~600		3711,~~150~~207
Lodging	92,~~243~~985		93,~~800~~032
Retail, entertainment and other	104,~~752~~171		123,~~357~~978
Advertising, general and administrative	~~140~~47,~~949~~101		~~144~~49,~~766~~500
Pre-opening costs	~~246~~72		~~294~~58
Depreciation	3610,~~838~~730		3812,~~533~~587
Impairment of property and equipment	~~109,036~~55		—
Total Operating expenses	$	452,628	$	369,589
Total operating expenses	$	111,436	$	117,587

Gaming Expenses

The following table summarizes the exclusivity ~~fee~~fees ~~incurred~~expense by property:

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009		2008
	(Dollars in Thousands)
Seneca Niagara Falls Casino and Hotel	$	5015,~~815~~937	$	5716,~~732~~573
Seneca Allegany Casino and Hotel	206,~~707~~268		226,~~506~~599
Seneca Buffalo Creek Casino	62,~~549~~365		51,~~064~~909
Total	$	7824,~~071~~570	$	8525,~~302~~081

The slot exclusivity fee decreased $70.23 million, from $8525.31 million for the ~~nine~~ three months ended ~~June~~December 3031, 2008 to $7824.18 million for the ~~nine~~three months ended ~~June~~ December 3031, 2009, due to lower net slot revenues. Gaming expenses as a percentage of gross gaming revenues were 26.14% and 27.02% for the ~~nine~~ three months ended ~~June~~December 3031, 2009 and 2008, respectively. Starting January 1, 2010, the slot exclusivity fee payable to New York State will increase from 22% to 25%.

Food and Beverage Expenses

Food and beverage expenses represent those costs incurred for the operation of our restaurants, snack bars and beverage outlets. The primary components of these expenses are the cost of food and beverage products and payroll and payroll related expenses for team members providing the service. During the ~~nine~~ three months ended ~~June~~December 3031, 2009, food and beverage costs decreased $40.1 6 million, or 115%, when compared to the same period in 2008, due ~~primarily~~ to lower volumes, reflected as a decrease in covers (as discussed above), and a continued concerted effort to reduce all components of such costs, while maintaining superior product offerings to our patrons. The decrease in the number of covers, reduced food costs and reduced payroll expenses each contributed approximately $0.2 million to the decrease. Food and beverage expenses as a percentage of food and beverage revenues were 76 80.50% and 7978.69% for the ~~nine~~three months ended ~~June~~ December 3031, 2009 and 2008, respectively.

Lodging Expenses

Lodging ~~expenses~~ expenses represent those costs incurred for the operation of our luxury hotel ~~and~~ ~~spa~~ at Seneca Niagara Casino and Hotel and our resort hotel ~~and spa~~ at Seneca Allegany Casino and Hotel. The components of these expenses include payroll and payroll related expenses, guest amenity supplies, laundry and other expenses. During the ~~nine months ended June 30,~~three ~~2009, lodging expenses decreased $0.6 million, or 6%, as compared to the nine~~ months ended June 30, 2008. The decrease is primarily due to a $0.5 million decrease in payroll and benefit expenses. Lodging expenses as a percentage of lodging revenues were 51.9% and 45.6% for the nine months ended June 30, 2009 and 2008, respectively.

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December 31, 2009, lodging expenses were consistent when compared to the three months ended December 31, 2008. Lodging expenses as a percentage of lodging revenues were 57.4% and 48.2% for the three months ended December 31, 2009 and 2008, respectively. The increase in this percentage is due to the decrease in lodging revenues, discussed above.

Retail, Entertainment and Other Expenses

Retail, entertainment and other expenses primarily represent those costs incurred for the operation of our retail shops and spas, and our entertainment offerings. The components of these expenses include payroll and payroll related costs, the purchase of products offered for sale in our retail outlets and spas and contract costs for entertainers. For the ~~nine~~three months ended ~~June~~ December 3031, 2009, these costs ~~decreased~~increased approximately $10.62 million, or 135%, over the comparable 2008 period, due ~~principally~~ to a $~~1.4 million decrease in headline entertainment costs and a $~~0.51 million ~~decrease~~increase in retail cost of goods ~~sales,~~sold ~~offset~~and by a $0.1 million increase in payroll and ~~payroll~~headline ~~related~~entertainment costs. Retail, entertainment and other expenses as a percentage of retail, entertainment and other revenues were 6170.08% and 6661.8%, for the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, respectively. The increase in this percentage is due to the decrease in retail, entertainment and other revenues, discussed above.

Advertising, General and Administrative Expenses

Advertising, general and administrative expenses consist primarily of payroll and payroll ~~related~~ related expenses, regulatory fees, advertising and marketing costs, Head Lease expense, insurance, legal and utility costs. For the ~~nine~~three months ended ~~June~~December 3031, 2009, such costs decreased $32.84 million, or 35%, from the same period in 2008~~, primarily due to a $10~~.~~5 million~~ ~~increase~~The indecrease ~~Head~~was ~~Lease~~primarily ~~expense,~~due ~~offset~~to by a ~~$2.5 million~~ decrease ~~in advertising~~of ~~costs, a~~ $2.23 million ~~decrease~~ in ~~promotional~~payroll and related expenses, a decrease of $1.6 3 million ~~decrease~~ in ~~special~~Head ~~event~~Lease ~~costs~~expense, a decrease of $10.5 million ~~decrease~~ in ~~outside services~~utilities ~~(primarily~~expenses ~~related to employee transportation~~ and ~~tour~~decreases ~~bus~~of ~~services), a~~ $10.42 million ~~decrease~~ in insurance ~~utility~~and ~~costs,~~other aoperating $1expenses.2 ~~million~~These ~~decrease~~decreases inwere ~~payroll~~partially offset ~~and~~by ~~payroll~~increases ~~related~~of ~~costs, a~~ $0.9 million, ~~decrease~~$0.8 inmillion ~~employee relations expenses~~ and a $10.94 million ~~decrease~~ in ~~various~~professional ~~other operating~~ services expenses ~~. Furthermore~~, ~~during~~regulatory ~~the~~expenses ~~nine~~and ~~months~~advertising ~~ended June 30~~expenses, ~~2008, a write off of $1~~respectively.~~1 million was recognized related to~~ ~~external development costs associated with Seneca Massachusetts Gaming Corporation.~~ Advertising, general and administrative expenses as a percentage of gross revenues were 2729.65% and 2630.02%, for the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, respectively.

Pre-opening Expenses

Pre-opening expenses are non-recurring costs incurred to support the expected opening of ~~new~~ new facilities. During the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, pre-opening expenses incurred were primarily related to the ~~construction and~~ preparation of the Seneca Hickory Stick Golf Club, to be operated by the Lewiston Golf Course Corporation. ~~During the nine months ended June 30, 2009, pre-opening expenses decreased when compared to the same period in 2008.~~

Depreciation Expense

During the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, depreciation expense was $3610.87 million and $3812.56 million, respectively, a decrease of $1.79 million, or 4 15%.

Impairment ~~charge~~of Property and Equipment

On August 27, 2008, the construction activities at Seneca Allegany Casino and Hotel and Seneca Buffalo Creek Casino, as previously described, were suspended for reasons including: the economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash, such as our payments and distributions to the Nation. ~~As of June~~ ~~30, 2009, due to~~ ~~the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook, it is unlikely construction will resume in the foreseeable future.~~ Furthermore, certain master planning efforts related to the future expansion of the Seneca Niagara Falls property ~~have~~were ~~been~~ suspended for the same reasons. As a result of ~~these~~the ~~circumstances and in~~ongoing ~~accordance with SFAS 144~~suspension, an impairment charge of approximately $~~109.0~~55,000 ~~million~~ was ~~recognized~~recorded during atthe ~~June~~three months ended December 3031, 2009, in ~~order~~addition to ~~write~~the ~~off these costs as they do not~~impairment ~~currently~~charge ~~represent~~of ~~any~~$107.6 ~~future~~million ~~value~~recognized orduring ~~provide~~Fiscal ~~future benefit to the Company~~2009.

Other Non-Operating Expenses

The following table summarizes information related to other non-operating expenses:

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009		2008
	(Dollars in Thousands)
Non-operating expenses	$	~~188~~112	$	~~4,150~~113

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During the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, we recorded an other-than-temporary loss on one specific investment of $0.21 million ~~and $4.2 million, respectively,~~ as other non-operating expense. The cost basis of this investment has been reduced by the amount of the other-than-temporary loss recorded.

Interest Income

Interest income was ~~$0.2 million~~approximately ~~for the nine months ended June 30~~$11,000 ~~2009,~~and ~~compared to~~ $~~1.3 million~~58,000, respectively, for the ~~nine~~three months ended ~~June~~December 3031, ~~2008. The~~2009 ~~decrease~~and ~~in interest income can be attributed to the decrease in the average cash balance on deposit with financial institutions in interest bearing accounts when comparing these periods~~2008.

Interest Expense

The following table summarizes information related to interest on our long-term debt and Senior Secured Revolving Loan Agreement:

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009		2008
	(Dollars in Thousands)
Interest expense	$	289,~~777~~541	$	289,~~833~~603

During the ~~nine~~three months ended ~~June~~December 3031, 2009, interest expense consisted ~~primarily~~ of interest on our $500 million aggregate principal amount of 7¼% senior notes, including $20.4 8 million of amortization related to financing costs and discount, which was partially offset by $10.13 million of capitalized interest on our ~~construction~~ construction activities for our Seneca Hickory Stick Golf Club~~. During~~ during the ~~nine~~three months ended ~~June~~ December 3031, ~~2008~~ 2009, ~~there~~and ~~was~~ $0.84 million ~~interest~~during ~~capitalized in conjunction with our construction activities for our Seneca Hickory Stick Golf Club,~~ the ~~permanent casino~~three atmonths ~~Seneca~~ended ~~Buffalo Creek Casino~~December 31, ~~and Phase V at the Seneca Allegany~~ ~~Casino and Hotel~~2008.

Net ~~(Loss)~~ Income

Net income ~~loss~~ for the ~~nine~~three months ended ~~June~~December 3031, 2009 was $5314.61 million, compared to anet income of $6511.65 million ~~net income~~ for the ~~nine~~ three months ended ~~June~~December 3031, 2008, aan increase ~~decrease~~ of $~~119.~~2.6 million, for the reasons stated above.

Liquidity and Capital Resources

AsOur ~~previously discussed, our~~ senior management continues to monitor, and review with ~~the Corporation~~SGC’s Board of Directors and its owner, the Seneca Nation of Indians, our financial condition and liquidity needs, to help ensure appropriate strategic plans are developed and implemented to meet ongoing economic challenges and to address our ongoing liquidity requirements.

In addition, we intend to continue to work closely with the Nation to help ensure cash generated from our operations, available cash and cash equivalents, short-term investments and cash available under our Amended Senior Secured Revolving Loan Agreement are sufficient to service our debt, satisfy our other financial obligations and commitments and to meet our working capital requirements for the remainder of the current fiscal year. In October 2009, the Nation reduced anticipated 2010 monthly distributions, exclusive of amounts required under the Distribution Agreement, to $30.0 million for Fiscal 2010, compared to $42.0 million for Fiscal 2009. As a result of these efforts, in conjunction with our efforts to create additional operating efficiencies, SGC’s depository cash balances increased to approximately $60.5 million at December 31, 2009 from $7.0 million, net of the $20.0 million proceeds drawn under the Senior Secured Revolving Loan Agreement, as of December 31, 2008.

Our ability to fund our operations, make planned capital expenditures, service our debt and satisfy our other financial obligations and commitments depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control. Additionally, unlike traditional corporations, we are prohibited by law from obtaining capital through an offering of equity securities and our ability to incur additional indebtedness is limited under the terms of the Indenture governing the senior notes, the Distribution Agreement and the Amended Senior Secured Revolving Loan Agreement.

We are leveraged, have significant interest payment requirements under the Senior Notes Indenture, distribution obligations under the Distribution Agreement and other commitments from time to time to the Nation. We make distributions to the Nation pursuant to declarations by our Board of Directors. During the nine months ended June 30, 2009 we distributed $33.2 million to the Nation pursuant to such declarations. We distributed an additional 23

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~~$10~~We are leveraged, have significant interest payment requirements under the Senior Notes Indenture, distribution obligations under the Distribution Agreement and other commitments from time to time to the Nation.7 We make distributions to the Nation pursuant to declarations by our Board of Directors. During the three months ended December 31, 2009, we distributed $7.5 million to the Nation pursuant to such declarations. We distributed an additional $3.7 million to the Nation during the ~~nine~~three months ended ~~June~~December 3031, 2009 pursuant to the Distribution Agreement. As such, limitations on our capital resources could force us to delay or abandon capital projects as well as the construction and development of suspended expansion projects when and if resumed.

Cash Flows

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009			2008
	(Dollars in Thousands)
Net cash provided by operations	$	8417,~~873~~673		$	~~105~~20,~~851~~915
Cash flows relating to investing activities
Purchases of property and equipment	(403,~~137~~469		)	(9421,~~254~~909		)
Land acquisition costs	(~~1,022~~83		)	(~~5,408~~497		)
Decrease in restricted cash	—			14,579
Net cash used in investing activities	(3,552		)	(22,406		)
Sale of investments, net	—			14,600
Net cash used in investing activities	(41,159		)	(70,483		)
Cash flows relating to financing activities
Proceeds from senior secured revolving loan agreement	20,000			—
Contribution received from the Nation	5,101			—
Payments on senior secured revolving loan agreement	(20,000		)	—
Proceeds from senior secured revolving loan agreement	—			20,000
Distributions paid to the Nation	(4311,~~937~~217		)	(5120,~~158~~506		)
Net cash used in financing activities	(436,~~937~~116		)	(~~51,158~~506		)
Net decrease in cash and cash equivalents	$	(223	)	$	(15,790	)
Net increase (decrease) in cash and cash equivalents	$	8,005		$	(1,997	)

Cash Flows—Operating Activities

The $213.02 million decrease in cash flows from operations during the ~~nine~~three months ended ~~June~~December 3031, 2009 as compared to the ~~nine~~three months ended ~~June~~December 3031, 2008 was ~~primarily~~ due to cash aoutflows ~~$119.2~~from ~~million~~the ~~decrease~~change in ~~net~~current ~~income,~~liabilities ~~as previously~~of ~~described, offset by a~~ $~~109~~5.05 million ~~impairment of property~~ and ~~equipment~~ ~~charge. The decrease in cash~~lower ~~flows~~depreciation ~~from~~expense ~~operations was also due to a decrease in an other than temporary loss in investment~~ of $41.09 million, apartly ~~$2.1~~offset ~~million~~by ~~increase~~higher innet ~~cash~~income ~~paid for~~of ~~current~~$2.6 ~~assets,~~million and anthe ~~increase~~change in ~~net cash paid for~~ current ~~liabilities~~assets of $31.5 million.

Cash Flows—Investing Activities

During the ~~nine~~three months ended ~~June~~December 3031, 2009, cash flows used in investing activities were approximately $413.26 million, compared to $7022.54 million during the ~~nine~~three months ended ~~June~~December 3031, 2008. The decrease of $2918.39 million was due primarily to: a decrease in ~~proceeds~~cash ~~from~~paid ~~the~~for property ~~sale~~and ~~of investments~~equipment of $1418.64 million ~~and~~resulting aprimarily ~~$14.6~~from ~~million decrease in cash provided by~~ the ~~release~~ suspension of ~~restricted~~construction ~~cash;~~activities ~~offset~~at bythe apermanent ~~decrease~~Seneca inBuffalo ~~cash~~Creek ~~paid~~Casino ~~for property~~ and ~~equipment~~Hotel ofand ~~$54.1~~the ~~million;~~additional ~~and~~hotel atower ~~decrease~~at inthe ~~cash~~Seneca ~~paid~~Allegany ~~for~~Casino ~~land~~and ~~acquisition of $4~~Hotel.~~4 million.~~

During the ~~nine~~three months ended ~~June~~December 3031, 2009, capital expenditures were $403.1 5 million and consisted of: $151.26 million ~~relating~~related to ~~the~~ construction of the ~~permanent~~ Seneca ~~Buffalo~~ Creek Casino and Hotel on the Nation’s Buffalo Creek Territory; $6.5 million associated with pre-construction costs relating to the additional hotel tower at the Seneca Allegany Casino and Hotel; $3.9 million relating to construction of the Seneca Hickory Stick Golf Club; and $1.0.4 million for the ~~conversion~~ expansion of the temporary gaming facility at the Seneca ~~Allegany~~Buffalo ~~Casino~~Creek ~~and Hotel into an events center, with related amenities~~Casino. The remaining $131.5 million in capital expenditures were principally for ~~the~~ the acquisition of equipment for existing casino operations. Our land acquisitions of $1.0.1 million include legal expenses and other acquisition costs related to certain parcels ~~within~~ within the 50 acre “footprint” described in the Compact with New York State and designated for ownership by the Nation.

Cash Flows—Financing Activities

During the ~~nine~~three months ended ~~June~~December 3031, 2009, net cash used in financing activities was $436.91 million, compared to $510.25 million during the three ~~nine~~ months ended ~~June~~December 3031, 2008, aan ~~decrease~~increase of $75.31 million. ~~The~~During ~~decrease~~the ~~was~~three ~~due~~months toended December 31, 2009 these activities included a $5.1 million contribution received from the ~~decrease~~Nation inand cash distributions paid to the Nation of $711.32 million. ~~Cash~~During the three months ended December 31, 2008 these activities included cash distributions ~~were~~to the Nation of $3320.25 million ~~and~~ ~~payments~~offset ~~pursuant~~by toproceeds from borrowings under the ~~Distribution~~senior ~~Agreement~~secured ~~were~~revolving loan agreement of $1020.70 million.

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Principal Debt Arrangements

As of ~~June~~December 3031, 2009, our debt instruments and facilities consisted of the 2004 and 2005 senior notes on which we pay a fixed interest rate of 7¼%, and athe $50.0 million Amended Senior Secured Revolving Loan Agreement, which matures on December 1931, ~~2009~~ 2011. Following is a summary of certain ~~material~~ material terms of the senior notes and the Amended Senior Secured Revolving Loan Agreement.

The Senior Notes. On May 5, 2004 and May 23, 2005, SGC issued $300.0 million and $200.0 million, respectively, in senior notes with fixed interest payable at a rate of 7¼% per annum due 2012, which we refer to collectively as the Senior Notes, under the Indenture. The Senior Notes are currently guaranteed by SNFGC, STGC, SEGC, and LGCC. Interest on the Senior Notes is payable semi-annually on May 1 and November 1. The Senior Notes mature on May 1, 2012. The Senior Notes are unsecured general obligations. As of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, accrued interest on the Senior Notes was $6.0 million and $15.1 million, respectively. ~~Reference~~The isindenture ~~made~~contains tocertain ~~“Part II. Item 1. —~~covenants, ~~Legal~~including ~~Proceedings~~limitations —on ~~Seneca~~restricted ~~Gaming~~payments ~~Authority~~and ~~Proposed~~the ~~Notices~~incurrence of ~~Violation~~ ~~issued~~indebtedness, ~~to Seneca Gaming Corporation~~ and ~~Employees~~reporting ~~dated, July 13, 2009~~obligations.” asAs of ~~June~~December 3031, 2009, SGC was in compliance with all covenants in the Indenture.

Amended Senior Secured Revolving Loan Agreement. ~~Effective~~ On ~~June~~December 1918, ~~2008~~2009, SGC amended ~~entered~~its ~~into a~~ $50.0 million Senior Secured Revolving Loan Agreement, ~~which would have matured on June 19, 2009, subject~~ to ~~extension~~extend ~~by SGC at its election (at any time after~~ the ~~six~~ ~~month~~maturity ~~anniversary of the closing~~ date ~~and~~from ~~prior to June~~December 19, 2009) ~~for~~to ~~an additional period of six months, provided that no default or event of default existed at the time of election. On June~~December 1131, ~~2009, SGC exercised this election~~2011. ~~Amounts~~ Amounts borrowed under the Amended Senior Secured Revolving Loan Agreement continue to bear interest at either one, three or six-month LIBOR plus one and one quarter percent (1.25%), or the prime rate (as reported in The Wall Street Journal) plus one quarter percent (0.25%)~~. Any~~ , with any outstanding principal balance ~~is required~~ to be paid by, or on, the new maturity date. The $50.0 million commitment under the Amended Senior Secured Revolving Loan Agreement reduces in tandem with any reduction in the letter of credit requirement imposed by ESDC (relating to the ESDC’s efforts on behalf of SGC in connection with ongoing condemnation proceedings in Niagara Falls, NY),), up to an aggregate reduction of $10.0 million. The Amended Senior Secured Revolving Loan Agreement requires that SGC maintain all of its deposit and investment accounts with the lender, subject to limited exceptions for certain existing accounts.

SGC’s obligations under the Amended Senior Secured Revolving Loan Agreement ~~are~~continue to be secured by substantially all gaming and related assets (including substantially all gaming revenues) not ~~constituting~~ constituting real property or improvements. SGC’s obligations are guaranteed by SNFGC, STGC, SEGC and LGCC~~. The~~, and the guarantors’ obligations ~~are~~ continue to be secured by substantially all of each guarantor’s gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements. The Amended Senior Secured Revolving Loan Agreement modifies certain of the financial covenants contained in the Senior Secured Revolving Loan Agreement, including reducing the minimum consolidated EBITDA covenant from $160 million to $145 million (on a rolling 12-month basis) as well as modifying the total leverage ratio (of total funded debt to EBITDA) to a limit of 3.5 to 1.0. The Amended Senior Secured Revolving Loan Agreement also continues to contain additional customary covenants, including covenants restricting the incurrence of additional indebtedness, the creation of additional liens and the disposition of assets. As of December 31, 2009, SGC was in compliance with all covenants in the Amended Senior Secured Revolving Loan Agreement.

~~The Senior~~As ~~Secured Revolving Loan Agreement contains certain financial covenants requiring minimum consolidated EBITDA~~ of ~~$160~~December 31, ~~million~~2009, ~~(on~~at aSGC’s ~~rolling~~request, ~~12 month~~the ~~basis)~~lender ~~and~~under ~~compliance~~the ~~with~~Amended ~~certain leverage and coverage ratios. The~~ Senior Secured Revolving Loan Agreement ~~also~~had ~~contains~~issued letters ~~additional~~of ~~customary~~credit ~~covenants, including~~(as ~~covenants~~required ~~restricting~~by ~~the~~ESDC) ~~incurrence~~totaling of$19.6 ~~additional indebtedness~~million, ~~the creation~~$13.2 million of ~~additional~~which ~~liens,~~may ~~and~~be ~~the~~drawn ~~disposition~~upon ofto ~~assets. Reference~~fund isthe ~~made~~purchase toof ~~“Part II.~~certain ~~Item~~parcels 1.within ~~— Legal~~the ~~Proceedings~~50 —acre ~~Seneca~~“footprint” ~~Gaming~~described ~~Authority~~in ~~Proposed~~the ~~Notices~~Compact ofwith ~~Violation~~New ~~issued~~York ~~to Seneca~~State ~~Gaming~~and ~~Corporation~~designated for ~~and~~ownership ~~Employees~~by ~~dated,~~the ~~July 13~~Nation, ~~2009.”~~with asthe ofremaining ~~June 30, 2009,~~$6.4 ~~SGC~~million ~~was~~issued in connection ~~compliance~~ with ~~all~~worker’s ~~covenants~~compensation inpolicies ~~the~~and ~~Senior~~certain ~~Secured~~other ~~Revolving Loan~~contracts, ~~Agreement~~as required.

As of June 30, 2009, at SGC’s request, the lender under the Senior Secured Revolving Loan Agreement had issued letters of credit totaling $19.6 million, $13.2 million of which may be drawn upon to fund the purchase of certain parcels within the 50 acre “footprint” described in the Compact with New York State and designated for ownership by the Nation, with the remaining $6.4 million issued in connection with worker’s compensation policies and certain other contracts, as required.

On October 29, 2008 SGC borrowed $20.0 million under the Senior Secured Revolving Loan Agreement. During the third quarter of fiscal 2009, SGC paid $20 million on the Senior Secured Revolving Loan Agreement, leaving no outstanding balance at June 30, 2009.

Effective June 19, 2008, SGC’s secured reimbursement facilities were terminated and all outstanding letters of credit under such facilities were assumed as outstanding letters of credit under the Senior Secured Revolving Loan Agreement.

Distribution Agreement Obligations

On April 27, 2007, SGC entered into a Distribution Agreement among the Nation, the Seneca ~~Nation~~ Nation of Indians Capital Improvements Authority, or the Authority, SGC and ~~Wells~~ Wells Fargo Bank, as Trustee, in connection with the Authority’s issuance in ~~two~~ two series (one tax exempt and the other taxable) of an aggregate principal amount of $159,495,000 special obligation bonds, or the 2007 Nation Bonds. The Distribution Agreement obligates SGC, subject to any contractual restrictions applicable to SGC (including, but not limited to, those contained in the Senior Notes Indenture) to make monthly distributions to the Nation at the times and in the amounts necessary to enable the Authority to pay the debt service on the 2007 Nation Bonds as required under the Authority’s indenture. At the direction of the Nation and the Authority, SGC pays such distributions directly to the Trustee. The Authority’s debt service commenced on June 1, 2007. For the period from June 1, 2007 through November 1, 2007, the Authority’s

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$159,495,000 special obligation bonds, or the 2007 Nation Bonds. The Distribution Agreement obligates SGC, subject to any contractual restrictions applicable to SGC (including, but not limited to, those contained in the Senior Notes Indenture) to make monthly distributions to the Nation at the times and in the amounts necessary to enable the Authority to pay the debt service on the 2007 Nation Bonds as required under the Authority’s indenture. At the direction of the Nation and the Authority, SGC pays such distributions directly to the Trustee. The Authority’s debt service commenced on June 1, 2007. For the period from June 1, 2007 through November 1, 2007, the Authority’s debt service averaged approximately $0.9 million per month. For the period December 1, 2007 through June 1, 2008, the Authority’s debt service averaged approximately $1.7 million per month. In June 2008, it was determined that the amortization (debt service) schedule provided, upon which the foregoing $1.7 million monthly payments was made, was incorrect. A corrected amortization schedule was provided and, after giving effect to a resulting credit for amounts overpaid, for the period from January 1, 2008 through December 1, 2023, the Authority’s debt service averages approximately $1.2 million per month. The foregoing debt service averages are based on scheduled payments of interest and principal under the Authority’s indenture and bonds and do not address the effects of any earlier call for redemption, by acceleration or otherwise. The Distribution Agreement provides that neither the Trustee nor the Authority’s bondholders will have any recourse under the Distribution Agreement to any revenues, assets or property of SGC or its subsidiaries should SGC fail to comply with our distribution obligations. During the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, SGC distributed to the Nation $103.7 ~~million~~ million and $143.93 million, respectively, for the Authority’s debt service on the special obligation bonds.

~~Reference is~~In ~~made~~October 2009, to the Nation ~~Senior~~reduced ~~Notes~~anticipated ~~Indenture,~~2010 ~~the~~monthly ~~Senior~~distributions, ~~Secured~~exclusive ~~Revolving~~of ~~Loan~~amounts ~~Agreement~~required ~~and~~under the Distribution Agreement, to $30.0 million for anFiscal ~~understanding~~2010, compared ofto ~~all~~$42.0 ~~terms~~million ~~of such~~for ~~financing~~Fiscal ~~arrangements~~2009..

Other Commitments

~~We have~~In ~~acquired~~2002 ~~approximately~~and 45pursuant ~~acres in the City of Niagara Falls, New York,~~to ~~designated by New York State under~~ the Compact ~~for ownership by the Nation~~, ~~and intend to acquire approximately three additional acres. Under~~ the ~~Compact, the~~ Nation isacquired ~~required~~from ~~to fund~~ the ~~acquisition~~State of ~~this~~New ~~property,~~York ~~including~~approximately ~~all~~24 ~~related~~acres ~~costs~~of land and ~~expenses.~~related Asimprovements ~~initial~~in ~~security for~~ the ~~Nation’s~~City ~~obligations to pay site acquisition costs and in furtherance~~ of ~~the~~Niagara ~~ongoing condemnation proceeding~~Falls, ~~the~~New ~~Nation was required to~~York, including ~~and~~the ~~did,~~then-Niagara ~~deliver,~~Falls toConvention ~~the~~Center. The ~~Empire~~ State ~~Development~~ ~~Corporation,~~of orNew ~~ESDC,~~York afurther ~~letter~~agreed ~~of credit~~ in the ~~amount of $33.5~~ ~~million~~Compact ~~representing~~to ~~150%~~assist of the ~~then~~Nation ~~estimate~~in ofwhatever ~~the~~manner ~~total remaining site acquisition costs not yet paid by the Nation. In July 2006~~appropriate, weincluding ~~acquired,~~ through the ~~condemnation~~exercise ~~process, approximately~~of 18its ~~acres~~power of ~~land~~eminent ~~and trade fixtures appurtenant thereto from Fallsite~~domain, ~~LLC,~~to oracquire ~~Fallsite~~the ~~and~~remaining ~~Fallsville, LLC, or Fallsville, for an aggregate~~acreage ~~initial~~within ~~advance~~the ~~payment~~approximate of50-acre ~~$17.0~~footprint ~~million, which land is a portion of the land~~ in the City of Niagara Falls, New York, designated by New York State under the Compact for ownership by the Nation. OfThe ~~this~~Compact ~~amount,~~specifically ~~$7.7~~excluded ~~million~~approximately ~~was~~1.5 ~~drawn~~acres onof ~~the letter~~land ofwithin ~~credit as part of~~ the ~~consideration~~footprint ~~for~~owned ~~the~~by ~~purchase,~~a ~~leaving~~Roman ~~$25.8~~Catholic ~~million available under the letter of credit~~Church. ~~In March 2007~~Additionally, anin ~~additional~~July 2006, ~~$11.5 million was drawn under~~ the ~~letter of~~Nation ~~credit~~agreed to ~~fund~~waive ~~the~~its ~~acquisition~~right ofto 18acquire ~~additional~~approximately ~~parcels~~one ofhalf ~~land~~acre ~~and~~of ~~certain~~additional ~~improvements. In~~land ~~December 2007, an~~within ~~additional $3.0 million was drawn under~~ the ~~letter~~footprint ~~of credit to fund the acquisition of seven additional parcels of land~~ owned by ~~the~~End ~~City~~Time ofHandmaidens, Inc., ~~Niagara~~a religious ~~Falls~~organization. In ~~connection~~return ~~with~~for the ~~closing of~~waiver, the ~~Senior~~Nation ~~Secured~~obtained ~~Revolving~~a ~~Loan~~right ~~Agreement, at SGC’s request, the lender issued letters~~ of ~~credit~~first ~~totaling~~negotiation ~~$19.6~~and ~~million,~~refusal ~~$13.2~~with ~~million~~respect ~~of which could be drawn upon as of June 30, 2009~~ to ~~fund the purchase of the remaining~~ ~~parcels within~~ the ~~“footprint”~~future ~~described~~sale inof the ~~Compact~~parcels. IfAs ~~the~~a result ~~estimate~~ of ~~such~~the ~~site~~carve-out ~~acquisition costs~~relating ~~increases~~to orthe ifparcels ~~certain~~owned ~~other~~by ~~events occur,~~ the ~~Nation~~Roman ~~may have to~~Catholic ~~provide~~Church, anand ~~additional letter of credit or replace~~ the ~~existing~~Nation’s ~~one~~agreement with ~~one~~End ~~for a~~Time ~~larger monetary amount or~~Handmaidens, ~~if acceptable to~~ the ~~ESDC,~~total ~~provide a supplemental~~acreage ~~cash~~of ~~escrow~~the ~~amount. Unreimbursed~~Niagara ~~amounts on~~Territory ~~the~~upon ~~letter~~completion of ~~credit~~the ~~may~~condemnation ~~result~~process inis anticipated ~~automatic~~to ~~draw-downs~~be ~~under~~approximately ~~the~~48 ~~Senior Secured Revolving Loan Agreement~~acres.

~~The~~We ~~amounts~~have ~~paid to~~obtained ~~condemnees~~possession ~~from~~of, ~~whom~~either wethrough ~~have~~eminent ~~acquired~~domain ~~property~~proceedings ~~are~~or ~~deemed~~private ~~to be advance~~purchase, ~~payments.~~substantially ~~Pursuant~~all toof the ~~New~~remaining ~~York~~acreage ~~State~~within ~~Eminent~~the ~~Domain Procedure Law~~footprint, orother ~~EDPL,~~than ~~the~~certain ~~New~~streets ~~York~~and ~~state~~alleys ~~courts~~owned ~~will~~by ~~determine~~ the ~~final~~City ~~purchase~~of ~~price~~Niagara toFalls beproviding ~~paid to~~access ~~condemnees~~to ~~who~~the ~~elect~~above tochurch ~~challenge~~parcels, ~~the~~and ~~initial~~a ~~appraised~~bicycle ~~value~~path ofowned ~~their property. To~~by ~~date,~~the ~~all~~New ~~record~~York ~~owners from~~State ~~whom~~Department ~~property~~of ~~was~~Transportation ~~condemned~~(NYSDOT). ~~pursuant~~We expect to acquire the ~~EDPL~~above ~~have~~Niagara Falls ~~reserved~~city ~~rights~~street toand ~~claim additional~~alley ~~compensation. Four~~parcels ~~record owners~~during ~~have~~the ~~filed~~second ~~notices~~quarter of ~~claim~~Fiscal to2010, with ~~challenge~~acquisition of the ~~fair~~NYSDOT ~~market~~bike ~~value appraisals~~path ~~utilized~~requiring byfurther ~~ESDC~~dialogue with New York State.

~~Fallsite~~Substantially ~~LLC~~all ~~and~~of the ~~Fallsville~~post-2002 ~~Splash~~real property acquisitions in Niagara Falls, ~~LLC~~NY have ~~filed~~been ~~notices~~pursuant ofto New ~~claim~~York inState Eminent Domain Procedure Law, or EDPL, using the ~~amounts~~State’s power of ~~$40~~eminent domain (through the ESDC).0 ~~million~~The ~~and~~amounts ~~$35.0~~paid ~~million~~to ~~for~~condemnees ~~land~~from ~~and~~whom ~~trade~~the ~~fixtures,~~ESDC ~~respectively,~~has ~~relating~~acquired property are deemed to abe ~~former~~advance ~~water~~payments, ~~park~~in ~~within~~that property owners are entitled to reserve their rights to challenge the ~~footprint.~~ land and improvement values determined by ~~ESDC~~the condemnor’s ~~fair~~appraisers. The ~~market~~ESDC ~~appraisal~~has made ~~value~~advanced ~~for~~payments under the ~~foregoing~~EDPL ~~was~~of approximately $1731.05 million~~. If~~ afor ~~court determines~~the ~~that~~condemned ~~the~~parcels ~~value~~within ~~for~~ the ~~land~~footprint ~~and improvements~~including, ~~including~~in ~~trade fixtures~~particular, isapproximately ~~higher~~18 ~~than~~acres ~~what~~of ~~ESDC~~land ~~has~~and ~~determined~~related tofixtures be(a ~~their~~former ~~appraised~~water ~~values,~~park) ~~then~~for wean ~~may~~aggregate beadvanced ~~liable~~payment ~~for~~of ~~the~~$18.0 ~~difference~~million, and ~~potentially~~another ~~also~~hotel ~~responsible~~property for ~~certain~~an aggregate ~~additional~~advanced ~~costs~~payment ~~and~~of $8.2 million (excluding fixtures).

Pursuant to the EDPL, New York state courts will determine the final purchase price to be paid to condemnees who elect to challenge the initial appraised value of their property. To date, all record owners from whom property was acquired pursuant to the EDPL have reserved rights to claim additional compensation. Most record owners have filed notices of claim to initiate proceedings challenging the fair market value appraisals utilized by ESDC. The most significant pending valuation proceedings continue to be those involving Fallsite LLC and Fallsville Splash, LLC, which have filed notices of claim in the amounts of $40.0 million and $35.0 million for land and trade fixtures, respectively, relating to a former water park within the footprint. ESDC’s fair market appraisal value for the foregoing was approximately $17.0 million. The valuation trial proceedings with regard to the former water park are complete. The decision of the court is pending and is expected during the second quarter of Fiscal 2010. Intertrust Development had filed a notice of claim for $15.8 million for land and trade fixtures associated with a former Holiday Inn hotel within the footprint. ESDC’s fair market appraisal value for the foregoing was $8.2 million (excluding fixtures). We agreed to a settlement of this matter with Intertrust, whereby Intertrust has received an additional $3.8 million in addition to the appraisal value of $8.2 million, and whereby we have agreed to purchase,

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~~payments~~for tobusiness ~~the~~promotional ~~applicable condemnee(s)~~use, ~~such~~tickets asto ~~their~~Fallsview ~~attorney~~Waterpark, ~~fees. The~~an ~~valuation~~affiliate ~~trial~~of ~~proceedings~~Intertrust, ~~with~~for ~~regard~~$2.5 million to ~~the~~be ~~former~~paid ~~water~~in ~~park~~three ~~are~~installments ~~complete~~over ~~with~~three ~~a decision expected in August or September 2009~~years.

~~Intertrust~~Another ~~Development~~former landowner, ~~had~~JFD Holdings has filed a notice of claim for $151.81 million for ~~land~~a ~~and~~parcel ~~trade~~of ~~fixtures~~land ~~associated~~at ~~with~~621 aNiagara ~~former~~Street ~~Holiday Inn hotel~~ within the footprint. ESDC’s fair market appraisal ~~value~~ for the foregoing ~~was~~is approximately $8550,000.2 No ~~million~~trial ~~(excluding~~date ~~fixtures). We~~has ~~have~~yet ~~agreed~~been set. ~~to a settlement of this matter with Intertrust~~Also, ~~whereby Intertrust~~three ~~has~~individuals ~~received~~have anfiled ~~additional~~notices ~~$3.8~~of ~~million~~claim inwith ~~addition~~respect to ~~the appraisal~~four ~~value~~parcels ofwithin ~~$8.2~~the ~~million,~~footprint ~~and~~seeking ~~whereby we have agreed to purchase~~$955, ~~for our business promotional use~~000, ~~tickets~~in ~~to Fallsview Waterpark~~aggregate, anfor ~~affiliate~~the ~~of Intertrust,~~four ~~for $2~~parcels.5 ESDC’s ~~million~~fair-market ~~to be paid in three installments over three years.~~ appraisal ~~Pursuant~~for to the ~~stipulation~~four ~~of settlement~~properties, ~~Intertrust has~~in ~~executed a release of SNFGC~~aggregate, ~~ESDC~~is ~~and the Seneca Nation of Indians with respect to the valuation proceeding~~$185,000. No ~~and~~trial ~~ESDC~~dates ~~and~~have ~~Intertrust~~been ~~shall file a stipulation of discontinuance~~set.

~~Additionally,~~If a court determines ~~JFD~~that ~~Holdings~~the ~~has~~value ~~filed~~for the land and improvements is higher than the appraised value paid to a ~~notice~~condemnee, ofthen ~~claim~~SGC may be liable to the condemnee for the difference and potentially also responsible for certain additional costs and payments to the condemnee, such as attorneys’ fees. As of December 31, 2009, $1.17 million ~~for~~of athe ~~parcel~~previously recorded reserve of ~~land at~~$6.4 ~~621~~million ~~Niagara~~remained ~~Street~~for ~~within~~such matters and is included in the ~~footprint.~~ other ~~ESDC’s~~current ~~fair~~and ~~market~~long-term ~~appraisal~~liabilities ~~for~~sections ~~the~~on ~~foregoing~~SGC’s isconsolidated ~~approximately~~balance ~~$550,000~~sheet. NoShould ~~trial~~the ~~date~~liability ~~has~~be ~~yet~~greater than ~~been~~our reserve for such matters, it could have a negative impact on income ~~set~~and financial condition.

Also, Elizabeth Stone, Robert Stone and Alan Stone have filed notices of claim with respect to four parcels within the footprint. According to the trial-ready appraisal reports submitted by the Stones, they will seek $955,000, in aggregate, for the four parcels. ESDC’s fair-market appraisal for the four properties, in aggregate, is $185,000. No trial date has been set.

As of June 30, 2009, we have an existing reserve in the amount of $2.5 million for such matters, which is included as a component of other current liabilities on SGC’s consolidated balance sheet.

Expansion and Development Plans

During the next 12 months, due to liquidity concerns, ongoing demands on our cash, and the state of the capital markets, it is unlikely that we will make ~~substantial~~ substantial capital investments in our gaming facilities from cash on hand, other than completion of the ongoing expansion of our Seneca Buffalo Creek Casino temporary facility, and completion of the Seneca Hickory Stick Golf Club, each described below.

On August 27, 2008, the construction activities at Seneca Allegany Casino and Hotel and Seneca Buffalo Creek Casino, aseach ~~previously~~ described below, were suspended for reasons including: the economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on ~~our~~ available cash, such as ~~our~~ payments to the Nation. As of ~~June~~December 3031, 2009, ~~due to the continuation of weak economic conditions, adverse credit~~ ~~market conditions and an uncertain economic outlook, it is unlikely~~ construction ~~will~~remained ~~resume~~suspended ~~in the foreseeable future~~indefinitely. Furthermore, certain planning efforts related to the future expansion of the Seneca Niagara Falls property ~~have~~were ~~been~~ suspended for the same reasons. As a result of these circumstances ~~and in accordance with SFAS 144,~~ an ~~impairment~~ impairment charge of $~~109~~107.06 million was recognized atduring ~~June~~Fiscal 2009. During the three months ended December 3031, 2009, an additional $55,000 was recorded as an impairment of property and equipment. Nonetheless, SGC will continue to explore alternative future expansion and development options.

Seneca Niagara Falls Casino and Hotel. In 2006, we began master planning activities for the remaining approximately 24 acres of undeveloped land contained in the Niagara Falls footprint. During August 2008, these master planning activities were suspended and an impairment charge was recognized in Fiscal 2009 related to these activities, in the amount of approximately $3.5 million.

InSeneca Allegany ~~2006,~~Casino weand ~~began~~Hotel. Construction ~~master~~on ~~planning activities for~~ the ~~remaining approximately~~next 24phase ~~acres~~ of development ~~undeveloped~~at ~~land~~Seneca ~~contained~~Allegany inCasino ~~the~~and ~~Niagara~~Hotel, ~~Falls footprint. As~~which ~~discussed~~was ~~above,~~planned ~~these~~to include ~~master~~an ~~planning~~additional ~~activities~~200-room ~~have~~hotel ~~ceased~~tower, ~~due~~and up to ~~the~~30,000 ~~continuation~~square feet of ~~weak economic~~additional ~~conditions~~gaming space and ~~adverse~~related ~~credit~~amenities, ~~market~~for ~~conditions~~a ~~and~~total anestimated ~~uncertain~~cost ~~economic outlook. As~~ of ~~June 30, 2009, the~~approximately ~~Company had incurred~~ $~~3.5~~130 million, ~~related~~was tosuspended ~~these~~and ~~master planning activities, for which~~ an impairment charge was recognized in ~~order~~Fiscal 2009 related to ~~write~~these ~~off~~activities, ~~these~~in ~~costs as~~the ~~they~~amount doof ~~not~~approximately ~~currently~~$17.1 ~~represent~~million. During ~~any~~the ~~future~~three ~~value~~months orended ~~provide~~December 31, ~~future~~2009, ~~benefit~~an additional $38,000 was torecorded ~~the~~as ~~Company~~an impairment of property and equipment.

Seneca Buffalo ~~Allegany~~Creek Casino. Construction on the next phase of development at Seneca Buffalo Creek Casino and Hotel, which was planned to include approximately 90,000 square feet of gaming space; 2,000 slot machines; 45 table games; a 22-story all-suite hotel; four restaurants; a full-service spa and salon; retail and other amenities; and a 2,200-space parking garage, for a total estimated cost of approximately $333 million, was suspended and an impairment charge was recognized in Fiscal 2009 related to these activities, in the amount of approximately $87.0 million. During the three months ended December 31, 2009, an additional $17,000 was recorded as an impairment of property and equipment.

InOn ~~March~~October ~~2008~~19, 2009 we ~~completed~~began ~~the~~an ~~conversion~~expansion of the ~~former~~Seneca ~~temporary~~Buffalo ~~casino~~Creek ~~facility~~temporary ~~at Seneca~~facility, ~~Allegany~~which ~~Casino~~will ~~and~~add ~~Hotel~~approximately 5,300 atsquare afeet ~~cost~~ of ~~approximately~~gaming ~~$29.3~~space ~~million,~~to ~~into~~the anfacility ~~approximate~~and ~~2,200~~will ~~seat~~accommodate ~~event~~approximately ~~center~~an ~~with~~ additional ~~amenities~~212 ~~and~~slot ~~administrative space~~machines. ~~The~~ ~~exterior landscaping and~~The ~~façade~~expansion ~~enhancements,~~is ~~originally~~due ~~planned as part of the conversion of the temporary casino, had been deferred~~ to ~~the~~be ~~next~~completed ~~phase~~in ofspring ~~construction~~2010.

~~The next~~Seneca ~~phase~~Hickory ofStick ~~construction,~~Golf ~~originally~~Club. In ~~planned for an additional 200 room hotel and 30~~July 2007,~~000 square feet of additional gaming and related amenities, was~~ ~~suspended for reasons including:~~ the ~~continuing~~ ~~economic~~Company ~~recession;~~commenced ~~inability to obtain~~ construction ~~financing~~of ~~on acceptable~~the ~~terms;~~Seneca ~~and~~Hickory ~~operating~~Stick ~~and~~Golf ~~other demands on our available cash~~Club, ~~such~~an as18-hole ~~our~~Robert ~~payments~~Trent ~~and~~Jones ~~distributions~~II todesigned ~~the~~golf ~~Nation~~course. As ofThe ~~June 30,~~golf ~~2009,~~course ~~the~~is ~~Company has~~located ~~incurred~~in ~~$18.2 million related to this phase of construction~~Lewiston, ~~for~~New ~~which~~York ~~an impairment charge was recognized in order to write off~~

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~~these~~and ~~costs~~is asapproximately ~~they~~eight domiles ~~not~~from the Seneca Niagara Casino and Hotel. Completion of golf course construction and official course opening are currently ~~represent~~scheduled ~~any~~for ~~future~~Summer ~~value~~2010. orAs ~~provide~~of ~~future~~December 31, ~~benefit~~2009, the Company has incurred $22.1 million for the purchase of land and construction, with a total cost to construct the ~~Company~~golf course, clubhouse and related amenities estimated to be approximately $25.5 million.

Seneca Buffalo Creek Casino

In March 2008, the Company completed a 109 slot machine expansion (for a total of 244 slot machines) of the temporary Seneca Buffalo Creek Casino. Construction of the permanent Seneca Buffalo Creek Casino and Hotel commenced in January 2008, with completion originally estimated for Summer 2010. The permanent complex was originally planned to feature 90,000 square feet of gaming space with 2,000 slot machines, 45 table games and a 22-story all suite hotel with approximately 206 rooms. In August 2008, we suspended construction due to various factors, including challenging economic and capital market conditions, operating and other demands on our available cash and increased competition and construction costs. As of June 30, 2009, the Company has incurred $87.4 million on the construction of the permanent casino and hotel, for which an impairment charge was recognized in order to write off these costs as they do not currently represent any future value or provide future benefit to the Company.

Although we have suspended for the foreseeable future our construction on a number of permanent expansion plans, as previously discussed, on August 8, 2009, the Nation offered SEGC a $9 million unsecured loan. The proceeds will be used for purposes of expanding the Buffalo Creek Casino temporary facility to include up to 250 additional slot machines. The loan carries an interest rate of 5% per annum with principal and interest payable monthly over a 12 month period commencing on the 15th day of the calendar month following the opening of the expansion, currently estimated to occur in February 2010. The note is prepayable at any time without penalty. The SEGC Board of Directors, on August 14, 2009, found such terms acceptable but SEGC has not yet executed a note for the loan. SEGC is currently in the initial design stage for this expansion, and therefore, the final budget, construction timeline and the number of machines for the expanded facility are being finalized. See “Executive Summary — Seneca Buffalo Creek Casino,” “Part II. Item 1. — Legal Proceedings,” and “2008 Form 10-K Item 3. — Legal Proceedings” for information regarding the status of, and litigation related to, our Seneca Buffalo Creek Casino.

Seneca Hickory Stick Golf Club

In July 2007, the Company commenced construction of the Seneca Hickory Stick Golf Club, an 18-hole Robert Trent Jones II designed golf course, located in Lewiston, New York, approximately eight miles from the Seneca Niagara Casino and Hotel. Construction of the course is expected to be complete in Summer 2009, but to allow for proper grow-in of the course, it is anticipated that the official opening of the course will occur in Spring 2010. As of June 30, 2009, the Company has incurred $19.1 million on land acquisition and construction costs, with the total cost to construct the golf course, clubhouse and related amenities estimated to be approximately $25.5 million.

Regulation

Our operations are regulated by Nation laws, the Compact and federal statutes, most notably the Indian Gaming Regulatory Act, or IGRA. Several bills were proposed during past sessions of Congress that would have affected Indian gaming but were not enacted into law. While bills may be introduced that are relevant to Indian gaming in the 111th Congress, leaders from the committees that have jurisdiction over the IGRA have not made any indications that gaming regulation will be an agenda item for the 111th Congress. ~~Moreover, the new administration has yet to~~ ~~appoint~~It ~~new members to the NIGC thus it~~ remains unclear whether the administration will pursue legislative initiatives related to the topic of Indian gaming.

The Department of the Interior published final regulations effective August 25, 2008 governing the conduct of gaming on lands taken into trust after October 17, 1988. The regulations on their face do not purport to impair the ability of the Nation and SGC to expand its gaming operations. Future gaming legislation or court decisions construing the new regulations could adversely impact expansion of SGC gaming operations and the future growth of the Nation’s revenue base. In addition, from time to time, various government officials have proposed taxing Indian casino gaming or otherwise limiting or restricting the conduct of gaming operations by Indian tribes. No assurance can be given that such legislation, if and when enacted by Congress, would not have a material adverse effect on the operations of SGC. If Congress were to enact comprehensive amendments to the IGRA, such legislation could have a material adverse effect on the operations of SGC. In addition, under federal law, gaming on the Nation’s lands may be dependent upon the permissibility under New York law of certain forms of gaming or similar activities. If New York State were to make various forms of gaming illegal or against public policy (or the courts were to similarly rule), or otherwise to take a legal position adverse to SGC, such actions could have a material adverse effect on our ability to conduct our gaming operations as currently conducted. Moreover, a 1996 U.S. Supreme Court decision may permit a state to avoid or refuse to negotiate amendments to existing compacts such as the Compact.

37Recent Accounting Pronouncements

~~Table~~A variety of ~~Contents~~proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, SGC has not yet determined the effect, if any, that the implementation of such proposed standards would have on the consolidated financial statements.

U.S. Supreme Court decision may permit a state to avoid or refuse to negotiate amendments to existing compacts such as the Compact.

New Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162” (“SFAS No. 168)”. SFAS No. 168 stipulates the FASB Accounting Standards Codification is the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. SFAS No. 168 is effective for the financial statements issued for interim and annual reporting periods ending after September 15, 2009. The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Reference~~There have been no ismaterial ~~made~~changes toin our ~~2008~~market ~~Annual~~risk ~~Report~~exposures onsince ~~Form~~September ~~10-K~~30, 2009. For ~~for~~more ainformation, ~~complete~~refer ~~discussion~~to “Item of7A. Quantitative and Qualitative Disclosures About Market Risk” included in our ~~market~~2009 ~~risk~~Form 10-K.

On June 19, 2008, we entered into the Senior Secured Revolving Loan Agreement that exposes SGC to interest rate risk in that amounts borrowed under the Senior Secured Revolving Loan Agreement will bear interest at either one, three or six-month LIBOR plus one and one quarter percent (1.25%), or the prime rate (as reported in The Wall Street Journal) plus one quarter percent (0.25%). On October 29, 2008, SGC borrowed $20.0 million under the Senior Secured Revolving Loan Agreement. During the third quarter of fiscal 2009, SGC paid $20 million on the Senior Secured Revolving Loan Agreement, leaving no outstanding balance at June 30, 2009. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Principal Debt Arrangements” for further information relating to the Senior Secured Revolving Loan Agreement.

Since our senior notes are fixed-rate indebtedness, and our obligations under the Distribution Agreement are based upon fixed-rate indebtedness of the Authority, we believe that our overall exposure to market risk in the form of interest rate fluctuations is low.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such ~~information~~ information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, have inherent limitations due to cost issues, the possibility of human error, judgments and assumptions regarding the likelihood of future events, and the circumvention and overriding of the controls and procedures. Accordingly, even effective disclosure of controls and procedures can provide only reasonable assurance of achieving the desired control objectives.

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SGC’s management, with ~~including~~the participation of our Chief Operating Officer and Chief Financial Officer (as our principal executive officer and principal financial officer, as ~~appropriate~~respectively), tohas ~~allow~~evaluated ~~timely~~the ~~decisions~~effectiveness ~~regarding~~of ~~required~~the ~~disclosure. In~~design ~~designing~~ and ~~evaluating~~operation ~~the~~of our disclosure controls and procedures,. Based ~~management~~on ~~recognized~~ that ~~any controls and procedures~~evaluation, no ~~matter~~our ~~how~~Chief ~~well~~Operating ~~designed~~Officer and ~~operated,~~Chief Financial Officer have ~~inherent~~concluded ~~limitations~~that ~~due~~the todesign ~~cost issues,~~and ~~the~~operation ~~possibility~~ of ~~human~~our ~~error,~~disclosure ~~judgments~~ controls and ~~assumptions~~procedures ~~regarding~~as ~~the likelihood~~ of ~~future events~~December 31, ~~and~~2009 ~~the~~provided ~~circumvention~~reasonable ~~and~~assurance ~~overriding of the~~that ~~controls~~the ~~and procedures. Accordingly, even effective~~ disclosure of controls and procedures ~~can~~are ~~provide~~effective ~~only reasonable~~to ~~assurance~~accomplish ~~of achieving the desired control~~ their objectives.

SGC’s management, under the supervision of our principal executive officer, and with the participation of our principal executive officer and our principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our principal executive officer and principal financial officer have concluded that the design and operation of our disclosure controls and procedures as of June 30, 2009 provided reasonable assurance that the disclosure controls and procedures are effective to accomplish their objectives.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rules 13a-15 or or 15d-15 or otherwise that occurred during the quarter ended ~~June~~December 3031, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

~~Citizens~~Other than ~~Against~~as ~~Casino~~described ~~Gambling~~below, there have been no material changes in ~~Erie~~our ~~County~~legal proceedings vsince September 30, 2009. ~~Hogen~~For ~~(1:2009-cv-00291~~more ~~(WDNY))~~information, —refer ~~CACGEC~~to ~~III~~“Item 3. Legal Proceedings” in our 2009 Form 10-K.

On March 31, 2009 , Citizens Against Casino Gambling in Erie County (CACGEC) filed a third action in the United States District Court, Western District of New York against the Chairman of the National Indian Gaming Commission, or NIGC, the United States Department of Interior, the NIGC, the Secretary of the Interior and the President of the United States. The action seeks declaratory and injunctive relief under the Administrative Procedure Act, the Declaratory Judgments Act, and the Indian Regulatory Gaming Act and is principally directed at the decision by the NIGC Chairman, on January 20, 2009, to approve the Seneca Nation’s amendments to its Class III Gaming Ordinance regarding the Nation’s Buffalo Creek Territory. The NIGC Chairman concluded that IGRA’s general prohibition against gaming on lands acquired after its enactment in 1988 does not apply to lands, such as the Buffalo Creek Territory, that are held in restricted fee. The plaintiffs claim that, in approving the Nation’s Class III Gaming ordinance on January 20, 2009, the NIGC Chairman ignored the intention of Congress. The plaintiffs also make several claims that go beyond their prior lawsuits. Most notably, they challenge the constitutionality of the land purchase provisions contained in the Seneca Nation Settlement Act of 1990 (“SNSA”), and attempt to challenge in a more extensive fashion than they had previously the validity of the Nation-State Gaming Compact.

On June 15, 2009, the Nation moved to intervene as a defendant in CACGEC III. The Nation’s proposed intervention and participation as a defendant are expressly restricted to the three claims for relief specified in the plaintiffs’ complaint, namely: (1) whether, as restricted fee lands over which the Nation exerts governmental authority, the Buffalo Creek Territory qualifies as “Indian lands” under IGRA; (2) whether the Buffalo Creek Territory is subject to the general prohibition found in section 2719 of IGRA against gaming on trust lands acquired after IGRA’s effective date even though the Territory consists of restricted fee, rather than trust, lands; and (3) whether, if the Buffalo Creek Territory is subject to Section 2719’s general prohibition, Class III gaming may nevertheless proceed on it because the Buffalo Creek Territory was acquired in settlement of a land claim.

The plaintiffs are opposing the Nation’s motion and as of August 14, 2009, the Nation’s motion was still pending before the Court.

Seneca Gaming Authority Proposed Notices of Violation issued to the Seneca Gaming Corporation and Employees dated July 13, 2009.

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Summary

On July 14, 2009, SGC received a proposed Notice of Violation dated July 13, 2009, or the 2009 NOV, from the Seneca Gaming Authority, or the SGA, alleging fifteen violations of certain sections of the Class III Gaming Ordinance and the ~~Seneca Nation of Indians-State of New York~~ Compact, ~~(“Compact”),~~ as well as our Charter. In addition to SGC, eleven employees received similar notices arising out of the same set of facts, alleging from five to twelve violations of the provisions noted above. Each of the alleged violations is attributable to SGC’s accounting treatment of an alleged table games inventory (i.e., gaming chips) discrepancy of $25,971 that arose due to a single human error during an ordinary course table games move on April 3, 2009. The initial notices from the SGA ~~indicate~~indicated that each of the alleged violations carried ~~carries~~ with it a potential fine of $500 per day per violation imposed from the date of the initial alleged infraction, April 3, 2009, or approximately $1,000,000 for the SGC and approximately $8,000,000 in the aggregate for the eleven individuals as of August 14, 2009. On August 17, 2009, SGC and each of the affected employees received a proposed final assessment, which included proposed fines of $10,000 payable by SGC, and proposed fines payable by four out of the eleven individual employees cited originally, ranging from $500 to $2,500.

AsOn ~~more fully described~~December 18, ~~below~~2009, the ~~alleged~~SGA ~~accounting~~Commission ~~discrepancy~~determined ~~was~~that ~~properly~~the ~~documented in SGC~~SGA’s ~~accounting~~ ~~records~~action ~~and~~with ~~had~~respect ato ~~net effect~~ seven of ~~zero at~~ the ~~close~~affected ofindividuals ~~the~~did ~~reporting period~~not ~~and~~constitute ata no“Notice ~~time was the applicable inventory unaccounted for or at risk~~ of ~~misappropriation~~Violation” orand ~~loss. Subsequent~~that ~~to receipt of~~ the ~~proposed~~matter ~~NOVs,~~had abeen ~~review~~settled byfrom ~~PricewaterhouseCoopers,~~the ~~serving as our internal auditors, supports SGC~~SGA’s ~~conclusion~~perspective ~~that:~~ (~~1) SGC’s~~confirming ~~internal~~that ~~controls immediately identified~~ the ~~alleged discrepancy; (2) the alleged discrepancy was~~ ~~documented~~matter ~~and~~would ~~resolved~~not ~~through~~have ~~proper~~any ~~procedures~~negative ~~and~~licensing ~~protocols~~implications ~~(including notification~~for of the ~~SGA~~ individuals);. Also ~~(3) an~~on ~~appropriate audit trail was created for all adjustments~~ that ~~were~~date, ~~made;~~the ~~(4) assets were appropriately safeguarded,~~SGC and ~~(5) duties~~the ~~were~~SGA ~~appropriately~~entered ~~segregated. SGC~~into ~~is currently awaiting~~ a ~~response~~settlement ~~from~~agreement ~~the SGA~~pursuant ~~with regard~~ to ~~whether~~which ~~final~~the proposed Notices ~~NOVs~~of ~~will~~Violation be issued, ~~after~~to ~~which~~the ~~time each~~four ~~recipient~~remaining ~~will~~individuals ~~have~~(with ~~30 days to appeal.~~ proposed Infines ~~the~~ranging ~~event~~from ~~final~~$500 ~~proposed~~to ~~NOVs~~$2,500) ~~are~~were ~~issued~~vacated byand ~~the~~dismissed ~~SGA~~in their entirety, ~~for~~while the ~~reasons noted~~SGA ~~above,~~agreed ~~and~~that ~~numerous~~the ~~additional~~proposed ~~substantive~~Notice ~~and~~of ~~procedural~~Violation ~~issues~~issued ~~relating~~ to SGC ~~the~~would ~~merits~~be ofvacated ~~the~~and ~~proposed~~dismissed ~~violations,~~without ~~the~~further ~~scope~~action of the ~~recipients,~~SGA ~~and~~on ~~the~~March 15, ~~amounts~~2010. The ofsettlement ~~the~~agreement ~~proposed~~requires that ~~fines,~~the SGC ~~intends~~engage toin ~~vigorously~~certain ~~defend~~compliance-related ~~itself~~efforts, and ~~intends~~ remit to ~~fully~~the ~~support~~SGA an ~~the~~administrative ~~defense~~fine of ~~its~~$10,000 ~~employees~~to incover ~~this~~SGA ~~matter~~costs. ~~Notwithstanding~~In ~~SGC’s~~connection ~~position~~with ~~that~~this ~~no violations~~SGA ~~occurred~~enforcement matter, ~~given~~ the ~~potential~~SGC ~~significance~~indemnified of the ~~actions~~affected ~~taken~~employees ~~by the~~for ~~SGA~~their todefense ~~date,~~costs pursuant weto ~~include~~mandatory ~~below~~Charter aindemnification ~~more~~provisions ~~detailed~~and ~~description~~action of ~~this~~the ~~matter~~SGC Board of Directors.

~~Supplemental~~Seneca ~~Description~~Gaming ofCorporation ~~Facts~~v. Merrill Lynch Pierce Fenner & Smith Incorporated

On ~~April~~ August 36, 2009, anSGC ~~error~~filed ~~occurred~~suit ~~during~~in the ~~relocation~~United ofStates ~~certain~~District ~~game~~Court ~~tables~~for ~~at our Seneca Niagara Casino & Hotel in which~~ the ~~table games manager for~~ ~~such~~Southern ~~tables~~District ~~failed~~of toNew ~~remove inventory (i.e.~~York, ~~gaming~~alleging ~~chips)~~fraudulent ~~from~~conduct ~~the tables involved in the relocation and transport the inventory to the cage prior to moving the tables. Rather, the inventory~~ on the ~~tables~~part ~~remained and in certain instances was subsequently assigned to new table numbers when the tables were relocated. As a result, the closing inventory~~ of ~~any~~ ~~given~~Merrill ~~numbered~~Lynch ~~table~~in oninducing ~~the~~SGC ~~shift prior~~ to ~~the~~purchase ~~move did not match the opening inventory of the re~~auction-~~numbered~~rate ~~tables subsequent to the move~~securities. InThe ~~order~~claim toalleges ~~open~~that ~~the~~Merrill ~~tables in our electronic~~Lynch ~~accounting~~represented ~~system, ACSC,~~ the ~~inventory~~securities ~~for~~as ~~each~~highly ~~table~~liquid ~~had to be adjusted such that the closing inventory for the prior shift~~ and ~~the~~collateralized ~~opening~~by ~~inventory on the~~residential ~~opening shift of relocation were the same~~mortgages. SGC ~~This~~discovered ~~adjustment resulted in a~~subsequently ~~discrepancy~~that ~~of $25,791 in~~ the ~~recorded~~securities ~~electronic inventory vis-a-vis the physical inventory on the tables at the time of the relocation. However, at no time~~ were ~~the~~illiquid ~~gaming~~and ~~chips~~ not ~~under~~collateralized ~~our~~by ~~control, nor were such assets at risk of~~residential ~~misappropriation or loss. The effect of the discrepancy was an understatement of revenue on April 2~~mortgages, ~~2009~~but ~~and a correcting and exactly corresponding overstatement on April 3~~rather, ~~2009, resulting~~by incomplex aderivative ~~net effect of zero at the close of the reporting period. Upon further review~~instruments, and ~~upon discussion with the SGA, the inventory of each table was again adjusted such~~ that ~~each table’s opening inventory matched~~ the ~~physical inventory on the tables at that time,~~ ~~and~~securities ~~consequently~~had ~~did~~become ~~not match the closing inventory of the table prior to the relocation~~worthless. ~~This adjustment also~~SGC’s ~~resulted~~suit inseeks ~~a discrepancy of~~ $~~25,791. These~~5 ~~known,~~million ~~identified variances were appropriately documented~~ in, ~~and supported by, the accounting records~~damages.

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~~all~~On ~~transactions~~January 4, ~~pertaining~~2010, Merrill Lynch filed a motion to dismiss the ~~company~~complaint. SGC’s ~~revenues~~counsel ~~and~~is ~~expenses,~~preparing ~~assets,~~a ~~liabilities~~reply. No ~~and equity~~hearing indate ~~conformance~~on ~~with~~the ~~GAAP;~~motion has been set.

(ii) the knowing submission of false or misleading information to the regulatory authorities in response to any provision of applicable law;

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an adverse decision from the SGA Commission. We have been in continuous contact with the SGA since the issuance of the NOV and plan to vigorously defend the allegations set forth therein.

Item 1A. Risk Factors

~~There~~Our ~~are~~results noof ~~material~~operations ~~changes~~and ~~from~~financial ~~the~~condition ~~risk~~are ~~factors~~subject ~~previously~~to ~~disclosed~~numerous inrisks ~~our~~and ~~Annual Report on Form 10-K~~uncertainties ~~for~~described ~~the fiscal year ended September 30, 2008, except as disclosed~~ in ~~our quarterly reports on Form 10-Q, including without limitation, the risk factors relating to our Seneca Buffalo Creek Casino set forth in~~ “~~Part I~~Item 1A. ~~Item~~Risk ~~2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations~~Factors” ~~— “Executive Summary —~~ ~~Buffalo~~included ~~Creek~~in ~~Casino” and those relating to~~ our ~~expansion~~2009 ~~and development projects set forth in “Part~~Form I10-K. ~~Item~~The 2risk —factors ~~Management’s~~identified ~~Discussion~~therein ~~and~~have ~~Analysis~~not ofmaterially ~~Financial Condition and Results of Operations” — Liquidity and Capital Resources”, and those relating to Legal Proceedings set forth in “Part II~~changed. ~~Other Information: Item 1. Legal Proceedings.”~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

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

Exhibit No.		Description
10.1		First Amendment to Loan Agreement by and among Seneca Gaming Corporation and KeyBank National Association dated as of December 18, 2009 (incorporated by reference to Exhibit 10.29 to SGC’s Annual Report on Form 10-K filed on December 23, 2009).
31.1		Certification of Catherine Walker, principal executive officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934 (filed herewith).
31.2		Certification of David Sheridan, principal financial officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934 (filed herewith).
32.1		Certification of Catherine Walker, principal executive officer, and David Sheridan, principal financial officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (~~filed~~furnished herewith).

4230

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SIGNATURES

SENECA GAMING CORPORATION

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated August 14, 2009

	SENECA GAMING CORPORATION


Date: February 4, 2010	/s/ Catherine Walker
	Catherine Walker
	Chief Operating Officer
	(Principal Executive Officer)


Date: February 4, 2010	/s/ David Sheridan
	David Sheridan
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

~~/s/ Catherine Walker Catherine Walker Chief Operating Officer (Principal Executive Officer) /s/ David Sheridan David Sheridan Chief Financial Officer (Principal Financial and Accounting Officer)~~31

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