Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C.  20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2009

OR

For the transition period from               to              

Commission File Number: 333-115186

RIVER ROCK ENTERTAINMENT AUTHORITY

(Exact name of registrant as specified in its charter)

3250 Highway 128 East
Geyserville, California 95441
(707) 857-2777

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

Indicate by check mark whether the registrant (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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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).   o Yes o No

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):

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

Table of Contents

RIVER ROCK ENTERTAINMENT AUTHORITY

INDEX TO FORM 10-Q

2

Table of Contents

CAUTIONARY STATEMENT

Except for the historical financial information contained herein, the matters discussed in this report on Form 10-Q (as well as documents incorporated herein by reference) may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Such forward-looking statements are based upon current expectations that involve risks and uncertainties and include declarations regarding the intent, belief or current expectations of us and our management and may be signified by the words “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. All forward-looking statements in this document are based on information available to us as of the date hereof, and we assume no obligation to update any such forward-looking statements, whether as a result of new information, future events, or otherwise. All discussion in this report should be read in conjunction with our financial statements and the accompanying notes contained in this report.

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

Our key risks are described in our annual report on Form 10-K filed with the Securities and Exchange Commission.

3

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

RIVER ROCK ENTERTAINMENT AUTHORITY

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

CONDENSED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited interim financial statements.  The condensed balance sheet as of December 31, 2008 has been derived from audited financial statements.

4

Table of Contents

RIVER ROCK ENTERTAINMENT AUTHORITY

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

CONDENSED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (DEFICIT)
(Unaudited)

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

5

Table of Contents

RIVER ROCK ENTERTAINMENT AUTHORITY

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

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

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

6

Table of Contents

RIVER ROCK ENTERTAINMENT AUTHORITY

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

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

7

Table of Contents

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1.                          DESCRIPTION OF BUSINESS

River Rock Entertainment Authority (the “Authority”) is a governmental instrumentality of the Dry Creek Rancheria Band of Pomo Indians (the “Tribe”), a federally recognized Indian tribe. The Authority owns and operates River Rock Casino (the “Casino”). The Casino offers Class III gaming (as defined by the Indian Gaming Regulatory Act of 1988, as amended) on tribal land located in Geyserville, California. At September 30, 2009, the Casino was operating 1,191 slot and video poker gaming machines.  The legal authority for slot machines and table games is provided by the Tribe’s gaming compact with the State of California (the “Compact”), which was entered into in September 1999 and became effective upon approval by the Secretary of Interior on May 5, 2000.  The Compact expires on December 31, 2020.

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

The Authority operates as a separate, wholly owned operating unit of the Tribe (i.e., a separate enterprise fund of the Tribe) and is not a separate legal entity. These financial statements reflect the financial position and activity of only the Authority and do not purport to represent the financial position and activity of the Tribe.

2.                                BASIS OF PRESENTATION, UNAUDITED INTERIM FINANCIAL STATEMENTS

The accompanying condensed balance sheet as of December 31, 2008 has been derived from the audited financial statements included in the Authority’s Annual Report on Form 10-K for the year ended December 31, 2008.

River Rock Entertainment Authority has made its disclosures in accordance with the Financial Accounting Standards Board, commonly referred to as the “FASB”.  The FASB sets generally accepted accounting principles (“GAAP”) in the United States of America as they apply to interim reporting.  The Authority condensed or omitted certain information and disclosures normally included in notes to financial statements in accordance with the Securities and Exchange Commission’s rules and regulations. The unaudited condensed financial statements should be read in conjunction with the financial statements and the notes thereto in River Rock Entertainment Authority’s Annual Report on Form 10-K for the year ended December 31, 2008.

In the opinion of the Authority’s management, the accompanying unaudited interim condensed financial statements contain all adjustments (consisting of normal recurring adjustments) to fairly present the Authority’s condensed financial position as of September 30, 2009 and the condensed statements of revenues, expenses and changes in net assets (deficit) for the three and nine month periods ending September 30, 2009 and 2008, and condensed statements of cash flows for the nine months ended September 30, 2009 and 2008, as applicable. The condensed statements of revenues, expenses and changes in net assets (deficit) and condensed cash flows for all periods presented are not necessarily indicative of the results of operations or cash flows expected for the year or any other period.

3.                    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Standards—The Authority prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The financial statements presented are prepared on the accrual basis of accounting from the accounts and financial transactions of the Authority. GAAP requires the Authority to apply all applicable pronouncements of the Governmental Accounting Standards Board (“GASB”). The Authority is also required to follow Financial Accounting Standards Board (“FASB”) Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements.  The Authority is given the option whether to apply all FASB Statements and Interpretations issued after November 30, 1989, except for those that conflict with or contradict GASB pronouncements. Accordingly, the Authority has elected to implement non-conflicting FASB Statements and Interpretations issued after November 30, 1989.

There are differences between financial statements prepared in accordance with GASB pronouncements and those prepared in accordance with FASB pronouncements. The statements of revenues, expenses and changes in net assets (deficit) are a combined statement under GASB pronouncements. FASB pronouncements allow a statement of income or operations

8

Table of Contents

and a separate statement of owners’ or shareholders’ equity (deficit), which is where distributions to owners would be presented under FASB pronouncements.  The amount shown as income before distributions to Tribe would be the most comparable amount to net income computed under FASB pronouncements.  The Authority is a separate enterprise fund of the Tribe, a governmental entity, and as such there is no owners’ or shareholders’ equity (deficit) as traditionally represented under FASB pronouncements.  The most comparable measure of owners’ equity (deficit) is presented on the Authority’s balance sheet as net assets (deficit).

During the third quarter of 2009, we adopted the new Accounting Standards Codification (ASC) as issued by the FASB.  The ASC has become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities.  The ASC is not intended to change or alter existing GAAP.  The adoption of the ASC did not have a material impact on our consolidated financial statements.

The ASC will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities.  Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the ASC will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the ASC will become nonauthoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.

Following this statement, FASB will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates.  FASB will not consider Accounting Standards Updates as authoritative in their own right.  Accounting Standards Updates will serve only to update the ASC, provide background information about the guidance, and provide the bases for conclusions on the change(s)  in the ASC.

On April 1, 2009, the Authority adopted ASC 825-10, “Financial Instruments.”  ASC 825 requires an entity to provide disclosures about fair value of financial instruments in interim financial information.  Codification 270-10, “Interim Reporting,” related to APB 28-1, “Interim Financial Reporting,” requires those disclosures in summarized financial information at interim reporting periods.  Codification 825-10 emphasizes that a publicly traded company shall include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods.  In addition, an entity shall disclose in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position.

In May 2009, the FASB issued ASC 855-10 (formerly SFAS Statement No. 165), “Subsequent Events”.  The objective of ASC 855 is to establish general standards of accounting and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  ASC 855 provides 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 or disclosure in the financial statements; 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 an entity should make about events or transactions that occurred after the balance sheet date.  The Authority adopted this new accounting guidance on April 1, 2009.

In April 2009, the FASB issued ASC 820-10, “Fair Value Measurement and Disclosure” guidance related to FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” ASC 820 provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased and includes guidance on identifying circumstances that indicate a transaction is not orderly.  ASC 820 emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of fair value measurement remains the same.  Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions.  The Authority adopted this new accounting guidance on April 1, 2009.

In August 2009, the FASB issued Accounting Standards Update No. 2009-05, “Fair Value Measurements and Disclosures (ASC Topic 820) — Measuring Liabilities at Fair Value,” which amends ASC Subtopic 820-10, “Fair Value Measurements and Disclosures.”  The Update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more

9

Table of Contents

of two techniques.  One valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets. The other valuation technique that is consistent with the principles of ASC 820, for example an income approach (such as a present value technique) or a market approach (such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability).  This Update is effective for the first reporting period (including interim periods) beginning after August 26, 2009.

In July 2007, the GASB issued Statement No. 51, “Accounting and Financial Reporting for Intangible Assets.”  This Statement provides guidance regarding how to identify, account for and report intangible assets.  The new standard characterizes an intangible asset as an asset that lacks physical substance, is nonfinancial in nature and has an initial useful life extending beyond a single reporting period.  Examples of intangible assets include easements, computer software, water rights, timber rights, patents and trademarks.  Statement No. 51 requires that intangible assets be classified as capital assets (except for those explicitly excluded from scope of the new standard).  The Authority adopted this Statement on July 1, 2009.

In April 2009, the GASB issued Statement No 55, “The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments.”  The Statement incorporates the hierarchy of generally accepted accounting principles (GAAP) for state and local governments into the GASB’s authoritative literature.  This Statement is intended to make it easier for preparers of state and local government financial statements to identify and apply the “GAAP hierarchy,” which consists of accounting principles used in the preparation of financial statements so that they are presented in conformity with GAAP and the framework for selecting those principles.  The Statement will improve financial reporting by contributing to the GASB’s efforts to codify all GAAP for state and local governments so that they derive from a single source.  The requirements of Statement No. 55 are effective immediately.

In April 2009, the GASB issued Statement No 56, “Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards.”  The Statement incorporates accounting and financial reporting guidance previously only contained in the American Institute of Certified Public Accountants (AICPA) auditing literature into the GASB’s accounting and financial reporting literature for state and local governments.  The Statement 56 guidance addresses three issues from the AICPA’s literature:  (1) related-party transactions, (2) going concern considerations and (3) subsequent events.  Statement No. 56 is part of the GASB’s effort to codify all generally accepted accounting principles for state and local governments so that they derive from a single source.  This is intended to make it easier for preparers of state and local government financial statements to identify and apply relevant accounting guidance.  The requirements of Statement No. 56 are effective immediately.

The adoption of these new standards had no effect on the Casino’s financial position or result of operations.

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate those estimates, including those related to asset impairment, accruals for our promotional slot club, compensation and related benefits, revenue recognition, allowance for doubtful accounts, contingencies and litigation. Actual results could differ from these estimates.

Cash and Cash Equivalents — The Authority considers all highly liquid investments with a maturity of three months or less at date of purchase as cash equivalents. The carrying amount of cash and cash equivalents approximates its fair value. Cash and cash equivalents include cash on hand, cash on deposit with banks and highly liquid investments.  The Federal Deposit Insurance Corporation (“FDIC”) has insured $250,000 of the cash on deposit with each bank. The Authority believes that there is little risk of loss regarding the uninsured amounts of cash and cash equivalents on deposit with the banks.

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

Restricted Assets — Funds are set aside as restricted assets, and they are not available for current expenses, when constraints placed on their use are legally enforceable due to either:

·                  Externally imposed requirements by creditors (such as through debt covenants), grantors or contributors.

·                  Laws or regulations of other governments.

·                  Constitutional provisions or enabling legislation.

The Authority’s policy is to use restricted assets before unrestricted assets for expenses incurred for which both restricted and unrestricted net assets are available.  The Authority’s restricted assets consist of estimated construction

10

Table of Contents

expenses for three parking structures, related infrastructure improvements and construction contingencies. It also includes funds that are reserved for additional construction contingencies and the funds necessary to develop an approximately 18-acre parcel of land adjacent to the Tribe’s reservation. These funds are held in escrow accounts which are restricted for authorized construction disbursements. These escrow accounts are invested in certificates of deposit, which generate interest on a monthly basis. The FDIC has insured $250,000 of this balance. The Authority believes that there is little risk of loss regarding the uninsured amounts of restricted cash held in the escrow account. Restricted cash was $7,095,650 and $7,090,273 at September 30, 2009 and December 31, 2008, respectively.  As of September 30, 2009, restricted cash includes $2,771,159 for construction, $4,324,437 for land development, plus $54 of other restricted cash.

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

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

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

Evaluation of Long-Lived Assets — Accounting pronouncement GASB No. 42, “Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries,” was effective for the Authority for the year ended December 31, 2005.  This Statement established accounting and financial reporting standards for impairment of capital assets.  The Authority’s capital assets include building and improvements, furniture, fixtures and equipment.  A capital asset is considered impaired if both the decline in service utility of the capital asset is large in magnitude and the event or change in circumstances is outside the normal life cycle of the capital asset.  The Authority is required to evaluate prominent events or changes in circumstances affecting capital assets to determine whether impairment of a capital asset has occurred.  Common indicators of impairment include evidence of physical damage where restoration efforts are needed to restore service utility, enactment or approval of laws or regulations setting standards that the capital asset would not be able to meet, technological development or evidence of obsolescence, a change in the manner or expected duration of use of a capital asset or construction stoppage.  This Statement will require the Authority to report the effects of capital asset impairment in its financial statements when they occur, rather than as part of the ongoing depreciation expense for the capital asset or upon disposal of the capital asset, and to account for insurance recoveries in the same manner.  The Authority’s management has determined that no impairment of capital assets currently exists.

Capitalized interest — The interest cost associated with major development and construction projects is capitalized and included in the cost of the asset.  Capitalization of interest ceases when the project is substantially complete or when development activity is suspended.  The Authority did not capitalize any interest for the nine months ended September 30, 2009 and 2008.

Deposits and Other Assets — As of September 30, 2009 and December 31, 2008, deposits and other assets include $2,130,871 and $2,897,142 in unamortized legal fees and other issuance costs related to the issuance of the Authority’s 9 ¾% Senior Notes due 2011 (the “Senior Notes”) under the Indenture, dated November 7, 2003 (the “Indenture”); $21,161 and $126,487 of performance deposits; $15,900 and $15,900 of rental deposits; and $47,618 and $0 of equipment deposits.  Deferred loan costs are amortized using the effective interest method to interest expense over the term of the related financial arrangement.

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

Compensated absences — All employees of the Authority earn annual leave that is paid upon termination or retirement.  Annual leave is accrued at current rates of compensation.

Accrued Progressive Slot Jackpots — Accrued progressive slot jackpots consist of estimates for prizes relating to various games that have accumulated jackpots. The Authority has recorded the cost of these anticipated payouts as a reduction of Casino revenues, and the cost is included as a component of accrued liabilities.

11

Table of Contents

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

Contingencies — The Authority assesses its exposure to loss contingencies, including legal matters, and provides for an exposure if it is judged to be probable and estimable. If the actual loss from a contingency differs from management’s estimate, operating results could be materially impacted. As of September 30, 2009, management determined that no accruals for claims and legal actions are required. If circumstances surrounding claims and legal actions change, the addition of accruals for such items in future periods may be required, which accruals may be material.

Authority net assets — Invested in capital assets, net of related debt, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets.  Invested in capital assets, net of related debt, excludes unspent debt proceeds.

Restricted net assets represent amounts that are appropriated or are legally segregated for a specific purpose.  Authority net assets are reported as restricted when there are limitations imposed on its use, either through the enabling legislation adopted by the Authority or through external restrictions imposed by creditors, grantors, laws or regulations of other governments.

Casino Revenues — In accordance with industry practice, the Authority recognizes as Casino revenue the net win from gaming activities, which is the difference between gaming wins and losses. Casino revenues are net of accruals for anticipated payouts of progressive slot jackpots and certain player incentives, when earned by the customer

Food, Beverage and Retail Revenues — The Authority recognizes as food, beverage and retail revenues the proceeds from its food, beverage and gift shop sales. The Authority continues to distribute non-alcoholic beverages without cost in the gaming area for playing guests.

Other Revenues — Other revenues are comprised of commissions on ATM machine transactions.

Promotional Allowances — The retail value of food and beverages provided to customers without charge or at a discount is included in food, beverage and retail revenues and then deducted as promotional allowances. Such amounts that are included in food, beverage, and retail revenues for the three months ended September 30, 2009 and 2008 were $101,401 and $127,188, respectively.  The amounts included in food, beverage, and retail revenues for the nine months ended September 30, 2009 and 2008 were $319,873 and $394,446, respectively.

Food and Beverage Expenses — Food and beverage expenses include cost of goods sold related to providing food and beverage to our customers. The estimated costs of providing complimentary services are reflected in Casino expenses.

Advertising Costs — Advertising costs are expensed the first time advertising takes place. Advertising costs included in selling, general and administrative expenses for the three months ended September 30, 2009 and 2008 were $1,097,397 and $1,071,092, respectively.  Advertising costs for the nine months ended September 30, 2009 and 2008 were $3,166,096 and $5,028,228, respectively.

Gaming Commission and Surveillance Expenses — The Authority pays for various expenses for the Tribal Gaming Commission and Surveillance.  Tribal Gaming Commission expenses are reported as Gaming Commission and surveillance expense on the statements of revenues, expenses and changes in net assets (deficit).  Gaming Commission and surveillance expenses for the three months ended September 30, 2009 and 2008 were $985,703 and $806,583, respectively.  Gaming Commission and surveillance expenses for the nine months ended September 30, 2009 and 2008 were $2,901,577 and $2,662,483, respectively.

Income Taxes —As a governmental instrumentality of the Tribe, the Authority is a non-taxable entity for purposes of federal and state income taxes.

Distributions to Tribe — Distributions to Tribe are made up of payments permitted under the covenants of the Indenture.  They are included in the statements of revenues, expenses and changes in net assets (deficit) as distributions to Tribe allowed pursuant to the Indenture.  Total distributions to the Tribe for the three months ended September 30, 2009 and 2008 were $3,324,979 and $3,254,791, respectively.  Total distributions to the Tribe for the nine months ended September 30, 2009 and 2008 were $9,974,938 and $10,640,879, respectively.

12

Table of Contents

Reclassifications — Certain prior year balances in the condensed statements of revenues, expenses and changes in net assets (deficit) have been reclassified to be consistent with current year presentation with no change to net revenues or net income as reflected in the 2008 Form 10-K, including the reclassification of e-coupons and cash incentives from promotional allowances to casino contra-revenues.

4.                                CERTAIN RISKS AND UNCERTAINTIES

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

5.                                RELATED PARTIES

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

The Authority pays for various expenses for the following departments operated by the Tribe:  Tribal Gaming Commission, surveillance, plant operations, human resources and warehouse.  These departmental expenses include but are not limited to payroll and related expenses, legal, and other operational expenses.

Total amounts billed by the Tribe to the Casino for these departments, excluding Tribal Gaming Commission and surveillance, for the three months ended September 30, 2009 and 2008 were $950,706 and $814,705, respectively, which is recorded as a component of selling, general and administrative expenses.  Total expenses for these departments for the nine months end September 30, 2009 and 2008 were $2,808,488 and $2,561,272, respectively.

The Authority pays for various expenses for the Tribal Gaming Commission and surveillance. Tribal Gaming Commission and surveillance expenses are recorded in Gaming Commission and surveillance expenses on the statements of revenues, expenses and changes in net assets (deficit).  Gaming Commission and surveillance expenses for the three months ended September 30, 2009 and 2008 were $985,703 and $806,583, respectively.  Gaming Commission and surveillance expenses for the nine months ended September 30, 2009 and 2008 were $2,901,577 and $2,662,483, respectively.

The Tribe has incurred expenses on behalf of the Authority that relate to the master planning for the proposed resort and Tribal infrastructure that benefit the Casino.  During the three months ended September 30, 2009, the Authority authorized reimbursement of $1,850,000 to the Tribe for these expenses.  During the nine months ended September 30, 2009, the Authority authorized reimbursement of $8,067,445.  These expenses were capitalized and are reflected in construction-in-progress. The reimbursed costs consist primarily of engineering and design costs related to the proposed master plan development, including electrical, HVAC, landscaping, interior design services and consulting fees for legal, branding, feasibility and public relations services. While the Tribe has not made any additional request to the Authority for reimbursement, it may request additional reimbursements from the Authority in the future. While the Authority has no obligation to pay such amounts when requested, and any such reimbursement would need to be approved by management and the Board of Directors of the Authority, there is a possibility that such request for reimbursement may be made by the Tribe. Prior to making any reimbursement payment, the Authority will consider various factors, including, but not limited to, whether the costs incurred were actually related to the master planning, whether such costs are beneficial to the gaming business and expansion plans of the Authority, the reasonableness of such costs, the availability of cash and whether the reimbursement payment is in compliance with the covenants in the Indenture.

On April 16, 2008, in a joint effort with the Tribe, the Authority pledged a cash gift to Healthcare Foundation, a local hospital.  This pledge was in the amount of $1.8 million over the course of five years, at a monthly rate of $30,000 commencing May 2008.  This cash donation is a gift and not part of any revenue sharing agreement with any state or local government.

The Authority reserved 50 recreational vehicle spaces and 10 campsite spaces at Alexander RV Park and Campground for casino guests.  Alexander RV Park and Campground is a wholly owned subsidiary of the Tribe.  The cost of reserving the parking spaces and campsite spaces for the three months ended September 30, 2009 was $69,458 compared to $66,150 for the same prior year period.

13

Table of Contents

6.                                      CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

Cash and cash equivalents and restricted cash consisted of the following as of September 30, 2009 and December 31, 2008:

Custodial credit risk for deposits is the risk that, in event of the failure of a depository financial institution, “a governmental entity” will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party.  The California Code and the Authority’s investment policy authorize these types of investments.  The deposits were insured by the FDIC up to $100,000 per bank.  On October 3, 2008, Congress temporarily increased FDIC deposit insurance from $100,000 to $250,000 per depositor through December 31, 2009.  The Authority’s operating cash and restricted cash accounts are FDIC insured up to $250,000 each.

7.             FAIR VALUE MEASUREMENTS

In accordance with the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification (ASC), the following table summarizes the basis used to measure certain assets and liabilities at fair value on a recurring basis:

Also see Note 10 for fair value of the Senior Notes.

14

Table of Contents

8.             CAPITAL ASSETS

Capital Assets at December 31, 2008 and September 30, 2009 consisted of the following:

Construction in progress consists of payments to various vendors through reimbursements to the Tribe related to the Authority’s master plan development and land improvements.  Substantially all of the Authority’s personal property is pledged as collateral to secure its debt.

9.             ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of September 30, 2009 and December 31, 2008:

10.          LONG-TERM DEBT

Long-term debt consisted of the following as of September 30, 2009 and December 31, 2008:

15

Table of Contents

On November 7, 2003, the Authority issued the Senior Notes. The proceeds were utilized to fund an expansion project, which included three parking structures, related infrastructure improvements, repayment of various debt and advances and fund payment of various accruals and payables, as well as to increase cash on hand. The proceeds were also utilized to fund a land purchase and settle litigation.  The Senior Notes are collateralized by a first priority pledge of the Authority’s revenue and substantially all of the existing and future tangible and intangible personal property. The Authority may redeem the Senior Notes, in whole or in part, at a redemption price that is at a premium to the principal amount of the Senior Notes (expressed as percentages of principal amount), plus accrued and unpaid interest.  Interest on the Senior Notes is due semi-annually in May and November.

The Authority’s long-term debt is recorded at an amortized historical cost basis.  The fair value of the Senior Notes was approximately $182.0 million as of September 30, 2009 based on level one inputs, quoted prices in active markets.

11.                   LEASES

On May 30, 2002, the Authority entered into an operating lease for a sprung structure.  The lease expired on August 17, 2007.  Upon expiration, the Authority continued on a month-to-month basis.  On June 12, 2009, the Authority amended the agreement to lease the sprung structure for three years.  The monthly lease fee is $25,395.

On February 21, 2007, the Authority entered into a one year operating lease for office and promotional space commencing February 21, 2007 and expiring February 20, 2008.  The monthly lease fee was $600 per month.  On February 21, 2008, the Authority extended the lease for three years, commencing on February 21, 2008 and expiring on February 20, 2011.  The extended lease fee was $625 per month for the first year (through February 2009) and $712 per month for the second year (March 2009 through February 2010), with adjustments for the Consumer Price Index, and property taxes in the third year.  Commencing May 2009, the Authority subleased the entire office and promotional space at a monthly rate of $500.

On August 30, 2007, the Authority entered into a five year operating lease agreement for office and showroom space commencing October 1, 2007 and expiring on September 30, 2012.  The monthly lease fee for the initial year was $16,630.  As of October 1, 2008, the monthly lease fee increased to $17,129.

On September 1, 2004, the Authority entered into a five year capital lease to purchase two licenses to operate three-card poker tables in the amount of $120,000.  The capital lease is at 7.20% interest with monthly lease fees of $2,390 and a $1 buyout at the end of the lease term.  The lease expired on August 31, 2009.

On August 1, 2006 the Authority entered into a thirty six month capital lease to purchase 2 licenses to operate Pai Gow poker tables in the amount of $38,800.  The capital lease is at 4.20% interest with monthly lease fees of $1,150 and a $1 buyout at the end of the lease term.  The lease expired on July 31, 2009.

12.                         LEGAL MATTERS AND SUBSEQUENT EVENTS

Runyan Litigation

On March 7, 2008, Norman Runyan, our former Chief Operations Officer, filed a wrongful termination suit against the Authority, the Casino and Mr. Harvey Hopkins, the Chairman of the Tribe and a member of the Authority’s Board, in the Sonoma County Superior Court.  We believed the case lacked merit and moved to dismiss.  On October 17, 2008, the Court issued an Order dismissing the lawsuit.  On December 3, 2008, the Court entered an Order granting our motion and dismissed the case.

On January 14, 2009, Mr. Runyan filed a Petition for Order Compelling Arbitration with the Sonoma County Superior Court, and on January 30, 2009, he filed a Motion for Order Compelling Arbitration.  In both the Petition and the Motion, Mr. Runyan sought to have the Court issue an order compelling arbitration of the claims asserted in the complaint that was dismissed by the court in December 2008.  The Authority believed, based on fact that Mr. Runyan entered into a Severance Agreement and General Release with the Authority, the Casino, and other released parties, that there was no basis for Mr. Runyan to seek arbitration.  On April 13, 2009, the Authority, the Casino, and Mr. Hopkins filed a hybrid motion to quash summons and dismiss the Petition and Motion.  On June 1, 2009, the Court granted the motion in its entirety, holding that the Court lacked personal and subject matter jurisdiction, that Mr. Runyan terminated and extinguished his purported employment agreement (which contained the arbitration clause he relied on) and that he waived any right to arbitration he might have had by settling and releasing all claims.  Finally, the Court held that all respondents have tribal sovereign immunity from service of process.

16

Table of Contents

Mr. Runyan filed a Notice of Appeal of the Court’s Order on July 27, 2009.  Mr. Runyan’s opening brief is due on or about November 23, 2009.  The respondents’ brief will be due 30 days after Mr. Runyan’s opening brief.  Mr. Runyan will then have 20 days to reply to the Authority’s brief.  Following the completion of briefing, we would expect the court to set a date for oral argument.  The Authority continues to believe that there was no basis for Mr. Runyan to seek arbitration and will argue vigorously in favor of upholding the Superior Court’s Order granting the motion to quash summons and dismissing Mr. Runyan’s petition and motion for an order compelling arbitration.

Other Legal Matters

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

13.                         COMPACT REVENUE SHARING TRUST FUND

The Compact requires the Authority to pay a quarterly fee to the State of California’s revenue sharing trust fund, based on the number of licensed gaming devices operated by the Tribe. Revenue sharing trust fund fees assessed were $333,750 and $333,750 for the three months ended September 30, 2009 and 2008, respectively.

14.                         COMMITMENTS AND CONTINGENCIES

The Authority is an unincorporated instrumentality of the Tribe formed pursuant to an adopted law of the Tribe. While the Authority is not a separate corporation or other legal entity distinct from the Tribe, this tribal law allows the Authority to own and operate its business. This tribal law also provides that the Authority’s obligations and other liabilities are not those of the Tribe and that the obligations and liabilities of the Tribe are not those of the Authority. This law is untested and generally has no direct counterpart in other areas of the law. If this law should prove to be ineffective at limiting the Authority’s liability, the Authority’s business and assets could become subject to claims asserted against the Tribe or its assets. Similarly, the Authority would be liable for such claims if the Tribe waived its sovereign immunity to an extent that allowed enforcement of such claims against the Authority’s business or assets.

On March 18, 2008, the Tribe and the Sonoma County Board of Supervisors entered into a memorandum of agreement (“MOA”) that is expected to settle several long-standing legal disputes between Sonoma County and the Tribe and provide a binding framework for resolving future disputes.  Pursuant to the MOA, the Tribe has agreed to pay the County $75.0 million in mitigation fees over the next 12 years, subject to adjustment under certain circumstances described in the MOA, to offset the potential losses and impacts to the County resulting from the Tribe’s various ongoing projects and to support the services being provided by the County.  The Tribe paid $3.0 million on April 17, 2008, $4.5 million on September 20, 2008 and $2.8 million on June 26, 2009.  Future payments are scheduled to take place as follows: $5.0 million upon the earlier of March 18, 2011 or the opening of phase one of the resort project; $5.0 million in the subsequent year but no later than July 1, 2011; and $5.0 million plus 4% compounded annually on July 1 of each subsequent year until the entire $75.0 million has been paid.  In addition to the mitigation fees, the Tribe will pay a fee in lieu of the County’s Transient Occupancy Tax in the amount of 9% of the rental collected on occupied hotel rooms, to be paid quarterly and continuing for five years after the later to occur of the termination of the MOA, as may be extended, or the Tribe’s Compact with the State (which is now terminable in 2020 at the earliest), which fees may be applied to programs and services that serve to promote tourism in the County.  Such in lieu fees could total as much as $25 million during the term of the MOA.

The Authority is not a party to the agreement with the Sonoma County Board of Supervisors and is not obligated to pay any fees pursuant to the MOA.  It is expected that the Tribe will make payments to Sonoma County pursuant to the MOA from distributions made by the Authority to the Tribe.

A casino renovation was approved by the Authority’s Board of Directors as part of an overall strategic operating plan for River Rock Casino.  The project is expected to be fully complete by December 31, 2009 and to remain within the $5.2 million budget approved by the Authority’s Board of Directors.

15.                         SUBSEQUENT EVENTS

In accordance with the Subsequent Events Topic of the FASB Accounting Standards Codification, we have evaluated subsequent events through November 13, 2009, the date of issuance of the unaudited condensed financial

17

Table of Contents

statements.  During this period we did not have any material recognizable subsequent events to recognize or disclose, other than the subsequent events under Note 12.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed financial statements and related notes included in Item 1 of this report.

Overview

We are an unincorporated governmental instrumentality of the Tribe that owns and operates the Casino.  We offer Class III slot and video poker gaming machines, house banked table games (including Blackjack, Three card poker, Mini-baccarat and Pai Gow poker), Poker, featuring Texas Hold’em, comprehensive food and beverage offerings and goods for sale in our gift shop.

FASB Codification Discussion

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

The ASC will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities.  Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  On the effective date of this Statement, the ASC will supersede all then-existing non-SEC accounting and reporting standards.  All other nongrandfathered non-SEC accounting literature not included in the ASC will become nonauthoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.

Following this Statement, FASB will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates. FASB will not consider Accounting Standards Updates as authoritative in their own right.  Accounting Standards Updates will serve only to update the ASC, provide background information about the guidance, and provide the bases for conclusions on the change(s)  in the ASC.

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

Critical Accounting Policies and Estimates

We have identified certain critical accounting policies and estimates that affect our more significant judgments and estimates used in the preparation of our financial statements. The preparation of our financial statements, in conformity with GAAP, requires that we make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate those estimates, including those related to asset impairment, accruals for our promotional slot club, compensation and related benefits, revenue recognition, allowance for doubtful accounts, contingencies and litigation. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions. We believe that the following critical accounting policies affect significant judgments and estimates used in the preparation of our financial statements:

·                          Casino Revenues — In accordance with industry practice, the Authority recognizes as Casino revenue the net win from gaming activities, which is the difference between gaming wins and losses. Casino revenues are net of accruals for anticipated payouts of progressive slot jackpots and certain player incentives, when earned by the customer.

18

Table of Contents

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

·                          We evaluate our capital assets for impairment in accordance with the Accounting pronouncement GASB No. 42, “Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries.”  This Statement establishes accounting and financial reporting standards for impairment of capital assets.  The Authority’s capital assets include building and improvements, furniture, fixtures and equipment.  A capital asset is considered impaired if both the decline in service utility of the capital asset is large in magnitude and the event or change in circumstances is outside the normal life cycle of the capital asset.  The Authority is required to evaluate prominent events or changes in circumstances affecting capital assets to determine whether impairment of a capital asset has occurred.  Common indicators of impairment include evidence of physical damage where restoration efforts are needed to restore service utility, enactment or approval of laws or regulations setting standards that the capital asset would not be able to meet, technological development or evidence of obsolescence, a change in the manner or expected duration of use of a capital asset or construction stoppage.  This Statement will require the Authority to report the effects of capital asset impairment in its financial statements when they occur, rather than as part of the ongoing depreciation expense for the capital asset or upon disposal of the capital asset, and to account for insurance recoveries in the same manner.

·                  Accrued Progressive Slot Jackpots — Accrued progressive slot jackpots consist of estimates for prizes relating to various games that have accumulated jackpots. We have recorded the cost of these anticipated payouts as a reduction of casino revenues which is included as a component of accrued liabilities.

·                  Contingencies — We assess our exposure to loss contingencies, including legal matters, and provide for an exposure if it is judged to be probable and estimable. If the actual loss from a contingency differs from management’s estimate, operating results could be materially impacted. As of September 30, 2009, we have determined that no accruals for claims and legal actions are required. If circumstances surrounding claims and legal actions change, the addition of accruals for such items in future periods may be required, which accruals may be material.

Accounting Standards — There are differences between financial statements prepared in accordance with GASB pronouncements and those prepared in accordance with FASB pronouncements. The statements of revenues, expenses and changes in net assets (deficit) are a combined statement under GASB pronouncements. FASB pronouncements allow a statement of income or operations and a statement of owners’ or shareholders’ equity (deficit), which is where distributions to owners would be presented under FASB pronouncements. The amount shown on our statements of revenues, expenses and changes in net assets (deficit) as income before distributions to the Tribe would be the most comparable amount to net income computed under FASB pronouncements. We are an unincorporated instrumentality created by tribal law and accounted for as a separate fund of the Tribe.  As such, there is no owners’ or shareholders’ equity (deficit) as traditionally represented under FASB pronouncements. The most comparable measure of owners’ equity presented on our balance sheet would be net assets (deficit).

Reclassifications — Certain prior year balances in the statements of revenues, expenses and changes in net assets (deficit) have been reclassified to be consistent with current year presentation with no change to net revenues or net income as reflected in the 2008 Form 10-K, including the reclassification of e-coupons and cash incentives from promotional allowances to casino contra-revenues.

Results of Operations

Comparison of the three months ended September 30, 2009 and 2008

Net revenues. Net revenues for the three months ended September 30, 2009 decreased by $2.6 million to $29.7 million, from $32.3 million for the three months ended September 30, 2008.  The decrease in net revenues is attributable to the continuing industry-wide slow down in the gaming and entertainment industry during 2009.  Approximately 94.7% of our net revenues were from our gaming activities in the third quarter of 2009, as compared to 96.3% in the comparable prior year period.  We generated $25.2 million or 84.7% of our net revenues from gaming devices, and $3.0 million, or 10.0% of our

19

Table of Contents

net revenues from table games and poker for the three months ended September 30, 2009, compared to $27.5 million from gaming devices or 85.2% of our net revenues, and $3.6 million or 11.0% of net revenues from table games and poker for the three months ended September 30, 2008.  Our win per slot machine per day was $230 for the three months ended September 30, 2009, which increased by $36 from $194 for the three months ended September 30, 2008.  The increase in net win per machine per day is primarily attributable to the decrease in the average number of slot machines on the floor.  We have been reconfiguring our gaming floor in an effort to enhance our overall appeal.  As part of this effort, we reduced the average number of slot machines to 1,191 for the three months ended September 30, 2009, compared to 1,571 for the three months ended September 30, 2008.

We generated $1.4 million, net of promotional allowance of $0.1 million, in food, beverage and retail sales for the three months ended September 30, 2009, compared to $1.2 million, net of promotional allowances of $0.1 million, in food, beverage and retail sales for the three months ended September 30, 2008.

Promotional allowances. Promotional allowances for the three months ended September 30, 2009 were $0.1 million, or 0.3% of net revenues, compared to $0.1 million, or 0.4% of net revenues, for the three months ended September 30, 2008.

Operating expenses. Operating expenses for the three months ended September 30, 2009 were $18.9 million, or 63.7% of net revenues, compared to $20.1 million, or 62.3% of net revenues, for the three months ended September 30, 2008.

Casino expense includes costs associated with our gaming operations and the allocation of food and beverage expense related to the cost of complimentary activities.  Casino expense for the three months ended September 30, 2009 was $3.7 million compared to $5.2 million for the three months ended September 30, 2008.  Casino expense as a percentage of Casino revenues decreased by 3.6 percentage points from 16.6% to 13.0% for the three months ended September 30, 2009.  The decrease in Casino expenses is due to the decrease in the estimated costs of providing complimentary services that are reclassified from food, beverage and retail costs to Casino expenses, as well as the adaptation of cost saving measures that have reduced payroll, participation fees and WAP commissions.

Food, beverage and retail expense for the three months ended September 30, 2009 was $1.8 million, or 133.4% of food, beverage and retail revenue, net of promotional allowances, compared to $1.7 million, or 143.0% of food, beverage and retail revenue, net of promotional allowances for the three months ended September 30, 2008.  The decrease in percentage is primarily due to the decrease in complimentary beverages to our guests on the casino floor.  Our food, beverage and retail expense ratio is significantly higher than the industry average because we have utilized these amenities as an opportunity to build customer loyalty rather than as a source of income.

Selling, general and administrative expense for the three months ended September 30, 2009 decreased by $39,449 to $9.7 million, or 32.8% of net revenues, from $9.8 million, or 30.3% of net revenues, for the three months ended September 30, 2008.

Depreciation expense for the three months ended September 30, 2009 was $2.4 million compared to $2.3 million for the three months ended September 30, 2008.  Depreciation expense was computed using the straight-line method over the useful life of property, plant and equipment.  Depreciation expense increased slightly due to the net effect of two factors.  First, since the Casino is over five years old, much of our original equipment has been fully depreciated.  Second, there were additions to fixed assets that included purchases of slot machines, slot machine chairs, Bally’s SDS gaming system upgrade and carpeting.

Gaming Commission and surveillance expense for the three months ended September 30, 2009 was $1.0 million compared to $0.8 million for the three months ended September 30, 2008.

The Compact requires us to pay a quarterly fee to the State of California’s revenue sharing trust fund, based on the number of licensed gaming devices we are allowed to operate.  Revenue sharing trust fund fees assessed were $0.3 million for each of the three months ended September 30, 2009 and 2008.

Income from operations. Income from operations for the three months ended September 30, 2009 was $10.8 million, or 36.3% of net revenues, compared to $12.2 million, or 37.7% of net revenues, for the three months ended September 30, 2008.  The decrease in income from operations is attributable to the decrease in business volumes as a result of the downturn in the economy.  We have continued with the adaptation of cost saving measures to adjust for the decline in customer demand.  The percent decrease of 7.9% in net revenues was greater than the percentage decrease of 5.9% in operating expenses resulting in an offset to the cost savings.

20

Table of Contents

Non-Operating expense, net. Non-operating expense, net for the three months ended September 30, 2009 was $5.2  million, or 17.5% of net revenues, compared to $5.0 million or 15.4% of net revenues, for the three months ended September 30, 2008.  Non-operating expense, net, includes $5.2 million of interest expense for each of the three months ended September 30, 2009 and 2008.  The primary reason for the variance was due to the $0.2 million decrease in interest income as a result of decreased balances and lower interest rates.  No interest costs were capitalized in the three months ended September 30, 2009 and 2008.

Income before distributions to the Tribe. Income before distributions to the Tribe for the three months ended September 30, 2009 decreased by $1.6 million to $5.6 million, or 18.9% of net revenues, from $7.2 million, or 22.3% of net revenues, for the three months ended September 30, 2008.

Distributions to the Tribe. Distributions to the Tribe for the three months ended September 30, 2009 increased by $70,188 to $3.3 million, compared to $3.3 million, for the three months ended September 30, 2008.

Comparison of the nine months ended September 30, 2009 and 2008

Net revenues. Net revenues for the nine months ended September 30, 2009 decreased by $6.8 million to $92.3 million, from $99.1 million, for the nine months ended September 30, 2008.  The decrease in net revenues is attributable to the continuing industry-wide slow down in the gaming and entertainment industry during 2009.  Approximately 94.9% of our net revenues were from our gaming activities in the nine month period ended September 30, 2009, compared to 95.5% for the comparable prior year period. We generated $78.5 million or 85.1% of our net revenues from gaming devices, and $9.0 million, or 9.8% of our net revenues from table games and poker for the nine months ended September 30, 2009, compared to $83.6 million from gaming devices or 84.3% of our net revenues, and $11.1 million or 11.2% of net revenues from table games and poker for the nine months ended September 30, 2008.  Our win per slot machine per day was $208 for the nine months ended September 30, 2009, which increased by $13 from $195 for the nine months ended September 30, 2008.  The increase in net win per machine per day is primarily attributable to the decrease in the average number of slot machines on the floor.  We have been reconfiguring our gaming floor in an effort to enhance our overall appeal.  As part of this effort, we reduced the average number of slot machines to 1,380 for the nine months ended September 30, 2009, compared to 1,572 for the nine months ended September 30, 2008.

We generated $4.0 million, net of promotional allowance of $0.3 million, in food, beverage and retail sales for the nine months ended September 30, 2009, compared to $4.1 million, net of promotional allowances of $0.4 million, in food, beverage and retail sales for the nine months ended September 30, 2008.  The decrease in promotional allowances was the result of a strategic reduction to narrow our marketing focus on higher revenue generating players.

Promotional allowances. Promotional allowances for the nine months ended September 30, 2009 were $0.3 million, or 0.3% of net revenues, compared to $0.4 million, or 0.4% of net revenues, for the nine months ended September 30, 2008.

Operating expenses. Operating expenses for the nine months ended September 30, 2009 were $58.5 million, or 63.3% of net revenues, compared to $64.3  million, or 64.9% of net revenues, for the nine months ended September 30, 2008.

Casino expense includes costs associated with our gaming operations and the allocation of food and beverage expense related to the cost of complimentary activities. Casino expense for the nine months ended September 30, 2009 was $11.8 million compared to $15.1 million for the nine months ended September 30, 2008.  Casino expense as a percentage of Casino revenues decreased by 2.5 percentage points from 15.9% to 13.4% for the nine months ended September 30, 2009.  The decrease in Casino expenses is due to the decrease in the estimated costs of providing complimentary services that are reclassified from food, beverage and retail costs to Casino expenses, as well as the adaptation of cost saving measures that have reduced payroll, participation fees and WAP commissions.

Food, beverage and retail expense for the nine months ended September 30, 2009 was $5.6 million, or 137.8% of food, beverage and retail revenue, net of promotional allowances, compared to $5.9 million, or 144.1% of food, beverage and retail revenue, net of promotional allowances for the nine months ended September 30, 2008.  Our food, beverage and retail expense ratio is significantly higher than the industry average because we have utilized these amenities as an opportunity to build customer loyalty rather than as a source of income.

Selling, general and administrative expense for the nine months ended September 30, 2009 decreased by $1.9 million to $30.1 million, or 32.6% of net revenues, from $32.0 million, or 32.3% of net revenues, for the nine months ended September 30, 2008.

21

Table of Contents

Depreciation expense for the nine months ended September 30, 2009 was $7.1 million compared to $7.7 million for the nine months ended September 30, 2008.  Depreciation expense was computed using the straight-line method over the useful life of property, plant and equipment.  Since the Casino is now over five years old, much of our original equipment became fully depreciated by the second quarter of 2008, which was partially offset by our recent purchases of slot machines, slot machine chairs, Bally’s SDS gaming system upgrade and carpeting.

Gaming Commission and surveillance expense for the nine months ended September 30, 2009 was $2.9 million compared to $2.7 million for the nine months ended September 30, 2008.

The Compact requires us to pay a quarterly fee to the State of California’s revenue sharing trust fund, based on the number of licensed gaming devices we are allowed to operate. Revenue sharing trust fund fees assessed were $1.0 million for each of the nine months ended September 30, 2009 and 2008.

Income from operations. Income from operations for the nine months ended September 30, 2009 was $33.8 million, or 36.7% of net revenues, compared to $34.8 million, or 35.1% of net revenues, for the nine months ended September 30, 2008.  The decrease in income from operations is attributable to the decrease in business volumes as a result of the downturn in the economy.  We have continued with the adaptation of cost saving measures to adjust for the decline in customer demand.  Although the percent decrease of 9.1% from operating expenses was greater than the percent decrease of 6.9% from net revenue, the decrease in dollars was greater for net revenues than operating expenses resulting in an offset to the cost savings.

Non-Operating expense, net. Non-operating expense, net for the nine months ended September 30, 2009 was $15.6 million, or 16.9% of net revenues, compared to $14.7 million, or 14.8% of net revenues, for the nine months ended September 30, 2008.  Non-operating expense, net includes $15.6 million of interest expense for both the nine month periods ended September 30, 2009 and 2008.  The primary reason for the variance was due to the $0.9 million decrease in interest income as a result of decreased balances and lower interest rates.  No interest costs were capitalized in the nine month periods ended September 30, 2009 and 2008.

Income before distributions to the Tribe. Income before distributions to the Tribe for the nine months ended September 30, 2009 decreased by $1.9 million to $18.2 million, or 19.8% of net revenues, from $20.1 million, or 20.3% of net revenues, for the nine months ended September 30, 2008.

Distributions to the Tribe. Distributions to the Tribe for the nine months ended September 30, 2009 decreased by $0.7 million to $10.0 million, compared to $10.6 million, for the nine months ended September 30, 2008.  The decrease is primarily due to the prior year second quarter one-time catch up distribution to the Tribe of service payments that could have been previously distributed to the Tribe as permitted by the Indenture for the Senior Notes.

Liquidity and Capital Resources

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

For the nine months ended September 30, 2009, we spent $12,800 on the development of an approximately 18-acre parcel of land adjacent to the Tribe’s reservation (referred to as the “Dugan Property”) which is expected to provide an additional access road to our Casino. We have $4.3 million remaining in a restricted account funded from the proceeds of our Senior Notes for the development of the Dugan Property.   The construction of the access road shall commence concurrently with phase one of the resort construction.

Our capital expenditures for the nine months ended September 30, 2009 and 2008 were $12.6 million and $22.1 million, respectively.  The capital expenditures for the nine months ended September 30, 2009 consisted primarily of $4.1 million in additions to equipment largely due to slot machine purchases, as well as the Bally’s SDS gaming systems upgrade, slot machine chairs, carpeting and signs.  Additionally, $8.5 million consisted of an increase to construction-in-progress which included $8.1 reimbursed to the Tribe for the master plan development of our planned resort and $0.4 million of other assets not yet placed into service.  We have reflected the expenditures relating to the master plan development which we reimbursed the Tribe as construction-in-progress in our balance sheet.

As of September 30, 2009, we had cash and cash equivalents, net of restricted cash of $35.6 million, compared to $27.3 million, as of December 31, 2008. We had restricted cash of $7.1 million as of September 30, 2009 and as of December

22

Table of Contents

31, 2008, respectively.  Our principal source of liquidity during the nine months ended September 30, 2009 consisted of cash flow from operating activities.

Restricted cash consists of net proceeds from the Senior Notes and investment earnings thereon set aside in construction financing accounts for construction costs for the three parking structures, related infrastructure improvements and construction contingencies. It also includes funds that are reserved for additional construction contingencies and the funds for the development of the Dugan Property.  Our restricted cash is held in escrow accounts that can only be used for authorized construction disbursements until the related projects are completed.  The construction of the three parking structures has been completed and the remaining funds are expected to be released from the restricted account.

Net cash used for capital and related financing activities for the nine months ended September 30, 2009 was $21.8 million, compared to $32.0 million, for the nine months ended September 30, 2008.  This decrease was primarily attributable to the decrease in purchases of capital assets and payments for development costs.

Cash flows provided by investing activities consisting of interest income for the nine months ended September 30, 2009 decreased by $0.9 million to $53,044, from $1.0 million, for the nine months ended September 30, 2008.

Cash flows used in non-capital financing activities for the nine months ended September 30, 2009 was $10.0 million, a decrease of $0.7 million, from $10.6 million, for the nine months ended September 30, 2008.  Cash flows used in non-capital financing activities consist of distributions to the Tribe.  The decrease is primarily due to the prior year second quarter one-time catch up distribution to the Tribe of $1.0 million of service payments that could have been previously distributed to the Tribe as permitted by the Indenture for the Senior Notes.

We believe the existing cash balances, cash from operations, as well as permitted disbursements from our restricted cash escrow accounts will provide adequate funds for our working capital needs and debt service requirements for the foreseeable future.  We anticipate that funding for future capital expenditures and expansions will derive from additional third party financing.  However, our ability to fund our operations, make capital expenditures, make scheduled debt payments and refinance our indebtedness depends on our future operating performance and cash flow, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control. Additionally, the Indenture limits our ability to incur additional indebtedness.

The Tribe announced plans to build a destination resort, which plans are more fully described in our Form 8-K dated June 28, 2007, and exhibits listed therein.  The proposed project includes the construction of a casino, hotel and spa, several food and beverage venues, administrative facilities, a garden and terrace plaza, a retail area, and back of house facilities. The proposed project includes three above-ground levels and a hotel tower (up to eight levels) and two below-ground levels.  We do not currently have adequate liquidity or cash flow to finance the project as proposed.  We will consider various sources of liquidity to finance the first phase of the proposed project, although it cannot be assured that we will be able to obtain financing or that the interest rates on any financings will be favorable.

On March 18, 2008, the Tribe and the Sonoma County Board of Supervisors entered into the MOA that, among other things, settled several long-standing legal disputes between Sonoma County and the Tribe, and will provide a binding framework for resolving future disputes.  The MOA enables the Tribe to move forward with its proposed resort development project, including a new and expanded “Tuscan-themed” casino and hotel with luxury resort amenities.  A copy of the MOA was filed as an exhibit to the Authority’s Form 10-K for the fiscal year ending December 31, 2007.  Under the MOA, the County agreed to drop its opposition to the Tribe’s application for a liquor license and on May 29, 2008, the California Department of Alcoholic Beverage Control issued a liquor license to our gaming and entertainment facility.  However, the Tribe has agreed to restrict the sale of alcohol to wine and beer between the hours of 11 a.m. and 5 p.m. on weekdays, and to stop serving alcohol altogether at midnight except for Friday and Saturday nights and the nights before holidays. The Tribe has also agreed not to serve liquor on the Casino floor, although patrons may bring drinks purchased at the restaurant or bar on to the Casino floor. The restrictions may be renegotiated following the first to occur of the three year anniversary of the MOA or the opening of a hotel, which is anticipated to occur within the next two to three years.  In addition, the MOA commits the County Sheriff’s Department and Fire Marshall to provide public safety and fire investigation services to the Casino and the Tribe’s future gaming projects on the reservation and provides detailed agreements on off-reservation impact mitigation measures.  Pursuant to the MOA, the County withdrew its opposition to the Tribe’s application to take the Dugan Property into trust.  Previously, the trust application had been approved by the Department of the Interior, which approval had been opposed by the County.  Pursuant to the MOA, the Tribe has agreed to pay the County $75.0 million in mitigation fees over the next 12 years, subject to adjustment under certain circumstances described in the MOA, to offset the potential losses and impacts to the County resulting from the Tribe’s various ongoing projects and to support the services being provided by the County.  The Tribe paid $3.0 million on April 17, 2008, $4.5 million on September 20, 2008 and $2.8 million on June 26, 2009.  Future payments are scheduled to take place as follows: $5.0 million upon the earlier of March 18, 2011 or the opening of phase one of the resort project; $5.0 million in the subsequent year but no later than July 1, 2011; and

23

Table of Contents

$5.0 million plus 4% compounded annually on July 1 of each subsequent year until the entire $75.0 million has been paid.  In addition, the Tribe has agreed to pay a fee in lieu of the County’s Transient Occupancy Tax in the amount of 9% of the rental charges collected on occupied hotel rooms.  Such fees are required to be paid quarterly until five years after the later to occur of the termination of the MOA, as may be extended, or the Tribe’s Compact with the State.

We are not a party to the agreement with the Sonoma County Board of Supervisors and are not obligated to pay any fees pursuant to the MOA.   It is expected that the Tribe will make payments to Sonoma County pursuant to the MOA from distributions made by us to the Tribe.

As part of the effort to enhance the overall appeal of our product, we have been reconfiguring our gaming floor.  This effort has resulted in the reduction of approximately 372 slot machines and 2 table games.  We will maintain our legal right per the Compact to operate a total of 1,600 slot machines in our Casino.  We considered many factors such as peak period demand, per unit productivity, and player comfort in our analysis to ensure that the reduction of gaming devices will not adversely impact our revenues.  The reduction of gaming units on the Casino floor will ultimately provide us an opportunity to upgrade current amenities, establish new amenities, improve player comfort and enhance entertainment value. We are confident that these improvements, targeted at improving product appeal, will ultimately open up a greater spectrum of potential consumers within our designated market area.  In combination with our continuing effort to improve operational efficiency, upgrading our gaming technology, and refocusing our marketing efforts, we are confident that we will have set a solid foundation for improved and sustained cash flows.

Contractual Obligations as of September 30, 2009

A casino renovation was approved by our Board of Directors as part of an overall strategic operating plan for River Rock Casino.  In anticipation of building a new casino resort the current facility was not upgraded for several years.  In addition to the physical plant of the gaming operation, furniture, fixtures, equipment and gaming software was either not replaced or repaired to adequately service the needs of the business. The overall appearance and appeal of the casino was insufficient to meet basic customer requirements.

Major components of the renovation project include upgrading slot accounting software, slot and table player tracking software, adding new carpeting, new slot chairs, interior and exterior signage and the replacement of paint and wall paper.  To additionally enhance the overall gaming experience and appeal to a broader spectrum of potential gamers, two additional food amenities are currently under construction.  The Fortune Café will be a quick service Asian-themed restaurant designed to be a high-margin, high-volume, quick turn restaurant.  Additionally, the Center Stage Bar & Grill will encompass a casual dining experience combined with the existing bar and an upgraded stage and sound system.

The project is expected to be fully complete by December 31, 2009 and to remain within the $5.2 million budget approved by our Board of Directors.

Regulation and Taxes

We are subject to extensive regulation by the Tribe’s Gaming Commission, the California Gambling Control Commission and the National Indian Gaming Commission. Changes in applicable laws or regulations could have a significant impact on our operations.

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

Since we are an unincorporated governmental instrumentality of the Tribe located on reservation land held in trust by the United States of America, we are not subject to federal or state income taxes. Various efforts have been made in Congress over the past several years to enact legislation that would subject the income of tribal governmental business entities, such as us, to federal income tax. Although no such legislation has been enacted, similar legislation could be passed in the future. It is not possible to determine with certainty the likelihood of possible changes in tax law or in the

24

Table of Contents

administration of such law. Such changes, if adopted, could have a material adverse effect on our operating results and cash flow from operations.

Impact of Inflation

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

Seasonality

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Through September 30, 2009, we had not invested in derivative or foreign currency-based financial instruments.  We primarily have invested in money markets.  As such, we do not believe we have material exposure to market risk.

ITEM 4T.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Management has performed, with the participation of our Chief Executive Officer, Chief Financial Officer and Chief Operations Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.  Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2009, our disclosure controls and procedures were effective.

Changes to Internal Controls Over Financial Reporting

We continue to test our internal controls so as to make improvements to the weaknesses that we have identified and to determine whether there are other procedures that we can implement to improve our financial reporting processes.  For the three month period ended September 30, 2009, there have been no changes in the internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Runyan Litigation

On March 7, 2008, Norman Runyan, our former Chief Operations Officer, filed a wrongful termination suit against the Authority, the Casino and Mr. Harvey Hopkins, the Chairman of the Tribe and a member of the Authority’s Board, in the Sonoma County Superior Court.  We believed the case lacked merit and moved to dismiss.  On October 17, 2008, the Court issued an Order dismissing the lawsuit.  On December 3, 2008, the Court entered an Order granting our motion and dismissed the case.

25

Table of Contents

On January 14, 2009, Mr. Runyan filed a Petition for Order Compelling Arbitration with the Sonoma County Superior Court, and on January 30, 2009, he filed a Motion for Order Compelling Arbitration.  In both the Petition and the Motion, Mr. Runyan sought to have the Court issue an order compelling arbitration of the claims asserted in the complaint that was dismissed by the court in December 2008.  The Authority believed, based on fact that Mr. Runyan entered into a Severance Agreement and General Release with the Authority, the Casino, and other released parties, that there was no basis for Mr. Runyan to seek arbitration.  On April 13, 2009, the Authority, the Casino, and Mr. Hopkins filed a hybrid motion to quash summons and dismiss the Petition and Motion.  On June 1, 2009, the Court granted the motion in its entirety, holding that the Court lacked personal and subject matter jurisdiction, that Mr. Runyan terminated and extinguished his purported employment agreement (which contained the arbitration clause he relied on) and that he waived any right to arbitration he might have had by settling and releasing all claims.  Finally, the Court held that all respondents have tribal sovereign immunity from service of process.

Mr. Runyan filed a Notice of Appeal of the Court’s Order on July 27, 2009.  Mr. Runyan’s opening brief is due on or about November 23, 2009.  The respondents’ brief will be due 30 days after Mr. Runyan’s opening brief.  Mr. Runyan will then have 20 days to reply to the Authority’s brief.  Following the completion of briefing, we would expect the court to set a date for oral argument.  The Authority continues to believe that there was no basis for Mr. Runyan to seek arbitration and will argue vigorously in favor of upholding the Superior Court’s Order granting the motion to quash summons and dismissing Mr. Runyan’s petition and motion for an order compelling arbitration.

Other Legal Matters

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

ITEM 1A.            RISK FACTORS

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

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

The gaming industry is very competitive. We face or will face competition from existing and proposed California Indian gaming facilities in the surrounding area, and elsewhere in California, and with casino gaming in Nevada, including gaming facilities that could be located closer to the San Francisco Bay area. We also compete with card rooms located in the surrounding area, and other forms of gaming that are legal in California, including on and off-track wagering and the California State Lottery, as well as with non-gaming leisure activities. The availability of such alternative gaming and non-gaming activities may increase in the future. Many of our competitors have substantially greater resources and name recognition than our Casino. In addition, we may also face competition in our market from new facilities that may be built by other Indian tribes in the future.

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

The greatest competition may come from the proposed Graton Rancheria casino. In April 2003, the Federated Indians of the Graton Rancheria, also known as the Coast Miwoks, announced plans to purchase land in Sonoma County near Highway 37 and Lakeville Highway, approximately 20 miles south of our gaming facility and closer to San Francisco than our reservation. The proposed location would lie directly between our Casino and the majority of the 7 million population base of the San Francisco Bay area. The announced plans include construction of a casino-hotel complex that will be managed by Station Casinos, Inc. based in Las Vegas, Nevada. The proposed facility would house approximately 2,000 slot machines, 120 card tables and bingo, as well as a 300-room hotel, five restaurants and a theater with up to 2,000 seats. As a

26

Table of Contents

result of environmental opposition to the development of such location, the Federated Indians of the Graton Rancheria announced plans to move the proposed casino-hotel complex to a site near Rohnert Park, California. The Rohnert Park City Council has approved an agreement with the Federated Indians of the Graton Rancheria to share revenues with Rohnert Park and various community groups, approximately $200.0 million over 20 years, to offset the impact of the proposed project.

In May 2008, the U.S. Department of Interior published in the Federal Register a notice to take the proposed Rohnert Park site into federal trust on behalf of the Graton Rancheria. This represents a significant step towards the development of a casino at Rohnert Park, as do the separate agreements negotiated between the Graton Rancheria and Sonoma County and Marin County, whereby the counties pledged to not challenge the land-into-trust decision and the Graton Rancheria agreed not to build any additional casinos in Sonoma or Marin counties. The U.S. Department of Interior’s land-into-trust decision has, however, been challenged by citizens group opposed to a casino in Rohnert Park. The federal district court dismissed the citizens group’s lawsuit on April 21, 2009, but the group has appealed the decision to the Ninth Circuit Court of Appeals.  The Department of the Interior has agreed to withhold action on taking the land into trust pending the appeal.  A spokesperson for the citizen’s group has also stated publicly that the group will challenge the adequacy of the environmental impact statement for the proposed Graton casino, which was issued in February 2009.  Another obstacle facing the proposed Graton Rancheria casino is the ability to obtain financing for the project.  In addition, the Graton Rancheria will also need to enter into a tribal-state compact with the State of California before it can operate Class III gaming at the Rohnert Park site.

The Hopland Sho-ka-wah Casino is located several miles east of Highway 101 on Route 175. The facility features a 40,000 square foot casino offering 570 slot machines and nine table games. The facility no longer offers poker games; only pai gow and blackjack are offered.  The facility contains a Mexican food taqueria, a small cafe-type food and beverage area, a fine-dining steak house and a bar. Hopland operates a small bus program but does not operate a hotel.

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

The Thunder Valley Casino opened in June 2003 and is located at the intersection of Highway 65 and Interstate 80 just outside of Sacramento, California. The Nevada-style property offers over 2,400 slot machines and 98 table games that include blackjack, baccarat, and a variety of poker games including Let It Ride and Pai Gow. The facility features a salon, private dining rooms, bars and butler service. In addition, it houses a 500-seat buffet and various fast food options. The facility also features a nightclub.  In 2008, the Thunder Valley Casino announced plans to build a new 650-room, 23-story hotel featuring a spa, family center and other amenities.  Thunder Valley also planned to construct a 3,000-seat performing arts center, and to expand the casino to include three new restaurants, more gaming space and new poker room, and a parking structure capable of holding 5,000 cars.  Thunder Valley obtained financing for the expansion, which began in July 2008 but was halted in November 2008.  In May 2009, the casino resumed work on the expansion, but the project has been scaled down to include a 15-story hotel with 300-400 rooms; a 700-seat, 10,000-square-feet multipurpose entertainment center in place of the performing arts center; and a 7-story parking structure with approximately 3,800 spaces. Thunder Valley expects to open the hotel in July 2010.

The Cache Creek Casino is located approximately 50 miles west of Sacramento. The Cache Creek Casino offers over 2,400 slot machines. The casino recently added a 28-table poker room and houses 122 table games including blackjack, Texas Hold’em, Pai Gow and Caribbean Stud. The facility also includes a 200-room luxury hotel, 8 restaurant outlets, an entertainment pavilion with seating for 600, a spa and outdoor pool, an 18-hole golf course and a 1,883 spot parking structure. In 2007, Cache Creek announced plans to add more shops and parking and expand its gaming floor, and to add a 10-story hotel tower with 467 rooms, and a 62,500 square-foot convention center capable of seating 2,300 people.  These expansion plans were put on hold indefinitely in early October 2009.

The Lytton Band of Pomo Indians currently operate a 70,000 square-foot casino with 1,050 Class II electronic bingo machines on a 9-acre site in a card room in San Pablo, near Oakland, California, on land that was placed in trust for the tribe through congressional legislation. The Lytton Band signed a compact with Governor Arnold Schwarzenegger for operating Class III casino gaming on the San Pablo site, but the state legislature withheld its approval. In May 2007, legislation was introduced in the U.S. Senate, which has the support of the Lytton Band, that would require the Lytton Band to forego any Class III machines at the San Pablo site and instead limit itself to operating its existing Class II machines. This legislation was passed by the Senate in November 2007 and referred to the Committee on Natural Resources of the U.S. House of Representatives, but no further action was taken.  The legislation was again introduced in the U.S. Senate in January 2009, and the Senate passed the bill on March 12, 2009.

27

Table of Contents

The Twin Pine Casino and Hotel, owned and operated by the Middletown Rancheria of Pomo Indians, is located approximately 4 miles off Highway 29 in Napa County, approximately 34 miles from our gaming and entertainment facility. The Middletown Rancheria has recently completed an expansion of the Twin Pine Casino and Hotel which includes a 60-room hotel, three food areas and a wine tasting room, as well as 50,000 square feet of gaming space with approximately 520 slot machines and 12 table games.

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

The Guidiville Band hopes to have transferred to it land at the former Point Molate Naval Base in Richmond, California on which it hopes to operate a 240,000 square-foot casino with 124,000 square-feet of gaming space, along with two hotels, a conference center, retail shops, restaurants and two parking structures.  The project is still in its early stages, as the land transfer has not been approved and environmental reviews must be completed.  In January 2009, two environmental groups filed a lawsuit against the City of Richmond, the Guidiville Band and its financial backer and developer in an effort to stop the transfer of the land.  The Guidiville Band released the draft environmental impact study for the proposed project in July 2009, and the Bureau of Indian Affairs held a public hearing on the draft study in August 2009 and took public comments on the study until September 23, 2009.

The Scotts Valley Band hopes to build a 225,000 square-foot casino complex and five-story parking garage on a 29.87-acre site in unincorporated Contra Costa County, near Richmond, California.  In March 2008, the Bureau of Indian Affairs announced the filing of the Final Environmental Impact Statement for the proposed project.  In August 2008, the Contra Costa County Superior Court struck down a municipal services agreement between the City of Richmond and the Scotts Valley Band on the ground that the City failed to conduct the proper environmental reviews before signing the agreement.

The Cloverdale Rancheria has announced preliminary plans to build a 596,00 square-foot hotel/spa and casino resort some ten miles north of our Casino on U.S. Highway 101, and they and their financial backers have purchased approximately 79 acres for the proposed facility. The environmental review process for the proposed Cloverdale Rancheria project began in July 2008, and in December 2008 the U.S. Department of the Interior issued an opinion stating that if the lands were taken into trust, they would be eligible for gaming under the Indian Gaming Regulatory Act.

Each of these proposed projects face numerous obstacles in addition to environmental approvals, including the negotiation and approval of a compact with the State of California, approval from the U.S. Department of the Interior to take the land on which the project would be located into federal trust on behalf of the tribe, and, for the Guidiville and Scotts Valley projects, determinations from appropriate federal agencies that the tribes may conduct gaming on these lands pursuant to the Indian Gaming Regulatory Act.

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

In May 2007, Governor Schwarzenegger proposed that the California State Lottery be leased to a private concessionaire to increase its revenue and efficiency. Part of the Governor’s proposal includes authorizing the use of instant lottery video terminals that resemble and operate like slot machines at locations including horse racing tracks and card rooms. Approval of this proposal would require a two-thirds affirmative vote of the state legislature and could require a constitutional amendment to the Constitution of the State of California. While it is uncertain whether or when this proposal will be approved, implementation of such a proposal could adversely affect our and other Indian casinos’ competitive positions.  A proposal that would have allowed the California State Lottery to dedicate a higher percentage of its revenues to player winnings (with the hope of boosting lottery sales in California), securitized California State Lottery revenues, and change the amount of California Lottery revenues dedicated to education was defeated in a statewide ballot referendum in May 2009.

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

28

Table of Contents

In August 2009, a federal district court judge issued an order, in ongoing litigation regarding the proper number of total slot machines allowed under the 1999 tribal-state gaming compacts, requiring that the State of California issue an additional 10,549 slot machine licenses.  A drawing was held on October 5, 2009, and 3,548 licenses were awarded to eleven different Indian tribes.  The only one of our competitors to receive licenses in the draw was the Middletown Rancheria of Pomo Indians, which operates the Twin Pine Casino and Hotel and received 100 additional licenses through the draw.  As with the licenses awarded to other tribes in the draw, the licenses awarded to the Middletown Rancheria will revert back to the State if the machines are not put into operation within one year of the draw.  The licenses could also be withdrawn if the State of California is successful in its appeal of the district court’s ruling to the United States Court of Appeals for the Ninth Circuit.

The discussion under the heading “Management’s Discussion and Analysis of the Financial Condition and Results of Operations-Risk Factors” in the 2008 Annual Report on form 10-K under the captions “We have a substantial amount of indebtedness that could adversely affect our financial condition and prevent us from fulfilling our obligations under the Outstanding Notes” and “We will require a significant amount of cash to service our indebtedness and fund our gaming operations. Our ability to generate cash depends on many factors beyond our control” is updated as follows to reflect the recent events in the financial markets:

Our ability to make scheduled principal and interest payments, refinance debt, and fund operations, and make planned capital expenditures, depends on the levels of our operating cash flow and access to the capital markets.  Like many companies, we rely on the capital markets to fund significant capital expenditure plans with long-term debt. Our ability to access the capital markets and the costs and terms of available financing depend on many factors, including changes in our credit ratings, changes in the federal or state regulatory environment, and general economic and market conditions.  The recent financial distress experienced at major financial institutions has caused significant disruption in the capital markets, particularly in the commercial paper market where short-term rates have increased significantly and access generally has contracted.  Long-term debt rates on bond issuances also have increased significantly since mid-September and the volume of bond issuances has decreased.  The longer such conditions persist, the more significant the implications become for us, including the potential that adequate capital is not available to fund our capital expansion plans and other planned capital expenditures.  If we are unable, in part or in whole, to fund our planned capital expenditures or obtain financing to refinance our debt, there could be a material adverse effect on our results of operations, cash flows and financial condition.

ITEM 6.               EXHIBITS

 The Exhibit Index filed herewith is incorporated herein by reference.

29

Table of Contents

SIGNATURE

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.

EXHIBIT INDEX

*               This certification is being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act and is not to be incorporated by reference into any filing of River Rock Entertainment Authority whether made before or after the date hereof, regardless of any general incorporation language in such filing.

30