6.

GOODWILL & OTHER INTANGIBLES

Goodwill:

Goodwill represents the excess of the purchase price over fair market value of net assets acquired in connection with the Stockman’s Casino operation and the Grand Victoria Hotel and Casino. Goodwill is $10.3 million and $1.6 million for Stockman’s and Grand Victoria as of June 30, 2011, respectively. The Company’s review of goodwill associated with the purchase of Stockman’s as of June 30, 2011, resulted in approximately a 3% excess estimated fair value over the carrying amount of Stockman’s goodwill and related assets using a market approach considering an earnings multiple of 6.5 times. The calculation, which is subject to change as a result of future economic uncertainty, contemplates changes for both current year and future year estimates in earnings and the impact of these changes to the fair value of Stockman’s, although there is always some uncertainty in key assumptions including projected future earnings growth. Management believes Stockman’s could sustain a minimal decline in projected earnings or earnings growth without impairment. The Company continues to review goodwill on a quarterly basis and will recognize an impairment charge should earnings decline. The Company acquired the Grand Victoria on April 1, 2011 for approximately $43 million, before adjusting for working capital and cash acquired. The goodwill of $1.6 million is the excess purchase price over the assets purchased.

Other Intangible Assets:

Other intangible assets, net consist of the following:

		June 30, 2011 (unaudited)
		Estimated Life				Gross Carrying				Accumulated				Intangible Asset
		(years)				Value				Amortization				(Net)
Amortizing Intangibles assets:
Player Loyalty Program-Grand Victoria			3			$	1,700,000			$	(141,667	)		$	1,558,333
Nevada State Bank Loan Fees-FHR			15				218,545				(218,545	)			—
Wells Fargo Bank Loan Fees-FHR			5				2,612,188				(250,230	)			2,361,958
Non-amortizing intangible assets:
Gaming License -Grand Victoria		Indefinite					9,900,000				—				9,900,000
Gaming License- Other		Indefinite					484,675				—				484,675
Trademark		Indefinite					24,153				—				24,153
						$	14,939,561			$	(610,442	)		$	14,329,119

		December 31, 2010
		Estimated				Gross Carrying				Accumulated				Intangible Asset
		Life (years)				Value				Amortization				(Net)
Amortizing Intangibles assets:
Nevada State Bank Loan Fees-FHR			15			$	218,545			$	(96,087	)		$	122,458
Wells Fargo Bank Loan Fees-FHR			5				1,965,646				—				1,965,646
Non-amortizing intangible assets:
Gaming License-Other		Indefinite					464,232				—				464,232
Trademark		Indefinite					11,818				—				11,818
						$	2,660,241			$	(96,087	)		$	2,564,154

Player Loyalty Program

The player loyalty program represents the value of repeat business associated with Grand Victoria’s loyalty program. The value of $1.7 million of the Grand Victoria gaming license is determined using a multi-period excess earning method of the income approach, which examines the economic returns contributed by the identified tangible and intangible assets of a company, and then isolates the excess return, which is attributable to the asset being valued, based on cash flows attributable to the player loyalty program. The valuation analysis for the active rated player was based on projected revenues and attrition rates. Grand Victoria maintains historical information for the proportion of revenues attributable to the rated players for gross gaming revenue.

Loan Fees

Loan fees incurred and paid as a result of debt instruments are accumulated and amortized over the term of the related debt, based on an effective interest method. Loan fees incurred for Nevada State Bank in the amount of $0.2 million resulted from the credit facility to purchase Stockman’s Casino in 2007. In March 2011, the credit facility with Nevada State Bank was terminated and the amortization of the loan fees was accelerated. The Company recognized amortization expense of $122,458 during the first quarter of 2011 as a result of the termination. On October 29, 2010, the Company entered into a Credit Agreement with Wells Fargo Bank. In December 2010, the Company entered into a Commitment Increase Agreement to increase the funds available under the Credit Agreement. Loan fees related to the Wells Fargo Bank debt were $2.6 million and will be amortized over the five-year term of the loan. The aggregate amortization expense was $243,715 and $3,655 for the three months ended June 30, 2011 and June 30, 2010, respectively; and $372,689 and $7,311 for the six months ended June 30, 2011 and June 30, 2010, respectively.

Gaming Licenses

Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight and a limitation on the number of licenses available for issuance. The value of $9.9 million of the Grand Victoria gaming license is determined using a multi-period excess earning method of the income approach, which examines the economic returns contributed by the identified tangible and intangible assets of a company, and then isolates the excess return, which is attributable to the asset being valued, based on cash flows attributable to the gaming license. The other gaming license values are based on actual costs. Gaming licenses are not subject to amortization as they have indefinite useful lives.

Trademark

Trademarks are based on the legal fees and recording fees related to the trademark of the “Rising Sun Casino Resort & Hotel” name, and variations of such name. Trademarks are not subject to amortization, as they have an indefinite useful life.

Current & Future Amortization

The Company amortizes its definite-lived intangible assets, including its player loyalty program, over their estimated useful lives. The aggregate amortization expense was $141,667 and $0 for the three months ended June 30, 2011 and June 30, 2010, respectively; and $141,667 and $0 for the six months ended June 30, 2011 and June 30, 2010, respectively.

Total amortization expense for intangible assets for the years ended December 30, 2011, 2012, 2013, 2014, 2015 and thereafter is anticipated to be approximately $1.3 million, $1.3 million, $1.1 million, $0.5 million, $0.2 million, and $12,400, respectively.