Fourth Quarter Results

Lakes Entertainment reported fourth quarter 2009 revenues of $5.3 million, compared to prior-year period revenues of $5.5 million. This decrease was due to a decline in fees from the Red Hawk Casino near Sacramento, California.

For the fourth quarter of 2009, Lakes' selling, general and administrative expenses were $2.9 million compared to $3.5 million in the fourth quarter of 2008. Selling, general and administrative expenses consisted primarily of payroll and related expenses, travel expenses and professional fees. Included in selling, general and administrative expenses were costs associated with the application for a gaming site in the State of Kansas of approximately $0.3 million during the fourth quarter of 2009.

Net unrealized losses on notes receivable relate to the Company's notes receivable from Indian tribes, which are adjusted to estimated fair value prior to opening, based upon the current status of the related tribal casino projects and evolving market conditions. In the fourth quarter of 2009, net unrealized losses on notes receivable were $1.4 million, compared to net unrealized losses of $18.8 million in the prior-year period. Unrealized losses on notes receivable during the fourth quarter of 2009 resulted primarily from the recognition of loss associated with the project with the Jamul Indian Village ("Jamul Tribe") near San Diego, California because of further delays in the expected opening date of this project. The net unrealized losses in the fourth quarter of 2008 were due to the recognition of an $11.8 million loss associated with the Jamul Tribe project, which resulted from uncertainty surrounding the completion of this project, and a $6.6 million loss on notes receivable from the Shingle Springs Tribe related to the Red Hawk Casino which resulted primarily from a decline in projected interest rates and an increase in the discount rate associated with this project as a result of financial market conditions.

Impairments on intangible assets and land held for development during the fourth quarter related to the Jamul project ($0.8 million in 2009 and $20.0 million in 2008) due to issues described in the previous paragraph and our Vicksburg project ($0.5 million in 2009 and $4.0 million in 2008) due to continued uncertainty surrounding the development of this project.

Costs associated with supporting the 2008 Ohio casino resort initiative were $18.4 million during the fourth quarter of 2008.

The loss from operations was $3.2 million for the fourth quarter of 2009, compared to $61.1 million for the fourth quarter of 2008, and resulted primarily from the items discussed above.

Other income (expense), net for the three months ended January 3, 2010 was $2.2 million compared to ($0.3) million for the three months ended December 28, 2008. The increase was due primarily to interest recognized on notes receivable from the Shingle Springs Tribal Gaming Authority.

The loss from continuing operations for the fourth quarter of 2009 was $2.4 million, compared to $67.0 million in the fourth quarter of 2008. Losses applicable to common shareholders were $0.09 per share in the fourth quarter of 2009, compared to $2.63 per share for the fourth quarter of 2008.

Twelve Month 2009 Results

Lakes Entertainment reported revenues for the twelve-month period ended January 3, 2010 of $26.2 million, compared to prior-year revenues of $24.3 million. This increase was primarily due to a full twelve months of contribution of management fees from the Red Hawk Casino, which opened to the public on December 17, 2008.

For 2009, Lakes' selling, general and administrative expenses were $14.2 million compared to $15.3 million in 2008. This decrease was primarily the result of a decline in payroll and related costs as well as a decline in travel expenses during 2009, which were partially offset by an increase in professional fees, which consisted mainly of legal costs related to our new business opportunities, compared to the prior year. Included in 2009 selling, general and administrative expenses were costs associated with the application for a gaming site in the State of Kansas of approximately $0.7 million.

Other costs and expenses for the twelve months ended January 3, 2010 included an increase in amortization of intangible assets of approximately $3.6 million over the prior year, primarily associated with the casino project with the Shingle Springs Band of Miwok Indians, which commenced upon the opening of the Red Hawk Casino in December 2008. Also included in other costs and expenses were impairment losses of $4.2 million and $24.0 million during 2009 and 2008, respectively, primarily associated with the Jamul project ($2.9 million in 2009 and $20.0 million in 2008) and the Vicksburg project ($0.5 million in 2009 and $4.0 million in 2008), both discussed above.

For the twelve months ended January 3, 2010, net unrealized gains on notes receivable were $1.9 million, compared to net unrealized losses of $17.8 million in the prior-year. Net unrealized losses during 2008 were primarily due to the unrealized losses associated with the notes receivable from the Jamul Tribe and the Shingle Springs Tribe discussed above. The net unrealized gains of $1.9 million in 2009 were primarily related to the notes receivable from the Jamul Tribe primarily due to improvements in the credit markets during 2009, which were partially offset by losses related to further delays in the expected opening date of this project.

Costs associated with supporting the 2008 Ohio casino resort initiative were $28.7 million during 2008.

The loss from operations was $1.0 million for the twelve months ended January 3, 2010, compared to $68.7 million for the twelve months ended December 28, 2008.

Other income (expense), net for the twelve months ended January 3, 2010 was $6.1 million compared to $(0.3) million for the twelve months ended December 28, 2008. The increase was due primarily to interest recognized on notes receivable from the Shingle Springs Tribal Gaming Authority.

Earnings from continuing operations for the twelve months ended January 3, 2010 were $3.7 million, compared to a loss of $78.0 million in the prior-year. Earnings applicable to common shareholders were $0.14 per share in the twelve months ended January 3, 2010, compared to losses of $3.43 per share in 2008.