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<SEC-DOCUMENT>0000950123-10-015752.txt : 20100419
<SEC-HEADER>0000950123-10-015752.hdr.sgml : 20100419
<ACCEPTANCE-DATETIME>20100223161015
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950123-10-015752
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20100223

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			LAKES ENTERTAINMENT INC
		CENTRAL INDEX KEY:			0001071255
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990]
		IRS NUMBER:				411913991
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		130 CHESHIERE LANE
		CITY:			MINNETONKA
		STATE:			MN
		ZIP:			55305
		BUSINESS PHONE:		6124499092

	MAIL ADDRESS:	
		STREET 1:		130 CHESHIRE LANE
		CITY:			MINNETONKA
		STATE:			MN
		ZIP:			55305

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	LAKES GAMING INC
		DATE OF NAME CHANGE:	19980929
</SEC-HEADER>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Timothy J. Cope<BR>
President, Chief Financial Officer<BR>
and Treasurer<BR>
Telephone: (952)&nbsp;449-9092<BR>
Facsimile: (952)&nbsp;449-7068
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">February&nbsp;23, 2010
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Linda Cvrkel<BR>
Branch Chief<BR>
Division of Corporation Finance<BR>
United States Securities and Exchange Commission<BR>
Mail Stop 3561<BR>
Washington, D.C. 20549

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">RE:</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Lakes Entertainment, Inc.<BR>
Form 10-K for the year ended December&nbsp;28, 2008<BR>
Filed March&nbsp;13, 2009<BR>
File No.&nbsp;000-24993</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dear Ms.&nbsp;Cvrkel:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are writing in response to the comments we received from you by letter dated January&nbsp;29, 2010,
regarding the above-referenced filings of Lakes Entertainment, Inc. (the &#147;Company,&#148; &#147;we&#148; or
&#147;Lakes&#148;). To facilitate your review, we have included in this letter your original comments (in
bold) followed by our responses, which have been numbered to correspond to your letter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Form&nbsp;10-Q for the Quarter Ended September&nbsp;27, 2009</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Note 8. Other Long Term Assets Related to Indian Casino Projects </B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>We note from your response to our prior comment 8 that because the agreements were executed
for the purpose of the management contract acquisition, you are recording the obligations as
additional costs of contract rights classified as intangible assets. However, we continue to
question the appropriateness of the amount as an intangible asset rather than an expense such
as compensation expense. Please explain to us in further detail why you believe these
payments are appropriately classified as intangible assets. Include in your response specific
references to the accounting literature relied upon in your conclusions.</B></TD>
</TR>




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</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Response</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Per the terms of his agreement, Mr.&nbsp;Argovitz elected to receive annual payments of $1&nbsp;million
during the remaining term of the management contract, which caused him to forgo the opportunity to
a 15% interest in the contract. This election was viewed as a purchase by Lakes of Mr.&nbsp;Argovitz&#146;s
contractual rights to an effective 15% interest in the project. Because the Company effectively
purchased Mr.&nbsp;Argovitz&#146;s contractual rights to a 15% interest in the Lakes entity with the
management contract relative to the project, the offset to the purchase obligation was treated as
an intangible asset (contract rights) and will be amortized through the end of the management
contract term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Kean&#146;s election was treated consistently under the terms of his agreement with Lakes. His
election to receive $1&nbsp;million annual payments over the remaining management contract term caused
him to forgo the opportunity to an effective 15% interest in the management fees relative to the
project. This election was viewed as a purchase by Lakes of Mr.&nbsp;Kean&#146;s contractual rights
representing an effective 15% contractual interest. Because the Company effectively purchased Mr.
Kean&#146;s contractual rights to an effective 15% interest in the project, the offset to the purchase
obligation was treated as an intangible asset (contract rights) and will be amortized through the
end of the management contract term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the time of entering into these agreements, the Company considered the following accounting
guidance:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Insurance policy acquisition cost provisions within FASB Statement No.&nbsp;60, <I>Accounting
and Reporting by Insurance Enterprises,</I></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Loan origination cost provisions within FASB Statement No.&nbsp;91 <I>Accounting for
Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial
Direct Costs of Leases </I>and,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Contingent consideration provisions within FASB Statement No.&nbsp;141 <I>Business Combinations</I>,</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the guidance considered above does not specifically address the Company&#146;s management
contract acquisition costs, management of the Company concluded that the concepts embodied within
the foregoing guidance to be appropriate for this situation. The concepts related to insurance
policy acquisition costs and loan origination costs whereby the cost incurred to acquire a contract
that will provide future revenues are capitalized and then amortized over the life of the contract,
therefore, matching expenses with revenues, appear to be applicable for the capitalization of costs
associated with the acquisition of the Company&#146;s management contract rights.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the consideration was provided for the purpose of acquiring the rights to a
portion of the revenue from the management contract and not for use of property or services
provided by Mr.&nbsp;Argovitz or Mr.&nbsp;Kean. Management contrasts this to the guidance provided by FASB
Statement No.&nbsp;141, paragraph 34, which states that contingent consideration provided to compensate
for services or use of property is to be recognized as an expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to the fact that the consideration was not being provided to compensate for services or
use of property but rather is a cost of acquiring contract rights to future revenues, the Company
recognized the consideration provided to Mr.&nbsp;Argovitz and Mr.&nbsp;Kean as an intangible asset.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Note 16. Subsequent Event</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>With respect to Penn Ventures, we note from your response to our prior comment number 11 that
subsequent to our reimbursement of Phase 1 costs the Company has the option to A) acquire a
percentage interest in the project through future capital contributions to the project
(excluding the $1.9&nbsp;million previously contributed) or B) contribute no additional money and
the Company will receive an equity position equal to the percentage of the Phase 1 costs to
the total equity invested by all parties in the project. However, the Joint Funding
Arrangement, provided as an exhibit to your </B><B>Form 8-K</B><B> filed on November&nbsp;4, 2009, states that
should you elect the option &#147;to acquire a percentage interest in the project through future
capital contribution, the percentage interest is based upon the pro rata share of the Phase 1
costs that were </B><B><I>actually </I></B><B>reimbursed by LEI...&#148; In this regard, it is unclear to us why you
believe the $1.9&nbsp;million paid by the Company should be excluded from LEI contributions and
expensed for the quarter ended January&nbsp;3, 2010 or that as of January&nbsp;3, 2010 the Company does
not have an equity interest in Penn Ventures given your known intent to contribute additional
funds to the Project and acquire an interest in the project. We may have further comment upon
receipt of your response.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Response</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Through further discussions with Penn Ventures, we have received clarification regarding the
Project provisions of the Joint Funding Arrangement. Pursuant to Section&nbsp;4b of the Joint Funding
Arrangement, the initial $1.9&nbsp;million paid to Penn Ventures will be included in the total capital
contributed for determination of ownership interest of the Project. Therefore, Lakes&#146; ownership
interest of the equity in the Project will include the $1.9&nbsp;million contributed in October&nbsp;2009, in
addition to any subsequent capital contributions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to (a)&nbsp;percentage of ownership of the Project is known to be less than 20% and (b)Lakes does
not have significant influence over the Project based on the current status of the Project, Lakes
will record a cost method investment equal to the $1.9&nbsp;million contributed to date.
</DIV>





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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">* * *
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company hereby acknowledges that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Company is responsible for the adequacy and accuracy of the disclosure in the
filings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filings; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the United States.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We hope that our letter has addressed each of the Staff&#146;s comments. If you have any questions
regarding our responses, please contact Timothy J. Cope at (952)&nbsp;449-9092.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" align="left">Very truly yours,<BR><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 0px solid #000000" align="left">Timothy J. Cope
&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">President, Chief Financial Officer and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
</TR>
</TABLE>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">cc:</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Daniel Tenenbaum, Esq.<BR>
Jeffery C. Anderson, Esq.</TD>
</TR>

</TABLE>
</DIV>


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</DIV>



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