UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2020
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission File No. 1-32583

FULL HOUSE RESORTS, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		13-3391527 (I.R.S. Employer Identification No.)

One Summerlin, 1980 Festival Plaza Drive, Suite 680 Las Vegas, Nevada (Address of principal executive offices)		89135 (Zip Code)

(702) 221-7800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	FLL	The Nasdaq Stock Market LLC

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐

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

Large accelerated filer ☐	Accelerated filer ☐	Emerging growth company ☐
Non-accelerated filer ☑	Smaller reporting company ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐

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

As of August 7, 2020, there were 27,105,728 shares of Common Stock, $0.0001 par value per share, outstanding.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share data)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenues
Casino	$	10,955	$	28,450	$	31,706	$	56,748
Food and beverage		1,994		8,863		8,984		17,521
Hotel		719		3,051		2,693		5,766
Other operations, including online/mobile sports operations		843		1,299		1,981		2,122
Total revenues		14,511		41,663		45,364		82,157
Operating costs and expenses
Casino		3,470		11,592		13,803		23,377
Food and beverage		2,083		9,449		9,219		18,818
Hotel		377		2,379		1,550		4,799
Other operations		273		1,072		835		1,841
Selling, general and administrative		9,796		13,027		22,777		25,687
Project development costs		259		142		315		275
Depreciation and amortization		1,980		2,083		4,020		4,174
Loss (gain) on disposal of assets, net		439		(4)		439		(5)
		18,677		39,740		52,958		78,966
Operating (loss) income		(4,166)		1,923		(7,594)		3,191
Other (expense) income
Interest expense, net of $211 and $83 capitalized for the three-months ended June 30, 2020 and 2019, and $431 and $130 capitalized for the six-months ended June 30, 2020 and 2019		(2,447)		(2,931)		(4,938)		(5,634)
Adjustment to fair value of warrants		(94)		141		1,562		101
		(2,541)		(2,790)		(3,376)		(5,533)
Loss before income taxes		(6,707)		(867)		(10,970)		(2,342)
Income tax (benefit) provision		(4)		143		91		285
Net loss	$	(6,703)	$	(1,010)	$	(11,061)	$	(2,627)

Basic loss per share	$	(0.25)	$	(0.04)	$	(0.41)	$	(0.10)
Diluted loss per share	$	(0.25)	$	(0.04)	$	(0.46)	$	(0.10)

See condensed notes to consolidated financial statements.

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except share data)


	June 30,		December 31,
	2020		2019
ASSETS
Current assets
Cash and equivalents	$	26,495	$	28,851
Restricted cash		—		1,000
Accounts receivable, net of allowance of $199 and $141		1,784		2,206
Inventories		1,780		2,292
Prepaid expenses and other		3,298		3,340
		33,357		37,689

Property and equipment, net		118,199		121,487
Operating lease right-of-use assets, net		18,917		19,171
Goodwill		21,286		21,286
Other intangible assets, net		11,010		11,056
Deposits and other		622		646
	$	203,391	$	211,335
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	7,284	$	5,216
Accrued payroll and related		2,532		3,044
Other accrued expenses and other		8,878		10,613
Current portion of operating lease obligations		3,166		2,707
Current portion of finance lease obligation		481		448
Current portion of long-term debt		3,253		1,100
Common stock warrant liability		493		2,055
		26,087		25,183

Operating lease obligations, net of current portion		16,130		16,706
Finance lease obligation, net of current portion		3,546		3,829
Long-term debt, net		105,876		102,923
Deferred income taxes, net		803		712
Contract liabilities, net of current portion		5,728		5,886
		158,170		155,239
Commitments and contingencies (Note 8)
Stockholders’ equity
Common stock, $0.0001 par value, 100,000,000 shares authorized; 28,359,397 and 28,345,525 shares issued and 27,089,834 and 27,075,962 shares outstanding		3		3
Additional paid-in capital		64,588		64,402
Treasury stock, 1,269,563 common shares		(1,548)		(1,548)
Accumulated deficit		(17,822)		(6,761)
		45,221		56,096
	$	203,391	$	211,335

See condensed notes to consolidated financial statements.

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands)


				Additional							Total
	Common Stock			Paid-in		Treasury Stock			Accumulated		Stockholders’
	Shares	Dollars		Capital		Shares	Dollars		Deficit		Equity
Balance, January 1, 2020	28,346	$	3	$	64,402	1,270	$	(1,548)	$	(6,761)	$	56,096
Stock-based compensation	—		—		83	—		—		—		83
Net loss	—		—		—	—		—		(4,358)		(4,358)
Balance, March 31, 2020	28,346		3		64,485	1,270		(1,548)		(11,119)		51,821
Stock grants	13		—		24	—		—		—		24
Stock-based compensation	—		—		79	—		—		—		79
Net loss	—		—		—	—		—		(6,703)		(6,703)
Balance, June 30, 2020	28,359	$	3	$	64,588	1,270	$	(1,548)	$	(17,822)	$	45,221


				Additional							Total
	Common Stock			Paid-in		Treasury Stock			Accumulated		Stockholders’
	Shares	Dollars		Capital		Shares	Dollars		Deficit		Equity
Balance, January 1, 2019	28,289	$	3	$	63,935	1,357	$	(1,654)	$	(939)	$	61,345
Exercise of stock options	26		—		45	—		—		—		45
Stock-based compensation	—		—		86	—		—		—		86
Net loss	—		—		—	—		—		(1,617)		(1,617)
Balance, March 31, 2019	28,315		3		64,066	1,357	$	(1,654)		(2,556)		59,859
Stock grants	22		—		48	—		—		—		48
Stock-based compensation	—		—		59	—		—		—		59
Net loss	—		—		—	—		—		(1,010)		(1,010)
Balance, June 30, 2019	28,337	$	3	$	64,173	1,357	$	(1,654)	$	(3,566)	$	58,956

See condensed notes to consolidated financial statements.

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)


	Six Months Ended
	June 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(11,061)	$	(2,627)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		4,020		4,174
Amortization of debt issuance and warrant costs and other		496		598
Stock-based compensation		186		193
Change in fair value of stock warrants		(1,562)		(101)
Change in fair value of interest rate cap		—		82
Loss (gain) on disposal of assets		439		(5)
Increases and decreases in operating assets and liabilities:
Accounts receivable		422		(41)
Prepaid expenses, inventories and other		554		(2,098)
Deferred taxes		91		285
Deferred revenue		(58)		—
Accounts payable and accrued expenses		112		(2,205)
Net cash used in operating activities		(6,361)		(1,745)
Cash flows from investing activities:
Purchase of property and equipment		(1,375)		(3,056)
Other		22		(1)
Net cash used in investing activities		(1,353)		(3,057)
Cash flows from financing activities:
Proceeds from Senior Secured Notes borrowings		—		10,000
Proceeds from CARES Act unsecured loans		5,606		—
Payment of debt discount and issuance costs		(447)		(1,181)
Repayment of Senior Secured Notes		(550)		(525)
Repayment of finance lease obligation		(251)		(263)
Proceeds from exercise of stock options		—		45
Net cash provided by financing activities		4,358		8,076

Net (decrease) increase in cash, cash equivalents and restricted cash		(3,356)		3,274
Cash, cash equivalents and restricted cash, beginning of period		29,851		20,634
Cash, cash equivalents and restricted cash, end of period	$	26,495	$	23,908

Supplemental Cash Flow Information:
Cash paid for interest, net of amounts capitalized	$	4,336	$	4,797
Non-Cash Investing Activities:
Accounts payable related capital expenditures	$	137	$	502

See condensed notes to consolidated financial statements.

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. ORGANIZATION

Organization. Formed as a Delaware corporation in 1987, Full House Resorts, Inc. owns, leases, operates, develops, manages, and/or invests in casinos and related hospitality and entertainment facilities. References in this document to “Full House,” the “Company,” “we,” “our,” or “us” refer to Full House Resorts, Inc. and its subsidiaries, except where stated or the context otherwise indicates.

The Company currently operates five casinos; four are part of real estate that it owns or leases, and one is located within a hotel owned by a third party. The following table identifies the properties along with their respective dates of acquisition and locations:


	Acquisition
Property	Date	Location
Silver Slipper Casino and Hotel	2012	Hancock County, MS (near New Orleans)
Bronco Billy’s Casino and Hotel	2016	Cripple Creek, CO (near Colorado Springs)
Rising Star Casino Resort	2011	Rising Sun, IN (near Cincinnati)
Stockman’s Casino	2007	Fallon, NV (one hour east of Reno)
Grand Lodge Casino (leased and part of the Hyatt Regency Lake Tahoe Resort, Spa and Casino)	2011	Incline Village, NV (North Shore of Lake Tahoe)

The Company manages its casinos based on geographic regions within the United States. See Note 11 for further information.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. As permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Company’s 2019 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The interim consolidated financial statements of the Company included herein reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of annualized results for an entire year.

The consolidated financial statements include the accounts of Full House and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Liquidity, Going Concern and Management Plans. The consolidated financial statements have been prepared on the going concern basis of accounting, assuming the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company’s casinos are its primary sources of income and operating cash flows and they are relied upon to remain in compliance with debt covenants and meet the Company’s obligations when due. As described in Note 5, the Senior Secured Notes agreement requires the Company to maintain a total leverage ratio covenant, which measures Consolidated EBITDA (as defined in the indenture) against outstanding debt. As detailed in Notes 2 and 14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company temporarily suspended operations at its casinos and hotels

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in March 2020 pursuant to orders from governmental authorities as a precautionary measure against the ongoing spread of a highly contagious coronavirus that was declared a pandemic (“COVID-19”) by the World Health Organization. The Company’s properties began reopening when permitted by local authorities, beginning with the Silver Slipper Casino and Hotel on May 21, 2020, Grand Lodge Casino and Stockman’s Casino on June 4, 2020, and Bronco Billy’s Casino and Hotel and Rising Star Casino Resort on June 15, 2020. The Company believes it has sufficient resources to fund its reopened operations through its current cash balances and the management of labor, marketing expenses, and capital expenditures. Also, as discussed herein, operating profits in June 2020 were higher than levels in June 2019. However, management does not control and is not qualified to predict the ongoing effects of the continuing pandemic.

As described in Notes 2 and 14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, a significant period of closure or significant declines in business volumes could negatively impact our ability to remain in compliance with our debt covenants. In the event that the Company would fail to meet its debt covenants in the next twelve months from the issuance of the consolidated financial statements, the Company would either seek covenant waivers or attempt to amend its covenants, though there is no certainty that the Company would be successful in such efforts. For example, the Company’s lenders agreed to amend our leverage covenant for the period ended June 30, 2020, and the parties collectively continue to discuss amending covenants for future quarters. ASC 205-40, Going Concern, calls for management to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the financial statements are issued. Because of the length of this look-forward period and the substantial items that are outside of the Company’s control, and despite its intent and best efforts to overcome the challenges in the current environment, management concluded that there is substantial doubt as to the Company’s ability to continue as a going concern. The Company is attempting to mitigate the impacts of COVID-19 on the Company through the plans described above. The consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty.

Fair Value and the Fair Value Input Hierarchy. Fair value measurements affect the Company’s accounting for net assets acquired in acquisition transactions and certain financial assets and liabilities, such as its interest rate cap (“Interest Rate Cap”) agreement and common stock warrant liability. Fair value measurements are also used in the Company’s periodic assessments of long-lived tangible and intangible assets for possible impairment, including for property and equipment, goodwill, and other intangible assets. Fair value is defined as the expected price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

GAAP categorizes the inputs used for fair value into a three-level hierarchy:

●

Level 1: Observable inputs, such as quoted prices in active markets for identical assets or liabilities;

●

Level 2: Comparable inputs other than quoted prices that are observable for similar assets or liabilities in less active markets; and

●

Level 3: Unobservable inputs which may include metrics that market participants would use to estimate values, such as revenue and earnings multiples and relative rates of return.

The Company utilizes Level 2 inputs when measuring the fair value of its Interest Rate Cap (see Note 5).

The Company utilizes Level 3 inputs when measuring the fair value of net assets acquired in business combination transactions, subsequent assessments for impairment, and most financial instruments, including but not limited to the estimated fair value of common stock warrants at issuance and for recurring changes in the related warrant liability (see Note 6).

Cash Equivalents and Restricted Cash. Cash equivalents include cash involved in operations and cash in excess of daily requirements that is invested in highly liquid, short-term investments with initial maturities of three months or less when purchased.

Restricted cash balances were funds received from certain sports wagering agreements that had not commenced and were contractually required to be separated from the Company’s operating cash. In March 2020, such cash was no longer categorized as restricted, as the Company was approved for its “master license” for sports betting by the Colorado Limited Gaming Control Commission on March 19, 2020.

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Cash, cash equivalents and restricted cash consisted of the following:


(In thousands)	June 30,		December 31,
	2020		2019
Cash and equivalents	$	26,495	$	28,851
Restricted cash		—		1,000
	$	26,495	$	29,851

Revenue Recognition of Accrued Club Points and Deferred Revenues

Accrued Club Points: Operating Revenues and Related Costs and Expenses. The Company’s revenues consist primarily of casino gaming, food and beverage, hotel, and other revenues (such as entertainment). The majority of the Company’s revenues are derived from casino gaming, principally slot machines.

Gaming revenue is the difference between gaming wins and losses, not the total amount wagered. The Company accounts for its gaming transactions on a portfolio basis as such wagers have similar characteristics and it would not be practical to view each wager on an individual basis.

The Company sometimes provides discretionary complimentary goods and services (“discretionary comps”). For these types of transactions, the Company allocates revenue to the department providing the complimentary goods or services based upon its estimated standalone selling price, offset by a reduction in casino revenues.

Many of the Company’s customers choose to earn points under its customer loyalty programs. As points are accrued, the Company defers a portion of its gaming revenue based on the estimated standalone value of loyalty points being earned by the customer. The standalone value of loyalty points is derived from the retail value of food, beverages, hotel rooms, and other goods or services for which such points may be redeemed. A liability related to these customer loyalty points is recorded, net of estimated breakage and other factors, until the customer redeems these points, primarily for “free casino play,” complimentary dining, or hotel stays. Such liabilities were approximately $1.4 million each for June 30, 2020 and December 31, 2019. Upon redemption, the related revenue is recognized at retail value within the department providing the goods or services.

Revenue for food and beverage, hotel, and other revenue transactions is typically the net amount collected from the customer for such goods and services, plus the retail value of (i) discretionary comps and (ii) comps provided in return for redemption of loyalty points. The Company records such revenue as the good or service is transferred to the customer. Additionally, the Company may collect deposits in advance for future hotel reservations or entertainment, among other services, which represent obligations to the Company until the service is provided to the customer.

Deferred Revenues: Market Access Fees from Sports Wagering Agreements. These liabilities were created in the third quarter of 2019 when the Company entered into several agreements with various unaffiliated companies allowing for online/mobile sports wagering within Indiana and Colorado, as well as on-site sports wagering at Rising Star Casino Resort and at Bronco Billy’s Casino and Hotel (the “Sports Agreements”). As part of these longer-term Sports Agreements, the Company received one-time market access fees in cash, which were recorded as a long-term liability in the same amount and will be recognized as revenue ratably over the initial term length of 10 years, beginning with the commencement of operations. The current and noncurrent portions of the deferred revenues balance totaling $5.93 million for June 30, 2020 is included with “Other accrued expenses and other” and “Contract liabilities, net of current portion” on the consolidated balance sheets, respectively. Of the Company’s Sports Agreements, on-site sports wagering commenced at Rising Star in the fourth quarter of 2019, as did one of the Company’s three contracted mobile sports wagering websites in Indiana. In June of 2020, one of the Company’s three contracted mobile sports wagering websites in Colorado also commenced operations.

Income Taxes. For interim income tax reporting for the three- and six-months ended June 30, 2020, the Company estimates its annual effective tax rate and applies it to its year-to-date pretax income or loss.

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Reclassifications. The Company made certain minor financial statement presentation reclassifications to prior-period amounts to conform to the current-period presentation. Such reclassifications had no effect on the previously reported results of operations or financial position.

Earnings (Loss) Per Share. Earnings (loss) per share is net income (loss) applicable to common stock divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects additional dilutive effects for all potentially-dilutive securities, including common stock options and warrants, using the treasury stock method.

Leases. The Company determines if a contract is or contains a lease at inception or modification of the agreement. A contract is or contains a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period of time in exchange for consideration. Control over the use of the identified asset means that the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset. Accounting Standards Codification 842 (“ASC 842”) requires a dual approach for lessee accounting under which a lessee would classify and account for leases as either finance leases or operating leases, both of which result in the lessee recognizing a right-of-use (“ROU”) asset and a corresponding lease liability on the balance sheet, as measured on a discounted basis for leases with terms greater than a year. For finance leases, the lessee will recognize interest expense associated with the lease liability and depreciation expense associated with the ROU asset; for operating leases, the lessee will recognize straight-line rent expense.

The Company does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less. However, costs related to short-term leases with terms greater than one month, which the Company deems material, are disclosed as a component of lease expenses when applicable. Additionally, the Company accounts for new and existing leases containing both lease and non-lease components (“embedded leases”) together as a single lease component by asset class for gaming-related equipment; therefore, the Company does not allocate contract consideration to the separate lease and non-lease components based on their relative standalone prices.

Finance and operating lease ROU assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement. As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental borrowing rate as estimated by third-party valuation specialists in determining the present value of future payments. The expected lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term.

Recently Issued Accounting Standards. The Company believes that there are no other recently-issued accounting standards not yet effective that are currently likely to have a material impact on its financial statements.

3. LEASES

The Company has no leases in which it is the lessor. As lessee, the Company has one finance lease for a hotel and various operating leases for land, casino and office space, equipment, buildings, and signage. The Company’s lease terms, including extensions, range from one month to approximately 38 years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants, but the land lease at Silver Slipper does include contingent rent as further discussed below.

Operating Leases

Silver Slipper Casino Land Lease through April 2058 and Options to Purchase. In 2004, the Company’s subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease with Cure Land Company, LLC for approximately 31 acres of marshlands and a seven-acre parcel on which the Silver Slipper Casino and Hotel is situated. The agreement includes fixed, base monthly payments of $77,500 plus contingent rents of 3% of monthly gross gaming revenue (as defined in the lease) in excess of $3.65 million, with no scheduled base rent increases through the remaining lease term ending in 2058.

Effective March 2020, the Company later executed a fourth amendment to the original lease with the landlord, which granted a waiver of base rent for April and May of 2020. With such abatement totaling $155,000 of undiscounted cash, the Company

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Leases recorded on the balance sheet consist of the following:


(In thousands)

Leases	Balance Sheet Classification	June 30, 2020		December 31, 2019
Assets
Operating lease assets	Operating Lease Right-of-Use Assets, Net	$	18,917	$	19,171
Finance lease assets	Property and Equipment, Net⁽¹⁾		4,958		5,037
Total lease assets		$	23,875	$	24,208

Liabilities
Current
Operating	Current Portion of Operating Lease Obligations	$	3,166	$	2,707
Finance	Current Portion of Finance Lease Obligation		481		448
Noncurrent
Operating	Operating Lease Obligations, Net of Current Portion		16,130		16,706
Finance	Finance Lease Obligation, Net of Current Portion		3,546		3,829
Total lease liabilities		$	23,323	$	23,690

(1)	Finance lease assets are recorded net of accumulated amortization of $2.8 million as of June 30, 2020.

The components of lease expense are as follows:


(In thousands)		Three Months Ended				Six Months Ended
		June 30,				June 30,
Lease Costs	Statement of Operations Classification	2020		2019		2020		2019
Operating leases:
Fixed/base rent	Selling, General and Administrative Expenses	$	1,199	$	958	$	2,399	$	1,918
Variable payments	Selling, General and Administrative Expenses		4		171		158		355
Finance lease:
Amortization of leased assets	Depreciation and Amortization		39		39		79		79
Interest on lease liabilities	Interest Expense, Net		62		52		94		106
Total lease costs		$	1,304	$	1,220	$	2,730	$	2,458

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Maturities of lease liabilities as of June 30, 2020 are summarized as follows:


(In thousands)
	Operating		Financing
Years Ending December 31,	Leases		Lease⁽¹⁾
2020 (excluding the six months ended June 30, 2020)	$	2,397	$	272
2021		4,684		652
2022		4,468		652
2023		2,876		652
2024		1,135		652
Thereafter		31,017		1,847
Total future minimum lease payments		46,577		4,727
Less: Amount representing interest		(27,281)		(700)
Present value of lease liabilities		19,296		4,027
Less: Current lease obligations		(3,166)		(481)
Long-term lease obligations	$	16,130	$	3,546

(1)The Company’s only material finance lease is at Rising Star Casino Resort for a 104-room hotel.

Other information related to lease term and discount rate is as follows:


Lease Term and Discount Rate	June 30, 2020		December 31, 2019
Weighted-average remaining lease term
Operating leases	19.8	years	20.2	years
Finance lease	7.3	years	7.8	years
Weighted-average discount rate
Operating leases⁽¹⁾	9.40	%	9.40	%
Finance lease	4.50	%	4.50	%

(1)Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.

Supplemental cash flow information related to leases is as follows:


(In thousands)	Six Months Ended
	June 30,
Cash paid for amounts included in the measurement of lease liabilities:	2020		2019
Operating cash flows for operating leases	$	1,659	$	1,928
Operating cash flows for finance lease	$	94	$	106
Financing cash flows for finance lease	$	251	$	263

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4. PROPERTY AND EQUIPMENT

Property and equipment, including finance lease assets, consists of the following:


(In thousands)	June 30,		December 31,
	2020		2019
Land and improvements	$	16,144	$	16,144
Buildings and improvements		107,139		106,946
Furniture and equipment		48,260		47,886
Finance lease assets (see Note 3)		7,726		7,726
Construction in progress		10,916		10,856
		190,185		189,558
Less: Accumulated depreciation		(71,986)		(68,071)
	$	118,199	$	121,487

5. LONG-TERM DEBT

Long-term debt, related discounts and issuance costs consist of the following:


(In thousands)	June 30,		December 31,
	2020		2019
Senior Secured Notes	$	107,375	$	107,925
Unsecured Loans (CARES Act)		5,606		—
Less: Unamortized discounts and debt issuance costs		(3,852)		(3,902)
		109,129		104,023
Less: Current portion of long-term debt		(3,253)		(1,100)
	$	105,876	$	102,923

Senior Secured Notes and Waiver. On April 28, 2020, the Company executed the Third Amendment to Indenture dated as of April 28, 2020 (the “Third Amendment”) to amend the Indenture dated as of February 2, 2018 (as amended and supplemented, the “Indenture”), which governs the senior secured notes due 2024 issued by the Company in the aggregate principal amount of $110.0 million (collectively, the “Notes”). Reflecting the impact of the temporary closures of the Company’s properties due to COVID-19, the Third Amendment (i) deleted the total leverage ratio covenant as of March 31, 2020, and (ii) resolved any potential ambiguities regarding a qualified auditor opinion in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The Company paid an amendment fee of 0.35%, or $376,775 to the holders of its Notes, based on the outstanding balance of the aggregate principal amount as of the amendment date. Additionally, the Third Amendment increased the optional premiums by 15 basis points, plus accrued and applicable unpaid interest, if the Company chooses to redeem all or a part of the Notes prior to, or at, maturity.

On August 12, 2020, the Company executed the Fourth Amendment to Indenture dated as of August 12, 2020 (the “Fourth Amendment”) to amend the Indenture to the “Notes.” Reflecting the adverse impact on the Company’s business operations due to the ongoing COVID-19 pandemic, the Fourth Amendment (i) deleted the total leverage ratio covenant as of June 30, 2020, and (ii) permitted the incurrence of $5.6 million of unsecured loans under the CARES Act, as detailed below. The Company paid an amendment fee of 0.75%, or $805,313 to the holders of its Notes, based on the outstanding balance of the aggregate principal amount as of the amendment date. Additionally, the Fourth Amendment increased the optional premiums by 25 basis points, plus accrued and applicable unpaid interest, if the Company chooses to redeem all or a part of the Notes prior to, or at, maturity. The following table summarizes the current debt repayment premiums for the Notes:


Redemption Periods	Percentage Premium
On February 2, 2020 to February 1, 2021	1.90	%
On February 2, 2021 to February 1, 2022	0.90	%
On or after February 2, 2022	0.40	%

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The Notes bear interest at the greater of the three-month London Interbank Offered Rate (“LIBOR”) or 1.0%, plus a margin rate of 7.0%. Interest on the Notes is payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year until the Notes mature on February 2, 2024. On each interest payment date, the Company is required to make principal payments of $275,000 with a balloon payment for the remaining $103.5 million due upon maturity. Additionally, excluding the exercise of any optional early redemptions, the Company will pay a debt redemption premium of $0.4 million at maturity, as required by the Third and Fourth Amendments and detailed in the table above.

The Notes are collateralized by substantially all of the Company’s assets and are guaranteed by all of its material subsidiaries.

Unsecured Loans Under the CARES Act. On May 8, 2020, two wholly-owned subsidiaries of the Company executed promissory notes (the “Promissory Notes”) evidencing unsecured loans in the aggregate amount of $5,606,200 through programs established under the CARES Act (the “Loans”) and administered by the U.S. Small Business Administration (the “SBA”). Such funds were principally used to rehire several hundred employees at Rising Star and Bronco Billy’s in advance of, and subsequent to, their reopenings in mid-June. The Loans were made through Zions Bancorporation, N.A. dba Nevada State Bank (the “Lender”), have a two-year term, bear interest at a rate of 1.00% per annum, and mature on May 3, 2022. Recently-passed legislation allows for the maturity date to potentially be extended to May 3, 2025. Monthly principal and interest payments are deferred for six months. Beginning in December 2020, the Company is required to make monthly payments of principal and interest to the Lender. The Loans may be prepaid at any time prior to maturity with no prepayment penalties. Such Loans may be forgiven, either in whole or in part, depending on the amount of such proceeds that are used for certain eligible expenses over a 24-week period, including primarily the payroll and health benefits of employees who might otherwise be without jobs or health benefits. There is no certainty that any or all of such Loans will be forgiven.

Maturities of the unsecured loans as of June 30, 2020 are as follows:


(In thousands)
	Unsecured
For Years Ending December 31,	Loans
2020	$	282
2021		3,750
2022		1,574
	$	5,606

Covenants. The Indenture governing the Notes contains customary representations and warranties, events of default, and positive and negative covenants, including financial covenants. The Company is required to maintain a total leverage ratio, which measures Consolidated EBITDA (as defined in the Indenture) against outstanding debt. The Company is allowed to deduct up to $15 million of its cash and equivalents (beyond estimated cash utilized in daily operations) from its total debt when calculating the numerator of such ratio. The Third and Fourth Amendments deleted the total leverage ratio covenant for the periods ended March 31, 2020 and June 30, 2020. For the remainder of the year, the total leverage ratio maximum is 5.75x through September 30, 2020 and 5.50x through December 31, 2020. Due to the impact of COVID-19, the Company is currently in discussions with its lenders regarding amendments with respect to leverage ratio covenants in future periods. However, there can be no assurances that the Company will remain in compliance with all covenants and/or that it would be successful in obtaining waivers or modifications in the event of noncompliance in the future.

6. COMMON STOCK WARRANT LIABILITY

As part of the Company’s former Second Lien Credit Facility, on May 13, 2016, the Company granted the Second Lien Credit Facility lenders 1,006,568 warrants, which have an exercise price of $1.67 and expire on May 13, 2026. The warrants also provide for redemption rights, preemptive rights under certain circumstances to maintain their ownership interest in the Company, piggyback registration rights and mandatory registration rights. In addition to a refinancing, the redemption rights allow the warrant-holders, at their option, to require the Company to repurchase all or a portion of the warrants upon the occurrence of certain events, including: (i) a liquidity event, as defined in the warrant purchase agreement, or (ii) the Company’s insolvency. The repurchase value is the 21-day average price of the Company’s common stock at the time of such liquidity event, net of the warrant exercise price. If the redemption rights are exercised, the repurchase amount is payable by

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9. EARNINGS (LOSS) PER SHARE

The table below reconciles basic and diluted loss per share of common stock:


(In thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Numerator:
Net loss - basic	$	(6,703)	$	(1,010)	$	(11,061)	$	(2,627)
Adjustment for assumed conversion of warrants		—		(141)		(1,562)		(101)
Net loss - diluted	$	(6,703)	$	(1,151)	$	(12,623)	$	(2,728)

Denominator:
Weighted-average common and common share equivalents - basic		27,079		26,969		27,077		26,955
Potential dilution from assumed conversion of warrants		—		217		182		232
Weighted-average common and common share equivalents - diluted		27,079		27,186		27,259		27,187
Anti-dilutive share-based awards and warrants excluded from the calculation of diluted loss per share		4,204		2,699		3,198		2,699

10. SHARE-BASED COMPENSATION

As of June 30, 2020, the Company had 122,413 share-based awards authorized by shareholders and available for grant from the 2015 Equity Incentive Plan (the “2015 Plan”).

The following table summarizes information related to the Company’s common stock options as of June 30, 2020:


		Weighted
	Number	Average
	of Stock	Exercise
	Options	Price
Options outstanding at January 1, 2020	2,844,405	$	1.71
Granted	362,000		1.73
Exercised	—		—
Canceled/Forfeited	(8,650)		2.23
Expired	—		—
Options outstanding at June 30, 2020	3,197,755	$	1.71
Options exercisable at June 30, 2020	2,369,088	$	1.61

Share-based compensation expense totaled $103,000 and $107,000 for the three-months ended June 30, 2020 and 2019, respectively, and $186,000 and $193,000 for the six-months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, there was approximately $0.7 million of unrecognized compensation cost related to unvested stock options previously granted that is expected to be recognized over a weighted-average period of approximately 2.3 years.

11. SEGMENT REPORTING AND DISAGGREGATED REVENUE

The Company manages its casinos based on geographic regions within the United States. The casino/resort operations include four segments: Silver Slipper Casino and Hotel (Hancock County, Mississippi); Rising Star Casino Resort, consisting of Rising Star Casino Resort (Rising Sun, Indiana) and its ferry boat operations (connecting Rising Sun, Indiana with Boone County, Kentucky); Bronco Billy’s Casino and Hotel (including the Christmas Casino & Inn, both in Cripple Creek, Colorado); and the

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Northern Nevada segment, consisting of Grand Lodge Casino (Incline Village, Nevada) and Stockman’s Casino (Fallon, Nevada).

The Company utilizes Adjusted Property EBITDA as the measure of segment profit in assessing performance and allocating resources at the reportable segment level. Adjusted Property EBITDA is defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, pre-opening expenses, impairment charges, asset write-offs, recoveries, gain (loss) from asset disposals, project development and acquisition costs, non-cash share-based compensation expense, and corporate-related costs and expenses that are not allocated to each property.

The following tables present the Company’s segment information:


(In thousands)	Three Months Ended June 30, 2020
	Silver				Bronco
	Slipper		Rising Star		Billy’s		Northern
	Casino		Casino		Casino		Nevada
	and Hotel		Resort		and Hotel		Casinos		Corporate		Total
Total Revenues
Casino	$	6,645	$	1,824	$	1,486	$	1,000	$	—	$	10,955
Food and beverage		1,757		91		88		58		—		1,994
Hotel		560		118		41		—		—		719
Other operations		160		554		101		28		—		843
	$	9,122	$	2,587	$	1,716	$	1,086	$	—	$	14,511

Adjusted Property EBITDA	$	1,200	$	(995)	$	(118)	$	(562)	$	—	$	(475)
Other operating costs and expenses:
Depreciation and amortization												(1,980)
Corporate expenses												(910)
Project development costs												(259)
Loss on disposal of asset, net												(439)
Stock-based compensation												(103)
Operating loss												(4,166)
Other (expense) income:
Interest expense, net												(2,447)
Adjustment to fair value of warrants												(94)
												(2,541)
Loss before income taxes												(6,707)
Income tax benefit												(4)
Net loss											$	(6,703)

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(In thousands)	Three Months Ended June 30, 2019
	Silver				Bronco
	Slipper		Rising Star		Billy’s		Northern
	Casino		Casino		Casino		Nevada
	and Hotel		Resort		and Hotel		Casinos		Corporate		Total
Total Revenues
Casino	$	11,636	$	7,526	$	5,563	$	3,725	$	—	$	28,450
Food and beverage		5,515		1,800		1,051		497		—		8,863
Hotel		1,305		1,560		186		—		—		3,051
Other operations		436		712		77		74		—		1,299
	$	18,892	$	11,598	$	6,877	$	4,296	$	—	$	41,663

Adjusted Property EBITDA	$	3,594	$	604	$	876	$	417	$	—	$	5,491
Other operating costs and expenses:
Depreciation and amortization												(2,083)
Corporate expenses												(1,240)
Project development costs												(142)
Gain on disposal of assets, net												4
Stock-based compensation												(107)
Operating income												1,923
Other (expense) income:
Interest expense, net												(2,931)
Adjustment to fair value of warrants												141
												(2,790)
Loss before income taxes												(867)
Income tax provision												143
Net loss											$	(1,010)

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(In thousands)

Six Months Ended June 30, 2020

Silver

Bronco

Slipper

Rising Star

Billy’s

Northern

Casino

Nevada

and Hotel

Resort

and Hotel

Casinos

Corporate

Total

Total Revenues

Casino

15,715


		Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Operations	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Changes in Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Condensed Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	41

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 5.	Other Information	43
Item 6.	Exhibits	44


Signatures		45