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 March 31, 2022
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 May 5, 2022, there were 34,345,656 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
	March 31,
	2022		2021
Revenues
Casino	$	29,084	$	32,064
Food and beverage		6,511		6,101
Hotel		2,179		2,211
Other operations, including contracted sports wagering		3,649		1,832
		41,423		42,208
Operating costs and expenses
Casino		9,875		10,339
Food and beverage		6,568		5,360
Hotel		1,071		1,056
Other operations		462		395
Selling, general and administrative		15,393		14,413
Project development costs		165		47
Preopening costs		786		—
Depreciation and amortization		1,792		1,800
Loss on disposal of assets, net		8		104
		36,120		33,514
Operating income		5,303		8,694
Other expense
Interest expense, net of amounts capitalized		(6,399)		(4,456)
Loss on modification and extinguishment of debt		(4,406)		(6,134)
Adjustment to fair value of warrants		—		(1,347)
		(10,805)		(11,937)
Loss before income taxes		(5,502)		(3,243)
Income tax (benefit) provision		(5,612)		202
Net income (loss)	$	110	$	(3,445)

Basic earnings (loss) per share	$	—	$	(0.13)
Diluted earnings (loss) per share	$	—	$	(0.13)

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)


	March 31,		December 31,
	2022		2021
ASSETS
Current assets
Cash and equivalents	$	109,041	$	88,721
Restricted cash		210,494		176,572
Accounts receivable, net of reserves of $259 and $257		5,350		4,693
Inventories		1,529		1,660
Prepaid expenses and other		3,580		3,726
		329,994		275,372

Property and equipment, net		181,095		149,540
Operating lease right-of-use assets, net		14,998		15,814
Goodwill		21,286		21,286
Other intangible assets, net		10,891		10,896
Deposits and other		1,710		934
Deferred income taxes, net		4,556		—
	$	564,530	$	473,842
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	9,926	$	8,411
Accrued payroll and related		4,139		5,473
Accrued interest		4,134		9,861
Other accrued liabilities		10,535		10,252
Current portion of operating lease obligations		3,609		3,542
Current portion of finance lease obligation		520		514
		32,863		38,053

Operating lease obligations, net of current portion		11,963		12,903
Finance lease obligation, net of current portion		2,651		2,783
Long-term debt, net		400,590		301,619
Deferred income taxes, net		—		1,055
Contract liabilities, net of current portion		3,156		4,714
		451,223		361,127
Commitments and contingencies (Note 7)
Stockholders’ equity
Common stock, $0.0001 par value, 100,000,000 shares authorized; 35,302,549 and 35,302,549 shares issued and 34,345,656 and 34,242,581 shares outstanding		4		4
Additional paid-in capital		109,268		108,911
Treasury stock, 956,893 and 1,059,968 common shares		(1,167)		(1,292)
Retained earnings		5,202		5,092
		113,307		112,715
	$	564,530	$	473,842

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			Retained		Stockholders’
	Shares	Dollars		Capital		Shares	Dollars		Earnings		Equity
Balance, January 1, 2022	35,302	$	4	$	108,911	1,060	$	(1,292)	$	5,092	$	112,715
Issuance of stock on options exercised and restricted stocks vested	—		—		14	(103)		125		—		139
Stock-based compensation	—		—		343	—		—		—		343
Net income	—		—		—	—		—		110		110
Balance, March 31, 2022	35,302	$	4	$	109,268	957	$	(1,167)	$	5,202	$	113,307


				Additional							Total
	Common Stock			Paid-in		Treasury Stock			Accumulated		Stockholders’
	Shares	Dollars		Capital		Shares	Dollars		Deficit		Equity
Balance, January 1, 2021	28,385	$	3	$	64,826	1,261	$	(1,538)	$	(6,614)	$	56,677
Equity offering, net	6,917		1		42,973	—		—		—		42,974
Issuance of stock on options exercised	—		—		36	(34)		42		—		78
Stock-based compensation	—		—		124	—		—		—		124
Net loss	—		—		—	—		—		(3,445)		(3,445)
Balance, March 31, 2021	35,302	$	4	$	107,959	1,227	$	(1,496)	$	(10,059)	$	96,408

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)


	Three Months Ended
	March 31,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	110	$	(3,445)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		1,792		1,800
Amortization of debt issuance costs and discounts (premium) on debt		386		284
Stock-based compensation		343		124
Change in fair value of stock warrants		—		1,347
Loss on disposal of assets, net		8		104
Loss on modification and extinguishment of debt		4,406		6,134
Increases and decreases in operating assets and liabilities:
Accounts receivable		(657)		1,103
Prepaid expenses, inventories and other		277		(1,011)
Deferred taxes		(5,611)		202
Common stock warrant liability		—		(4,000)
Contract liabilities		(1,555)		(350)
Accounts payable and accrued expenses		(7,467)		5,999
Net cash (used in) provided by operating activities		(7,968)		8,291
Cash flows from investing activities:
Purchase of property and equipment		(31,203)		(3,413)
Other		(671)		(8)
Net cash used in investing activities		(31,874)		(3,421)
Cash flows from financing activities:
Proceeds from Senior Secured Notes due 2028 borrowings		100,000		310,000
Proceeds from premium on Senior Secured Notes due 2028 borrowings		2,000		—
Proceeds from equity offering, net of issuance costs		—		42,974
Payment of debt discount and issuance costs		(7,821)		(9,510)
Repayment of Senior Secured Notes due 2024		—		(106,825)
Prepayment premiums of Senior Secured Notes due 2024		—		(1,261)
Repayment of finance lease obligation		(126)		(120)
Proceeds from exercise of stock options		139		78
Other		(108)		24
Net cash provided by financing activities		94,084		235,360

Net increase in cash, cash equivalents and restricted cash		54,242		240,230
Cash, cash equivalents and restricted cash, beginning of period		265,293		37,698
Cash, cash equivalents and restricted cash, end of period	$	319,535	$	277,928

Supplemental Cash Flow Information:
Cash paid for interest, net of amounts capitalized	$	15,699	$	812
Non-Cash Investing Activities:
Accounts payable related capital expenditures	$	7,001	$	478

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 on real estate that we own or lease and one located within a hotel owned by a third party. We are currently constructing two additional properties: Chamonix Casino Hotel (“Chamonix”), adjacent to the Company’s existing Bronco Billy’s Casino and Hotel in Cripple Creek, Colorado; and The Temporary by American Place (“The Temporary”) in Waukegan, Illinois. We also benefit currently from six permitted sports wagering “skins,” three in Colorado and three in Indiana. Upon the opening of The Temporary, we expect to benefit from an additional skin in Illinois. Other companies operate or will operate these online sports wagering sites under their brands, paying us a percentage of revenues, as defined in each respective agreement, subject to annual minimum amounts.

In December 2021, Full House was selected by the Illinois Gaming Board (“IGB”) to develop its American Place project in Waukegan, Illinois, a northern suburb of Chicago. During the period that the permanent American Place facility is under construction, we intend to operate a temporary casino facility named The Temporary. In May 2022, we commenced construction of The Temporary, which is expected to open in Fall 2022, subject to customary regulatory approvals.

The following table identifies our segments, along with properties and their locations:


Segments and Properties		Locations
Colorado
Bronco Billy’s Casino and Hotel		Cripple Creek, CO (near Colorado Springs)
Chamonix Casino Hotel (under construction)		Cripple Creek, CO (near Colorado Springs)
Illinois
The Temporary and American Place (under construction)		Waukegan, IL (northern suburb of Chicago)
Indiana
Rising Star Casino Resort		Rising Sun, IN (near Cincinnati)
Mississippi
Silver Slipper Casino and Hotel		Hancock County, MS (near New Orleans)
Nevada
Grand Lodge Casino (leased and part of the Hyatt Regency Lake Tahoe Resort, Spa and Casino)		Incline Village, NV (North Shore of Lake Tahoe)
Stockman’s Casino		Fallon, NV (one hour east of Reno)
Contracted Sports Wagering
Three sports wagering websites (“skins”)		Colorado
Three sports wagering websites (“skins”)		Indiana
One sports wagering website (“skin”) upon opening of The Temporary		Illinois

The Company manages its casinos based on geographic regions within the United States. See Note 10 for further information.

COVID-19 Pandemic Update. The COVID-19 pandemic continues to evolve. Governmental authorities continue to update their precautionary measures and promote vaccination programs to manage the spread of the virus as different variants of the virus surface and subside. The Company has generally benefited from the gradual relaxation of pandemic-related business restrictions since 2021.

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However, the COVID-19 pandemic, and certain precautionary measures, have created economic uncertainty both in the United States and globally, as well as significant volatility in, and disruption to, financial markets, labor markets and supply chains. Global supply chain disruptions have resulted in shipping delays, increased shipping costs, supply shortages, and inflationary pressures, including overall increases in prices such as fuel, food, and building materials. These increased costs and supply shortages continued to put additional constraints on our operating business and our construction projects for the three months ended March 31, 2022. We do not know when these cost constraints and supply chain issues will materially alleviate and, accordingly, they may continue to impact our existing business and our construction projects in the near term.

We believe that as the COVID-19 pandemic evolves, the direct and indirect impacts on global macro-economic conditions, as well as conditions specific to us, are becoming more difficult to isolate or quantify. In addition, these direct and indirect factors can make it difficult to isolate and quantify the portion of our costs that are a direct result of the pandemic versus costs arising from factors that may have been influenced by the pandemic, including supply chain constraints, increased prices and inflationary pressures, and changes in the spending patterns of customers. These factors and their effects on our operations may persist for a longer period, even after the COVID-19 pandemic has subsided.

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 2021 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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.

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. 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 1 inputs when measuring the fair value of its 2028 Notes (see Note 5).

The Company utilizes Level 2 inputs when measuring the fair value of its asset purchases and acquisitions (see Note 4).

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.

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Deferred Revenues: Market Access Fees from Sports Wagering Agreements. The Company entered into several agreements with various unaffiliated companies allowing for online sports wagering within Indiana, Colorado and Illinois, as well as on-site sports wagering at Rising Star Casino Resort, Bronco Billy’s Casino and Hotel, and The Temporary/American Place (the “Sports Agreements”). As part of these long-term Sports Agreements, the Company received one-time market access fees totaling $6 million, which were recorded as long-term liabilities and are being recognized as revenue ratably over the initial contract terms, beginning with the commencement of operations. The market access fees are not refundable under ordinary circumstances. The Company subsequently received an additional $5 million of one-time market access fees in May 2022 for its recently-executed Illinois Sports Agreement. As with the prior Sports Agreements, such market access fee will be similarly capitalized and amortized over the initial term of the agreement, beginning with the commencement of operations.

Indiana. Two of the Company’s Sports Agreements commenced operations in December 2019 and April 2021, respectively. The third party for the remaining Sports Agreement went live contractually in December 2021.

Colorado. The Company’s three Sports Agreements commenced online operations in June 2020, December 2020 and April 2021, respectively.

Illinois. The Company signed a Sports Agreement in May 2022 for Illinois. Such operations are expected to commence either concurrent with, or after, the opening of The Temporary, upon receipt of customary gaming approvals.

In addition to the market access fees, deferred revenue includes the annual prepayment of contracted revenue, as required in two of the Sports Agreements. We received $1.0 million of prepaid revenue for contracted sports operations that commenced in Colorado in December 2020, and $1.0 million for contracted sports operations that commenced in Indiana in April 2021. As of March 31, 2022, $1.3 million of such deferred revenue has been recognized.

Deferred revenues consisted of the following, as discussed above:


(In thousands)		March 31,		December 31,
	Balance Sheet Location	2022		2021
Deferred revenue, current	Other accrued liabilities	$	1,826	$	1,822
Deferred revenue, net of current portion	Contract liabilities, net of current portion		3,156		4,714
		$	4,982	$	6,536

In February 2022, one of the Company’s contracted parties for sports wagering gave notice of its intent to cease operations on May 15, 2022, which will create one available skin in each of Colorado and Indiana. Accordingly, this accelerated the recognition of $1.6 million of deferred revenue, which is now being recognized through the May 2022 termination date, as opposed to the remaining eight years of the original 10-year term. The Company is currently negotiating with other companies to be the replacement operator for such skins, but there can be no assurance that the Company will be able to replace them on similar terms as our existing agreements.

Other Revenues. The transaction price of rooms, food and beverage, and retail contracts is the net amount collected from the customer for such goods and services. The transaction price for such contracts is recorded as revenue when the good or service is transferred to the customer over their stay at the hotel or when the delivery is made for the food, beverage, retail and other contracts. Sales and usage-based taxes are excluded from revenues.

Revenue by Source. The Company presents earned revenue as disaggregated by the type or nature of the good or service (casino, food and beverage, hotel, and other operations comprised mainly of retail, golf, entertainment, and contracted sports wagering) and by relevant geographic region within Note 10.

Income Taxes. For interim income tax reporting for the three-months ended March 31, 2022, 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 share-based awards outstanding under the Company’s stock compensation plan 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.

For material leases with terms greater than a year, the Company records right-of-use (“ROU”) assets and lease liabilities on the balance sheet, as measured on a discounted basis. For finance leases, the Company recognizes interest expense associated with the lease liability and depreciation expense associated with the ROU asset; for operating leases, the Company recognizes 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 based on the information available at the commencement date and/or modification date. The expected lease terms include options to extend 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 for operating leases. For finance leases, the ROU asset depreciates on a straight-line basis over the shorter of the lease term or useful life of the ROU asset and the lease liability accretes interest based on the interest method using the discount rate determined at lease commencement.

Recently Issued Accounting Pronouncements Not Yet Adopted. 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 36 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.

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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 land lease 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.

From April 1, 2022 through October 1, 2027, the Company may buy out the lease for $15.5 million plus a seller-retained interest in Silver Slipper Casino and Hotel’s operations of 3% of net income (as defined) for 10 years following the purchase date. In 2021, total rent paid during the year was $2.1 million, including $1.2 million of contingent rents.

Bronco Billy’s / Chamonix Lease through January 2035 and Option to Purchase. Bronco Billy’s leases certain parking lots and buildings, including a portion of the hotel and casino, under a long-term lease. The lease term includes six renewal options in three-year increments to 2035. The Company considers the renewal options reasonably certain of being exercised through January 2026, with current annual lease payments of $0.4 million. The lease contains a $7.6 million purchase option exercisable at any time during the lease term, or as extended, and a right of first refusal on any sale of the property.

Third Street Corner Building through August 2023 and Option to Purchase. The Company leased a nearby closed casino in August 2018 and reopened it in November 2018. The reopened casino did not produce enough incremental revenue to offset the incremental costs, and it was closed in September 2020. The Company has the right to purchase the casino at any time during the extended lease term for $2.8 million.

As part of the Chamonix development project, this building is currently used as office space for construction personnel, obviating the need for construction trailers. The lease had an initial three-year term with annual lease payments of $0.2 million, and was subsequently extended to August 13, 2023 with current annual lease payments of $0.3 million.

Grand Lodge Casino Lease through August 2023. The Company’s subsidiary, Gaming Entertainment (Nevada), LLC, has a lease with Incline Hotel, LLC, the owner of the Hyatt Regency Lake Tahoe Resort (“Hyatt Lake Tahoe”), to operate the Grand Lodge Casino. It is collateralized by the Company’s interests under the lease and property (as defined in the lease) and is subordinate to the liens of the Notes (see Note 5). The lessor currently has an option to purchase the Company’s leasehold interest and related operating assets of the Grand Lodge Casino, subject to assumption of applicable liabilities. The option price is an amount equal to the Grand Lodge Casino’s positive working capital, plus Grand Lodge Casino’s earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the twelve-month period preceding the acquisition (or pro-rated if less than twelve months remain on the lease), plus the fair market value of the Grand Lodge Casino’s personal property. The current monthly rent of $166,667 is applicable through the remaining lease term ending in August 2023.

Corporate Office Lease through January 2025. The Company leases 4,479 square feet of office space in Las Vegas, Nevada. Annual rent is approximately $0.2 million and the term of the office lease expires in January 2025.

Finance Lease

Rising Star Casino Hotel Lease through October 2027 and Option to Purchase. The Company’s Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a 104-room hotel at Rising Star Casino Resort. At any time during the lease term, the Company has the option to purchase the hotel at a price based upon the hotel’s original cost of $7.7 million, reduced by the cumulative principal payments made by the Company during the lease term. At March 31, 2022, such potential purchase price was $3.2 million. Upon expiration of the lease term in October 2027, (i) the landlord has the right to sell the hotel to the Company, and (ii) the Company has the option to purchase the hotel. In either case, the purchase price is $1 plus closing costs.

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The components of lease expense are as follows:


(In thousands)		Three Months Ended
		March 31,
Lease Costs	Classification within Statement of Operations	2022		2021
Operating leases:
Fixed/base rent	Selling, General and Administrative Expenses	$	1,165	$	1,159
Short-term payments	Selling, General and Administrative Expenses		27		—
Variable payments	Selling, General and Administrative Expenses		384		402
Finance lease:
Amortization of leased assets	Depreciation and Amortization		39		39
Interest on lease liabilities	Interest Expense, Net		37		43
Total lease costs		$	1,652	$	1,643

Leases recorded on the balance sheet consist of the following:


(In thousands)
		March 31,		December 31,
Leases	Balance Sheet Classification	2022		2021
Assets
Operating lease assets	Operating Lease Right-of-Use Assets, Net	$	14,998	$	15,814
Finance lease assets	Property and Equipment, Net⁽¹⁾		4,683		4,722
Total lease assets		$	19,681	$	20,536

Liabilities
Current
Operating	Current Portion of Operating Lease Obligations	$	3,609	$	3,542
Finance	Current Portion of Finance Lease Obligation		520		514
Noncurrent
Operating	Operating Lease Obligations, Net of Current Portion		11,963		12,903
Finance	Finance Lease Obligation, Net of Current Portion		2,651		2,783
Total lease liabilities		$	18,743	$	19,742

__________

(1)	Finance lease assets are recorded net of accumulated amortization of $3.0 million for each of March 31, 2022 and December 31, 2021.

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Maturities of lease liabilities as of March 31, 2022 are summarized as follows:


(In thousands)
	Operating		Financing
Years Ending December 31,	Leases		Lease⁽¹⁾
2022 (excluding the three months ended March 31, 2022)	$	3,631	$	434
2023		3,539		652
2024		1,663		652
2025		1,466		652
2026		965		652
Thereafter		29,140		543
Total future minimum lease payments		40,404		3,585
Less: Amount representing interest		(24,832)		(414)
Present value of lease liabilities		15,572		3,171
Less: Current lease obligations		(3,609)		(520)
Long-term lease obligations	$	11,963	$	2,651

__________

(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	March 31, 2022		December 31, 2021
Weighted-average remaining lease term
Operating leases	22.3	years	21.5	years
Finance lease	5.5	years	5.8	years
Weighted-average discount rate
Operating leases	9.35	%	9.32	%
Finance lease	4.50	%	4.50	%

Supplemental cash flow information related to leases is as follows:


(In thousands)	Three Months Ended
	March 31,
Cash paid for amounts included in the measurement of lease liabilities:	2022		2021
Operating cash flows for operating leases	$	1,221	$	1,218
Operating cash flows for finance lease	$	37	$	43
Financing cash flows for finance lease	$	126	$	120

4. ACQUISITIONS

Fountain Square of Waukegan Land Purchase. In connection with the development of its American Place project in Waukegan, Illinois, the Company entered into an agreement in January 2022 to purchase approximately 10 acres of land adjoining the approximately 30-acre casino site to be leased from the City, providing space for additional parking and access to the casino site from a major road. The land was acquired on March 17, 2022 for total consideration of $7.5 million.

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5. LONG-TERM DEBT

Long-term debt, related premium (discount) and issuance costs consist of the following:


(In thousands)	March 31,		December 31,
	2022		2021
Revolving Credit Facility due 2026	$	—	$	—
Senior Secured Notes due 2028⁽¹⁾		410,000		310,000
Less: Unamortized debt issuance costs and premium/(discount), net		(9,410)		(8,381)
	$	400,590	$	301,619

__________

(1)	The estimated fair value of these notes was approximately $421.9 million for March 31, 2022 and $327.5 million for December 31, 2021. The fair value was estimated using quoted market prices for these notes.

Senior Secured Notes due 2028. On February 12, 2021, the Company refinanced all $106.8 million of its outstanding Senior Secured Notes due 2024 (the “Prior Notes”) with the issuance of $310 million aggregate principal amount of 8.25% Senior Secured Notes due 2028 (the “2028 Notes”). The net proceeds from the sale of the 2028 Notes were used to redeem all of the Prior Notes (including a 0.90% prepayment premium) and to repurchase all outstanding warrants. Additionally, $180 million of bond proceeds were placed into a construction reserve account to fund construction of Chamonix. Net of transaction fees and expenses, approximately $8 million was added to unrestricted cash and equivalents.

On February 7, 2022, the Company closed a private offering of $100 million aggregate principal amount of additional 8.25% Senior Secured Notes due 2028 (the “Additional Notes”), which sold at a price of 102.0% of such principal amount. Proceeds from the sale of the Additional Notes are being used: (i) to develop, equip and open The Temporary, which the Company intends to operate while it constructs its permanent American Place facility, (ii) to pay the transaction fees and expenses of the offer and sale of the Additional Notes and (iii) for general corporate purposes. No cash restrictions were applied on the Additional Notes as similarly reserved on the 2028 Notes to fund construction. The Additional Notes were issued pursuant to the indenture, dated as of February 12, 2021 (the “Indenture”), to which the Company issued the $310 million of 2028 Notes noted above (collectively, the “Notes”). In connection with the issuance of the Additional Notes, the Company and the subsidiary guarantors party to the Indenture entered into two Supplemental Indentures with Wilmington Trust, National Association, as trustee, dated February 1, 2022 and February 7, 2022, respectively. On March 3, 2022, the Company entered into a third Supplemental Indenture to establish a special record date for the initial interest payment for the Additional Notes.

The Notes bear interest at a fixed rate of 8.25% per year and mature on February 15, 2028. There is no mandatory debt amortization prior to the maturity date. Interest on the Notes is payable on February 15 and August 15 of each year, with the next interest payment due on August 15, 2022.

The Notes are guaranteed, jointly and severally (such guarantees, the “Guarantees”), by each of the Company’s restricted subsidiaries (collectively, the “Guarantors”). The Notes and the Guarantees are the Company’s and the Guarantors’ general senior secured obligations, subject to the terms of the Collateral Trust Agreement (as defined in the Indenture), ranking senior in right of payment to all of the Company’s and the Guarantors’ existing and future debt that is expressly subordinated in right of payment to the Notes and the Guarantees, if any. The Notes and the Guarantees will rank equally in right of payment with all of the Company’s and the Guarantors’ existing and future senior debt.

The Notes contain representations and warranties, financial covenants, and restrictions on dividends customary for notes of this type. Mandatory prepayments, in whole or in part, of the Notes will be required upon the occurrence of certain events, including sales of certain assets, upon certain changes of control, or should the Company have certain unused funds in the construction disbursement account following the completion of Chamonix.

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On or prior to February 15, 2024, the Company may redeem up to 35% of the original principal amount of the Notes with proceeds of certain equity offerings at a redemption price of 108.25%, plus accrued and unpaid interest to the redemption date. In addition, the Company may redeem some or all of the Notes prior to February 15, 2024 at a redemption price of 100% of the principal amount of the Notes, plus accrued and unpaid interest to the redemption date and a “make-whole” premium.

At any time on or after February 15, 2024, the Company may redeem some or all of the Notes for cash at the following redemption prices:


Redemption Periods	Percentage Premium
February 15, 2024 to February 14, 2025	104.125	%
February 15, 2025 to February 14, 2026	102.063	%
February 15, 2026 and Thereafter	100.000	%

Revolving Credit Facility due 2026. On February 7, 2022, the Company entered into a First Amendment to Credit Agreement with Capital One, N.A., which, among other things, increased the borrowing capacity under the Company’s Credit Agreement, dated as of March 31, 2021, from $15.0 million to $40.0 million (the “Credit Facility”). The amended $40.0 million senior secured revolving credit facility matures on March 31, 2026 and includes a letter of credit sub-facility. The Credit Facility may be used for working capital and other ongoing general purposes.

Under the First Amendment to Credit Agreement, the interest rate per annum applicable to loans under the Credit Facility was amended to be, at the Company’s option, either (i) the Secured Overnight Financing Rate (“SOFR”) plus a margin equal to 3.50% and a Term SOFR adjustment of 0.15%, or (ii) a base rate plus a margin equal to 2.50%. Upon completion of Chamonix (as defined in the agreement), the interest rate per annum applicable to loans under the Credit Facility will be reduced to, at the Company’s option, either (i) SOFR plus a margin equal to 3.00% and a Term SOFR adjustment of 0.15%, or (ii) a base rate plus a margin equal to 2.00%. Terms regarding the annual commitment fee, customary letter of credit fees, and repayment date of March 31, 2026, remain unchanged from the original Credit Agreement, dated as of March 31, 2021. As of this report date, there were no drawn amounts under the Credit Facility and an outstanding standby letter of credit of $1 million related to the American Place project.

The Credit Facility is equally and ratably secured by the same assets and guarantees securing the Notes. The Company may make prepayments of any amounts outstanding under the Credit Facility (without any reduction of the revolving commitments) in whole or in part at any time without penalty.

The Credit Facility contains a number of negative covenants that, subject to certain exceptions, are substantially similar to the covenants contained in the Notes. The Credit Facility also requires compliance with a financial covenant as of the last day of each fiscal quarter, such that Adjusted EBITDA (as defined) for the trailing twelve-month period must equal or exceed the utilized portion of the Credit Facility, if drawn. The Company was in compliance with this financial covenant as of March 31, 2022.

6. INCOME TAXES

The Company’s effective income tax rate for the three-months ended March 31, 2022 and 2021 was 102.0% and (6.2%), respectively. The significant change in the effective income tax rate was primarily due to the Company’s projections for pre-tax book income in 2022, the effects of tax amortization on indefinite lived intangibles in 2022, valuation allowances, and certain permanent differences between tax and financial reporting purposes. The Company expects that it will reverse the tax benefit that was booked, as of March 31, 2022, in future interim periods as pre-tax book income offsets the year-to-date, pre-tax loss.

The Company continues to assess the realizability of deferred tax assets (“DTAs”) and concluded that it has not met the “more likely than not” threshold. As of March 31, 2022, the Company continues to provide a valuation allowance against its DTAs that cannot be offset by existing deferred tax liabilities. In accordance with Accounting Standards Codification 740 (“ASC 740”), this assessment has taken into consideration the jurisdictions in which these DTAs reside. The valuation allowance against DTAs has no effect on the actual taxes paid or owed by the Company.

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8. EARNINGS (LOSS) PER SHARE AND STOCKHOLDERS’ EQUITY

Earnings (Loss) Per Share

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


(In thousands)	Three Months Ended
	March 31,
	2022		2021
Numerator:
Net income (loss) ─ basic	$	110	$	(3,445)
Net income (loss) ─ diluted	$	110	$	(3,445)

Denominator:
Weighted-average common and common share equivalents ─ basic		34,262		27,357
Potential dilution from share-based awards		2,361		—
Weighted-average common and common share equivalents ─ diluted		36,623		27,357
Anti-dilutive share-based awards excluded from the calculation of diluted loss per share		411		3,140

9. SHARE-BASED COMPENSATION

Performance-Based Shares. The Company issued a total of 36,849 performance-based shares to three of the Company’s executives during the first quarter of 2022. The vesting for these performance-based shares is based on the compounded annual growth rate of the Company’s Adjusted EBITDA and Free Cash Flow Per Share, as defined, for the three-year periods ending December 31, 2022, December 31, 2023, and December 31, 2024. For the 2022 period, one-sixth of such performance-based shares will vest on the anniversary date of the award if the Company’s annual Adjusted EBITDA for 2022 reflects at least 10% per annum growth since 2019, and one-sixth of such performance-based shares will vest on the anniversary date if the Company’s annual Free Cash Flow Per Share for 2022 reflects at least 12% per annum growth since 2019. Vesting of the performance-based shares is similar for the 2023 and 2024 periods.

On March 14, 2022, the Company issued 23,325 shares of stock to one of the Company’s executives for having previously met performance-based metrics in 2021 pertaining to Adjusted EBITDA growth and Free Cash Flow Per Share growth.

As of March 31, 2022, the Company had 1,561,690 share-based awards authorized by shareholders and available for grant from the Company’s 2015 Equity Incentive Plan.

The following table summarizes information related to the Company’s common stock options as of March 31, 2022:


		Weighted
	Number	Average
	of Stock	Exercise
	Options	Price
Options outstanding at January 1, 2022	3,221,956	$	2.19
Granted	141,939		9.64
Exercised	(79,750)		1.74
Canceled/Forfeited	—		—
Expired	—		—
Options outstanding at March 31, 2022	3,284,145	$	2.53
Options exercisable at March 31, 2022	2,562,961	$	1.70

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The following tables present the Company’s segment information:


(In thousands)	Three Months Ended March 31, 2022
									Contracted
									Sports
	Mississippi		Indiana		Colorado		Nevada		Wagering		Total
Revenues
Casino	$	14,683	$	6,716	$	3,631	$	4,054	$	—	$	29,084
Food and beverage		4,939		873		420		279		—		6,511
Hotel		1,222		822		135		—		—		2,179
Other operations, including contracted sports wagering		469		225		47		78		2,830		3,649
	$	21,313	$	8,636	$	4,233	$	4,411	$	2,830	$	41,423

Adjusted Segment EBITDA	$	5,950	$	1,138	$	(319)	$	828	$	2,767	$	10,364
Other operating expenses:
Depreciation and amortization												(1,792)
Corporate expenses												(1,967)
Project development costs												(165)
Preopening costs												(786)
Loss on disposal of assets, net												(8)
Stock-based compensation												(343)
Operating income												5,303
Other expenses:
Interest expense, net												(6,399)
Loss on modification of debt												(4,406)
												(10,805)
Loss before income taxes


		Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021	3
	Consolidated Balance Sheets at March 31, 2022 and December 31, 2021	4
	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021	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	34
Item 4.	Controls and Procedures	35

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 6.	Exhibits	36


Signatures		37