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 September 30, 2023
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 November 6, 2023, there were 34,587,350 shares of Common Stock, $0.0001 par value per share, outstanding.

Table of Contents

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

FORM 10-Q

INDEX


		Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022	3
	Consolidated Balance Sheets at September 30, 2023 and December 31, 2022	4
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	6
	Condensed Notes to Consolidated Financial Statements	8
	Note 1 ⸺ Organization	8
	Note 2 ⸺ Basis of Presentation and Significant Accounting Policies	8
	Note 3 ⸺ Leases	12
	Note 4 ⸺ Long-Term Debt	15
	Note 5 ⸺ Income Taxes	17
	Note 6 ⸺ Commitments and Contingencies	18
	Note 7 ⸺ Earnings (Loss) Per Share	18
	Note 8 ⸺ Share-Based Compensation	18
	Note 9 ⸺ Segment Reporting and Disaggregated Revenue	19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	40

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 6.	Exhibits	42


Signatures		43

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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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenues
Casino	$	50,240	$	29,721	$	131,586	$	88,293
Food and beverage		9,086		6,811		25,419		20,255
Hotel		2,560		2,490		7,052		7,076
Other operations, including contracted sports wagering		9,657		2,371		16,974		11,575
		71,543		41,393		181,031		127,199
Operating costs and expenses
Casino		19,437		10,292		49,771		30,273
Food and beverage		8,330		6,814		24,815		20,134
Hotel		1,164		1,256		3,611		3,524
Other operations		691		587		1,878		1,594
Selling, general and administrative		22,017		15,218		61,823		44,795
Project development costs, net		21		(149)		45		33
Preopening costs		1,051		2,594		12,634		4,914
Depreciation and amortization		8,468		2,386		22,482		6,012
Loss on disposal of assets		7		—		7		3
		61,186		38,998		177,066		111,282
Operating income		10,357		2,395		3,965		15,917
Other (expense) income
Interest expense, net		(5,867)		(5,838)		(16,319)		(19,225)
Loss on modification of debt		—		(105)		—		(4,530)
Gain on settlements		29		—		384		—
		(5,838)		(5,943)		(15,935)		(23,755)
Income (loss) before income taxes		4,519		(3,548)		(11,970)		(7,838)
Income tax (benefit) provision		(74)		29		452		(16)
Net income (loss)	$	4,593	$	(3,577)	$	(12,422)	$	(7,822)

Basic earnings (loss) per share	$	0.13	$	(0.10)	$	(0.36)	$	(0.23)
Diluted earnings (loss) per share	$	0.13	$	(0.10)	$	(0.36)	$	(0.23)

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)


	September 30,		December 31,
	2023		2022
ASSETS
Current assets
Cash and equivalents	$	25,945	$	56,589
Restricted cash		58,047		134,587
Accounts receivable, net		8,272		4,082
Inventories		1,736		1,479
Prepaid expenses and other		6,570		6,184
		100,570		202,921

Property and equipment, net		432,719		339,057
Operating lease right-of-use assets, net		45,480		15,771
Finance lease right-of-use assets, net		2,661		3,808
Goodwill		21,286		21,286
Other intangible assets, net		61,097		10,869
Deposits and other		1,291		1,617
	$	665,104	$	595,329
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	5,861	$	4,602
Construction payable		23,007		30,279
Accrued payroll and related		4,190		3,784
Accrued interest		4,758		12,966
Other accrued expenses and current liabilities		13,603		9,964
Current portion of operating lease obligations		4,141		2,485
Current portion of finance lease obligations		1,659		1,581
		57,219		65,661

Operating lease obligations, net of current portion		41,627		13,418
Finance lease obligations, net of current portion		3,141		4,727
Other long-term liabilities, net of current portion		1,235		—
Long-term debt, net		464,401		401,852
Deferred income taxes, net		1,476		1,024
Contract liabilities, net of current portion		6,432		8,856
		575,531		495,538
Commitments and contingencies (Note 6)
Stockholders’ equity
Common stock, $0.0001 par value, 100,000,000 shares authorized; 35,302,549 and 35,302,549 shares issued and 34,587,350 and 34,407,654 shares outstanding		4		4
Additional paid-in capital		112,575		110,590
Treasury stock, 715,199 and 894,895 common shares		(872)		(1,091)
Accumulated deficit		(22,134)		(9,712)
		89,573		99,791
	$	665,104	$	595,329

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, 2023	35,302	$	4	$	110,590	895	$	(1,091)	$	(9,712)	$	99,791
Options exercised	—		—		12	(4)		5		—		17
Stock-based compensation	—		—		748	—		—		—		748
Net loss	—		—		—	—		—		(11,415)		(11,415)
Balance, March 31, 2023	35,302		4		111,350	891		(1,086)		(21,127)		89,141
Options exercised and restricted stocks vested	—		—		(65)	(166)		202		—		137
Stock-based compensation	—		—		655	—		—		—		655
Net loss	—		—		—	—		—		(5,600)		(5,600)
Balance, June 30, 2023	35,302		4		111,940	725		(884)		(26,727)		84,333
Restricted stocks vested	—		—		(91)	(10)		12		—		(79)
Stock-based compensation	—		—		726	—		—		—		726
Net income	—		—		—	—		—		4,593		4,593
Balance, September 30, 2023	35,302	$	4	$	112,575	715	$	(872)	$	(22,134)	$	89,573


									Retained
				Additional					Earnings		Total
	Common Stock			Paid-in		Treasury Stock			(Accumulated		Stockholders’
	Shares	Dollars		Capital		Shares	Dollars		Deficit)		Equity
Balance, January 1, 2022	35,302	$	4	$	108,911	1,060	$	(1,292)	$	5,092	$	112,715
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
Restricted stocks vested	—		—		(47)	(39)		47		—		—
Stock-based compensation	—		—		487	—		—		—		487
Net loss	—		—		—	—		—		(4,355)		(4,355)
Balance, June 30, 2022	35,302		4		109,708	918		(1,120)		847		109,439
Options exercised	—		—		9	(15)		18		—		27
Stock-based compensation	—		—		532	—		—		—		532
Net loss	—		—		—	—		—		(3,577)		(3,577)
Balance, September 30, 2022	35,302	$	4	$	110,249	903	$	(1,102)	$	(2,730)	$	106,421

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)


	Nine Months Ended
	September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(12,422)	$	(7,822)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		22,482		6,012
Amortization of debt issuance costs, discounts and premiums		2,042		1,227
Non-cash change in ROU operating lease assets		2,810		2,506
Stock-based compensation		2,129		1,362
Loss on disposal of assets		7		3
Gain on settlements		(384)		—
Loss on modification of debt		—		4,530
Other operating activities		437		—
Deferred income taxes		452		(16)
Increases and decreases in operating assets and liabilities:
Accounts receivable		(4,190)		1,887
Prepaid expenses, inventories and other		(643)		(2,784)
Operating lease liabilities		(2,654)		(2,626)
Contract liabilities		(1,611)		2,635
Accounts payable and other liabilities		(5,248)		(6,874)
Net cash provided by operating activities		3,207		40
Cash flows from investing activities:
Capital expenditures		(119,898)		(116,148)
Proceeds from insurance settlement related to property damage		355		—
Acquisition of intangible assets		(50,251)		—
Other		—		(1,086)
Net cash used in investing activities		(169,794)		(117,234)
Cash flows from financing activities:
Proceeds from Senior Secured Notes due 2028 borrowings		40,000		100,000
Proceeds from premium on Senior Secured Notes due 2028 borrowings		—		2,000
Payment of debt discount and issuance costs		(6,494)		(7,945)
Borrowings under revolving credit facility		42,950		—
Repayment of revolving credit facility borrowings		(15,950)		—
Repayment of finance lease obligations		(1,159)		(383)
Proceeds from exercise of stock options		75		166
Other		(19)		(108)
Net cash provided by financing activities		59,403		93,730

Net decrease in cash, cash equivalents and restricted cash		(107,184)		(23,464)
Cash, cash equivalents and restricted cash, beginning of period		191,176		265,293
Cash, cash equivalents and restricted cash, end of period	$	83,992	$	241,829

See condensed notes to consolidated financial statements.

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) – (Continued)

(In thousands)


	Nine Months Ended
	September 30,
	2023		2022
Supplemental Cash Flow Disclosure:
Cash paid for interest, net of amounts capitalized	$	25,539	$	27,726

Supplemental Schedule of Non-Cash Investing and Financing Activities:
Accounts and construction payables related to property and equipment	$	23,065	$	17,312
Note payable incurred for asset acquisition		1,500		—
Right-of-use assets obtained in exchange for operating lease liabilities		30,178		475
Right-of-use asset and liability remeasurements:
Operating leases		2,341		1,773
Financing leases		(151)		—

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 six casinos: five on real estate that we own or lease and one located within a hotel owned by a third party. We are currently constructing our seventh property, Chamonix Casino Hotel (“Chamonix”), adjacent to our existing Bronco Billy’s Casino and Hotel in Cripple Creek, Colorado. We are also designing our permanent American Place casino destination, which will be built adjacent to a temporary facility that we opened in February 2023, named The Temporary by American Place (“The Temporary”). Additionally, we benefit from seven permitted sports wagering “skins” – three in Colorado, three in Indiana, and one in Illinois. Other companies operate or will operate these online sports wagering websites under their brands, paying us a percentage of revenues, as defined, subject to annual minimum amounts.

Starting in the first quarter of 2023, the Company updated its reportable segments to Midwest & South, West, and Contracted Sports Wagering. This change reflects a realignment within the Company as a result of our continued growth. See Note 9 for additional information about the Company’s segments.

The following table presents selected information concerning our segments:


Segments and Properties		Locations
Midwest & South
The Temporary by American Place (opened on February 17, 2023) and American Place (under development)		Waukegan, IL (northern suburb of Chicago)
Silver Slipper Casino and Hotel		Hancock County, MS (near New Orleans)
Rising Star Casino Resort		Rising Sun, IN (near Cincinnati)
West
Bronco Billy’s Casino and Hotel		Cripple Creek, CO (near Colorado Springs)
Chamonix Casino Hotel (scheduled to open on December 26, 2023)		Cripple Creek, CO (near Colorado Springs)
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”), one of which is currently idle		Colorado
Three sports wagering websites (“skins”), two of which are currently idle		Indiana
One sports wagering website (“skin”), commenced in August 2023		Illinois

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 2022 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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.

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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.

Methods and assumptions used to estimate the fair value of financial instruments are affected by the duration of the instruments and other factors used by market participants to estimate value. The carrying amounts for cash and equivalents, restricted cash, accounts receivable, and accounts payable approximate their estimated fair value because of the short durations of the instruments and inconsequential rates of interest.

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 consist of funds placed into a construction reserve, interest-bearing account to fund the completion of the Chamonix construction project, in accordance with the Company’s debt covenants.

Accounts Receivable. Accounts receivable consist primarily of casino, hotel and other receivables, are typically non-interest bearing, and are carried net of an appropriate reserve to approximate fair value. Reserves are estimated based on specific review of customer accounts including the customers’ willingness and ability to pay and nature of collateral, if any, as well as historical collection experience and current economic and business conditions. Accounts are written off when management deems the account to be uncollectible and recoveries of accounts previously written off are recorded when received.


(In thousands)	September 30,		December 31,
	2023		2022
Accounts receivable	$	8,508	$	4,331
Less: Reserves		(236)		(249)
	$	8,272	$	4,082

At September 30, 2023, the balance in accounts receivables includes $3.6 million in connection with two online sports wagering agreements that ceased operations in September 2023. We received all of such amount in October 2023.

Management believes that, as of September 30, 2023, no significant concentrations of credit risk existed for which a reserve had not already been recorded.

Other Intangible Assets. In March 2023, the Company paid $50.3 million to the Illinois Gaming Board (“IGB”) for required gaming license fees to operate The Temporary, and upon its opening, American Place. Management has deemed the gaming license in Illinois as having an indefinite economic life, as such license is eligible for renewal every four years if all regulatory requirements are met. There may be an additional one-time reconciliation fee, depending on interim gaming revenues, which is calculated three years after commencing operations and can be paid over a six-year period. See Note 6 for details.

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Revenue Recognition:

Accrued Club Points and Customer Loyalty Programs: 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 sports wagering, golf, RV park operations, and entertainment). The majority of the Company’s revenues are derived from casino gaming, principally slot machines.

The transaction price for a casino wager is the difference between gaming wins and losses, not the total amount wagered. As such wagers have similar characteristics, the Company accounts for its gaming transactions on a portfolio basis by recognizing net win per gaming day versus 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 casino customers choose to earn points under its customer loyalty programs. As points are accrued, the Company defers a portion of its casino 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 for various loyalty program benefits, primarily for “free casino play,” complimentary dining, or hotel stays, among others, depending on each property’s specific offers. Upon redemption, the related revenue is recognized at retail value within the department providing the goods or services. Unredeemed points are forfeited if the customer becomes and remains inactive for a specified period of time. Such liabilities were approximately $0.8 million for September 30, 2023 and $0.7 million for December 31, 2022, and these amounts are included in “other accrued expenses and current liabilities” on the consolidated balance sheets.

Revenue for food and beverage, hotel, and other revenue transactions is typically the net amount collected from customers 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 of the Company until the service is provided to the customer.

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 The Temporary/American Place (the “Sports Agreements”). As part of these long-term Sports Agreements, the Company received one-time “market access” fees, which are recorded as long-term liabilities and then recognized as revenue ratably over the initial contract terms (or as accelerated due to early termination), beginning with the earlier of operations commencement or contractual commencement. One of the Company’s contracted parties recently announced that it was ceasing online operations in several states, including in Indiana and Colorado. Accordingly, this accelerated the revenue recognition of $1.5 million in related market access fees, which was recognized in the third quarter of 2023, and created one available skin in each of Indiana and Colorado.

Indiana. The Company’s three Sports Agreements commenced operations in December 2019, April 2021 and December 2021. Two of these Sports Agreements ceased operations, one in May 2022 and the second in September 2023. Under the Company’s remaining active Sports Agreement in Indiana, we receive a percentage of revenues (as defined), subject to an annualized minimum of $1.0 million. For its two idle skins, the Company could operate the skins itself or utilize replacement operators. There is no certainty that the Company will be able to enter into agreements with replacement operators or successfully operate the skins itself.

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Colorado. The Company’s three original Sports Agreements commenced operations in June 2020, December 2020 and April 2021. Two of these Sports Agreements ceased operations, one in May 2022 and the second in September 2023. In December 2022, the Company signed a Sports Agreement with a new third party for one of its available skins. The upfront fee was capitalized upon signing. In March 2023, when the Sports Agreement began its contractual term, we began amortization of the upfront fee over the 10-year term of the agreement. Under the Company’s two current Sports Agreements in Colorado, we receive a percentage of revenues (as defined), subject to annualized minimums totaling $2.0 million. For its idle skin, the Company could operate the skin itself or utilize a replacement operator. There is no certainty that the Company will be able to enter into an agreement with a replacement operator or successfully operate the skin itself.

Illinois. In May 2022, the Company signed a Sports Agreement for its sole Illinois sports skin and received an upfront fee of $5.0 million, which was capitalized. In August 2023, when the Sports Agreement began its contractual term, we began amortization of the upfront fee over the eight-year term of the agreement. The Company will also receive a percentage of revenues (as defined), subject to a minimum of $5.0 million per year.

In addition to the “market access” fees, deferred revenue includes quarterly and annual prepayments of contracted revenue, as required in four of the Sports Agreements. As of September 30, 2023, $3.4 million of such deferred revenue has been recognized during the year.

Deferred revenues consisted of the following, as discussed above:


(In thousands)		September 30,		December 31,
	Balance Sheet Location	2023		2022
Deferred revenue, current	Other accrued expenses and current liabilities	$	2,435	$	1,651
Deferred revenue, net of current portion	Contract liabilities, net of current portion		6,432		8,856
		$	8,867	$	10,507

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 9.

Income Taxes. For interim income tax reporting for the three and nine months ended September 30, 2023, the Company estimates its annual effective tax rate and applies it to its year-to-date pretax income or loss.

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, 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.

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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, as well as depreciation (or amortization) expense associated with the ROU asset, depending on whether those ROU assets are expected to transfer to the Company upon lease expiration. If ownership of a finance lease ROU asset is expected to transfer to the Company upon lease expiration, then it is included with the Company’s property and equipment; other qualifying finance lease ROU assets, based on other classifying criteria under Accounting Standards Codification 842 (“ASC 842”), are disclosed separately as “Finance Lease Right-of-Use Assets, Net.” 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, plus any qualifying initial direct costs paid prior to commencement for ROU assets. 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 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 for operating leases. For finance leases, the ROU asset depreciates/amortizes on a straight-line basis over the shorter of the lease term or useful life of the ROU asset as applicable, and the lease liability accretes interest based on the interest method using the discount rate determined at lease commencement.

Preopening costs. Preopening costs are related to the preopening phases of new ventures, in accordance with accounting standards regarding start-up activities, and are expensed as incurred. These costs consist of payroll, advertising, outside services, organizational costs and other expenses directly related to both the Chamonix and The Temporary/American Place developments.

Debt Issuance Costs and Debt Discounts/Premiums. Debt issuance costs and debt discounts/premiums incurred in connection with the issuance of debt have been included as a component of the carrying amount of debt, and are amortized/accreted over the contractual term of the debt to interest expense, using the straight-line method, which approximates the effective interest method. When its existing debt agreements are determined to have been modified, the Company amortizes/accretes such costs to interest expense using the effective interest method over the terms of the modified debt agreement.

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 material leases in which it is the lessor. As lessee, the Company has finance leases for a hotel and certain equipment and operating leases for land, casino and office space, equipment, and buildings. The Company’s remaining lease terms, including extensions, range from one month to approximately 99 years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants, but the land leases at Silver Slipper and The Temporary/American Place do include contingent rent, as further discussed below.

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Operating Leases

Waukegan Ground Lease through February 2122 and Option to Purchase. In January 2023, the Company’s subsidiary, FHR-Illinois, LLC, entered into a 99-year ground lease (the “Ground Lease”) for approximately 32 acres of land (the “City-Owned Parcel”) with the City of Waukegan in Illinois (the “City”). The ground lease commenced concurrently with the opening of The Temporary on February 17, 2023. The City-Owned Parcel and an adjacent 10-acre parcel owned by the Company comprise the location of American Place, including The Temporary. Annual rent under the Ground Lease is the greater of (i) $3.0 million (the “Annual Guaranteed Minimum Rent”), or (ii) 2.5% of gross gaming revenue (as defined in the lease) generated by either the Temporary or American Place.

The Company has the right to purchase the City-Owned Parcel at any time during the term of the Ground Lease for $30 million. If it does so prior to the opening of the permanent American Place facility, then it must continue to pay rent due to the City under the Ground Lease until the permanent casino is open.

Silver Slipper Casino Land Lease through April 2058 and Option 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. Annual minimum rent is $0.9 million throughout the lease term until 2058, plus contingent rents of 3% of gross gaming revenue (as defined in the lease) in excess of $3.65 million per month.

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.

Bronco Billy’s / Chamonix Lease through January 2035 and Option to Purchase. The Company’s subsidiary leases certain parcels, 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 exercised its third renewal option to extend the lease term through January 2026, with current annual lease payments of $0.4 million. Annual minimum rent will increase to $0.5 million starting in February 2026 with adjustments on each anniversary thereafter, based on the consumer price index. 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.

Grand Lodge Casino Lease through December 2024. 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 4). The lessor 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 12-month period preceding the acquisition (or pro-rated if less than 12 months remain on the lease), plus the fair market value of the Grand Lodge Casino’s personal property.

The current annual rent of $2.0 million is applicable through the remaining lease term. In February 2023, the lease was amended to extend the current term through December 31, 2024 (with no changes to rent). Accordingly, the Company remeasured this lease’s related ROU asset and liability balances on its balance sheet upon the effective date of the amendment.

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.

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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-guestroom hotel at Rising Star Casino Resort. At any time during the lease term, the Company has the option to purchase the hotel, and approximately 3.01 acres of land on which it resides, 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 September 30, 2023, such potential purchase price was $2.4 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.

The components of lease expenses are as follows:


(In thousands)		Three Months Ended				Nine Months Ended
	Classification within	September 30,				September 30,
Lease Costs	Statement of Operations	2023		2022		2023		2022
Operating leases:
Fixed/base rent	Selling, General and Administrative Expenses	$	2,008	$	1,206	$	5,970	$	3,549
Short-term payments	Selling, General and Administrative Expenses		—		33		22		103
Variable payments	Selling, General and Administrative Expenses		281		314		935		1,069
Finance leases:
Amortization of leased assets	Depreciation and Amortization		412		39		1,113		118
Interest on lease liabilities	Interest Expense, Net		89		34		309		106
Total lease costs		$	2,790	$	1,626	$	8,349	$	4,945

Leases recorded on the balance sheet consist of the following:


(In thousands)
		September 30,		December 31,
Leases	Balance Sheet Classification	2023		2022
Assets
Operating lease assets	Operating Lease Right-of-Use Assets, Net	$	45,480	$	15,771
Finance lease assets	Property and Equipment, Net⁽¹⁾		4,448		4,566
Finance lease assets	Finance Lease Right-of-Use Assets, Net⁽²⁾		2,661		3,808
Total lease assets		$	52,589	$	24,145

Liabilities
Current
Operating	Current Portion of Operating Lease Obligations	$	4,141	$	2,485
Finance	Current Portion of Finance Lease Obligations		1,659		1,581
Noncurrent
Operating	Operating Lease Obligations, Net of Current Portion		41,627		13,418
Finance	Finance Lease Obligations, Net of Current Portion		3,141		4,727
Total lease liabilities		$	50,568	$	22,211

__________

(1)	Finance lease assets are recorded net of accumulated amortization of $2.7 million (after the effects of $0.6 million in disposals) for September 30, 2023 and $3.2 million for December 31, 2022.

(2)

These finance lease assets are recorded separately from Property and Equipment due to meeting qualifying classification criteria under ASC 842, but ownership of such assets is not expected to transfer to the Company upon term expiration. Additionally, amortization of these assets are expensed over the duration of the lease term or the assets’ estimated useful lives, whichever is earlier.

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Maturities of lease liabilities as of September 30, 2023 are summarized as follows:


(In thousands)
	Operating		Finance
Years Ending December 31,	Leases		Leases
2023 (excluding the nine months ended September 30, 2023)	$	1,923	$	489
2024		7,735		1,957
2025		5,722		1,721
2026		4,864		652
2027		4,515		489
Thereafter		316,582		—
Total future minimum lease payments		341,341		5,308
Less: Amount representing interest		(295,573)		(508)
Present value of lease liabilities		45,768		4,800
Less: Current lease obligations		(4,141)		(1,659)
Long-term lease obligations	$	41,627	$	3,141

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


	September 30,		December 31,
Lease Term and Discount Rate	2023		2022
Weighted-average remaining lease term
Operating leases	67.1	years	23.2	years
Finance leases	3.0	years	3.7	years
Weighted-average discount rate
Operating leases	10.90	%	9.73	%
Finance leases	7.56	%	7.08	%

Supplemental cash flow information related to leases is as follows:


(In thousands)	Nine Months Ended
	September 30,
Cash paid for amounts included in the measurement of lease liabilities:	2023		2022
Operating cash flows for operating leases	$	5,813	$	3,670
Operating cash flows for finance leases	$	309	$	106
Financing cash flows for finance leases	$	1,159	$	383

4. LONG-TERM DEBT

Long-term debt consists of the following:


(In thousands)	September 30,		December 31,
	2023		2022
Revolving Credit Facility due 2026	$	27,000	$	—
8.25% Senior Secured Notes due 2028		450,000		410,000
Less: Unamortized debt issuance costs and discounts/premiums, net		(12,599)