U.S. UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
þAnnual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended: December 31, 20132014
o
Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Commission file number 1-32583

 
FULL HOUSE RESORTS, INC.
(Exact Name of Registrant as specified in Its Charter)

 
Delaware13-3391527
(State or Other Jurisdiction(I.R.S. Employer
of Incorporation or Organization)Identification No.)
 
4670 S. Fort Apache Rd., Suite 190, Las Vegas, Nevada 89147
(Address and zip code of principal executive offices)
 
(702) 221-7800
(Registrant’s Telephone Number, Including Area Code)
 
Securities registered under Section 12(b) of the Exchange Act:
 
Common Stock, $.0001 per ShareThe NASDAQ Stock Market LLC
(Title of Each Class)(Name of Each Exchange on Which Registered)
 
Securities registered under Section 12(g) of the Exchange Act:
 
None
(Title of class)

 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o
 
Indicate by checkmark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 þ No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).   Yes  þ      No  o
 
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer o     Accelerated Filer o      Non Accelerated Filer oSmaller reporting company  þ
Do not check if smaller reporting company
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
 
The aggregate market value of registrant’s voting $.0001 par value common stock held by non-affiliates of the registrant, as of June 30, 2013,2014, was: $47,027,115.$24,708,114.  As of March 1, 2014,25, 2015, there were 18,870,68118,876,681 shares of Common Stock,common stock, $.0001 par value per share, outstanding.
 
Documents Incorporated By Reference
The information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated by reference from the Registrant’s definitive proxy statement relating the annual meeting of stockholders to be held in 2014,2015, which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Form 10-K relates.
 


 
 

 

 
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PART I
2

 
Forward PART ILooking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to our financial condition, profitability, liquidity, resources, business outlook, market forces, corporate strategies, contractual commitments, legal matters, capital requirements and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. We note that many factors could cause our actual results and experience to change significantly from the anticipated results or expectations expressed in our forward-looking statements. When words and expressions such as “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely,” “enable,” or similar words or expressions are used in this Form 10-K, as well as statements containing phrases such as “in our view,” “there can be no assurance,” “although no assurance can be given,” or “there is no way to anticipate with certainty,” forward-looking statements are being made.
Various risks and uncertainties may affect the operation, performance, development and results of our business and could cause future outcomes to change significantly from those set forth in our forward-looking statements, including the following factors:
 
Item 1. Business.
our growth strategies;
 
Backgroundour potential acquisitions and investments;
 
successful integration of acquisitions;
risks related to development and construction activities;
anticipated trends in the gaming industries;
patron demographics;
general market and economic conditions, including but not limited to, the effects of local and national economic, housing and energy conditions on the economy in general and on the gaming and lodging industries in particular;
access to capital and credit, including our ability to finance future business requirements;
our dependence on key personnel;
the availability of adequate levels of insurance;
changes in federal, state, and local laws and regulations, including environmental and gaming licenses or legislation and regulations;
ability to obtain and maintain gaming and other governmental licenses;
regulatory approvals;
impact of weather;
competitive environment, including increased competition in our target market areas;
increases in the effective rate of taxation at any of our properties or at the corporate level; and
risks, uncertainties and other factors described from time to time in this and our other SEC filings and reports.
For a more detailed description of certain Risk Factors affecting our business, see Item 1A, “Risk Factors.”
We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or conditions. New risks emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements.
Item 1. Business.
Background
Formed as a Delaware corporation on January 5, 1987, Full House Resorts, Inc., a Delaware corporation formedowns, operates, develops, manages, and/or invests in 1987,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, (collectively, Full House, we, our, ours, us) develops, manages, operates, and/except where stated or invests in gaming-related enterprises. We continue to actively investigate, individually and with partners, new business opportunities and our long-term strategy is to continue deriving revenues primarily from owned operations, as well as management fees. In furtherance of that strategy we made significant acquisitions of the Rising Star Casino Resort and Grand Lodge Casino leased operation in 2011 and the Silver Slipper Casino in 2012. With the 2012 sale of the management agreement for the FireKeepers Casino in Michigan, we have transitioned the primary source of our revenues to owned entities.context otherwise indicates.
 
We currently own three casino properties and operate a fourth casino subject to a lease, one casino property and we have one management contractas follows:
 
Property
Acquisition
Date
 
Location
 Slot
Machines
Table
Games
Hotel
Rooms
Silver Slipper Casino (Owned)2012Bay St. Louis, MS (near New Orleans) 93829
129(1)
Rising Star Casino Resort (Owned)2011Rising Sun, IN (near Cincinnati) 92128
294(2)
Stockman’s Casino (Owned)2007Fallon, NV (one hour east of Reno) 2654--
Grand Lodge Casino (leased and part of the Hyatt Regency Lake Tahoe Resort)2011Incline Village, NV (North Shore of Lake Tahoe) 25420
--(3)
(1)Silver Slipper Casino is expected to open its hotel in the first half of 2015.
(2)Includes a 190-room hotel that we own and operate, and an adjacent 104-room hotel that we lease pursuant to a 10-year capital lease.
(3)Under the Facilities Agreement dated June 29, 2011 with Hyatt Equities, L.L.C. we have the ability to provide rooms to our guests at the Hyatt Regency at Lake Tahoe upon mutually agreeable rates, as well as other amenities and services that cater to our guests and support our operations.
We manage a group of related casino properties. These properties are located in four distinctour casinos based on geographical regions ofwithin the United States - the Gulf Coast, the Midwest,States.  Accordingly, Stockman’s Casino and Grand Lodge Casino comprise a Northern Nevada and the Southwest. We ownbusiness segment, while Rising Star Casino Resort located in Rising Sun, Indiana,and the Silver Slipper Casino locatedare currently distinct segments.  We previously managed certain casinos owned by Native American tribes and we also consider our fee-based casino development and management services as a segment, although none of our current casino properties are managed for others.
Until our three-year contract expired in Bay St. Louis, Mississippi and Stockman’s Casino located in Fallon, Nevada. We lease the Grand Lodge Casino at the Hyatt Regency Lake Tahoe Resort, Spa and Casino located in Incline Village, Nevada on the North Shore of Lake Tahoe. We manage theSeptember 2014, we managed Buffalo Thunder Casino and Resort, and the Cities of Gold, and other gaming facilities both located innear Santa Fe, New Mexico, for the Pueblo of Pojoaque pursuant to an agreement with a three-year term expiring in September 2014.Pojoaque.
 
PreviouslyUntil we sold our interest in March 2012, we managed, through a 50%-owned joint venture, the FireKeepers Casino near Battle Creek, Michigan for the Nottawaseppi Huron Band of Potawatomi through a 50% joint venture, pursuant to a seven-year management agreement through March 30, 2012, when our interest in the joint venture was sold.agreement.
Recent Developments
 
Properties Currently OperatingSolicitation and Settlement Agreement
 
Gulf Coast Casino OperationsOn November 28, 2014, Full House, and Daniel R. Lee, Bradley M. Tirpak and Craig W. Thomas (jointly and severally, the “Shareholder Group”), entered into a Settlement Agreement (the “Settlement Agreement”) to resolve actions taken by the Shareholder Group to call a special meeting of the Company’s shareholders for the purpose of, among other things, nominating certain individuals to our board of directors and amending the Company’s by-laws (the “Solicitation”).
Pursuant to the Settlement Agreement, among other things:
-           The size of our board of directors was increased from five to nine members, creating four vacancies on the board of directors.
-          We accepted the resignation of Andre M. Hilliou and Mark J. Miller as directors, effective November 28, 2014, resulting in two additional vacancies on the board of directors.
-           W.H. Baird Garrett, Raymond Hemmig, Ellis Landau, Daniel R. Lee, Bradley M. Tirpak and Craig W. Thomas (the “Shareholder Group Nominees”) were appointed by the board of directors to fill the six vacancies, each subject to normal and customary state licensing requirements. Pursuant to the Amended Settlement Agreement (defined below), Mr. Hemmig subsequently resigned, leaving the current size of the board of directors at eight members. Mr. Hemmig had no disagreements with the Company.
-           At the Company’s 2015 annual meeting of stockholders (the “2015 Annual Meeting”), the  Company will nominate Kenneth R. Adams, Carl G. Braunlich, Kathleen Marshall and each of the Shareholder Group Nominees, with the exception of Mr. Hemmig, to the board of directors.
-           The Shareholder Group has irrevocably withdrawn its Solicitation, and has agreed to immediately cease all efforts related to the Solicitation.
-           Through the end of our 2016 meeting of the stockholders (or an earlier date upon the occurrence of certain events), each member of the Shareholder Group has agreed not to engage in certain customary standstill restrictions.
-           The Company and the Shareholder Group agreed to a mutual release of claims, including those arising in respect of, or in connection with, the Solicitation.
-           The Company agreed to reimburse the Shareholder Group for actual out-of-pocket expenses in the aggregate amount up to $215,000 incurred in connection with the Solicitation.
Resignation of Andre M. Hilliou and Mark J. Miller
Andre M. Hilliou resigned as a director and Chief Executive Officer of the Company effective November 28, 2014. Pursuant to a Separation Agreement entered into between Mr. Hilliou and the Company (the “Hilliou Separation Agreement”), it was agreed that Mr. Hilliou’s employment with the Company would be terminated at a future date, subject to the Company using its best efforts to  comply with its covenants under the Company’s existing credit facilities.  Mark J. Miller resigned as a director and Chief Operating Officer of the Company effective November 28, 2014. Pursuant to a Separation Agreement entered into between Mr. Miller and the Company (the “Miller Separation Agreement” and together with the Hilliou Separation Agreement, the “Separation Agreements”), it was agreed that Mr. Miller’s employment would be terminated at a future date, subject to the Company using its best efforts to comply with its covenants under the Company’s existing credit facilities.  On January 9, 2015, in conjunction with the amendment of our existing credit facilities, Mr. Hilliou’s and Mr. Miller’s employment was terminated.  Pursuant to the Separation Agreements, (i) all outstanding Company restricted stock held by Messrs. Hilliou and Miller (constituting 60,000 shares of common stock held by each) accelerated and vested in full as of their resignation and (ii) in connection with their terminations of employment, Messrs. Hilliou and Miller each received a cash severance payment of $644,724 and $599,830, respectively, as well as company-paid continued healthcare coverage to the earlier of December 31, 2015 or the date that such executive is covered by another employer’s comparable health plan. On February 18, 2015, as part of our tax strategy, we entered into an amendment to the Separation Agreements with Mr. Hilliou and Mr. Miller respectively (collectively, the “Separation Amendments”).  The Separation Amendments provide us the ability, in our sole discretion, to accelerate any remaining severance payments to payment of a single lump sum.
Employment Agreement of Daniel R. Lee
On November 28, 2014, we entered into an Employment Agreement with Mr. Lee (the “Employment Agreement”) pursuant to which Mr. Lee serves as our Chief Executive Officer. The Employment Agreement was effective as of November 28, 2014 and expires on November 30, 2018, unless earlier terminated.
Mr. Lee’s Employment Agreement provides for an annual base salary of $350,000 and an opportunity to earn an annual discretionary cash performance bonus, based on the achievement of individual and Company-based performance criteria established by our board of directors or compensation committee. In addition, pursuant to the Employment Agreement, Mr. Lee is entitled to (i) participate in customary health, welfare and fringe benefit plans, or at his option, a private medical plan, at our sole expense and (ii) Company-paid life insurance and long-term disability policies each covering $525,000.
In connection with entering into the Employment Agreement, Mr. Lee was granted nonqualified stock options covering 943,834 shares of Company common stock, with a per share exercise price equal to $1.25, which was the closing price per share on the grant date. The stock options are intended to be an “employee inducement award” and are scheduled to vest over a four-year period, with 25% vesting on November 28, 2015 and the remaining 75% vesting in substantially equal installments on each monthly anniversary thereafter, subject to Mr. Lee’s continued service through the applicable vesting date.  The stock options will vest in full on a change in control of the Company.
Upon Mr. Lee’s termination of employment due to death or disability, he will be entitled to accelerated vesting of all outstanding stock options held by Mr. Lee on the termination date with respect to such number of shares underlying each stock option that would have vested over the one-year period immediately following the termination date had the stock options continued to vest in accordance with its terms.
If Mr. Lee’s employment is terminated by us without “cause” or by Mr. Lee for “good reason” (each, as defined in the Employment Agreement), then, in addition to accrued amounts, Mr. Lee will be entitled to receive the following payments and benefits:
-           cash severance in an aggregate amount equal to the greater of (i) the salary Mr. Lee would have earned had he remained employed from the termination date through the fourth anniversary of the effective date of the Employment Agreement and (ii) 12 months’ salary, payable in installments through the fourth anniversary of the Employment Agreement effective date or, if the termination occurs within six months following a change in control, in a lump sum;
-           Company-paid healthcare continuation coverage for Mr. Lee and his dependents for the original term of the agreement, unless covered by comparable insurance by a subsequent employer; and
-           full accelerated vesting of all outstanding Company stock options held by Mr. Lee on the termination dates.
 Mr. Lee’s right to receive the severance payments and benefits described above is subject to the delivery of an effective mutual general release of claims.  The Employment Agreement also contains confidentiality, non-solicitation and non-competition provisions.
Settlement Agreement Amendment
On January 28, 2015, we entered into that certain First Amendment to Settlement Agreement (the “Amended Settlement Agreement”), which modified portions of the Settlement Agreement.  The Settlement Agreement required, among other things, (i) a board of directors consisting of nine members, and (ii) that Raymond Hemmig be nominated and elected to the board of directors at the 2015 Annual Meeting.  Pursuant to the resignation of Mr. Hemmig, the Company and the Shareholder Group agreed to amend the Settlement Agreement. The Amended Settlement Agreement eliminates the requirement that Mr. Hemmig be nominated and elected to the board of directors, and acknowledges the reduction in the size of the board of directors from nine to eight directors.
Properties
 
Silver Slipper Casino
 
On October 1, 2012, we acquired all of the outstanding membership interests in Silver Slipper Casino Venture, LLC (which owned the Silver Slipper Casino) for approximately $78.6 million, inclusive of net working capital, fees and expenses.  The Silver Slipper Casino is situated on the far west end of the Mississippi Gulf Coast in Bay St. Louis, Mississippi. The property has approximately 37,000 square feet of gaming space containing approximately 950938 slot and video poker machines, 2529 table games and the only live keno game on the Gulf Coast. The propertykeno. It includes a fine dining restaurant, buffet, quick service restaurant and two casino bars. The property draws heavilyproperty’s customers are primarily from communities in southern Louisiana, including the New Orleans metropolitan area, and other communities in southern Louisiana and southwestern Mississippi.
We acquired all of the outstanding membership interests in Silver Slipper Casino Venture LLC, the owner of Silver Slipper Casino, on October 1, 2012, for $69.3 million, exclusive of net working capital balances, fees and expenses.
 
On August 26, 2013, we entered into an agreement with WHD Silver Slipper Casino, LLC, relatedan unrelated general contractor, to construction ofconstruct a six-story, 142-room hotel overlooking the waterfront at our Silver Slipper Casino property (the “Silver Slipper Casino Hotel”). We have commenced constructionproperty.  In January 2015, we announced a design change to enhance the property’s appeal, specifically targeting high-end customers by reconfiguring 22 guest rooms on the hotel’s top floor from standard guest rooms to nine larger luxury suites, subject to customary lender approvals for change orders of this nature.  Due to the Silver Slipper Casino Hotelcreation of these larger suites, the number of guest room “keys” was reduced to approximately 129.  Given that the hotel’s interior work was not yet completed, we expect to invest approximately an additional $1 million on this improved configuration.  The total budget for this project, including the design change for the suites mentioned above, is approximately $20 million, inclusive of capitalized interest.  The Company expects to complete and expect construction to be completedopen the 120 standard rooms in late 2014 or early 2015. Upon completion, the hotel will have 142-rooms in a six-story tower overlookingsecond quarter of 2015, followed shortly thereafter by the waterfront.remaining nine suites.  We believe that the Silver Slipper Casino Hotel is a much-needed amenity andhotel will favorably impact customer loyalty by allowingallow guests to extend their visits at Silver Slipper Casino.
Midwest Casino Operationsand improve customer loyalty.
 
Rising Star Casino Resort
 
On April 1, 2011, we acquired all of the operating assets of Grand Victoria Casino & Resort, L.P. through Gaming Entertainment (Indiana) LLC, our wholly-owned subsidiary. We renamedrebranded the property as the Rising Star Casino Resort in August 2011.  We paid approximately $43 million for Rising Star Casino Resort, including working capital, fees and rebranding costs.  The property has approximately 40,000 square feet of casino space and includes approximately 1,200921 slot and video poker machines, 3328 table games, a contiguous 190-room hotel, five dining outlets and an 18-hole Scottish links golf course.
 
In October 2011, Rising Sun/Ohio County First, Inc. (“RSOCF”) and Rising Sun Regional Foundation, Inc. teamed up to developOn August 16, 2013, our Gaming Entertainment (Indiana), LLC subsidiary entered into a newcapital lease of a 104-room hotel towerdeveloped by a non-profit, municipal corporation on land adjacent to our Rising Star Casino Resort.  On June 13, 2012, the City of Rising Sun Advisory Plan Commission provided a favorable recommendation to the City Council of Rising Sun, Indiana, regarding a revised amendment to the plan of development, which was adopted by the City Council on July 5, 2012.  On August 13, 2012, the Advisory Plan Commission approved the detailed plan of development.  The parties entered into a real estate sale agreement dated May 2, 2012, for RSOCF to purchase approximately three acres of land on which the hotel was developed.  Construction commenced in December 2012,opened and the new hotel tower at Rising Star Casino Resort opened on November 15, 2013. The opening of the new hotel tower at Rising Star Casino Resort brought total room capacity to 294.  We believe that the added hotel room inventory in close proximity to our casino facility will favorably impact revenues and visitor counts.
On August 16, 2013, we entered into a 10-year capital lease for the new hotel tower at Rising Star Casino Resort (the “Rising Star Hotel Agreement”) which commenced on November 15, 2013, increasing our room inventory to 294.  The lease is for ten years and provides us with full management control andcalls for payments of $77,500 per month. We have an option to purchase the new hotel tower at Rising Star Casino Resort atduring the end of the term. We have recorded the capital lease obligation and hotel assets in our financial statements. On November 15, 2013, we began operating the new hotel tower at Rising Star Casino Resort. The Rising Star Hotel Agreement provides that we will be the lessee of the new hotel tower at Rising Star Casino Resort and assume all responsibilities, revenues, expenses, profits and losses related to the hotel’s operations. The term of the Rising Star Hotel Agreement islease for 10 years from November 15, 2013, with the landlord having a right to sell the hotel to uspre-set price or at the end of the term and our corresponding obligation to purchase it on the terms set forth in the Rising Star Hotel Agreement. Duringfor $1 plus closing costs. Upon expiration of the term of the lease, if we will have the exclusivenot exercised our option to purchase the new hotel, tower at Rising Star Casino Resort at a pre-set price. On January 1, 2014, we began paying a fixed monthly rent payment of approximately $77.5 thousand, which will continue throughout the term ofLandlord shall have the Rising Star Hotel Agreement unless we electright and option to purchasesell us the hotel before the end of the lease period.for $1 plus closing costs. We are responsible for all maintenance and repairs. In the event that we default on the lease agreement, the landlord’s recourse is limitedincludes rights against our subsidiary to takingtake possession of the property, collection of all rent duecollect rents as defined, and payable, and the right to seek remediation for any attorneys’ fees, litigation expenses, and costs of retaking and re-leasing the property.
 
Northern Nevada Casino Operations
 
Grand Lodge Casino
On September 1, 2011, we purchased the operating assets of Grand Lodge Casino and entered into a lease with Hyatt Equities, L.L.C. for the casino space in the Hyatt Regency Lake Tahoe Resort, Spa and Casino in Incline Village, Nevada on the north shore of Lake Tahoe.  The initial term of the lease expires on August 31, 2018.  The lease has an option, subject to mutual agreement, to renew for an additional five-year term. The Grand Lodge Casino has 18,900 square feet of casino space integrated with the Hyatt Regency Lake Tahoe Resort, Spa and Casino, featuring approximately 260 slot machines, 16 table games and a poker room.
Stockman’s Casino
 
We acquired Stockman’s Casino in Fallon, Nevada on January 31, 2007.2007 for approximately $27 million, including fees and working capital.  In 2008, we sold a Holiday Inn Express that was part of the original acquisition for $7.2 million. Stockman’s Casino has approximately 8,400 square feet of gaming space with approximatelyand 265 slot machines, four table games and keno. The facility has a bar, a fine dining restaurant and a coffee shop.
 
Grand Lodge Casino
Southwest
On June 28, 2011, we entered into a lease with Hyatt Equities L.L.C. to operate the Grand Lodge Casino Management Operationsat Hyatt Regency Lake Tahoe Resort, Spa & Casino in Incline Village, Nevada (“Hyatt Lake Tahoe”) on the north shore of Lake Tahoe.  In addition, on June 28, 2011, we entered into an agreement with HCC Corporation to acquire the operating assets and certain liabilities related to the Grand Lodge Casino for approximately $1.4 million, including operating cash and working capital. The lease is secured by the Company’s interests under the lease and property, as defined, and is subordinate to the liens in the First and Second Lien Credit Facilities (defined below).  The initial term of the lease was due to expire on August 31, 2016.  In April 2013, the lease was extended and is now scheduled to expire on August 31, 2018.  The lease has an option, subject to mutual agreement, to renew for an additional five-year term. Hyatt Equities has an option to purchase the leasehold interest and the operating assets at the Grand Lodge Casino, subject to assumption of applicable liabilities. The option purchase price is an amount equal to the Grand Lodge Casino’s positive working capital, plus the Grand Lodge Casino’s EBITDA for the twelve-month period preceding the acquisition or for such period of time remaining on the lease term, whichever is less, plus the fair market value of the Grand Lodge Casino’s personal property.
The Grand Lodge Casino has 18,900 square feet of casino space within Hyatt Lake Tahoe, featuring 254 slot machines, 20 table games and a poker room.  The Hyatt Lake Tahoe is one of two AAA Four Diamond hotels in the Lake Tahoe area, and is one of only three AAA Four Diamond hotels in northern Nevada.
Prior Projects
 
Buffalo Thunder Casino and Resort
 
In May 2011, we entered into a three-year agreementmanagement contract with the Pueblo of Pojoaque which has been approved byto advise the National Indian Gaming Commission as a management contract, to advisetribe on the operations of Buffalo Thunder Casino and Resort in Santa Fe, New Mexico, along with the Pueblo’s Cities of Gold and other gaming facilities. In aggregate, these gaming facilities which in aggregate have approximately 1,200 slot machines, 18 tablestable games (including poker) and a simulcast area. We receivereceived a base consulting fee of $0.1 million per month plus quarterly success fees based on achieving certain financial targets, and incurincurred only minimal incremental operating costs related to the contract. Our management contract and related agreements with Buffalo Thunder Casino and Resort became effective on September 23, 2011.
Additional projects are considered based2011 and expired on their forecasted profitability, development period, regulatory and political environment and the ability to secure the funding necessary to complete the development, among other considerations. We continue to actively investigate, individually and with partners, new business opportunities. We believe we will have sufficient cash and financing available to fund acquisitions and development opportunities in the future.
Prior ProjectsSeptember 23, 2014.
 
FireKeepers Casino
 
Until March 30, 2012, we owned 50% of Gaming Entertainment (Michigan), LLC, (“GEM”), a joint venture with RAM Entertainment, LLC, (“RAM”) a privately-held investment company.  GEMGaming Entertainment (Michigan), LLC had the exclusive right to provide casino management services at the FireKeepers Casino near Battle Creek, Michigan for the Nottawaseppi Huron Band of Potawatomi (the “Michigan Tribe”) for seven years commencing August 5, 2009. On December 2, 2010, the FireKeepers Development Authority, a tribal entity formed by the Michigan Tribe, entered into a hotel consulting services agreement with GEM, as the consultant, related to the FireKeepers Casino phase II development project, which included development of a hotel, multi-purpose/ballroom facility, surface parking and related ancillary support spaces and improvements. GEM was to perform hotel consulting services for a fixed fee of $12,500 per month, continuing through to the opening of the project, provided the total fee for services did not exceed, in the aggregate, $0.2 million. On May 22, 2012, we signed an amendment to the hotel consulting services agreement extending the terms of the agreement through November 2012.
 
On March 30, 2012, theour joint venture managingwhich managed the FireKeepers Casino sold the equity of the joint venture and the management agreementits interests to the FireKeepers Development Authority for $97.5 million.  In addition to the $97.5 million sale price, the FireKeepers Development Authority paid RAM Entertainment, LLC and us $1.2 million each, equal to the management fee that would have been earned under the management agreement for April 2012 less a $0.2 million wind-up fee and $0.1 million holdback receivable.  The $0.1 million holdback receivable was received in May 2012, less expenses related to the sale deducted by the FireKeepers Development Authority.each.  Our gain on the sale was $41.2 million.
Terminated Transactions and Agreements
On March 21, 2014, we entered into a definitive agreement (the “Majestic Star Purchase Agreement”) with The Majestic Star Casino LLC (“Majestic Star”) to acquire all of joint venture,the outstanding membership interests of Majestic Mississippi, LLC (“Majestic Mississippi”), which operates a casino located in Tunica, Mississippi commonly known as the Fitz Tunica Casino & Hotel.  On June 23, 2014, we terminated the Majestic Star Purchase Agreement and such termination was disputed by the seller.  On August 21, 2014, Majestic Star, Majestic Mississippi, LLC and the Company entered into a settlement agreement to resolve all disputes, and mutually released each other and their respective officers, directors, and employees from any claims, demands or actions for damages related thereto. This potential but unconsummated transaction cost us approximately $0.9 million in fees and $1.7 million in a foregone deposit, all of which was recorded in 2014.  For “additional detail on our termination of the Majestic Star Purchase Agreement and the settlement agreement, see Note 10 to the saleconsolidated financial statements set forth in “Item 8. Financial Statements and Supplementary Data”.
On February 26, 2014, we entered into an exclusivity agreement with Keeneland Association, Inc. (“Keeneland”) to own, manage, and operate instant racing and, if authorized, traditional casino gaming at racetracks in Kentucky, subject to completion of our interestdefinitive documents for each opportunity. On November 17, 2014, both parties agreed to terminate all agreements between us. For additional detail regarding the termination of the Keeneland agreements, see Note 10 to the consolidated financial statements set forth in GEM, was $41.2 million“Item 8. Financial Statements and allocated as follows (in millions):
     
Gross proceeds $48.8 
Plus:  April 2012 wind-up fee received, net of $0.03 million wind-up fee and holdback receivable  0.9 
Net proceeds  49.7 
Less:  Our interest in joint venture  (5.7)
Full House gain on sale of joint venture  44.0 
Less: contract right owned by subsidiary  (2.8)
Consolidated gain on sale of joint venture $41.2 
Supplementary Data”.
 
Government Regulation
 
The ownership, management, and operation of gaming facilities are subject to many federal, state, provincial, tribal and/or local laws, regulations and ordinances, which are administered by the relevant regulatory agency or agencies in each jurisdiction. These laws, regulations and ordinances are different in each jurisdiction, but primarily deal with the responsibility, financial stability and character of the owners and managers of gaming operations, as well as persons financially interested or involved in gaming operations.
 
We may not own, manage or operate a gaming facility unless we obtain proper licenses, permits and approvals. Applications for a license, permit or approval may generally be denied for reasonable cause. Most regulatory authorities license, investigate, and determine the suitability of any person who has a material relationship with us. Persons having material relationships include officers, directors, employees, and certain security holders.
 
Once obtained, licenses, permits, and approvals must be renewed from time to time and generally are not transferable. Regulatory authorities may at any time revoke, suspend, condition, limit, or restrict a license for reasonable cause. License holders may be fined and, in some jurisdictions and under certain circumstances, gaming operation revenues can be forfeited. We may be unable to obtain any licenses, permits, or approvals, or if obtained, they may not be renewed or may be revoked in the future. In addition, a rejection or termination of a license, permit, or approval in one jurisdiction may have a negative effect in other jurisdictions. Some jurisdictions require gaming operators licensed in that state to receive their permission before conducting gaming in other jurisdictions.
 
The political and regulatory environment for gaming is dynamic and rapidly changing. The laws, regulations, and procedures dealing with gaming are subject to the interpretation of the regulatory authorities and may be amended. Any changes in such laws, regulations, or their interpretations could have a negative effect on our operations and future development of gaming opportunities. Certain specific provisions applicable to us are described below.  We believe that we are in material compliance with such governmental regulations in each jurisdiction in which we conduct business.
 
Nevada Regulatory Matters
 
In order to acquire, and own or lease Stockman’s Casino, the Grand Lodge Casino or any other gaming operation in Nevada, we are subject to the Nevada Gaming Control Act and to the licensing and regulatory control of the Nevada State Gaming Control Board, the Nevada Gaming Commission, and various local, city and county regulatory agencies.
 
The laws, regulations and supervisory procedures of the Nevada gaming authorities are based upon declarations of public policy which are concerned with, among other things:
 
 
the character of persons having any direct or indirect involvement with gaming to prevent unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity;
 
 
establishment and application of responsible accounting practices and procedures;
 
 
maintenance of effective control over the financial practices and financial stability of licensees, including procedures for internal controls and the safeguarding of assets and revenues;
 
 
recordkeeping and reporting to the Nevada gaming authorities;
 
 
fair operation of games; and
 
 
the raising of revenues through taxation and licensing fees.
 
In May 2006, we applied for registration with the Nevada Gaming Commission as a publicly traded corporation, which was granted on January 25, 2007. The registration is not transferable and requires periodic payment of fees. The Nevada gaming authorities may limit, condition, suspend or revoke a license, registration, approval or finding of suitability for any cause deemed reasonable by the licensing agency. If a Nevada gaming authority determines that we violated gaming laws, then the approvals and licenses we hold could be limited, conditioned, suspended or revoked, and we, and the individuals involved, could be subject to substantial fines for each separate violation of the gaming laws at the discretion of the Nevada Gaming Commission. Each type of gaming device, slot game, slot game operating system, table game or associated equipment manufactured, distributed, leased, licensed or sold in Nevada must first be approved by the Nevada State Gaming Control Board and, in some cases, the Nevada Gaming Commission. We must regularly submit detailed financial and operating reports to the Nevada State Gaming Control Board. Certain loans, leases, sales of securities and similar financing transactions must also be reported to or approved by the Nevada Gaming Commission.
 
Certain of our officers, directors and key employees are required to be, and have been, found suitable by the Nevada Gaming Commission and employees associated with gaming must obtain work permitsbe registered as gaming employees, which are subject to immediate suspension under certain circumstances. An application for suitability may be denied for any cause deemed reasonable by the Nevada Gaming Commission. Changes in specified key positions must be reported to the Nevada Gaming Commission. In addition to its authority to deny an application for a license, the Nevada Gaming Commission has jurisdiction to disapprove a change in position by an officer, director or key employee. The Nevada Gaming Commission has the power to require licensed gaming companies to suspend or dismiss officers, directors or other key employees and to sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in such capacities.
 
The Nevada Gaming Commission may also require anyone having a material relationship or involvement with us to be found suitable or licensed, in which case those persons are required to pay the costs and fees of the Nevada State Gaming Control Board in connection with the investigation. Any person who acquires more than 5% of any class of our voting securities must report the acquisition to the Nevada Gaming Commission; any person who becomes a beneficial owner of 10% or more of our voting securities is required to apply for a finding of suitability. Under certain circumstances, an “institutional investor,” as such term is defined in the regulations of the Nevada Gaming Commission, which acquires more than 10%, but not more than 25% of our voting securities, may apply to the Nevada Gaming Commission for a waiver of such finding of suitability requirements, provided the institutional investor holds the voting securities for investment purposes only. The Nevada Gaming Commission has amended its regulations pertaining to institutional investors to temporarily allowAdditionally, an institutional investor tomay beneficially own more than 15%25%, but not more than 19%29%, of the voting securities if the ownership percentage results from a stock repurchase program. These institutional investors may not acquire any additional shares and must reduce their holdings within one year from constructive notice of exceeding 15%, or must file a suitability application.shares. An institutional investor will be deemed to hold voting securities for investment purposes only if the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of our board of directors, any change in our corporate charter, bylaws,by-laws, management, policies or operations, or any of our gaming affiliates, or any other action which the Nevada Gaming Commission finds to be inconsistent with holding our voting securities for investment purposes only.
 
Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Gaming Commission may be found unsuitable based solely on such failure or refusal. The same restrictions apply to a record owner if the record owner, when requested, fails to identify the beneficial owner. Any security holder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock beyond such period of time as may be prescribed by the Nevada Gaming Commission may be guilty of a gross misdemeanor. We are subject to disciplinary action if, after we receive notice that a person is unsuitable to be a security holder or to have any other relationship with us, we:
 
 
pay that person any dividend or interest upon our voting securities;
 
 
allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person; or
 
 
give remuneration in any form to that person.
 
If a security holder is found unsuitable, then we may be found unsuitable if we fail to pursue all lawful efforts to require such unsuitable person to relinquish his or her voting securities for cash at fair market value.
 
The Nevada Gaming Commission may also, in its discretion, require any other holders of our debt or equity securities to file applications, be investigated and be found suitable to own the debt or equity securities. The applicant security holder is required to pay all costs of such investigation. If the Nevada Gaming Commission determines that a person is unsuitable to own such security, then pursuant to the regulations of the Nevada Gaming Commission, we may be sanctioned, including the loss of our approvals, if, without the prior approval of the Nevada Gaming Commission, we:
 
 
pay to the unsuitable person any dividends, interest or any distribution whatsoever;
 
 
recognize any voting right by such unsuitable person in connection with such securities;
 
 
pay the unsuitable person remuneration in any form; or
 
 
make any payment to the unsuitable person by way of principal, redemption, conversion; exchange, liquidation or similar transaction.
 
We are required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Commission at any time, and to file with the Nevada Gaming Commission, at least annually, a list of our stockholders. The Nevada Gaming Commission has the power to require our stock certificates to bear a legend indicating that the securities are subject to the Nevada Gaming Control Act and the regulations of the Nevada Gaming Commission.
 
As a licensee or registrant, we may not make certain public offerings of our securities without the prior approval of the Nevada Gaming Commission.  Such approval, if given, does not constitute a recommendation or approval of the investment merits of the securities subject to the offering.  We have received a waiver of the prior approval requirement with respect to public offerings of securities subject to certain conditions.  Also, changes in control through merger, consolidation, acquisition of assets, management or consulting agreements or any form of takeover cannot occur without prior investigation by the Nevada State Gaming Control Board and approval by the Nevada Gaming Commission.
 
The Nevada legislature has declared that some repurchases of voting securities, corporate acquisitions opposed by management, and corporate defense tactics affecting Nevada gaming licensees, and registered companies that are affiliated with those operations, may be harmful to stable and productive corporate gaming. The Nevada Gaming Commission has established a regulatory scheme to reduce the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to:
 
 
assure the financial stability of corporate gaming licensees and their affiliates;
 
 
preserve the beneficial aspects of conducting business in the corporate form; and
 
 
promote a neutral environment for the orderly governance of corporate affairs.
 
Because we are a registered company, approvals may be required from the Nevada Gaming Commission before we can make exceptional repurchases of voting securities above their current market price and before a corporate acquisition opposed by management can be consummated. The Nevada Gaming Control Act also requires prior approval of a plan of recapitalization proposed by a registered company’s board of directorsBoard in response to a tender offer made directly to its stockholders for the purpose of acquiring control.
 
Any person who is licensed, required to be licensed, registered, required to be registered, or who is under common control with those persons, collectively, “licensees,” and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Gaming Control Board, and thereafter maintain, a revolving fund in the amount of $0.03 million$30,000 to pay the expenses of investigation by the Nevada Gaming Control Board of the licensee’s participation in foreign gaming. We currently comply with this requirement. The revolving fund is subject to increase or decrease at the discretion of the Nevada Gaming Commission. Licensees are required to comply with the reporting requirements imposed by the Nevada Gaming Control Act. A licensee is also subject to disciplinary action by the Nevada Gaming Commission if it:
 
 
knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation;
 
 
fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations;
 
 
engages in any activity or enters into any association that is unsuitable because it poses an unreasonable threat to the control of gaming in Nevada, reflects or tends to reflect, discredit or disrepute upon the State of Nevada or gaming in Nevada, or is contrary to the gaming policies of Nevada;
 
 
engages in activities or enters into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees; or
 
 
employs, contracts with or associates with a person in the foreign operation who has been denied a license or a finding of suitability in Nevada on the ground of unsuitability.
 
In May 2006, we adopted a compliance plan, which has been amended from time to time, and appointed a compliance committee whichin accordance with Nevada Gaming Commission requirements.  It currently consists of the following Company directors and officers,directors: Kenneth A. Adams (Chair and Independent Director), Carl G. Braunlich (Independent Director), Kathleen Marshall (Independent Director), W.H. Baird Garrett (Independent Director) and Mark J. Miller (COO and Director), in accordance with Nevada Gaming Commission requirements.Daniel R. Lee.  Our compliance committee meets quarterly and is responsible for implementing and monitoring our compliance with Nevada regulatory matters.matters, as well as other jurisdictions in which we operate. This committee will also review information and reports regarding the suitability of potential key employees or other parties who may be involved in material transactions or relationships with us.
 
Indiana Regulatory Matters
 
We own and operate a wholly-owned subsidiary, Gaming Entertainment (Indiana) LLC, which acquired and operates Rising Star Casino Resort in Rising Sun, Indiana. The ownership and operation of casino facilities in Indiana are subject to extensive state and local regulation, including primarily the licensing and regulatory control of the Indiana Gaming Commission.Commission (“IGC”).  The Indiana Gaming CommissionIGC is given extensive powers and duties for administering, regulating and enforcing riverboat gaming in Indiana.
 
Pursuant to the Indiana Riverboat Gaming Act, as amended (the “Indiana Act”), the Indiana Gaming CommissionIGC is authorized to award up to 11 gaming licenses to operate riverboat casinos in the State of Indiana, including five to counties contiguous to Lake Michigan in northern Indiana, five to counties contiguous to the Ohio River in southern Indiana and one to a county contiguous to Patoka Lake in southern Indiana, which was subsequently relocated to French Lick, Indiana. In April 2007, the Indiana General Assembly enacted legislation that authorized the holders of two horse trackspari-mutuel racing permits located in Anderson and Shelbyville, Indiana to obtain gambling game licenses and install up to 2,000 slot machines at each facility (“racinos”). The Indiana Gaming CommissionIGC granted each horse track a five-year gaming license authorizing the use of such slot machines.  Installation of slot machines beyond the statutorily authorized number requiresis allowed with further approval by the Indiana Gaming Commission. The slot operations at the race tracksracetracks opened in the second quarterJune of 2008. There is no similar cap on the number of gaming positions under each riverboat license, although the installation of additional tables and slots generally requires IGC approval. Historically, the IGC has generally permitted increases in gaming capacity, provided its concerns as to security and surveillance coverage are accommodated.  In November 2011, the Indiana Commission authorized Indiana Live! Casino (now known as Indiana Grand),Grand, located in Shelbyville, to install up to 2,200an additional 200 slot machines at its facility. In November 2012, the Indiana Gaming Commission authorized Hoosier Park, in Anderson, Indiana, to install up to 2,200an additional 200 slot machines at its facility.
 
The Indiana Act strictly regulates the facilities, persons, associations and practices related to gaming operations pursuant to the police powers of Indiana, including comprehensive law enforcement provisions. The Indiana Act vests the Indiana Gaming CommissionIGC with the power and duties of administering, regulating and enforcing the system of riverboat gaming in Indiana. The Indiana Gaming Commission’sIGC’s jurisdiction extends to every person, association, corporation, partnership and trust involved in riverboat gaming operations in Indiana.
 
The Indiana Act requires the owner of a riverboat gaming operation to hold an owner’s license issued by the Indiana Gaming Commission.IGC. To obtain an owner’s license, the Indiana Act requires extensive disclosure of records and other information concerning an applicant. Applicants for licensure must submit a comprehensive application and personal disclosure forms and undergo an exhaustive background investigation prior to the issuance of a license. The applicant must also disclose the identity of every person holding an ownership interest in the applicant. Any person holding an interest of 5% or more in the applicant must undergo a background investigation and be licensed. The Indiana Gaming CommissionIGC has the authority to request specific information on or license anyone holding an ownership interest.  An ownership interest in a licensee may only be transferred in accordance with the Indiana Act and the rules promulgated thereunder.
 
Each license is a revocable privilege and is not a property right under the Indiana Act.   An Indiana riverboat license entitles the licensee to own and operate one riverboat and gaming equipment as part of a gaming operation. The Indiana Act allows a person to hold up to 100% of up to two individualseparate licenses. Each initial owner’s license runs for a period of five years. Thereafter, the license is subject to renewal on an annual basis upon a determination by the Indiana Gaming CommissionIGC that the licensee continues to be eligible for an owner’s license pursuant to the Indiana Act and the rules and regulations adopted thereunder. A licensee may not lease, hypothecate, borrow money against or lend money against an owner’s riverboat gaming license. An ownership interest in an owner’s riverboat gaming license may only be transferred in accordance with the regulations promulgated under the Indiana Act.  Gaming Entertainment (Indiana) LLC applied for and, on March 15, 2011, was granted the transfer of a riverboat owner’s license. Thereafter, Gaming Entertainment (Indiana) LLC has renewed its license annually on September 15 of each year.
 
The Indiana Act requires that a licensed owner undergo a complete investigation every three years. If for any reason the license is terminated, the assets of the riverboat gaming operation cannot be disposed of without the approval of the Indiana Gaming Commission.IGC. Furthermore, the Indiana Act requires licensees to disclose the identity of all directors, officers and persons holding a beneficial ownership interest in the licensee, and the IGC may require licensure for such persons, as well as other key employees.  The IGC also requires a comprehensive disclosure of financial and operating information on licensees, their principal officers and their parent corporations.
If an institutional investor acquires 5% or more of any class of voting securities, the investor is required to notify the IGC and may be subject to a finding of suitability.  Institutional investors who acquire 15% or more of any class of voting securities are subject to a finding of suitability.  In addition, the IGC may require an institutional investor that officers, directors and employeesacquires 15% or more of certain non-voting equity units to apply for a finding of suitability.  Any other person who acquires 5% or more of any class of voting securities of a gaming operation be licensed. licensee is required to apply for a finding of suitability.
The Indiana Act prohibits contributions to a candidate for a state, legislative, or local office, to a candidate’s committee or to a regular party by the holder of a riverboat owner’s license or a supplier’s license, by a political action committee of the licensee, by an officer of a licensee, by an officer of a person that holds at least 1% interest in the licensee or by a person holding at least 1% interest in the licensee.
In 2009, the Indiana General Assembly enacted legislation requiring all casino operators to submit for approval by the CommissionIGC a written power of attorney identifying a person who would serve as a trustee to temporarily operate the casino in certain rare circumstances, such as the revocation or non-renewal of any owner’s license.license; the denial of an owner’s license to a proposed transferee and the person attempting to sell the riverboat is unable or unwilling to retain ownership or control; or a licensed owner agrees in writing to relinquish control of the riverboat. The IGC has developed a model power of attorney granting the trustee board an exclusive authority to exercise and perform those acts and powers concerning real and personal property transactions, litigation, insurance, employees and making transactions.  The power of attorney, which each licensee is required to execute, also authorizes the trustee, on behalf of the licensee, to commence, manage, and consent to relief in a case involving the licensee under bankruptcy code without the consent of the licensee.  A riverboat’s owner has 180 days after the date of the resolution is adopted to sell the riverboat and its related properties to a suitable owner who is approved by the IGC.  If the owner is unable to sell the property within the timeframe, the trustee may take any action necessary to sell the property to a person who meets the requirements for licensure under the Indiana Act.  During the time period that the trustee is operating the casino operations, the trustee has exclusive and broad authority over the casino gambling operations.  The IGC most recently approved Gaming Entertainment (Indiana) LLC most recently had itsLLC’s power of attorney approval renewedrenewal on September 12, 2013.18, 2014.
 
The Indiana Gaming CommissionIGC has promulgated a rule mandating that licensees maintain a cash reserve to protect patrons against defaults in gaming debts.reserve.  The cash reserve is to be equal to a licensee’s average payout for a three-day period based on the riverboat’s performance during the prior calendar quarter. The cash reserve can consist of cash on hand, cash maintained in Indiana bank accounts and cash equivalents not otherwise committed or obligated. The IGC has also promulgated a rule that prohibits distributions, excluding distributions for the payment of state or federal taxes, by a licensee to its partners, shareholders, its self or any affiliated entity if the distribution would impair the financial viability of the riverboat gaming operation.
 
The Indiana Act does not limit the maximum bet or loss per patron. Each licensee sets minimum and maximum wagers on its own games. Players must use chips or tokens as, according to the Indiana Act, wagering may not be conducted with money or other negotiable currency. No person under the age of 21 is permitted to wager, and wagers may only be taken from persons present at a licensed riverboat.
 
TheContracts to which Gaming Entertainment (Indiana) LLC is a party are subject to disclosure and approval processes imposed by Indiana Gaming Commission places special emphasis onregulations.  A riverboat owner licensee may not enter into or perform any contract or transaction in which it transfers or receives consideration which is not commercially reasonable or which does not reflect the participationfair market value of the goods or services rendered or received.  All contracts are subject to disapproval by the IGC.
Through the establishment of purchasing goals, the IGC encourages minority business enterprises (“MBEs”) and women business enterprises (“WBEs”)to participate in the riverboatgaming industry. EachThe goals must be derived from the statistical analysis of utilization studies of licensee is required to submit annually to the Indiana Gaming Commission a report that includes the total dollar value of contracts awarded for goods and services and the percentage awarded to MBEs and WBEs, respectively. Prior to 2008, the Indiana Gaming Commission required licensees to establish goals of expending 10% of the total dollars spent on the majority of goods and services with MBEs and 5% with WBEs. Following a disparity study in 2007 to determine whether there existed a gap between the capacity of MBEs and WBEs and the utilization thereof by riverboat casinos in Indiana, the Indiana Commission mandated that, effective as of January 1, 2008, annual goals for expenditures to WBEs for the purchase of construction goods and services shall be set at 10.9%. In November 2010, relying on two years of expenditure data, that indicated a statistically significant disparity, the Indiana Gaming Commission issued Resolution 2010-217 to mandate that, effective January 1, 2011, the annual goal for expenditures to MBEs for the purchase of construction goods and services shall be set at 23.2%. The Indiana Act requires that the Indiana Gaming Commission update the disparity study every five years. Accordingly, a disparity study was conducted in 2012, reviewing Indiana riverboat and racino expenditures between January 1, 2009 and December 31, 2011 (the “2012 Disparity Study”).
The 2012 Disparity Study showed that there were no expenditure disparities by riverboat casinos or racinos. On November 15, 2012, the Indiana Gaming Commission adopted the 2012 Disparity Study. For expenditures in all areas, the Indiana Gaming Commission has taken the position that the capacity percentages set forth in the 2012 Disparity Study for MBEs and WBEs, respectively, are goals and targets for which best faith efforts of each licensee are expected.services. Failure to meet these goals will be scrutinized heavily by the Indiana Gaming CommissionIGC, and the Indiana Act authorizes the Indiana Gaming CommissionIGC to suspend, limit or revoke an owner’s gaming license or impose a fine for failure to comply with these guidelines. However, ifIf a determination is made that a licensee has failed to demonstrate compliance with these guidelines, the licensee has 90 days from the date of the determination to comply.
 
A licensee may not lease, hypothecate, borrow money against or lend money against an owner’sPursuant to a 2013 amendment to the graduated wagering tax law, riverboat gaming license. An ownership interest in an owner’s riverboat gaming license may only be transferred in accordance with the regulations promulgatedlicensees that received Adjusted Gross Receipts (“AGR”) under the Indiana Act.
Indiana state law stipulates$75.0 million are subject to a graduated wagering tax with a starting tax rate of 5% offor the first $25.0 million of adjusted gross receipts for casinos with adjusted gross gaming receipts under $75.0 million during the fiscal tax year ended June 30, 2014, with a deduction for free playAGR and a top rate of 40% for adjusted gross receiptsAGR in excess of $600.0 million. “AGR” is the total of all cash and property received from gaming less cash paid out as winnings and uncollectible gaming receivables (not to exceed 2%).
The 2013 legislation also permits riverboats and racinos to deduct amounts attributable to qualified wagering incentives from AGR.  Qualified wagering incentives refers to wagers made by patrons using non-cash vouchers, coupons, electronic credits or electronic promotions offered by the licensee and are commonly referred to as “free play”.  For the state fiscal years ending after June 30, 2013, and before July 1, 2016, the maximum amount of permitted deduction is $5.0 million.
In addition to the wagering tax, an admissions tax of $3 per admission is assessed. The Indiana Act provides for the suspension or revocation of a license if the wagering and admissions taxes are not timely submitted.
 
Pursuant to a development agreement between the Company and the City of Rising Sun, Indiana, we are required to pay annually 1.55% of AGR if $150 million or less, or 1.6% of AGR if greater than $150 million, to the Rising Sun Regional Foundation.
Real property taxes are imposed on riverboats at rates determined by local taxing authorities.  Income to us from Rising Star Casino Resort is also subject to the Indiana adjusted gross income tax and certain court decisions have resulted in gaming taxes not being deductible in the computation of Indiana income taxes.  Sales on a riverboat and at its related amenities, other than gaming revenues, are subject to applicable use, excise and retail taxes.  The Indiana Act requires a riverboat licensee to directly reimburse the IGC for the costs of gaming enforcement agents which are required to be present while gaming is conducted.
A licensee may enter into debt transactions that totalof $1.0 million or moregreater only with the prior approval of the Indiana Gaming Commission.IGC. Such approval is subject to compliance with requisite procedures and a showing that each person with whom the licensee enters into a debt transaction would be suitable for licensure under the Indiana Act. Unless waived, approval of debt transactions requires consideration by the CommissionIGC at two business meetings. The Indiana Gaming Commission,IGC, by resolution, has authorized its executive director, subject to subsequent ratification by the Indiana Gaming Commission,IGC, to approve debt transactions after a review of the transaction documents and consultation with the Indian Gaming Commission chairIGC’s Chairman and the Indiana Gaming Commission’sIGC’s financial consultant.
 
The Indiana Gaming CommissionIGC may subject a licensee to fines, suspension or revocation of its license for any act that is in violation of the Indiana Act or the regulations of the Indiana Gaming CommissionIGC or for any other fraudulent act. In addition, the Indiana Gaming CommissionIGC may revoke an owner’s license if the Indiana Gaming CommissionIGC determines that the revocation of the license is in the best interests of the State of Indiana. Limitation, conditioning, or suspension of any gaming license or approval or the directive to utilize its power of attorney could (and revocation of any gaming license or approval would) materially adversely affect us, our gaming operations and our results of operations.
 
The Indiana Act provides that the sale of alcoholic beverages at riverboat casinos is subject to licensing, control and regulation pursuant to Title 7.1 of the Indiana Code and the rules adopted by the Indiana Alcohol and Tobacco Commission.
 
Mississippi Regulatory Matters
 
In order to acquire, own and ownoperate Silver Slipper Casino or any other gaming operation in Mississippi, we are subject to the Mississippi Gaming Control Act (“Mississippi Act”) and to the licensing and regulatory control of the Mississippi Gaming Commission (“MGC”), the Mississippi Department of Revenue and various local, city and county regulatory agencies. The Mississippi Act is similar to the Nevada Gaming Control Act. The Mississippi Gaming Commission has adopted regulations that are also similar in many respects to the Nevada gaming regulations.
 
The laws, regulations and supervisory procedures of the Mississippi gaming authorities are based upon declarations of public policy which are concerned with, among other things:
 
 
the character of persons having any direct or indirect involvement with gaming to prevent unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity;
 
 
the establishment and application of responsible accounting practices and procedures;
 
 
maintenance of effective control over the financial practices and financial stability of licensees, including procedures for internal controls and the safeguarding of assets and revenues, including recordkeeping and requiring the filing of periodic reports to the Mississippi Gaming Commission;MGC;
 
 
the prevention of cheating and fraudulent practices;
 
 
providing a source of state and local revenues through taxation and licensing fees; and
 
 
ensuring that gaming licensees, to the extent practicable, employ Mississippi residents.
 
The Mississippi Act provides for legalized gaming in each of the 14 counties that border the Gulf Coast or the Mississippi River; however, gaming is legalizedlegal only if the voters in the county have not voted to prohibit gaming in that county. Currently, gaming is permissible in nine of the fourteen counties and occurs in all nine counties. Historically, the Mississippi Act required gaming vessels to be located on the Mississippi River or on navigable waterways in eligible counties along the Mississippi River or in waters along the Gulf Coast shore of the eligible counties. However, more recently, the Mississippi Act has been amended to permit licensees in the three counties along the Gulf Coast to establish land basedland-based casino operations. Due to another change to the Mississippi Act, the Mississippi Gaming CommissionMGC has also permitted licensees in approved river counties to conduct gaming operations on permanent structures, provided that the majority of any such structure is located on the river side of the “bank full” line of the Mississippi River.
 
We and any subsidiary we own that operates a casino in Mississippi are subject to the licensing and regulatory control of the Mississippi Gaming Commission.MGC. As the sole member of Silver Slipper Casino Venture LLC, a licensee of the Mississippi Gaming Commission,MGC, we applied for registration with the Mississippi Gaming CommissionMGC as a publicly traded corporation, which was granted on September 20, 2012. As a registered, publicly-traded corporation, we are required periodically to submit financial and operating reports, and any other information that the Mississippi Gaming CommissionMGC may require. If we fail to satisfy the registration requirements of the Mississippi Act, we and our Mississippi subsidiary, Silver Slipper Casino Venture LLC, cannot own or operate gaming facilities in Mississippi. No person may become a stockholder of or receive any percentage of profits from a Mississippi gaming subsidiarylicensee without first obtaining the necessary licensing and approvals from the Mississippi Gaming Commission.MGC. A Mississippi gaming subsidiarylicensee must maintain a gaming license from the Mississippi Gaming Commission,MGC, subject to certain conditions, including continued compliance with all applicable state laws and regulations.
 
There are no limitations on the number of gaming licenses that may be granted. Further, the Mississippi Act provides for 24-hour gaming operations and does not limit the maximum bet or loss per patron or the percentage of space that may be utilized for gaming. Gaming licenses are issued for a three-year period, are not transferable, and must be renewed periodically thereafter. There is no assurance that a new license can be obtained at the end of each three-year period of a license.  Moreover, the MGC may, at any time, and for any cause it deems reasonable, revoke, suspend, condition, limit or restrict a license.  Silver Slipper Casino was most recently granted a renewal of its license by the Mississippi Gaming CommissionMGC on June 21, 2012, effective July 20, 2012. ThisThe license expires on July 15,19, 2015, and we submitted our application for renewal to the MGC on March 3, 2015.
 
The Mississippi gaming authorities may limit, condition, suspend or revoke a license, registration, approval or finding of suitability for any cause deemed reasonable byIf the Mississippi Gaming Commission. If a Mississippi Gaming CommissionMGC determines that we violated gaming laws, then the approvals and licenses we hold could be limited, conditioned, suspended or revoked, and we, our subsidiary, and the individuals involved, could be subject to substantial fines for each separate violation of the gaming laws at the discretion of the Mississippi Gaming Commission. Because of such a violation, the Mississippi Gaming Commission may attempt to appoint a supervisor to operate the casino facilities. Limitation,MGC. Such limitation, conditioning, or suspension of any gaming license or approval or the appointment of a supervisor could (and revocation of any gaming license or approval would) materially adversely affect us, our gaming operations and our results of operations.
 
Certain of our officers, directors and key employees are required to be, and have been, found suitable by the Mississippi Gaming CommissionMGC and employees associated with gaming must obtain work permits which are subject to immediate suspension under certain circumstances. The MGC, at its discretion, may require additional persons to file applications for findings of suitability.  An application for suitability may be denied for any cause deemed reasonable by the Mississippi Gaming Commission.MGC. Changes in specified key positions must be reported to the Mississippi Gaming Commission.MGC. In addition to its authority to deny an application for a license, the Mississippi Gaming CommissionMGC has jurisdiction to disapprove a change in position by an officer, director or key employee. The Mississippi Gaming CommissionMGC has the power to require licensed gaming companies to suspend or dismiss officers, directors or other key employees and to sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in such capacities. Determinations of suitability or questions pertaining to licensing are not subject to judicial review in Mississippi. We believe that we have obtained, applied for or are in the process of applying for all necessary findings of suitability with respect to such persons affiliated with us or Silver Slipper Casino Venture LLC, although the Mississippi Gaming Commission,MGC, in its discretion, may require additional persons to file applications for findings of suitability.
 
The Mississippi Gaming CommissionMGC may also require anyone having a material relationship or involvement with us to be found suitable or licensed, in which case those persons are required to pay the costs and fees in connection with the investigation. At any time, the Mississippi Gaming CommissionMGC has the power to investigate and require the finding of suitability of any recordbeneficial stockholders of our beneficial stockholders.record. The Mississippi Act requires that any person who acquires more than 5% of any class of our voting securities, as reported to the Securities and Exchange Commission, must report the acquisition to the Mississippi Gaming CommissionMGC and such person may be required to be found suitable. Also, any person who becomes a beneficial owner of 10% or more of any class of our voting securities, as reported to the Securities and Exchange Commission, is required to apply for a finding of suitability by the Mississippi Gaming CommissionMGC and must pay the costs and fees that the Mississippi Gaming CommissionMGC incurs in conducting its investigation. If a stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information, including a list of beneficial owners.
 
The Mississippi Gaming CommissionMGC generally has exercised its discretion to require a finding of suitability of any beneficial owner of 5% of any class of voting securities of a registered corporation. However, under certain circumstances, an “institutional investor”, as defined in the Mississippi gaming regulations, which acquires more than 10%, but not more than 15%, of the voting securities of a registered corporation, as reported to the Securities and Exchange Commission, may apply for a waiver of such finding of suitability if such investor holds the securities for investment purposes only. An institutional investor will be deemed to hold voting securities for investment purposes only if the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of our board of directors, any change in our corporate charter, bylaws, management, policies or operations, or any of our gaming affiliates, or any other action which the Mississippi Gaming CommissionMGC finds to be inconsistent with holding our voting securities for investment purposes only. Activities that are not deemed to be inconsistent with holding voting securities for investment purposes include (1) voting on all matters voted on by stockholders; (2) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in the registered corporation’s management, policies or operations’operations and (3) such other activities as the Mississippi Gaming CommissionMGC may determine to be consistent with such investment intent.
 
Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Mississippi Gaming CommissionMGC may be found unsuitable based solely on such failure or refusal. The same restrictions apply to a record owner if the record owner, when requested, fails to identify the beneficial owner. Any security holder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock beyond such period of time as may be prescribed by the Mississippi Gaming CommissionMGC may be guilty of a misdemeanor. We are subject to disciplinary action if, after we receive notice that a person is unsuitable to be a security holder or to have any other relationship with us, we:
 
 
pay that person any dividend or interest upon our voting securities;
 
 
recognize the exercise, directly or indirectly of any voting right conferred through securities held by that person;
 
 
Paypay the unsuitable person any remuneration in any form for services rendered or otherwise, except in certain limited and specific circumstances; or
 
 
Failfail to pursue all lawful efforts to require the unsuitable person to divest himself of the securities including, if necessary, the immediate purchase of the securities for cash at fair market value.
 
The Mississippi Gaming CommissionMGC may also, in its discretion, require us to disclose the identities of the holders of our debt or other securities, and, in its discretion, require such holders to file applications, be investigated and be found suitable to own any debt security of a registered corporation if the Mississippi Gaming Commission has reason to believe that the holder’s ownership of such debt securities would be inconsistent with the declared policies of the State of Mississippi.corporation. Although the Mississippi Gaming CommissionMGC generally does not require the individual holders of such notessecurities to be investigated and found suitable, it retains the right to do so for any reason deemed necessary by the Mississippi Gaming Commission.MGC. The applicant holder of any debt securities is required to pay all costs of such investigation.
 
If the Mississippi Gaming CommissionMGC determines that a person is unsuitable to own such debt security, we may be sanctioned, including the loss of our approvals, if, without the prior approval of the Mississippi Gaming Commission,MGC, we:
 
 
pay to the unsuitable person any dividends, interest or any distribution whatsoever;
 
 
recognize any voting right by such unsuitable person in connection with such securities;
 
 
pay the unsuitable person remuneration in any form; or
 
 
make any payment to the unsuitable person by way of principal, redemption, conversion; exchange, liquidation or similar transaction.
 
Each Mississippi gaming subsidiary must maintain in Mississippi a current stock ledger with respect to the ownership of its equity securities. We also must maintain a current list of our shareholders, which must reflect the record ownership of each outstanding share of any class of our equity securities. The ledger and stockholder lists must be available for inspection by the Mississippi Gaming CommissionMGC at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Mississippi Gaming Commission.MGC. A failure to make such disclosure may be grounds for finding the record holder unsuitable. We must also render maximum assistance in determining the identity of the beneficial owner. The Mississippi Act requires that certificates representing securities of a registered corporation bear a legend indicating that the securities are subject to the Mississippi Act and the regulations of the Mississippi Gaming Commission.MGC. On September 20, 2012, we received a waiver of this legend requirement from the Mississippi Gaming Commission.MGC. The Mississippi Gaming CommissionMGC has the power to impose additional restrictions on the holders of our securities at any time.
 
Substantially all material loans, leases, sales of securities and similar financing transactions by a registered corporation or a Mississippi gaming subsidiary must be reported to and approved by the Mississippi Gaming Commission.MGC. A Mississippi gaming subsidiary may not make a public offering of its securities, but may pledge or mortgage casino facilities. A registered corporation may not make a public offering of its securities without the prior approval of the Mississippi Gaming CommissionMGC if any part of the proceeds of the offering is to be used to finance the construction, acquisition, or operation of gaming facilities in Mississippi or to retire or extend obligations incurred for those purposes. Such approval, if given, does not constitute a recommendation or approval of the investment merits of the securities subject to the offering. We have received a waiver of the prior approval requirement with respect to public offerings and private placements of securities, subject to certain conditions.
 
A Mississippi gaming subsidiary may not guarantee a security issued by an affiliated company pursuant to a public offering, or pledge its assets to secure payment or performance of the obligations evidenced by a security issued by an affiliated company, without the prior approval of the Mississippi Gaming Commission.MGC. A pledge of the stock of a Mississippi gaming subsidiary and the foreclosure of such a pledge are ineffective without the prior approval of the Mississippi Gaming Commission.MGC. We have obtained approvals from the Mississippi Gaming CommissionMGC for such guarantees, pledges and restrictions in connection with offerings of securities, subject to certain restrictions.
 
Also, changes in control through merger, consolidation, acquisition of assets, management or consulting agreements or any form of takeover cannot occur without prior investigation and approval by the Mississippi Gaming Commission.MGC.
 
The Mississippi legislature has declared that some repurchases of voting securities, corporate acquisitions opposed by management, and corporate defense tactics affecting Mississippi gaming licensees and registered corporations that are affiliated with those operations, may be harmful to stable and productive corporate gaming. The Mississippi Gaming CommissionMGC has established a regulatory scheme to reduce the potentially adverse effects of these business practices upon Mississippi’s gaming industry and to further Mississippi’s policy to:
 
 
assure the financial stability of corporate gaming licensees and their affiliates;
 
 
preserve the beneficial aspects of conducting business in the corporate form; and
 
 
promote a neutral environment for the orderly governance of corporate affairs.
 
Because we are a registered corporation, approvals may be required from the Mississippi Gaming CommissionMGC before we can make exceptional repurchases of voting securities above their current market price and before a corporate acquisition opposed by management can be consummated. Mississippi gaming regulations also require prior approval of a plan of recapitalization proposed by a registered corporation’s board of directors in response to a tender offer made directly to its stockholders for the purpose of acquiring control of the registered corporation.
 
Neither we nor Silver Slipper Casino Venture LLC may engage in gaming activities in Mississippi while also conducting operations outside of Mississippi without approval of, or a waiver of such approval by, the Mississippi Gaming Commission.MGC. The Mississippi Gaming CommissionMGC may require determinations that there are means for the Mississippi Gaming CommissionMGC to have access to information concerning us and our affiliates’ out-of-state gaming operations. We have approval from the Mississippi Gaming CommissionMGC for foreign gaming operations in that such approval for foreign gaming operations is automatically granted under the Mississippi regulations in connection with foreign operations (except for internet gaming activities) conducted within the 50 states or any territory of the United States, or on board any cruise ship embarking from a port located therein. The Mississippi Gaming CommissionMGC requires a formal foreign gaming waiver for involvement in internet gaming.
 
License, fees and taxes are payable to the State of Mississippi, the Mississippi Gaming Commission,MGC, and the county and city in which our Mississippi subsidiary, Silver Slipper Casino Venture LLC’s gaming operations are conducted. Depending on the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually. Gaming fees and tax calculations are generally based upon (1) a percentage of the gross gaming revenues received by the subsidiary operation; (2) the number of gaming devices operated by the casino; or (3) the number of table games operated by the casino. The license fee payable to the State of Mississippi is based upon gross revenue (generally defined as gaming receipts less payout to customers as winnings) and the current maximum tax rate imposed isequals 4% of gross revenue of $50,000 or less per calendar month, 6% of gross revenue in excess of $50,000 but less than $134,000 per calendar month, and 8% of all gaming receiptsgross revenue in excess of $134,000 per calendar month.  The Gaming Commission imposes a flat annual fee on each casino operator licensee, covering all investigative fees for that year associated with an operator licensee, any entity registered as a holding company or publicly traded corporation of that licensee, and any person required to be found suitable in connection with that licensee or any holding company or publicly-traded corporation of that licensee.  The annual fee is based on the average number of gaming devices operated by the licensee during a twelve month period, as reported to the MGC.  The investigative fee is $325,000 for licensees with 1,500 or more gaming devices, $250,000 for licensees with 1,000 to 1,499 gaming devices, and $150,000 for licensees with less than 1,000 gaming devices.  The fee is payable in four (4) equal quarterly installments.  During the twelve months ended December 31, 2014, the Silver Slipper Casino operated an average of 955 gaming devices.
 
The sale of alcoholic beverages at our Mississippi gaming operation is subject to the licensing, control and regulation by the Alcoholic Beverage Control Division of the Mississippi State Tax Commission (“ABC”)Department of Revenue as well as local ordinances. If alcohol regulations are violated, the ABCAlcoholic Beverage Control Division may limit, condition, suspend or revoke any license for the serving of alcoholic beverages or place such licensee on probation with or without conditions.
 
In November 2004, Silver Slipper Casino Venture LLC entered into a thirty-year public trust tidelands lease agreement with the State of Mississippi for thecertain marsh lands. Prior to Hurricane Katrina, all Gulf Coast casinos had this type ofsimilar tidelands leaseleases with the State of Mississippi, generally for the lease of the water bottombottoms under theeach casino when the casinos were required to be over water.floating. Subsequent to Hurricane Katrina, the law changed to allow casinos to be built on land no further than 800 feet from the approved gaming site, thereforesite. Therefore the tidelands lease expired and the Gulf Coast casinos hold an “In Lieu” agreementagreements with the State of Mississippi. The “In Lieu” agreements are in the form of a property tax assessment with the State of Mississippi and the properties are taxed similarly to their tidelands leases as long as they occupy the land and continue gaming operations.
Tribal Gaming
Gaming on tribal lands (lands over which tribes have jurisdiction  Payments under our “In Lieu” agreement are currently $472,000 per year and which meet the definition of tribal lands under the Indian Gaming Regulatory Act of 1988, (the “Regulatory Act”)) is regulated by federal, state and tribal governments.  The regulatory environment regarding tribal gaming is always changing.  Changes in federal, state or tribal law or regulations may limit or otherwise affect tribal gaming or may be applied retroactively and could then have a negative effect on our operations.
The terms and conditions of management agreements or other agreements and the operation of casinos on tribal lands are subject to the Regulatory Act, which is implemented by the National Indian Gaming Commission (“NIGC”).  The contracts also are subject to the provisions of statutes relating to contracts with tribes, which are supervised by the United States Department of the Interior.  The Regulatory Act is interpreted by the Department of the Interiorannual review and the NIGC and may be clarified or amended by the judiciary or legislature.
Under the Regulatory Act, the NIGC has the power to:
inspect and examine certain tribal gaming facilities;
perform background checks on persons associated with tribal gaming;
inspect, copy and audit all records of tribal gaming facilities;
hold hearings, issue subpoenas, take depositions, and adopt regulations; and
penalize violators of the Regulatory Act.
Penalties for violations of the Regulatory Act include fines, and possible temporary or permanent closing of gaming facilities.  The Department of Justice may also impose federal criminal sanctions for illegal gaming on tribal lands and for theft from tribal gaming facilities.
The Regulatory Act also requires that the NIGC review tribal gaming ordinances.  Such ordinances are approved only if they meet certain requirements relating to:
ownership;
security;
personnel background;
recordkeeping and auditing of the tribe’s gaming enterprises;
use of the revenues from gaming; and
protection of the environment and the public health and safety.
The Regulatory Act also regulates tribal gaming and management agreements.  The NIGC must approve management agreements and collateral agreements,adjustment including agreements like promissory notes, loan agreements and security agreements.  A management agreement can be approved only after determining that the contract provides for:
adequate accounting procedures and verifiable financial reports, copies of which must be furnished to the tribe;
tribal access to the daily operations of the gaming enterprise, including the right to verify gross revenues and income;
minimum guaranteed payments to the tribe, which must have priority over the retirement of development and construction costs;
a ceiling on the repayment of such development and construction costs; and
a contract term not exceeding five years and a management fee not exceeding 30% of net revenues as defined by the agency and a determination by the chairman of the NIGC that the fee is reasonable considering the circumstances; provided that the NIGC may approve up to a seven-year term and a management fee not to exceed 40% of net revenues if the NIGC is satisfied that the capital investment required or the income projections for the particular gaming activity justify the larger profit allocation and longer term.
Under the Regulatory Act, we must provide the NIGC with background information, including financial statements and gaming experience, on:
each person with management responsibility for a management agreement;
each of our directors; and
the ten persons who have the greatest direct or indirect financial interest in a management agreement to which we are a party, or
in the case of a publicly traded company, the holders of 5% or more of the ownership interest in the company.
The NIGC will not approve a management company and may void an existing management agreement if a director, key employee or an interested person of the management company:
is an elected member of the tribal government that owns the facility being managed;
has been or is convicted of a felony or misdemeanor gaming offense;
has knowingly and willfully provided materially false information to the NIGC or a tribe;
has refused to respond to questions from the NIGC;
is a person whose prior history, reputation and associations pose a threat to the public interest or to effective gaming regulation and control, or create or enhance the chance of unsuitable, unfair or illegal activities in gaming or the business and financial arrangements incidental thereto; or
has tried to influence any decision or process of tribal government relating to gaming.
Contracts may also be voided if:
the management company has materially breached the terms of the management agreement, or the tribe’s gaming ordinance; or
a trustee, exercising the skill and diligence to which a trustee is commonly held, would not approve such management agreement.
The Regulatory Act divides games that may be played on tribal land into three categories.  Class I Gaming includes traditional tribal games and private social games and is not regulated under the Regulatory Act.  Class II Gaming includes bingo, pull tabs, lotto, punch boards, tip jars, instant bingo, and other games similar to bingo, if those games are played at a location where bingo is played.  Class III Gaming includes all other commercial forms of gaming, such as video casino games (e.g., video slots, video blackjack), so-called “table games” (e.g., blackjack, craps, roulette), and other commercial gaming (e.g., sports betting and pari-mutuel wagering).
Class II Gaming is allowed on tribal land if performed according to a tribal ordinance which has been approved by the NIGC and if the state in which the tribal land is located allows such gaming for any purpose.  Class II Gaming also must comply with several other requirements, including a requirement that key management officials and employees be licensed by the tribe.
Class III Gaming is permitted on tribal land if the same conditions that apply to Class II Gaming are met and if the gaming is performed according to the terms of a written gaming compact between the tribe and the host state.  The Regulatory Act requires states to negotiate in good faith with tribes that seek to enter into tribal-state compacts.  Should the state not negotiate in good faith, regulations of the Department of Interior allow the Secretary of the Interior to impose the terms of a gaming compact on the state.
The negotiation and adoption of tribal-state compacts is vulnerable to legal and political changes that may affect our future revenues and securities prices.  Accordingly, we cannot predict:
which additional states, if any, will approve casino gaming on tribal land;
the timing of any such approval;
the types of gaming permitted by each tribal-state compact;
any limits on the number of gaming machines allowed per facility; or
whether states will attempt to renegotiate or take other steps that may affect existing compacts.
Under the Regulatory Act, tribal governments have primary regulatory authority over gaming on tribal land within the tribe’s jurisdiction unless a tribal-state compact has delegated this authority. Therefore, persons engaged in gaming activities, including us, are subject to the provisions of tribal ordinances and regulations on gaming.
Tribal-state compacts have been litigated in several states, including Michigan.  In addition, many bills have been introduced in Congress that would amend the Regulatory Act, including bills introduced in 2005 that seek to limit “off reservation” gaming by tribes.  Although this legislative attempt was rejected, the Department of the Interior under the Bush administration in January 2008 issued a “guidance memorandum” immediately followed by a series of decisions which gave effect to the defeated legislation, placing limitations on the distance a tribal casino could be from the tribe’s reservation. Although under the Obama administration, the strictures of the “guidance memorandum” have been reduced, there continues to be a policy of restricting the ability of tribes from operating gaming facilities that are remote from the tribe’s reservation or core geographic area of operation.  If the Regulatory Act were amended or this department policy remain in effect, then the governmental structure and requirements by which tribes may conduct gaming could be significantly changed, which could have an impact on our future operations and development of tribal gaming opportunities.  Furthermore, in 2009, the United States Supreme Court issued a decision which interpreted the Indian Reorganization Act, enacted in 1934, and found that the Secretary of the Interior was only authorized to take land into trust for tribes recognized as of the date of that Act.  Thus, a tribe receiving federal recognition after 1934 was not allowed to have land taken into trust for its benefit.
Pueblo of Pojoaque Gaming Commission
On September 23, 2011, a management contract between us and Buffalo Thunder, Inc. and Pojoaque Gaming, Inc. became effective. Those entities are the operating arms of the Pueblo of Pojoaque in Santa Fe, New Mexico (“the Pueblo”). The management contract and two ancillary employment agreements had been approved by the NIGC pursuant to the Regulatory Act. Gaming on the Pueblo is subject to regulation and control by the NIGC as detailed above and the Pueblo of Pojoaque Gaming Commission (“Pueblo Gaming Commission”). The Pueblo Gaming Commission is authorized under the Pueblo Gaming Ordinance to regulate gaming. Regulations of the Gaming Commission require the licensing of managers, employees and gaming vendors. The Pueblo Gaming Commission has the authority to require any persons or entities with an interest in the gaming operations or seeking to conduct business with the gaming operations to submit applications for licensing or approval, submit to background and financial investigations and criminal checks to determine that such persons or entities have the requisite honesty, integrity and experience to not adversely affect gaming operations or pose a threat to the integrity of the gaming operations or the Pueblo.
The Pueblo Gaming Commission is empowered to conduct investigations, issue Notices of Violation, conduct hearings and impose penalties including fines, suspension, termination or revocation of gaming licenses or deny the issuance of gaming licenses for violations of the gaming ordinance or the Pueblo Gaming Commission’s regulations.
The Pueblo Gaming Commission maintains a presence at the gaming facilities to ensure the fairness of the games, protection of the public and Pueblo and security of the Pueblo’s assets.
The two Company executives who are responsible for the management of the gaming operations have been granted gaming licenses by the Pueblo Gaming Commission.consumer price index factors.
 
Costs and Effects of Compliance with Environmental Laws
 
Indiana riverboat casinos are subject to regulation by the Indiana Department of Environmental Management (IDEM)(“IDEM”). That department has regulations similar to the federal Department of Environmental Protection and maintains enforcement programs in the areas of air pollution, water and wastewater pollution and hazardous waste handling. AsOperating a riverboat and land-baseda golf club, we are subject to the regulation of the IDEM in our operations. The IDEM has reporting requirements and can impose fines and other penalties for violations of its regulations. While there can be criminal sanctions for serious and intentional violations of the regulations, the general penalty is a fine of up to $0.03 million$30,000 for each day of a violation and injunctions against continued violations and corrective orders. Rising Star Casino Resort has not been the subject of any fine or other enforcement proceeding by the IDEM.
In order to have land taken into trust or otherwise be approved for use by a tribe for gaming purposes by the federal Bureau of Indian Affairs (BIA), as a federal agency, the BIA is required to comply with the National Environmental Policy Act (NEPA).  Likewise, in order for the NIGC to approve a management agreement for us to manage a tribal gaming casino as required by the Indian Gaming Regulatory Act, the NIGC, as a federal agency, is required to comply with NEPA.  For these purposes, NEPA requires a federal agency to consider the effect on the physical and natural environment of a development project as part of its approval process.  Compliance with NEPA begins with conducting an environmental assessment, which considers the factors identified in NEPA, as implemented by the Council on Environmental Quality, and determines whether the development will cause a significant impact on the environment.  If not, the federal agency may issue a finding of no significant impact.  If the federal agency determines the development project may cause a significant impact on the environment, then it will conduct a further study resulting in an environmental impact statement, which considers all impacts on the environment and what can be done to mitigate those impacts.  Because this constitutes action by a federal agency, any of these determinations can be the subject of litigation.
 
Competition
 
The gaming industry is highly competitive. Gaming activities include traditional land-based casinos, riverboat and dockside gaming, casino gaming on tribal land, state-sponsored lotteries, video poker in restaurants, bars and hotels, internet gaming, pari-mutuel betting on horse racing, dog racing and jai alai, sports bookmaking, card rooms, and casinos at racetracks.  Silver Slipper Casino, Rising Star Casino Resort, Stockman’s Casino and Grand Lodge Casino, Stockman’s Casino and the Indian-owned andas well as other casinos that we may be developing and plan to managedevelop or ownacquire, compete with all these forms of gaming, andgaming.  We also will compete with any new forms or jurisdictions of gaming that may be legalized, in additional jurisdictions, as well as with other types of entertainment. Some of our competitors have more personnel and greater financial or other resources than we do. The principal methods of competition are: location, with casinos located closer to their feeder markets at an advantage; product quality, both in terms of the quality of the facilities and customer service; breadth of offerings, including the selection of casino games and other non-gaming amenities (such as a hotel) offered at the facility; and marketing, often the amount and frequency of promotions offered to guests.
Silver Slipper Casino
 
Silver Slipper Casino is one of eleven casinos located on the Gulf Coast. Its closest competitor is the Hollywood Casino, approximately a fifteen minute drive to the northwestnortheast in Bay St. Louis, whichLouis.  The Hollywood Casino is larger than our property with 56,300 square feet of casino space, approximately 1,200 slot machines, 20 table games poker room,and 290 hotel rooms and four dining options. Furtherrooms. Approximately 30 minutes further to the east, in Gulfport, Mississippi, is the Island View, Casino, approximately thirty minutes away in Gulfport, with 83,000 square feet of casino space, approximately 2,000 slot machines, over 40 table games and approximately 560 hotel rooms and four dining options. In August 2013,rooms.   Island View Casino Resort officials announced plans for a $50.0 millionis constructing an expansion to include an approximately 400 rooma new 400-room beachfront hotel, restaurants and meeting and convention space. Construction will begin this fall andThe Island View expansion is expected to be completed by the summer of 2015. There are also eight casinos in the Biloxi area, approximately an hour away on I-10 East. The largest Biloxi casinos include the Beau Rivage Casino & Hotel and IP Casino, Resort & Spa. The IP Casino, Resort & Spa includes approximately 70,000 square feet of gaming space, 1,800 slot machines, 60 table games and a poker room.  The Beau Rivage Casino & Hotel includes approximately 79,000 square feet of casino space, 2,000 slot machines, 80 table games and a poker room.  In January 2014, the Hard Rock Biloxi completed a 154-room expansion project, which increased its hotel capacity to 479 rooms.  In May 2014, the Golden Nugget Biloxi completed a $100 million renovation project.  Approximately a one and a half hour drive on I-10 West from1.5 hours to the west of the Silver Slipper Casino are three casinos located in andor near New Orleans, which include theOrleans: Harrah’s New Orleans, Casino, Boomtown Casino New Orleans and the Treasure Chest Casino.Chest.  The largest of these casinos is the Harrah’s New Orleans, Casino, the only land casino in downtown New Orleans, which features approximately 125,000 square feet of gaming space, 1,800 gaming machines, 150 table and poker games and ten restaurants.a 450-room hotel.  In January 2015, Boomtown New Orleans opened a 150-room hotel, the first hotel product at that property.  Each of these facilities is within the general market of Silver Slipper Casino and is expected to continue providing competition to our Silver Slipper Casino operation.
 
Rising Star Casino Resort
The Rising Star Casino Resort is one of three riverboat casinos located on the Ohio River in southeastern Indiana. Its closest competitor is the Hollywood Casino Lawrenceburg, approximately 20 minutes away, which features a twenty minute drive, which is largerlarge casino with 142,500 square feet of casino space, over 2,9002,200 slot machines 80and 76 table games, poker room and five dining options. Togames.  Approximately 30 minutes to the south of the Rising Star Casino Resort is the Belterra Casino approximately thirty minutes away,Resort & Spa, with approximately 50,000 square feet of casino space, 1,4001,200 slot machines and 5345 table games. Ohio has recently authorized legalized gamblinga limited number of casinos in 2009. The Scioto Downs racino and the new Scioto Downs Racino and Hollywood Casino opened in Columbus, Ohio in June and October 2012, respectively.  The Scioto Downs Racino includes over 2,100 slots and live horse racing. The Ohio Hollywood Casino Columbus includes over 3,0002,250 slots, approximately 70114 table games and a poker room. TheIn March 2013, the Horseshoe Casino Cincinnati opened on March 4, 2013 and features approximately 96,000 square feet of casino space, 1,800in downtown Cincinnati featuring 1,950 slot machines, 120119 table games and a poker room.  Miami Valley Gaming opened approximately 30 miles north of Cincinnati in December 2013 and has over 1,550 slots.  Belterra Park racino opened in December 2013.  There are also two proposed racinos withinMay 2014 with over 1,300 slot machines and the general market of Rising Star Casino Resort which are expected to openHollywood Dayton racino opened in August 2014 and provide increased competition to our Rising Star Casino Resort operation.with approximately 980 slot machines. While Kentucky has limited legal gaming, the cities of Lexington and Louisville are within the market of Rising Star Casino Resort and there is a possibility thatResort. Should Kentucky will expand legalized gaming, Rising Star could be adversely impacted. Two racetracks in Kentucky have recently installed wagering devices branded “historical racing machines”, but it is not yet clear if such machines are permitted under Kentucky law.  There is a racetrack in Northern Kentucky near Rising Sun that has not yet installed such wagering devices.  Also, the two racinos near future.Indianapolis that Rising Star Casino Resort competes with are currently trying to amend existing legislation that prohibits them from offering table games with live dealers, similar to what Rising Star currently offers.  This change, should it occur, would likely impact our business.
 
Grand LodgeStockman’s Casino is one of four casinos located within a five mile radius of each other in the north Lake Tahoe area.  The closest and largest competitor is the Tahoe Biltmore Lodge & Casino which is approximately 4.5 miles away and has more than 200 slot machines, approximately eight table games and a sports book. In South Lake Tahoe, approximately a 45 minute drive from Incline Village, there are four gaming properties, which do not directly compete with the North Lake Tahoe area.  There are also numerous Native American casinos serving the Northern California market.
 
Stockman’s Casino is located on the west side ofin Fallon, Nevada on Highway 50, approximately 60 miles east of Reno, Nevada, and is the largest of several casinos in the Churchill County area.  The county’s population is roughly 25,000, with a nearby naval air base which hashaving a significant economic impact on our business.  Of the approximately nine casinos currently operating in the Fallon, Nevada market, our major competitors are three other casinos that are smaller than Stockman’s Casino both in size and the number of gaming machines.   While we are not aware of any significant planned expansion to gaming capacity in the Churchill County area, additional competition may adversely affect our financial condition or results of operations. Furthermore, if the naval air base closed, it would likely have an adverse effect on our financial condition and results of operations.
 
The Buffalo ThunderGrand Lodge Casino and Resort and the Cities of Gold and other gaming facilities are two
Grand Lodge Casino is one of four casinos located within a five mile radius in the Santa Fe, New MexicoNorth Lake Tahoe area.   The closest competitorA fifth casino is the Camel Rock Casinocurrently expected to re-open in Santa Fe, New Mexico, approximately a ten minute drive, which is smallerDecember 2015. 
Grand Lodge also competes with approximately 500 slot machines, two table gamescasinos in nearby South Lake Tahoe and two dining options.  To the southwest, approximately an hour away, is the San Felipe Casino Hollywood, located in Algodones, New Mexico.  The San Felipe Casino Hollywood includes approximately 600 slot machines and an RV park. The San Felipe Travel Center, which is adjacent to the San Felipe Casino Hollywood, includes a 24-hour convenience store, restaurant and service station.Reno.  There are threealso numerous Native American casinos located in Albuquerque, New Mexico, approximately a 1.5 hour drive away.  The largest of these casinos isCalifornia serving the Isleta Resort & Casino with 300,000 square feet of casino space, over 1,600 slot machines, approximately 30 table games, poker room, bingo and five dining options.  Each of these facilities is within the general market of Buffalo Thunder Casino and Resort and the Cities of Gold and other gaming facilities and is expected to provide competition.Northern California market.
 
Employees
 
As of March 1, 2014,February 20, 2015, we had 16twelve full-time corporate employees, fourtwo of whom are executive officers and an additional threefour that are senior management. The Silver Slipper CasinoOur casino properties had approximately 400985 full-time and 80277 part-time employees Rising Star Casino Resort had approximately 500 full-time and 150 part-time employees, Grand Lodge Casino had approximately 105 full-time and 30 part-time employees and Stockman’s Casino had approximately 95 full-time and 20 part-time employees. The Buffalo Thunder management contract oversees approximately 460 full-time and 15 part-time employees, none of which are our direct employees.  as follows:
  Full-time Part-time
Silver Slipper Casino  393   90 
Rising Star Casino Resort  416   139 
Grand Lodge Casino  91   36 
Stockman’s Casino  85   12 
We believe that our relationship with our employees is good. None of our employees are currently represented by a labor union, although such representation could occur in the future.union.
 
Item 1A. Risk Factors.
 
An investment in our securities is subject to risks inherent to our business. We have described below what we currently believe to be the material risks and uncertainties in our business. Before making an investment decision, you should carefully consider the risks and uncertainties described below, together with all of the other information included or incorporated by reference in this Annual Report on Form 10-K.
We also face other risks and uncertainties beyond what is described below. This Annual Report on Form 10-K is qualified in its entirety by these risk factors. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of securities, including our common stock, could decline significantly. You could lose all or part of your investment.
Risks Related to our Substantial Indebtedness
Our present indebtedness and projected future borrowings could adversely affect our financial health; future cash flows may not be sufficient to meet our obligations, and we may have difficulty obtaining additional financing or refinancing; and we may experience adverse effects of interest rate fluctuations.
As of December 31, 2014, we had indebtedness of $60.6 million, including $40.6 million of variable interest debt and $20 million of 14.25% debt.  We are incurring additional debt in 2015, including for the construction of our hotel at Silver Slipper Casino.  Our variable interest rate debt is due in June of 2016, while our 14.25% debt is due in April 2017.
There can be no assurance that we will generate sufficient cash flow from operations or through asset sales to meet our long-term debt service obligations. Our present indebtedness and projected future borrowings could have important adverse consequences to us, such as:
making it more difficult for us to satisfy our obligations with respect to our existing indebtedness;
limiting our ability to obtain additional financing without restructuring the covenants in our existing indebtedness to permit the incurrence of such financing;
requiring a substantial portion of our cash flow to be used for payments on the debt and related interest, thereby reducing our ability to use cash flow to fund other working capital, capital expenditures and general corporate requirements;
limiting our ability to respond to changing business, industry and economic conditions and to withstand competitive pressures, which may affect our financial condition;
causing us to incur higher interest expense in the event of increases in interest rates on our borrowings that have variable interest rates or in the event of refinancing existing debt at higher interest rates;
limiting our ability to make investments, dispose of assets, pay cash dividends or repurchase stock;
increasing our vulnerability to downturns in our business, our industry or the general economy and restricting us from making improvements or acquisitions or exploring business opportunities;
placing us at a competitive disadvantage to competitors with less debt or greater resources; and
subjecting us to financial and other restrictive covenants in our indebtedness, the non-compliance with which could result in an event of default.
If we fail to refinance our debt at least one year prior to its maturity, it becomes a current liability.  Having a large current liability may cause our auditors to qualify their opinion as to our status as a “going concern”. There can be no assurance that our business will generate sufficient cash flow from operations, that our anticipated growth in operations will be realized, or that future borrowings will be available to us under our credit facilities in amounts sufficient to enable us to pay our indebtedness, to complete construction of the hotel at Silver Slipper Casino, or to fund our other liquidity needs. In addition, as we undertake substantial new developments or facility renovations or if we consummate significant acquisitions in the future, our cash requirements and our debt service requirements may increase significantly.
We may need to refinance all or a portion of our debt on or before maturity. There can be no assurance that we will be able to refinance any of our debt on either attractive terms or commercially reasonable terms, or at all. Our future operating performance and our ability to service, extend or refinance our indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.
Certain borrowings under our credit facilities are at variable rates of interest, and to the extent not protected with interest rate hedges, could expose us to market risk from adverse changes in interest rates. If interest rates increase, our debt service obligations on the variable-rate indebtedness could increase significantly even though the amount borrowed would remain the same.
Our indebtedness imposes restrictive covenants on us.
Our credit facilities impose various customary covenants on us and our subsidiaries. The restrictions that are imposed under these debt obligations include, among other obligations, limitations on our and our subsidiaries’ ability to:
incur additional debt;
make payments on subordinated obligations;
make dividends or distributions and repurchase stock;
make investments;
grant liens on our property to secure debt;
sell assets or enter into mergers or consolidations;
sell equity interest in our subsidiaries;
make capital expenditures;
amend or modify our subordinate indebtedness without obtaining consent from the holders of our senior indebtedness.
Our credit facilities impose various customary affirmative covenants on us and our restricted subsidiaries, including, among others, reporting covenants, covenants to maintain insurance, compliance with laws, maintenance of properties and other covenants customary in financings of this type. In addition, our credit facilities require that we comply with various restrictive maintenance financial covenants, including a maximum total leverage ratio and maximum first lien leverage ratio (a ratio of total debt to LTM Adjusted EBITDA (as defined in our credit facilities )), and a fixed charge coverage ratio.
Our ability to comply with the covenants governing our indebtedness may be affected by general economic conditions, industry conditions, and other events beyond our control, including delay in the completion of new projects under construction. As a smaller reporting company,result, there can be no assurance that we will be able to comply with these covenants. Our failure to comply with the covenants contained in the instruments governing our indebtedness, including failure to comply as a result of events beyond our control, could result in an event of default, which could materially and adversely affect our operating results and our financial condition.
If there were an event of default under one of our credit facilities, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable, subject to applicable grace periods. This could trigger cross-defaults under our other debt obligations. There can be no assurance that our assets or cash flow would be sufficient to repay borrowings under our outstanding credit facilities if accelerated upon an event of default, or that we would be able to repay, refinance or restructure the payments on any of those debt instruments.
To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures and expansion efforts will depend upon our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
There can be no assurance that our business will generate sufficient cash flows from operations, or that future borrowings will be available to us under our credit facilities in amounts sufficient to enable us to pay our indebtedness, as such indebtedness matures and to fund our other liquidity needs. In such circumstances, we may need to refinance all or a portion of our indebtedness, at or before maturity, and cannot provide assurances that we will be able to refinance any of our indebtedness on commercially reasonable terms, or at all. We may have to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing or joint venture partners. These financing strategies may not be completed on satisfactory terms, if at all. In addition, certain states’ laws contain restrictions on the ability of companies engaged in the gaming business to undertake certain financing transactions. Some restrictions may prevent us from obtaining necessary capital.
Our ability to obtain additional financing on commercially reasonable terms may be limited.
Although we believe that our cash, cash equivalents and working capital, as well as future cash from operations and availability under the revolving term loan, will provide adequate resources to fund ongoing operating requirements, we may need to seek additional financing to compete effectively. If we are unable to obtain financing on commercially reasonable terms, it could:
reduce funds available to us for purposes such as working capital, capital expenditures, strategic acquisitions and other general corporate purposes;
restrict our ability to capitalize on business opportunities;
increase our vulnerability to economic downturns and competitive pressures in the markets in which we operate; and
place us at a competitive disadvantage.
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Risks Related to our Business
We may face reductions in discretionary consumer spending as a result of an economic downturn.
Our net revenues are highly dependent upon the volume and spending levels of customers at our properties and, as such, our business has been adversely impacted by economic downturns. Decreases in discretionary consumer spending brought about by weakened general economic conditions such as, but not limited to, lackluster recoveries from recessions, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, cultural and demographic changes, and increased stock market volatility may negatively impact our revenues and operating cash flow.
We face significant competition from other gaming and entertainment operations.
                The gaming industry is characterized by an increasingly high degree of competition among a large number of participants, including riverboat casinos, dockside casinos, land-based casinos, racetrack casinos, video lottery, poker machines not located in casinos, Native American gaming, social gaming and other forms of gaming in the U.S. Furthermore, competition from internet lotteries, sweepstakes, and other internet wagering gaming services, which allow their customers to wager on a wide variety of sporting events and play Las Vegas-style casino games from home or in non-casino settings, could divert customers from our properties and thus adversely affect our business. Such internet wagering services are often illegal under federal law but operate from overseas locations and are nevertheless sometimes accessible to domestic gamblers. Currently, there are proposals that would legalize internet poker and other varieties of internet gaming in a number of states and at the federal level. Several states, including Nevada, New Jersey and Delaware, have enacted legislation authorizing intrastate internet gaming and internet gaming operations have begun in these states. Expansion of internet gaming in other jurisdictions (both legal and illegal) could further compete with our traditional operations, which could have an adverse impact on our business and results of operations.
                In a broader sense, our gaming operations face competition from all manner of leisure and entertainment activities, including: shopping; athletic events; television and movies; concerts; and travel. Legalized gaming is currently permitted in various forms throughout the U.S., in several Canadian provinces and on various lands taken into trust for the benefit of certain Native Americans in the U.S. and Canada. Other jurisdictions, including states adjacent to states in which we currently have facilities (such as in Ohio), have recently legalized and implemented gaming. In addition, established gaming jurisdictions could award additional gaming licenses or permit the expansion or relocation of existing gaming operations. New, relocated or expanded operations by other persons could increase competition for our gaming operations and could have a material adverse impact on us.
                Gaming competition is intense in most of the markets where we operate. As competing properties and new markets are opened, our operating results may be negatively impacted. In addition, some of our direct competitors in certain markets may have superior facilities and/or operating conditions.  We expect each existing or future market in which we participate to be highly competitive. The competitive position of each of our casino properties is discussed in “Item 1, Business – Competition”.
We face extensive regulation from gaming and other regulatory authorities.
Licensing.    The ownership, management and operation of gaming facilities are subject to extensive state and local regulation.   See “Item 1. Business – Government Regulation.”
Taxation and fees.    We believe that the prospect of significant revenue is one of the primary reasons that jurisdictions permit legalized gaming. As a result, gaming companies are typically subject to significant revenue-based taxes and fees in addition to normal federal, state, local and provincial income taxes, and such taxes and fees are subject to increase at any time. We pay substantial taxes and fees with respect to our operations. From time to time, federal, state, local and provincial legislators and officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming industry. In addition, worsening economic conditions could intensify the efforts of state and local governments to raise revenues through increases in gaming taxes and/or property taxes. It is not possible to determine with certainty the likelihood of changes in tax laws or in the administration of such laws. Such changes, if adopted, could have a material adverse effect on our business, financial condition and results of operations. The large number of state and local governments with significant current or projected budget deficits makes it more likely that those governments that currently permit gaming will seek to fund such deficits with new or increased gaming taxes and/or property taxes, and worsening economic conditions could intensify those efforts. Any material increase, or the adoption of additional taxes or fees, could have a material adverse effect on our future financial results.
Compliance with other laws.    We are also subject to a variety of other rules and regulations, including zoning, environmental, employment, construction and land-use laws and regulations governing the serving of alcoholic beverages. If we are not in compliance with these laws, it could have a material adverse effect on our business, financial condition and results of operations.
We are subject to certain federal, state and other regulations.
We are subject to certain federal, state and local environmental laws, regulations and ordinances that apply to businesses generally. The Bank Secrecy Act, enforced by the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Treasury Department, requires us to report currency transactions in excess of $10,000 occurring within a gaming day, including identification of the guest by name and social security number, to the Internal Revenue Service (“IRS”).  This regulation also requires us to report certain suspicious activity, including any transaction that exceeds $5,000 that we know, suspect or have reason to believe involves funds from illegal activity or is designed to evade federal regulations or reporting requirements.  Periodic audits by the IRS and our internal audit department assess compliance with the Bank Secrecy Act, and substantial penalties can be imposed against us if we fail to comply with this regulation.  In recent years, the U.S. Treasury Department has increased its focus on Bank Secrecy Act compliance throughout the gaming industry, and recent public comments by FinCEN suggest that casinos should obtain information on each customer’s sources of income.  This could impact our ability to attract and retain casino guests.
Our riverboat must comply with certain federal and state laws and regulations with respect to boat design, on-board facilities, equipment, personnel and safety. In addition, we are required to providehave third parties periodically inspect and certify our casino riverboat for stability and single compartment flooding integrity. Our casinos also must meet local fire safety standards. We would incur additional costs, if any, if our gaming facilities were not in compliance with one or more of these regulations.
We are also subject to various federal, state, and local laws and regulations affecting businesses in general. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, smoking, employees, currency transactions, taxation, zoning and building codes, and marketing and advertising.
We also deal with significant amounts of cash in our operations and are subject to various reporting and anti-money laundering regulations. Any violations of anti-money laundering laws or regulations by any of our properties could have an adverse effect on our financial condition, results of operations or cash flows. Such laws and regulations could change or could be interpreted differently in the information requiredfuture, or new laws and regulations could be enacted.
The imposition of a substantial penalty could have a material adverse effect on our business.
Our business may be adversely affected by this item.legislation prohibiting tobacco smoking.
Legislation in various forms to ban indoor tobacco smoking has been enacted or introduced in jurisdictions in which we operate.  The gaming areas of our properties are not currently subject to tobacco restrictions.  While gaming areas have generally been exempted from these restrictions, if additional restrictions on smoking are enacted in jurisdictions in which we operate, we could experience a significant decrease in gaming revenue and particularly, if such restrictions are not applicable to all competitive facilities in that gaming market, our business could be materially adversely affected.
We derive a significant amount of our revenues from our properties located in Indiana and Mississippi, and are especially subject to certain risks, including economic and competitive risks, associated with the conditions in those areas and in the states from which we draw patrons.
Because we derive a majority of our revenues from properties concentrated in two states, we are subject to greater risks from regional conditions than a gaming company with operating properties in several different geographies. A decrease in revenues from or increase in costs for one of these locations is likely to have a proportionally greater impact on our business and operations than it would for a gaming company with more geographically diverse operating properties. Risks from regional conditions include the following:
regional economic conditions;
regional competitive conditions, including legalization or expansion of gaming in Indiana, Mississippi or in neighboring states;
allowance of new types of gaming, such as the introduction of live table games at Indiana racinos;
reduced land and air travel due to increasing fuel costs or transportation disruptions;
increase our vulnerability to economic downturns and competitive pressures in the markets in which we operate; and
place us at a competitive disadvantage.
Some of our casinos are located on leased property. If lessor buyout rights are exercised or if we default on one or more leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected casino.
 
We lease certain parcels of land at our Silver Slipper Casino in Mississippi, and one of the two hotels at our Rising Star Casino Resort in Indiana.  We also lease casino space at our Grand Lodge Casino in Nevada. As a lessee, we have the right to use the leased land, hotel or space as applicable; however, we do not hold fee ownership. Accordingly, unless we have a purchase option and exercise such option, we will have no interest in the improvements thereon at the expiration of the leases. The operating lease at the Grand Lodge Casino includes certain lessor buyout rights based upon a multiple of EBITDA that, if exercised, could result in the lessor purchasing our leasehold interest and the operating assets on terms that are less than fair market value or that are financially unfavorable to us.  Since we do not completely control the land, hotel and space underlying our leased properties, a lessor could take certain actions to disrupt our rights under the long-term leases which are beyond our control. If the entity owning any leased land, hotel or space chose to disrupt our use either permanently or for a significant period of time, then the value of our assets could be impaired and our business and operations could be adversely affected. If we were to default on the lease, the lessor could terminate the affected lease and we could lose possession of the affected land, hotel or space and any improvements thereon. The loss of the lease through exercise of buyout rights or through termination upon default would have a significant adverse effect on our business, financial condition and results of operations as we would then be unable to operate all or portions of the affected facilities, which, in turn, may result in a default under our credit facilities.
We are engaged from time to time in one or more construction and development projects, and many factors could prevent us from completing them as planned.
Construction of major buildings has certain inherent risks, including the risks of fire, structural collapse, human error and electrical, mechanical and plumbing malfunction. In addition, projects entail additional risks related to structural heights and the required use of cranes. Our development and expansion projects also entail significant risks, including:
shortage of materials;
shortage of skilled labor or work stoppages;
unforeseen construction scheduling, engineering, excavation, environmental or geological problems;
natural disasters, hurricanes, weather interference, changes in river levels, floods, fires, earthquakes or other casualty losses or delays;
unanticipated cost increase or delays in completing the project;
delays in obtaining or inability to obtain or maintain necessary license or permits;
changes to plans or specifications;
performance by contractors and subcontractors;
disputes with contractors;
disruption of our operations caused by diversion of management’s attention to new development projects and construction at our existing properties;
remediation of environmental contamination at some of our proposed construction sites, which may prove more difficult or expensive than anticipated in our construction budgets;
failure to obtain and maintain necessary gaming regulatory approvals and licenses, or failure to obtain such approvals and licenses on a timely basis;
requirements or government-established “goals” concerning union labor or requiring that a portion of the project expenditures be through companies controlled by specific ethnic or gender groups, goals that may not be obtainable, or may only be obtainable at additional project cost; and
increases in the cost of raw materials for construction, driven by demand, higher labor and construction costs and other factors, may cause price increases beyond those anticipated in the budgets for our development projects.
Escalating construction costs may cause us to modify the design and scope of projects from those initially contemplated or cause the budgets for those projects to be increased. We generally carry insurance to cover certain liabilities related to construction, but not all risks are covered, and it is uncertain whether such insurance will provide sufficient payment in a timely fashion even for those risks that are insured and material to us.
Construction of our development projects exposes us to risks of cost overruns due to typical construction uncertainties associated with any project or changes in the designs, plans or concepts of such projects. For these and other reasons, construction costs may exceed the estimated cost of completion, notwithstanding the existence of any guaranteed maximum price construction contracts.
The casino, hotel and resort industry is capital intensive and we may not be able to finance expansion and renovation projects, which could put us at a competitive disadvantage.
Our properties have an ongoing need for renovations and other capital improvements to remain competitive, including replacement, from time to time, of furniture, fixtures and equipment.  We may also need to make capital expenditures at our casino properties to comply with applicable laws and regulations.
Renovations and other capital improvements at our properties require significant capital expenditures. In addition, renovations and capital improvements usually generate little or no cash flow until the projects are completed.  We may not be able to fund such projects solely from cash provided from operating activities.  Consequently, we may have to rely upon the availability of debt or equity capital to fund renovations and capital improvements, and our ability to carry them out will be limited if we cannot obtain satisfactory debt or equity financing, which will depend on, among other things, market conditions.  There can be no assurance that we will be able to obtain additional equity or debt financing or that we will be able to obtain such financing on favorable terms. Our failure to renovate our properties may put us at a competitive disadvantage.
Adverse weather conditions, road construction, gasoline shortages and other factors affecting our facilities and the areas in which we operate could make it more difficult for potential customers to travel to our properties and deter customers from visiting our properties.
Our continued success depends upon our ability to draw customers from each of the geographic markets in which we operate. Adverse weather conditions or road construction can deter our customers from traveling to our facilities or make it difficult for them to frequent our properties. In late 2013 and early 2014, there were severe cold temperatures that we believe adversely affected our Indiana and Mississippi properties’ financial performance. Moreover, gasoline shortages or fuel price increases in regions that constitute a significant source of customers for our properties could make it more difficult for potential customers to travel to our properties and deter customers from visiting. Our dockside gaming facility in Indiana, as well as any additional riverboat or dockside casino properties that might be developed or acquired, are also subject to risks, in addition to those associated with land-based casinos, which could disrupt our operations. Although our Indiana vessel does not leave its moorings in normal operations, there are risks associated with the movement or mooring of vessels on waterways, including risks of casualty due to river turbulence, flooding, collisions with other vessels and severe weather conditions.
Our results of operations and financial condition could be materially adversely affected by the occurrence of natural disasters, such as hurricanes, or other catastrophic events, including war and terrorism.
Natural disasters, such as major hurricanes, tornados, typhoons, floods, fires and earthquakes, could adversely affect our business and operating results. Hurricanes are common in the areas in which our Mississippi property is located and the severity of such natural disasters is unpredictable. In 2005, Hurricanes Katrina and Rita caused significant damage in the Gulf Coast region and damaged our Mississippi facility.  Additionally, our Indiana property is at risk of flooding due to its proximity to the Ohio River.
Catastrophic events, such as terrorist and war activities in the United States and elsewhere, have had a negative effect on travel and leisure expenditures, including lodging, gaming (in some jurisdictions) and tourism. We cannot accurately predict the extent to which such events may affect us, directly or indirectly, in the future. There also can be no assurance that we will be able to obtain or choose to purchase any insurance coverage with respect to occurrences of terrorist acts and any losses that could result from these acts. If there is a prolonged disruption at our properties due to natural disasters, terrorist attacks or other catastrophic events, our results of operations and financial condition would be materially adversely affected.
We may incur property and other losses that are not adequately covered by insurance, including adequate levels of Weather Catastrophe Occurrence/Named Windstorm, Flood and Earthquake insurance coverage for our properties.
Although we maintain insurance that our management believes is customary and appropriate for our business, there can be no assurance that insurance will be available at reasonable costs in any given year or adequate to cover all losses and damage to which our business or our assets might be subjected. The lack of adequate insurance for certain types or levels of risk could expose us to significant losses in the event that a catastrophe occurred for which we are uninsured or underinsured. Any losses we incur that are not adequately covered by insurance may decrease our future operating income, require us to find replacements or repairs for destroyed property, and reduce the funds available for payments of our obligations.
Because of significant loss experience caused by hurricanes and other natural disasters over the last several years, a number of insurance companies have stopped writing insurance in Class 1 hurricane areas, including Mississippi. Others have significantly limited the amount of coverage they will write in these markets and have dramatically increased the premiums charged for this coverage. In addition, as a result of the worldwide economic conditions, there has been uncertainty as to the viability of certain insurance companies. While we believe that the insurance companies from which we have purchased insurance policies will remain solvent, there is no certainty that this will be the case.
We may face disruption and other difficulties in integrating and managing facilities we have recently developed or acquired, or may develop or acquire in the future.
We expect to continue pursuing expansion opportunities, and we regularly evaluate opportunities for acquisition and development of new properties, which evaluations may include discussions and the review of confidential information after the execution of nondisclosure agreements with potential acquisition candidates, some of which may be potentially significant in relation to our size.
We could face significant challenges in managing and integrating our expanded or combined operations and any other properties we may develop or acquire, particularly in new competitive markets. The integration of properties we may develop or acquire will require the dedication of management resources that may temporarily divert attention from our day-to-day business. The process of integrating properties that we may acquire also could interrupt the activities of those businesses, which could have a material adverse effect on our business, financial condition and results of operations. In addition, the development of new properties may involve construction, local opposition, regulatory, legal and competitive risks, as well as the risks attendant to partnership deals on these development opportunities. In particular, in projects where we team up with a joint venture partner, if we cannot reach agreement with such partners, or our relationships otherwise deteriorate, we could face significant increased costs and delays. Local opposition can delay or increase the anticipated cost of a project. Finally, given the competitive nature of these types of limited license opportunities, litigation is possible.
Management of new properties, especially in new geographic areas, may require that we increase our management resources. We cannot assure you that we will be able to manage the combined operations effectively or realize any of the anticipated benefits of our acquisitions. We also cannot assure you that if acquisitions are completed, that the acquired businesses will generate returns consistent with our expectations.
Our ability to achieve our objectives in connection with any acquisition we may consummate may be highly dependent on, among other things, our ability to retain the senior level property management teams of such acquisition candidates. If, for any reason, we are unable to retain these management teams following such acquisitions or if we fail to attract new capable executives, our operations after consummation of such acquisitions could be materially adversely affected.
If we make new acquisitions or new investments, we may face additional risks related to our business, results of operations, financial condition, liquidity, ability to satisfy financial covenants and comply with other restrictive covenants under our debt agreements, and ability to pay or refinance our credit facilities and other indebtedness.
The occurrence of some or all of the above described events could have a material adverse effect on our business, financial condition and results of operations.
We may face risks related to our ability to receive regulatory approvals required to complete, or other delays or impediments to completing, certain of our acquisitions.
Our growth may be fueled, in part, by the acquisition of existing gaming and development properties. In addition to standard closing conditions, our acquisitions are often conditioned on the receipt of regulatory approvals and other hurdles that create uncertainty and could increase costs. Such delays could significantly reduce the benefits to us of such acquisitions and could have a material adverse effect on our business, financial condition and results of operations.
We face a number of challenges prior to opening new or upgraded facilities.
No assurance can be given that, when we endeavor to open new or upgraded facilities, the expected timetables for opening such facilities will be met in light of the uncertainties inherent in the development of the regulatory framework, construction, the licensing process, legislative action and litigation. For example, recent labor disputes at port facilities in California has delayed the arrival of some furniture items needed for the hotel we are constructing in Mississippi. Delays in opening new or upgraded facilities could lead to increased costs and delays in receiving anticipated revenues with respect to such facilities and could have a material adverse effect on our business, financial condition and results of operations.
Insufficient or lower-than-expected results generated from our new developments and acquired properties may negatively affect our operating results and financial condition.
There can be no assurance that the revenues generated from our new developments and acquired properties will be sufficient to pay related expenses if and when these developments are completed; or, even if revenues are sufficient to pay expenses, that the new developments and acquired properties will yield an adequate return or any return on our significant investments. Our projects, if completed, may take significantly longer than we expect to generate returns, if any. Moreover, lower-than-expected results from the opening of a new facility may negatively affect our operating results and financial condition and may make it more difficult to raise capital.
Rising operating costs at our gaming properties could have a negative impact on our business.
The operating expenses associated with our gaming properties could increase due to, among other reasons, the following factors:
changes in federal, state or local tax or regulations, including state gaming regulations or gaming taxes, could impose additional restrictions or increase our operating costs;
aggressive marketing and promotional campaigns by our competitors for an extended period of time could force us to increase our expenditures for marketing and promotional campaigns in order to maintain our existing customer base or attract new customers;
as our properties age, we may need to increase our expenditures for repairs, maintenance, and to replace equipment necessary to operate our business in amounts greater than what we have spent historically;
an increase in the cost of health care benefits for our employees could have a negative impact on our financial results;
our reliance on slot play revenues and any additional costs imposed on us from vendors;
availability and cost of the many products and service we provide our customers, including food, beverages, retail items, entertainment, hotel rooms, spa and golf services;
availability and costs associated with insurance;
increase in costs of labor, including due to potential unionization of our employees;
our properties use significant amounts of electricity, natural gas and other forms of energy, and energy price increases may adversely affect our cost structure; and
our properties use significant amounts of water, and a water shortage may adversely affect our operations.
If our operating expenses increase without any offsetting increase in our revenues, our results of operations would suffer.
We may experience an impairment of our goodwill, which could adversely affect our financial condition and results of operations.
We have recognized a substantial amount of goodwill in connection with the purchase of our owned properties. We test goodwill for impairment annually or more frequently if events or circumstances indicate that the carrying value may not be recoverable. A significant amount of judgment is involved in performing fair value estimates for goodwill since the results are based on estimated future cash flows and assumptions related thereto. Significant assumptions include estimates of future sales and expense trends, liquidity and capitalization, among other factors. We base our fair value estimates on projected financial information, which we believe to be reasonable. However, actual results may differ from those projections. Further, we may need to recognize an impairment of some of the goodwill recognized, which would adversely affect our financial condition and results of operations.
Our gaming operations rely heavily on technology services and an uninterrupted supply of electrical power. Our security systems and all of our slot machines are controlled by computers and are reliant on electrical power to operate.
Any unscheduled disruption in our technology services or interruption in the supply of electrical power could result in an immediate, and possibly substantial, loss of revenues due to a shutdown of our gaming operations. Such interruptions may occur as a result of, for example, a failure of our information technology or related systems, catastrophic events or rolling blackouts. Our systems are also vulnerable to damage or interruption from earthquakes, floods, fires, telecommunication failures, terrorist attacks, computer viruses, computer denial-of-service attacks and similar events.
Our information technology and other systems are subject to cyber security risk, including misappropriation of customer information or other breaches of information security.
We rely on information technology and other systems to maintain and transmit our customers’ personal and financial information, credit card settlements, credit card funds transmissions, mailing lists and reservations information. We have taken steps designed to safeguard our customers’ confidential personal information and have implemented systems designed to meet all requirements of the Payment Card Industry standards for data protection. However, our information and processes are subject to the ever-changing threat of compromised security in the form of a risk of potential breach, system failure, computer virus, or unauthorized or fraudulent use by customers, company employees, or employees of third party vendors. The steps we take to deter and mitigate these risks may not be successful, and any resulting compromise or loss of data or systems could adversely impact operations or regulatory compliance and could result in remedial expenses, fines, litigation, and loss of reputation, potentially impacting our financial results.
We are subject to environmental laws and potential exposure to environmental liabilities.
We are subject to various federal, state and local environmental laws and regulations that govern our operations, including emissions and discharges into the environment, and the handling and disposal of hazardous and non-hazardous substances and wastes. Failure to comply with such laws and regulations could result in costs for corrective action, penalties or the imposition of other liabilities or restrictions.  To date, none of these matters have had a material adverse effect on our business, financial condition or results of operations; however, there can be no assurance that such matters will not have such an effect in the future.  We also are subject to laws and regulations that impose liability and clean-up responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, a current or previous owner or operator of property may be liable for the costs of remediating contaminated soil or groundwater on or from its property, without regard to whether the owner or operator knew of, or caused, the contamination, as well as incur liability to third parties impacted by such contamination. The presence of contamination, or failure to remediate it properly, may adversely affect our ability to use, sell or rent property. To date, none of these matters or other matters arising under environmental laws has had a material adverse effect on our business, financial condition, or results of operations; however, there can be no assurance that such matters will not have such an effect in the future.
The concentration and evolution of the slot machine manufacturing industry could impose additional costs on us.
A majority of our revenues are attributable to slot machines and related systems operated by us at our gaming facilities. It is important, for competitive reasons, that we offer popular and up to date slot machine games to our customers.
A substantial majority of the slot machines sold in the U.S. in recent years were manufactured by a few select companies, and there has been recent consolidation activity within the gaming equipment sector.
In recent years, slot machine manufacturers have frequently refused to sell slot machines featuring the most popular games, instead requiring participation lease arrangements in order to acquire the machines. Participation slot machine leasing arrangements typically require the payment of a fixed daily rental. Such agreements may also include a percentage payment of coin-in or net win. Generally, a participation lease is substantially more expensive over the long term than the cost to purchase a new machine.
For competitive reasons, we may be forced to purchase new slot machines or enter into participation lease arrangements that are more expensive than our current costs associated with the continued operation of our existing slot machines. If the newer slot machines do not result in sufficient incremental revenues to offset the increased investment and participation lease costs, it could hurt our profitability.
We depend on our key personnel.
We are highly dependent on the services of our executive management team and other members of our senior management team.  Our ability to attract and retain key personnel is affected by the competitiveness of our compensation packages and the other terms and conditions of employment, our continued ability to compete effectively against other gaming companies, and our growth prospects. The loss of the services of any members of our senior management team could have a material adverse effect on our business, financial condition and results of operations.
We are subject to litigation which, if adversely determined, could cause us to incur substantial losses.
From time to time during the normal course of operating our businesses, we are subject to various litigation claims and legal disputes. Some of the litigation claims may not be covered under our insurance policies, or our insurance carriers may seek to deny coverage. As a result, we might also be required to incur significant legal fees, which may have a material adverse effect on our financial position. In addition, because we cannot accurately predict the outcome of any action, it is possible that, as a result of current and/or future litigation, we will be subject to adverse judgments or settlements that could significantly reduce our earnings or result in losses.
Subsequent phases to certain of our existing projects and potential enhancements at our properties may require us to raise additional capital.
We may need to access the capital markets or otherwise obtain additional funds to complete subsequent phases of our existing projects and to fund potential enhancements we may undertake at our facilities there. We do not know when or if the capital markets will permit us to raise additional funds for such phases and enhancements in a timely manner, on acceptable terms, or at all. Inability to access the capital markets, or the availability of capital only on less-than-favorable terms, may force us to delay, reduce or cancel our subsequent phases and enhancement projects.
Our ability to obtain bank financing or to access the capital markets for future offerings may also be limited by our financial condition, results of operations or other factors, such as our credit rating or outlook at the time of any such financing or offering and the covenants in our existing debt agreements, as well as by general economic conditions and contingencies and uncertainties that are beyond our control. As we seek additional financing, we will be subject to the risks of rising interest rates and other factors affecting the financial markets.
The market price for our common stock may be volatile, and you may not be able to sell our stock at a favorable price or at all.
Many factors could cause the market price of our common stock to rise and fall, including:
actual or anticipated variations in our quarterly results of operations;
change in market valuations of companies in our industry;
change in expectations of future financial performance;
regulatory changes;
fluctuations in stock market prices and volumes;
issuance of common stock market prices and volumes;
issuance of common stock or other securities in the future;
the addition or departure of key personnel; and
announcements by us or our competitors of acquisitions, investments, dispositions, joint ventures or other significant business decisions.
In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to companies’ operating performance. Broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, shareholder derivative lawsuits and/or securities class action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources.
The global financial crisis and recession have affected our business and financial condition, and economic and financial market conditions may continue to affect us in ways that we currently cannot accurately predict.
The credit crisis, economic recession and related turmoil in the global financial system have had and may continue to have an effect on our business and financial condition. The U.S. economy continues to experience some weakness following a severe recession, which resulted in increased unemployment, decreased consumer spending and a decline in housing values. While the U.S. economy has emerged from the recession, high levels of unemployment have continued to persist. In addition, while the Federal Reserve took policy actions to promote market liquidity and encourage economic growth following the recession, such actions are now being curtailed as signs of improvement in the economy have emerged, and the impact of these monetary policy actions on the recovery is uncertain. If the economic recovery slows or stalls, or if the economy experiences another recession, we may experience a material adverse effect on our business, results of operations and financial condition.
If our lenders were to file for bankruptcy or otherwise default on their obligations to us, we may not have the liquidity to fund our current or future projects. There is no certainty that our lenders will continue to remain solvent or fund their respective obligations under our credit facilities, which would have a material adverse effect on our liquidity and financial condition.
The significant distress experienced by financial institutions during the financial crisis and the recession has had and may continue to have far reaching adverse consequences across many industries, including the gaming industry. The credit and liquidity crisis greatly restricted the availability of capital and caused the cost of capital (if available) to be much higher than it had traditionally been. Volatility in the capital markets is perceived to be high. The need to access the capital markets could increase the costs of our projects, which could have an impact on our flexibility to react to changing economic and business conditions and our ability or willingness to fund our development projects. All of these effects could have a material adverse effect on our business, financial condition and results of operations, liquidity and our ability to satisfy financial covenants and comply with other restrictive covenants.
Item 1B. Unresolved Staff Comments.
 
Not applicable.
 
Item 2. Properties.
 
The following describes our principal real estate properties.  All properties listed below and substantially all other assets secure our indebtedness in connection with our First Lien Credit Agreement with Capital One Bank, N.A. (“First Lien Credit Agreement”Facility”) and our Second Lien Credit Agreement with ABC Funding, LLC (“Second Lien Credit Agreement”Facility”), as discussed in Note 87 to the consolidated financial statements set forth in Item“Item 8. Financial Statements and Supplementary Data.Data.
 
Silver Slipper Casino
 
We own the Silver Slipper Casino located in Bay St. Louis, Mississippi. The Silver Slipper Casino property consists ofMississippi which offers a casino with approximately 37,000 square feet, three restaurants, a surface parking lot, and an 800-space parking garage.  It is located on 38 acres of land we lease pursuant to a Lease with Option to Purchase, as amended, which expires on April 30, 2058.  The leased land includes approximately 31 acres of protected marsh land as well as a seven-acre casino parcel. Silver Slipper Casino includes approximately 37,000 square feet of gaming space and an adjacent surface lot.marshlands.  We also lease approximately five acres of land occupied by the Silver Slipper Casino gaming office and warehouse space, as well as a small parcel of land with a building. In addition, weWe have commenced construction of a 142-room129-room hotel, including nine suites, adjacent to the Silver Slipper Casino.  ConstructionWe expect to complete and open the 120 standard rooms in the second quarter of 2015, followed shortly thereafter by the hotel is expected to be completed in late 2014 or early 2015.remaining nine suites.
 
Rising Star Casino Resort
 
We own the Rising Star Casino Resort, located in Rising Sun, Indiana on the Ohio River.  The property consists of a dockside barge structureriverboat with approximately 40,000 square feet of gaming space, a land-based pavilion, a 190-room hotel, surface parking and an 18-hole golf course on 380 acres.  In addition, a third party constructed a new 104-room hotel that opened in 2013 on property adjacent to Rising Star Casino Resort, bringing total room capacity to 294.  We operateThrough our Indiana subsidiary, we lease this new hotel pursuant to a 10-year capital lease that includes an option to purchase the new hotel at any time during the term of the lease.lease at a pre-set price or at the end of the term for $1 plus closing costs. Upon expiration of the term of the lease, if we have not exercised our option to purchase the hotel, the Landlord shall have the right and option to sell us the hotel for $1 plus closing costs. We are responsible for all maintenance and repairs.  See Note 6 to the consolidated financial statements set forth in “Item 8.  Financial Statements and Supplementary Data”.
 
Stockman’s Casino
 
We own Stockman’s Casino located in Fallon, Nevada. Stockman’s Casino is located on approximately five acres and includes 8,400 square feet of gaming space, a fine dining restaurant, coffee shop and adjacent surface parking.
 
Grand Lodge Casino
 
Pursuant to a lease expiring on August 31, 2018, we lease the Grand Lodge Casino at the Hyatt Regency Lake Tahoe Resort, Spa and Casino in Incline Village, Nevada on the north shore of Lake Tahoe.  We pay a fixed monthly rent of $0.1 million over the initial term of the lease. The lease has an option, subject to mutual agreement, to renew the lease for an additional five-year term.  The Grand Lodge Casino has 18,900 square feet of gaming area and the casino is integrated into the Hyatt Regency Lake Tahoe Resort, Spain Incline Village, Nevada on the north shore of Lake Tahoe.  Pursuant to a lease expiring on August 31, 2018, we operate the Grand Lodge Casino and Casino.pay a fixed monthly rent of $0.1 million over the term of the lease.   The lease includes an option, subject to future mutual agreement, to renew the lease for an additional five-year term.  The lease is secured by the Company’s interests under the lease and property, as defined, and is subordinate to the liens in the First and Second Lien Credit Facilities. Lessor has an option to purchase the leasehold interest and the operating assets of the Grand Lodge Casino, subject to assumption of applicable liabilities. The option purchase price is an amount equal to the Grand Lodge Casino’s positive working capital, plus Grand Lodge Casino’s EBITDA for the twelve-month period preceding the acquisition or for such period of time remaining on the lease term, whichever is less, plus the fair market value of the Grand Lodge Casino’s personal property (including slot machines).
 
Corporate Offices
 
We lease corporate2,569 square feet of office space in Las Vegas, Nevada pursuant to thean amended lease agreement dated December 1, 2012.  We occupy approximately 2,569 square feet of office space in the same location we have occupied since 2002.  The lease agreement expires on May 31, 2018.
 
Item 3. Legal Proceedings.
 
 We are subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions and other matters arising in the normal course of business.  We do not believe that the final outcome of these matters will have a material adverse effect on our consolidated financial position or results of operations. We maintain what we believe is adequate insurance coverage to further mitigate the risks of such proceedings.
 
Item 4. Mine Safety Disclosures.
 
Not applicable.
PART II
 
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
Our common stock traded on the NYSE Amex under the symbol “FLL” until February 12, 2013.  On February 13, 2013, our common stock commenced trading on the NASDAQ Capital Market under the symbol “FLL”.  Set forth below are the high and low sales prices of our common stock as reported on the NYSE Amex until February 12, 2013 and the NASDAQ Capital Market for the periods thereafter.
         
   High  Low 
 
Year Ended December 31, 2013
       
 First Quarter $3.58  $2.75 
 Second Quarter  3.32   2.58 
 Third Quarter  3.05   2.61 
 Fourth Quarter  3.03   2.70 
           
 
Year Ended December 31, 2012
         
 First Quarter $3.59  $2.45 
 Second Quarter  3.15   2.76 
 Third Quarter  4.00   2.60 
 Fourth Quarter  3.82   2.73 
thereafter.
 
  High  Low
Year Ended December 31, 2014     
First Quarter $2.79  $1.92 
Second Quarter  2.23   1.18 
Third Quarter  1.59   0.87 
Fourth Quarter  1.65   1.07 
         
Year Ended December 31, 2013        
First Quarter $3.58  $2.75 
Second Quarter  3.32   2.58 
Third Quarter  3.05   2.61 
Fourth Quarter  3.03   2.70 
On March 3, 2014,23, 2015, the last sale price of our common stock as reported by the NASDAQ Capital Market was $2.47.
As of March 3, 2014,$1.47, and we had 10796 registered holders of record of our common stock. We believe that there are over 1,300 beneficial owners.
 
Dividend Policy
 
We have not paid any dividends on our common stock to date.  The payment of dividends in the future will be contingent upon the terms of our indebtedness, and our revenues and earnings, if any,any; the terms of our indebtedness; our capital requirements,requirements; growth opportunitiesopportunities; and general financial condition.   ItOur debt covenants restrict the payment of dividends and it is the present intention of our Boardboard of Directorsdirectors to retain all earnings, if any, for use in our business operations, debt reduction and growth initiatives and, accordingly, our Board of Directors doesinitiatives.  Accordingly, we do not anticipate paying any dividends in the foreseeable future.
Stock Options Granted In Connection With the Daniel R. Lee Employment Agreement
 
On November 28, 2014, the Company entered into the Employment Agreement with Daniel R. Lee pursuant to which Mr. Lee serves as the Company’s Chief Executive Officer.  The employment agreement is discussed in more detail in Item 1. “Business – Recent Developments”.
 
In connection with entering into the Employment Agreement, we granted Mr. Lee nonqualified stock options, covering 943,834 shares of Company common stock, with a per share exercise price equal to the closing price per share on the grant date. At the time, the Company did not have sufficient options available under the Company’s Amended and Restated 2006 Incentive Compensation Plan. The stock options were issued as an “employee inducement award” as permitted under the rules of NASDAQ and the Securities and Exchange Commission.  The options are scheduled to vest over a four-year period, with 25% vesting on November 28, 2015 and the remaining 75% vesting in substantially equal installments on each monthly anniversary thereafter, subject to Mr. Lee’s continued service through the applicable vesting date.  The stock options will vest in full on a change in control of the Company.  The Company intends to file a Registration Statement on SEC Form S-8 to register the shares issuable upon exercise of the nonqualified stock option.  As of December 31, 2014, all of Mr. Lee’s stock options remained outstanding.
Upon Mr. Lee’s termination of employment due to death or disability, he or his estate will be entitled to accelerated vesting of all outstanding stock options held by Mr. Lee on the termination date with respect to such number of shares underlying each stock option that would have vested over the one-year period immediately following the termination date had the stock options continued to vest in accordance with its term. If Mr. Lee’s employment is terminated by the Company without “cause” or by Mr. Lee for “good reason” (each, as defined in the Employment Agreement), then Mr. Lee will be entitled to receive full accelerated vesting of all outstanding Company stock options held by Mr. Lee on the termination dates.
Item 6.  Selected Financial Data.
As a smaller reporting company, we are not required to provide the information required by this item.Item.
 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statements
 
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to our financial condition, profitability, liquidity, resources, business outlook, market forces, corporate strategies, contractual commitments, legal matters, capital requirements and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. We note that many factors could cause our actual results and experience to change significantly from the anticipated results or expectations expressed in our forward-looking statements. When words and expressions such as: “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely,” “enable,” or similar words or expressions are used in this Form 10-K, as well as statements containing phrases such as “in our view,” “there can be no assurance,” “although no assurance can be given,” or “there is no way to anticipate with certainty,” forward-looking statements are being made.
Overview
Various risks and uncertainties may affect the operation, performance, development and results of our business and could cause future outcomes to change significantly from those set forth in our forward-looking statements, including the following factors:
 ●our growth strategies;
 ●
our potential acquisitions and investments;
 ●successful integration of acquisitions;
 ●
risks related to development and construction activities;
 ●anticipated trends in the gaming industries;
 ●patron demographics;
 ●general market and economic conditions, including but not limited to, the effects of local and national economic, housing and energy conditions on the economy in general and on the gaming and lodging industries in particular;
 ●access to capital and credit, including our ability to finance future business requirements;
 ●our dependence on key personnel;
 ●the availability of adequate levels of insurance;
 ●changes in federal, state, and local laws and regulations, including environmental and gaming licenses or legislation and regulations;
 ●ability to obtain and maintain gaming and other governmental licenses;
 ●regulatory approvals;
 ●impact of weather;
 ●competitive environment, including increased competition in our target market areas;
 ●increases in the effective rate of taxation at any of our properties or at the corporate level; and
 ●risks, uncertainties and other factors described from time to time in this and our other SEC filings and reports.
 
We undertake no obligation to publicly update own, operate, develop, manage, and/or revise any forward-looking statements as a result of future developments, events or conditions. New risks emerge from time to timeinvest in casinos and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements.
Overview
We are a leading multi-jurisdictional developer, ownerrelated hospitality and operator of gaming-related enterprises in regional markets.  We have successfully transitioned from a gaming management company to a company with operations that consist primarily of owned casino properties.  The repositioning of our business plan is highlighted by the acquisition of Rising Star Casino Resort and the lease of Grand Lodge Casino in 2011 and the acquisition of Silver Slipper Casino and the sale of the management agreement for the FireKeepers Casino in 2012.  We actively explore, individually and with partners, new gaming-related opportunities with a focus on acquiring and developing casino properties.entertainment facilities.
 
We currently own three casino properties and operate a fourth casino subject to a lease, one casino property and we have one management contract to manage a group of related casino properties. These properties are located in four distinct regions of the United States – the Gulf Coast, the Midwest, Northern Nevada and the Southwest.as follows:
 
On March 30, 2012, we entered into a Membership Interest Purchase Agreement with Silver Slipper Casino Venture LLC to acquire all of the outstanding membership interest of the entity operating Silver Slipper Casino in Bay St. Louis, Mississippi.  The purchase was closed on October 1, 2012, for a price of approximately $69.3 million exclusive of cash and working capital in the amount of $6.4 million and $2.9 million, respectively.  We entered into the First Lien Credit Agreement on June 29, 2012 and the Second Lien Credit Agreement on October 1, 2012, as discussed in Note 8 to our consolidated financial statements set forth in Item 8. Financial Statements and Supplementary Data, and we used the debt to fund the Silver Slipper Casino purchase price.
Property Acquisition
Date
Location Slot
Machines
Table
Games
Hotel
Rooms
Silver Slipper Casino (Owned) 2012Bay St. Louis, MS (near New Orleans) 93829
129(1)
Rising Star Casino Resort (Owned) 2011Rising Sun, IN (near Cincinnati) 92128
294(2)
Stockman’s Casino (Owned) 2007Fallon, NV (one hour east of Reno) 2654--
Grand Lodge Casino (leased and part of the Hyatt Regency Lake Tahoe Resort) 2011Incline Village, NV (North Shore of Lake Tahoe) 25420
-- (3)
(1)The Silver Slipper Casino is expected to open its hotel in the first half of 2015.
(2)Includes a 190-room hotel that we own and operate, and a 104-room hotel that we lease pursuant to a 10-year capital lease.
(3)Under the Facilities Agreement dated June 29, 2011 with Hyatt Equities, L.L.C. we have the ability to provide rooms to our guests at the Hyatt Regency at Lake Tahoe upon mutually agreeable rates, as well as other amenities and services that cater to our guests and support our operations.
 
On April 1, 2011,Until our three-year contract expired in September 2014, we acquired all of the operating assets of Grand Victoria Casino & Resort, L.P. through Gaming Entertainment (Indiana) LLC, our wholly-owned subsidiary. In August 2011, the property was renamed Rising Star Casino Resort. In May 2011, we entered into a three-year agreement with the Pueblo of Pojoaque, which has been approved by the National Indian Gaming Commission as a management contract, to advise on the operations ofmanaged Buffalo Thunder Casino and Resort, in Santa Fe, New Mexico, along with the Pueblo’s Cities of Gold and other gaming facilities which in aggregate have approximately 1,200 slot machines, 18 tables games (including poker) and a simulcast area. Our management and related agreements with Buffalo Thunder Casino and Resort became effective on September 23, 2011. As of September 1, 2011, we own the operating assets of Grand Lodge Casino, and have a lease terminating August 31, 2018 with Hyatt Equities, L.L.C.near Santa Fe, New Mexico for the casino space in the Hyatt Regency Lake Tahoe Resort, Spa and Casino in Incline Village, Nevada on the north shorePueblo of Lake Tahoe.
Until March 30, 2012,Pojoaque.  In addition, we ownedalso previously managed, through a 50% of GEM, a-owned joint venture, with RAM, a privately-held investment company, where we were the primary beneficiary and, therefore, we included GEM in our consolidated financial statements. On February 17, 2012, we and RAM signed a letter of intent with the FireKeepers Development Authority to propose terms of a potential sale of GEM and its management rights and responsibilities under the current management agreement and allow the FireKeepers casino to become self-managed by the FireKeepers Development Authority, in return for $97.5 million. The sale closed on March 30, 2012 and effectively terminated the existing management agreement, which was scheduled to run through August 2016. We also received a $1.2 million wind-up fee equivalent to what our management fee would have beenCasino near Battle Creek, Michigan for the monthNottawaseppi Huron Band of AprilPotawatomi until we sold our interest in March 2012.
 
We conductOur financial results are dependent upon the number of patrons that we attract to our properties and the amounts those guests spend per visit. Additionally, our operating results may be affected by, among other things, overall economic conditions affecting the disposable income of our guests, weather conditions affecting our properties, achieving and maintaining cost efficiencies, competitive factors, gaming tax increases and other regulatory changes, the commencement of new gaming operations and construction at existing facilities. We may experience significant fluctuations in fourour quarterly operating results due to seasonality, variations in gaming jurisdictionshold percentages and other factors. Consequently, our operating results for any quarter or year are subjectnot necessarily comparable and may not be indicative of future periods’ results.
Our revenues are primarily derived from gaming revenues, which include revenues from slot machines, table games and live keno. Gaming revenues are generally defined as gaming wins less gaming losses. In addition, we derive a significant amount of revenue from our hotel rooms and our food and beverage outlets. We also derive revenues from our golf course (at Rising Star Casino Resort), retail outlets and entertainment. Promotional allowances consist primarily of hotel, food and beverages furnished to regulatory oversightcustomers on a complimentary basis. The retail value of such services is included in each ofthe respective revenue classifications and is then deducted as promotional allowances to calculate net revenues.  We calculate operating income (loss) as net revenues less total operating costs and expenses. Operating income (loss) represents only those jurisdictions. Accordingly, we are requiredamounts that relate to submit regular reports to the gaming authorities in each jurisdiction regarding our operations and from time to time make applications regarding our operations, including financial arrangements entered into by us,excludes interest income, interest expense, and obtaining gaming licenses or findings of suitability of key personnel working at our properties. Such reportingother non-operating income and applications may affect our abilities to obtain financings or loans for our existing operations or expansion opportunities. We believe that we and our operations are in material compliance with all such gaming regulations.expenses.
 
Critical Accounting EstimatesResults of Operations - 2014 Compared to 2013

Operating results – reportable segments
The following summarizes our operating results by reportable segment for the years ended December 31, 2014 and Policies
2013, expressed in thousands of dollars:
 
Use of Estimates
               Percent of Net Revenues  Increase
(Decrease)
 
  2014  2013  2014  2013  Dollars  Percent 
Net Revenues                  
    Silver Slipper Casino $48,023  $51,629   39.6%  35.6% $(3,606)  (7.0)%
    Rising Star Casino Resort  51,110   69,147   42.1%  47.8%  (18,037)  (26.1)%
    Northern Nevada Casinos  21,222   22,273   17.5%  15.5%  (1,051)  (4.7)%
    Corporate and other  1,066   1,678   0.8%  1.1%  (612)  (36.5)%
  $121,421  $144,727   100.0%  100.0% $(23,306)  (16.1)%
Operating income (loss)                        
    Silver Slipper Casino $2,189  $3,936   1.8%  2.7% $(1,747)  (44.4)%
    Rising Star Casino Resort  (12,742)  2,393   (10.5)%  1.7%  (15,135)  (632.4)%
    Northern Nevada Casinos  3,609   334   3.0%  0.2%  3,275   980.5%
    Corporate and other  (6,894)  (3,727)  (5.7)%  (2.6)%  (3,167)  (85.0)%
  $(13,838) $2,936   (11.4)%  2.0% $(16,774)  (571.3)%
 
We prepareConsolidated operating results
The following summarizes our consolidated operating results for the years ended December 31, 2014 and 2013, expressed in thousands of dollars:
        Percent of Net Revenues  Increase (Decrease) 
  2014  2013  2014  2013  Dollars  Percent 
                   
Revenues, net                  
Casino $109,566  $131,581   90.2%  90.9% $(22,015)  (16.7)%
Non-casino related, net of promotional allowances  10,789   11,468   8.9%  7.9%  (679)  (5.9)%
Management fees  1,066   1,678   0.9%  1.2%  (612)  (36.5)%
   121,421   144,727   100.0%  100.0%  (23,306)  (16.1)%
                         
Costs and expenses                        
Casino  56,867   67,779   46.8%  46.8%  (10,912)  (16.1)%
Non-casino related  10,311   10,086   8.5%  7.0%  225   2.2%
Project development and acquisition costs  296   67   0.2%  --%  229   341.8%
Board and executive transition costs  2,741   --   2.3%  --%  2,741   --%
Selling, general and administrative  43,942   50,447   36.2%  34.9%  (6,505)  (12.9)%
Depreciation and amortization  9,183   9,388   7.6%  6.5%  (205)  (2.2)%
Loss on disposal of assets, net  372   24   0.3%  --%  348   1,450%
Impairment charges  11,547   4,000   9.5%  2.8%  7,547   188.7%
   135,259   141,791   111.4%  98.0%  (6,532)  (4.6)%
                         
Operating income (loss)  (13,838)  2,936   (11.4)%  2.0%  (16,774)  (571.3)%
                         
Interest expense and other  7,995   7,259   6.6%  5.0%  736   10.1%
                         
Loss before income tax benefit  (21,833)  (4,323)  (18.0)%  (3.0)%  (17,510)  (405.0)%
                         
Income tax benefit  (988)  (361)  (0.8)%  (0.3)%  (627)  173.7%
                         
Net loss $(20,845) $(3,962)  (17.2)%  (2.7)% $(16,883)  (426.1)%
Additional details related to the composition of our revenues for the years ended December 31, 2014 and 2013, expressed in thousands of dollars, follows:
        Percent of Net
Revenues
  Increase (Decrease) 
  2014  2013  2014  2013  Dollars  Percent 
Casino revenues                  
Slots $94,239  $114,249   77.6%  78.9% $(20,010)  (17.5)%
Table games  14,968   16,950   12.3%  11.7%  (1,982)  (11.7)%
Other  359   382   0.3%  0.3%  (23)  (6.0)%
   109,566   131,581   90.2%  90.9%  (22,015)  (16.7)%
                         
Non-casino revenues, net                        
Food and beverage  7,768   7,967   6.4%  5.5%  (199)  (2.5)%
Hotel  822   582   0.7%  0.4%  240   41.2%
Other  2,199   2,919   1.8%  2.0%  (720)  (24.7)%
   10,789   11,468   8.9%  7.9%  (679)  (5.9)%
                         
Management fees  1,066   1,678   0.9%  1.2%  (612)  (36.5)%
                         
Total net revenues $121,421  $144,727   100.0%  100.0% $(23,306)  (16.1)%
The following discussion is based on our consolidated financial statements for the years ended December 31, 2014 and 2013.
Revenues. Consolidated net revenues and casino revenues decreased primarily as a result of increased competitive pressure from new casino openings in conformitysouthwest Ohio, adverse weather conditions during the first quarter at both the Rising Star and Silver Slipper casinos, and construction disruption at the Silver Slipper Casino.
Similarly, consolidated non-casino revenues decreased primarily as a result of the decline in patronage at the Rising Star and Silver Slipper casinos, partially offset by an increase in hotel revenues after the opening of the new 104-room hotel in November 2013 at Rising Star Casino Resort.
Consolidated management fees, included within our corporate segment, decreased due to the expiration of our management contract in September 2014 with accounting principles generally acceptedBuffalo Thunder, Cities of Gold, and other gaming facilities near Santa Fe, New Mexico, for the Pueblo of Pojoaque.
Casino costs and expenses.  The decrease in consolidated casino costs and expenses was primarily attributable to reductions in gaming and other revenue-based taxes ($7.9 million), payroll-related cost containment measures ($1.3 million) and a decline in the United States. Certaincost of our accounting policies require that we apply significant judgmentcomplimentaries ($1.2 million), all at the Rising Star Casino Resort. The decrease in defining the appropriate assumptions for calculating financial estimates. The significant accounting estimates inherentgaming taxes was due to lower gaming revenues and a legislative reduction in the preparationtax rate.
Non-casino related costs and expenses.  Consolidated non-casino related costs and expenses increased primarily due to higher food and beverage costs from promotional campaigns at Rising Star and Silver Slipper casinos, and an increase in costs related to the opening of our financial statements primarily include our valuation of goodwillthe new hotel at Rising Star Casino Resort in November 2013.
Project development and purchase price allocations madeacquisition costs.   Project development and acquisition costs were not significant in connection with our acquisitions, the estimated useful lives assignedeither year and are allocated to our depreciable and amortizable assets, asset impairment, bad debt expense, our opinion of collectability of receivables and fair value estimates related to valuation of receivables. Other accounting estimates include management’s proper calculation of payroll liabilities such as paid time off, medical benefits, bonus accruals and other liabilities including slot club points and tax liabilities.development/management segment.
 
Various assumptions, principally affectingBoard and executive transition costs.    These costs include $0.8 million in fees for advisors consisting of a financial strategist, proxy solicitor, and legal counsel hired to assist the timing Company with responding to the requests of the Shareholder Group; reimbursement of $0.2 million in fees and other factors, underlieexpenses incurred by the determination of some ofShareholder Group; and the payments and benefits made to executives in accordance with the resultant Settlement Agreement ($1.7 million).  The matters that gave rise to these significant estimates. The process of determining significant estimates is fact-and project-specific and takes into account factors such as historical experience and current and expected legal, regulatory and economic conditions. We regularly evaluate these estimates and assumptions, particularlyexpenses are described in areas, if any, where changes in such estimates and assumptions could have a material impact on our results of operations, financial position and, generally to a lesser extent, cash flows. Where recoverability of these assets or planned investments are contingent upon the successful development and management of a project, we evaluate the likelihood that the project will be completed, the prospective market dynamics and how the proposed facilities should compete in that setting in order to forecast future cash flows necessary to recover the recorded value of the assets or planned investment. We review our conclusions as warranted by changing conditions. By their nature, these judgments are subject to an inherent degree of uncertainty. Our judgments are based on our historical experience, terms of existing contracts, observance of trends in the gaming industry and information available from other outside sources. There can be no assurance that actual results will not differ from our estimates.
Our significant accounting policies and basis of presentation are discussed below, as well as where appropriate in this discussion and analysis“Item 1. Business – Recent Developments” above, and in the notes to our consolidated financial statements. Although our financial statements necessarily make use of certain accounting estimates made by management, except as discussed in the following paragraphs, we believe that no matters that are the subject of such estimates are so highly uncertain or susceptible to change as to present a significant risk of a material impact on our financial condition or operating performance.
Property and Equipment
We define a fixed asset as a unit of property that: (a) has an economic useful life that extends beyond 12 months; and (b) was acquired or produced for a cost greater than $2,500 for a single asset, or greater than $5,000 for a group of assets acquired or produced for a specific capital project. See Note 6 and Note 79 to the consolidated financial statements set forth in Item“Item 8. Financial Statements and Supplementary Data. Fixed assets are capitalized and depreciated for book and tax purposes.  Fixed assets acquired or produced for a cost less than $2,500, our minimum threshold amount for capitalization, are reflected as an expense in our financial statements.Data”.
 
Fixed assets are recordedSelling, general and administrative costs and expenses.  These costs decreased by approximately $1.6 million, or 8.5%, at historicalSilver Slipper Casino; $4.2 million, or 20.1%, at Rising Star Casino Resort; $0.3 million, or 5.5%, at the Northern Nevada properties; and $0.4 million at our corporate segment. The decrease primarily related to the implementation of cost ascontrol initiatives at all of the date acquiredour properties, including staff reductions and depreciated beginning on the date the fixed asset is placed in service.  A fixed asset costing less than the threshold stated above is recorded as an expenseemployee-related expenses ($2.9 million) and lower spending for financial statement and tax purposes. A fixed asset with an economic useful life that is less than 12 months is expensed for financial statement and tax purposes, regardless of the acquisition or production cost. We evaluate our property and equipment and other long-lived assets for impairment in accordance with the accounting guidance in the Impairment or Disposal of Long-Lived Assets Subsections of FASB ASC Topic 360-10.marketing expenses ($3.1 million) at Rising Star.
 
The interest cost associated with major development and construction projects is capitalized and included in the cost of the project.  Interest expense is capitalized at the applicable weighted-average borrowing rates of interest. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use.
Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the capitalized lease, whichever is appropriate under the circumstances. Our capital lease assetexpense.  Depreciation and liabilities are initially measured at the beginning of the lease term at the present value of the minimum lease payments. Assets under a capital lease which meet the transfer-of-ownership or bargain-purchase option criteria of FASB ASC Topic 840, “Leases”, are amortized over the estimated useful lives of the assets. Our depreciationamortization expense is highly dependent on the assumptions we make about our assets’ estimated useful lives. We determine the estimated useful lives based on our experience with similar assets and our estimate of the usage of the asset. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.
Goodwill
Goodwill represents the excess of the purchase price over fair value of net assets acquired in connection with Silver Slipper Casino, Rising Star Casino Resort and Stockman’s Casino. In accordance with the authoritative guidance for goodwill and otherdecreased primarily due to intangible assets we test our goodwill and indefinite-lived intangible assets for impairment annually or if a triggering event occurs. We evaluate goodwill utilizing the market approach and income approach applying the discounted cash flows in accordance with the provisions of FASB ASC Topic 350, “Intangibles-Goodwill and Other” on an annual basis.
Intangible Assets
Our indefinite-lived intangible assets include trademarks and certain license rights. Gaming licenses represent the value of the license to conduct gaming in certain jurisdictions, which are subject to highly extensive regulatory oversight and, in some cases, a limitation on the number of licenses available for issuance. The value of the Rising Star Casino Resort gaming license was estimated using a derivation of the income approach to valuation.  The other gaming license values are based on actual costs. Trademarks are based on the legal fees and recording fees related to the trademark of the “Rising Star Casino Resort” name, and variations of such name.  Indefinite-lived intangible assets are not amortized unless it is determined that their useful life is no longer indefinite. We periodically review our indefinite-lived assets to determine whether events and circumstances continue to support an indefinite useful life. If it is determined that an indefinite-lived intangible asset has a finite useful life, then the asset is tested for impairment and is subsequently accounted for as a finite-lived intangible asset.
Our finite-lived intangible assets include customer relationship player loyalty programs, land leases, water rights and bank loan fee intangibles. Finite-lived intangible assets areprogram becoming fully amortized, over their estimated useful lives, and we periodically evaluate the remaining useful lives of these intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization. We review our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
The player loyalty programs represent the value of repeat business associated with Silver Slipper Casino’s and Rising Star Casino Resort’s loyalty programs. The values of the loyalty programs were determined using a derivation of the income approach to valuation. The valuation analyses for the active rated players were based on projected revenues and attrition rates. Silver Slipper Casino and Rising Star Casino Resort maintain historical information for the proportion of revenues attributable to the rated players for gross gaming revenue.  The value of the player loyalty programs are amortized over a life of three years. Loan fees incurred and paid as a result of debt instruments were accumulated and amortized over the term of the related debt, based onpartially offset by an effective interest method.
Revenue Recognition and Promotional Allowances
Slot coin-in is the gross amount wagered for the period cited.  The win or hold percentage is the net amount of gaming wins and losses, with liabilities recognized for accruals related to the anticipated payout of progressive jackpots, funds deposited by customers before gaming play occurs (commonly called “casino front money”) and for chips and tokens in the customers’ possession (outstanding chip and token liability). Changes in our slot win percentages can have a significant impact to earnings.
For table games, customers usually purchase gaming chips at the gaming tables.  The cash and markers (extensions of credit granted to certain credit worthy customers) are deposited in the gaming table’s drop box.  Table game win is the amount of drop that is retained and recorded as casino gaming revenue, with liabilities recognized for funds deposited by customers before gaming play occurs and for unredeemed gaming chips.  As we are focused on regional gaming markets, our table win percentages are fairly stable as the majority of these markets do not regularly experience high-end play, which can lead to volatility in win percentages.  Therefore, changes in table game win percentages do not typically have a material impact to our earnings.
Key performance indicators related to gaming revenue are slot coin-in and table game drop (volume indicators) and “win” or “hold” percentage. Our typical property slot win percentage is in the range of 4% to 9% of slot coin-in, and our typical table game win percentage is in the range of 5% to 25% of table game drop.
Hotel, food and beverage, entertainment and other operating revenues are recognized as services are performed, net of revenue-based taxes. Advance ticket sales are recorded as deferred revenue until services are provided to the customer. Revenues are recognized net of certain sales incentives, and accordingly, cash incentives to customers for gambling activity, including the cash value of points redeemed by Players Club members, totaling $6.0 million and $6.7 million have been recognized as a direct reduction of casino revenue in 2013 and 2012, respectively. Sales and similar revenue-linked taxes collectedincrease from customers are excluded from revenue and recorded as a liability payable to the appropriate taxing authority and included in accrued expenses. Revenue also does not include the retail value of accommodations, food and beverage, and other services gratuitously furnished to customers totaling $19.8 million in 2013 and $15.4 million in 2012. The estimated cost of providing room, food and beverage and other incentives is included primarily in casino expenses.
We recognize the impact on gaming revenues on an annual basis to reflect an estimate of the change in the value of outstanding chips and tokens that are not expected to be redeemed. This estimate is determined by measuring the difference between the total value of chips and tokens placed in service less the value of chips and tokens in the inventory of chips and tokens under our control. This measurement was not consistently performed in past years, but will be performed on an annual basis in the future utilizing methodology in which a consistent formula is applied to estimate the percentage value of the chips and tokens not in custody that are not expected to be redeemed.  In addition to the formula, certain judgments are made with regard to various denominations and souvenir chips and tokens.
Customer Loyalty Programs
We currently offer incentives to our customers through customer loyalty programs at eachdepreciation of our properties – the Silver Slipper Casino Players Club, the Rising Star Rewards Club™, the Grand Lodge Players Advantage Club® and the Stockman’s Winner’s Club.  Under these programs, customers earn points based on their level of play that may be redeemed for various benefits, such as free play, cash back, complimentary dining, ornew leased hotel stays, among others, depending on each property’s specific offers. The reward credit balance under the plans will be forfeited if the customer does not earn any reward credits over a specified time period, or after a specified time period of inactivity, up to a 13-month time period, depending on the specific property’s customer loyalty program.
We accrue a liability for the estimated cost of providing these benefits as the benefits are earned. Estimates and assumptions are made regarding cost of providing the benefits, breakage rates, and the mix of goods and services customers will choose. We use historical data to assist in the determination of estimated accruals. Changes in estimates or customer redemption habits could produce significantly different results. At December 31, 2013 and December 31, 2012, we had accrued $1.2 million and $1.3 million, respectively, for the estimated cost of providing these benefits. Such amounts are included in “Accrued player club points and progressive jackpots” in our Consolidated Balance Sheets.
Loyalty programs are just a part of the total marketing program.  The amount of marketing reinvestment (complimentaries to players, promotional awards, entertainment, etc.) is based on the specific property and competitive assumptions.  We track the percentage of promotional and marketing costs compared to gaming revenue for an efficient use and return on our marketing investment.  Each of our properties has been faced with a highly competitive promotional environment due to the high amounts of incentives offered by the competition.  The Rising Star Casino Resort has been significantly impacted by the substantial promotions offered at the new Ohio casinos.
Share-based Compensation
Share-based compensation expense from stock awards is included in general and administrative expense. See Note 12 to the consolidated financial statements set forth in Item 8. Financial Statements and Supplementary Data. Vesting is contingent upon certain conditions, including continuous service of the individual recipients. Unvested stock grants made in connection with our incentive compensation plan are viewed as a series of individual awards and the related share-based compensation expense is amortized into compensation expense on a straight-line basis as services are provided over the vesting period, and reported as a reduction of stockholders’ equity. We grant shares of restricted stock, rather than options, to key members of management and the board of directors. 
Recently Issued Accounting Pronouncements
We have reviewed authoritative standards issued after December 31, 2013. As a result, we determined that the new standards are not likely to have any significant impact on our future financial statements.
Results of Operations
A significant portion of our operating income in 2012 and prior years was generated from our management agreements, including agreements with the FireKeepers Casino in Michigan and the Buffalo Thunder Casino and Resort in New Mexico. The FireKeepers management agreement ended March 30, 2012, with the sale of our interest in GEM.  The Buffalo Thunder Casino and Resort management agreement is in effect through September 2014. There can be no assurance that the Buffalo Thunder management agreement will be extended. Consistent with our long-term strategy, we have acquired gaming properties and have transitioned from primarily a management company to primarily an owner/operator of regional casino operations. With the acquisition of Rising Star Casino Resort in 2011 and Silver Slipper Casino in 2012, and the leasing of Grand Lodge Casino in 2011, our results of continuing operations have been significantly impacted and our revenues are currently primarily derived from owned operations.
For purposes of our discussion, references to (i) Midwest segment refers to Rising Star Casino Resort, (ii) Gulf Coast segment refers to Silver Slipper Casino and (iii) Northern Nevada segment refers to Grand Lodge Casino and Stockman’s Casino.
We believe the impact of the lost revenues from the sale of our interest in GEM and the FireKeepers management agreement was diminished with the acquisition of the Silver Slipper Casino, as well as the Rising Star Casino Resort and Grand Lodge Casino operations.
Indiana gaming tax legislation was recently passed, which allows a portion of the free play to be tax-free, resulting in a savings of $1.0 million for the year ended December 31, 2013, for the Rising Star Casino Resort.  In addition, as part of the legislation, if Rising Star Casino Resort’s gross gaming revenues are less than $75.0 million during the State of Indiana’s fiscal year ended June 30, 2014, we may be entitled to additional tax relief currently estimated at $2.5 million per year, beginning on July 1, 2014.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Revenues
For the year ended December 31, 2013, total revenues increased $16.0 million, or 12% as compared to 2012, principally related to $51.6 million in revenue in our Gulf Coast segment, representing a full year of operations at Silver Slipper Casino, which we purchased on October 1, 2012, offset by a $17.1 million, or 20%, decrease in our Midwest segment revenues as a result of increased competition and a $5.6 million, or 77%, decrease in our development/management segment revenues as a result of the sale of our interest in GEM and the FireKeepers management agreement on March 30, 2012.
The $17.1 million decrease in our Midwest segment revenues was the result of lower casino revenues at the Rising Star Casino Resort primarily as a result ofwhich opened in November 2013.
Loss on disposals, net.  Loss on disposals, net, increased competition due to the openingdisposition of an Ohio racino in December 2013, a new casino in Cincinnati, Ohio, in March 2013, and two casinos in Columbus, Ohio in 2012, coupled with an overall soft market growth.various assets related to our hotel remodel at Rising Star Casino Resort.
 
The $16.0Impairment losses.  During 2014, we incurred impairment charges for goodwill of $1.6 million increase in total revenues for the year ended December 31, 2013 consistedand gaming licenses of the following changes by revenue type: an $18.9$9.9 million or 17%, increase in casino revenues, a $1.7 million, or 28%, increase in food and beverage revenues, a $0.1 million, or 18%, increase in hotel revenues, and a $0.7 million, or 32%, increase in other revenues, offset by a $5.5 million, or 77%, decrease in management fees, as discussed above. The increases in casino and food and beverage revenues were due to the revenue at the Silver Slipper Casino, representing a full year of operations, offset by a $16.5 million, or 21%, decrease in casino revenues and $0.7 million, or 18%, decrease in food and beverage revenues at the Rising Star Casino Resort, due to increased competition as discussed above.  The Rising Star Casino Resort’s hotel revenue for the year ended December 31, 2013 was $0.6 million, an increase of $0.1 million, or 18%, over the prior year due to the addition of the 104 new rooms in November. The Rising Star Casino Resort had an occupancy rate of 90%, an average daily rate (“ADR”) of $63 and hotel revenue per available room (“RevPAR”) of $57, for the year ended December 31, 2013, as compared to an occupancy rate of 97%, an ADR of $63 and RevPAR of $61, for the year ended December 31, 2012. The Rising Star Casino Resort’s hotel revenue consisted of approximately 89% of complimentaryroom sales for the year ended December 31, 2013, as compared to approximately 90% of complimentary room sales for the year ended December 31, 2012.
Operating Costs and Expenses
For the year ended December 31, 2013, total operating costs and expenses increased $17.5 million, or 15%, as compared to 2012, as a result of the purchase of the Silver Slipper Casino operations with $47.7 million in operating costs for the full year. Casino expenses increased by 7.6% to approximately $67.8 million in 2013 and food and beverage expenses increased by 31.4% to approximately $7.8 million in 2013, principally due to a full year of operations at Silver Slipper Casino in 2013. Hotel expenses increased $0.1 million, or 20%, primarily due to the addition of the new 104-room hotel tower at the Rising Star Casino Resort in November 2013. The increase in Silver Slipper Casino operating costs was offset by a $13.8 million, or 17%, decrease in our Midwest segment costs and a $2.2 million, or 97%, decrease in our development/management segment operating costs. Operating costs also decreased $1.5 million, or 22%, in our corporate segment primarily due to a $1.2 million, or 18%, decrease in selling, general and administrative expenses as explained below. The $2.2 million decrease in our development/management segment operating costs was predominantly attributable to the sale of our interest in GEM and the FireKeepers management agreement on March 30, 2012.
The $13.8 million decrease in our Midwest segment operating expenses was the result of cost containment measures and a decrease in business volume. The decrease in Midwest segment operating costs were spread between expense categories with $10.2 million, or 21%, in lower casino expenses, $2.0 million, or 10%, in lower selling, general and administrative expenses (as explained below), $1.1 million, or 27%, in lower depreciation expense and $0.4 million, or 12%, in lower food and beverage expenses. Rising Star Casino Resort’s casino expenses decreased $10.2 million over the prior year, largely due to a $7.3 million, or 30%, decrease in gaming taxes, a $1.5 million, or 13%, decrease in complimentary expense and a $0.7 million, or 8%, decrease in casino payroll and related expenses. Gaming taxes were lower for the year ended December 31, 2013 due to lower taxable gaming revenues and also were partially attributable to new Indiana gaming tax legislation, which allows a portion of the free play to be tax-free resulting in a savings of $1.0 million for the year ended December 31, 2013. Rising Star Casino Resort’s depreciation expenses decreased $1.1 million over the prior year period, as a result of some shorter-lived fixed assets that became fully depreciated. Rising Star Casino Resort’s food and beverage expenses decreased $0.4 million over the prior year period due to the decline in business which lowered food and beverage cost of sales.
Project Development and Acquisition Costs
For the year ended December 31, 2013, project development costs decreased $1.8 million, or 96%, as compared to 2012, mainly as a result of the Silver Slipper Casino acquisition costs incurred in the prior year. Project development and acquisition costs are allocated to our development/management segment.
Selling, General and Administrative Expense
For the year ended December 31, 2013, selling, general and administrative expenses increased $10.0 million, or 27%, as compared to 2012. Selling, general and administrative expenses were $18.2 million for the year ended December 31, 2013 at the Silver Slipper Casino, which was acquired on October 1, 2012, which were partially offset by a $2.0 million, or 10%, decrease in our Midwest segment expenses and also a $1.2 million, or 18%, decrease in our corporate segment expenses due to lower compensation and other employee related expenses.
The $2.0 million decrease in our Midwest segment’s selling, general and administrative expenses was due to Rising Star Casino Resort’s cost control initiatives which resulted in $1.2 million, or 13%, lower payroll and other employee related expenses, $0.3 million, or 93%, lower maintenance expenses related to dredging and a $0.5 million, or 29%, decline in advertising expenses.
Operating Gains (Losses)
For the year ended December 31,Resort.  During 2013, we incurred ana goodwill impairment losscharge of $4.0 million related to Stockman’s Casino goodwill as discussed inat our Northern Nevada segment.
Goodwill and other intangible assets are reviewed for impairment annually or more frequently if indicators of impairment exist. During the second quarter of 2014, we believed such indicators existed. See Note 5 to the consolidated financial statements set forth in Item“Item 8. Financial Statements and Supplementary Data. This contrasts withData” for a $41.2 million gain on sale ofmore detailed discussion. These impairments were driven by various factors including weak economic conditions, lower than anticipated discretionary consumer spending, and increased competition in the joint venture, relatedIndiana market.
Interest and other non-operating expense.  Interest and other non-operating expenses increased primarily due to the sale$1.7 million settlement loss associated with the terminated purchase of Majestic Mississippi, LLC, partially offset by a $1.0 million decrease in interest expense. Interest expense declined due to the reduction of $8.8 million of long-term debt during 2013, a one percentage point reduction of our interest in GEM inrate within the prior year period.
Other (Expense) Income
For the year ended December 31, 2013, we incurred a $4.5 million increase in interest expense related to our First Lien Credit AgreementFacility in August 2013, and Second Lien Credit Agreement, whose proceeds were used to purchase Silver Slipper Casino. We capitalized $0.03the capitalization of $0.4 million inof interest related to the construction of a hotel we are constructing at Silver Slipper Casino, as discussedCasino.
Income tax benefit. Income tax benefit increased due to a larger pre-tax book loss, partially offset by a $7.0 million valuation allowance related to our long-term deferred tax assets. The effective income tax rate was 4.5% during 2014 compared to 8.3% in 2013. The impairment charges recorded in 2014 and 2013 resulted in a significant amount of deferred tax assets.  In assessing our ability to realize our deferred tax assets, we consider whether it is “more likely than not” that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible.  As a result, we recorded a valuation allowance against our deferred tax assets, which also resulted in a tax rate substantially below statutory rates.  Our actual tax returns resulted in tax losses during 2014 and 2013 which we elected to carryback to taxable income earned during 2012 and 2011 in accordance with IRS rules. See Note 11 to the consolidated financial statements set forth inItem 8. Financial Statements and Supplementary Data. InData”, for a more detailed discussion.
Non-GAAP Measures
“Adjusted EBITDA” is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, impairment charges, asset disposals, board and executive transition costs, project development and acquisition costs, and non-cash share based compensation expense.  Adjusted EBITDA information is presented solely as a supplemental disclosure to reported U.S. generally accepted accounting principles (“GAAP”) measures because management believes these measures are (1) widely used measures of operating performance in the yeargaming and hospitality industry, (2) a principal basis for valuation of gaming and hospitality companies, and (3) are utilized in the covenants within our debt agreements, although not necessarily defined in the same way as above.  “Adjusted Property EBITDA” is Adjusted EBITDA before corporate related costs and expenses which are not allocated to each property.   Adjusted EBITDA and Adjusted Property EBITDA are not, however, a measure of financial performance or liquidity under U.S. generally accepted accounting principles.  Accordingly, these measures should be considered supplemental and not a substitute for net income (loss) or cash flows as an indicator of the Company’s operating performance or liquidity.
The following table presents a reconciliation of Adjusted EBITDA to net loss for the years ended December 31, 2012, we incurred a $1.7 million loss on extinguishment of debt related to the write-off of the loan costs related to our prior credit agreement with Wells Fargo Bank, National Association (the “Wells Fargo Credit Agreement”). These other (expense) income items are allocated to our corporate operations segment.2014 and 2013:
Income Taxes
       
  2014  2013 
Adjusted EBITDA $10,549  $17,058 
Depreciation and amortization  (9,183)  (9,388)
Impairment charges  (11,547)  (4,000)
Loss on disposal of assets, net  (372)  (24)
Board & executive transition costs  (2,741)  -- 
Project development & acquisition costs  (296)  (67)
Stock compensation  (248)  (643)
Operating income (loss)  (13,838)  2,936 
         
Non-operating expenses        
Interest expense  6,272   7,268 
Settlement and other  1,723   (9)
   7,995   7,259 
         
Loss before income tax benefit  (21,833)  (4,323)
Income tax benefit  (988)  (361)
         
Net loss $(20,845) $(3,962)
 
The estimated effective tax ratefollowing tables present reconciliations of operating income (loss) to Adjusted Property EBITDA and Adjusted EBITDA for the yearyears ended December 31, 20132014 and 2013:
        Impairment     Project       
     Depreciation  charges and  Board and  development       
  Operating  and  disposals,  executive  and acquisition  Stock  Adjusted 
2014 income (loss)  amortization  net  transition costs  costs  compensation  EBITDA 
                      
Casino properties                     
Silver Slipper Casino $2,189  $5,312  $-  $-  $-  $-  $7,501 
Rising Star Casino Resort  (12,742)  2,997   11,919   -   -   -   2,174 
Northern Nevada Casinos  3,609   857   -   -   -   -   4,466 
   (6,944)  9,166   11,919   -   -   -   14,141 
                             
Other operations                            
Management fees  1,066   -   -   -   -   -   1,066 
Board and executive                            
    transition costs  (2,741)  -   -   2,741   -   -   - 
Project development and                            
    acquisition costs  (296)  -   -   -   296   -   - 
Stock compensation  (248)  -   -   -   -   248   - 
Corporate  (4,675)  17   -   -   -   -   (4,658)
   (6,894)  17   -   2,741   296   248   (3,592)
                             
  $(13,838) $9,183  $11,919  $2,741  $296  $248  $10,549 
        Impairment     Project       
     Depreciation  charges and  Board and  development       
  Operating  and  disposals,  executive  
and acquisition
  Stock  Adjusted 
2013 income (loss)  amortization  net  transition costs  costs  compensation  EBITDA 
                      
Casino properties                     
Silver Slipper Casino $3,936  $5,595  $24  $-  $-  $-  $9,555 
Rising Star Casino Resort  2,393   3,032   -   -   -   -   5,425 
Northern Nevada Casinos  334   748   4,000   -   -   -   5,082 
   6,663   9,375   4,024   -   -   -   20,062 
                             
Other operations                            
Management fees  1,678   -   -   -   -   -   1,678 
Board and executive                            
    transition costs  -   -   -   -   -   -   - 
Project development and                            
    acquisition costs  (67)  -   -   -   67   -   - 
Stock compensation  (643)  -   -   -   -   643   - 
Corporate  (4,695)  13   -   -   -   -   (4,682)
   (3,727)  13   -   -   67   643   (3,004)
                             
  $2,936  $9,388  $4,024  $-  $67  $643  $17,058 
The Silver Slipper information presented above is approximately 8% compared to 35%net of rent paid on its underlying land lease of $0.9 million in 2014 and 2013.  Likewise, the Northern Nevada figures are net of $1.5 million of rent paid for the same periodcasino space at Grand Lodge Casino in 2012. The lower tax rate2014 and 2013.   Rising Star Casino Resort paid $0.9 million in 2014 and $0 in 2013 to rent the hotel that opened in November 2013.  Because this hotel lease is primarily a functioncapital lease, the rent payments are not included in the above numbers but instead appear as amortization of pre-tax book loss of $4.3 million for the year ended December 2013 compared to pre-tax book income of $45.2 million for the year ended December 31, 2012. The lower tax rate in 2013 was primarily due to the pre-tax book loss of $4.3 millioncapitalized lease obligation and the impact of permanent items, including the non-deductibility of gaming taxes in calculating state tax and the deductibility of executive compensation related to the vesting of restricted stock during the year. State tax expense is typically higher than the statutory rate as a resultcomponent of the non-deductibility of gaming taxes in certain states. The tax deduction for restricted stock, which vested in June 2013, was lower than the cumulative expense recognized on the income statement over the three year vesting period. There is no valuation allowance on the deferred tax asset of $1.3 million as of December 31, 2013, as we believe the deferred tax assets are fully realizable. Subsequent to year end, we filed our tax return for 2013, and we received in early March 2014 a refund of 2.0 million for a net operating loss carryback.
Noncontrolling Interest
For the year ended December 31, 2012, we recorded net income attributable to non-controlling interest in consolidated joint venture of $2.2 million as a result of our interest in GEM, which was sold on March 30, 2012.expense.

Liquidity and Capital Resources
 
Economic Conditions and Related Risks and Uncertainties
 
TheBeginning in 2007, the United States has experienced since 2007, a widespread and severe economic slowdown accompanied by, among other things, weakness in consumer spending including gaming activity and reduced credit and capital financing availability, all of which have had far-reaching effects on economic conditions in the country for an indeterminate period.country. Our operations are currently concentrated in Mississippi, Indiana and Northern Nevada. Although the Gulf Coast, the Midwest, Northern Nevada and the Southwest. Accordingly,national economy has begun to recover, future operations could be affected by adverse economic conditions and increased competition particularly in those areas and their key feeder markets in neighboring states. The effects and duration of these conditions and related risks and uncertainties on our future operations and cash flows, including our access to capital or credit financing, cannot be estimated at this time, but may be significant.
 
Silver Slipper Casino, Rising Star Casino Resort, Grand Lodge Casino,Liquidity Outlook
Our ability to generate cash from operations in the future depends, in significant part, upon the state of the gaming industry in Indiana, Mississippi and Stockman’s CasinoNorthern Nevada, which in turn depends upon a number of factors including the state of the United States economy, the amount of discretionary consumer spending and the level of competition in these markets. As of December 31, 2014, we held $15.6 million of cash and cash equivalents, have a $3.1 million federal income tax receivable expected to be received during 2015, and had drawn $2.0 million on our $5.0 million revolving loan agreement.
The next scheduled principal payment for the term loan of $1.25 million is due October 1, 2015.   Additionally, quarterly payments of $0.25 million are scheduled to begin June 1, 2015 on the construction portion of the term loan.
We believe that our existing cash balance, cash flows from operations, alongand availability under our revolving loan will meet our financial and operating obligations over the next twelve months. However, we will continue to closely monitor and manage our cash position given the current economic environment. If our sources of capital are inadequate to fund our long-term liquidity requirements, we will attempt to procure additional debt or equity financing to fund our operations, capital expenditures and debt service requirements. Our ability to draw on our revolving loan is subject to, amongst other terms, our continued ability to meet our various financial covenants.  We are unlikely to generate sufficient cash flow from operations to repay our existing debt when it comes due and we have begun discussions with the Buffalo Thunder Casino and Resort management agreement,our lenders to refinance that debt.
 Our casinos are currently our primary sources of income and operating cash flow. There can be no assurance that the Pueblo of Pojoaque management agreement endingour business will generate sufficient cash flow from operations or that future borrowings will be available in September 2014,amounts sufficient to enable us to pay our indebtedness or fund our other liquidity needs. In addition, there can be no assurance that the Grand Lodge Casino lease ending in August 2018 will be extended beyond theirits current terms.  The Buffalo Thunder management agreement generated $1.7 million in management income in 2013.terms, or that the lessor will not exercise its purchase option. Moreover, we may need to refinance all or a portion of our indebtedness on or before maturity. We cannot make assurances that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.
 
Cash flows - operating activities.  On a consolidated basis, cash provided by operations during the year ended December 31, 20132014, was $7.6 million compared to $12.3 million.million in 2013. Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges, but can be affected by changes in working capital.  Cash provided by operating activities decreased primarily due to decreased operating cash flow at the Rising Star and Silver Slipper casinos and from the expiration of $6.5 million wasour tribal management contract.
Cash flows - investing activities.  On a consolidated basis, cash used in investing activities largely due to the purchase of $6.2 million in property and equipment at our various properties, including $2.2 million in construction costs for the Silver Slipper Casino Hotel. Cash of $11.5 million was used in financing activities to repay $11.3 million in debt and pay $0.2 million in loan fees connected with the Silver Slipper Casino Hotel financing.
As of December 31, 2013, we had approximately $14.9 million in cash and equivalents. Duringduring the year ended December 31, 2012, we prepaid,2014, was $8.9 million largely due to the construction of the hotel and repair of the parking garage at our discretion, the principal payment of $1.3 million due April 1, 2013 on the First Lien Credit Agreement,Silver Slipper Casino. Cash used in order to reduce interest costs.  As a practice, we consistently prepaid our quarterly payments before their due dates in 2013, andinvesting activities during the year ended December 31, 2013, we prepaid,was $6.5 million, which primarily related to the purchase of property and equipment at our discretion, the sumproperties and $2.2 million of $8.8 million in quarterly principal payments, which were due through July 1, 2015.  The next scheduled principal payment is due October 1, 2015.
Projects
Our future cash requirements include funding needs of approximately $5.2 million towards future construction costs for the Silver Slipper hotel.
Cash flows - financing activities. On a consolidated basis, cash provided by financing activities during the year ended December 31, 2014, was $2.1 million.  Cash of $2 million was drawn on the revolving term loan related to the terminated purchase of the Majestic Star, and $1.1 million was drawn for construction costs related to the hotel at Silver Slipper Casino.  These funds were partially offset by $0.8 million of payments related to amortization of the Rising Star Casino Hotel. ConstructionResort’s capital lease and $0.3 million of loan fees for the First and Second Lien Credit Facility amendments. Cash used in financing costs of $2.5 million were funded from available cashactivities during the year ended December 31, 2013, forwas $11.5 million primarily used to pay debt.
Projects
 In January 2015, we announced a design change to the hotel at Silver Slipper Casino, Hotel. On August 26, 2013,subject to customary lender approvals as required, which will add nine luxury suites and reduce the room count to approximately 129 rooms, including nine suites, from 142 standard hotel rooms. The new configuration provides suites for high-end customers which we entered into an agreement with WHD Silver Slipper Casino, LLC relatedbelieve will enhance the customer experience and our profitability. Given that the hotel’s interior work was not yet completed, our expected cash requirements to construction ofcomplete the Silver Slipper Casino Hotel. We have commenced construction of the Silver Slipper Casino Hotel, whichhotel’s new configuration is expected to be completedapproximately an additional $1 million, bringing the budgeted cost to approximately $20 million, inclusive of capitalized interest.  We expect to complete and open the 120 standard rooms in late 2014 or earlythe second quarter of 2015, followed shortly thereafter by the remaining nine suites. Construction and is budgeted to cost approximately $17.7 million. The progress on the Silver Slipper Casino Hotel has been slower than expected as we encountered soil conditions which may extend the opening offinancing costs for the hotel to early 2015. In connection with the financing of the Silver Slipper Casino Hotel, on August 26, 2013, we entered into a First Amendment to the First Lien Credit Agreement (“First Lien Amendment”) and an Amendment No. 1 to the Second Lien Credit Agreement (“Second Lien Amendment”) which amended certain provisions$8.2 million were funded from available cash as of our First and Second Lien Credit Agreements, respectively. The First Lien Amendment modifications included a $10.0 million increase to the term loan portion of the First Lien Credit Agreement to $56.3 million, a 1% lower interest rate and an extended maturity date to June 29, 2016.December 31, 2014.  We intend to finance $10.0 million of the construction costcosts of the Silver Slipper Casino Hotelhotel with the proceeds offrom the increase in the term loan under our First Lien Credit AgreementFacility as described in Note 87 to the consolidated financial statements set forth in Item“Item 8. Financial Statements and Supplementary Data,Data”, of which remains undrawn and available withinwe had drawn $1.1 million as of December 31, 2014.  The remaining budgeted costs, including the limits and terms of the First Lien Credit Agreement, with the remaining $7.7approximately $1 million of additional funding related to the construction cost funded ornew suites, is intended to be funded from available cash as discussed previously.
We believe the Silver Slipper Casino Hotel is a much-needed amenity which will allow guests to extend their visits and enjoy more of what Silver Slipper Casino has to offer and favorably impact customer loyalty and revenues.
In October 2011, Rising Sun/Ohio County First, Inc., an Indiana non-profit corporation, and Rising Sun Regional Foundation, Inc. teamed up to develop a new 104-room hotel on land adjacent tothrough our Rising Star Casino Resort. Construction commenced in December 2012, and the new hotel tower at Rising Star Casino Resort opened November 15, 2013.  We believe that the added hotel room inventory in proximity to our casino facility will favorably impact revenues and visitor counts.
On August 16, 2013, we entered into a 10-yearexisting working capital lease for the new hotel tower at Rising Star Casino Resort (the “Rising Star Hotel Agreement”) which commenced on November 15, 2013 and provides us with full management control and an option to purchase the new hotel tower at Rising Star Casino Resort at the end of the lease term. We have recorded the capital lease obligation and hotel assets in our financial statements. On November 15, 2013, we began operating the new hotel tower at Rising Star Casino Resort. The Rising Star Hotel Agreement provides that we, as the lessee, assume all responsibilities, revenues, expenses, profits and losses related to the hotel’s operations. The term of the Rising Star Hotel Agreement is for 10 years from November 15, 2013, with the landlord having a right to sell the hotel to us at the end of the term and our corresponding obligation to purchase it on the terms set forth in the Rising Star Hotel Agreement. During the term, we will have the exclusive option to purchase the new hotel tower at Rising Star Casino Resort at a pre-set price. On January 1, 2014, we began paying a fixed monthly rent payment of approximately $77.5 thousand, which will continue throughout the term of the Rising Star Hotel Agreement unless we elect to purchase the hotel before the end of the lease period. In the event that we default on the lease agreement, the landlord’s recourse is limited to taking possession of the property, collection of all rent due and payable, and the right to seek remediation for any attorneys’ fees, litigation expenses, and costs of retaking and re-leasing the property.during 2015.
 
Subject to the effects of the economic uncertainties discussed above, we believe that adequate financial resources will be available to execute our current growth plan from a combination of operating cash flows and external debt and equity financing.  However, there can be no assurances of our ability to continue expanding.
Other Projects
 
We evaluate projects on a number of factors, including forecasted profitability, development period, regulatory and political environment, and the ability to secure the funding necessary to complete the development or acquisition, among other considerations.  No assurance can be given that any additional projects will be pursued or completed or that any completed projects will be successful.
 
We believe that there are significant opportunities to grow our operations in existing and new regional casino markets throughout the United States.  Our expansion efforts have principally focused on opportunities in the Southern United States. We believe that our expertise as a multi-jurisdictional casino operator and our experience with the development of the FireKeepers Casino position us well to expand our operations with new project openings.
We, together with Keeneland Association, Inc., are currently pursuing potential gaming opportunities in Kentucky, including the installation of instant racing machines at racetrack properties.  The installation of instant racing machines at racetrack properties in Kentucky has been challenged by opponents of the instant racing machines who filed an action alleging that the machines are unlawful gambling.  The Kentucky Court of Appeals had vacated the lower court’s decision that had upheld regulations adopted by the Kentucky Horse Racing Commission authorizing the use of instant racing machines by race tracks in Kentucky, and the Kentucky Horse Racing Commission and others, including Keeneland Association, Inc., appealed the vacation of the lower court’s decision to the Kentucky Supreme Court.  On February 20, 2014, the Kentucky Supreme Court held, among other matters, that the Kentucky Horse Racing Commission acted in its regulatory authority when it licensed the operation of pari-mutuel wagering on instant racing, also known as historical horse racing, but remanded the matter to the Circuit Court, to determine if instant racing constitutes a pari-mutuel form of wagering authorized by Kentucky law.
On February 26, 2014, we entered into an exclusivity agreement with Keeneland Association, Inc. to own, manage, and operate instant racing and, if authorized, traditional casino gaming at race tracks in Kentucky, subject to completion of definitive documents for each opportunity. In addition, we and Keeneland Association, Inc. have a letter of intent that provides for an exclusive option to purchase the Thunder Ridge Raceway in Prestonsburg, Kentucky. The purchase will be subject to the completion of definitive documentation and to the approval of the Kentucky Horse Racing Commission, including the approval to transfer the racing license to a to-be-constructed quarter horse racetrack near Corbin, Kentucky to be owned 75% by us and 25% by Keeneland Association, Inc.
Banking RelationshipsCredit Facilities
 
On October 29, 2010,1, 2012, we as borrower, entered into the Wells Fargo Credit Agreement with the financial institutions listed therein and Wells Fargo Bank, National Association. On December 17, 2010, we entered into a Commitment Increaseacquired all of the Wells Fargo Credit Agreement and a related Assignment Agreement increasing the loan commitment from $36.0 million to $38.0 million, consisting of a $33.0 million term loan and a revolving line of credit of $5.0 million.
The initial funding date of the Wells Fargo Credit Agreement occurred on March 31, 2011, when we borrowed $33.0 million on the term loan which was used to fund our acquisition of Rising Starequity membership interests in Silver Slipper Casino Resort.Venture LLC dba Silver Slipper Casino located in Bay St. Louis, Mississippi. The purchase occurred on April 1, 2011.price of approximately $69.3 million, exclusive of cash and working capital in the amounts of $6.4 million and $2.9 million, respectively, was funded by our First Lien Credit Facility and our Second Lien Credit Facility.  The Wells FargoFirst Lien Credit Agreement wasFacility and Second Lien Credit Facility are secured by substantially all of our assets.  Using proceeds fromassets, and our wholly-owned subsidiaries guarantee our obligation under the sale of our interest in GEM and the FireKeepers management agreement, we paid off the remaining $25.3 million debt relatedagreements.  The Second Lien Credit Facility is subordinate to the Wells Fargolien of the First Lien Credit Agreement and extinguished the facility on March 30, 2012, which consisted of $24.8 million of our existing long term debt and $0.5 million due on the interest rate swap agreement related to the Wells Fargo Credit Agreement.Facility.
 
On June 29, 2012, we entered into the First Lien Credit AgreementFacility with Capital One (including the amendments described below), which provided for a term loan in an amount up to $50.0 million and a revolving loan in an amount up to $5.0 million.  The First Lien Credit Facility has been amended as follows:
On August 26, 2013, we entered into the First Lien Amendment to:
¡
Increase the term loan portion by $10.0 million to $56.3 million;
¡
Reduce the interest rate by one percent;
¡
Extend the maturity date to June 29, 2016; and
¡
Amend certain financial covenants.
On July 18, 2014, we entered into the Second Amendment to First Lien Credit Facility (“First Lien 2nd Amendment”) effective as of June 30, 2014 to:
¡
Revise certain financial ratio covenants as of June 30, 2014, and going forward through the term of the loan;
¡
Extend the time period to March 31, 2015 for draws against the $10.0 million term loan associated with the hotel at the Silver Slipper Casino; and
¡
Extend the payment terms to begin on April 1, 2015.
On January 9, 2015 we entered into the Third Amendment to the First Lien Credit Facility (“First Lien 3rd Amendment”) effective as of December 31, 2014 to:
¡
Revise certain financial ratio covenants as of December 31, 2014, and going forward through the term of the loan;
¡
Extend the time period to May 31, 2015 for draws against the $10.0 million term loan associated with the hotel at the Silver Slipper Casino; and
¡
Extend the payment terms to begin on June 1, 2015.
On October 1, 2012, we entered into the Second Lien Credit AgreementFacility (including the amendments described below) with ABC Funding, LLC as administrative agent, which provided for a term loan in an amountof up to $20.0 million. On October 1, 2012, we closed on the acquisition of all of the equity membership interests in Silver Slipper Casino Venture LLC dba Silver Slipper Casino located in Bay St. Louis, Mississippi. The purchase priceSecond Lien Credit Facility has been amended as follows:
On August 26, 2013, we entered into the Second Lien Amendment to:
¡
Revise certain financial ratio covenants.
On July 18, 2014, we entered into the Second Amendment to Second Lien Credit Agreement (“Second Lien 2nd Amendment”) to:
¡
Revise certain financial ratio covenants as of June 30, 2014, and going forward through the term of the loan; and
¡
Increase the interest rate by one percentage point to 14.25% for the remainder of the term of the loan.
On January 9, 2015, we entered into the Third Amendment to Second Lien Credit Agreement (“Second Lien 3rd Amendment”) effective as of December 31, 2014 to:
¡
Revise certain financial ratio covenants as of December 31, 2014, and going forward through the term of the loan; and
¡
Extend the maturity date to April 1, 2017.
As of approximately $69.3December 31, 2014, we had drawn $1.1 million exclusive of cash and working capital in the amount $6.4$10.0 million and $2.9 million, respectively, was funded by ourterm loan under the First Lien Credit AgreementFacility.  The remaining $8.9 million of funding availability under the term loan will be used for a portion of the approximately $20 million, inclusive of capitalized interest, construction of the 129-room hotel addition to the Silver Slipper Casino. The remaining construction costs will be funded from available cash.  As of December 31, 2014, we had funded cash of $8.2 million in construction costs for the hotel at Silver Slipper Casino, and we anticipate additional funding of approximately $1.5 million in cash in 2015. Construction of the hotel is expected to be completed in two phases, with Capital One Bank, N.A.the 120 standard rooms opening in the second quarter of 2015, and the remaining nine suites shortly thereafter.
On March 24, 2014, we made a $2.0 million draw on our Second Lien Credit Agreement with ABC Funding, LLC.  The $5.0 million revolving loan under the First Lien Credit Agreement remainsFacility.  We currently have $3.0 million undrawn and available, subject toon the terms and restrictions of the First Lien Credit Agreement.  The First Lien Credit Agreement and Second Lien Credit Agreement are secured by substantially all of our assets and therefore, our wholly-owned subsidiaries guarantee our obligations under the agreements.  The Second Lien Credit Agreement is subject to the lien of the First Lien Credit agreement.revolving loan.
 
We have elected to pay interest on the First Lien Credit AgreementFacility based on the greater of the elected LIBORLondon Interbank Offered Rate (“LIBOR”) rate or 1.0%, plus a margin rate as set forth in the agreement.  The LIBOR rate is a rate per annum equal to the quotient of (a) the greater of (1) 1.00% and (2) the rate per annum referenced to as the BBA (British Bankers Association) LIBOR divided by (b) one minus the reserve requirement set forth in the First Lien Credit Agreement for such loan in effect from time to time.rate. LIBOR rate elections can be made based on a 30 day, 60 day, 90 day30-day, 60-day, 90-day or 180 day180-day LIBOR, and margins are adjusted quarterly.  As of December 31, 2013,2014, the interest rate was 4.75% on the balance outstanding on the First Lien Credit Agreement,Facility, based on the 1.0% minimum, plus a 3.75% margin.  We pay interest on the Second Lien Credit AgreementFacility at the fixed rate of 14.25% per annum effective July 18, 2014.  During 2013, we paid interest at a fixed rate of 13.25% per annum.
 
The First Lien Credit AgreementFacility and Second Lien Credit AgreementFacility contain customary negative covenants, including, but not limited to, restrictions on our and our subsidiaries’ ability to: incur indebtedness; grant liens; pay dividends and make other restricted payments; make investments; make fundamental changes; dispose of assets; and change the nature of our business.  The First Lien Credit AgreementFacility and Second Lien Credit AgreementFacility require that we maintain specified financial covenants, including a total leverage ratio, a first lien leverage ratio, and a fixed charge coverage ratio, all of which measure Adjusted EBITDA (as defined in the agreements) against outstanding debt and fixed charges (as defined in the agreements). A capital expenditure ratio must also be maintained as set forth in the agreements.maintained. The First Lien Credit AgreementFacility and Second Lien Credit Agreement defineFacility currently defines Adjusted EBITDA as net income (loss) plus (i)(a) interest expense, net, (ii) provision(b) provisions for income taxes, (iii)and (c) depreciation and amortization, and further adjusted to eliminate the impact of certain items that are either non-cash items or are not indicative of ongoing operating performance such as: (iv) acquisition costs, (v)as (d) extraordinary gains and losses (including non-cash impairment charges), (e) non-cash stock compensation (vi) loss on derivativesexpense, (f) certain acquisition costs, (g) costs related to the Company’s S-1 registration statement in 2014, (h) board and debt, (vii) gain on sale ofmanagement transition expenses, and (i) joint venture (viii) impairment loss,net income, unless such net income has actually been received by the Company in the form of cash dividends or distributions. For purposes of our covenants, we also receive pro forma credit for gaming tax reductions in Indiana in 2014 and (ix) certain severance costs.the first quarter of 2015.

 
The First Lien Amendment revised the ratio requirements under the First Lien Credit Agreement. Also, the Second Lien Amendment revised the total leverage ratio requirements under the Second Lien Credit Agreement to exclude the capital lease related to the new tower at the Rising Star Casino Resort. The First Lien Credit AgreementFacility and the Second Lien Credit AgreementFacility maximum total leverage ratio and maximum first lien leverage ratio vary according to the applicable time period and the fixed charge coverage ratio remains constant, as indicated in the tables below:
First Lien Credit Agreement
Applicable PeriodMaximum
Total Leverage
Ratio
Maximum
First Lien Leverage
Ratio
Minimum
Fixed Charge Coverage
Ratio
Initial funding date through and including December 31, 20144.00x2.75x1.10x
January 1, 2015 through and including December 31, 20153.75x2.50x1.10x
January 1, 2016 and thereafter3.50x2.25x1.10x
Second Lien Credit Agreement
Applicable PeriodMaximum
Total Leverage
Ratio
Maximum
First Lien Leverage
Ratio
Minimum
Fixed Charge Coverage
Ratio
Initial funding date through and including September 30, 20134.00x3.00x1.00x
October 1, 2013 through and including September 30, 20143.75x2.75x1.00x
October 1, 2014 and thereafter3.50x2.50x1.00x

First Lien Credit Facility 
 
 
Applicable Period
 
Maximum
Total Leverage
Ratio
  
Maximum
First Lien Leverage
Ratio
  
Minimum
Fixed Charge
Coverage Ratio
 
June 30, 2014 through and including September 29, 2014  4.75x  3.50x  1.10x
September 30, 2014 through and including December 30, 2014  5.50x  3.50x  1.10x
December 31, 2014 through and including June 29, 2015  5.50x  4.00x  1.10x
June 30, 2015 through and including September 29, 2015  4.75x  3.50x  1.10x
September 30, 2015 through and including December 30, 2015  4.50x  3.25x  1.10x
December 31, 2015 through and including March 30, 2016  4.25x  3.00x  1.10x
March 31, 2016 and thereafter  4.25x  3.00x  1.10x
             
Second Lien Credit Facility 
 
 
Applicable Period
 
Maximum
Total Leverage
Ratio
  
Maximum
First Lien Leverage
Ratio
  
Minimum
Fixed Charge
Coverage Ratio
 
June 30, 2014 through and including September 29, 2014  5.00x  3.75x  1.00x
September 30, 2014 through and including December 30, 2014  5.75x  3.75x  1.00x
December 31, 2014 through and including March 30, 2015  5.75x  4.25x  1.00x
March 31, 2015 through and including June 29, 2015  5.75x  4.25x  1.00x
June 30, 2015 through and including September 29, 2015  5.00x  3.75x  1.00x
September 30, 2015 through and including December 30, 2015  4.75x  3.50x  1.00x
December 31, 2015 through and including March 30, 2016  4.50x  3.25x  1.00x
March 31, 2016 and thereafter  4.50x  3.25x  1.00x
We measurewere in compliance with our covenants on a quarterly basis and we were in compliance as of December 31, 2013;2014; however, there can be no assurances that we will remain in compliance with all covenants in the future. The First Lien Credit AgreementFacility and Second Lien Credit AgreementFacility also include customary events of default, including, among other things: non-payment; breach of covenant; breach of representation or warranty; cross-default under certain other indebtedness or guarantees; commencement of insolvency proceedings; inability to pay debts; entry of certain material judgments against us or our subsidiaries; occurrence of certain ERISA events; re-purchase of our own stock and certain changes of control. A breach of a covenant or other events of default could cause the loans to be immediately due and payable, terminate commitments for additional loan funds, or the lenders could exercise any other remedy available under the First Lien Credit AgreementFacility or Second Lien Credit AgreementFacility or by law.  If a breach of covenants or other event of default were to occur, we would seek modifications to covenants or a temporary waiver or waivers from the First Lien Credit AgreementFacility and Second Lien Credit AgreementFacility lenders. No assurance can be given that we would be successful in obtaining such modifications.
 
During the year ended December 31, 2012, we prepaid, at our discretion, the principal payment of $1.3 million due April 1, 2013 on the First Lien Credit Agreement, in order to reduce interest costs.  As a practice, we consistently prepaid our quarterly payments before their due dates in 2013, and during the year ended December 31, 2013, we prepaid, at our discretion, the sum of $8.8 million in quarterly principal payments, which were due through July 1, 2015.  The next scheduled principal payment is due October 1, 2015.
We are required to make prepayments under the First Lien Credit Agreement,Facility, under certain conditions defined in the agreement, in addition to the scheduled principal installments for any fiscal year ending December 31, 2012 and thereafter. Prepayment penalties will be assessed in the event that prepayments are made on the Second Lien Credit AgreementFacility prior to the discharge of the First Lien Credit Agreement.Facility.
 
On August 26, 2013, we entered into the First Lien AmendmentThe summary of principal terms of and the Second Lien Amendment which amended certain provisions ofamendments to the First Lien Credit AgreementFacility and to the Second Lien Credit Agreement. The First Lien Amendment modifications included a $10.0 million increase to the term loan portion of the First Lien Credit Agreement to $56.3 million, a 1% lower interest rate and an extended maturity date to June 29, 2016. Also, certain financial ratio covenants were revised under the First Lien Credit Agreement and Second Lien Credit Agreement to accommodate the additional extension of credit under the First Lien Credit Agreement and our capital lease agreement related to the new hotel tower at Rising Star Casino Resort, as discussedFacility in Note 7 to the consolidated financial statements set forththis Annual Report on Form 10-K are in Item 8. Financial Statements and Supplementary Data. The $10.0 million increase to the term loan under our First Lien Credit Agreement remains undrawn and available,all cases subject to the terms and restrictions of the First Lien Credit Agreement,actual credit agreements and will be usedamendments, copies of which are referenced as Exhibits in Part IV to fund a portion of the approximately $17.7 million construction of the Silver Slipper Casino Hotel. We have commenced construction of the Silver Slipper Casino Hotel, which is expected to be completed in late 2014 or early 2015. The remaining $7.7 million of the construction cost has been, and will be, funded from available cash. As of December 31, 2013, we had funded cash of $2.5 million in construction and financing costs for the Silver Slipper Casino Hotel and we anticipate funding an additional $5.2 million in cash in 2014.this Annual Report on Form 10-K.
 
Off-balance Sheet Arrangements
 
We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
 
Critical Accounting Estimates and Policies
Use of Estimates
Our consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Certain of our accounting policies require that we apply significant judgment in defining the appropriate assumptions for calculating estimates that affect reported amounts and disclosures. Significant accounting estimates include valuation of goodwill and impairment of other long-lived assets, allocation of the purchase price associated with our acquisitions, collectability of receivables, the estimated useful lives assigned to our depreciable and amortizable assets, estimated cost of services furnished on a complimentary basis to customers and the estimated liability for unredeemed customer loyalty awards, and income taxes.  By their nature, judgments are subject to an inherent degree of uncertainty, and therefore actual results may differ from our estimates. We believe the following critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial statements.
Impairment of Long-lived Assets
Our long-lived assets include property and equipment, goodwill, and other intangibles.  Our long-lived assets are evaluated at least annually (and more frequently when circumstances warrant) to determine if events or changes in circumstances indicate that the carrying value may not be recoverable.  Examples of such events or changes in circumstances that might indicate impairment testing is warranted might include, as applicable, prolonged periods of the trading value of available-for-sale securities being less than cost, an adverse change in the legal, regulatory or business climate relative to gaming nationally or in the jurisdictions in which we operate, or a significant long-term decline in historical or forecasted earnings or cash flows or the fair value of our property or business, possibly as a result of competitive or other economic or political factors. In evaluating whether a loss in value is other than temporary, we consider: (1) the length of time and the extent to which the fair value or market value has been less than cost; (2) the financial condition and near-term prospects of the casino property, including any specific events which may influence the operations; (3) our intent related to the asset and ability to retain it for a period of time sufficient to allow for any anticipated recovery in fair value; (4) the condition and trend of the economic cycle; (5) historical and forecasted financial performance; and (6) trends in the general market.
In determining whether the carrying value of long-lived assets is less than its estimated fair value, a discounted cash flow approach to value is used and is based on Level 3 inputs as defined by GAAP. The Company’s valuation model incorporates a discount rate considering specific transactions and/or an estimated weighted-average cost of capital and terminal value multiples that are used by market participants.  When an estimated weighted-average cost of capital is used, it is based on the risk-free interest rate at the time, adjusted for specific risk factors.  We also consider the metrics of specific business transactions that may be comparable to varying degrees. The weight assigned to these approaches to value in our impairment evaluation may vary from period to period depending upon evolving events. Forecasted prospective financial information used in the model is based on management’s expected course of action. Sensitivity analyses are also performed related to key assumptions used, including possible variations in the weighted-average cost of capital and terminal value multiples, among others. Any impairment charges incurred are not reversed if a subsequent evaluation concludes in a higher valuation than the carrying value.
Property and Equipment
We define a fixed asset as a unit of property that (a) has an economic useful life that extends beyond 12 months and (b) was acquired or produced for a cost greater than $2,500 for a single asset or greater than $5,000 for a group of assets, including interest costs associated with long-term development projects calculated using our weighted average rate of borrowing.
Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the capitalized lease, whichever is appropriate under the circumstances. We determine the estimated useful lives based on our experience with similar assets and common industry practice.  Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.
Goodwill and Business Combinations
Goodwill represents the excess of the purchase price over fair value of net assets acquired in connection with business combinations.  We accounted for our acquisition of casino properties, most recently the Silver Slipper and Rising Star casinos, as business combinations. In a business combination, we determine the fair value of acquired assets, including identifiable intangible assets, assumed liabilities, and non-controlling interests, if any. The fair value of the acquired business is allocated to the acquired assets, assumed liabilities, and non-controlling interests based on their fair value, with any remaining fair value allocated to goodwill. This allocation process requires use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets.
Intangible Assets
Our indefinite-lived intangible assets include the cost of gaming licenses and trademarks. Gaming licenses represent the rights to conduct gaming in certain jurisdictions. The value of the Rising Star Casino Resort gaming license was estimated using a derivation of the income approach to valuation. The value of certain trademarks is based primarily on legal and recording fees to obtain such marks.  Indefinite-lived intangible assets are not amortized unless it is determined that their useful life is no longer indefinite. We periodically review our indefinite-lived assets to determine whether events and circumstances continue to support an indefinite useful life.  If it is determined that an indefinite-lived intangible asset has a finite useful life, then the asset is tested for impairment and is subsequently accounted for as a finite-lived intangible asset.
Our finite-lived intangible assets include customer relationship and loyalty programs, land leases, water rights and deferred loan costs. Finite-lived intangible assets are amortized over the shorter of their contractual or economic useful lives.
Customer loyalty programs represent the value of repeat business associated with the Silver Slipper and Rising Star casinos’ loyalty programs when we acquired the properties. Such values were determined using a derivation of the income approach to valuation.  The valuation analyses for the active-rated players were based on estimated revenues and attrition rates. Silver Slipper and Rising Star casinos maintain historical information for the proportion of revenues attributable to the rated play.  The value of the customer loyalty programs are amortized over three years, their assumed economic useful life.  Deferred loan costs are amortized over the term of the related debt using the effective interest method.
Revenue Recognition and Promotional Allowances
Our revenue recognition policies follow casino industry practices. Casino revenue is the aggregate  net difference between  gaming wins and losses, with liabilities recognized for accruals related to the anticipated payout of progressive jackpots, funds deposited by customers before gaming play occurs, and for certain chips and tokens in the customers’ possession.
Hotel rooms, food, beverages and other services provided by us on a complimentary basis are recorded at estimated retail value, then subtracted as promotional allowances (a contra-revenue item) to calculate net revenues. The actual estimated cost of providing such goods and services is then charged as a casino operating expense. Promotional items provided to customers that are purchased from third parties are recorded as expenses at their cost.
Key performance indicators related to gaming revenue are slot coin-in and table game drop (volume indicators) and “win” or “hold” percentage.
Hotel, food and beverage, entertainment and other operating revenues are recognized as these services are performed.  Advance deposits on rooms and advance ticket sales are recorded as deferred revenue until services are provided to the customer without regard to whether they are refundable. Sales and similar revenue-linked taxes (except for gaming taxes) collected from customers on behalf of, and submitted to, taxing authorities are also excluded from revenue and recorded as a current liability.
Customer Loyalty Programs
We have customer loyalty programs at each of our properties – the Silver Slipper Casino Players Club, the Rising Star Rewards Club™, the Grand Lodge Players Advantage Club® and the Stockman’s Winner’s Club.  Under these programs, customers earn points based on their volume of wagering that may be redeemed for various benefits, such as free play, cash back, complimentary dining, or hotel stays, among others, depending on each property’s specific offers. We also occasionally offer sweepstakes and other promotions for tracked customers that do not require redemption of points.  Unredeemed points are forfeited if the customer becomes and remains inactive for a specified period of time.
Loyalty programs are a part of the total marketing program. The amount of marketing reinvestment (complimentaries to players, promotional awards, entertainment, etc.) is based on the specific property and competitive assumptions.  We track the percentage of promotional and marketing costs compared to gaming revenue for an efficient use and return on our marketing investment.  Each of our properties has been faced with a highly competitive promotional environment due to the high amounts of incentives offered by the competition.
Share-based Compensation
We have granted shares of both restricted stock and stock options to key members of management and the board of directors.  Accounting standards require us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognize that cost over the service period.  Share-based compensation expense from stock awards is included in general and administrative expense. Vesting is contingent upon certain conditions, including continuous service of the individual recipients. Unvested stock grants made in connection with our incentive compensation plan are viewed as a series of individual awards and the related share-based compensation expense is amortized into compensation expense on a straight-line basis as services are provided over the vesting period, and reported as a reduction of stockholders’ equity.  We use the Black-Scholes valuation model to determine the estimated fair value for each option grant issued. The Black-Scholes-determined fair value, net of estimated forfeitures, is amortized as compensation cost on a straight line basis over the service period.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are provided against deferred tax assets when it is deemed more likely than not that some portion or all of the deferred tax asset will not be realized within a reasonable time period.
Our income tax returns are subject to examination by the IRS and other tax authorities. Positions taken in tax returns are sometimes subject to uncertainty in the tax laws and may not ultimately be accepted by the IRS or other tax authorities.  We assess our tax positions using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold. It is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized.  Additionally, we recognize accrued interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Recently Issued Accounting Pronouncements
We have reviewed authoritative standards issued after December 31, 2014 and others not yet effective.  As a result, we determined that the new standards are not likely to have any significant impact on our future financial statements.
 
As a smaller reporting company, we are not required to provide the information required by this item.Item.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
Board of Directors
Full House Resorts, Inc.
Las Vegas, NV
 
We have audited the accompanying consolidated balance sheets of Full House Resorts, Inc. and Subsidiariessubsidiaries (collectively, the “Company”) as of December 31, 20132014 and 2012,2013, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20132014 and 2012,2013, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
 
/s/ Piercy Bowler Taylor & Kern
 
Piercy Bowler Taylor & Kern
Certified Public Accountants
Las Vegas, Nevada
 
March 10, 201425, 2015
 
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except number of shares and per share data)
         Year Ended December 31,
  
December 31,
2013
   
December 31,
2012
  
2014
  
2013
 
Revenues
              
Casino $131,581  $112,649  $109,566  $131,581 
Food and beverage  7,967   6,223   20,083   22,700 
Hotel  582   493   5,002   4,219 
Management fees  1,678   7,180   1,066   1,678 
Other operations  2,919   2,215   3,535   4,182 
Gross Revenues  139,252   164,360 
Less promotional allowances  (17,831)  (19,633)
Net Revenues  121,421   144,727 
  144,727   128,760         
Operating costs and expenses                
Casino  67,779   62,976   56,867   67,779 
Food and beverage  7,847   5,973   8,315   7,847 
Hotel  656   547   713   656 
Other operations  5,056   5,067   1,283   1,583 
Project development and acquisition costs  67   1,861   296   67 
Board and executive transition costs  2,741   - 
Selling, general and administrative  46,974   37,003   43,942   50,447 
Depreciation and amortization  9,388   6,884   9,183   9,388 
  137,767   120,311 
Operating gains (losses)        
Gain on sale of joint venture  --   41,189 
Impairment loss  (4,000)  -- 
Loss on disposal of assets, net  372   24 
Impairment charges  11,547   4,000 
  (4,000)  41,189   135,259   141,791 
                
Operating income  2,960   49,638 
Operating (loss) income  (13,838)  2,936 
                
Other (expense) income        
Interest expense  (7,268)  (2,731)
Gain on derivative instrument  --   8 
Other expense        
Interest expense, net of $0.4 million and $0.03 million capitalized  (6,272)  (7,268)
Settlement loss  (1,700)  -- 
Other expense, net  (15)  (6)  (23)  9 
Loss on extinguishment of debt  --   (1,719)
Other expense, net  (7,283)  (4,448)
(Loss) income before income taxes  (4,323)  45,190 
Income tax (benefit) expense  (361)  15,175 
Net (loss) income  (3,962)  30,015 
Income attributable to noncontrolling interest in consolidated joint venture  --   (2,181)
Net (loss) income attributable to the Company $(3,962) $27,834 
          (7,995)  (7,259)
Net (loss) income attributable to the Company per common share $(0.21) $1.49 
Loss before income taxes
  (21,833)  (4,323)
Income tax benefit  (988)  (361)
Net loss $(20,845) $(3,962)
                
Weighted-average number of common shares outstanding  18,740,162   18,677,544 
Loss per share:        
Basic $(1.10) $(0.21)
Diluted $(1.10) $(0.21)
        
Weighted average number of common shares outstanding:        
Basic   18,874,472   18,740,162 
Diluted  18,874,472   18,740,162 
See notesNotes to consolidated financial statements.
 
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
 
        
  
December 31,
2013
   
December 31,
2012
  December 31,
         2014  2013 
ASSETS              
Current assets              
Cash and equivalents $14,936  $20,603  $15,639  $14,936 
Accounts receivable, net of allowance for doubtful accounts of $471 and $959  1,869   2,657 
Accounts receivable, net of allowance for doubtful accounts of $513 and $471  1,573   1,869 
Income tax receivable  3,095   1,970 
Prepaid expenses  6,288   5,744   2,105   4,318 
Deferred tax asset  --   2,110 
Other  726   1,225   728   726 
  23,819   32,339   23,140   23,819 
Property, equipment and capital lease assets, net of accumulated depreciation  91,168   83,673   95,040   91,168 
        
Other long-term assets                
Goodwill  18,127   22,127   16,480   18,127 
Intangible assets, net of accumulated amortization of $4,055 and $1,506  15,533   18,106 
Intangible assets, net of accumulated amortization of $6,195 and $4,055  3,382   15,533 
Long term deposits  761   301   178   761 
Loan fees, net of accumulated amortization of $2,327 and $496  3,558   5,159 
Loan fees, net of accumulated amortization of $3,827 and $2,327  2,650   3,558 
Deferred tax asset  1,321   1,020   74   1,321 
  39,300   46,713   22,764   39,300 
 $154,287  $162,725  $140,944  $154,287 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities                
Accounts payable $2,661  $2,532  $4,102  $2,110 
Income taxes payable  --   7 
Construction contracts payable  1,638   551 
Accrued player club points and progressive jackpots  1,999   2,378   1,709   1,999 
Accrued payroll and related  3,276   4,107   3,743   3,276 
Other accrued expenses  3,139   3,808   3,704   3,139 
Deferred tax liability  66   --   901   66 
Current portion of capital lease obligation  736   --   690   736 
Current portion of long-term debt  --   2,500   1,337   -- 
  11,877   15,332   17,824   11,877 
                
Long-term debt, net of current portion  57,500   66,250   59,294   57,500 
Deferred tax liability  113   10   99   113 
Capital lease obligation, net of current portion  6,983   --   6,230   6,983 
  76,473   81,592   83,447   76,473 
Commitments and contingencies (Note 11)        
        
Stockholders’ equity                
Common stock, $.0001 par value, 100,000,000 shares authorized; 20,107,276
and 20,036,276 shares issued
  2   2 
Common stock, $0.0001 par value, 100,000,000 shares authorized; 20,233,276 and 20,107,276 shares issued; 18,876,681 and 18,750,681 shares outstanding  2   2 
Additional paid-in capital  45,350   44,707   45,878   45,350 
Treasury stock, 1,356,595 common shares  (1,654)  (1,654)  (1,654)  (1,654)
Retained earnings  34,116   38,078   13,271   34,116 
  77,814   81,133   57,497   77,814 
 $154,287  $162,725  $140,944  $154,287 
 
See notesNotes to consolidated financial statements.
 
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2014 and 2013
(In thousands)
                                Additional        Total 
         Additional              Total  Common stock  paid-in  Treasury stock  Retained  Stockholders’ 
 Common stock  paid-in  Treasury stock  Retained  Stockholders’ 
December 31, 2013 Shares  Dollars  capital  Shares  Dollars  Earnings  Equity 
December 31, 2014 Shares  Dollars  capital  Shares  Dollars  Earnings  Equity 
                                                        
Beginning balances  20,036  $2  $44,707   1,357  $(1,654) $38,078  $81,133   20,107  $2  $45,350   1,357  $(1,654) $34,116  $77,814 
Issuance of share based compensation  65   --   --   --   --   --   --   120   --   --   --   --   --   -- 
                            
Previously deferred share-based compensation recognized  --   --     623   --   --   --   623   --   --     229   --   --   --   229 
Immediate vesting of deferred-based compensation recognized  --   --   280   --   --   --   280 
Stock based compensation expense  --   --   10   --   --   --   10 
Issuances of common stock  6   --   20   --   --   --   20   6   --   9   --   --   --   9 
                            
Net (loss)  --   --   --   --   --   (3,962)  (3,962)
                            
Net loss  --   --   --   --   --   (20,845)  (20,845)
Ending balances  20,107  $2  $45,350   1,357  $(1,654) $34,116  $77,814   20,233  $2  $45,878   1,357  $(1,654) $13,271  $57,497 
 
                                    Additional        Total 
         Additional                  Total  Common stock  paid-in  Treasury stock  Retained  Stockholders’ 
 Common stock  paid-in  Treasury stock  Retained  Noncontrolling  Stockholders’ 
December 31, 2012 Shares  Dollars  capital  Shares  Dollars  Earnings  interest  Equity 
December 31, 2013 Shares  Dollars  capital  Shares  Dollars  Earnings  Equity 
                                                            
Beginning balances  20,030  $2  $43,448   1,357  $(1,654) $8,508  $5,141  $55,445   20,036  $2  $44,707   1,357  $(1,654) $38,078  $81,133 
Issuance of share based compensation  65   --   --   --   --   --   -- 
Previously deferred share-based compensation recognized  --   --     1,242   --   --   --     --   1,242   --   --     623   -- �� --   --   623 
Issuances of common stock  6   --   17   --   --   --   --   17   6   --   20   --   --   --   20 
                                
Distributions to non-controlling interest in consolidated joint venture  --   --       --       --   --   --   (3,586)  (3,586)
                                
Sale of interest in joint venture  --   --   --   --   --   1,736   (3,736)  (2,000)
                                
Net income  --   --   --   --   --   27,834   2,181   30,015 
                                
Net loss  --   --   --   --   --   (3,962)  (3,962)
Ending balances  20,036  $2  $44,707   1,357  $(1,654) $38,078  $--  $81,133   20,107  $2  $45,350   1,357  $(1,654) $34,116  $77,814 
 
See notes to consolidated financial statements
See Notes to consolidated financial statements.

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
         Year Ended December 31,
  
2013
   
2012
  2014  2013 
Cash flows from operating activities:              
Net (loss) income attributable to the Company $(3,962) $27,834 
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:        
Non-controlling interest in consolidated joint venture  --   2,181 
Gain on sale of joint venture  --   (41,189)
Stockman’s goodwill impairment adjustment  4,000   -- 
Net loss $(20,845) $(3,962)
Adjustments to reconcile net loss to net cash provided by operating activities:        
Gaming license impairment  9,900   -- 
Goodwill impairment  1,647   4,000 
Depreciation  6,839   5,270   7,044   6,839 
Amortization of gaming and other rights  --   593 
Amortization of loan fees  1,831   2,395   1,500   1,831 
Amortization of player loyalty program, land lease and water rights  2,550   1,021   2,139   2,550 
Other  24   90 
Loss on disposals  372   24 
Deferred and share-based compensation  643   1,259   528   643 
Increases and decreases in operating assets and liabilities:                
Accounts receivable, net  788   2,840   296   788 
Income tax receivable  (1,125)  (1,970)
Prepaid expenses  (544)  (1,460)  2,213   1,426 
Deferred tax  1,977   (1,724)  2,068   1,977 
Other assets  499   (442)
Other assets and deposits  70   499 
Accounts payable and accrued expenses  (2,359)  (567)  1,754   (2,359)
Income taxes payable  (7)  (2,402)  -   (7)
Net cash provided by (used in) operating activities  12,279   (4,301)
Net cash provided by operating activities  7,561   12,279 
Cash flows from investing activities:                
Proceeds from sale of joint venture, less holdback  --   49,658 
Purchase of property and equipment  (6,162)  (2,986)
Proceeds from sale of assets  20   -- 
Purchase of property and equipment, net of construction contracts payable  (9,567)  (6,162)
Deposits and other related costs  (333)  (1,286)  584   (333)
Other  29   (115)  39   29 
Net cash (used in) provided by investing activities  (6,466)  45,271 
Net cash used in investing activities  (8,924)  (6,466)
Cash flows from financing activities:                
Repayment of long-term debt and interest rate swap  (11,250)  (28,187)
Distributions to non-controlling interest in consolidated joint venture  --   (3,323)
Loan fees  (230)  (3,564)
Net cash used in financing activities  (11,480)  (35,074)
Net (decrease) increase in cash and equivalents  (5,667)  5,896 
Borrowings of long-term debt  3,131   -- 
Repayment of long-term debt, capital lease and interest rate swap  (799)  (11,250)
Loan fees, net of fees payable  (266)  (230)
Net cash provided by (used in) financing activities  2,066   (11,480)
Net increase (decrease) in cash and equivalents  703   (5,667)
Cash and equivalents, beginning of year  20,603   14,707   14,936   20,603 
Cash and equivalents, end of year $14,936  $20,603  $15,639  $14,936 
 
   
2013
   
2012
 
SUPPLEMENTAL CASH FLOW INFORMATION:        
   Cash paid for interest $5,516  $1,877 
   Cash received from income tax refund, net of cash paid of $0.3 million for income taxes in 2013 and cash paid for income taxes in 2012 $(2,409) $21,876 
   Borrowings  paid directly to sellers and vendors at closing $--  $70,000 
   Property acquisition financed with a capital lease
 $7,719  $-- 
  2014  2013 
SUPPLEMENTAL CASH FLOW INFORMATION:      
   Cash paid for interest, net of amounts capitalized $4,820  $5,516 
Cash received from net loss carryback, net of cash paid of $0.1 million for income taxes in 2014, and cash received from income tax refund, net of cash paid of $0.03 million for income taxes in 2013 $(2,370) $(2,409)
NON-CASH INVESTING AND FINANCING ACTIVITIES:
        
   Property and equipment expenditures included in payables and accruals $2,292  $609 
   Property acquisition financed with a capital lease $--  $7,719 
 
See notesNotes to consolidated financial statements.
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.  ORGANIZATION, NATURE AND HISTORY OF OPERATIONS

1.  ORGANIZATION AND DESCRIPTION OF BUSINESS

Formed as a Delaware corporation in 1987, Full House Resorts, Inc., a Delaware corporation formedowns, operates, develops, manages, and/or invests in 1987,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, (collectively, Full House, we, our, ours, us) develops, manages, operates, and/except where stated or invests in gaming-related enterprises. We continue to actively investigate, individually and with partners, new business opportunities and our long-term strategy is to continue deriving revenues primarily from owned operations, as well as management fees. In furtherance of that strategy we made significant acquisitions of the Rising Star Casino Resort and Grand Lodge Casino leased operation in 2011 and the Silver Slipper Casino in 2012.  With the 2012 sale of the management agreement for the FireKeepers Casino in Michigan, we have transitioned the primary source of our revenues to owned entities.context otherwise indicates.

We currently own three casino properties and operate a fourth casino subject to a lease, one casino propertyas follows:

PropertyAcquisition
Date
LocationSlot
Machines
Table
Games
Hotel
Rooms
Silver Slipper Casino (Owned)2012Bay St. Louis, MS (near New Orleans)93829
129(1)
Rising Star Casino Resort (Owned)2011Rising Sun, IN (near Cincinnati)92128
294(2)
Stockman’s Casino (Owned)2007Fallon, NV (one hour east of Reno)2654--
Grand Lodge Casino (leased and part of the Hyatt Regency Lake Tahoe Resort)2011Incline Village, NV (North Shore of Lake Tahoe)25420
-- (3)
(1)The Silver Slipper Casino is expected to open its hotel in the first half of 2015.
(2)Includes a 190-room hotel that we own and operate, and an adjacent 104-room hotel that we operate pursuant to a 10-year capital lease.
(3)Under the Facilities Agreement dated June 29, 2011 with Hyatt Equities, L.L.C. we have the ability to provide rooms to our guests at the Hyatt Regency at Lake Tahoe upon mutually agreeable rates, as well as other amenities and services that cater to our guests and support our operations.

Until our three-year contract expired in September 2014, we have one management contract to manage a group of related casino properties. These properties are located in four distinct regions of the United States – the Gulf Coast, the Midwest, Northern Nevada and the Southwest. We own Rising Star Casino Resort located in Rising Sun, Indiana, Silver Slipper Casino located in Bay St. Louis, Mississippi and Stockman’s Casino located in Fallon, Nevada. We lease one property, the Grand Lodge Casino at the Hyatt Regency Lake Tahoe Resort, Spa and Casino located in Incline Village, Nevada on the North Shore of Lake Tahoe. We managealso managed the Buffalo Thunder Casino and Resort, and the Cities of Gold and other gaming facilities, both located in Santa Fe, New Mexico, for the Pueblo of Pojoaque pursuant to an agreement withPojoaque.

Through a three-year term expiring September 2014.
Previously50% owned joint venture, we also previously managed the FireKeepers Casino near Battle Creek, Michigan for the Nottawaseppi Huron Band of Potawatomi through a 50% joint venture, pursuant to a seven-year management agreement through March 30, 2012, whenuntil we sold our interest in the joint venture was sold.
Properties Currently Operating
Gulf Coast Casino Operations
Silver Slipper Casino
The Silver Slipper Casino is on the far west end of the Mississippi Gulf Coast in Bay St. Louis, Mississippi. The property has approximately 37,000 square feet of gaming space containing approximately 950 slot and video poker machines, 25 table games and the only live keno game on the Gulf Coast. The property includes a fine dining restaurant, buffet, quick service restaurant and two casino bars. The property draws heavily from the New Orleans metropolitan area and other communities in southern Louisiana and southwestern Mississippi.
We acquired all of the outstanding membership interests in Silver Slipper Casino Venture LLC, the owner of Silver Slipper Casino, on October 1, 2012, for $69.3 million, exclusive of net working capital balances, fees and expenses.March 2012.
 
On AugustFebruary 26, 2013,2014, we entered into an exclusivity agreement with WHD Silver Slipper Casino, LLC relatedKeeneland Association, Inc. (“Keeneland”) to constructionown, manage, and operate instant racing and, if authorized, traditional casino gaming at racetracks in Kentucky, subject to completion of a six-story, 142-room hotel at our Silver Slipper Casino property (the “Silver Slipper Casino Hotel”). We have commenced construction of the Silver Slipper Casino Hotel and expect construction to be completed late indefinitive documents for each opportunity. On November 17, 2014, or early 2015. Upon completion, the hotel will have 142-rooms in a six-story tower overlooking the waterfront.  We believe that the Silver Slipper Casino Hotel is a much-needed amenity and will favorably impact customer loyalty by allowing guests to extend their visits at Silver Slipper Casino.
Midwest Casino Operations
Rising Star Casino Resort
On April 1, 2011, we acquired all of the operating assets of Grand Victoria Casino & Resort, L.P. through Gaming Entertainment (Indiana) LLC, our wholly-owned subsidiary. We renamed the property Rising Star Casino Resort in August 2011.  The property has approximately 40,000 square feet of casino space and includes approximately 1,200 slot and video poker machines, 33 table games, a 190-room hotel, five dining outlets and an 18-hole Scottish links golf course.
In October 2011, Rising Sun/Ohio County First, Inc. (“RSOCF”) and Rising Sun Regional Foundation, Inc. teamed up to develop a new 104-room hotel tower on land adjacent to our Rising Star Casino Resort. On June 13, 2012, the City of Rising Sun Advisory Plan Commission provided a favorable recommendation to the City Council of Rising Sun, Indiana, regarding a revised amendment to the plan of development, which was adopted by the City Council on July 5, 2012.  On August 13, 2012, the Advisory Plan Commission approved the detailed plan of development.  Theboth parties entered into a real estate saletermination agreement dated May 2, 2012,to terminate all agreements between us. See Note 10 for RSOCF to purchase approximately three acres of land on which the hotel was developed.  Construction commenced in December 2012, and the new hotel tower at Rising Star Casino Resort opened on November 15, 2013.  The openingfurther discussion of the new hotel tower at Rising Star Casino Resort brought total room capacity to 294.  We believe thattermination of the added hotel room inventory in close proximity to our casino facility will favorably impact revenues and visitor counts.Keeneland agreement.

On August 16, 2013, weNovember 28, 2014, Full House, and Daniel R. Lee, Bradley M. Tirpak and Craig W. Thomas (jointly and severally), the (“Shareholder Group”), entered into a 10-year capital leaseSettlement Agreement (the “Settlement Agreement”) resulting in significant changes in the Company’s board of directors and management. The Company incurred significant costs involved with such changes. See Note 9 for the new hotel tower at Rising Star Casino Resort (the “Rising Star Hotel Agreement”) which commenced on November 15, 2013 and provides us with full management control and an option to purchase the new hotel tower at Rising Star Casino Resort at the endadditional discussion of the lease term. We have recorded the capital lease obligation and hotel assets in our financial statements. On November 15, 2013, we began operating the new hotel tower at Rising Star Casino Resort. The Rising Star HotelSettlement Agreement, provides that we, as the lessee, assume all responsibilities, revenues, expenses, profits and losses relatedamendment to the hotel’s operations. The termCompany’s by-laws, and changes to the board of the Rising Star Hotel Agreement is for 10 years from November 15, 2013, with the landlord having a right to sell the hotel to us at the end of the term and our corresponding obligation to purchase it on the terms set forth in the Rising Star Hotel Agreement. During the term, we will have the exclusive option to purchase the new hotel tower at Rising Star Casino Resort at a pre-set price. On January 1, 2014, we began paying a fixed monthly rent payment of approximately $77.5 thousand, which will continue throughout the term of the Rising Star Hotel Agreement unless we elect to purchase the hotel before the end of the lease period. In the event that we default on the lease agreement, the landlord’s recourse is limited to taking possession of the property, collection of all rent due and payable, and the right to seek remediation for any attorneys’ fees, litigation expenses, and costs of retaking and re-leasing the property.directors.
 
Northern Nevada Casino Operations
Grand LodgeWe manage our casinos based on geographical regions within the United States.  Accordingly, Stockman’s Casino
On September 1, 2011, we purchased the operating assets of and Grand Lodge Casino comprise a Northern Nevada business segment, while Rising Star and entered into a lease with Hyatt Equities, L.L.C. for the casino space in the Hyatt Regency Lake Tahoe Resort, Spa and Casino in Incline Village, Nevada on the north shore of Lake Tahoe. The initial term of the lease expires on August 31, 2018. The lease has an option, subject to mutual agreement, to renew for an additional five-year term. The Grand Lodge Casino has 18,900 square feet of casino space integrated with the Hyatt Regency Lake Tahoe Resort, Spa and Casino, featuring approximately 260 slot machines, 16 table games and a poker room.Silver Slipper are currently distinct segments.
Stockman’s Casino
We acquired Stockman’s Casino in Fallon, Nevada on January 31, 2007. Stockman’s Casino has approximately 8,400 square feet of gaming space with approximately 265 slot machines, four table games and keno. The facility has a bar, a fine dining restaurant and a coffee shop.
Southwest Casino Management Operations
Buffalo Thunder Casino and Resort
In May 2011, we entered into a three-year agreement with the Pueblo of Pojoaque, which has been approved by the National Indian Gaming Commission as a management contract, to advise on the operations of Buffalo Thunder Casino and Resort in Santa Fe, New Mexico, along with the Pueblo’s Cities of Gold and other gaming facilities which in aggregate have approximately 1,200 slot machines, 18 table games (including poker) and a simulcast area. We receive a base consulting fee of $0.1 million per month plus quarterly success fees based on achieving certain financial targets and incur only minimal incremental operating costs related to the contract. Our management and related agreements with Buffalo Thunder Casino and Resort became effective on September 23, 2011.
Additional projects are considered based on their forecasted profitability, development period, regulatory and political environment and the ability to secure the funding necessary to complete the development, among other considerations. We continue to actively investigate, individually and with partners, new business opportunities. We believe we will have sufficient cash and financing available to fund acquisitions and development opportunities in the future.
Prior Projects
FireKeepers Casino
Until March 30, 2012, we owned 50% of Gaming Entertainment (Michigan), LLC (“GEM”), a joint venture with RAM Entertainment, LLC, (“RAM”) a privately-held investment company. GEM had the exclusive right to provide casino management services at the FireKeepers Casino near Battle Creek, Michigan for the Nottawaseppi Huron Band of Potawatomi (the “Michigan Tribe”) for seven years commencing August 5, 2009. We were the primary beneficiary and, therefore, included GEM in our consolidated financial statements. On December 2, 2010, the FireKeepers Development Authority (“FDA”), a tribal entity formed by the Michigan Tribe, entered into a hotel consulting services agreement with GEM, as the consultant, related to the FireKeepers Casino phase II development project, which included development of a hotel, multi-purpose/ballroom facility, surface parking and related ancillary support spaces and improvements. GEM was to perform hotel consulting services for a fixed fee of $12,500 per month, continuing through to the opening of the project, provided the total fee for services did not exceed, in the aggregate, $0.2 million. On May 22, 2012, we signed an amendment to the hotel consulting services agreement extending the terms of the agreement through November 2012.
On March 30, 2012, the joint venture managing the FireKeepers Casino sold the equity of the joint venture and the management agreement to the FDA for $97.5 million.  In addition to the $97.5 million sale price, the FDA paid RAM and us $1.2 million each, equal to the management fee that would have been earned under the management agreement for April 2012 less a $0.2 million wind-up fee and $0.1 million holdback receivable.  The $0.1 million holdback receivable was received in May 2012, less expenses related to the sale deducted by the FDA. Our gain on the sale of joint venture, related to the sale of our interest in GEM, was $41.2 million and allocated as follows (in millions):
Gross proceeds $48.8 
Plus:  April 2012 wind-up fee received, net of $0.03 million wind-up fee and holdback receivable  0.9 
Net proceeds  49.7 
Less: Our interest in joint venture  (5.7)
Full House gain on sale of joint venture  44.0 
Less: contract right owned by subsidiary  (2.8)
Consolidated gain on sale of joint venture $41.2 

2.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BasisPrinciples of PresentationConsolidation and Accounting.The consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, including the Silver Slipper Casino, Rising Star Casino Resort, Grand Lodge Casino and Stockman’s Casino. GEM, a 50%-owned investee that was jointly owned by RAM, until March 30, 2012, was consolidated pursuant to the relevant portions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification™ (“ASC”) Topic 810, “Consolidation.”subsidiaries.  All material intercompany accounts and transactions have been eliminated.  Certain prior-period amounts in the consolidated statements of operations and balance sheets have been reclassified to conform to the current period presentation. These reclassifications had no effect on the previously reported income from operations or net loss.

We have elected to not adopt the option available under ASC Topic 825, “Financial Instruments”, to measure any of our eligible financial instruments or other items. Accordingly, except where carried at estimated fair value under otherExcept when otherwise required by accounting principles generally accepted accounting principles and disclosed herein,in the United States of America (U.S. GAAP), we continue to measure all of our assets and liabilities on the historical cost basis of accounting.

Use of Estimates.We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. Certain of our accounting policies require that we apply significant judgment in defining the appropriate assumptions for calculating financial estimates. The significant accounting estimates inherent in the preparation of our financial statements primarily include our valuation of goodwillthat affect reported amounts and purchase price allocations made in connection with our acquisitions, the estimated useful lives assigned to our depreciable and amortizable assets, asset impairment, bad debt expense, our opinion of collectability of receivables and fair value estimates related to valuation of receivables. Other accounting estimates include management’s proper calculation of payroll liabilities such as paid time off, medical benefits, bonus accruals and other liabilities including slot club points and tax liabilities.
Various assumptions, principally affecting the timing and other factors, underlie the determination of some of these significant estimates. The process of determining significant estimates is fact-and project-specific and takes into account factors such as historical experience and current and expected legal, regulatory and economic conditions. We regularly evaluate these estimates and assumptions, particularly in areas, if any, where changes in such estimates and assumptions could have a material impact on our results of operations, financial position and, generally to a lesser extent, cash flows. Where recoverability of these assets or planned investments are contingent upon the successful development and management of a project, we evaluate the likelihood that the project will be completed, the prospective market dynamics and how the proposed facilities should compete in that setting in order to forecast future cash flows necessary to recover the recorded value of the assets or planned investment. We review our conclusions as warranted by changing conditions.
disclosures. By their nature, these judgments are subject to an inherent degree of uncertainty. Significant accounting estimates include valuation of goodwill and impairment of other long-lived assets, allocation of the purchase price associated with our acquisitions, collectability of receivables, the estimated useful lives assigned to our depreciable and amortizable assets, estimated cost of services furnished on a complimentary basis to customers and the estimated liability for unredeemed customer loyalty awards, and income taxes. Our judgments are based on our historical experience, termsestimates related to the valuation of existing contracts, observancegoodwill and impairment of trends inother long-lived assets could materially change during the gaming industry and information available from other outside sources. There can be no assurance that actual results will not differ from our estimates.next year.
 
Cash Equivalents.Cash equivalents include cash involved in operations and cash in excess of daily requirements may bethat is invested in highly liquid, short-term investments with initial maturities of three months or less when purchased, which are reported as cash equivalents in the consolidated financial statements.purchased.

Fair Value of Financial Instruments. Fair value measurements affect the Company’s accounting and impairment assessments of its long-lived assets, assets acquired and liabilities assumed in an acquisition, and goodwill and other intangible assets. Fair value measurements also affect the Company’s accounting for certain of its financial assets and liabilities. Fair value is defined as the 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 and is measured according to a hierarchy that includes: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs.  The carrying value of our cash and equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of those instruments. The estimated fair values of our debt approximates theirapproximate the recorded values as of the balance sheet dates presented, based on levelLevel 2 inputs as defined by U.S. GAAP consisting of interest rates offered to us for loans of the same orwith similar remaining maturities and bearing similar risks. We used Level 3 inputs when assessing the fair value of intangible assets (See Note 5) and property and equipment.
 
Liquidity, Concentrations and Economic Risks and Uncertainties. We are economically dependent upon relatively few investments in the gaming industry. The United States, since 2007,gaming industry in general, including the markets in which we operate, has experienced a widespreadnot fully recovered from the most recent economic slowdown accompanied by, among other things,recession and, to varying degrees, the continuing economic weakness inthat has curtailed consumer spending, includingparticularly for gaming activity and reduced credit and capital financing availability, all of which have far-reaching effects on economic conditions in the country for an indeterminate period. Our operations are currently concentrated in the Gulf Coast, the Midwest, Northern Nevada and the Southwest.other recreational activities.  Accordingly, future operations could be affected by adverse economic conditions and increased competition, particularly in those areas and their key feeder markets in neighboring states. The effects and duration of these conditions and related risks and uncertainties on our future operations and cash flows, including our access to capital or credit financing, cannot be estimated at this time, but may be significant.

The Company carries cash on deposit with financial institutions that may be in excess of federally-insured limits. However, the extent of any loss that might be incurred as a result of uninsured deposits in the event of a future failure of a bank or other financial institution, if any, is not subject to estimate at this time.

Receivables. Accounts receivable are uncollateralized and carried, net of an appropriate allowance, at their estimated collectible value based on customers’ past credit history and current financial condition and on current general economic conditions. Since credit is extended on a short-term basis, accounts receivables do not normally bear interest.  The allowances for doubtful accounts are estimated by management for accounts that are believed to be partially or entirely uncollectible. We record uncollectibleDoubtful collection allowances over 90 days old as a chargeare charged to selling, general and administrative expenses.operations. The majority of our casino accounts receivable consists primarily of returned checks and markers.  We review the receivablesour receivables’ aging and related aginghistorical collection results to determine a factorestablish factors for estimating the allowance foramount of our receivables.receivables that will not be collected.

Bad debt expense for accounts receivable totaled $0.3 million and $0.04 million for the years ended December 31, 2014 and 2013 respectively.

Property and Equipment.We define a fixed asset as a unit of property that: (a) has an economic useful life that extends beyond 12 months; and (b) was acquired or produced for a cost greater than $2,500 for a single asset, or greater than $5,000 for a group of assets, acquired or produced for a specific capital project. Fixed assets are capitalized and depreciated for book and tax purposes.  FixedCosts of normal repairs and maintenance and fixed assets acquired or produced for a cost less than $2,500, our minimum threshold amount for capitalization, are reflected as an expense in our financial statements.

Fixed assets are recorded at historical cost as of the date acquired (Note 6)3), and depreciated beginning on the date the fixed asset is placed in service.  A fixed asset costing less than the threshold stated above is recorded as an expense for financial statement and tax purposes. A fixed asset with an economic useful life that is less than 12 months is expensed for financial statement and tax purposes, regardless of the acquisition or production cost. We evaluate ourCertain events or changes in circumstances may indicate that the recoverability of the carrying amount of property, plant and equipment and other long-lived assets for impairmentshould be assessed, including, among others, a significant decrease in accordance with the accounting guidancemarket value, a significant change in the Impairmentbusiness climate in a particular market, or Disposala current period operating or cash flow loss combined with historical losses or projected future losses. When such events or changes in circumstances are present, we estimate the future cash flows expected to result from the use of Long-Lived Assets Subsectionsthe asset (or asset group) and its eventual disposition. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of FASB ASC Topic 360-10.the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value.
 
The interest cost associated with major development and construction projects is capitalized and included in the cost of the project.  Interest expense is capitalized at the applicable weighted-average borrowing rates of interest.interest and added to the project cost. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use.

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the capitalized lease, whichever is appropriate under the circumstances. Our capital lease asset and liabilities are initially measured at the beginning of the lease term at the present value of the minimum lease payments. Assets under a capital lease which meet the transfer-of-ownership or bargain-purchase option criteria of FASB ASC Topic 840, “Leases”, are amortized over the estimated useful lives of the assets. Our depreciation expense is highly dependent on the assumptions we make about our assets’ estimated useful lives. We determine the estimated useful lives based on our experience with similar assets, and our estimate of theestimated usage of the asset.asset, and industry practice. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.  Depreciation and amortization is provided over the following estimated useful lives:
 
Buildings and improvements:10 to 39 years
Furniture, fixtures and equipment: 3 to 10 years

Goodwill. Goodwill and Other Intangibles.Goodwill represents the excess of the purchase price over fair value of net assets acquired in connection with the Silver Slipper Casino, Rising Star Casino Resort and Stockman’s Casino. In accordance withCasino properties over the authoritative guidance for goodwill andestimated fair value of their net assets. Our other indefinite-lived intangible assets weinclude trademarks and certain license rights to conduct gaming in certain jurisdictions. Goodwill and indefinite-lived intangible assets are not amortized, but are periodically tested for impairment.  We test our goodwill and indefinite-lived intangible assets for impairment annually or ifwhen a triggering event occurs. Weoccurs and evaluate goodwill utilizing the market approach and indefinite-lived intangible assets using an income approach to value applying thea typical discounted cash flows in accordance withmethodology. During the provisionssecond quarter of FASB ASC Topic 350, “Intangibles-Goodwill2014, such indicators existed and Other” on an annual basis.impairment charge was recorded related to the goodwill and gaming license at Rising Star Casino. During 2013, we recorded a similar impairment charge for the goodwill at Stockman’s Casino.  See Note 5.

Intangible Assets. AssetsOur indefinite-lived intangible assets include trademarks and certain license rights. Gaming licenses represent. We estimated the value of the license to conduct gaming in certain jurisdictions, which are subject to highly extensive regulatory oversight and, in some cases, a limitation on the number of licenses available for issuance. The fair value of the Rising Star Casino Resort gaming license was estimated using a derivation of the income approach to valuation. The other gaming license values are based on actual costs. Indefinite-lived intangible assets are not amortized unless it is determined that their useful life is no longer indefinite.

We also periodically review our indefinite-lived assets to determine whether events and circumstances continue to support an indefinite useful life.  If it is determined that an indefinite-lived intangible asset has a finite useful life, then the asset is tested for impairment and is subsequently accounted for as a finite-lived intangible asset.

Our finite-lived intangible assets include customer relationship player loyalty programs, land leases, water rights and bank loan fee intangibles. Finite-lived intangible assets are amortized over the shorter of their estimated useful lives, and wecontractual or economic lives.  We periodically evaluate the remaining useful lives of these intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization. We also review our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

The player loyalty programs represent the value of repeat business associated with Silver Slipper Casino’s and Rising Star Casino Resort’s loyalty programs.  The value of the loyalty programs were determined using a multi-period excess earning method of the income approach, which examines the economic returns contributed by the identified tangible and intangible assets of a company, and then isolates the excess return, which is attributable to the asset being valued, based on cash flows attributable to the player loyalty program.  The valuation analyses for the active rated players were based on projected revenues and attrition rates. Costs incurred in obtaining long-term financing are included in loan fees, net of amortization over the life of the related debt.
Revenue Recognition and Promotional Allowances.Slot coin-in Our revenue recognition policies follow casino resort industry practices.  Similarly, associated estimates include primarily the estimated cost of providing customers with complimentary services.  Casino revenue is the gross amount wagered for the period cited.  The win or hold percentage is theaggregate net amount ofdifference between gaming wins and losses, with liabilities recognized for accruals related to the anticipated payout of progressive jackpots, funds deposited by customers before gaming play occurs (commonly called “casino front money”) and for chips and tokens in the customers’ possession (outstanding chip and token liability). Changes in our slot win percentages can have a significant impact to earnings.
For table games, customers usually purchase gaming chips at the gaming tables.  The cash and markers (extensions of credit granted to certain credit worthy customers) are deposited in the gaming table’s drop box.  Table game win is the amount of drop that is retained and recorded as casino gaming revenue, with liabilities recognized for funds deposited by customers before gaming play occurs and for unredeemed gaming chips.  As we are focused on regional gaming markets, our table win percentages are fairly stable as the majority of these markets do not regularly experience high-end play, which can lead to volatility in win percentages.  Therefore, changes in table game win percentages do not typically have a material impact to our earnings.
possession.  Key performance indicators related to gaming revenue are slot coin-in and table game drop (volume indicators) and “win” or “hold” percentage. Our typical property slot win percentage is in the range of 4% to 9% of slot coin-in, and our typical table game win percentage is in the range of 5% to 25% of table game drop.
 
Hotel, food and beverage, entertainment and other operating revenues are recognized as these services are performed, net of revenue-based taxes.performed. Advance deposits on rooms and advance ticket sales are recorded as deferred revenue until services are provided to the customer. Revenuescustomer without regard to whether they are refundable. Sales and similar revenue-linked taxes collected from customers on behalf of, and submitted to, taxing authorities are also excluded from revenue and recorded as a current liability.

Net revenues are recognized net of certain sales incentives and, accordingly, cash incentives to customers for gambling activity including thesuch as cash back and free play has been netted against gross revenues. The retail value of points redeemed by Players Club members, totaling $6.0 million and $6.7 million have been recognized as a direct reduction of casino revenue in 2013 and 2012, respectively. Sales and similar revenue-linked taxes collected from customers are excluded from revenue and recorded as a liability payable to the appropriate taxing authority and included in accrued expenses. Revenue also does not include the retail value ofhotel accommodations, food and beverage items and other services gratuitously furnishedentertainment provided to customers totaling $19.8 millionguests without charge is included in 2013gross revenues and $15.4 millionthen deducted as promotional allowances to arrive at net revenues. The estimated costs of providing these promotional allowances are primarily included in 2012.casino operating expenses. The amounts in promotional allowances and the estimated cost of providing room, food and beverage and other incentives is included primarily in casino expenses, assuch promotional allowances are noted in the table below (in thousands):below:

Retail Value of Promotional Allowances   
For the years ended December 31,
(in thousands)
   
  2014  2013 
   Rooms $4,180  $3,636 
   Food and beverage  12,315   14,733 
   Other incentives  1,336   1,264 
  $17,831  $19,633 
 
Costs of Providing Promotional Allowances
For the years ended December 31,
(in thousands)
   
 2013  2012    
       2014  2013 
Rooms $3,577  $3,588  $3,412  $3,577 
Food and beverage  13,549   9,249   12,451   13,549 
Other incentives  888   1,120   994   888 
 $18,014  $13,957  $16,857  $18,014 
We recognize the impact on gaming revenues on an annual basis to reflect an estimate of the change in the value of outstanding chips and tokens that are not expected to be redeemed. This estimate is determined by measuring the difference between the total value of chips and tokens placed in service less the value of chips and tokens in the inventory of chips and tokens under our control. This measurement was not consistently performed in past years, but will be performed on an annual basis in the future utilizing methodology in which a consistent formula is applied to estimate the percentage value of the chips and tokens not in custody that are not expected to be redeemed.  In addition to the formula, certain judgments are made with regard to various denominations and souvenir chips and tokens.
Derivative Instruments and Hedging Activities.
 
Advertising Costs.  Costs for advertising are expensed as incurred or the first time the advertising takes place and are included in selling, general and administrative expenses. Total advertising costs were $1.8 million and $2.7 million for the years ended December 31, 2014 and 2013, respectively.

Derivative Instruments – Interest Rate SwapCap Agreement. We adopted the accounting guidance for derivative instruments and hedging activities (ASC Topic 815, “Derivatives and Hedging”), as amended, to account for our interest rate swap, prior to the pay-off of the interest rate swap on March 30, 2012. The accounting guidance required us to recognize our derivative instruments as either assets or liabilities in our consolidated balance sheet at fair value. The accounting for changes in fair value (i.e. gains or losses) of a derivative instrument agreement depended on whether it had been designated and qualified as part of a hedging relationship and further, on the type of hedging relationship.  The derivative instrument was not designated as a hedge for accounting purposes. The change in fair value was recorded in the consolidated statement of operations in the period of change.  Additionally, the difference between amounts received and paid under such agreements, as well as any costs or fees, were recorded as a reduction of, or an addition to, interest expense as incurred over the life of the agreement.   Fluctuations in interest rates caused the fair value of our derivative instrument to change each reporting period. Effective March 20, 2012 the interest rate swap was terminated, and $0.5 million was paid, which reflected the fair value of the interest rate swap on that date, and we ceased to recognize the interest rate swap as a liability on the balance sheet in long-term debt.
Derivative Instruments – Interest Rate Cap Agreement. Currently, we are subject to interest rate risk under our Capital One First Lien Credit Agreement.  In November 2012 in accordance with the terms of the First Lien Credit Agreement, we entered into a prepaidcap. Our interest rate cap agreement with Capital One foris classified as a notional amount of $15.0 million at a LIBOR cap rate of 1.5%. The agreement was effective November 2, 2012risk management instrument and will terminate on October 1, 2014.management elected not to apply hedge accounting.
 
Customer Loyalty Programs. We currently offer incentives to our customers throughhave customer loyalty programs at each of our properties – the Silver Slipper Casino Players Club, the Rising Star Rewards Club™, the Grand Lodge Players Advantage Club® and the Stockman’s Winner’s Club.  Under these programs, customers earn points based on their levelvolume of playwagering that may be redeemed for various benefits, such as free play, cash back, complimentary dining, or hotel stays, among others, depending on each property’s specific offers. The reward credit balance under the plans will beUnredeemed points are forfeited if the customer does not earn any reward credits overbecomes and remains inactive for a specified time period, or after a specified time period of inactivity, up to a 13-month time period, depending on the specific property’s customer loyalty program.
We accrue atime.  At December 31, 2014 and 2013, our liability for the estimated cost of providing theseto provide such benefits as the benefits are earned. Estimatestotaled $1.0 million and assumptions are made regarding cost of providing the benefits, breakage rates, and the mix of goods and services customers will choose. We use historical data to assist in the determination of estimated accruals. Changes in estimates or customer redemption habits could produce significantly different results. At December 31, 2013 and December 31, 2012, we had accrued $1.2 million, and $1.3 million, respectively, for the estimated cost of providing these benefits.respectively. Such amounts are included in “Accrued“accrued player club points and progressive jackpots” in our consolidated balance sheets.

Project Development and Acquisition Costs. Project development and acquisition costs consist of amounts expended on potential developments and their related costs to execute the acquisition. For the year ended December 31, 2014 these costs included amounts related to the terminated acquisition of Majestic Mississippi, LLC, as described in Note 10, including professional fees, licensing costs and travel expenses.
 
Loyalty programs are just a part
Share-based Compensation. We measure the cost of the total marketing program.  The amountemployee services received in exchange for an award of marketing reinvestment (complimentaries to players, promotional awards, entertainment, etc.) isequity instruments based on the specific propertygrant-date fair value of the award and competitive assumptions.  We trackrecognize that cost over the percentage of promotional and marketing costs compared to gaming revenue for an efficient use and return on our marketing investment.  Each of our properties has been faced with a highly competitive promotional environment due to the high amounts of incentives offered by the competition. The Rising Star Casino Resort has been significantly impacted by the substantial promotions offered at the new Ohio casinos.
Share-based Compensation.service period.  Share-based compensation expense from stock awards (Note 12) is included in general and administrative expense. Vesting is contingent upon certain conditions, including continuous service of the individual recipients. Unvested stock grants made in connection with our incentive compensation plan are viewed as a series of individual awards and the related share-based compensation expense is amortized into compensation expense on a straight-line basis as services are provided over the vesting period, and reported as a reduction of stockholders’ equity.  We use the Black-Scholes valuation model to determine the estimated fair value for each option grant sharesissued. The Black-Scholes-determined fair value, net of restricted stock, rather than options, to key members of management andestimated forfeitures, is amortized as compensation cost on a straight line basis over the board of directors. service period.

Legal Defense Costs.We do not accrue for estimated future legal and related defense costs, if any, to be incurred in connection with outstanding or threatened litigation and other disputed matters but rather,matters. Instead, we record such costs as period costs when the related services are rendered.

Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are provided against deferred tax assets when it is deemed more likely than not that some portion or all of the deferred tax asset will not be realized within a reasonable time period.
 
Income Taxes. Income tax-relatedOur income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities. Positions taken in tax returns are sometimes subject to uncertainty in the tax laws and may not ultimately be accepted by the IRS or other tax authorities.  We assess our tax positions using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized.  Additionally, we recognize accrued interest and penalties, if any, are treated as part ofrelated to unrecognized tax benefits in income tax expense.
 
IncomeEarnings per Common Share.Share. Basic income or earnings per share (“EPS”)EPS is computed based uponby dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the year.period. Diluted EPS is computed based uponreflects the weighted average number of commonadditional dilution for all potentially-dilutive securities, including stock options and common equivalentunvested restricted shares if their effect upon exercise would have been dilutive using the treasury stock method. As ofFor the year ended December 31, 2013 and 2012, there were no common equivalent shares that2014, potentially dilutive stock options excluded from the earnings per share computation, as their effect would have been dilutive and, therefore, the calculations for basic and diluted EPS are equal.be anti-dilutive, totaled 943,834 shares.
Reclassifications. Certain minor reclassifications in prior year balances have been made to conform to the current presentation, which had no effect on previously reported net income.

Recently Issued Accounting Pronouncements

We have reviewed authoritative standards issued after December 31, 2013.2014 and others not yet effective.  As a result, we determined that the new standards are not likely to have any significant impact on our future financial statements.

3. VARIABLE INTEREST ENTITIESPROPERTY AND EQUIPMENT

At December 31, 2014 and 2013, property and equipment consists of the following (in thousands):

  2014  2013 
Land and improvements $11,670  $11,670 
Buildings and improvements  73,997   72,570 
Furniture and equipment  27,951   26,943 
Construction in progress  11,264   3,081 
   124,882   114,264 
Less accumulated depreciation  (29,842)  (23,096)
  $95,040  $91,168 

Construction in progress was primarily related to construction costs for the hotel at Silver Slipper Casino (Note 12) and certain repairs to the Silver Slipper Casino parking garage, including capitalized interest of $0.4 million and $0.03 million related to these projects during 2014 and 2013, respectively.  During 2014, we primarily disposed of certain assets related to the hotel remodel at Rising Star Casino Resort and recorded a $0.4 million loss on disposal.

At December 31, 2014 and 2013, property and equipment under capitalized leases, detailed in the table below, is related to the 104-room hotel at Rising Star Casino Resort (Note 6) and is also included in the schedule above.
 
GEM. Prior
  2014  2013 
Leased land and improvements $215  $215 
Leased buildings and improvements  5,787   5,787 
Leased furniture and equipment  1,717   1,717 
   7,719   7,719 
Less accumulated amortization
  (582)  (83)
  $7,137  $7,636 

Amortization related to the sale of our interest on March 30, 2012, we directed the day-to-day operational activities of GEM which significantly impacted GEM’s economic performance, and therefore, we were the primary beneficiary pursuant to the relevant portions of FASB ASC Topic 810 “Consolidation” [ASC 810-10-25 Recognition of Variable Interest Entities, paragraphs 38-39].  As such, the joint venture was a variable interest entity that was consolidated in our financial statements.
An unaudited summary of GEM’s operations follows (In thousands):
GEM CONDENSED STATEMENT OF INCOME INFORMATION
  Twelve Months Ended: 
  
December 31,
2013
  
December 31,
2012
 
Revenues $--  $5,340 
Net income  --   4,362 
Rising Star Casino Resort capital lease is combined with depreciation expense.
 
4. CONTRACT RIGHTSACCRUED LIABILITIES

Other accrued expenses at December 31, 2014 and 2013 consist of the following (in thousands):

  2014  2013 
Real estate and personal property taxes $1,172  $1,122 
Gaming taxes  294   252 
Other taxes  495   258 
Gaming related accruals  490   459 
Other  1,253   1,048 
  $3,704  $3,139 
 
On March 30, 2012, our remaining contract rights were sold with our interest in GEM to the FDA.
5. GOODWILL &AND OTHER INTANGIBLES
Goodwill:
Goodwill represents the excess of the purchase price over fair value of net assets acquired in connection with Silver Slipper Casino, Rising Star Casino Resort and Stockman’s Casino operations. In accordance with the authoritative guidance for goodwill and other intangible assets, we test our goodwill and indefinite-lived intangible assets for impairment annually or if a triggering event occurs. We evaluate goodwill and indefinite-lived intangible assets utilizing the market approach and income approach applying discounted cash flows.

Due to various factors, including weak economic conditions, lower than anticipated discretionary consumer spending, and increased competition in our Indiana market, we realized lower than expected operating results during the third quarter of 2013 at some of our properties.2014.  We performed interim impairment assessments of goodwill for these propertiesand indefinite-lived intangible assets as of SeptemberJune 30, 2013.  We evaluated goodwill2014 for all of the relevant properties and recognized a $1.6 million and $9.9 million impairment of Rising Star Casino Resort’s goodwill and gaming license, respectively, which were recorded as impairment charges in the Statements of Operations. Key assumptions included in the analysis were estimates of future cash flows including outflows for capital expenditures, a long-term growth rate of 1% and a discount rate of 11.2%.  During 2013, we recognized a $4.0 million impairment of goodwill at Stockman’s Casino goodwill.  Our review of Rising Star Casino Resort as of September 30, 2013, resulted in approximately a 2.6% excess of estimated fair value using the discounted cash flows approach. We also evaluated goodwill for the Silver Slipper Casino utilizing the market approach, resulting in approximately a 20.1% excess of estimated fair value over carrying value considering an earnings multiple of 7.0. Casino.

These calculations, which are subject to change as a result of future economic uncertainty, contemplate changes for both current year and future year estimates in earnings and the impact of these changes to the fair value of Silver Slipper Casino, Rising Star Casino Resort and Stockman’s Casino, although there is always some uncertainty in key assumptions including projected future earnings growth. If our estimates of projected cash flows related to our assets are not achieved, we may be subject to future impairment charges, which could have a material adverse impact on our consolidated financial statements.  We do not reverse the impairment charges if subsequent evaluations result in an increase in the estimated value of the asset.
          
  
Year ended December 31, 2013
(in thousands)
 
  
Balance at
beginning of
the year
   
Changes during
the year
  Balance at
end of the
year
 
Stockman’s Goodwill $5,809  $(4,000) $1,809 
Rising Star Goodwill  1,647   --   1,647 
Silver Slipper Goodwill  14,671   --   14,671 
Goodwill, net of accumulated impairment losses $22,127  $(4,000) $18,127 
          
  
Year ended December 31, 2012
(in thousands)
 
  
Balance at
beginning of
the year
   
Changes during
the year
  
Balance at
end of the
year
 
Stockman’s Goodwill $5,809  $--  $5,809 
Rising Star Goodwill  1,647   --   1,647 
Silver Slipper Goodwill  --   14,671   14,671 
Goodwill, net of accumulated impairment losses $7,456  $14,671  $22,127 
Goodwill:

As of December 31, 2014 and 2013, goodwill associated with our acquisition of our gaming properties totaled $16.5 million and $18.1 million, net of impairment write-downs of $1.6 million and $4.0 million, respectively.  Changes in the carrying value of goodwill for the periods presented follows:
          
  Year ended December 31, 2014
(in thousands)
 
  
Balance at
beginning of
the year
  Impairments  
Balance at
end of the
year
 
Stockman’s Casino $1,809  $--  $1,809 
Rising Star Casino Resort  1,647   (1,647)  -- 
Silver Slipper Casino  14,671   --   14,671 
Goodwill, net of accumulated impairment losses $18,127  $(1,647) $16,480 
          
  Year ended December 31, 2013
(in thousands)
 
  
Balance at
beginning of
the year
  Impairments  
Balance at
end of the
year
 
Stockman’s Casino $5,809  $(4,000) $1,809 
Rising Star Casino Resort  1,647   --   1,647 
Silver Slipper Casino  14,671   --   14,671 
Goodwill, net of accumulated impairment losses $22,127  $(4,000) $18,127 
 
Other Intangible Assets:

Other intangible assets, net consist of the following (in thousands):
  December 31, 2013 
  Estimated
Life
(years)
  Gross
Carrying
Value
  Accumulated
Amortization
  Cumulative
Expense /
(Disposals)
  Intangible
Asset, Net
 
Amortizing Intangible assets:               
Player Loyalty Program - Rising Star  3  $1,700  $(1,558) $-  $142 
Player Loyalty Program - Silver Slipper  3   5,900   (2,458)  -   3,442 
Land Lease and Water Rights - Silver Slipper  46   1,420   (39)      1,381 
Capital One Bank Loan Fees  3   4,671   (2,019)  216   2,868 
ABC Funding, LLC Loan Fees  4   984   (308)  14   690 
                     
Non-amortizing intangible assets:                    
Gaming License-Indiana Indefinite   9,900   --   -   9,900 
Gaming License-Mississippi Indefinite   115   --   (10)  105 
Gaming Licensing - Nevada Indefinite   542   --   (19)  523 
Trademarks Indefinite   36   --   4   40 
  Indefinite       --   -   - 
      $25,268  $(6,382) $205  $19,091 
                     
Other Intangible assets subtotal     $19,613  $(4,055) $(25) $15,533 
Loan Fees subtotal      5,655   (2,327)  230   3,558 
      $25,268  $(6,382) $205  $19,091 
  December 31, 2014 
  Estimated
Life
(Years)
  Gross
Carrying
Value
  Accumulated
Amortization
  Impairment /
Write-offs, Net
  Intangible
Assets, Net
 
Amortizing Intangible Assets:               
Player Loyalty Program - Rising Star  3  $1,700  $(1,700) $--  $- 
Player Loyalty Program - Silver Slipper  3   5,900   (4,425)  --   1,475 
Land Lease and Water Rights - Silver Slipper  46   1,420   (70)  --   1,350 
Capital One Bank Loan Fees  3   5,049   (3,241)  --   1,808 
ABC Funding, LLC Loan Fees  5   1,428   (586)  --   842 
                     
Non-amortizing Intangible Assets:                    
Gaming License - Rising Star Indefinite   9,900   --   (9,900)  -- 
Gaming License – Silver Slipper Indefinite   105   --   (44)  61 
Gaming Licensing – Northern Nevada Indefinite   523   --   (67)  456 
Trademarks Indefinite   40   --   --   40 
      $26,065  $(10,022) $(10,011) $6,032 
                     
Other Intangible Assets Subtotal     $19,588  $(6,195) $(10,011) $3,382 
Loan Fees Subtotal      6,477   (3,827)  --   2,650 
      $26,065  $(10,022) $(10,011) $6,032 
 
  December 31, 2012 
  
Estimated
Life
(years)
  Gross
Carrying
Value
  Accumulated
Amortization
  Cumulative
Expense /
(Disposals)
  Intangible
Asset, Net
 
Amortizing Intangible assets:               
Player Loyalty Program - Rising Star  3  $1,700  $(992) $--  $708 
Player Loyalty Program - Silver Slipper  3   5,900   (492)  --   5,408 
Land Lease and Water Rights - Silver Slipper  46   1,420   (23)  --   1,397 
Wells Fargo Bank Loan Fees  5   2,614   (924)  (1,690)  - 
Capital One Bank Loan Fees  3   4,671   (434)  --   4,237 
ABC Funding, LLC Loan Fees  4   984   (62)  --   922 
                     
Non-amortizing intangible assets:                    
Gaming License-Indiana Indefinite   9,900   --   --   9,900 
Gaming License-Mississippi Indefinite   115   --   --   115 
Gaming License-Nevada Indefinite   542   --   --   542 
Trademarks Indefinite   36   --   --   36 
      $27,882  $(2,927) $(1,690) $23,265 
                     
Other Intangible assets subtotal $19,613  $(1,507) $--  $18,106 
Loan Fees subtotal  8,269   (1,420)  (1,690)  5,159 
  $27,882  $(2,927) $(1,690) $23,265 
  December 31, 2013 
  
Estimated
Life
(Years)
  Gross
Carrying
Value
  Accumulated
Amortization
  
Write-offs, Net
  Intangible
Assets, Net
 
Amortizing Intangible Assets:               
Player Loyalty Program - Rising Star  3  $1,700  $(1,558) $--  $142 
Player Loyalty Program - Silver Slipper  3   5,900   (2,458)  --   3,442 
Land Lease and Water Rights - Silver Slipper  46   1,420   (39)  --   1,381 
Capital One Bank Loan Fees  3   4,887   (2,019)  --   2,868 
ABC Funding, LLC Loan Fees  4   998   (308)  --   690 
                     
Non-amortizing Intangible Assets:                    
Gaming License - Rising Star Indefinite   9,900   --   --   9,900 
Gaming License – Silver Slipper Indefinite   115   --   (10)  105 
Gaming License – Northern Nevada Indefinite   542   --   (19)  523 
Trademarks Indefinite   40   --   --   40 
      $25,502  $(6,382) $(29) $19,091 
                     
Other Intangible Assets Subtotal     $19,617  $(4,055) $(29) $15,533 
Loan Fees Subtotal      5,885   (2,327)  --   3,558 
      $25,502  $(6,382) $(29) $19,091 
 
PlayerCustomer Loyalty Program
Programs. The player loyalty programs represent the value of repeat business associated with Silver Slipper Casino’s and Rising Star Casino Resort’s loyalty programs.  The value of $5.9 million and $1.7 million of the Silver Slipper Casino’s and Rising Star Casino Resort’s player loyalty programs, respectively, were determined using a multi-period excess earning method of the income approach, which examines the economic returns contributed by the identified tangible and intangible assets of a company, and then isolates the excess return, which is attributable to the asset being valued, based on cash flows attributable to the player loyalty program.  The valuation analyses for the active rated players were based on projected revenues and attrition rates.  Silver Slipper Casino and Rising Star Casino Resort maintain historical information for the proportion of revenues attributable to the rated players for gross gaming revenue.  The value of the player loyalty programs are amortized over a life of three years.

Land Lease and Water Rights
Rights.  In November 2004, Silver Slipper Casino entered into a lease agreement with Cure Land Company, LLC for approximately 38 acres of land (“Land Lease”), which includes approximately 31 acres of protected marsh land as well as amarshland and the seven-acre casino parcel on which the Silver Slipper Casino was subsequently built. The lease was amended and extended on February 26, 2013, as discussed in Note 11.12. The $1.0 million Land Lease represents the excess fair value of the land over the estimated net present value of the Land Lease payments.   The $0.4 million of water rights represented the fair value of the water rights based upon the market rates in Hancock County, Mississippi.  The valueterm of the Land Leaseland lease is 46 years.
Loan Fees.   Loan fees incurred and water rightspaid as a result of debt instruments are accumulated and amortized over the lifeterm of the Land Lease, or 46 years.
Loan Fees
related debt, based on an effective interest method. On October 1, 2012, we funded the purchase of the Silver Slipper Casino with the full amount of the $50.0 million First Lien Credit AgreementFacility (“First Lien Credit Facility”) with Capital One Bank, N.A. (“Capital One”) and the full amount of the Second Lien Credit AgreementFacility (“Second Lien Credit Facility”) with ABC Funding, LLC, as discussed in Note 8.7. We incurred $4.7 million in loan fees related to obtaining the First Lien Credit AgreementFacility and $1.0 million in loan fees related to obtaining the Second Lien Credit Agreement.Facility. On August 26, 2013, we entered into a first amendment to the First Lien Credit AgreementFacility (the “First Lien Amendment”) and an amendment to the Second Lien Credit AgreementFacility (the “Second Lien Amendment”) and incurred $0.2 million in additional loan fees, as discussed in Note 8. All of the loan fees are amortized over the terms of the agreements.7. The First Lien Amendment modifications included an extended maturity date to June 29, 2016, thereforeand thus the amortization period for these loan fees was also extended. On July 18, 2014, we entered into a second amendment to the First Lien Credit Facility (the “First Lien 2nd Amendment”) and an amendment to the Second Lien Credit Facility (the “Second Lien 2nd Amendment”) and incurred $0.2 million in additional loan fees, as discussed in Note 7.  Effective December 31, 2014 we entered into a third amendment to the First Lien Credit Facility (the “First Lien 3rd Amendment”) and an amendment to the Second Lien Credit Facility (the “Second Lien 3rd Amendment”) and incurred $0.3 million in additional loan fees, as discussed in Note 7. The Second Lien 3rd Amendment modifications included an extended maturity date to April 1, 2017, and thus the amortization period for these loan fees was also extended.

The amortization of loan fees was $1.8$1.5 million and $0.7$1.8 million for the yearyears ended December 31, 20132014 and December 31, 2012,2013, respectively.

Gaming Licenses
Licenses.  Gaming licenses represent the value of the license to conduct gaming in certain jurisdictions, which are subject to highly extensive regulatory oversight and, in some cases, a limitation on the number of licenses available for issuance.  The value of the $9.9 million Rising Star Casino Resort gaming license was estimated using a multi-period excess earning method of the income approach, which examines the economic returns contributed by the identified tangible and intangible assets of a company, and then isolates the excess return, which is attributable to the asset being valued, based on cash flows attributable to the gaming license. The other gaming license values are based on actual costs. Gaming licenses are not amortized as they have indefinite useful lives and are evaluated for potential impairment on an annual basis unless events or changes in circumstances indicate the carrying amount of the gaming licenses may not be recoverable.  We reviewed existing gaming licenses as of December 31, 2013 and recognized an expense of $10.2 million, including a $9.9 million impairment of the gaming license at Rising Star Casino Resort during 2014, and $0.1 million related to gaming licensing costs pertaining to a former director and a secretary/general counsel, who are no longer affiliated with us.during 2013.

We incurred $0.1 million in costs related to obtaining a Mississippi gaming license during 2012, for the purchase of all of the outstanding membership interest of Silver Slipper Casino Venture, LLC which owns and operates the Silver Slipper Casino.
Trademark
Trademark.  Trademarks are based on the legal fees and recording fees primarily related to the trademark of the “Rising Star Casino Resort” name, and variations of such name.  Trademarks are not subject to amortization, as they have an indefinite useful life and are evaluated for potential impairment on an annual basis unless events or changes in circumstances indicate the carrying amount of the trademark may not be recoverable.

Current and Future Amortization
We amortize our definite-lived intangible assets, including our player loyalty programs, loan fees, land leases and water rights over their estimated useful lives.  Amortization.   The aggregate amortization expense was $4.4$3.6 million and $1.7$4.4 million for the yearyears ended December 31, 20132014 and December 31, 2012,2013, respectively.

Total amortization expense for intangible assets for the years ending December 31, 2014, 2015, 2016, 2017, 2018, 2019 and thereafter is anticipated to be approximately $2.4$3.1 million, $1.8$1.1 million, $3.1$0.2 million, $0.03 million, $0.03 million, and $1.2 million, respectively.
 
6. PROPERTY AND EQUIPMENT
At December 31, 2013 and 2012, property and equipment consists of the following (in thousands):
  2013  2012 
Land and improvements $11,670  $9,907 
Buildings and improvements  72,570   70,401 
Furniture and equipment  26,943   19,338 
Construction in progress  3,081   311 
   114,264   99,957 
Less accumulated depreciation  (23,096)  (16,284)
  $91,168  $83,673 
The construction in progress was primarily related to construction costs for the Silver Slipper Casino Hotel (Note 11) and the renovation of the Silver Slipper garage and also included capitalized interest of $0.03 million related to these projects.
Leased property and equipment of $7.6 million, as of December 31, 2013, related to the Rising Star Casino Resort capital lease (Note 7) is also included in the schedule above.
At December 31, 2013 and 2012, leased property and equipment consisted of the following (in thousands):
  2013  2012 
Leased land and improvements $215  $-- 
Leased buildings and improvements  5,787   -- 
Leased furniture and equipment  1,717   -- 
   7,719   -- 
Less accumulated amortization  (83)  -- 
  $7,636  $-- 
Amortization related to the Rising Star Casino Resort capital lease is combined with depreciation expense.
7. CAPITAL LEASE OBLIGATION

Rising Star Casino Resort Capital Lease.On August 16, 2013, weour Indiana subsidiary Gaming Entertainment (Indiana) LLC, entered into a 10-year capital lease for the new hotel tower at Rising Star Casino Resort (the “Rising Star HotelLease Agreement”) with Rising Sun/Ohio County First, Inc., an Indiana non-profit corporation (the “Landlord”). The Landlord’slease is not guaranteed by the parent company or any subsidiary other than Gaming Entertainment (Indiana) LLC.  The 104-room tower, adjacent to the Rising Star Casino Resort, opened on November 15, 2013. The Rising Star Hotel Agreementcapital lease provides us with full management control and we, as the lessee, assume all responsibilities including maintenance and repair, revenues, expenses, profits and losses related to the hotel’s operations. The term of the Rising Star HotelLease Agreement is for 10 years from November 15, 2013, with the Landlord having a right to sell the hotel tower to us at the end of the term and our corresponding obligation to purchase itfor $1 plus closing costs on the terms set forth in the Rising Star HotelLease Agreement. During the term, we will have the exclusive option to purchase the new hotel tower at Rising Star Casino Resort at a pre-set price.price (the “Pre-Set Price”), based upon the project’s actual costs, reduced by the cumulative principal payments made by the Company during the lease term. Upon expiration of the term of the lease, if we have not exercised our option to purchase the hotel tower, we have the option to purchase the hotel for $1 plus closing costs. On January 1, 2014, we began paying a fixed monthly rent payment of approximately $77.5 thousand,$77,500, which will continue throughout the term of the Rising Star HotelLease Agreement unless we elect to purchase the hotel before the end of the lease period. In the event that weof a default on the lease agreement, the Landlord’s recourse is limitedallows for them to takingtake possession of the property, collection of all rent due and payable, andrents as defined, the right to seek remediation for any attorneys’ fees, litigation expenses, and costs of retaking and re-leasing the property.

Future minimum lease payments and the present value of such payments related to the capital lease are as follows, as of December 31, 20132014 (in thousands):

2014 $930 
2015  930  $853 
2016  930   930 
2017  930   930 
2018  930   930 
2019  930 
Thereafter  4,499   3,568 
Total minimum lease payments  9,149   8,141 
Less: amount representing interest  (1,430)  (1,221)
Present value of minimum lease payments $7,719  $6,920 

The current portion of our capital lease obligation is $0.7 million, which represents the minimum lease payments, less interest, to be paid over the next year.  The capital lease obligation, net of current portion is $7.0$6.2 million.
 
8.7. LONG-TERM DEBT

At December 31, 20132014 and 2012,2013, long-term debt consists of the following (in thousands):

 
2013
  
2012
  
2014
  
2013
 
Long-term debt, net of current portion:            
Term loan agreement, $50.0 million on June 29, 2012, funded on October 1, 2012, maturing June 29, 2016, with variable interest as described in the fourth succeeding paragraph. (the average interest rate was 4.75% and 5.4% during the quarter and year ended December 31, 2013, respectively) $   37,500  $   48,750 
Term loan agreement, $20.0 million on October 1, 2012, maturing October 1, 2016, interest rate is fixed at 13.25% per annum.  20,000   20,000 
First Term Loan, maturing June 29, 2016, variable interest rate which averaged 4.75% and 5.4% during 2014 and 2013 $38,631  $37,500 
        
Second Term Loan, maturing April 1, 2017, interest rate is fixed at 14.25% per annum  20,000   20,000 
        
Revolving Loan, maturing June 29, 2016, variable interest rate which averaged 4.75% in 2014  2,000   -- 
        
Less current portion  --   ( 2,500)  (1,337)  -- 
 $57,500  $66,250  $59,294  $57,500 

First and Second Lien Credit Agreements. Facilities. On October 1, 2012, we acquired all of the equity membership interests in Silver Slipper Casino Venture LLC dba Silver Slipper Casino located in Bay St. Louis, Mississippi.  The purchase price of approximately $69.3 million, exclusive of cash and working capital in the amounts of $6.4 million and $2.9 million, respectively, was funded by our First Lien Credit Facility and our Second Lien Credit Facility.  The First Lien Credit Facility and Second Lien Credit Facility are secured by substantially all of our assets, and our wholly-owned subsidiaries guarantee our obligation under the agreements.  The Second Lien Credit Facility is subordinate to the lien of the First Lien Credit Facility.

On June 29, 2012, we entered into the First Lien Credit Agreement with Capital One,Facility which, providesincluding the amendments described below, provided for a term loan in an amount up to $50.0 million and a revolving loan (“Revolving Loan”) in an amount up to $5.0 million. The First Lien Credit Facility has been amended as follows:

·On August 26, 2013, we entered into the First Lien Amendment to:
¡Increase the term loan portion by $10.0 million to $56.3 million;
¡
Reduce the interest rate by one percent;
¡
Extend the maturity date to June 29, 2016; and
¡
Amend certain financial covenants.
·
On July 18, 2014, we entered into the First Lien 2nd Amendment effective as of June 30, 2014 to:
¡
Revise certain financial ratio covenants as of June 30, 2014, and going forward through the term of the loan;
¡
Extend the time period to March 31, 2015 for draws against the $10.0 million term loan associated with the hotel at the Silver Slipper Casino; and
¡
Extend the payment terms to begin on April 1, 2015.
·On January 9, 2015 we entered into the First Lien 3rd Amendment effective as of December 31, 2014 to:
¡
Revise certain financial ratio covenants as of December 31, 2014, and going forward through the term of the loan;
¡
Extend the time period to May 31, 2015 for draws against the $10.0 million term loan associated with the hotel at the Silver Slipper Casino; and
¡
Extend the payment terms to begin on June 1, 2015.

On October 1, 2012, we entered into athe Second Lien Credit AgreementFacility (including the amendments described below) with ABC Funding, LLC as administrative agent which provided for a term loan in an amount up to $20.0 million. We funded

On October 1, 2012, we closed on the purchaseacquisition of all of the equity membership interests in Silver Slipper Casino with the full amount of the $50.0 million term loan under the First Lien Credit Agreement and the full amount of theVenture LLC dba Silver Slipper Casino located in Bay St. Louis, Mississippi.  The Second Lien Credit Agreement. The $5.0Facility has been amended as follows:

·On August 26, 2013, we entered into the Second Lien Amendment to:
¡
Revise certain financial ratio covenants.
·On July 18, 2014, we entered into the Second Lien 2nd Amendment, to:
¡
Revise certain financial ratio covenants as of June 30, 2014, and going forward through the term of the loan; and
¡
Increase the interest rate by one percentage point to 14.25% for the remainder of the term of the loan.
·On January 9, 2015, we entered into the Second Lien 3rd Amendment, which became effective December 31, 2014, to:
¡
Revise certain financial ratio covenants as of December 31, 2014, and going forward through the term of the loan; and
¡
Extend the maturity date to April 1, 2017.

As of December 31, 2014, we had drawn $1.1 million revolving loan under the First Lien Credit Agreement remains undrawn and available, subject to the terms and restrictions of the First Lien Credit Agreement.
On August 26, 2013, we entered into the First Lien Amendment and the Second Lien Amendment which amended certain provisions of the First Lien Credit Agreement and Second Lien Credit Agreement. The First Lien Amendment modifications included a $10.0 million increase to the term loan portion of the First Lien Credit Agreement to $56.3 million, a 1% lower interest rate and an extended maturity date to June 29, 2016. Also, certain financial ratio covenants were revised under the First Lien Credit Agreement and Second Lien Credit Agreement to accommodate the additional extension of credit under the First Lien Credit Agreement and our capital lease agreement related to the hotel adjacent to the Rising Star Casino Resort as discussed in Note 7. The $10.0 million term loan under the First Lien Credit Agreement remains undrawn and available withinFacility.  The remaining $8.9 million of funding availability under the limits and terms of the First Lien Credit Agreement, andterm loan will be used to fundfor a portion of the $17.7 million construction costs of the six-story, 142-room129-room hotel addition to the Silver Slipper Casino Hotel being built between the south side of the casino and the waterfront, with rooms facing views of the bay.Casino. The remaining $7.7 million of the construction cost has been, andcosts will be funded from available cash.cash and cash flow from operations.  As of December 31, 2013,2014, we had funded cash of $2.5$8.2 million in construction and financingof the estimated total project costs for the Silver Slipper Casino Hotel,of $20 million (including capitalized interest) and we anticipate funding an additional $5.2$1.5 million in cash in 2014.2015.  Construction of the hotel is expected to be completed in latetwo phases, with the 120 standard rooms opening in the second quarter of 2015, followed shortly thereafter by the remaining nine suites.

On March 24, 2014 or early 2015.
The First Lien Credit Agreement and Second Lien Credit Agreement are secured by substantially all ofwe made a $2.0 million draw on our assets and therefore, our wholly-owned subsidiaries guarantee our obligation$5.0 million revolving loan under the agreements.  The Second Lien Credit Agreement is subject to the lien of the First Lien Credit Agreement.Facility.  We currently have $3.0 million undrawn on the revolving loan.

We have elected to pay interest on the First Lien Credit AgreementFacility based on the greater of the elected LIBORLondon Interbank Offered Rate (“LIBOR”) rate or 1.0%, plus a margin rate as set forth in the agreement. The LIBOR rate is a rate per annum equal to the quotient of (a) the greater of (1) 1.00% and (2) the rate per annum referenced to as the BBA (British Bankers Association) LIBOR divided by (b) one minus the reserve requirement set forth in the First Lien Credit Agreement for such loan in effect from time to time.rate. LIBOR rate elections can be made based on a 30 day, 60 day, 90 day30-day, 60-day, 90-day or 180 day180-day LIBOR, and margins are adjusted quarterly.  As of December 31, 2013,2014, the interest rate was 4.75% on the balance outstanding on the First Lien Credit Agreement,Facility, based on the 1.0% minimum, plus a 3.75% margin.  We pay interest on the Second Lien Credit AgreementFacility at the fixed rate of 14.25% per annum effective July 18, 2014.  During 2013, we paid interest at a fixed rate of 13.25% per annum.
 
The First Lien Credit AgreementFacility and Second Lien Credit AgreementFacility contain customary negative covenants, for transactions of this type, including, but not limited to, restrictions on our and our subsidiaries’ ability to: incur indebtedness; grant liens; pay dividends and make other restricted payments; make investments; make fundamental changes; dispose of assets; and change the nature of our business.  The First Lien Credit AgreementFacility and Second Lien Credit AgreementFacility require that we maintain specified financial covenants, including a total leverage ratio, a first lien leverage ratio, and a fixed charge coverage ratio, all of which measure Adjusted EBITDA (as defined in the agreements) against outstanding debt and fixed charges (as defined in the agreements). A capital expenditure ratio must also be maintained as set forth in the agreements.maintained. The First Lien Credit AgreementFacility and Second Lien Credit Agreement defineFacility currently defines Adjusted EBITDA as net income (loss) plus (i)(a) interest expense, net, (ii) provision(b) provisions for income taxes, (iii)and (c) depreciation and amortization, and further adjusted to eliminate the impact of certain items that are either non-cash items or are not indicative of ongoing operating performance such as:  (iv) acquisition costs, (v)as (d) extraordinary gains and losses (including non-cash impairment charges), (e) non-cash stock compensation (vi) loss on derivativesexpense, (f) certain acquisition costs, (g) costs related to the Company’s S-1 registration statement in 2014, (h) board and debt, (vii) gain on sale ofmanagement transition expenses, (i) joint venture (viii) impairment loss,net income, unless such net income has actually been received by the Company in the form of cash dividends or distributions. For purposes of our covenants, we also received pro forma credit for gaming tax reductions in Indiana in 2014 and (ix) certain severance costs.ending with the first quarter of 2015.

The First Lien Amendment revised the ratio requirements under the First Lien Credit Agreement. Also, the Second Lien Amendment revised the total leverage ratio requirements under the Second Lien Credit Agreement to exclude the capital lease related to the new tower at the Rising Star Casino Resort. The First Lien Credit AgreementFacility and the Second Lien Credit AgreementFacility maximum total leverage ratio and maximum first lien leverage ratio vary according to the applicable time period and the fixed charge coverage ratio remains constant, as indicated in the tables below:
First Lien Credit Agreement
Applicable PeriodMaximum
Total Leverage
Ratio
Maximum
First Lien Leverage
Ratio
Minimum
Fixed Charge Coverage
Ratio
Initial funding date through and including December 31, 20144.00x2.75x1.10x
January 1, 2015 through and including December 31, 20153.75x2.50x1.10x
January 1, 2016 and thereafter3.50x2.25x1.10x
Second Lien Credit Agreement
Applicable PeriodMaximum
Total Leverage
Ratio
Maximum
First Lien Leverage
Ratio
Minimum
Fixed Charge Coverage
Ratio
Initial funding date through and including September 30, 20134.00x3.00x1.00x
October 1, 2013 through and including September 30, 20143.75x2.75x1.00x
October 1, 2014 and thereafter3.50x2.50x1.00x


First Lien Credit Facility 
 
 
Applicable Period
 
Maximum
Total Leverage
Ratio
  
Maximum
First Lien Leverage
Ratio
  
Minimum
Fixed Charge
Coverage Ratio
 
June 30, 2014 through and including September 29, 2014  4.75x  3.50x  1.10x
September 30, 2014 through and including December 30, 2014  5.50x  3.50x  1.10x
December 31, 2014 through and including June 29, 2015  5.50x  4.00x  1.10x
June 30, 2015 through and including September 29, 2015  4.75x  3.50x  1.10x
September 30, 2015 through and including December 30, 2015  4.50x  3.25x  1.10x
December 31, 2015 through and including March 30, 2016  4.25x  3.00x  1.10x
March 31, 2016 and thereafter  4.25x  3.00x  1.10x
          
Second Lien Credit Facility 
 
 
Applicable Period
 
Maximum
Total Leverage
Ratio
  
Maximum
First Lien Leverage
Ratio
  
Minimum
Fixed Charge
Coverage Ratio
 
June 30, 2014 through and including September 29, 2014  5.00x  3.75x  1.00x
September 30, 2014 through and including December 30, 2014  5.75x  3.75x  1.00x
December 31, 2014 through and including March 30, 2015  5.75x  4.25x  1.00x
March 31, 2015 through and including June 29, 2015  5.75x  4.25x  1.00x
June 30, 2015 through and including September 29, 2015  5.00x  3.75x  1.00x
September 30, 2015 through and including December 30, 2015  4.75x  3.50x  1.00x
December 31, 2015 through and including March 30, 2016  4.50x  3.25x  1.00x
March 31, 2016 and thereafter  4.50x  3.25x  1.00x

We measurewere in compliance with our covenants on a quarterly basis and we were in compliance atas of December 31, 2013,2014, however, there can be no assurances that we will remain in compliance with all covenants in the future. The First Lien Credit AgreementFacility and Second Lien Credit AgreementFacility also include customary events of default, including, among other things: non-payment; breach of covenant; breach of representation or warranty; cross-default under certain other indebtedness or guarantees; commencement of insolvency proceedings; inability to pay debts; entry of certain material judgments against us or our subsidiaries; occurrence of certain ERISA events; re-purchase of our own stock and certain changes of control. A breach of a covenant or other events of default could cause the loans to be immediately due and payable, terminate commitments for additional loan funds, or the lenders could exercise any other remedy available under the First Lien Credit AgreementFacility or Second Lien Credit AgreementFacility or by law.  If a breach of covenants or other event of default were to occur, we would seek modifications to covenants or a temporary waiver or waivers from the First Lien Credit AgreementFacility and Second Lien Credit AgreementFacility lenders. No assurance can be given that we would be successful in obtaining such modifications.

During the year ended December 31, 2012, we prepaid, at our discretion, the principal payment of $1.3 million due April 1, 2013 on the First Lien Credit Agreement, in order to reduce interest costs. As a practice, we consistently prepaid our quarterly payments before their due dates in 2013, and during the year ended December 31, 2013, we prepaid, at our discretion, the sum of $8.8 million in quarterly principal payments, which were due through July 1, 2015.  TheOur next scheduled principal payment is due October 1, 2015.  Additionally, quarterly payments of $0.25 million are scheduled to begin June 1, 2015 on the construction portion of the term loan.

We are required to make prepayments under the First Lien Credit Agreement,Facility, under certain conditions defined in the agreement, in addition to the scheduled principal installments for any fiscal year ending December 31, 2012 andor thereafter.  We are required to pay the entire outstanding principal on the First Lien Credit Agreement and Second Lien Credit Agreement, together with all accrued and unpaid interest thereon, on the respective maturity dates.  Prepayment penalties will be assessed in the event that prepayments are made on the Second Lien Credit AgreementFacility prior to the discharge of the First Lien Credit Agreement.Facility.

Scheduled maturities of long-term debt as of the most recent balance sheet presented are as follows, for the annual periods ended December 31 (in thousands):
      
2014 $-- 
2015  1,250  $1,337 
2016  56,250   39,294 
2017  --   20,000 
 $57,500  $60,631 
 
9.8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITY
Derivative Instruments – Interest Rate Swap Agreement
We adopted the accounting guidance for derivative instruments and hedging activities (ASC Topic 815, “Derivatives and Hedging”), as amended, to account for our interest rate swap, prior to the payoff of the interest rate swap on March 30, 2012.  The accounting guidance required us to recognize our derivative instruments as either assets or liabilities in our consolidated balance sheet at fair value.  The accounting for changes in fair value (i.e. gains or losses) of a derivative instrument agreement depended on whether it had been designated and qualified as part of a hedging relationship and further, on the type of hedging relationship.  The derivative instrument was not designated as a hedge for accounting purposes.  The change in fair value was recorded in the consolidated statement of operations in the period of change.  Additionally, the difference between amounts received and paid under such agreements, as well as any costs or fees, were recorded as a reduction of, or an addition to, interest expense as incurred over the life of the agreement. Fluctuations in interest rates caused the fair value of our derivative instrument to change each reporting period. Effective March 30, 2012 the interest rate swap was terminated, and $0.5 million was paid, which reflected the fair value of the interest rate swap on that date, and we ceased to recognize the interest rate swap as a liability on the balance sheet in long-term debt. Prior to the pay-off of the interest rate swap, the interest rate swap was adjusted to fair value and the adjustment of the interest rate swap was recognized as income during the first quarter of 2012.  During the three months ended March 31, 2012, the weighted average cash interest rate paid on the debt was 8.16%, including interest rate swap interest and loan interest.
70

Derivative Instruments – Interest Rate Cap Agreement
Currently, we are subject to interest rate risk under our Capital One First Lien Credit Agreement.  In November 2012 in accordance with the terms of the First Lien Credit Agreement,Facility, we entered into a prepaid interest rate cap agreement with Capital One for a notional amount of $15.0 million at a LIBOR cap rate of 1.5%. The agreement was effective November 2, 2012 and terminatesterminated on October 1, 2014. We renewed our prepaid interest rate cap agreement with Capital One, effective October 1, 2014, for a notional amount of $14.75 million at a LIBOR cap rate of 1.5%. This agreement terminates on June 29, 2016.  Any future settlements resulting from the interest rate cap will be recognized in interest expense during the period in which the change occurs.

9. BOARD AND EXECUTIVE TRANSITION COSTS

On October 9, 2014, we received a Preliminary Consent Solicitation Statement (the “Preliminary Solicitation”) from the Shareholder Group to call a special meeting of shareholders for the purpose, among other things, of nominating certain individuals to our board of directors and amending certain of the Company’s by-laws. On October 21, 2014, our board amended Article I, Section 2 of our by-laws. See Exhibit 3.2 for a copy of our amended and restated by-laws effective as of October 21, 2014.  On October 22, 2014, our board of directors authorized management to hire an investment bank to explore its alternatives, including the potential sale of the Company.
On October 28, 2014, the Shareholder Group filed a Definitive Consent Solicitation Statement (the “Solicitation”) which had been approved by the Securities and Exchange Commission for distribution.

On November 28, 2014, Full House and the Shareholder Group entered into the Settlement Agreement. In conjunction with such activities, we incurred fees during 2014 of $1.0 million, including $0.2 million as reimbursement for a portion of the Board expenses.

Pursuant to the Settlement Agreement, among other things:

The size of our board of directors was increased from five to nine members, creating four vacancies on the board of directors.

We accepted the resignation of Andre M. Hilliou and Mark J. Miller as directors, effective November 28, 2014, resulting in two additional vacancies on the board of directors.

W.H. Baird Garrett, Raymond Hemmig, Ellis Landau, Daniel R. Lee, Bradley M. Tirpak and Craig W. Thomas (the “Shareholder Group Nominees”) were appointed by the board of directors to fill the six vacancies each subject to normal and customary state licensing requirements. Pursuant to the Amended Settlement Agreement (defined below), Mr. Hemmig subsequently resigned, leaving the current size of the board of directors at eight members.

At our 2015 annual meeting of stockholders (the “2015 Annual Meeting”), we will nominate Kenneth R. Adams, Carl G. Braunlich, Kathleen Marshall and each of the Shareholder Group Nominees, with the exception of Mr. Hemmig, to the board of directors.

The Shareholder Group has irrevocably withdrawn its Solicitation, and has agreed to immediately cease all efforts related to the Solicitation.
Through the end of our 2016 meeting of the stockholders (or an earlier date upon the occurrence of certain events), each member of the Shareholder Group has agreed to certain customary standstill restrictions.

The Company and the Shareholder Group agreed to a mutual release of claims, including those arising in respect of, or in connection with, the Solicitation.

We agreed to reimburse the Shareholder Group for actual out-of-pocket expenses in the aggregate amount of up to $215,000 incurred in connection with the Solicitation.

Andre M. Hilliou resigned as a director and Chief Executive Officer of the Company effective November 28, 2014. Pursuant to a Separation Agreement entered into between Mr. Hilliou and the Company (the “Hilliou Separation Agreement”), it was agreed that Mr. Hilliou’s employment with the Company would be terminated at a future date, subject to the Company using its best efforts to comply with its covenants under the Company’s existing credit facilities.  Mark J. Miller resigned as a director and Chief Operating Officer of the Company effective November 28, 2014. Pursuant to a Separation Agreement entered into between Mr. Miller and the Company (the “Miller Separation Agreement” and together with the Hilliou Separation Agreement, the “Separation Agreements”), it was agreed that Mr. Miller’s employment would be terminated at a future date, subject to the Company using its best efforts to comply with its covenants under the Company’s existing credit facilities.  On January 9, 2015 (the “Resignation Date”), in conjunction with the amendment of our existing credit facilities, Mr. Hilliou’s and Mr. Miller’s employment was terminated. Pursuant to the Separation Agreements, (i) all outstanding Company restricted stock held by Messrs. Hilliou and Miller (constituting 60,000 shares of common stock held by each) accelerated and vested in full on the Resignation Date and (ii) in connection with their terminations of employment, Messrs. Hilliou and Miller received cash severance payments of $644,724 and $599,830, respectively, as well as company-paid continued healthcare coverage to the earlier of December 31, 2015 or the date that such executive is covered by another employer’s comparable health plan.
On November 28, 2014, we entered into an Employment Agreement with Mr. Lee pursuant to which Mr. Lee serves as our Chief Executive Officer.

10. TERMINATED PROJECTS AND SETTLEMENT LOSS

Keeneland Association, Inc.  On February 26, 2014, we entered into an exclusivity agreement with Keeneland to own, manage, and operate instant racing and, if authorized, traditional casino gaming at racetracks in Kentucky, subject to completion of definitive documents for each opportunity. On June 12, 2014, we executed an amendment to the exclusivity agreement extending the term to June 30, 2019.  On November 17, 2014, we entered into a Termination Agreement with Keeneland to terminate all agreements between us and Keeneland. In connection therewith, Keeneland (i) released and discharged the Company, its officers, directors and employees, agents and any other person or entity that may be responsible for any acts or omissions of the Company and (ii) agreed to indemnify and hold the Company and its officers, directors, agents and employees harmless from any obligations arising under the agreements between us. Keeneland also paid us $200,000 in connection with the termination of the agreements, offsetting a similar earlier payment and fees incurred by the Company.

Majestic Star. On March 21, 2014, we entered into a definitive agreement (the “Majestic Star Purchase Agreement”) with The Majestic Star Casino LLC (“Majestic Star”) and Majestic Mississippi, LLC (“Majestic Mississippi”) to acquire from Majestic Star all of the outstanding membership interests of Majestic Mississippi, which operates a casino located in Tunica, Mississippi, commonly known as the Fitz Tunica Casino & Hotel, for a purchase price of $62.0 million, subject to certain closing adjustments. The Company had deposited into escrow an amount of $1.75 million, which was to be credited toward the purchase price at closing.
On May 7, 2014 we informed Majestic Star of our financing efforts and our belief that we would not be successful in obtaining financing for the purchase of Majestic Mississippi. On June 23, 2014, we terminated the Majestic Star Purchase Agreement on the basis of our inability to obtain financing for the purchase. On June 25, 2014, Majestic Star notified us that it believed that the Majestic Star Purchase Agreement remained in effect and disputed its termination. Additionally, Majestic Star disputed the release to us of the $1.75 million held in escrow, pursuant to the terms of the Majestic Star Purchase Agreement.

On July 28, 2014 Majestic Star notified us that the Majestic Star Purchase Agreement was terminated pursuant to Section 8.1(c) (breach of representation or warranty) or 8.1(d) (failure to obtain a gaming license) and demanded the release of the escrowed funds to Majestic Star. On August 8, 2014, Majestic Star and Majestic Mississippi filed a complaint against the Company in the Circuit Court of Tunica County, Mississippi alleging damages for breaches of the Majestic Star Purchase Agreement by the Company (the “Lawsuit”). On August 21, 2014, Majestic Star, Majestic Mississippi and the Company entered into a settlement agreement to resolve all disputes, including the dismissal with prejudice of the Lawsuit, and mutually released each other and their respective officers, directors, and employees from any claims, demands or actions for damages related thereto. Pursuant to the terms of the settlement agreement, Majestic Star and Majestic Mississippi received $1.7 million of the funds held in escrow and the Company received $50,000.  Additionally, Majestic, Majestic Mississippi and the Company agreed that the Majestic Star Purchase Agreement was terminated.

On November 25, 2014, the Company reached an agreement with one of its advisors on the Majestic Star transaction. The advisor agreed to reimburse the Company $0.25 million which was included as a reimbursement of fees incurred in conjunction with the advisor’s services to the Company during 2014.
We also incurred $0.6 million of registration costs in conjunction with the attempted financing of this purchase, which were included in selling, general and administrative expenses.

11. INCOME TAXES

TheFor the years ended December 31, 2014 and 2013, the income tax provision consists of the following (in thousands):

  2013  2012   2014  2013 
Current:Federal $(2,627) $15,390 Federal $(3,436) $(2,627)
State  289   1,509 State  379   289 
   (2,338)  16,899    (3,057)  (2,338)
Deferred:Federal  1,572   (1,712)Federal  7,925   1,572 
State  405   (12)State  1,119   405 
   1,977   (1,724)Increase in valuation allowance  (6,975)  -- 
  $(361) $15,175    2,069   1,977 
  $(988) $(361)
 
A reconciliation of the income tax provision relative to continuing operations with amounts determined by applying the statutory U.S. Federal income tax rate of 35% to consolidated income before income taxes is as follows (in thousands):
 2014  2013 
 2013  2012  Percent  Amount  Percent  Amount 
Tax provision at U.S. statutory rate $(1,513) $15,053   35.0% $(7,641)  35.0% $(1,513)
State taxes, net of federal benefit  473   1,067   2.6%  (570)  (10.9)%  473 
Change in valuation allowance  (31.9)%  6,975   --%  -- 
Permanent differences  573   (586)  (0.4)%  92   (13.2)%  573 
Credits  (73)  (46)  --%  --   1.6%  (73)
Adjustments to beginning deferred balances  221   (196)  (0.2)%  42   (5.1)%  221 
Other  (42)  (117)  (0.6)%  114   0.9%  (42)
 $(361) $15,175   4.5% $(988)  8.3% $(361)
 
At December 31, 20132014 and 2012,2013, our deferred tax assets (liabilities) consist of the following (in thousands):
        
 
2013
  
2012
  2014  2013 
Deferred tax assets:              
Deferred compensation $537  $1,713  $238  $537 
Depreciation of fixed assets  --   595   91   -- 
Intangible assets and amortization  1,835   591   7,249   3,204 
Accrued expenses  427   933   642   427 
Chip and token liability  19   93 
Allowance for doubtful accounts  188   150   199   188 
Other  224   531   29   74 
Valuation allowance  (6,975)  -- 
  3,230   4,606   1,473   4,430 
Deferred tax liabilities:                
Depreciation of fixed assets  (627)  --   (455)  (627)
Amortization of indefinite lived intangibles  (926)  (1,370)
Prepaid expenses  (1,461)  (1,310)  (772)  (1,460)
Interest in partnerships  --   (176)
Other  (246)  169 
  (2,088)  (1,486)  (2,399)  (3,288)
 $1,142  $3,120  $(926) $1,142 
 
The impairment charges recorded in 2014 and 2013 resulted in a significant amount of deferred tax assets. In assessing our ability to realize our deferred tax assets, we consider whether it is “more likely than not” that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. We assessed the realizability of deferred tax assets and have concluded that it is less likely that we will be able to recognize certain deferred tax assets. Our assessment evaluated this, plus all other positive and negative evidence in determining the need for a valuation allowance. As a result, a valuation allowance of $7.0 million was recorded against federal and certain state deferred tax assets, which also resulted in a tax rate substantially below statutory rates.  As of December 31, 2014, we had $0.9 million of deferred tax liabilities relating to goodwill and other indefinite-lived intangibles for which the timing of the reversal is not determinable and, therefore, does not assure the realization of deferred tax assets or reduce the need for a valuation allowance.
Our tax returns resulted in tax losses during 2014 and 2013 which we elected to carryback to taxable income earned during 2012 and 2011 in accordance with IRS rules.  These carrybacks resulted in income tax receivables of $3.1 million and $2.0 million as of December 31, 2014 and 2013, respectively. The impairment charges and the valuation reserve against deferred tax assets have no effect on the actual taxes paid or owed by the Company.

When accounting for uncertain tax positions, accounting standards require that tax positions be assessed using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold. It is then measured at the largest amount of benefit that is greater than 50% likely of being realized. Uncertain tax positions must be reviewed at each balance sheet date. It is our policy to recognize penalties and interest related to unrecognized tax benefits in the provision for income taxes. Management has made an annual analysis of its state and federal tax returns that remain subject to examination by major authorities (presently consisting of tax years 20102011 through 2012)2013) and concluded that we have no recordable liability as of December 31, 20132014 or 2012,2013, for unrecognized tax benefits as a result of uncertain tax positions taken.

11.12. COMMITMENTS AND CONTINGENCIES

Operating leases

OnThe nature of our operating leases include the following as summarized below:

Leased property
Annual rentTerm / Expiration
Grand Lodge Casino facility$1.5 million7 years/August 2018
Land lease of Silver Slipper Casino site$0.9 million54 years/April 2058
Additionally, we have less significant operating leases for certain office and warehouse facilities, office equipment, signage and land.

The total rent expense for all operating leases for the years ended December 1, 2012, we amended31, 2014 and extended our corporate officeDecember 31, 2013 was $2.9 million.

Future minimum lease through May 2018. Effective December 2010, Stockman’spayments are as follows (in thousands):

2015 $2,744 
2016  2,712 
2017  2,709 
2018  2,105 
2019  1,029 
Thereafter  35,738 
  $47,037 
Grand Lodge Casino Lease.  We entered into a lease agreementwith Hyatt Equities L.L.C. to operate the Grand Lodge Casino.  The lease is secured by the Company’s interests under the lease and property as lessee for its primary outdoor casino sign until November 2015. On June 28, 2011,defined and is subordinate to the liens in the First and Second Lien Credit Facilities. Hyatt Equities, L.L.C. has an option to purchase our leasehold interest and related operating assets of the Grand Lodge Casino entered into a Casino Operations Lease (“Grand Lodge Lease”) with Hyatt Equities, L.L.C. for approximately 20,900 square feetsubject to assumption of building space occupied byapplicable liabilities. The option price is an amount equal to the Grand Lodge Casino gaming operations, as well as associated gaming office space.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 for such period of time remaining on the lease term, whichever is less, plus the fair market value of the Grand Lodge Casino’s personal property. On April 8, 2013, the Grand Lodge Casino entered into a first amendment to the Grand Lodge Lease (the “Amendment”“Grand Lodge Amendment”) with Hyatt Equities, L.L.C. amending the terms of the lease..  The Grand Lodge Amendment extended the initial term of the Grand Lodge Lease until August 31, 2018 and makes certain other conforming changes. Except as set forth in the Amendment, all other terms of the Grand Lodge Lease remain in full force and effect.

Options to Purchase Silver Slipper Casino Leased Land.Silver Slipper Casino entered into the Land Lease in November 2004, as amended in March 2009, September 2012 and February 2013, which includes approximately 31 acres of protected marsh landmarshlands as well as a seven-acre casino parcel, on which the Silver Slipper Casino was subsequently built.  In December 2010, Silver Slipper Casino entered into a lease agreement with Cure Land Company, LLC for approximately five acres of land occupied by the Silver Slipper Casino gaming office and warehouse space through November 30, 2020. On January 31, 2012 Silver Slipper Casino entered into a lease agreement with Chelsea Company, LLC for a small parcel of land with a building which may be occupied by a proposed Silver Slipper Casino welcome center in the future, through December 31, 2019. On January 11, 2013 Silver Slipper Casino terminated a previous restaurant lease agreement with Diamondhead Country Club & Property Owners Association (“DCCPOA”) and entered into a contract to purchase services to be provided by DCCPOA related to its golf and country club through December 31, 2019.
Land Lease buyout. The Land Lease includes an exclusive option to purchase the leased land (“Purchase Option”), as well as an exclusive option to purchase a four acre portion of the leased land, (“4 Acre Parcel Purchase Option”), which may be exercised at any time in conjunction with a hotel development during the term of the Land Lease for $2.0 million. On February 26, 2013, Silver Slipper Casino entered into a third amendment to the Land Lease which amended the term and Purchase Option provisions. The term of the Land Lease was extendedis to April 30, 2058, and thewith a Purchase Option was extended through October 1, 2027, andbut which may only be exercised after February 26, 2019. If there is no change in ownership, the purchase price will be $15.5 million less $2.0($13.5 million if the 4 Acre Parcel Purchase Optionfour acre parcel has been previously exercised,purchased) plus a retained interest in Silver Slipper Casino operations of 3% of net income. In the event that we sell or transfer substantially all of the assets of our ownership in Silver Slipper Casino, then the purchase price will increase to $17.0 million.

The total rent expense for all operating leasesSilver Slipper Casino Hotel Construction. On August 26, 2013, the Silver Slipper Casino entered into an agreement with WHD Silver Slipper, LLC, an unrelated third party, for the years endedconstruction of a six-story, 120-room and nine suite hotel being built between the south side of the casino and the waterfront. We expect costs related to the construction of the hotel to be approximately $20 million, inclusive of capitalized interest. We intend to finance $10.0 million of the construction costs with the proceeds of the term loan under the First Lien Credit Facility as described in Note 7, with the remaining construction and related costs funded from available cash and cash flows.  As of December 31, 20132014, we had funded cash of $8.2 million in construction costs for the Silver Slipper Casino Hotel, and December 31, 2012 was $2.9we anticipate funding an additional $1.5 million in cash during 2015, including capitalized interest.  We expect to complete and $1.9 million, respectively.open the 120 standard rooms in the second quarter of 2015, followed shortly thereafter by the remaining nine suites.
Future minimum lease payments are as follows (in thousands):
2014 $2,766 
2015  2,750 
2016  2,706 
2017  2,703 
2018  2,099 
Thereafter  36,755 
  $49,779 
Other Commitments

Employment agreementsAgreements. We are obligated underThe Company has entered into employment agreements with certain of its key employees thatemployees. The agreements may provide the employee with a base salary, bonus, restricted stock grants, stock options and other customary benefits andbenefits. Certain agreements also provide for severance in the event the employee resigns with “good reason,” or the employee is terminated without cause“cause” or due to a “change of control,” as defined in the agreements. The severance amounts vary with the termterms of the agreementagreements and can be up to two years’ base salarymay include the acceleration and an average bonus calculated as earnedvesting of certain unvested shares and stock-based awards upon a change of control, along with continuation insurance costs and certain other benefits. As of December 31, 2014, the total of these severance amounts in the previous three years or as a percentage of base salary. If such termination occurs within two yearsevent of a change of control as defined in the agreements, or by us without cause, the employee will receive a lump sum payment equal to no less than six months to one year’s annual base salary, a lump sum cash payment equal to the average bonus earned in the previous one to three years or calculated as a percentage of base salary, and the acceleration and vestingsubsequent termination of all unvested shares and stock-based grants awarded upon the date of change of control in some instances, along with insurance costs, 401(k) matching contributions and certain other benefits total ranging from $1.8 million to $2.2 million, in the aggregate.such individuals was approximately $3.2 million.
 
In the event the employee’semployee is terminated for cause or resigns without good reason, the severance amounts include payments of earned but unpaid salary, reimbursement of expenses, and accrued vacation benefits through the date of termination.   Additionally, if employment terminates due to illness, incapacitydeath or death,disability, the severance amounts vary withexecutive may receive benefits under the life and long term of the agreement and can be up to two years’ base salary, an amount equal to the prior year bonus on a pro-rata basis to date of termination, reimbursement of expenses incurred prior to date of termination and applicabledisability insurance and other group benefit proceeds, with an expected cost ranging from $0.4 million to $0.7 million per employee.policies we provide.

Defined Contribution Pension Plan. We sponsor a defined contribution pension plan for all eligible employees providing for voluntary contributions by eligible employees and matching contributions made by us.  Matching contributions made by us were $0.3 million and $0.6 million for both2014 and 2013, and 2012,respectively, excluding nominal administrative expenses assumed.  During 2014, the Company changed its employer contribution rate to 50% up to 4% of compensation for each participating employee, from 100% of the first 3% of compensation, plus 50% of the next 2% of compensation for each participating employee during 2013.

Silver Slipper Casino Hotel construction.On August 26, 2013,Indiana Department of Revenue. During 2014, we received a proposed assessment of $1.6 million, including interest and penalties, from the Silver Slipper Casino entered into an agreement with WHD Silver Slipper, LLCIndiana Department of Revenue related to constructionunpaid sales and use taxes for periods prior to 2013.  The proposed assessment is under protest by the Company and an accrual of $0.25 million has been recorded in the six-story, 142-room Silver Slipper Casino Hotel being built betweenconsolidated financial statements, which represents the south sideamount of unpaid sales and use tax we believe is owed.  It is possible that a change in this estimated liability could occur in the casino and the waterfront, with rooms facing views of the bay. We expect costs related to the construction of the Silver Slipper Casino Hotel to be approximately $17.7 million. We intend to finance $10.0 million of the construction cost with the proceeds of the term loan under the First Lien Credit Agreement as described in Note 8, with the remaining $7.7 million of the construction and related costs funded from available cash.  As of December 31, 2013, we had funded cash of $2.5 million in construction and financing costs for the Silver Slipper Casino Hotel, and we anticipate funding an additional $5.2 million in cash in 2014.  Construction of the Silver Slipper Casino Hotel is expected to be completed in late 2014 or early 2015.future.

Other items. We received correspondence from the Internal Revenue Service (IRS) regarding a late filing of an information return, which may result in a penalty.  We have requested a waiver of penalties and believe our request is sustainable on its merits.
Legal matters.Matters. We are party to a number of pending legal proceedings which occurred in the normal course of business.  Management does not expect that the outcome of such proceedings, either individually or in the aggregate, will have a material effect on our financial position, cash flows or results of operations.

13. SHARE-BASED BENEFIT PLANS

Compensation Cost.  We recognized stock compensation expense of $0.5 million and $0.6 million for the years ended December 31, 2014 and 2013, respectively. Share-based compensation expense is included in selling, general and administrative expense. Costs associated with accelerating the vesting of shares associated with the termination of Mr. Hilliou’s and Mr. Miller’s employment is included in board and executive transition costs. As of December 31, 2014, there was approximately $0.5 million of total unrecognized compensation cost related to unvested stock options granted by the Company. This unrecognized compensation cost is expected to be recognized over a weighted-average period of 4 years.

12. SHARE-BASED COMPENSATION PLANSThe fair value of the stock option grants was $0.5 million, with a weighted-average value of $1.25 per share, and an amortization period of 4 years.

Restricted Stock.  Restricted stock is valued at the closing price of our stock without discount on the date issuance is approved.  On June 1, 2011, our compensation committee approved the issuance of 660,000 shares of restricted stock, then valued at the closing price of our stock ($3.88)3.88 per share), with no discount.  The majority of the shares (600,000)600,000 vested on June 1, 2013.  The2013 with the remaining shares have a three year vesting schedule as follows:  20,001 vested on June 1, 2012,2012; 20,001 vested on June 1, 20132013; and 19,998 will vestvested on June 1, 2014.

On January 15, 2013, our compensation committee approved the issuance of 50,000 additional shares of restricted stock then valued at the closing price of our stock ($3.22), with no discount. These shares will vest3.22 per share) vesting over three years as follows: 16,667 on January 15, 2014,2014; 16,667 on January 15, 20152015; and 16,666 on January 15, 2016.
On June 5, 2013, our compensation committee approved the issuance of 15,000 additional shares of restricted stock then valued at the closing price of our stock ($2.86), with no discount. These shares will vest2.86 per share) vesting over three years as follows: 5,000 on June 1, 2014,2014; 5,000 on June 1, 20152015; and 5,000 on June 1, 2016.

On January 1, 2014, our compensation committee approved the issuance of 120,000 additional shares (60,000 each to Messrs. Hilliou and Miller, respectively) of restricted stock then valued at the December 31, 2013 closing price and the January 2, 2014 opening price of our stock for an average of ($2.78), with no discount. These shares will vest2.78 per share) vesting over two years as follows: 60,000 on January 1, 2015 and 60,000 on January 1, 2016.

As discussed in Note 9, in conjunction with the Settlement Agreement on November 28, 2014, the remaining 163,333 shares of unvested restricted stock vested as of such date. There are 11,000 shares of common stock available for future issuance under the Company’s Amended and Restated 2006 Incentive Compensation Plan (the “2006 Plan”), which expires on January 1, 2016.

Vesting is contingent upon certain conditions, including continuous service of the individual recipients. Unvested stock grants made in connection with our incentive compensation plan2006 Plan are viewed as a series of individual awards and the related share-based compensation expense is amortized into compensation expense on a straight-line basis as services are provided over the vesting period, and reported as a reduction of stockholders’ equity.   We grant shares of restricted stock, rather than options, to key members of management and the board of directors. 
We recognized stock compensation expense of $0.6 million and $1.2 million for the twelve months ended December 31, 2013 and December 31, 2012, respectively. Share based compensation expense related to the amortization of the restricted stock issued is included in selling, general and administrative expense. At December 31, 2013 and 2012, we had deferred share-based compensation of $0.2 million and $0.6 million, respectively.

The following table summarizes our restricted stock activity relative to share-based compensation for 20132014 and 2012:2013:
            
 
2013
  
2012
  
 2014
  
 2013
 
 
 
Shares
  
Weighted
average
grant date
value (per
share)
  
 
 
Shares
  
Weighted
average
grant date
value (per
share)
  
 
 
 
Shares
  
Weighted
average
grant date
value (per
share)
  
 
 
 
Shares
  
Weighted
average
grant date
value (per
share)
 
Unvested at beginning of year  639,999  $3.88   660,000  $3.88   84,998  $3.31   639,999  $3.88 
                
Issued  65,000   3.14   --   --   120,000   2.78   65,000   3.14 
Vested  (620,001)  3.88   (20,001)  3.88   (204,998)  3.00   (620,001)  3.88 
Forfeited  --   --   --   --    --   --    --   -- 
Unvested at end of year  84,998  $3.31   639,999  $3.88   --  $--   84,998  $3.31 
 
Stock Options. On November 28, 2014, the Company entered into an Employment Agreement with Mr. Lee pursuant to which Mr. Lee serves as the Company’s Chief Executive Officer.  In connection with entering into the second quarterEmployment Agreement, we granted Mr. Lee nonqualified stock options, outside of 2013 and 2012, we issued 6,000the 2006 Plan, covering 943,834 shares of unrestrictedCompany common stock, in conjunction with director compensation, which was valued at $0.02 million in each year based ona per share exercise price equal to the closing price of ourper share on the grant date. There were insufficient shares available for grant under the 2006 Plan. The stock of $3.19options qualify as an “employee inducement award” and $2.95, respectively,will vest with no discount. Sincerespect to 25% of the shares were fully vested aton November 28, 2015, and will continue to vest with respect to an additional 1/48th of the dateshares on each monthly anniversary thereafter, subject to Mr. Lee’s continued service through the applicable vesting date. The stock options will vest in full on a change in control of grant, we recognized share-based compensation expensethe Company.  The Company intends to file a registration statement on SEC Form S-8 to register the shares issuable upon exercise of $0.02 million in each year related to these grants.the nonqualified stock options.  As of March 1,December 31, 2014, there are 17,000 sharesall of commonMr. Lee’s stock available for future issuance underoptions remain outstanding. There were no stock options granted in the plan.year ended December 31, 2013.
 
13.Upon Mr. Lee’s termination of employment due to death or disability, he (or his estate) will be entitled to accelerated vesting of all outstanding stock options held on the termination date with respect to such number of shares underlying each stock option that would have vested over the one-year period immediately following the termination date had the stock options continued to vest in accordance with its term. If Mr. Lee’s employment is terminated by the Company without “cause” or by Mr. Lee for “good reason” (each, as defined in the Employment Agreement), then Mr. Lee will be entitled to receive full accelerated vesting of all outstanding Company stock options held on the termination dates.

The following table summarizes information related to our common stock options awarded to Mr. Lee on November 28, 2014, all of which remain unvested as of December 31, 2014:

  
Number
of Stock
Options
  
Weighted
Average
Exercise Price
 
Options outstanding at January 1, 2014  -   - 
Granted  943,834  $1.25 
Exercised  -  $- 
Canceled/Forfeited  -  $- 
Options outstanding at December 31, 2014  943,834  $1.25 
Options exercisable at December 31, 2014  -  $1.25 
The aggregate intrinsic value of options outstanding was $0.2 million at December 31, 2014, and there was no aggregate intrinsic value of options exercisable at December 31, 2014.   The aggregate intrinsic value represents the total pre-tax intrinsic value that would have been realized by the option holders had all option holders exercised their options on the applicable date. The intrinsic value of a stock option is the excess of our closing stock price on that date over the exercise price, multiplied by the number of in-the-money options.

We estimated the fair value of each stock option award on the grant date using the Black-Scholes valuation model incorporating the assumptions noted in the following table. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate. Option valuation assumptions for options granted during the year ended December 31, 2014 were as follows:

Vesting commencement dateNovember 28, 2015
Expected volatility60%
Expected dividend yield0%
Expected life (in years)3 years
Weighted average risk free rate0.88%
14. SEGMENT REPORTING

The following tables reflect selected information for our reporting segments for the twelve monthsyears ended December 31, 20132014 and December 31, 2012,2013, respectively. The casino operation segments include the Silver Slipper Casino’s operation in Bay St. Louis, Mississippi, Rising Star Casino Resort’s operation in Rising Sun, Indiana, the Grand Lodge Casino’s operation in Lake Tahoe,Incline Village, Nevada and Stockman’s Casino operation in Fallon, Nevada. We have included regional information for segment reporting and aggregated casino operations in the same region. The development/managementDevelopment/Management segment includes costs associated with casino development and management projects, including theour management agreementcontract with the Pueblo of Pojoaque to advise on the operations of the Buffalo Thunderwhich expired in Santa Fe, New Mexico, and until March 30, 2012, GEM.September 2014. The Corporate segment includes ourboard and executive transition costs, and selling, general and administrative expenses.
 
Selected statement of operations data for 20132014 and 2012,2013, respectively, is as follows (in thousands):
                         
2013
               
  
 
Casino Operations
             
  
Nevada
  
Midwest
  
Gulf Coast
  
Development/
Management
  
Corporate
  
Consolidated
 
Revenues $22,273  $69,147  $51,629  $1,678  $--  $144,727 
Selling, general and administrative expense  6,027   17,404   18,217   --   5,326   46,974 
Depreciation and amortization  748   3,032   5,595   --   13   9,388 
Impairment loss  (4,000)  --   --   --   --   (4,000)
Operating income (loss)  334   2,393   3,960   1,612   (5,339)  2,960 
Net (loss) income attributable to Company  213   979   2,508   (348)  (7,314)  (3,962)
                         
2012
                        
                         
  
 Casino Operations
             
  Nevada  Midwest  Gulf Coast  
Development/
Management
  Corporate  Consolidated 
Revenues $22,313  $86,291  $12,861  $7,295  $--  $128,760 
Selling, general and administrative expense  6,292   19,398   4,670   136   6,507   37,003 
Depreciation and amortization  909   4,163   1,211   592   9   6,884 
Operating gain  --   --   --   41,189   --   41,189 
Operating income (loss)  3,851   5,746   663   46,196   (6,818)  49,638 
Net income (loss) attributable to Company  2,539   2,158   456   30,108   (7,427)  27,834 
2014            
             
  
 
  Casino Operations
          
  
Northern
Nevada
  Rising Star
Casino Resort
  Silver Slipper
Casino
  
Development/
Management
  
 
Corporate
  
 
Consolidated
 
Revenues, net $21,222  $51,110  $48,023  $1,066  $--  $121,421 
Board and executive transition costs  --   --   --   --   2,741   2,741 
Selling, general and administrative expense  5,697   16,677   16,661   --   4,907   43,942 
Depreciation and amortization  857   2,997   5,312   --   17   9,183 
Impairment charges  --   11,547  --   --   --   11,547
Operating income (loss)  3,609   (12,742)  2,189   771   (7,665)  (13,838)
Interest expense, net of amounts capitalized  --   203   12   --   6,057   6,272 
Net (loss) income  3,364   (12,448)  1,939   (375)  (13,325)  (20,845)

2013            
             
  Casino Operations          
  
Northern
Nevada
  Rising Star
Casino Resort
  Silver Slipper
Casino
  
Development/
Management
  
 
Corporate
  
 
Consolidated
 
Revenues, net $22,273  $69,147  $51,629  $1,678  $--  $144,727 
Selling, general and administrative expense  6,027   20,877   18,217   --   5,326   50,447 
Depreciation and amortization  748   3,032   5,595   --   13   9,388 
Impairment charges  4,000  --   --   --   --   4,000
Operating income (loss)  334   2,393   3,936   1,612   (5,339)  2,936 
Interest expense, net of amounts capitalized  --   26   --   --   7,242   7,268 
Net income (loss) attributable to Company  213   979   2,508   (348)  (7,314)  (3,962)
 
Selected balance sheet data as of December 31, 20132014 and 20122013 is as follows (in thousands):
                         
2013
                        
                         
  Casino Operations             
  
Nevada
  
Midwest
  
Gulf Coast
  
Development/
Management
  
Corporate
  
Consolidated
 
Total assets $13,838  $55,523  $71,662  $59  $13,205  $154,287 
Property and equipment, net  7,352   36,427   47,338   --   51   91,168 
Goodwill  1,809   1,647   14,671   --   --   18,127 
Liabilities  2,056   12,718   3,559   --   58,140   76,473 

2012
2014            
            
 
 Casino Operations
           
Casino Operations
          
 Nevada  Midwest  Gulf Coast  
Development/
Management
  Corporate  Consolidated  Northern
Nevada
  Rising Star
Casino
Resort
  Silver Slipper
Casino
  
Development/
Management
  Corporate  
 
Consolidated
 
Total assets $16,964  $51,054  $72,911  $96  $21,700  $162,725  $12,471  $39,101  $76,898  $--  $12,474  $140,944 
Property and equipment, net  6,988   29,632   47,024   --   29   83,673 
Property, equipment and capital lease, net  6,656   33,801   54,548   --   35   95,040 
Goodwill  5,809   1,647   14,671   --   --   22,127   1,809   --   14,671   --   --   16,480 
Liabilities  2,281   5,817   3,020   --   70,474   81,592   1,970   11,543   4,182   --   65,752   83,447 
 
14.
2013            
             
  
Casino Operations
          
  Northern
Nevada
  Rising Star
Casino
Resort
  Silver Slipper
Casino
  
Development/
Management
  
 
Corporate
  
 
Consolidated
 
Total assets $13,838  $55,523  $71,662  $59  $13,205  $154,287 
Property, equipment and capital lease, net  7,352   36,427   47,338   --   51   91,168 
Goodwill  1,809   1,647   14,671   --   --   18,127 
Liabilities  2,056   12,718   3,559   --   58,140   76,473 
15. SUBSEQUENT EVENTS

Settlement Agreement Amendment.On January 1, 2014, our compensation committee approved28, 2015, we entered into that certain First Amendment to Settlement Agreement (the “Amended Settlement Agreement”), which modified portions of the issuanceSettlement Agreement by and among the Company and the Shareholder Group.

The Settlement Agreement required, among other things, (i) a board of 120,000 additional sharesdirectors consisting of restricted stock, then valuednine members and (ii) that Raymond Hemmig be nominated and elected to the board of directors at the December 31, 2013 closing price2015 Annual Meeting. Pursuant to the resignation of Mr. Hemmig, the Company and the Shareholder Group agreed to amend the Settlement Agreement which eliminates the requirement that Mr. Hemmig be nominated and elected to the Board, and acknowledges the reduction in the size of the board of directors from nine to eight directors. Mr. Hemmig did not have any disagreements with the Company.

Employment Agreement. On January 2, 2014 opening price of our stock for an average of ($2.78), with no discount. These shares will vest over two years, 60,000 on January 1,30, 2015, and 60,000 on January 1, 2016.
On February 26, 2014, we entered into an exclusivityemployment agreement with Keeneland Association, Inc.Lewis Fanger, who will serve as the Company’s Senior Vice President, Chief Financial Officer and Treasurer.  In connection with entering into the employment agreement, Mr. Fanger was granted, outside of the 2006 Plan and qualifying as inducement options, nonqualified stock options covering 300,000 shares of Company common stock with a per share exercise price of $1.37, the closing price per share on the grant date. The stock options will vest with respect to own, manage,25% of the shares on January 30, 2016 and operate instant racing and, if authorized, traditional casino gaming at race tracks in Kentucky,will continue to vest with respect to an additional 1/48th of the shares on each monthly anniversary thereafter, subject to completion of definitive documents for each opportunity. In addition, we and Keeneland Association, Inc. haveMr. Fanger’s continued service through the applicable vesting date. The stock options will vest in full on a letter of intent that provides for an exclusive option to purchase the Thunder Ridge Racewaychange in Prestonsburg, Kentucky. The purchase will be subject to the completion of definitive documentation and to the approvalcontrol of the Kentucky Horse Racing Commission, including the approval to transfer the racing license to a to-be-constructed quarter horse racetrack near Corbin, Kentucky to be owned 75% by us and 25% by Keeneland Association, Inc.
None.
 
Tax Elections. On March 13, 2015, we filed an election with the Internal Revenue Service which will result in our subsidiaries, Silver Slipper Casino Venture, LLC and Gaming Entertainment (Nevada), LLC, being taxed as corporations effective January 1, 2015.
Item 9. Changes in and Disagreements with Accountants on Accounting andFinancial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures — As of December 31, 2013,2014, we completed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level in timely alerting them to material information relating to us which is required to be included in our periodic Securities and Exchange Commission filings.

Evaluation of Internal Control Over Financial Reporting — Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements.

Management assessed the effectiveness of our internal control over financial reporting (as defined in the Securities Exchange Act of 1934 Rule 13a-15(f) and 15d-15(f)) as of December 31, 2013.2014. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.Framework (2013). Based on our assessment we believe that, as of December 31, 2013,2014, our internal control over financial reporting is effective based on those criteria.

There have been no changes during the quarter ended December 31, 20132014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.
 
PART III

Item 10.  Directors, Executive Officers and Corporate Governance.

The information required by this Item will be set forth under the captions “Proposal No. 1.One: Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive Proxy Statement for our 20142015 Annual Meeting of Stockholders (our “Proxy Statement”) to be filed with the Securities and Exchange Commission on or before April 30,within 120 days of December 31, 2014 (our “Proxy Statement”)  and is incorporated herein by this reference.

Item 11. Executive Compensation.

The information required by this Item will be set forth under the caption “Executive Compensation” in our Proxy Statement and is incorporated herein by this reference.


The information required by this Item will be set forth under the captions “Proposal No. 1. Election of Directors - Security“Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation - Equity Compensation Plan Information” in our Proxy Statement and is incorporated herein by this reference.

Item 13.  Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item will be set forth under the caption “Certain Relationships and Related Transactions” and “Independance of Directors” in our Proxy Statement and is incorporated herein by this reference.

Item 14. Principal Accounting Fees and Services.

The information required by this Item will be set forth under the caption “Independent“Proposal Three: Ratification of Independent Registered Public Accounting Firm” in our Proxy Statement and is incorporated herein by this reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) Financial statements of the Company (including related Notes to consolidated financial statements) filed as part of Item 8 hereof are listed below:

Report of Independent Registered Public Accounting Firm;
Consolidated Statements of Operations for the years ended December 31, 2014 and 2013;
Consolidated Balance Sheets as of December 31, 2014 and 2013;
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014 and 2013;
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013;
Notes to Consolidated Financial Statements.
 
(a) Financial statements of the Company (including related notes to consolidated financial statements) filed as part of this report are listed below:
 
Report of Independent Registered Public Accounting Firm;
Consolidated Balance Sheets as of December 31, 2013 and 2012;
Consolidated Statements of Operations for the years ended December 31, 2013 and 2012;
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013 and 2012;
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012;
Notes to Consolidated Financial Statements.
(b) Exhibits
Exhibit
Number
 Description 
   
2.1 Asset Purchase Agreement by and between Grand Victoria Casino & Resort, L.P. and Full House Resorts, Inc., dated as of September 10, 2010. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 13, 2010)
   
2.2 Equity Purchase Agreement dated March 30, 2012 by and among Full House Resorts, Inc.; Firekeepers Development Authority, an unincorporated instrumentality and political subdivision of the Nottawaseppi Huron Band of Potawatomi Indians; RAM Entertainment, LLC and Robert A. Mathewson. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 8, 2012)
   
2.3 Membership Interest Purchase Agreement by and between the Sellers named therein, Full House Resorts, Inc. and Silver Slipper Casino Venture LLC, dated as of March 30, 2012. (Incorporated by reference to Exhibit 2.01 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on April 5, 2012)
   
2.4Interest Purchase Agreement by and among The Majestic Star Casino, LLC, Majestic Mississippi, LLC, and Full House Resorts, Inc., dated as of March 21, 2014. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on March 24, 2014.)
3.1 Amended and Restated Certificate of Incorporation as amended to date. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 9, 2011)
   
3.23.2* Amended and Restated BylawsBy-laws of Full House Resorts Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Reportas amended on Form 8-K as filed with the Securities and Exchange Commission on June 4, 2008)October 21, 2014
   
10.1+ Amended and Restated 2006 Incentive Compensation Plan (Effective as of April 26, 2011). (Incorporated by reference to Exhibit A to the Registrant’s Definitive Proxy Statement as filed with the Securities and Exchange Commission on March 16, 2011)
   
10.2+ Form of Restricted Stock Agreement. (Incorporated by reference to Exhibit 10.75 to the Registrant’s Quarterly Report on Form 10-QSB as filed with the Securities and Exchange Commission on August 14, 2006)
   
10.3+ Employment Agreement, dated July 17, 2007, between Full House Resorts, Inc. and Andre Hilliou. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on July 20, 2007)
10.4+ Employment Agreement, dated July 17, 2007, between Full House Resorts, Inc. and Mark J. Miller. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on July 20, 2007)
   
10.5+ Letter Agreement dated November 12, 2012, between Full House Resorts, Inc. and T. Wesley Elam. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 15, 2012)
   
10.6+ Employment Agreement, dated December 7, 2012, between Full House Resorts, Inc. and Deborah J. Pierce. (Incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 6, 2013)
   
10.7 Casino Operations Lease dated June 28, 2011 by and between Hyatt Equities, L.L.C. and Gaming Entertainment (Nevada) LLC. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-k filed with the Securities and Exchange Commission on June 30, 2011)
   
10.8 Asset Purchase and Transition Agreement dated June 28, 2011 by and between HCC Corporation, doing business as Grand Lodge Casino, and Gaming Entertainment (Nevada) LLC. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 30, 2011)
   
10.9 First Lien Credit Agreement dated as of June 29, 2012, by and among Full House Resorts, Inc. as borrower, the Lenders named therein and Capital One, National Association as Administrative Agent. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on August 8, 2012)
   
10.10 Second Lien Credit Agreement dated as of October 1, 2012, by and among Full House Resorts, Inc. as borrower, the Lenders named therein and ABC Funding, LLC as Administrative Agent. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K/A as filed with the Securities and Exchange Commission on October 5, 2012)
   
10.11 Lease Agreement with Option to Purchase dated as of November 17, 2004, by and between Cure Land Company, LLC, as landlord, and Silver Slipper Casino Venture LLC, as tenant. (Incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 6, 2013)
   
10.12 First Amendment to Lease Agreement with Option to Purchase dated as of March 13, 2009, by and between Cure Land Company, LLC, as landlord, and Silver Slipper Casino Venture LLC, as tenant. (Incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 6, 2013)
   
10.13 Second Amendment to Lease Agreement with Option to Purchase dated as of September 26, 2012, by and between Cure Land Company, LLC, as landlord, and Silver Slipper Casino Venture LLC, as tenant. (Incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 6, 2013)
   
10.14 Third Amendment to Lease Agreement with Option to Purchase dated as of February 26, 2013, by and between Cure Land Company, LLC, as landlord, and Silver Slipper Casino Venture LLC, as tenant. (Incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 6, 2013)
10.15 First Amendment to Casino Operations Lease dated April 8, 2013 by and between Hyatt Equities, L.L.C. and Gaming Entertainment (Nevada) LLC. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the SEC on April 11, 2013)
   
10.16 Hotel Lease / Purchase Agreement dated August 15, 2013 by and between Rising Sun/Ohio County First, Inc. and Gaming Entertainment (Indiana) LLC. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K/A as filed with the Securities and Exchange Commission on August 22, 2013)
   
10.17 First Amendment to First Lien Credit Agreement dated as of August 26, 2013 by and among Full House Resorts, Inc., as borrower, the Lenders named therein and Capital One, National Association, as administrative agent for the Lenders, as L/C Issuer and as Swing Line Lender. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on August 30, 2013)
   
10.18 Amendment No. 1 to Second Lien Credit Agreement dated as of August 26, 2013 by and among Full House Resorts, Inc., as borrower, the Lenders named therein and ABC Funding, LLC, as administrative agent for the Lenders. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on August 30, 2013)
   
10.19 
Standard Form of Agreement Between Owner and Design-Builder dated August 26, 2013 between Silver Slipper Casino Venture, LLC and WHD Silver Slipper, LLC. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on August 30, 2013)
10.20Second Amendment to First Lien Credit Agreement dated as of June 30, 2014 by and among Full House Resorts, Inc., as borrower, the Lenders named therein and Capital One, National Association, as administrative agent for the Lenders, as L/C Issuer and as Swing Line Lender. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on July 22, 2014)
10.21Amendment No. 2 to Second Lien Credit Agreement dated as of June 30, 2014 by and among Full House Resorts, Inc., as borrower, the Lenders named therein and ABC Funding, LLC, as administrative agent for the Lenders. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on July 22, 2014)
10.22Third Amendment to First Lien Credit Agreement dated as of January 9, 2015 and effective as of December 31, 2014 by and among Full House Resorts, Inc., as borrower, the Lenders named therein and Capital One, National Association, as administrative agent for the Lenders, as L/C Issuer and as Swing Line Lender. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on January 14, 2015)
10.23Amendment No. 3 to Second Lien Credit Agreement dated as of January 9, 2015 and effective as of December 31, 2014 by and among Full House Resorts, Inc., as borrower, the Lenders named therein and ABC Funding, LLC, as administrative agent for the Lenders. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on January 14, 2015)
10.24Settlement Agreement dated as of August 21, 2014 by and among Majestic Star Casino, LLC, Majestic Mississippi, LLC and Full House Resorts, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on August 27, 2014)
10.25Settlement Agreement dated November 28, 2014 by and among Full House Resorts, Inc., Daniel R. Lee, Bradley M. Tirpak, and Craig W. Thomas. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on December 1, 2014)
10.26+Employment Agreement dated as of November 28, 2014 by and between Full House Resorts, Inc. and Daniel R. Lee. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on December 1, 2014)
10.27+Inducement Stock Option Agreement dated November 28, 2014 by and between Full House Resorts, Inc. and Daniel R. Lee. (Incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on December 1, 2014)
10.28+Employment Agreement dated as of January 30, 2015, by and between Full House Resorts, Inc. and Lewis A. Fanger. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on February 4, 2015)
10.29+Inducement Stock Option Agreement, dated as of January 30, 2015, by and between Full House Resorts, Inc. and Lewis A. Fanger. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on February 4, 2015)
10.30First Amendment to Settlement Agreement dated as of January 28, 2015 by and among the Company, Daniel R. Lee, Bradley M. Tirpak, and Craig W. Thomas. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on January 29, 2015)
10.31Separation Agreement dated as of November 28, 2014 by and between Full House Resorts, Inc. and Andre M. Hilliou. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on December 1, 2014)
10.32Separation Agreement dated as of November 28, 2014 by and between Full House Resorts, Inc. and Mark L. Miller. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on December 1, 2014)
10.33*Amendment to Separation Agreement dated as of February 18, 2015 by and between the Company and Andre M. Hilliou
10.34*Amendment to Separation Agreement dated as of February 18, 2015 by and between the Company and Mark L. Miller
21.1*
 List of Subsidiaries of Full House Resorts, Inc. (Incorporated by reference to Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 6, 2013)
23.1Consent of Piercy Bowler Taylor & Kern, independent registered public accounting firm
   
31.1* Certification of principal executive officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
31.2* Certification of principal financial officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
   
32.1* Certification of principal executive officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
   
32.2* Certification of principal financial officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
   
101.INS* XBRL Instance
   
101.SCH* XBRL Taxonomy Extension Schema
   
101.CAL* XBRL Taxonomy Extension Calculation
   
101.DEF* XBRL Taxonomy Extension Definition
101.LAB* XBRL Taxonomy Extension Labels
   
101.PRE* XBRL Taxonomy Extension Presentation

*Filed herewith.

+Executive compensation plan or arrangement.
 
XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is otherwise not subject to liability under these sections.

83


SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 FULL HOUSE RESORTS, INC. 
    
Date: March 10, 201425, 2015By:/s/ ANDRE M. HILLIOUDANIEL R. LEE
  
Andre M. Hilliou,Daniel R. Lee, Chief Executive Officer
 
 
In accordance with the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name and Capacity
 
Date
   
/s/ ANDRE M. HILLIOU        
DANIEL R. LEE
 March 10, 201425, 2015
Andre M. Hilliou,Daniel R. Lee, Chief Executive Officer
and Chairman of the BoardDirector  
(Principal Executive Officer)  
   
/s/ DEBORAH J. PIERCE
LEWIS A. FANGER
 March 10, 201425, 2015
Deborah J. Pierce,Lewis A. Fanger, Chief Financial Officer  
(Principal Financial Officer)  
   
/s/ KENNETH R. ADAMS
 March 10, 201425, 2015
KenKenneth R. Adams, Director  
   
/s/ CARL G. BRAUNLICH
 March 10, 201425, 2015
Carl G. Braunlich, Director  
   
/s/ KATHLEEN MARSHALL     
W. H. BAIRD GARRETT
 March 10, 201425, 2015
W. H. Baird Garrett, Director
/s/ ELLIS LANDAUMarch 25, 2015
Ellis Landau, Director
/s/ KATHLEEN MARSHALLMarch 25, 2015
Kathleen Marshall, Director  
   
/s/ MARK J. MILLER                                                                         
CRAIG W. THOMAS
 March 10, 201425, 2015
Mark J. Miller,Craig W. Thomas, Director and Chief Operating Officer
/s/ BRADLEY M. TIRPAKMarch 25, 2015
Bradley M. Tirpak, Director  
 
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