PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenues
Casino	$	31,910	$	30,644	$	63,616	$	87,392
Food and beverage		5,612		9,262		14,596		26,783
Hotel		2,511		3,077		5,204		8,843
Other operations, including online/mobile sports operations		1,923		1,276		3,904		3,398
Total revenues		41,956		44,259		87,320		126,416
Operating costs and expenses
Casino		10,125		12,188		23,886		35,565
Food and beverage		5,234		10,154		14,453		28,972
Hotel		1,113		2,522		2,663		7,321
Other operations		564		1,189		1,441		3,030
Selling, general and administrative		12,555		12,485		35,332		38,172
Project development costs		108		228		423		503
Depreciation and amortization		1,848		2,089		5,868		6,263
Loss on disposal of assets, net		—		10		439		5
		31,547		40,865		84,505		119,831
Operating income		10,409		3,394		2,815		6,585
Other (expense) income
Interest expense, net of $208 and $478 capitalized for the three-months ended September 30, 2020 and 2019, and $639 and $608 capitalized for the nine-months ended September 30, 2020 and 2019		(2,391)		(2,428)		(7,329)		(8,062)
Adjustment to fair value of warrants		(403)		(262)		1,159		(161)
		(2,794)		(2,690)		(6,170)		(8,223)
Income (loss) before income taxes		7,615		704		(3,355)		(1,638)
Income tax (benefit) provision		(93)		(234)		(2)		51
Net income (loss)	$	7,708	$	938	$	(3,353)	$	(1,689)

Basic earnings (loss) per share	$	0.28	$	0.03	$	(0.12)	$	(0.06)
Diluted earnings (loss) per share	$	0.28	$	0.03	$	(0.17)	$	(0.06)

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Revenues
Casino $ 39,009
$ 36,967
$ 110,702
$ 97,093
Food and beverage 8,760
8,282
24,759
21,438
Hotel 2,408
2,361
6,724
6,488
Other operations 1,234
1,252
3,250
3,094
Gross revenues 51,411
48,862
145,435
128,113
Less promotional allowances (7,685 ) (7,601 ) (21,968 ) (20,309 )
Net revenues 43,726
41,261
123,467
107,804
Operating costs and expenses

Casino 20,102
19,380
57,556
49,910
Food and beverage 3,466
2,817
9,598
7,090
Hotel 348
297
826
768
Other operations 483
475
1,333
1,236
Selling, general and administrative 13,076
12,747
39,889
36,508
Project development, acquisition costs and other 65
439
249
1,211
Depreciation and amortization 2,193
2,203
6,428
5,795
39,733
38,358
115,879
102,518
Operating income 3,993
2,903
7,588
5,286
Other (expense) income

Interest expense, net of $77 capitalized for both 2017 periods (2,718 ) (2,748 ) (8,102 ) (6,740 )
Debt modification costs —
(24 ) —
(624 )
Adjustment to fair value of warrants (302 ) 181
(272 ) (60 )
(3,020 )
(2,591 )
(8,374 ) (7,424 )
Income (loss) before income taxes 973
312
(786 ) (2,138 )
Provision for income taxes 184
177
552
458
Net income (loss) $ 789
$ 135
$ (1,338 ) $ (2,596 )

Basic income (loss) per share $ 0.03
$ 0.01
$ (0.06 ) $ (0.13 )
Diluted income (loss) per share $ 0.03
$ —
$ (0.06 ) $ (0.13 )

See condensed notes to consolidated financial statements.

Table of Contents

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except share data)


	September 30,		December 31,
	2020		2019
ASSETS
Current assets
Cash and equivalents	$	34,032	$	28,851
Restricted cash		—		1,000
Accounts receivable, net of allowance of $187 and $141		1,900		2,206
Inventories		1,467		2,292
Prepaid expenses and other		2,632		3,340
		40,031		37,689

Property and equipment, net		117,013		121,487
Operating lease right-of-use assets, net		18,097		19,171
Goodwill		21,286		21,286
Other intangible assets, net		10,987		11,056
Deposits and other		633		646
	$	208,047	$	211,335
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	3,905	$	5,216
Accrued payroll and related		3,628		3,044
Other accrued expenses and other		9,041		10,613
Current portion of operating lease obligations		3,263		2,707
Current portion of finance lease obligation		486		448
Current portion of long-term debt		1,154		1,100
Common stock warrant liability		896		2,055
		22,373		25,183

Operating lease obligations, net of current portion		15,723		16,706
Finance lease obligation, net of current portion		3,422		3,829
Long-term debt, net		107,193		102,923
Deferred income taxes, net		710		712
Contract liabilities, net of current portion		5,576		5,886
		154,997		155,239
Commitments and contingencies (Note 8)
Stockholders’ equity
Common stock, $0.0001 par value, 100,000,000 shares authorized; 28,375,291 and 28,345,525 shares issued and 27,105,728 and 27,075,962 shares outstanding		3		3
Additional paid-in capital		64,709		64,402
Treasury stock, 1,269,563 common shares		(1,548)		(1,548)
Accumulated deficit		(10,114)		(6,761)
		53,050		56,096
	$	208,047	$	211,335

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30,
2017 December 31,
2016
(Unaudited)
ASSETS
Current assets
Cash and equivalents $ 22,420
$ 27,038
Accounts receivable, net of collection allowance of $122 and $53 1,575
1,909
Inventories 1,986
1,329
Prepaid expenses 3,745
2,809
29,726
33,085
Property and equipment, net 114,551
111,465
Other long-term assets

Goodwill 21,286
21,286
Intangible assets, net of accumulated amortization of $7,756 and $7,732 10,943
10,966
Deposits and other 894
404
33,123
32,656
$ 177,400
$ 177,206
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable $ 5,321
$ 4,910
Accrued payroll and other 12,195
11,122
Current portion of long-term debt 1,969
1,688
Current portion of capital lease obligation 413
419
19,898
18,139

Common stock warrant liability and other long-term obligations 1,589
1,117
Deferred taxes 2,458
1,907
Long-term debt, net of current portion 92,939
94,246
Capital lease obligation, net of current portion 4,978
5,318
121,862
120,727
Commitments and contingencies (Notes 5 and 7)

Stockholders’ equity

Common stock, $0.0001 par value, 100,000,000 shares authorized; 24,247,418 and 24,221,558 shares issued and 22,890,823 and 22,864,963 shares outstanding 2
2
Additional paid-in capital 51,668
51,271
Treasury stock, 1,356,595 common shares (1,654 ) (1,654 )
Retained earnings 5,522
6,860
55,538
56,479
$ 177,400
$ 177,206

See condensed notes to consolidated financial statements.

Table of Contents

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands)


				Additional							Total
	Common Stock			Paid-in		Treasury Stock			Accumulated		Stockholders’
	Shares	Dollars		Capital		Shares	Dollars		Deficit		Equity
Balance, January 1, 2020	28,346	$	3	$	64,402	1,270	$	(1,548)	$	(6,761)	$	56,096
Stock-based compensation	—		—		83	—		—		—		83
Net loss	—		—		—	—		—		(4,358)		(4,358)
Balance, March 31, 2020	28,346		3		64,485	1,270		(1,548)		(11,119)		51,821
Stock grants	13		—		24	—		—		—		24
Stock-based compensation	—		—		79	—		—		—		79
Net loss	—		—		—	—		—		(6,703)		(6,703)
Balance, June 30, 2020	28,359		3		64,588	1,270		(1,548)		(17,822)		45,221
Stock grants	16		—		24	—		—		—		24
Stock-based compensation	—		—		97	—		—		—		97
Net income	—		—		—	—		—		7,708		7,708
Balance, September 30, 2020	28,375	$	3	$	64,709	1,270	$	(1,548)	$	(10,114)	$	53,050


				Additional								Total
	Common Stock			Paid-in			Treasury Stock			Accumulated		Stockholders’
	Shares	Dollars		Capital		��	Shares	Dollars		Deficit		Equity
Balance, January 1, 2019	28,289	$	3	$	63,935		1,357	$	(1,654)	$	(939)	$	61,345
Exercise of stock options	26		—		45		—		—		—		45
Stock-based compensation	—		—		86		—		—		—		86
Net loss	—		—		—		—		—		(1,617)		(1,617)
Balance, March 31, 2019	28,315		3		64,066		1,357		(1,654)		(2,556)		59,859
Stock grants	22		—		48		—		—		—		48
Stock-based compensation	—		—		59		—		—		—		59
Net loss	—		—		—		—		—		(1,010)		(1,010)
Balance, June 30, 2019	28,337		3		64,173		1,357		(1,654)		(3,566)		58,956
Stock-based compensation	—		—		70		—		—		—		70
Net income	—		—		—		—		—		938		938
Balance, September 30, 2019	28,337	$	3	$	64,243		1,357	$	(1,654)	$	(2,628)	$	59,964

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands)
Common stock Treasury stock
Shares Dollars Additional Paid-in Capital Shares Dollars Retained Earnings Total Stockholders' Equity
Balance, January 1, 2017 24,221
$ 2
$ 51,271
1,357
$ (1,654 ) $ 6,860
$ 56,479
Share-based compensation 26
—
397
—
—
—
397
Net loss —
—
—
—
—
(1,338 ) (1,338 )
Balance, September 30, 2017 24,247
$ 2
$ 51,668
1,357
$ (1,654 ) $ 5,522
$ 55,538

See condensed notes to consolidated financial statements.

Table of Contents

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(3,353)	$	(1,689)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		5,868		6,263
Amortization of debt issuance and warrant costs and other		827		845
Stock-based compensation		307		263
Change in fair value of stock warrants		(1,159)		161
Change in fair value of interest rate cap		—		90
Loss on disposal of assets		439		5
Increases and decreases in operating assets and liabilities:
Accounts receivable		306		249
Prepaid expenses, inventories and other		1,533		(1,477)
Deferred taxes		(2)		51
Deferred revenue		(109)		2,000
Accounts payable and accrued expenses		(1,732)		(1,048)
Net cash provided by operating activities		2,925		5,713
Cash flows from investing activities:
Purchase of property and equipment		(1,883)		(5,662)
Other		11		(563)
Net cash used in investing activities		(1,872)		(6,225)
Cash flows from financing activities:
Proceeds from Senior Secured Notes borrowings		—		10,000
Proceeds from CARES Act unsecured loans		5,606		—
Payment of debt discount and issuance costs		(1,284)		(1,182)
Repayment of Senior Secured Notes		(825)		(800)
Repayment of finance lease obligation		(369)		(403)
Proceeds from exercise of stock options		—		45
Net cash provided by financing activities		3,128		7,660

Net increase in cash, cash equivalents and restricted cash		4,181		7,148
Cash, cash equivalents and restricted cash, beginning of period		29,851		20,634
Cash, cash equivalents and restricted cash, end of period	$	34,032	$	27,782

Supplemental Cash Flow Information:
Cash paid for interest, net of amounts capitalized	$	6,324	$	6,962
Non-Cash Investing Activities:
Accounts payable related capital expenditures	$	265	$	651

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)

Nine Months Ended
September 30,
2017 2016
Cash flows from operating activities:
Net loss $ (1,338 ) $ (2,596 )
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 6,428
5,795
Amortization of debt issuance and warrant costs 661
864
(Gain) loss on disposal of assets (2 ) 354
Share-based compensation 397
315
Change in value of stock warrants 272
60
Increases and decreases in operating assets and liabilities:

Accounts receivable 334
(93 )
Prepaid expenses, inventories and other (1,306 ) (1,267 )
Deferred taxes 551
459
Accounts payable and accrued expenses 837
2,425
Net cash provided by operating activities 6,834
6,316
Cash flows from investing activities:

Acquisition of Bronco Billy's, net of cash acquired —
(28,369 )
Purchase of property and equipment (8,952 ) (1,736 )
Restricted cash —
569
Refunded deposits and other, net (163 ) 2,861
Net cash used in investing activities (9,115 ) (26,675 )
Cash flows from financing activities:

Repayment of First Lien Term Loan (1,687 ) (2,125 )
Repayment of Revolving Loan —
(2,000 )
Second Lien Term Loan borrowings —
35,000
Repayment of capital lease obligation (346 ) (338 )
Debt issuance costs and other (304 ) (1,670 )
Net cash (used in) provided by financing activities (2,337 ) 28,867

Net (decrease) increase in cash and equivalents (4,618 ) 8,508
Cash and equivalents, beginning of period 27,038
14,574
Cash and equivalents, end of period $ 22,420
$ 23,082

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for interest, net of amounts capitalized $ 7,459
$ 5,738

See condensed notes to consolidated financial statements.

Table of Contents

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. ORGANIZATION

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

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


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

~~We manage our~~

The Company manages its casinos based on geographic regions within the United States. See Note 1011 for further information.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation.As permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Company’s ~~2016~~2019 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2019.

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

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

Liquidity, Going Concern and Management Plans. The consolidated financial statements have been prepared on the going concern basis of accounting, assuming the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company’s casinos are its primary sources of income and operating cash flows and they are relied upon to remain in compliance with debt covenants and meet the Company’s obligations when due. As described in Note 5, the Senior Secured Notes agreement requires the Company to maintain a total leverage ratio covenant, which measures Consolidated EBITDA (as defined in the indenture) against outstanding debt. As detailed in Notes 2 and 14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company temporarily suspended operations at its casinos and hotels in March 2020 pursuant to orders from governmental authorities as a precautionary measure against the ongoing spread of a

Table of Contents

highly contagious coronavirus that was declared a pandemic (“COVID-19”) by the World Health Organization. The Company’s properties began reopening when permitted by local authorities, beginning with the Silver Slipper Casino and Hotel on May 21, 2020, Grand Lodge Casino and Stockman’s Casino on June 4, 2020, and Bronco Billy’s Casino and Hotel and Rising Star Casino Resort on June 15, 2020. The Company believes it has sufficient resources to fund its operations through the generation of cash by its reopened properties (including in the third quarter of 2020), its current cash balances and the continued management of labor, marketing expenses, and capital expenditures. However, management does not control and is not qualified to predict the ongoing effects of the continuing pandemic.

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

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

GAAP categorizes the inputs used for fair value into a three-level ~~hierarchy. “Level 1”~~hierarchy:

●

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

●

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

●

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

The Company utilizes Level 2 inputs are most readily observable, such as quoted prices in an active market for identical assets or liabilities; “Level 2” inputs, such as observable inputs for similar assets in less active markets; and “Level 3” inputs, which are unobservable and may include metrics that market participants would use to estimate values, such as revenue and earnings multiples and relative rateswhen measuring the fair value of ~~return.~~

its interest rate cap.

The Company utilizes Level 3 inputs when measuring the fair value of net assets acquired in business combination transactions, subsequent assessments for impairment, and ~~all~~most financial instruments, including but not limited to the estimated fair value of common stock warrants at issuance and for recurring changes in the related warrant liability (see Note 5)6).

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

Restricted cash balances were funds received from certain sports wagering agreements that had not commenced and were contractually required to be separated from the Company’s operating cash. In March 2020, such cash was no longer categorized

Table of Contents

as restricted, as the Company was approved for its “master license” for sports betting by the Colorado Limited Gaming Control Commission on March 19, 2020.

Revenue Recognition of Accrued Club Points and Deferred Revenues

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

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

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

Many of the Company’s customers choose to earn points under its customer loyalty programs. As points are accrued, the Company defers a portion of its gaming revenue based on the estimated standalone value of loyalty points being earned by the customer. The standalone value of loyalty points is derived from the retail value of food, beverages, hotel rooms, and other goods or services for which such points may be redeemed. A liability related to these customer loyalty points is recorded, net of estimated breakage and other factors, until the customer redeems these points, primarily for “free casino play,” complimentary dining, or hotel stays. Such liabilities were approximately $1.0 million for September 30, 2020 and $1.4 million for December 31, 2019. Upon redemption, the related revenue is recognized at retail value within the department providing the goods or services.

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

Deferred Revenues: Market Access Fees from Sports Wagering Agreements. The Company entered into several agreements with various unaffiliated companies allowing for online/mobile sports wagering within Indiana and Colorado, as well as on-site sports wagering at Rising Star Casino Resort and at Bronco Billy’s Casino and Hotel (the “Sports Agreements”). As part of these long-term Sports Agreements, the Company received one-time market access fees in cash, which were recorded as a long-term liability in the same amount and will be recognized as revenue ratably over the initial term length of 10 years, beginning with the commencement of operations. The current and noncurrent portions of the deferred revenues balance totaling $5.88 million for September 30, 2020 is included with “Other accrued expenses and other” and “Contract liabilities, net of current portion” on the consolidated balance sheets, respectively. Of the Company’s Sports Agreements, on-site sports wagering commenced at Rising Star in the fourth quarter of 2019, as did one of the Company’s three contracted mobile sports wagering websites in Indiana. In the second quarter of 2020, one of the Company’s three contracted mobile sports wagering websites in Colorado also commenced operations. In September 2020, on-site sports wagering commenced at Bronco Billy’s.

Income Taxes.For interim income tax reporting ~~it was determined that~~for the ~~Company's~~three- and nine-months ended September 30, 2020, the Company estimates its annual effective tax rate ~~could not be reasonably estimated. As a result, the~~and applies it to its year-to-date pretax income or loss.

Reclassifications. The Company ~~used the actual year-to-date effective tax rate to determine the tax expense incurred during the three and nine months ended September 30, 2017 and 2016.~~

Effective January 1, 2017, the Company adopted Accounting Standards Update ("ASU") No. 2015-17, “Balance Sheet Classification of Deferred Taxes,” (“ASU 2015-17”) issued by the Financial Accounting Standards Board. This update requires that deferred tax liabilities and assets, along with any related valuation allowance, be classified as non-current in a classified statement of financial position. The update allows for retrospective application. Accordingly, as of December 31, 2016, we reclassified the current portion of deferred tax assets of $42,000 and the current portion of deferred tax liabilities of $723,000, to non-current deferred tax liabilities.

~~Reclassifications.~~ We made certain minor financial statement presentation reclassifications to prior-period amounts to conform to the current-period presentation. Such reclassifications had no effect on the previously reported ~~net income (loss)~~results of operations or ~~stockholders' equity.~~

financial position.

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

Table of Contents

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

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

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

Recently Issued Accounting ~~Standards~~Pronouncements Not Yet ~~Adopted.~~ ~~As more fully explained in~~Adopted

Income Taxes. In December 2019, the ~~notes to~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-12, “Income Taxes (Topic 740): Simplifying the ~~Company's 2016 annual consolidated financial statements included in the Company's Annual Report on Form 10-K~~Accounting for ~~the year ended December 31, 2016, certain accounting standards not yet effective may have a material effect on our financial statements. Such new standards include~~ Income Taxes” (“ASU ~~2016-02 relating to~~2019-12”). This standard simplifies the accounting for ~~leases as a lessee~~income taxes and includes removal of certain exceptions to the general principles of ASC 740, Income Taxes, and updates and simplifies certain areas of the codification. ASU ~~2014-09 (as amended) relating to revenue recognition and presentation. These updates will be~~2019-12 is effective for ~~annual reporting periods~~the Company beginning ~~after December 15, 2018 and 2017, respectively. Management~~on January 1, 2021, with early adoption permitted. The Company is currently assessing the impact ~~that adoption of the lease and revenue recognition accounting standards~~ASU 2019-12 will have on its consolidated financial statements and footnote ~~disclosures. Under~~disclosures and whether it intends to early adopt the new ~~revenue recognition standard, the~~standard.

The Company expects it will no longer be permitted to recognize revenues for complimentary goods and services provided to customers as an inducement to gamble as gross revenue with a corresponding offset to promotional allowances to arrive at net revenues. Revenues instead will be presented net of the retail value of those complimentary goods and services.

~~Management~~ believes that there are no other ~~recently issued~~recently-issued accounting standards not yet effective that are currently likely to have a material impact on ~~our~~its financial statements.

3. ~~PROPERTY AND EQUIPMENT~~

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

(In thousands) September 30,
2017 December 31,
2016
(Unaudited)
Land and improvements $ 15,057
$ 14,548
Buildings and improvements 106,416
102,410
Furniture and equipment 40,586
37,312
Construction in progress 2,443
868
164,502
155,138
Less accumulated depreciation and amortization (49,951 ) (43,673 )
$ 114,551
$ 111,465

~~4. ACQUISITION~~

~~On May 13, 2016, we completed our acquisition of Bronco Billy's Casino and Hotel ("Bronco Billy's") for consideration of $31.1 million.~~ LEASES

The ~~results of operations of Bronco Billy's are included~~Company has no leases in our consolidated financial statements from the date of acquisition. The acquisition was financed primarily through a $35 million increase in our Second Lien Credit Facility (see Note 5). During the fourth quarter of 2016, we completed our valuation analysis of the acquired net assets.

The following unaudited pro forma consolidated statement of operations for the Company includes the results of Bronco Billy's as if the acquisition and related financing transactions occurred on January 1, 2016. The pro forma financial information does not necessarily represent the results that might have actually occurred or may occur in the future. The pro forma amounts include the historical operating results of Full House and Bronco Billy's prior to the acquisition, adjusted only for matters directly attributable to the acquisition, which primarily include interest expense related to the Second Lien Credit Facility. The pro forma results also reflect the removal of non-recurring expenses directly attributable to the transaction of $1.2 million for the nine months ended September 30, 2016. The pro forma results do not include any anticipated synergies or other expected benefits from the acquisition.

Pro Forma Consolidated Statement of Operations
(In thousands except per share data, unaudited)
For the Nine Months Ended September 30, 2016
Net revenues $ 117,352
Net loss (3,372 )
Basic and diluted loss per share (0.17 )

~~5. LONG-TERM DEBT, CAPITAL LEASE AND COMMON STOCK WARRANT LIABILITY~~

~~Long-Term Debt~~

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

(In thousands) September 30, 2017
(unaudited)
Outstanding Principal Unamortized Discount Unamortized Debt Issuance Costs
Long-term
Debt, Net
First Lien Term Loan $ 41,625
$ —
$ (374 ) $ 41,251
Revolving Loan —
—
—
—
Second Lien Term Loan 55,000
(346 ) (997 ) 53,657
96,625
(346 ) (1,371 ) 94,908
Less current portion (1,969 ) —
—
(1,969 )
$ 94,656
$ (346 ) $ (1,371 ) $ 92,939

(In thousands) December 31, 2016
Outstanding Principal Unamortized Discount Unamortized Debt Issuance Costs
Long-term
Debt, Net
First Lien Term Loan $ 43,312
$ —
$ (561 ) $ 42,751
Revolving Loan —
—
—
—
Second Lien Term Loan 55,000
(469 ) (1,348 ) 53,183
98,312
(469 ) (1,909 ) 95,934
Less current portion (1,688 ) —
—
(1,688 )
$ 96,624
$ (469 ) $ (1,909 ) $ 94,246

The First Lien and Second Lien Credit Facilities are collateralized by substantially all of our assets and our subsidiaries guarantee our obligations under the agreements. The Second Lien Credit Facility is subordinate to the First Lien Credit Facility.

~~First Lien Credit Facility~~. This facility includes a term loan of originally $45 million and revolving loan of $2 million and matures in May 2019. Variable rate interest payments are required monthly. Quarterly principal payments of $562,500 are payable until May 2018, with such payments increasing to $843,750 thereafter through maturity. As of September 30, 2017, $41.6 million was owed.

The interest rate of the First Lien Credit Facility is based on the greater of the elected London Interbank Offered Rate (“LIBOR”) (as defined) or 1.0%, plus a margin rate of 4.25%. The margin rate increased to 4.25% from 3.75% beginning in May 2017. There is no prepayment premium or interest rate cap associated with this facility.

~~Second Lien Credit Facility. This facility is a $55 million term loan and currently is scheduled to mature in November 2019. The maturity~~it is the earlier of (i) May 13, 2022, or (ii) six months following the maturity date of the First Lien Credit Facility. Interest is currently payable monthly at a rate of 13.5%, and may vary between 12.5% and 13.5%, depending on the total leverage of the Company. All principal is due at maturity. If repaid early, the prepayment premium is 2% until May 13, 2018, 1% until May 13, 2019, and no prepayment premium thereafter.

~~Covenants~~. The First Lien and Second Lien Credit Facilities contain customary representations and warranties, events of default, and positive and negative covenants. We are also required to make capital expenditures of at least 1.425%, and no more than 5.25%, of our prior-year revenues, excluding capital expenditures made from any sale of our equity securities.

The First Lien and Second Lien Credit Facilities 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 against outstanding debt and fixed charges (as defined in the agreements). These financial covenant ratios are currently defined as follows:



~~First Lien Credit Facility~~
~~Applicable Period~~	~~Maximum~~ ~~Total Leverage~~ ~~Ratio~~	~~Maximum~~ ~~First Lien Leverage Ratio~~
~~March 31, 2017 through and including September 29, 2017~~	~~5.875x~~	~~2.625x~~
~~September 30, 2017 through and including March 30, 2018~~	~~5.750x~~	~~2.500x~~
~~March 31, 2018 through and including September 29, 2018~~	~~5.625x~~	~~2.375x~~
~~September 30, 2018 through and including March 30, 2019~~	~~5.375x~~	~~2.250x~~
~~March 31, 2019 and thereafter~~	~~5.250x~~	~~2.125x~~

~~Additionally, the Fixed Charge Coverage Ratio as of the last day of any fiscal quarter shall not be less than 1.10x.~~



~~Second Lien Credit Facility~~
~~Applicable Period~~	~~Maximum~~ ~~Total Leverage~~ ~~Ratio~~	~~Maximum~~ ~~First Lien Leverage Ratio~~
~~March 31, 2017 through and including September 29, 2017~~	~~6.125x~~	~~2.875x~~
~~September 30, 2017 through and including March 30, 2018~~	~~6.000x~~	~~2.750x~~
~~March 31, 2018 through and including September 29, 2018~~	~~5.875x~~	~~2.625x~~
~~September 30, 2018 through and including March 30, 2019~~	~~5.625x~~	~~2.500x~~
~~March 31, 2019 through and including September 29, 2019~~	~~5.500x~~	~~2.375x~~
~~September 30, 2019 and thereafter~~	~~5.250x~~	~~2.250x~~

~~Additionally, the Fixed Charge Coverage Ratio as of the last day of any fiscal quarter shall not be less than 1.0x.~~

We were in compliance with our covenants as of September 30, 2017; however, there can be no assurances that we will remain in compliance with all covenants in the future and/or that we would be successful in obtaining waivers or modifications in the event of noncompliance.

~~Capital Lease~~

Our Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a 104-room hotel at Rising Star Casino Resort. At any time during the lease term, we have the option to purchase the hotel at a price based upon the project’s actual cost of $7.7 million, reduced by the cumulative principal payments made by the Company during the lease term. At September 30, 2017, such net amount was $5.4 million. Upon expiration of the lease term, (i) the Landlord has the right to sell the hotel to us, and (ii) we have the option to purchase the hotel. In either case, the purchase price is $1 plus closing costs.

On March 16, 2016, we amended the hotel lease agreement to extend the payment terms. The amendment included, among other items, a covenant that the Company make certain improvements to the Rising Star Casino Resort of at least $1 million, whichlessor. As lessee, the Company has ~~already satisfied.~~

~~On September 17, 2017, we entered into~~one finance lease for a ~~second amendment to the lease agreement to facilitate construction of the Recreational Vehicle Park adjoining the leased hotel.~~

~~Common Stock Warrant Liability~~

~~On May 13, 2016, the Company granted the Second Lien Credit Facility lenders 1,006,568 warrants. The warrants have an exercise price of $1.67~~hotel and expire on May 13, 2026. The warrants also provide for redemption rights, preemptive rights under certain circumstances to maintain their 5% ownership interest in the Company, piggyback registration rights and mandatory registration rights after two years. The redemption rights allow the warrant-holders, at their option, to require the Company to repurchase all or a portion of the warrants in the event of: (i) the maturity of the Second Lien Credit Facility, (ii) an acceleration pursuant to the Second Lien Credit Facility, (iii) a refinancing, repayment or other transaction decreasing the aggregate principal amount of the Second Lien Credit Facility debt outstanding as of May 13, 2016 by more than 50%, (iv) a liquidity event, as defined, or (v) the Company's insolvency. The repurchase value is the 21-day average price of the Company's stock at the time of the event, as defined, net of the warrant exercise price. If the redemption rights are exercised, the repurchase amount is payable by the Company in cash or through the issuance of an unsecured note with a four-year term and a minimum interest rate of 13.25%, as further defined, and would be guaranteed by the Company's subsidiaries. Alternatively, the warrant-holders may choose to have the Company register and sell the shares related to the warrants through a public stock offering.

We measure the fair value of the warrants at each reporting period. Due to the variable terms regarding the timing of the settlement of the warrants, the Company utilized a "Monte Carlo" simulation approach to measure the fair value of the warrants. The simulation included certain estimates by Company management regarding the estimated timing of the settlement of the warrants. Significant increases or decreases in those management estimates would result in a significantly higher or lower fair value measurement. At September 30, 2017, the simulation included the following assumptions: an expected contractual term of 2.82 years, an expected stock price volatility rate of 44.11%, an expected dividend yield of 0%, and an expected risk-free interest rate of 1.64%. The common stock warrant liability at September 30, 2017 was $1.4 million.

~~6. INCOME TAXES~~

The Company's effective income tax rate for the three- and nine-months ended September 30, 2017 was 18.9% and (70.2)%, respectively, compared to an effective income tax rate of 56.9% and (21.4)% in the prior-year periods. Our tax rate differs from the statutory rate of 34.0% primarily due to the effects of valuation allowances against net deferred tax assets and certain permanent item differences between tax and financial reporting purposes.

~~7. COMMITMENTS AND CONTINGENCIES~~

~~Litigation~~

In 2013 and 2014, we expended and capitalized approximately $1.6 million to repair construction defects to the parking garage at the Silver Slipper Casino and Hotel. The parking garage was originally built in 2007 and the Company acquired the Silver Slipper Casino in 2012. We hired outside legal counsel to pursue damages against the contractor and architect. During the third quarter of 2015, the case was dismissed in favor of the defendants, as the statutes of repose had expired. On November 25, 2015, we entered into a settlement and release agreement with the architect.

On January 12, 2016, we filed an appellate brief in the U.S. Court of Appeals for the Fifth Circuit ("Fifth Circuit"). On August 31, 2016, the Fifth Circuit heard oral arguments and on January 6, 2017, the Fifth Circuit reversed the District Court’s grant of summary judgment in favor of the contractor and remanded the case back to the District Court for trial. The contractor's request for rehearing was subsequently denied. During March 2017, the Company also filed a lawsuit against the contractor's insurance company.

During September 2017, we reached a settlement with the contractor and contractor's insurance company. The parties agreed to a mutual release of all claims and counterclaims, and the contractor and the contractor's insurance company paid $675,000 to the Company. The settlement effectively compensated the Company for legal and other costs associated in pursuing the matter, including $55,000 and $98,000 of legal costs during the three and nine-months ended September 30, 2017, and $106,000 and $227,000 during the three and nine months ended September 30, 2016, respectively. The settlement proceeds reduced selling, general and administrative costs.

We are party to a number of pending legal proceedings related to matters that occurred in the normal course of business. Management does not expect that the outcome of any such proceedings, either individually or in the aggregate, will have a material effect on our financial position, results of operations and cash flows.

~~Operating Leases~~

~~In addition to the following leases, we have less-significant~~various operating leases for ~~certain~~land, casino and office space, equipment, buildings, and ~~warehouse facilities, office equipment, signage and land.~~

signage. The Company’s lease terms, including extensions, range from one month to approximately 38 years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants, but the land lease at Silver Slipper does include contingent rent as further discussed below.

Operating Leases

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

Table of Contents

The ~~land~~Company executed a fourth amendment to the original lease with the landlord, effective March 2020, which granted a waiver of base rent for April and May of 2020. Such abatement totaled $155,000 and the value of such abatement will be amortized over the remaining term of the lease. This amendment also ~~includes an exclusive~~restricts the Company’s purchase option ~~to purchase~~period for the leased land, ~~during~~so that the ~~period from February 26, 2019~~Company cannot exercise its purchase option until April 1, 2022. From such date through October 1, 2027, the Company may buy out the lease for $15.5 million plus a seller-retained interest in Silver Slipper Casino and Hotel’s operations of 3% of net income (as defined) for ~~ten~~10 years following the purchase date. In the event that we sell or transfer (i) substantially all of the assets of Silver Slipper Casino Venture, LLC, or (ii) our membership interests in Silver Slipper Casino Venture, LLC in its entirety, the purchase price will increase to $17.1 million plus the retained interest for ten years mentioned above.

Bronco ~~Billy's~~Billy’s Lease through January 2035 and Option to Purchase.Bronco ~~Billy's~~Billy’s leases certain parking lots and buildings, including a portion of the hotel and casino, under a long-term lease. The lease term includes six renewal options in three-year increments to 2035. Bronco ~~Billy's~~Billy’s exercised its first renewal option through January 2020, and currently pays $30,000 per month in rent. In May 2019, Bronco Billy’s also exercised its second renewal option to extend the lease term through January 31, 2023, which ~~increased~~will increase the monthly ~~rents from $18,500~~rent to ~~$25,000 for the first two years of the renewal period and $30,000 for the third year.~~$32,500 beginning in February 2021. The lease also contains ~~a requirement for Bronco Billy's to pay the property taxes and certain other costs associated with the leased property, and includes~~ a $7.6 million purchase option exercisable at any time during the lease term, or as extended, and a right of first ~~refusal.~~

refusal on any sale of the property.

Christmas Casino / Third Street Corner Building through August 2021 and Option to Purchase. As part of the Bronco Billy’s expansion, the Company leased a nearby closed casino in August 2018. The lease includes a minimum three-year term with annual lease payments of $0.2 million, and can be extended an additional two years with annual lease payments of $0.3 million. The Company also has the right to purchase the casino at any time during the lease term, or as extended. The purchase price is currently $2.7 million if exercised by October 31, 2021 and increases to $2.8 million for purchase dates thereafter.

The Company reopened the closed casino in November 2018, but it did not produce enough incremental revenue to offset the incremental costs, and it was closed in September 2020. The Company is currently evaluating other concepts for the leased space, which is located on a key corner in Cripple Creek, Colorado.

Grand Lodge Casino Lease through August 2023. ~~Our~~The Company’s subsidiary, Gaming Entertainment (Nevada), LLC, has a lease with Hyatt Equities, L.L.C. ~~("Hyatt"~~(“Hyatt”) to operate the Grand Lodge Casino. The lease is collateralized by the Company’s interests under

the lease and property as(as defined in the lease) and is subordinate to the liens of the ~~First Lien and Second Lien Credit Facilities.~~senior secured notes due 2024 (see Note 5). Hyatt currently has an option ~~beginning January 1, 2019,~~ to purchase ~~our~~the Company’s leasehold interest and related operating assets of the Grand Lodge Casino, subject to assumption of applicable liabilities. The option price is an amount equal to the Grand Lodge Casino’s positive working capital, plus Grand Lodge Casino’s earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the twelve-month period preceding the acquisition (or pro-rated if less than twelve months remain on the lease), plus the fair market value of the Grand Lodge Casino’s personal property. ~~Monthly~~The current monthly rent ~~increased from $125,000 to $145,833 on~~of $166,667 is applicable through the remaining lease term ending in August 2023.

In July 1, 2017, and will increase to $166,667 commencing on January 1, 2018. As a condition of the lease, the Company purchased new gaming devices and equipment and made other capital expenditures totaling up to $1.5 million and Hyatt renovated the casino at its sole cost and expense of up to $3.5 million, with both parties completing these renovations during the second quarter of 2017.

We also have an agreement with Hyatt for exclusive usage of certain hotel rooms and suites by our casino guests. The agreement, which commenced on June 1, 2016, includes a monthly fee of $41,667, a mutual six-month termination notification clause and matures on August 31, 2023, or earlier as set forth therein.

~~Corporate Office Lease.~~ ~~In August 2016,~~2020, the Company executed a fifth amendment to the Hyatt lease that retroactively reduced rent amounts due during the closure period, specifically a 25% reduction in rent for March 2020 and a 50% reduction in rent for each of April and May of 2020. Such reductions totaled $208,000 and such benefit is being amortized over the remaining life of the lease.

Corporate Office Lease through January 2025. The Company leases 4,479 square feet of office space in Las Vegas, ~~Nevada, replacing our previous office space lease that was originally due to expire in May 2018. The new lease terms include a length of 7.6 years,~~Nevada. Annual rent is approximately $0.2 million and the term of the office lease expires in January 2025.

Finance Lease

Rising Star Casino Hotel Lease through October 2027 and Option to Purchase. The Company’s Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a 104-room hotel at Rising Star Casino Resort. At any time during the lease term, the Company has the option to purchase the hotel at a price based upon the hotel’s original cost of $7.7 million (see Note 4), reduced by the cumulative principal payments made by the Company during the lease term. At September 30, 2020, such net amount was $3.9 million. Upon expiration of the lease term in October 2027, (i) the landlord has the right to sell the hotel to the Company, and (ii) the Company has the option to purchase the hotel. In either case, the purchase price is $1 plus closing costs.

Table of Contents

Leases recorded on the balance sheet consist of the following:


(In thousands)
		September 30,		December 31,
Leases	Balance Sheet Classification	2020		2019
Assets
Operating lease assets	Operating Lease Right-of-Use Assets, Net	$	18,097	$	19,171
Finance lease assets	Property and Equipment, Net⁽¹⁾		4,918		5,037
Total lease assets		$	23,015	$	24,208

Liabilities
Current
Operating	Current Portion of Operating Lease Obligations	$	3,263	$	2,707
Finance	Current Portion of Finance Lease Obligation		486		448
Noncurrent
Operating	Operating Lease Obligations, Net of Current Portion		15,723		16,706
Finance	Finance Lease Obligation, Net of Current Portion		3,422		3,829
Total lease liabilities		$	22,894	$	23,690

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

The components of lease expense are as follows:


(In thousands)		Three Months Ended				Nine Months Ended
		September 30,				September 30,
Lease Costs	Statement of Operations Classification	2020		2019		2020		2019
Operating leases:
Fixed/base rent	Selling, General and Administrative Expenses	$	1,156	$	959	$	3,478	$	2,877
Variable payments	Selling, General and Administrative Expenses		219		146		442		501
Finance lease:
Amortization of leased assets	Depreciation and Amortization		39		40		118		119
Interest on lease liabilities	Interest Expense, Net		45		51		139		157
Total lease costs		$	1,459	$	1,196	$	4,177	$	3,654

Table of Contents

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


(In thousands)
	Operating		Financing
Years Ending December 31,	Leases		Lease⁽¹⁾
2020 (excluding the nine months ended September 30, 2020)	$	1,212	$	108
2021		4,792		652
2022		4,576		652
2023		2,984		652
2024		1,243		652
Thereafter		31,116		1,847
Total future minimum lease payments		45,923		4,563
Less: Amount representing interest		(26,937)		(655)
Present value of lease liabilities		18,986		3,908
Less: Current lease obligations		(3,263)		(486)
Long-term lease obligations	$	15,723	$	3,422

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

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


Lease Term and Discount Rate	September 30, 2020		December 31, 2019
Weighted-average remaining lease term
Operating leases	19.9	years	20.2	years
Finance lease	7.0	years	7.8	years
Weighted-average discount rate
Operating leases⁽¹⁾	9.38	%	9.40	%
Finance lease	4.50	%	4.50	%

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

Supplemental cash flow information related to leases is as follows:


(In thousands)	Nine Months Ended
	September 30,
Cash paid for amounts included in the measurement of lease liabilities:	2020		2019
Operating cash flows for operating leases	$	3,250	$	2,881
Operating cash flows for finance lease	$	139	$	157
Financing cash flows for finance lease	$	369	$	403

Table of Contents

4. PROPERTY AND EQUIPMENT

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


(In thousands)	September 30,		December 31,
	2020		2019
Land and improvements	$	16,144	$	16,144
Buildings and improvements		107,360		106,946
Furniture and equipment		47,752		47,886
Finance lease assets (see Note 3)		7,726		7,726
Construction in progress		11,175		10,856
		190,157		189,558
Less: Accumulated depreciation		(73,144)		(68,071)
	$	117,013	$	121,487

5. LONG-TERM DEBT

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


(In thousands)	September 30,		December 31,
	2020		2019
Senior Secured Notes	$	107,100	$	107,925
Unsecured Loans (CARES Act)		5,606		—
Less: Unamortized discounts and debt issuance costs		(4,359)		(3,902)
		108,347		104,023
Less: Current portion of long-term debt		(1,154)		(1,100)
	$	107,193	$	102,923

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

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

Similarly, on November 6, 2020, the Company executed the Fifth Amendment to Indenture dated as of November 6, 2020 (the “Fifth Amendment”) to amend the Indenture to the Notes. The Fifth Amendment deleted the total leverage ratio covenant as of September 30, 2020. The Company paid an amendment fee of 1.00%, or approximately $1.07 million, to the holders of its

Table of Contents

Notes, based on the outstanding balance of the aggregate principal amount as of the amendment date. The Fifth Amendment did not increase the optional repayment premiums that were previously amended by the Third and Fourth Amendments.

The following table summarizes the current debt repayment premiums for the Notes:


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

The Notes bear interest at the greater of the three-month London Interbank Offered Rate (“LIBOR”) or 1.0%, plus a margin rate of 7.0%. Interest on the Notes is payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year until the Notes mature on February 2, 2024. On each interest payment date, the Company is required to make principal payments of $275,000 with a balloon payment for the remaining $103.5 million due upon maturity.

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

Unsecured Loans Under the CARES Act. On May 8, 2020, two wholly-owned subsidiaries of the Company executed promissory notes (the “Promissory Notes”) evidencing unsecured loans in the aggregate amount of $5,606,200 through programs established under the CARES Act (the “Loans”) and administered by the U.S. Small Business Administration (the “SBA”). Such funds were principally used to rehire several hundred employees at Rising Star and Bronco Billy’s in advance of, and subsequent to, their reopenings in mid-June. The Loans were made through Zions Bancorporation, N.A. dba Nevada State Bank (the “Lender”), bear interest at a rate of 1.00% per annum, and originally had a two-year term.

Recently-passed legislation extended the original maturity dates to May 3, 2025 with no change to the annual ~~rents~~interest rate. After a 15-month deferment period for principal and interest payments, the Company is required to make monthly loan payments totaling $128,557 beginning in September 2021 to the Lender. The Loans may be prepaid at any time prior to maturity with no prepayment penalties. Such Loans may be forgiven, either in whole or in part, depending on the amount of such proceeds that are used for certain eligible expenses over a 24-week period, including primarily the payroll and health benefits of employees who might otherwise be without jobs or health benefits. There is no certainty that any or all of such Loans will be forgiven.

Maturities of the unsecured loans as of September 30, 2020, unless forgiven, are as follows:


(In thousands)
	Unsecured
For Years Ending December 31,	Loans
2020	$	—
2021		426
2022		1,498
2023		1,513
2024		1,528
Thereafter		641
	$	5,606

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

Table of Contents

6. COMMON STOCK WARRANT LIABILITY

As part of the Company’s former Second Lien Credit Facility, on May 13, 2016, the Company granted the Second Lien Credit Facility lenders 1,006,568 warrants, which have an exercise price of $1.67 and expire on May 13, 2026. The warrants also provide for redemption rights, preemptive rights under certain circumstances to maintain their ownership interest in the Company, piggyback registration rights and mandatory registration rights. In addition to a refinancing, the redemption rights allow the warrant-holders, at their option, to require the Company to repurchase all or a portion of the warrants upon the occurrence of certain events, including: (i) a liquidity event, as defined in the warrant purchase agreement, or (ii) the Company’s insolvency. The repurchase value is the 21-day average price of the Company’s common stock at the time of such liquidity event, net of the warrant exercise price. If the redemption rights are exercised, the repurchase amount is payable by the Company in cash or through the issuance of an unsecured note with a four-year term and a ~~tenant improvement allowance~~minimum interest rate of ~~$0.2 million.~~ 13.25%, as further defined in the warrant purchase agreement, and would be guaranteed by the Company’s subsidiaries. Alternatively, the warrant-holders may choose to have the Company register and sell the shares related to the warrants through a public stock offering.

The Company’s debt refinancing of the Second Lien Credit Facility during 2018 was considered a “triggering event” for the possible redemption or registration of the warrants. The Company’s warrant-holders have not yet requested the redemption or registration of their outstanding warrants, though they may do so on any six-month anniversary of the refinancing date prior to warrant expiration. Accordingly, the obligation is reflected as a current liability.

The Company ~~began occupying~~measures the ~~new office space~~fair value of the warrants at each reporting period (see Note 2). At September 30, 2020, the estimated fair value was determined using the following assumptions: an expected contractual term of 5.62 years, an expected stock price volatility rate of 61.9%, an expected dividend yield of 0%, and an expected risk-free interest rate of 0.3%. Decreases in ~~June 2017. During~~our share price result in decreases in the ~~third quarter,~~value of the warrants, causing non-cash income. Conversely, increases in our share price result in increases in the value of the warrants, causing non-cash expense.

7. INCOME TAXES

The Company’s effective income tax rate for the three- and nine-months ended September 30, 2020 was (1.2%) and 0.1%, respectively, compared to an effective income tax rate of (33.2%) and (3.1%) for the corresponding prior-year periods. The Company’s tax rate differs from the statutory rate of 21.0% primarily due to the effects of valuation allowances against net deferred tax assets, adjustments made to certain deferred taxes, and certain permanent item differences between tax and financial reporting purposes. The Company recorded a benefit of approximately $269,000 during the period ended September 30, 2020, related to the removal of a state deferred balance on indefinite-lived assets.

On March 18, 2020, the Families First Coronavirus Response Act (the “FFCR Act”), and on March 27, 2020, the CARES Act were each enacted in response to COVID-19. The FFCR Act and the CARES Act contain numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses arising in taxable years beginning after December 31, 2017; however, these benefits do not impact the Company’s current tax provision.

8. COMMITMENTS AND CONTINGENCIES

Litigation

The Company is party to a number of pending legal proceedings related to matters that occurred in the normal course of business. Management does not expect that the outcome of any such proceedings, either individually or in the aggregate, will have a material effect on the Company’s financial position, results of operations and cash flows.

Table of Contents

Options to Purchase or Lease Land

La Posada del Llano Racetrack Proposal in New Mexico. In July 2018, the Company ~~terminated~~paid $125,000 for options to purchase approximately 520 acres of adjoining land in Clovis, New Mexico as part of its racetrack casino proposal to the ~~previous office space lease effective October 31, 2017 with~~New Mexico Racing Commission. The proposal was in response to the New Mexico Racing Commission’s request for proposals related to the potential issuance of the state’s sixth racing license (“RFP”). In July 2019, the Company ~~paying two months~~paid an additional $125,000 to renew these land options. In August 2019, the New Mexico Racing Commission announced that it would not issue the sixth racing license at this time. Due to uncertainties surrounding the timing of ~~additional rent.~~

8.the RFP process, as well as uncertainties created by the ongoing pandemic, the Company elected to let the New Mexico land options expire in July 2020. Accordingly, the Company wrote-off these option deposits totaling $250,000 in the second quarter of 2020, reflected on the income statement under “Project development costs.”

9. EARNINGS (LOSS) PER SHARE

The ~~weighted-average number of common and common equivalent shares used in the calculation of~~table below reconciles basic and diluted income (loss) per share ~~consists of the following:~~

(In thousands) Three Months Ended Nine Months Ended
September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016

Numerator:
Net income (loss) attributable to Full House Resorts, Inc. - basic $ 789
$ 135
$ (1,338 ) $ (2,596 )
Adjustment for assumed conversion of warrants —
(181 ) —
—
Net income (loss) attributable to Full House Resorts, Inc. - diluted $ 789
$ (46 ) $ (1,338 ) $ (2,596 )

Denominator:
Weighted-average common share equivalents - basic 22,891
19,689
22,877
19,666
Potential dilution from share-based awards 772
195
—
—
Potential dilution from assumed conversion of warrants —
112
—
—
Weighted-average common and common share equivalents - diluted 23,663
19,996
22,877
19,666
Anti-dilutive share-based awards and warrants excluded from the calculation of diluted earnings per share 1,487
494
3,545
3,065

In November 2016, the Company completed a rights offering to existing common stockholders. Because the rights issuance was offered to all existing stockholders at an exercise price that was less than the fair value of the stock, the weighted average shares outstanding and basic and diluted earnings per share were adjusted retroactively to reflect the bonus element of the rights offering for all periods presented. As a result, the Company retroactively adjusted the basic weighted average number of common ~~shares outstanding from 19,018,809 to 19,689,332 for the three months ended September 30, 2016, and from 18,995,279 to 19,665,686 for the nine months ended September 30, 2016.~~stock:


(In thousands)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Numerator:
Net income (loss) - basic	$	7,708	$	938	$	(3,353)	$	(1,689)
Adjustment for assumed conversion of warrants		—		—		(1,159)		—
Net income (loss) - diluted	$	7,708	$	938	$	(4,512)	$	(1,689)

Denominator:
Weighted-average common and common share equivalents - basic		27,106		26,980		27,087		26,963
Potential dilution from share-based awards		358		521		—		—
Potential dilution from assumed conversion of warrants		—		—		133		—
Weighted-average common and common share equivalents - diluted		27,464		27,501		27,220		26,963
Anti-dilutive share-based awards and warrants excluded from the calculation of diluted loss per share		2,360		1,901		3,534		3,959

Table of Contents

10. SHARE-BASED COMPENSATION

During the second quarter of 2017, our stockholders approved an amendment to the 2015 Equity Incentive Plan ("2015 Plan") that increased the number of shares of common stock available for issuance under the 2015 Plan from 1,400,000 to 2,500,000. In

~~addition to the increase in the number of authorized shares issuable under the 2015 Plan, the amendment included several "best practices" changes.~~

In May 2017, the Company issued 180,000 stock options under the 2015 Plan to various employees of the Company, all of which have an exercise price of $2.32. These stock options all vest in equal amounts over the next three years. Additionally, the Company extended the employment agreement of Daniel R. Lee, the Company's President and Chief Executive Officer, through November 2020 and simultaneously issued 240,000 stock options under the 2015 Plan to him with an exercise price of $2.32. Mr. Lee's options will vest ratably on a monthly basis between December 1, 2018 and November 30, 2020 in conjunction with his amended employment agreement. In all cases, the exercise price of the options reflects the Company's closing price on the date of grant.

As compensation for their annual service, the Company also issued to non-executive members of its Board of Directors 59,990 stock options under the 2015 Plan with an exercise price of $2.32 and a one-year vesting period; and 25,860 shares of common stock under the 2015 Plan that vested immediately.

As of September 30, ~~2017, we~~2020, the Company had ~~1,037,906~~105,677 share-based awards authorized by shareholders and available for grant from the 2015 ~~Plan.~~

Equity Incentive Plan (the “2015 Plan”).

The following table summarizes information related to ~~our~~the Company’s common stock options as of September 30, ~~2017:~~2020:


		Weighted
	Number	Average
	of Stock	Exercise
	Options	Price
Options outstanding at January 1, 2020	2,844,405	$	1.71
Granted	388,000		1.73
Exercised	—		—
Canceled/Forfeited	(8,650)		2.23
Expired	(25,158)		2.30
Options outstanding at September 30, 2020	3,198,597	$	1.71
Options exercisable at September 30, 2020	2,497,262	$	1.65

Number
of Stock
Options

Weighted
Average
Exercise Price
Options outstanding at January 1, 2017 2,057,950
$ 1.42
Granted 479,990
$ 2.32
Exercised —
n/a
Canceled/Forfeited —
n/a
Options outstanding at September 30, 2017 2,537,940
$ 1.59
Options exercisable at September 30, 2017 1,295,996
$ 1.39

We estimated the fair value of each stock option award on the grant date using the Black-Scholes valuation model. Option valuation models require the input of highly subjective assumptions. Changes in assumptions used can materially affect the fair value estimate. Option valuation assumptions for the options granted during the nine-month period ended September 30, 2017 included: an expected volatility range between 43.6% and 44.8%, an expected dividend yield of 0%, an expected term of 4.9 to 6.2 years, and an expected weighted-average risk-free rate of between 1.9% and 2.1%.

Share-based compensation expense totaled ~~$128,000~~$121,000 and ~~$95,000~~$70,000 for the ~~three months~~three-months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~$397,000~~$307,000 and ~~$315,000~~$263,000 for the ~~nine months~~nine-months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively. As of September 30, ~~2017,~~2020, there was approximately ~~$0.8~~$0.6 million of unrecognized compensation cost related to unvested stock options previously granted that is expected to be recognized over a ~~weighted average~~weighted-average period of ~~1.4~~approximately 2.1 years.

~~10.~~

11. SEGMENT REPORTING

~~We manage our~~ AND DISAGGREGATED REVENUE

The Company manages its casinos based on geographic regions within the United States. The casino/resort operations include four segments: Silver Slipper Casino and Hotel (Hancock County, Mississippi); Rising Star Casino Resort, consisting of Rising Star Casino Resort (Rising Sun, Indiana) and its ferry boat operations (connecting Rising Sun, Indiana with Boone County, Kentucky); Bronco ~~Billy's~~Billy’s Casino and Hotel ~~(Cripple~~(including the former Christmas Casino and Christmas Inn, both in Cripple Creek, Colorado); and the Northern Nevada segment, consisting of Grand Lodge Casino (Incline Village, Nevada) and Stockman’s Casino (Fallon, Nevada). ~~Bronco Billy's Casino and Hotel was acquired on May 13, 2016.~~

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

Table of Contents

The following tables present the ~~Company's~~Company’s segment information:


(In thousands)	Three Months Ended September 30, 2020
	Silver				Bronco
	Slipper		Rising Star		Billy’s		Northern
	Casino		Casino		Casino		Nevada
	and Hotel		Resort		and Hotel		Casinos		Total
Total Revenues
Casino	$	13,972	$	7,204	$	6,866	$	3,868	$	31,910
Food and beverage		4,231		711		505		165		5,612
Hotel		1,303		1,034		174		—		2,511
Other operations		460		1,018		365		80		1,923
	$	19,966	$	9,967	$	7,910	$	4,113	$	41,956

Adjusted Property EBITDA	$	6,495	$	2,436	$	3,393	$	1,032	$	13,356
Other operating costs and expenses:
Depreciation and amortization										(1,848)
Corporate expenses										(870)
Project development costs										(108)
Stock-based compensation										(121)
Operating income										10,409
Other (expense) income:
Interest expense, net										(2,391)
Adjustment to fair value of warrants										(403)
										(2,794)
Income before income taxes										7,615
Income tax benefit										(93)
Net income									$	7,708

Table of Contents


(In thousands)	Three Months Ended September 30, 2019
	Silver				Bronco
	Slipper		Rising Star		Billy’s		Northern
	Casino		Casino		Casino		Nevada
	and Hotel		Resort		and Hotel		Casinos		Total
Total Revenues
Casino	$	10,718	$	7,744	$	6,438	$	5,744	$	30,644
Food and beverage		5,676		1,760		1,345		481		9,262
Hotel		1,266		1,560		251		—		3,077
Other operations		406		671		80		119		1,276
	$	18,066	$	11,735	$	8,114	$	6,344	$	44,259

Adjusted Property EBITDA	$	3,009	$	156	$	1,582	$	2,108	$	6,855
Other operating costs and expenses:
Depreciation and amortization										(2,089)
Corporate expenses										(1,064)
Project development costs										(228)
Loss on disposal of assets, net										(10)
Stock-based compensation										(70)
Operating income										3,394
Other (expense) income:
Interest expense, net										(2,428)
Adjustment to fair value of warrants										(262)
										(2,690)
Income before income taxes										704
Income tax benefit										(234)
Net income									$	938

(In thousands, unaudited)

For the Three Months Ended,
For the Nine Months Ended,
September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016
Net Revenues
     Silver Slipper Casino and Hotel $ 16,425
$ 14,987
$ 49,520
$ 44,326
     Rising Star Casino Resort 12,698
12,553
37,498
36,852
     Bronco Billy's Hotel and Casino 7,505
7,092
20,140
10,427
     Northern Nevada Casinos 7,098
6,629
16,309
16,199
$ 43,726
$ 41,261
$ 123,467
$ 107,804

Adjusted Property EBITDA
     Silver Slipper Casino and Hotel $ 3,054
$ 2,304
$ 9,013
$ 7,335
     Rising Star Casino Resort 728
751
2,671
2,483
     Bronco Billy's Hotel and Casino 1,769
1,610
4,092
2,698
     Northern Nevada Casinos 1,892
1,864
2,391
3,256
7,443
6,529
18,167
15,772

Other operating (expenses) income:
Depreciation and amortization (2,193 ) (2,203 ) (6,428 ) (5,795 )
Corporate expenses (1,064 ) (889 ) (3,518 ) (3,165 )
Project development and acquisition costs (53 ) (130 ) (238 ) (902 )
Gain (loss) on asset disposals, net (12 ) (309 ) 2
(309 )
Share-based compensation (128 ) (95 ) (397 ) (315 )
Operating income 3,993
2,903
7,588
5,286
Other (expense) income:
Interest expense (2,718 ) (2,748 ) (8,102 ) (6,740 )
Debt modification costs —
(24 ) —
(624 )
Adjustment to fair value of warrants (302 ) 181
(272 ) (60 )
(3,020 ) (2,591 ) (8,374 ) (7,424 )
Income (loss) before income taxes 973
312
(786 ) (2,138 )
Provision for income taxes 184
177
552
458
Net income (loss) $ 789
$ 135
$ (1,338 ) $ (2,596 )

Table of Contents


(In thousands)	Nine Months Ended September 30, 2020
	Silver				Bronco
	Slipper		Rising Star		Billy’s		Northern
	Casino		Casino		Casino		Nevada
	and Hotel		Resort		and Hotel		Casinos		Total
Total Revenues
Casino	$	29,688	$	14,055	$	12,357	$	7,516	$	63,616
Food and beverage		10,666		1,956		1,360		614		14,596
Hotel		2,833		2,010		361		—		5,204
Other operations		994		2,204		529		177		3,904
	$	44,181	$	20,225	$	14,607	$	8,307	$	87,320

Adjusted Property EBITDA	$	9,526	$	348	$	2,798	$	79	$	12,751
Other operating costs and expenses:
Depreciation and amortization										(5,868)
Corporate expenses										(2,899)
Project development costs										(423)
Loss on disposal of asset, net										(439)
Stock-based compensation										(307)
Operating income										2,815
Other (expense) income:
Interest expense, net										(7,329)
Adjustment to fair value of warrants										1,159
										(6,170)
Loss before income taxes										(3,355)
Income tax benefit										(2)
Net loss									$	(3,353)

(In thousands)
September 30,
2017 December 31,
2016
(unaudited)
Total Assets
     Silver Slipper Casino and Hotel $ 80,830
$ 79,975
     Rising Star Casino Resort 37,066
36,444
     Bronco Billy's Hotel and Casino 35,777
36,732
     Northern Nevada Casinos 13,234
12,722
     Corporate and Other 10,493
11,333
$ 177,400
$ 177,206

Table of Contents


(In thousands)	Nine Months Ended September 30, 2019
	Silver				Bronco
	Slipper		Rising Star		Billy’s		Northern
	Casino		Casino		Casino		Nevada
	and Hotel		Resort		and Hotel		Casinos		Total
Total Revenues
Casino	$	34,732	$	22,614	$	17,244	$	12,802	$	87,392
Food and beverage		16,562		5,373		3,370		1,478		26,783
Hotel		3,713		4,544		586		—		8,843
Other operations		1,231		1,671		231		265		3,398
	$	56,238	$	34,202	$	21,431	$	14,545	$	126,416

Adjusted Property EBITDA	$	10,448	$	1,163	$	3,074	$	2,516	$	17,201
Other operating costs and expenses:
Depreciation and amortization										(6,263)
Corporate expenses										(3,582)
Project development costs										(503)
Loss on disposal of assets, net										(5)
Stock-based compensation										(263)
Operating income										6,585
Other (expense) income:
Interest expense, net										(8,062)
Adjustment to fair value of warrants										(161)
										(8,223)
Loss before income taxes										(1,638)
Income tax provision										51
Net loss									$	(1,689)


(In thousands)	September 30,		December 31,
	2020		2019
Total Assets
Silver Slipper Casino and Hotel	$	84,509	$	87,980
Rising Star Casino Resort		36,217		40,277
Bronco Billy's Casino and Hotel		45,167		45,034
Northern Nevada Casinos		13,140		18,612
Corporate and Other		29,014		19,432
	$	208,047	$	211,335

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes for the fiscal year ended December 31, ~~2016,~~2019, which were included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ~~("SEC"~~(“SEC”) on March ~~17, 2017.~~30, 2020. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. Full House Resorts, Inc., together with its subsidiaries, may be referred to as “Full ~~House”,~~House,” the ~~“Company”, “we”,~~“Company,” “we,” “our” or ~~“us”,~~“us,” except where stated or the context otherwise indicates.

Executive Overview

Our primary business is the ownership and/or operation of casino and related hospitality and entertainment facilities, which includes offering ~~gaming,~~casino gambling, hotel accommodations, dining, golfing, RV camping, sports betting, entertainment and retail ~~and~~outlets, among other amenities. We own ~~and/~~or operate five casino properties in four ~~states -~~states: Mississippi, Colorado, Indiana and Nevada. We view our Mississippi, Colorado and Indiana properties as distinct operating segments and both of our Nevada properties as one operating segment.

Our portfolio consists of the following:


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

Our financial results are dependent upon the number of patrons that we attract to our properties and the amounts those guests spend per visit. While we do provide credit at some of our casinos where we are permitted to by gaming regulations, most of our revenues are cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. Our revenues are primarily derived from ~~gaming activities, which include~~ slot machines, but also include table games, keno, and ~~keno.~~sports betting. In addition, we derive a significant amount of revenue from our hotels and our food and beverage outlets. We also derive revenues from our golf course ~~(at~~at Rising Star, ~~Casino Resort),~~our recreational vehicle parks (“RV parks”) as owned at Rising Star and managed at Silver Slipper, our ferry service at Rising Star, and retail outlets and ~~entertainment, and expect to derive additional revenues from our newly constructed projects as further described herein. Promotional allowances consist primarily of~~entertainment. We often provide hotel rooms, ~~and~~ food and beverages, ~~furnished~~ferry usage, and golf privileges to customers on a complimentary ~~basis. The retail~~basis; the value of such services isare included as revenue in those categories, offset by contra-revenue in the ~~respective~~casino revenue ~~classifications~~category. As a result, the casino revenues in our financial statements reflect patron gaming wins and ~~is then deducted as promotional allowances~~losses, reduced by the retail value of complimentary services, the value of free play provided to ~~calculate net revenues.~~ customers, the value of points earned by casino customers that can be redeemed for services or free play, and accruals for certain progressive jackpots offered by the Company.

We may experience significant fluctuations in our quarterly operating results due to seasonality, variations in gaming hold percentages and other factors. Consequently, our operating results for any quarter or year are not necessarily comparable and may not be indicative of future periods’ results.

Table of Contents

~~The casino resort industry~~

Our market environment is ~~capital-intensive,~~highly competitive and capital-intensive. Nevertheless, there are significant restrictions and barriers to entry vis-à-vis opening new casinos in most of the markets in which we operate. We rely on the ability of our properties to generate operating cash flow to pay interest, repay debt, and fund maintenance and certain growth-related capital expenditures. We continuously focus on improving the operating margins of our existing properties through a combination of revenue growth and expense management. We also assess growth and development opportunities, which include capital investments at our existing properties, the development of new properties, and the acquisition of existing properties.

Recent Developments

COVID-19 Pandemic.In March 2020, the World Health Organization declared the outbreak of the novel coronavirus as a pandemic (“COVID-19”), which continues to be spread throughout the U.S. and the world. COVID-19 has driven the implementation of significant, government-imposed measures to prevent or reduce its spread, including travel restrictions, business restrictions, closing of borders, “shelter in place” orders and business closures. Pursuant to state government orders to prevent the spread of COVID-19, we temporarily closed all of our casino properties in March 2020. As a result, we experienced a material decline in our revenues until our properties began reopening when permitted by local authorities. We reopened the Silver Slipper Casino and Hotel on May 21, 2020, Grand Lodge Casino and Stockman’s Casino on June 4, 2020, and Bronco Billy’s Casino and Hotel and Rising Star Casino Resort on June 15, 2020. In the third quarter of 2020, our total operating revenues were nearly comparable to that of the prior-year period, with casino revenues increasing by 4.1%. Additionally, labor and marketing expenses were meaningfully lower during the third quarter of 2020, resulting in operating income nearly tripling versus the third quarter of 2019. The current nine-month period, however, still shows the adverse effects of the multi-month business closures earlier in the year. The extent to which our financial and operating results in future periods may be affected by COVID-19 will largely depend on future developments, which are highly uncertain and cannot be accurately predicted, including the ability to operate and the operating results of our casinos over the next several months, new information which may emerge concerning the severity of COVID-19 and any additional actions imposed by governmental authorities to contain COVID-19 or minimize its impact, increased operating costs in light of social distancing requirements as a result of COVID-19 and general economic conditions, among others. For a further discussion regarding the impacts of COVID-19 on our business, see “Liquidity and Capital Resources – Cash Flows and COVID-19 Impact” below.

Waivers and Amendments of Debt Covenants. In April, August, and November 2020, we obtained waivers and amendments (the “Waivers and Amendments”) to the indenture dated as of February 2, 2018 (as amended and supplemented, the “Indenture”), which governs the aggregate $110.0 million of senior secured notes due 2024 (collectively, the “Notes”). The Waivers and Amendments were executed in recognition of the impacts of COVID-19 on our business and operations. Pursuant to the Waivers and Amendments, among other things, the noteholders agreed to waive or delete the total leverage ratio covenant for the measurement periods ending on March 31, 2020, June 30, 2020, and September 30, 2020, to permit the incurrence of $5.6 million of unsecured loans under the CARES Act, and to waive the requirement to deliver a financial statement to each noteholder without a “going-concern” or like qualification or exception. In consideration for the amendments and one-time waivers, we paid the noteholders waiver fees of $376,775 for the Third Amendment and $805,313 for the Fourth Amendment, plus increases in the call premiums and amounts due at maturity amounting to an additional $155,288 and $258,813, respectively. We paid $1,071,000 for the Fifth Amendment.

Such upfront waiver fees were partially offset in recent periods by the decline in LIBOR rates that are used to calculate quarterly interest expense for the Notes. There can be no assurance that we will be successful in obtaining such waivers or amendments in the future, if needed.

Bronco Billy’s Expansion Suspended and Colorado Referendum. In March 2020, we suspended construction that had just begun of a parking garage at Bronco Billy’s in order to conserve liquidity during the pandemic. In July 2020, we opened a temporary surface parking lot in such location.

In November 2020, Colorado voters approved several changes to the state’s gaming laws. Those changes eliminated the maximum betting limit of $100 per bet and allowed additional games of chance, including baccarat. These changes will allow the state’s casinos, including Bronco Billy’s, to attract a wealthier clientele and to offer a broader gaming experience. We continue to evaluate a potential major expansion of Bronco Billy’s, which was put on hold when we were required to close due to COVID-19. Whether or not we will be able to complete the Bronco Billy’s expansion in the near future will depend on the operating results of our casinos over the coming months, as well as the capital markets that might be available to us at some

Table of Contents

future date. The Bronco Billy’s expansion project is planned to include a new luxury hotel, spa, significant convention and entertainment space, and refurbishment and expansion of our casino and food and beverage offerings.

Sports Wagering in Colorado and Indiana. In March 2020, the Colorado Limited Gaming Control Commission approved us for our three permitted “Sports Betting Master Licenses.” Additionally, in April 2020, our three providers for mobile sports wagering were approved for their “Temporary Internet Sports Betting Operator Licenses” in Colorado. On June 4, 2020, the first of our contracted sports wagering websites launched in Colorado. We expect that the two remaining contracted websites will launch in Colorado in the coming months, pending customary gaming license approvals. Additionally, we commenced on-site sports wagering at Bronco Billy’s on September 24, 2020.

In Indiana, one of our three contracted mobile websites for sports wagering launched operations on December 30, 2019. We expect that the two remaining contracted websites will launch in Indiana in the coming months, pending customary gaming license approvals.

When all six of our contracted sports wagering websites have commenced operations, our sports wagering revenue, based on the contractual minimums, should total at least $7.0 million on an annualized basis. Since we incur very little expense related to these operations, almost all of such revenues should translate into Adjusted Property EBITDA and operating income.

Waukegan Proposal. We continue to be one of three bidders for the opportunity to build a new casino in Waukegan, Illinois, midway between Chicago and Milwaukee. If chosen, we plan to complete the development employing project financing. Accordingly, we recently signed a conditional commitment letter with a multi-billion-dollar investment management firm that has experience with casino construction projects. The commitment letter potentially funds our Waukegan project, named “American Place,” if we are chosen by the Illinois Gaming Board. Under the terms of the commitment letter, the investment firm would provide approximately $300 million of non-recourse, development capital to construct American Place, as well as a temporary casino while the permanent facility is under construction. We would be required to invest $25 million in the project as equity, will own no less than 60% of the project, and will receive management fees for operating the casino and related amenities. The commitment letter is conditioned upon us being awarded the Waukegan casino license by the Illinois Gaming Board. The financing commitment is also subject to, and contingent upon, the Illinois Gaming Board’s review and the investment firm’s further due diligence review, among other items. All of the project financing is anticipated to be limited to the Waukegan project and would not be guaranteed by us or our other subsidiaries. We can provide no assurances that our project will be chosen by the Illinois Gaming Board for the available gaming license in Waukegan.

Key Performance Indicators

We use several key performance indicators to evaluate the operations of our properties. These key performance indicators include the following:

Gaming revenue indicators:

Slot coin-in is the gross dollar amount wagered in slot machines and table game drop is the total amount of cash or credit exchanged into chips at table games for use by our customers. Slot coin-in and table game drop are indicators of volume.

Slot win is the difference between customer wagers and customer winnings on slot machines. Table game hold is the difference between the amount of money or markers exchanged into chips at the tables and customer winnings paid. Slot win and table game hold percentages represent the relationship between slot win and coin-in and table game win and drop.

Room revenue indicators:

Hotel occupancy rate is an indicator of the utilization of our available rooms. Complimentary room sales, or the retail value of accommodations gratuitously furnished to customers, are included in the calculation of the hotel occupancy rate.

Table of Contents

Adjusted EBITDA, Adjusted Property EBITDA and Adjusted Property EBITDA Margin:

Management uses Adjusted EBITDA as a measure of ~~the Company's~~our performance. For a description of Adjusted EBITDA, see ~~"Non-GAAP~~“Non-GAAP Financial ~~Measure". The Company utilizes~~Measure.” We utilize Adjusted Property EBITDA, a financial measure in accordance with generally accepted accounting principles in the United States of America (“GAAP”), as the measure of segment profit in assessing performance and allocating resources at the reportable segment level. For information regarding our operating segments, see Note 1011 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report. In addition, we use Adjusted Property EBITDA Margin, which is calculated by dividing Adjusted Property EBITDA by the ~~property's net~~property’s total revenues.

Results of Operations

Consolidated operating results

The following ~~summarizes~~tables summarize our consolidated operating results for the three- and nine-months ended September 30, ~~2017~~2020 and ~~2016:~~2019:


	Three Months Ended						Nine Months Ended
(In thousands)	September 30,				Percent		September 30,				Percent
	2020		2019		Change		2020		2019		Change
Total revenues	$	41,956	$	44,259	(5.2)	%	$	87,320	$	126,416	(30.9)	%
Operating expenses		31,547		40,865	(22.8)	%		84,505		119,831	(29.5)	%
Operating income		10,409		3,394	206.7	%		2,815		6,585	(57.3)	%
Interest and other non-operating expenses, net		2,794		2,690	3.9	%		6,170		8,223	(25.0)	%
Income tax (benefit) provision		(93)		(234)	(60.3)	%		(2)		51	(103.9)	%
Net income (loss)	$	7,708	$	938	721.7	%	$	(3,353)	$	(1,689)	98.5	%


	Three Months Ended						Nine Months Ended
(In thousands)	September 30,				Percent		September 30,				Percent
	2020		2019		Change		2020		2019		Change
Casino revenues
Slots	$	27,896	$	25,132	11.0	%	$	55,142	$	72,418	(23.9)	%
Table games		3,612		4,993	(27.7)	%		7,437		13,281	(44.0)	%
Other		402		519	(22.5)	%		1,037		1,693	(38.7)	%
		31,910		30,644	4.1	%		63,616		87,392	(27.2)	%

Non-casino revenues, net
Food and beverage		5,612		9,262	(39.4)	%		14,596		26,783	(45.5)	%
Hotel		2,511		3,077	(18.4)	%		5,204		8,843	(41.2)	%
Other		1,923		1,276	50.7	%		3,904		3,398	14.9	%
		10,046		13,615	(26.2)	%		23,704		39,024	(39.3)	%
Total revenues	$	41,956	$	44,259	(5.2)	%	$	87,320	$	126,416	(30.9)	%

(In thousands)
Three Months Ended
September 30,
Percent Change
Nine Months Ended
September 30,
Percent Change
2017 2016 2017 2016
Net revenues $ 43,726
$ 41,261
6.0 % $ 123,467
$ 107,804
14.5 %
Operating expenses 39,733
38,358
3.6 % 115,879
102,518
13.0 %
Operating income 3,993
2,903
37.5 % 7,588
5,286
43.5 %
Interest and other non-operating expenses 3,020
2,591
16.6 % 8,374
7,424
12.8 %
Income tax expense 184
177
4.0 % 552
458
20.5 %
Net income (loss) $ 789
$ 135
484.4 % $ (1,338 ) $ (2,596 ) (48.5 )%

(In thousands)
Three Months Ended
September 30,
Percent Change
Nine Months Ended
September 30,
Percent Change
2017 2016 2017 2016
Casino revenues
Slots $ 33,862
$ 32,372
4.6 % $ 96,028
$ 83,711
14.7 %
Table games 5,022
4,513
11.3 % 14,330
13,098
9.4 %
Other 125
82
52.4 % 344
284
21.1 %
39,009
36,967
5.5 % 110,702
97,093
14.0 %
Non-casino revenues, net

Food and beverage 3,283
2,860
14.8 % 9,147
7,235
26.4 %
Hotel 568
521
9.0 % 1,309
1,254
4.4 %
Other 866
913
(5.1 )% 2,309
2,222
3.9 %
4,717
4,294
9.9 % 12,765
10,711
19.2 %
Total net revenues $ 43,726
$ 41,261
6.0 % $ 123,467
$ 107,804
14.5 %

The following discussion is based on our consolidated financial statements for the three- and nine-months ended September 30, ~~2017~~2020 and ~~2016. The results of Bronco Billy's is included beginning May 13, 2016, subsequent to the beginning~~2019. Because all of the ~~prior year~~Company’s operations were closed from mid-March 2020 through much of the second quarter of 2020, the comparisons for the nine-month ~~comparative period.~~

periods are not particularly meaningful.

Revenues.Consolidated ~~net~~total revenues for the ~~three-month period increased at all of our properties, including 9.6% at Silver Slipper, 7.1% in Northern Nevada and 5.8% at Bronco Billy's.~~

Consolidated net revenues for the nine-month period increased due in part to the inclusion of Bronco Billy's for the full period. Excluding Bronco Billy's, our consolidated net revenues increased 6.1%, led by 11.7% at Silver Slipper and 1.8% at Rising Star, while Northern Nevada was flat.

~~See further information within our reportable segmentsdescribed below.~~

~~Operating Expenses.~~ Consolidated operating expenses for the three-month period increased 3.6% due primarily to increased promotional activity and customer traffic at Silver Slipper. The increase in costs was partially offset by the receipt of legal settlement proceeds to resolve the Silver Slipper parking garage litigation.

Consolidated operating expenses for the nine-month period increased 13.0% primarily due to the inclusion of Bronco Billy's for the full period. Excluding Bronco Billy's, our operating expenses increased 4.6%, primarily related to the factors described above at Silver Slipper. The increase was partially offset by a decrease in project development and acquisition costs from the Bronco Billy's transaction during 2016.

~~See further information within our reportable segmentsdescribed below.~~

~~Interest and Other Non-Operating Expenses.~~

~~Interest Expense~~

~~Interest expense consists of the following:~~

(In thousands)
Three Months Ended
September 30,

Nine Months Ended
September 30,
2017 2016 2017 2016
Interest cost (excluding loan fee amortization) $ 2,573
$ 2,523
$ 7,518
$ 5,901
Amortization of debt costs 222
225
661
839
Capitalized interest (77 ) —
(77 ) —
$ 2,718
$ 2,748
$ 8,102
$ 6,740

The increase in interest cost for the nine-month period was primarily due to the debt refinancing completed on May 13, 2016, which resulted in $35 million of additional debt used primarily to fund the purchase of Bronco Billy's.

~~Other Non-Operating Expenses, Net~~

~~For the three-month periods~~three-months ended September 30, ~~2017 and September 30, 2016,~~2020 were constrained by the ~~Company had $0.3 million of non-operating expense and $0.2 million of non-operating income, respectively, due~~requirements to the change in fair value of the stock warrants. For the nine-month period ended September 30, 2017, we incurred $0.3 million of non-operating expense from the change in fair value of the stock warrants; this amount compares to $0.7 million incurredmaintain “social distancing” during the ~~prior-year period,~~pandemic, including reductions in the ~~decrease resulting primarily from debt modification costs associated with~~number of slot machines we are permitted to operate, the ~~debt refinancing during 2016.~~

~~Income Tax Expense.~~ ~~Income tax expense was $0.2 million during~~number of people that we can accommodate at each table game, the seating capacity of our bars and restaurants, and restrictions on the ~~three-month periods ended September 30, 2017 and 2016, and was $0.6 million and $0.5 million~~types of food service we can offer. Consolidated total revenues for the nine-month periods ended September 30, ~~2017 and 2016, respectively. During 2017, we continued~~2020 decreased primarily due to ~~provide a valuation allowance against our deferred tax assets, net~~temporary suspensions of ~~any available deferred tax liabilities. In future years, if it is determined that we meet the "more likely than not" threshold of utilizing our deferred tax assets, we may reverse some or~~operations at all of our ~~valuation allowance against~~properties, as mandated

Table of Contents

by state government orders in mid-March 2020 in response to COVID-19. The first of our properties reopened on May 21, 2020, and all of our properties had reopened by June 15, 2020. As a result, our revenues reflect the closure of our properties for approximately two to three months in the current nine-month period, as compared to the prior-year period which includes a full nine months of operations. Of note, “Other Non-casino Revenues” includes $0.7 million and $1.6 million of revenue related to our mobile sports operations for the three- and nine-month periods ended September 30, 2020, respectively. See “Recent Developments – Sports Wagering in Colorado and Indiana” for details.

See further information within our reportable segments described below.

Operating Expenses. Consolidated operating expenses in the first half of 2020 decreased primarily due to the prolonged closures discussed above. This affected payroll and related expenses across all departments at the Company, as well as numerous volume-related costs, such as gaming taxes, device fees and our cost of the food and beverages served to guests. We also opted to significantly reduce our marketing expenses during the closure period, although some of such expenses, such as some contracted billboards, could not be reduced. Certain other costs continued despite the closures, thereby affecting income, including utility costs, real estate taxes, a much-limited payroll, much of our rent, and the costs to secure our properties and meet certain gaming regulatory requirements.

We chose to reopen our casinos, when permitted to do so, very cautiously, with limited hours of operation of many amenities and minimal staffing, as we were unsure as to the customer response. As the capacity of our restaurants was limited in order to ensure social distancing, we chose to eliminate certain promotions, like “2-for-1” buffets and a “$0.49 breakfast,” which were loss leaders, but could not be easily accommodated with our reduced restaurant capacity. We reduced the number of slot machines we operate, again to assure social distancing and, in some cases, as required to do so by the gaming authorities. This resulted in reductions in certain taxes based on the number of machines, as well as the amounts we pay for certain leased games. We have been limited in terms of the numbers of people who can participate at each table game, again to ensure social distancing, and we offset this by increasing the minimum wagers on our table games so as to afford to pay the dealers and other required personnel with fewer people playing each game. Meanwhile, we expanded the number of stadium gaming and similar machines in the vicinity of our table games, to accommodate customers who may not want to play at higher table game minimums. We also used the closure period to revamp much of our marketing programs, particularly at Rising Star and Bronco Billy’s, which had recently installed new, state-of-the-art slot machine systems and therefore had much better marketing data than was available previously. The improved marketing data allowed us to focus our attention and benefits on our most important customers, while we were also able to identify groups of customers who had historically been receiving benefits that were not justified by their levels of play.

As a result, our operating expenses in the third quarter of 2020 declined significantly, much more so than our revenues. This resulted in significant increases in income across our most important properties, as well as in our margins across all segments.

Operating expenses for the nine-month period ended September 30, 2020 reflect both the reductions from the pandemic period in the first half of the year and the planned cost efficiencies effected in the third quarter.

See further information within our reportable segments described below.

Table of Contents

Interest and Other Non-Operating Expenses.

Interest Expense

Interest expense consists of the following:


(In thousands)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Interest cost (excluding loan fee amortization)	$	2,269	$	2,651	$	7,141	$	7,735
Amortization of debt issuance costs and discount		330		247		827		845
Change in fair value of interest rate cap agreement		—		8		—		90
Capitalized interest		(208)		(478)		(639)		(608)
	$	2,391	$	2,428	$	7,329	$	8,062

The decreases in interest expense for the three- and nine-month periods were primarily due to the decline in the three-month London Interbank Offered Rate (“LIBOR”), which affected the total interest rate due for the Notes.

Other Non-Operating Expenses, Net

For the three- and nine-month periods ended September 30, 2020, we had approximately $403,000 of other non-operating expenses and $1.2 million of other non-operating income from the fair value adjustment to our outstanding warrants, respectively, which is a non-cash item primarily related to changes in our stock price. Decreases in our share price result in decreases in the value of the warrants, causing non-cash income. Conversely, increases in our share price result in increases in the value of the warrants, causing non-cash expense.

Income Tax Expense. Our effective income tax rates were (1.2%) and 0.1% for the three- and nine-months ended September 30, 2020, respectively. We recorded a benefit of approximately $269,000 during the period ended September 30, 2020, as shown below. This benefit relates to the removal of a state deferred ~~tax~~balance on indefinite-lived assets.


(In thousands)
	Three Months Ended		Nine Months Ended
Components of Income Tax	September 30, 2020		September 30, 2020
Income Tax Expense	$	176	$	267
Income Tax Benefit		(269)		(269)
Income Tax Benefit, net	$	(93)	$	(2)

We do not expect to pay any federal income taxes or receive any federal tax refunds related to our ~~2017~~2020 results. Tax losses incurred in ~~2017~~2020 may ~~shelter~~offset taxable income in future years. However, because of the level of uncertainty regarding sufficient prospective income, we currently maintain a valuation allowance against our remaining deferred tax ~~assets, as mentioned above.~~

assets.

Operating Results – Reportable Segments

We manage our casinos based on geographic regions within the United States. Accordingly, Stockman’s ~~Casino~~ and Grand Lodge Casino comprise our Northern Nevada business segment, while Silver Slipper, Bronco Billy’s and Rising Star are distinct segments. Our Rising Star segment includes ferry boat operations between Indiana and Kentucky, and our Bronco Billy’s segment includes the former Christmas Casino and ~~Hotel, Rising Star Casino Resort and~~the Christmas Inn, both located near Bronco ~~Billy's Casino and Hotel are each currently distinct segments.~~Billy’s in Cripple Creek, Colorado.

Table of Contents

The following table presents detail by segment of our consolidated ~~net~~total revenue and Adjusted ~~EBITDA. Management~~EBITDA; see “Non-GAAP Financial Measure” for additional information. Additionally, management uses Adjusted Property EBITDA as the measure of segment ~~profit.~~profit in accordance with GAAP.


(In thousands)	Three Months Ended						Nine Months Ended
	September 30,				Percent		September 30,				Percent
	2020		2019		Change		2020		2019		Change
Total revenues
Silver Slipper Casino and Hotel	$	19,966	$	18,066	10.5	%	$	44,181	$	56,238	(21.4)	%
Rising Star Casino Resort⁽¹⁾		9,967		11,735	(15.1)	%		20,225		34,202	(40.9)	%
Bronco Billy's Casino and Hotel⁽¹⁾		7,910		8,114	(2.5)	%		14,607		21,431	(31.8)	%
Northern Nevada Casinos		4,113		6,344	(35.2)	%		8,307		14,545	(42.9)	%
	$	41,956	$	44,259	(5.2)	%	$	87,320	$	126,416	(30.9)	%
Adjusted Property EBITDA and Adjusted EBITDA
Silver Slipper Casino and Hotel	$	6,495	$	3,009	115.9	%	$	9,526	$	10,448	(8.8)	%
Rising Star Casino Resort⁽¹⁾		2,436		156	1,461.5	%		348		1,163	(70.1)	%
Bronco Billy's Casino and Hotel⁽¹⁾		3,393		1,582	114.5	%		2,798		3,074	(9.0)	%
Northern Nevada Casinos		1,032		2,108	(51.0)	%		79		2,516	(96.9)	%
Adjusted Property EBITDA		13,356		6,855	94.8	%		12,751		17,201	(25.9)	%
Corporate		(870)		(1,064)	(18.2)	%		(2,899)		(3,582)	(19.1)	%
Adjusted EBITDA	$	12,486	$	5,791	115.6	%	$	9,852	$	13,619	(27.7)	%

(In thousands)
Three Months Ended
September 30,
Percent Change
Nine Months Ended
September 30,
Percent Change
2017 2016 2017 2016
Net revenues
Silver Slipper Casino and Hotel $ 16,425
$ 14,987
9.6 % $ 49,520
$ 44,326
11.7 %
Rising Star Casino Resort 12,698
12,553
1.2 % 37,498
36,852
1.8 %
Bronco Billy's Casino and Hotel 7,505
7,092
5.8 % 20,140
10,427
N/A
Northern Nevada Casinos 7,098
6,629
7.1 % 16,309
16,199
0.7 %
$ 43,726
$ 41,261
6.0 % $ 123,467
$ 107,804
14.5 %
Adjusted Property EBITDA and Adjusted EBITDA

Silver Slipper Casino and Hotel $ 3,054
$ 2,304
32.6 % $ 9,013
$ 7,335
22.9 %
Rising Star Casino Resort 728
751
(3.1 )% 2,671
2,483
7.6 %
Bronco Billy's Casino and Hotel 1,769
1,610
9.9 % 4,092
2,698
N/A
Northern Nevada Casinos 1,892
1,864
1.5 % 2,391
3,256
(26.6 )%
Adjusted Property EBITDA 7,443
6,529
14.0 % 18,167
15,772
15.2 %
Corporate (1,064 ) (889 ) 19.7 % (3,518 ) (3,165 ) 11.2 %
Adjusted EBITDA $ 6,379
$ 5,640
13.1 % $ 14,649
$ 12,607
16.2 %

(1) Includes amounts related to the property’s contracted sports revenue in 2020.

Silver Slipper Casino and Hotel

~~The net revenue increases during~~

Pursuant to an order from the ~~three-~~state gaming commission, we temporarily suspended operations on March 16, 2020, until we were permitted to reopen on May 21, 2020. During the shutdown period, we reexamined our staff levels company-wide and ~~nine-month periods~~we chose to reopen conservatively in terms of amenities and hours of operations.

For the three-months ended September 30, ~~2017 compared~~2020, total revenues increased by 10.5%, primarily due to improvements in casino revenues, which increased by 30.4%. Revenues increased despite pandemic-related business constraints and an active hurricane season, which resulted in several brief closures of the property, more so than occurred in the prior-year ~~periods were attributed~~period. Slot revenue rose 34.0% due to ~~successful marketing and food and beverage promotions that resulted in increases in both customer~~

~~counts and gaming volumes. Slot revenues~~ increased ~~6.5% during the quarter and 10.6% during the nine-month period,~~coin-in with ~~both slot coin-in and slot~~a relatively flat hold ~~percentage rising in 2017.~~percentage. Table games revenue ~~increased 15.1%~~rose by 26.3% due to a 5.3 percentage point increase in the table games hold percentage, though table games drop declined, in part, due to reduced operating hours and ~~2.5% for~~limitations on the ~~three-~~number of available table positions. Other casino revenues declined by $101,000, reflecting a lack of meaningful sports book operations until mid-July 2020 and ~~nine-month periods, with~~ the ~~increase for~~discontinuation of live keno; the ~~three-month~~prior-year period reflects a normal quarter of sports wagering activity and keno operations.

For the nine-months ended September 30, 2020, total revenues decreased by 21.4%, primarily due to ~~a higher hold percentage. Non-gaming net revenues (principally food~~approximately two months of closure related to COVID-19. Casino revenue decreased by 14.5%, reflecting the extended closure period.

Non-casino revenue decreased by 18.4% and beverage revenues) grew 27.6% during the quarter and 29.3% during the nine-month period due to certain promotions offered by the property and the opening of a new restaurant in July 2017. Our hotel occupancy was 89.3% compared to 88.0% in the prior-year nine-month period. The growth was achieved despite Hurricanes Harvey and Irma, which were in the Gulf of Mexico and came ashore to the west and east of the property, respectively. The storms did not affect the property directly, but caused weak periods during the quarter, as customers were distracted by the potential storm routes. Flooding in parts of Louisiana similarly affected results in the prior-year period.

~~Adjusted Property EBITDA~~32.6% for the three- and nine-month periods ended September 30, ~~2017 compared~~2020, respectively, due to impacts of the ~~prior-year periods increased primarily~~casino closure and limited operations upon our reopening. The majority of our non-casino revenue is from ~~the increase in net revenues described above along with the legal settlement related to~~ our ~~parking garage litigation described below. Our casino expenses and~~ food and beverage ~~costs increased due to increases in both volumes~~outlets. Food and ~~promotions. For the quarter, our Adjusted Property EBITDA Margin increased to 18.6% from 15.4% in the prior-year quarter,~~beverage revenues declined by 25.5% and 35.6% for the ~~nine-month period increased to 18.2% from 16.5% in the prior-year period.~~

During September 2017, we settled litigation involving construction defects at our parking garage. The contractor and contractor's insurance company paid the Company $675,000 in exchange for a mutual release of claims and counterclaims. The settlement, which was recorded as a reduction to selling, general and administrative costs, effectively reimbursed the Company for costs incurred in pursuing those claims including $561,000 of legal fees. See Note 7 to the accompanying consolidated financial statements for further information regarding the lawsuit.

In late-June 2017, we opened a new oyster bar on the casino floor. Additionally, during the third quarter of 2017, we opened a swimming pool and beach complex along the property's white sand beach. See ~~Liquidity and Capital Resources - Capital Investments~~ ~~for further information.~~

~~Rising Star Casino Resort~~

~~Net revenues increased modestly during the~~respective three- and nine-month periods ended September 30, ~~2017 compared~~2020, due to fewer buffet covers following protocols for socially-distanced tables, the ~~prior-year periods, primarily due~~elimination of certain buffet promotions, and the decision to not initially reopen the Oyster Bar, which could not be operated efficiently while maintaining proper social distancing. Hotel revenues increased 3.0% for the three-months ended September 30, 2020, with an increase in ~~table games revenue. Table games revenues increased 18.7% and 8.0%~~hotel occupancy offsetting lower average daily room rates. The nine-month period ended September 30, 2020 reflects the approximately two-month closure of the hotel during the ~~three-~~height of the pandemic. Total

Table of Contents

occupied room-nights increased by 4.7% to 10,629 room-nights for the third quarter of 2020, and ~~nine- month periods, while slot revenues and non-gaming net revenues were flat during both periods. Our hotel occupancy was 88.5% compared~~decreased by 25.0% to ~~86.3% in~~23,232 room-nights for the ~~prior-year nine-month period.~~

nine-months ended September 30, 2020.

Adjusted Property EBITDA for the three-month period ended September 30, ~~2017 compared~~2020 increased by 115.9%, while the nine-month period decreased by 8.8% due to the ~~prior-year~~closure earlier in the year. Adjusted Property EBITDA for the three months ended September 30, 2020 was driven by a combination of increases in casino revenues, which saw benefits from our casino remodeling that was completed in mid-2019, and our focus on controlling costs. Such efforts included reducing staff, decreasing marketing expenses, cancelling free entertainment acts to comply with social distancing limitations on gatherings, and postponing the reopening of certain amenities, such as the Oyster Bar, or limiting their hours of operation. Volume-related costs were also lower, such as lower food costs at the buffet, due to fewer covers in light of capacity constraints.

Rising Star Casino Resort

Pursuant to an order from the state gaming commission, we temporarily suspended operations on March 16, 2020 until we were permitted to reopen on June 15, 2020. During the shutdown period, we reexamined our staff levels company-wide and we chose to reopen conservatively in terms of amenities and hours of operations.

For the quarter and year-to-date periods, total revenues (excluding contractual minimums related to the property’s sports revenue agreements of $0.4 million and $1.2 million for the respective three- and nine-months ended September 30, 2020) decreased ~~3.1%~~by $2.2 million and $15.2 million for the same periods ended September 30, 2020. This decrease was due to lower business volumes, primarily due to the impacts of COVID-19, as well as an increase in competition. A competitor near Louisville opened a large new casino in mid-December, replacing its original casino boat. Additionally, on January 1, 2020, racetrack casinos near Indianapolis began offering live table games. Casino revenue decreased by 7.0% and 37.8% for the respective three- and nine-months ended September 30, 2020. Food and beverage revenues decreased by 59.6% and 63.6% for the same periods ended September 30, 2020, reflecting the continued closure of Rising Star’s buffet operations and limited operating hours for its other restaurants since permitted to reopen. Hotel revenues also decreased for the three- and nine-month periods due to lower occupancy. Total occupied room-nights decreased 33.1% to 14,798 for the third quarter of 2020, and decreased 56.3% to 27,262 for the nine-months ended September 30, 2020.

Adjusted Property EBITDA (excluding contractual minimums related to the property’s sports revenue agreements of $0.4 million and $1.2 million for the respective three- and nine-months ended September 30, 2020) increased ~~selling, general~~by $1.9 million and ~~administrative costs~~decreased by $2.0 million for the same respective periods ended September 30, 2020. The increase for the three-month period was due to a focus on labor efficiencies throughout the property, with operating hours for table games and food and beverage ~~costs.~~outlets more appropriately matched to the demand for such services, as well as the launch of an improved loyalty program in June 2020. Also, a significant mass marketing campaign during the third quarter of 2019 that proved to be unsuccessful was absent in 2020. The nine-month period decrease was due primarily to the prolonged property closure, offsetting improvements in the third quarter.

Including the contracted sports revenues, revenues and Adjusted Property EBITDA for the third quarter of 2020 were $10.0 million and $2.4 million, respectively. For the nine-month period, such amounts were $20.2 million and $0.3 million, respectively. Currently, only one of our three contracted sports wagering websites is operating in Indiana. The remaining two sports wagering websites are expected to commence operations in the coming months. When all three websites have commenced operations in Indiana, our sports wagering revenue, based on the contractual minimums, should total at least $3.5 million on an annualized basis with few related expenses. Accordingly, we expect that almost all of this amount will be reflected in Adjusted Property EBITDA and operating income.

In 2019, the Indiana legislature approved a reduction in certain gaming taxes that benefits Rising Star, beginning on July 1, 2021.

Bronco Billy’s Casino and Hotel

Pursuant to state government orders, we temporarily closed Bronco Billy’s on March 17, 2020 until we were permitted by governing authorities to reopen on June 15, 2020. During the shutdown period, we reexamined our staff levels company-wide and we chose to reopen conservatively in terms of amenities and hours of operations.

Table of Contents

For the three- and nine-months ended September 30, 2020, total revenues (excluding contractual minimums related to the property’s sports revenue agreements of $0.3 million and $0.4 million for the respective three- and nine-months ended September 30, 2020) decreased by $0.5 million and $7.2 million, respectively, due to the mandated closure of our casino for approximately three months and business limitations designed to maintain social distancing, including the continued shutdown of all table games at the property and a steep reduction in the number of slot machines being operated. Casino revenues in the third quarter of 2020 increased by 6.7%, reflecting a 15.4% increase in slot revenue due to a 1.0 percentage point increase in the slot hold percentage. We did not have any table games revenue during the third quarter of 2020, as table games are not yet allowed to resume operations in Cripple Creek. For the nine-month period, casino revenues declined 28.3% due to the property’s temporary closure. Food and beverage revenues decreased by 62.4% and 59.6% for the respective three- and nine-months ended September 30, 2020 due to the closure, limitations on seating, fewer available food outlets upon reopening, and reduced operating hours. Hotel revenues decreased by 31.0% and 38.4% for the same respective periods, reflecting limited hotel room availability.

Adjusted Property EBITDA (excluding contractual minimums related to the property’s sports revenue agreements) nearly doubled to $3.1 million for the third quarter of 2020 from $1.6 million in the prior-year period. Expenses during the period were lower due to operational changes, labor controls, more efficient marketing due to improved analytics from Bronco Billy’s new slot marketing system, and decreases in food costs and device fees/taxes. Additionally, Bronco Billy’s had a $424,000 benefit in the third quarter of 2020 from the elimination of point redemption liabilities that accrued under the property’s prior loyalty program. For the nine-month period ended September 30, ~~2017 compared to the prior-year period,~~2020, Adjusted Property EBITDA increased 7.6% primarily attributed to higher revenues. Adjusted Property EBITDA Margin for the quarter was 5.7% versus 6.0% in the prior-year period, and 7.1% during the nine-month period versus 6.7% in the prior-year period.

~~During the third quarter of 2017, we opened our 56-space RV Park. See~~ ~~Liquidity and Capital Resources - Capital Investments~~ ~~for further information.~~

~~Bronco Billy's Casino and Hotel~~

Bronco Billy's was acquired on May 13, 2016, and therefore the year-to-date amounts for the 2016 period do not include Bronco Billy's results for the full period. See Note 4 to the consolidated financial statements for further information regarding the acquisition of Bronco Billy's.

For the three-month period ended September 30, 2017 compared to the prior-year period, net revenues increased due to an increase in slot coin-in, while Adjusted Property EBITDA increased 9.9% primarilydecreased by $0.6 million due to the ~~increase in revenues. Adjusted Property EBITDA Margin increased to 23.6% during~~approximately three-month closure, offsetting the ~~quarter from 22.7%~~improvements in the ~~prior-year~~third quarter.

~~For~~

Bronco Billy’s also benefited from reduced operations of the ~~nine-month~~Christmas Casino, which was a satellite casino that the property opened in November 2018. The Christmas Casino helped to modestly increase our overall revenues in Colorado in 2019, but the increase was insufficient to offset the additional operating costs. We sharply reduced the operating hours of the Christmas Casino following the pandemic closure period, ~~ended~~but kept it open for limited hours on weekends so as to safeguard the continuity of the gaming license. We completed the closure of the Christmas Casino in September ~~30, 2017, net~~2020, after the Colorado Limited Gaming Control Commission approved the reabsorption of the Christmas Casino license back into Bronco Billy’s main casino operations.

Including the contracted sports revenues, revenues and Adjusted Property EBITDA for the third quarter of 2020 were ~~consistent~~$7.9 million and $3.4 million, respectively. For the nine-month period, such amounts were $14.6 million and $2.8 million, respectively. These figures reflect the launch of one of our three contracted online/mobile sports wagering websites in Colorado on June 4, 2020. The remaining two online/mobile sports wagering websites are expected to commence operations in Colorado in the coming months, subject to the receipt of customary regulatory approvals. Similar to Indiana, when all three of our contracted sports wagering websites have commenced operations in Colorado, our sports wagering revenue, based on the contractual minimums, should total at least $3.5 million on an annualized basis with ~~the Company's expectations and recent historical performance.~~few related expenses. Accordingly, we expect that almost all of this amount will be reflected in Adjusted Property EBITDA ~~during the 2016 short-period included lower-than-normal gaming tax expense due to certain anomalies related to the timing of the acquisition~~ and ~~Colorado's graduated gaming tax rate structure. These gaming tax anomalies benefited the second quarter of 2016 by approximately $0.3 million.~~

operating income. We also launched an on-site sportsbook at Bronco Billy’s in September 2020.

The market in Cripple Creek is seasonal, favoring the summer months.

Northern Nevada

Net revenues increased during the three-month period ended September 30, 2017 compared to the prior-year period primarily reflecting an 8.6% increase in slot revenues. Revenues from table games remained flat. For the nine-month period ended September 30, 2017 compared to the prior-year period, net revenues were flat despite significant business interruption due to renovation construction activity at Grand Lodge Casino during the first and second quarters of 2017.

Adjusted Property EBITDA during the three-month period ended September 30, 2017 compared to the prior-year period increased slightly primarily due to the revenue increase described above, partially offset by increased promotional and marketing costs. Adjusted Property EBITDA Margin for the quarter was 26.7% compared to 28.1% in the prior-year quarter.

Adjusted Property EBITDA during the nine-month period ended September 30, 2017 compared to the prior-year period decreased 26.6% due to the renovation work during the first and second quarters, when up to two-thirds of the casino was closed for construction work, as well as increases in promotional costs and salaries and benefits. Adjusted Property EBITDA Margin for the nine-month period decreased to 14.7% from 20.1% in the prior-year period.

~~On June 30, 2017, we in conjunction with our landlord, completed the approximately $5 million renovation~~

The Northern Nevada segment consists of the Grand Lodge ~~Casino. The renovation included new decor~~ and ~~lighting throughout~~Stockman’s casinos and is historically the ~~casino, along with numerous new slot machines, table games, and slot and table chairs. We believe these changes materially improve the ambiance~~smallest of the casino floor and the overall guest experience. The renovation began during February 2017 and caused us to close portions of our casino floor, which impacted our second quarter financial results. The renovation was completed on-budget and in accordance with our planned construction schedule prior to the start of our busy summer season.

~~The Company's~~Company’s segments. Our Northern Nevada operations have historically been seasonal, with the summer and winter months accounting for a disproportionate share of ~~its~~ annual revenues. Additionally, snowfall levels during the winter months ~~also frequently have a positive or negative effect.~~can often affect operations, as the Grand Lodge Casino is located near several major ski ~~resorts, including Alpine Meadows, Northstar and Squaw Valley.~~resorts. Normally, we benefit from a ~~"good"~~“good” snow year, resulting in extended periods of operation at the nearby ski areas. ~~During~~There are likely to be pandemic-related restrictions at the ~~first~~nearby ski resorts in the upcoming ski season and we are unsure how this might affect our business.

Pursuant to state government orders on March 17, 2020, we temporarily closed both Grand Lodge Casino and Stockman’s Casino until we were permitted to reopen on June 4, 2020. Similar to our other properties, a focus on operational improvements and staffing levels positively improved expenses, but not enough to overcome pandemic-related revenue declines.

Table of Contents

For the three- and nine-months ended September 30, 2020, total revenues decreased by 35.2% and 42.9%, respectively, reflecting nearly three months of required casino closures throughout the state and pandemic-related declines in the number of guests visiting our two casinos. For example, the hotel that houses Grand Lodge Casino relies, in part, on destination travel and convention business, which we believe have been adversely affected due to a reluctance by some guests to travel via airplanes or to attend group functions during the current pandemic. Grand Lodge’s customer base also includes the local community, which has been less affected by the pandemic. Meanwhile, Stockman’s Casino is located in Fallon, Nevada, near a large Naval Air Station. The Navy has restricted much of its personnel from leaving the base station during the current pandemic, resulting in guest volume declines at Stockman’s Casino.

Accordingly, casino revenues decreased by 32.7% and 41.3% for the respective three- and nine-months ended September 30, 2020 due to business restrictions that resulted in lower guest counts at both properties. While we resumed table games operations starting in the third quarter of 2017, however, the snowfall was exceptional (one of the highest in recorded Lake Tahoe history), resulting in extended periods of road closures and power outages. Nevertheless, we believe that the favorable ski season helped offset part of the construction disruption2020 at Grand Lodge Casino, ~~from our renovation discussed above.~~

~~Corporate~~

~~Corporate expenses increased~~such operations remain closed at Stockman’s Casino. Slot volumes at Grand Lodge Casino and Stockman’s Casino declined 22.6% and 28.1%, respectively, during ~~both~~the third quarter of 2020. Food and beverage revenue at Stockman’s Casino decreased by $0.3 million and $0.9 million for the respective three- and nine-months ended September 30, 2020.

Adjusted Property EBITDA for the three- and nine-month periods ended September 30, ~~2017~~2020 decreased by about $1.1 million and $2.4 million respectively, due primarily to the effects of the state-mandated closure of casinos and the continuing constraints of safety protocols. Management’s decision to not reopen table games during the third quarter of 2020 at Stockman’s Casino – which requires significantly higher labor levels than our slot operations – helped to meaningfully reduce labor expense during the quarter and nine-month period at Stockman’s Casino. As a result, the impact of lower casino revenues for the three- and nine-month periods ended September 30, 2020 was partially offset by the reduction in labor, helping to mitigate the overall decline in Adjusted Property EBITDA.

Corporate

Corporate expenses for the three- and nine-month periods ended September 30, 2020 decreased by 18.2% and 19.1%, respectively, primarily due to ~~increases~~decreases in ~~salaries~~professional fees, payroll and related expenses, implementation of corporate services allocations to casino properties starting in April 2020, and to a lesser extent, a reduction in taxes and travel expenses. During the ~~cost~~period that our casinos were closed, we temporarily reduced our corporate staff to a small group of ~~health care benefits.~~

necessary employees.

In ~~August 2016,~~April 2020, we began allocating certain costs to the ~~Company executed~~properties, consistent with most public casino companies. Previously, such costs were carried at the corporate level. In the third quarter of 2020, a ~~lease~~total of $243,000 was allocated, consisting of $90,000 of additional costs at Silver Slipper, $46,000 at Bronco Billy’s, $59,000 at Rising Star and $48,000 for ~~4,479 square feet of office space in Las Vegas,~~Northern Nevada. The ~~new corporate space, while smaller, is~~allocations were based on total annual revenue in ~~a higher-quality office building~~2019. Management believes that such allocations are appropriate and that they make our financial results more convenient for consultants, lenders, investors and others with whom the Company does business. Monthly expenditures for rent in the new office space are $14,000 per month versus $11,000 per month under the previous lease, which was nearing the end of its term and expectedcomparable to ~~increase. The Company began occupying the new office space in June 2017.~~

other casino companies.

Non-GAAP Financial Measure

“Adjusted EBITDA” is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, ~~preopening~~pre-opening expenses, impairment charges, asset write-offs, recoveries, gain (loss) from asset disposals, project development and acquisition costs, and non-cash share-based compensation expense. Adjusted EBITDA information is presented solely as supplemental disclosure to measures reported in accordance with generally accepted accounting principles in the United States of America (“GAAP”) because management believes ~~these measures are (1)~~this measure is (i) a widely used ~~measures~~measure of operating performance in the gaming and hospitality industries ~~(2)~~and (ii) a principal basis for valuation of gaming and hospitality ~~companies, and (3) are~~companies. In addition, a version of Adjusted EBITDA (known as Consolidated EBITDA) is utilized in the covenants within our ~~debt agreements,~~indenture, although not necessarily defined in the same way as above. Adjusted EBITDA is not, however, a measure of financial performance or liquidity under GAAP. Accordingly, ~~these measures~~this measure 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.

Table of Contents

The following table presents a reconciliation of ~~Adjusted EBITDA to~~net income (loss) and operating income ~~and net income (loss):~~to Adjusted EBITDA:


(In thousands)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net income (loss)	$	7,708	$	938	$	(3,353)	$	(1,689)
Income tax (benefit) provision		(93)		(234)		(2)		51
Interest expense, net of amounts capitalized		2,391		2,428		7,329		8,062
Adjustment to fair value of warrants		403		262		(1,159)		161
Operating income		10,409		3,394		2,815		6,585
Project development costs		108		228		423		503
Depreciation and amortization		1,848		2,089		5,868		6,263
Loss on disposal of assets, net		—		10		439		5
Stock-based compensation		121		70		307		263
Adjusted EBITDA	$	12,486	$	5,791	$	9,852	$	13,619

(In thousands)
Three Months Ended
September 30,

Nine Months Ended
September 30,
2017 2016 2017 2016
Adjusted EBITDA $ 6,379
$ 5,640
$ 14,649
$ 12,607
Depreciation and amortization (2,193 ) (2,203 ) (6,428 ) (5,795 )
Gain (loss) on asset disposals (12 ) (309 ) 2
(309 )
Project development and acquisition costs (53 ) (130 ) (238 ) (902 )
Share-based compensation (128 ) (95 ) (397 ) (315 )
Operating income 3,993
2,903
7,588
5,286
Other (expense) income

Interest expense (2,718 ) (2,748 ) (8,102 ) (6,740 )
Debt modification costs —
(24 ) —
(624 )
Adjustment to fair value of warrants (302 ) 181
(272 ) (60 )
(3,020 ) (2,591 ) (8,374 ) (7,424 )
Income (loss) before income taxes 973
312
(786 ) (2,138 )
Income tax expense 184
177
552
458
Net income (loss) $ 789
$ 135
$ (1,338 ) $ (2,596 )

Table of Contents

The following tables present reconciliations of operating income (loss) to Adjusted Property EBITDA and Adjusted EBITDA.


Three Months Ended September 30, 2020
(In thousands)

									Adjusted
									Property
	Operating		Depreciation		Project		Stock-		EBITDA and
	Income		and		Development		Based		Adjusted
	(Loss)		Amortization		Costs		Compensation		EBITDA
Casino properties
Silver Slipper Casino and Hotel	$	5,793	$	702	$	—	$	—	$	6,495
Rising Star Casino Resort		1,817		619		—		—		2,436
Bronco Billy's Casino and Hotel		3,048		345		—		—		3,393
Northern Nevada Casinos		888		144		—		—		1,032
		11,546		1,810		—		—		13,356
Other operations
Corporate		(1,137)		38		108		121		(870)
	$	10,409	$	1,848	$	108	$	121	$	12,486


Three Months Ended September 30, 2019
(In thousands)
											Adjusted
											Property
	Operating		Depreciation		Loss on		Project		Stock-		EBITDA and
	Income		and		Disposal		Development		Based		Adjusted
	(Loss)		Amortization		of Assets		Costs		Compensation		EBITDA
Casino properties
Silver Slipper Casino and Hotel	$	2,119	$	883	$	7	$	—	$	—	$	3,009
Rising Star Casino Resort		(445)		601		—		—		—		156
Bronco Billy's Casino and Hotel		1,156		423		3		—		—		1,582
Northern Nevada Casinos		1,964		144		—		—		—		2,108
		4,794		2,051		10		—		—		6,855
Other operations
Corporate		(1,400)		38		—		228		70		(1,064)
	$	3,394	$	2,089	$	10	$	228	$	70	$	5,791

For the three months ended September 30, 2017
(In thousands)

Operating
income (loss)

Depreciation and
amortization
Loss from asset disposals
Project
development and
acquisition costs

Share-based
compensation

Adjusted
EBITDA
Casino properties
Silver Slipper
Casino and Hotel
$ 2,174
$ 872
$ 8
$ —
$ —
$ 3,054
Rising Star
Casino Resort
117
611
—
—
—
728
Bronco Billy's Casino and Hotel 1,300
468
1
—
—
1,769
Northern
Nevada Casinos
1,685
207
—
—
—
1,892
5,276
2,158
9
—
—
7,443
Other operations

Corporate (1,283 ) 35
3
53
128
(1,064 )
(1,283 ) 35
3
53
128
(1,064 )
$ 3,993
$ 2,193
$ 12
$ 53
$ 128
$ 6,379

For the three months ended September 30, 2016
(In thousands)

Operating
income (loss)

Depreciation and
amortization
Loss from asset disposals
Project
development and
acquisition costs

Share-based
compensation

Adjusted
EBITDA
Casino properties
Silver Slipper
Casino and Hotel
$ 1,480
$ 818
$ 6
$ —
$ —
$ 2,304
Rising Star Casino Resort 83
660
8
—
—
751
Bronco Billy's
Casino and Hotel
1,106
504
—
—
—
1,610
Northern Nevada Casinos 1,350
219
295
—
—
1,864
4,019
2,201
309
—
—

6,529
Other operations

Corporate (1,116 ) 2
—
130
95
(889 )
(1,116 ) 2
—
130
95
(889 )
$ 2,903
$ 2,203
$ 309
$ 130
$ 95
$ 5,640

Operating expenses deducted to arrive at operating income (loss) in the above tables for the three-month ~~periods~~period ended September 30, ~~2017~~2020 and ~~2016~~2019 included facility rents related to: (i) Silver Slipper of $0.5 million during 2020 and $0.4 million during ~~2017 and $0.3 million during 2016,~~2019, (ii) Northern Nevada of $0.4 million during 2020 and $0.5 million during 2019, and (iii) Bronco Billy’s of $0.2 million for both ~~periods presented, and (iii) Bronco Billy's~~periods.

Table of ~~$84,000 for both periods presented.~~

Contents


For the Nine Months Ended September 30, 2020
(In thousands)
											Adjusted
											Property
	Operating		Depreciation		Loss on		Project		Stock-		EBITDA and
	Income		and		Disposal		Development		Based		Adjusted
	(Loss)		Amortization		of Assets		Costs		Compensation		EBITDA
Casino properties
Silver Slipper Casino and Hotel	$	7,180	$	2,346	$	—	$	—	$	—	$	9,526
Rising Star Casino Resort		(1,509)		1,857		—		—		—		348
Bronco Billy's Casino and Hotel		1,685		1,109		4		—		—		2,798
Northern Nevada Casinos		(797)		441		435		—		—		79
		6,559		5,753		439		—		—		12,751
Other operations
Corporate		(3,744)		115		—		423		307		(2,899)
	$	2,815	$	5,868	$	439	$	423	$	307	$	9,852


For the Nine Months Ended September 30, 2019
(In thousands)
											Adjusted
											Property
	Operating		Depreciation		Loss on		Project		Stock-		EBITDA and
	Income		and		Disposal		Development		Based		Adjusted
	(Loss)		Amortization		of Assets		Costs		Compensation		EBITDA
Casino properties
Silver Slipper Casino and Hotel	$	7,844	$	2,599	$	5	$	—	$	—	$	10,448
Rising Star Casino Resort		(637)		1,800		—		—		—		1,163
Bronco Billy's Casino and Hotel		1,770		1,304		—		—		—		3,074
Northern Nevada Casinos		2,070		446		—		—		—		2,516
		11,047		6,149		5		—		—		17,201
Other operations
Corporate		(4,462)		114		—		503		263		(3,582)
	$	6,585	$	6,263	$	5	$	503	$	263	$	13,619

For the nine months ended September 30, 2017
(In thousands)

Operating
income (loss)

Depreciation and
amortization
(Gain) loss from asset disposals
Project
development and
acquisition costs

Share-based
compensation

Adjusted
EBITDA
Casino properties
Silver Slipper
Casino and Hotel
$ 6,453
$ 2,552
$ 8
$ —
$ —
$ 9,013
Rising Star
Casino Resort
812
1,859
—
—
—
2,671
Bronco Billy's Casino and Hotel 2,691
1,407
(6 ) —
—
4,092
Northern
Nevada Casinos
1,842
556
(7 ) —
—
2,391
11,798
6,374
(5 ) —
—
18,167
Other operations

Corporate (4,210 ) 54
3
238
397
(3,518 )
(4,210 ) 54
3
238
397
(3,518 )
$ 7,588
$ 6,428
$ (2 ) $ 238
$ 397
$ 14,649

For the nine months ended September 30, 2016
(In thousands)

Operating
income (loss)

Depreciation and
amortization
Loss from asset disposals
Project
development and
acquisition costs

Share-based
compensation

Adjusted
EBITDA
Casino properties
Silver Slipper Casino and Hotel $ 4,847
$ 2,482
$ 6
$ —
$ —
$ 7,335
Rising Star Casino Resort 482
1,993
8
—
—
2,483
Bronco Billy's Casino and Hotel 1,975
723
—
—
—
2,698
Northern Nevada Casinos 2,372
589
295
—
—
3,256
9,676
5,787
309
—
—
15,772
Other operations

Corporate (4,390 ) 8
—
902
315
(3,165 )
(4,390 ) 8
—
902
315
(3,165 )
$ 5,286
$ 5,795
$ 309
$ 902
$ 315
$ 12,607

Operating expenses deducted to arrive at operating income (loss) in the above tables for the ~~nine month periods~~nine-month period ended September 30, ~~2017~~2020 and ~~2016~~2019 included facility rents related to: (i) Silver Slipper of $1.2 million during ~~2017~~2020 and ~~$1.0~~$1.3 million during ~~2016,~~2019, (ii) Northern Nevada of $1.4 million ~~during~~for both ~~2017 and 2016,~~periods, and (iii) Bronco ~~Billy's~~Billy’s of ~~$251,000 during 2017 and $111,000 from May 13, 2016 through September 30, 2016.~~

$0.5 million for both periods.

Liquidity and Capital Resources

Cash Flows

and COVID-19 Impact

As of September 30, ~~2017,~~2020, we had ~~$22.4~~$34.0 million of unrestricted cash and ~~equivalents~~equivalents. We estimate that between approximately $7 million and our $2 million Revolving Loan under our First Lien Credit Facility was undrawn and fully available. Our ability to draw on our Revolving Loan is subject to, among other terms, our continued ability to meet our various financial covenants. Management estimates that approximately $12$9 million of cash ~~and equivalents~~ is ~~currently required for the~~used in our current day-to-day operations, including for on-site cash in our slot machines, change and redemption kiosks, and cages. In our efforts to preserve liquidity, we halted construction work on our planned parking garage at Bronco Billy’s, on which we had just begun construction. Whether or not we will be able to complete the parking garage in the near future will depend on the operating results of our casinos over the coming months, as well as the capital markets that might be available to us at some future date.

In May 2020, we received approximately $5.6 million of loan proceeds under the CARES Act. At that time, we were unsure as to the potential length of the ~~Company.~~closure period, the operating restrictions under which we might be allowed to reopen, and the response that our customers would have to the situation and those operating restrictions. Capital was otherwise generally

Table of Contents

not available to us at the time. Two of our subsidiaries, one in Colorado and one in Indiana, qualified under the Payroll Protection Plan aspect of the CARES Act and utilized the proceeds of such loans to put employees back to work and to pay certain other costs, such as utilities, as was permitted under the CARES Act.

Our casinos are our primary sources of income and operating cash ~~flow. There~~flows, and they were closed for approximately three months as a result of COVID-19. We currently believe that we have sufficient liquidity and resources to fund our operations through the generation of cash by our reopened properties (including in the third quarter of 2020), and our current cash balances. However, there can be no assurance that our ~~business~~reopened casinos will be able to continue to be open, given the ongoing pandemic, or that they will continue to generate sufficient cash flow ~~from operations or that future borrowings will be available in amounts sufficient~~ to enable us to pay our indebtedness or fund our other liquidity needs. ~~Subject~~We used the shutdown period to ~~financial, economic, competitive, regulatory~~reexamine our staffing levels company-wide, and we chose to reopen our properties conservatively in terms of amenities and hours of operation, given the uncertainties created by the pandemic. As a result, despite significant constraints on our operations in order to ensure social distancing and address appropriate health and safety concerns, operating profits improved over the prior-year period since the full reopening of our company in June 2020. We elected to defer one-third of management salaries until the reopening of at least four of our casinos, including Silver Slipper Casino and Hotel, and recently ended these salary deferrals in August 2020, although deferred amounts remain outstanding. Note that the pandemic has resulted in additional expenditures, such as additional costs to sanitize equipment between guests, to police social distancing, and to provide masks and other ~~uncertainties, many beyond~~protective equipment to employees and guests.

Because of the length of the look-forward period and the substantial items that are outside of its control, and despite its intent and best efforts to overcome the challenges in the current environment, management concluded that there is substantial doubt as to our ~~control, we believe that adequate financial resources (including from existing cash balances, operating cash flows and available credit) will be available~~ability to ~~fund ongoing operating requirements over~~continue as a going concern, particularly if rising levels of COVID-19 cases result in additional closures of some or all of the ~~next 12 months. However, we may need~~our casinos. We are attempting to ~~refinance our debt and/or seek additional debt and/or equity financing~~continue to ~~compete effectively and/or grow our business. Management is reviewing market conditions and exploring financing or refinancing alternatives, though~~mitigate the impacts of COVID-19, although there can be no ~~assurances of our ability to obtain any additional financing, refinance our existing debt, or fund growth efforts and~~certainty that we will be able to continue to ~~expand.~~

do so.

Cash flows -– operating activities.On a consolidated basis, cash provided by operations during the nine months ended September 30, ~~2017~~2020 was ~~$6.8~~$2.9 million, compared to ~~$6.3~~cash provided by operations of $5.7 million in the prior-year period. Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges, but are also affected by changes in working capital. Comparing ~~2017~~the 2020 and ~~2016,~~2019 periods, our operating cash flows ~~increased~~decreased primarily due to ~~improved operating results~~the business interruption from the COVID-19 pandemic. As discussed above, all of the Company’s casinos were closed for approximately three months beginning in mid-March 2020, and various state mandates continue to impact the Company’s ability to fully resume business operations. Since reopening, our ~~legal settlement, partially offset by working capital changes.~~

properties have performed well overall when compared to similar months in prior years, including 2019.

Cash flows – investing activities.On a consolidated basis, cash used in investing activities during the nine months ended September 30, ~~2017~~2020 was ~~$9.1~~$1.9 million, which primarily related to ~~several growth projects~~the garage construction at ~~our existing properties.~~Bronco Billy’s that was suspended in March 2020 amidst the COVID-19 pandemic. Cash used in investing activities during the prior-year period was ~~$26.7~~$6.2 million, which primarily related to capital expenditures for maintenance and certain growth-related projects, including the ~~acquisition~~potential expansion at Bronco Billy’s, the remodeling of ~~Bronco Billy's.~~

the Silver Slipper casino and the renovation of the Stockman’s Steakhouse.

Cash flows -– financing activities.On a consolidated basis, cash ~~used in~~provided by financing activities during the nine months ended September 30, ~~2017~~2020 was ~~$2.3~~$3.1 million, ~~which primarily related~~compared to ~~principal repayments for the Company's First Lien Term Loan and capital lease for the hotel at Rising Star. Cash~~cash provided by financing activities ~~for~~of $7.7 million in the prior-year ~~period was $28.9~~period. Comparing the 2020 and 2019 periods, we received proceeds totaling $5.6 million ~~and primarily~~ related to ~~$35~~unsecured loans under the CARES Act in 2020 and we issued an additional $10 million of ~~Second Lien Term Loan proceeds to~~Notes in May 2019, offset in both periods by principal payments on the Notes and the finance ~~the acquisition of Bronco Billy's, partially offset by First Lien Term Loan and Revolving Loan repayments.~~

lease at Rising Star.

Other Factors Affecting Liquidity

We have significant outstanding debt and contractual obligations, in addition to potential future capital expenditures. Our principal debt matures in February 2024. We anticipate refinancing this debt prior to its maturity, as we are unlikely to generate sufficient cash flow in the interim to completely repay these obligations. Certain planned capital ~~expenditures. We expect~~expenditures designed to ~~meet these obligations~~grow the Company, if pursued, would likely require additional financing, including perhaps the issuance of additional debt and ~~planned capital expenditure requirements primarily through future anticipated operating cash flows, cash and equivalents and,~~potentially some form of equity financing, if ~~necessary,~~ available ~~borrowings under our Revolving Loan. We also intend to refinance our existing debt facilities prior to their maturity. However, our~~at such time. Our operations are subject to financial, economic, competitive, regulatory and other factors, many of which are beyond our control. If we are unable to generate sufficient

Table of Contents

operating cash flow and/or access the capital markets, ~~do not facilitate the refinancing~~including as a result of ~~our debt,~~COVID-19, we could be required to adopt one or more alternatives, such as reducing, delaying, or eliminating certain planned capital expenditures, selling assets, or obtaining additional equity ~~financing.~~

financing, or borrowing at higher costs of capital. See “Bronco Billy’s Expansion Suspended and Colorado Referendum” for measures that have been implemented as a result of COVID-19.

Long-term Debt.As discussed above in the “Executive Overview,” we executed the Waivers and Amendments in April, August and November 2020 to amend the Indenture governing the Notes, which included an amendment to waive or delete our total leverage covenant requirement for the periods ended March 31, 2020, June 30, 2020 and September 30, 2020, among other items.

On February 2, 2018, we issued $100 million of Notes and, as noted, on May 10, 2019, we issued an additional $10 million of Notes. The ~~Company's First Lien Credit Facility includes~~Notes are collateralized by substantially all of our assets and are guaranteed by all of our material subsidiaries. The Notes bear interest at the greater of the three-month LIBOR or 1.0%, plus a ~~First Lien Term Loan~~margin rate of ~~$45~~7.0 percentage points. The Indenture governing the Notes provides for a 50 basis point interest premium if Mr. Lee reduces his equity interests by 50% or more while serving as our CEO. Mr. Lee has no current intention to sell any shares. Interest on the Notes is payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year until the Notes mature on February 2, 2024. On each interest payment date (as amended), we are required to make principal payments of $275,000 with a balloon payment for the remaining $103.5 million ~~and Revolving Loan~~due upon maturity. As of $2September 30, 2020, the total balance of the Notes was $107.1 million and the ~~Second Lien Credit Facility includes a term loan facility~~current interest rate is 8.00%. Mandatory prepayments of ~~$55 million.~~

~~At September 30, 2017, there was $41.6 million~~the Notes will be required upon the occurrence of ~~outstanding principal under our First Lien Term Loan.~~certain events, including sales of certain assets. We may redeem the Notes, in whole or in part, at any time at the applicable redemption price plus accrued and unpaid interest. The First Lien Term Loan matures in May 2019 and provides for monthly interest payments at a minimum rate of 5.25% and quarterly principal payments of $562,500 until May 2018 and $843,750 thereafter through maturity. The First Lien Credit Facility does not allow the repayment of Second Lien principal obligations so long as the First Lien amounts remain outstanding. As discussed above, at September 30, 2017, there were no amounts outstanding under our $2 million Revolving Loan under our First Lien Credit Facility. At September 30, 2017, there was $55 million of outstanding principal under the Second Lien Credit Facility. Interestredemption price (as amended) is currently ~~payable monthly at a rate of 13.5% (and may vary between 12.5%~~101.9% through February 1, 2021, then 100.9% through February 1, 2022, and ~~13.5%, depending on~~100.4% thereafter.

The Indenture governing the total leverage of the Company), and there are no quarterly principal payment requirements as all principal is due at maturity. The Second Lien Credit Facility is scheduled to mature six months after the First Lien Term Loan, or November 2019.

~~The First and Second Lien Credit Facilities contain~~Notes contains customary representations and warranties, events of default, and positive and negative covenants. We are ~~also~~ required to ~~make capital expenditures of at least 1.425%, and no more than 5.25%,~~

~~of our prior-year revenues, excluding capital expenditures made from any sale of our equity securities. The First Lien and Second Lien Credit Facilities 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~~measures Consolidated EBITDA ~~against outstanding debt and fixed charges~~ (as defined in the ~~agreements). Adjusted EBITDA includes results for Bronco Billy's as if it were owned for the entire measurement period. During~~Indenture) against outstanding debt. For the period ~~September 30, 2017 through and including March 30, 2018, we are required to maintain (i) with respect to our First Lien Credit Facility, a maximum~~ending December 31, 2020, the total leverage ratio ~~of 5.750x and a~~ maximum ~~first lien leverage ratio of 2.500x and (ii) with respect~~is 5.50x. As discussed above, we amended the Indenture to ~~our Second Lien Credit Facility, a maximum~~waive or delete the total leverage ~~ratio of 6.000x and a maximum first lien leverage ratio of 2.750x. Additionally, under the First Lien and Second Lien Credit Facilities, the fixed charge coverage ratio~~covenant as of ~~the last day of any fiscal quarter shall not be less than 1.10x~~March 31, 2020, June 30, 2020 and ~~1.0x, respectively.~~

~~As of~~ September 30, ~~2017, we were in compliance with our~~2020, and waived certain other covenants under the ~~First Lien~~Indenture, reflecting the effects of the temporary closure of our properties due to the pandemic. At current business levels, we may or may not need to amend the total leverage covenant for the fourth and ~~Second Lien Credit Facilities.~~subsequent quarters, despite the fact that the trailing twelve-month measures will continue to reflect the pandemic closure period. If needed, however, there is no guarantee that we will be successful in obtaining such amendments or waivers, in which case we may not be able to comply with such covenants in future periods. See Note 5 to the accompanying consolidated financial statements for more information about our ~~First Lien~~Indenture governing the Notes.

Unsecured Loans Under the CARES Act. In May 2020, we received approximately $5.6 million of total loan proceeds under the CARES Act for our wholly-owned subsidiaries at Bronco Billy’s and ~~Second Lien Credit Facilities.~~

Rising Star. Such funds were principally used, in accordance with the CARES Act, to rehire several hundred employees in advance of, and subsequent to, their reopenings in mid-June. These loans have a 1.0% interest rate and were originally due to mature in May 2022.

Recently-passed legislation extended the original maturity dates to May 2025. Monthly principal and interest payments are now deferred for 15 months. Beginning in September 2021, we are required to make monthly payments of principal and interest to the lender totaling $128,557. The Loans may be prepaid at any time prior to maturity with no prepayment penalties. Such loans may be forgiven, either in whole or in part, depending on the amount of such proceeds that are used for certain eligible expenses, including primarily the payroll and health benefits of employees who might otherwise have been without jobs or health benefits. We believe that we will fully use such proceeds for these eligible expenses in the allowed 24-week time period. There is no certainty, however, that any or all of such loans will be forgiven.

Common Stock Warrants. ~~The Company granted its~~In connection with the former Second Lien Credit Facility, ~~lenders~~we have warrants outstanding, representing rights to purchase approximately 1.0 million shares of ~~the Company's~~our common stock. The warrants include redemption rights which allow the warrant-holders, at their option, to require ~~the Company~~us to repurchase all or a portion of the warrants ~~under~~upon the occurrence of certain ~~conditions.~~triggering events. The refinancing of the Second Lien Credit Facility qualified as a triggering event. Accordingly, we have reclassified the obligation to current. As of the date of this filing, the Second Lien Lenders have not exercised such redemption rights. If they do exercise their redemption rights, we have the option of paying them in cash or with a four-year

Table of Contents

note on terms stipulated in the warrant agreement, or by registering and selling the shares related to the warrants through a public offering. See Note 56 to the accompanying consolidated financial statements for further information ~~associated with~~about these warrants which could affect our liquidity and capital resources.

Hyatt Option to Purchase our Leasehold Interest and Related Assets.Our lease with Hyatt ~~Equities, L.L.C. ("Hyatt")~~ to operate the Grand Lodge Casino contains an option for Hyatt ~~beginning on January 1, 2019,~~ to purchase our leasehold interest and related casino operating assets. See Note 73 to the accompanying consolidated financial statements for further ~~information about this option and related rental commitments that could affect our liquidity and capital resources.~~

information.

Capital Investments. WeIn addition to normal maintenance capital expenditures, we made significant capital investments through ~~September 30, 2017 and expect to make~~March 31, 2020, but have curtailed making any significant additional capital investments during the full year 2017 and beyond. These investments are designed to improve the guest experience and to drive visitation, revenue and income growth. For the projects listed below, we expect to invest an estimated $0.8 million during the remainder of ~~2017.~~

~~Rising Star Casino Resort~~ ~~- We are making significant improvements (approximately $5 million) at Rising Star, including:~~

~~Construction of~~2020 until we have a ~~56-space RV park, which was completed during the third quarter of 2017;~~

~~Renovation of approximately 71~~better understanding of the ~~hotel's guest rooms that had not been refurbished under an earlier refurbishment program. The refurbishment is expected to be completed~~continuing COVID-19 pandemic.

Bronco Billy’s. As discussed above in ~~2018;~~

~~Implementation~~the “Executive Overview,” we acquired the Imperial Hotel in June 2018, along with other nearby parcels of ~~a 10-vehicle ferry boat service to Kentucky, which will significantly shorten~~land, and leased the ~~distance for customers traveling from Kentucky to Rising Star. We have received a conditional use permit from~~Imperial Casino in August 2018, all with the ~~Boone County Board~~intent of ~~Adjustment for a ferry landing~~potentially expanding Bronco Billy’s. In late 2019 and early 2020, we began construction on ~~land that the Company has purchased~~certain aspects of such expansion, but suspended construction in ~~Rabbit Hash, Kentucky. Commencement of ferry boat operations remains subject to additional approvals, including but not limited to, the Army Corps of Engineers and the U.S. Coast Guard;~~

~~Improvements to the entry pavilion and the hotel's lobby and hallways~~March 2020 in ~~early 2018; and~~

~~Refurbishment of a portion~~light of the ~~casino~~COVID-19 pandemic. Whether or not we will be able to ~~include a VIP room and sense-of-arrival improvements estimated to be completed in 2018.~~

As of September 30, 2017, we had invested a total of approximately $3.0 million with respect to the foregoing improvements at Rising Star, primarily for the RV park, hotel remodel and ferry boat. We currently anticipate investing an additional $0.4 million during the remainder of 2017 and the balance in 2018.

~~Grand Lodge Casino -~~ During 2017, we purchased new gaming devices and equipment and made other capital expenditures alongside certain enhancements funded by our landlord. The Company and the landlord completed the refurbishment in June 2017.

~~Stockman's Casino~~ - During 2016 and 2017, we began improving the property's exterior, including its landscaping, ease of access, parking lot, digital marquee, and new porte cochère. The parking lot and a new digital marquee sign were completed during the fourth quarter of 2016, landscaping improvements were completed during the third quarter of 2017, and a new porte cochère is slated for completion during the fourth quarter of 2017. We anticipate constructing new administrative offices in 2018.

~~Silver Slipper~~ ~~- In late-June 2017, we opened a new 18-seat oyster bar~~resume construction in the ~~casino. Additionally, during the third quarter of 2017, we opened our new swimming pool and beach complex along the white sand beach fronting the property and made certain~~

~~improvements to traffic patterns and landscaping around the front of the property. We invested approximately $1.3 million related to these improvements.~~

~~Bronco Billy's~~ ~~- During the third quarter of 2017, we converted an underutilized bar at a key location~~near future will depend on the ~~property into a new food~~operating results of our casinos over the coming months, as well as the capital markets that might be available to us at some future date and ~~beverage concept named the Crippled Cow. The Crippled Cow offers signature coffee, wood-fired pizzas and micro-brewed beers.~~

We also acquired land and options to purchase land (including a closed casino and a small operating hotel) whereby a high-quality hotel may be potentially constructed at this property. We are considering re-opening the closed casino.

certain other issues.

Other Capital Expenditures. Additionally, we may fund various other ~~various~~ capital expenditure projects, depending on our financial ~~resources.~~resources and subject to the impacts of the COVID-19 pandemic described herein. Our capital expenditures may fluctuate due to decisions regarding strategic capital investments in new or existing facilities, and the timing of capital investments to maintain the quality of our properties. No assurance can be given that any of our planned capital expenditure projects will be completed or that any completed projects will be successful.

We evaluate projects based on a number of factors, including profitability forecasts, length of the development period, the 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.

~~Credit Facilities~~

~~As discussed above under~~ ~~Liquidity~~

Concessions Obtained for Certain Leases. In our efforts to preserve cash, we were able to obtain rent concessions in the form of abatements and ~~Capital Resources~~,reductions totaling approximately $0.4 million. In March 2020, we ~~have significant long-term debt.~~were granted rent abatements for the casino land lease at Silver Slipper totaling $155,000. In July 2020, we were able to obtain rent credits and reductions totaling $208,000 for the facility lease at Grand Lodge Casino. See Note 53 to the accompanying consolidated financial statements for ~~a description of the material terms and restrictive covenants of such agreements.~~

details.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, 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 are material to investors.

Critical Accounting Estimates and Policies

We describe our critical accounting estimates and policies in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Form 10-K for the year ended December 31, ~~2016.~~2019. We also discuss our critical accounting estimates and policies in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the year ended December 31, ~~2016.~~2019. There has been no significant change in our ~~critical accounting policies and~~ estimation methods since the end of ~~2016.~~

2019.

Forward-Looking Statements

This Quarterly Report on Form ~~10-Q~~10 Q 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, adequacy of our financial resources, anticipated sources of funds, fluctuations in operating results, revenue sources, business outlook, market forces, corporate strategies, contractual commitments, legal matters, capital requirements and other matters. The(the “Exchange Act”), for which the Private Securities Litigation Reform Act of

Table of Contents

1995 provides a safe ~~harbor for~~harbor. These forward-looking ~~statements. We note that many factors could cause~~statements include, but are not limited to, statements about our ~~actual results~~plans, objectives, representations and ~~experience to change significantly from~~intentions. They are not historical facts and are typically identified by the ~~anticipated results or expectations expressed in our forward-looking statements. When words and expressions~~use of terms such ~~as:~~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-Q,~~ 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,~~certainty.” Specifically, this Quarterly Report on Form 10 Q contains forward-looking statements ~~are being made.~~

relating to (i) our expectations regarding our growth strategies; (ii) the impact of the COVID-19 pandemic on our business operations and financial condition; (iii) our expectations regarding the intended use and the potential forgiveness of loans received under the CARES Act; (iv) our development and expansion plans, including our currently suspended expansion plans for Bronco Billy’s, our budget and ability to obtain financing for such expansion and the timing for commencement (or recommencement in the case of Phase One) or completion of each phase of such expansion; (v) our investments in capital improvements and other projects; (vi) our sports wagering agreements, including expected revenues and expenses, duration of terms and expected timing for launch and commencement of the remaining four sports betting websites by our contracting parties in Indiana and Colorado; (vii) our expectations regarding the Waukegan proposal; (viii) our expectations regarding the impact of the elimination of betting maximums and approval of additional table games in Colorado; (ix) our ability to use our CARES Act loan proceeds for eligible expense in the permitted time period; (x) our expectations regarding new marketing plans and new labor expense plans that were implemented upon our casino reopenings and our beliefs regarding the benefit of such plans to the properties’ long-term expense structure; (xi) our estimated operating requirements, including as a result of the impact of COVID-19; (xii) our belief that we have sufficient liquidity and resources to fund our reopened operations; (xiii) our expectations regarding improvements as a result of the new slot systems at Rising Star and Bronco Billy’s; (xiv) our intention to focus on improving our operating margins; (xv) anticipated expenditures as a result of COVID-19; (xvi) our beliefs regarding the adequacy of our insurance; (xvii) our expectations regarding the outcome of legal matters and the impact of recently-issued accounting standards; and (xviii) our estimates and expectations regarding certain accounting and tax matters, including estimated savings as a result of the new gaming tax schedule, among others.

Various matters 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 risks, uncertainties and other factors:

●

our ability to repay our substantial indebtedness;

●

our ability to continue to comply with the covenants and terms of the Indenture or to obtain future waivers or amendments from the lenders;

●

the adverse impact of the COVID-19 pandemic on our business, constructions projects, financial condition and operating results, including on our ability to continue as a going concern;

●

actions by government officials at the federal, state or local level with respect to steps to be taken, including, without limitation, additional temporary shutdowns, travel restrictions, social distancing and shelter-in place orders, in connection with the COVID-19 pandemic;

●

our ability to effectively manage and control expenses during temporary or extended shutdown periods;

●

the impact of temporary or extended shutdowns on our ability to maintain compliance with the terms and conditions of our indenture and other material contracts;

●

changes in guest visitation or spending patterns due to COVID-19 or other health or other concerns, including a decrease in overall demand after the initial spike following the reopening of our casinos;

●

the impact of social distancing requirements and other health and safety protocols implemented at our properties, including a reduction in our operating margins (or negative operating margins);

•~~indebtedness and projected borrowing risks;~~

Table of Contents

•~~substantial dilution risks related to our outstanding warrants and options;~~

●

potentially uninsurable liability exposure to customers and staff should they become (or allege that they have become) infected with COVID-19 while at one of our resorts;

●

unwillingness of employees to report to work due to the adverse effects of the COVID-19 pandemic or to otherwise conduct work under any revised work environment protocols;

●

the potential of increases in state and federal taxation to address budgetary and other impacts of the COVID-19 pandemic;

●

the potential of increased regulatory and other burdens to address the direct and indirect impacts of the COVID-19 pandemic

●

a continuing inability of the global response to contain the COVID-19 pandemic or to develop an effective vaccine or a rebound of the virus;

●

our ability to maintain strong relationships with our regulators, employees, lenders, suppliers, customers, insurance carriers, and other stakeholders;

●

our ability to successfully implement social distancing and other safety measures and to protect our workforce and guests upon the reopening of our casinos;

●

changes by the SBA or other governmental authorities regarding the CARES Act, loan programs established under the CARES Act, or related administrative matters;

●

our ability to comply with the terms of the loans and the CARES Act and to use the loans in a manner that results in forgiveness of some or all of the loans;

●

the availability of forgiveness of the loans under the CARES Act in whole or in part;

●

the inability to obtain financing upon reasonable terms or at all (including for projects such as the Bronco Billy’s expansion or the Waukegan proposal) or, if applicable, our inability to negotiate definitive agreements in accordance with the terms of the commitment letter related to the Waukegan proposal;

●

the impact of any uninsured losses;

●

disruptions in our supply chain;

●

disruptions or shortages in our labor supply;

●

the adverse impact of cancellations and/or postponements of hotel stays, live entertainment events and small meeting groups on our business, market position, growth, financial condition and operating results.

●

changes in guest visitation or spending patterns due to health or other concerns;

●

substantial dilution related to our outstanding stock warrants and options;

●

implementation of our growth strategies, including the Bronco Billy’s expansion, capital investments and potential acquisitions;

●

risks related to development and construction activities (including disputes with and defaults by contractors and subcontractors; construction, equipment or staffing problems; shortages of materials or skilled labor; environment, health and safety issues; and unanticipated cost increases);

Table of Contents

●

risks related to entering into sports betting operations, including our ability to establish and maintain relationships with key partners or vendors, the ability and/or willingness of our sports wagering providers to sustain sports betting operations should they experience an extended period of unprofitability, and the ability to replace existing partners or vendors on similar terms as our existing contractual minimums;

●

our ability to successfully implement our sports betting operations in the anticipated time frame and to accurately forecast its impact on our cash flows;

●

risks related to entering into the sports wagering agreements, including the ability of the parties to perform their obligations under the respective agreements;

●

the impact that any discontinuance, modification or other reform of LIBOR, or the establishment of alternative reference rates, may have on our LIBOR-based debt instruments such as our senior secured notes;

●

commerciality of our ferry boat service and risks associated with ferry boat operations;

●

our ability to successfully integrate acquisitions;

●

the development and success of our expansion projects and the financial performance of completed projects;

●

some of our casinos being on leased property, which leases are subject to early termination in the event of a default;

●

changes to anticipated trends in the gaming industries;

●

changes in patron demographics;

●

general market and economic conditions including, but not limited to, the effects of housing and energy conditions on the economy in general and on the gaming and lodging industries in particular;

●

our ability to access capital and credit upon reasonable terms, including our ability to finance future business requirements and to repay or refinance debt as it matures;

●

our dependence on key personnel;

●

our ability and the cost to hire, motivate and retain employees during periods with a competitive labor environment and, in some jurisdictions, increases in minimum wages;

●

availability of adequate levels of insurance;

●

changes to federal, state, and local taxation and tax rates, and gaming, health and safety and environmental laws, regulations and legislation;

●

any violations of the anti-money laundering laws;

●

cyber-security risks, including misappropriation of customer information or other breaches of information security;

●

our ability to obtain and maintain gaming and other licenses, and obtain entitlements and other regulatory approvals for projects;

●

the impact of severe weather;

•~~growth strategies, including potential acquisitions and investments;~~

Table of Contents

•~~challenges regarding the successful integration of acquisitions;~~

●

lack of alternative routes to certain of our properties;

●

the competitive environment, including increased competition in our target market areas;

●

the outcome of litigation matters;

●

marine transportation risks, including disasters, accidents, damage, injury, death and spills;

●

our ability to successfully estimate the impact of certain accounting and tax matters, including the effect on our company of adopting certain accounting pronouncements;

●

the scale, speed and effectiveness that the parties with which we have contracted will introduce and market their respective sports wagering services in Indiana and Colorado;

●

the potential for any of the parties with which we have contracted for sports wagering to terminate their agreements prior to the expiration of their term (such as through bankruptcy, sustained unprofitability of their online/mobile operations, a court ruling that overturns the legality of sports wagering in Indiana or Colorado, or, in some cases, their purchase of a physical casino in Indiana or Colorado with a competing online/mobile sports wagering application, subject to an extended non-compete period), and our ability to replace such party with another third-party on similar financial terms and in a timely manner; and

●

other factors described from time to time in this and our other SEC filings and reports.

•~~development and construction activities risks;~~

•~~some of our casinos being on leased property;~~

•~~changes to anticipated trends in the gaming industries;~~

•~~changes in patron demographics;~~

~~general market and economic conditions including, but not limited to, the effects of 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 and to repay or refinance debt as it matures;~~

~~dependence on key personnel;~~

~~availability of adequate levels of insurance;~~

changes to federal, state, and local taxation and tax rates, and gaming and environmental laws, regulations and legislation, including obtaining and maintaining gaming and other licenses and approvals;

~~severe weather;~~

~~lack of alternative routes to certain of our properties;~~

~~competitive environment, including increased competition in our target market areas; and~~

~~other risks, uncertainties and factors described from time to time in this and our other SEC filings and reports.~~

We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or ~~conditions.~~conditions, except as required by law. 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 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures — As of September 30, ~~2017,~~2020, 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, as of September 30, 2020, 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 SEC filings.

We have established controls and procedures designed at the reasonable assurance level to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting — There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II - OTHER INFORMATION

Item 1.Legal Proceedings

Reference is made to the disclosure set forth in Part I, Item 3. Legal Proceedings, in our Annual Report on Form 10-K for the year ended December 31, 2016 regarding the construction defect litigation related to the parking garage at the Silver Slipper Casino and Hotel. During the three months ended September 30, 2017, we reached a settlement with the contractor and contractor's insurance company in connection with such litigation. The parties agreed to a mutual release of all claims and counterclaims, and the contractor and the contractor's insurance company agreed to pay us $675,000.

We incurred $55,000 and $98,000 of legal costs during the three and nine-months ended September 30, 2017, respectively, related to this matter. We have received all settlement proceeds. See Part I, Item 1, "Financial Statements" - Note 7 - Litigation for further information.

~~Additionally, 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 1A. Risk Factors

~~There were no material changes from~~

In addition to the risk factors ~~set forth under Part I, Item 1A “Risk Factors” section of the Company’s~~previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2019, the following risk factor was identified:

We ~~encourage investors~~are subject to ~~review the~~ risks related to corporate social responsibility and ~~uncertainties relating to~~reputation.

Many factors influence our ~~business disclosed in that Annual Report on Form 10-K, as well as those contained in "Forward-Looking Statements".~~

~~If any of the risks discussed in the sections referenced above actually occur, our business, financial condition~~reputation and ~~results of operations could be materially and adversely affected. If this were to happen,~~ the value of our ~~common stock~~brands including the perception held by our customers, business partners, other key stakeholders and the communities in which we do business. Our business faces increasing scrutiny related to environmental, social and governance activities and risk of damage to our reputation and the value of our brands if we fail to act responsibly in a number of areas, such as diversity and inclusion, environmental stewardship, climate change, workplace conduct, human rights, philanthropy and support for local communities. Any harm to our reputation could ~~decline significantly,~~impact employee engagement and ~~investors~~retention and the willingness of customers and our partners to do business with us, which could ~~lose~~have a material adverse effect on our business, results of operations and cash flows.

Item 5. Other Information

Item 1.01 Entry into a Material Definitive Agreement.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On November 6, 2020, the Company executed the Fifth Amendment dated as of November 6, 2020 to amend the Indenture to the Notes. Reflecting the continuing impact on the Company’s business operations due to the ongoing COVID-19 pandemic, the Fifth Amendment deleted the total leverage ratio covenant as of September 30, 2020. The Company paid an amendment fee of 1.00%, or approximately $1.07 million, to the holders of its Notes, based on the outstanding balance of the aggregate principal amount as of the amendment date.

The Notes are collateralized by substantially all ~~or part~~ of ~~their investment.~~

~~This report~~the Company’s assets and are guaranteed by all of its material subsidiaries.

The foregoing description of the Fifth Amendment does not purport to be complete and is qualified in its entirety by ~~these risk factors.~~reference to the copy of the Fifth Amendment attached as Exhibit 4.2 to this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Table of Contents

Item 6. Exhibits


Exhibit Number		Description
~~10.1†~~ 3.1		Second Amended and Restated Bylaws of Full House Resorts, Inc. ~~Annual Incentive Plan for Executives~~, effective July 1, 2020 (incorporated by reference to Exhibit ~~10.1~~3.1 to the ~~Company's~~Company’s Current Report on Form 8-K (SEC File No. 1-32583) filed on ~~August 1, 2017)~~July 2, 2020).
~~10.2~~ 4.1		~~Second~~Waiver and Fourth Amendment to ~~Hotel Lease/Purchase Agreement~~Indenture, dated ~~September 19, 2017,~~as of August 12, 2020, by and ~~between Rising Sun/Ohio County First,~~among Full House Resorts, Inc., Wilmington Trust, National Association and ~~Gaming Entertainment (Indiana)~~the Guarantors (as named therein) (incorporated by reference to Exhibit ~~10.1~~4.2 to the ~~Company's 8-K~~Company’s Quarterly Report on Form 10-Q (SEC File No. 1-32583) filed on ~~September 21, 2017 )~~August 13, 2020).
31.1* 4.2*		Fifth Amendment to Indenture, dated as of November 6, 2020, by and among Full House Resorts, Inc., Wilmington Trust, National Association and the Guarantors (as named therein).
10.1*		Addendum A to Promissory Note, effective as of September 22, 2020 by Gaming Entertainment (Indiana) LLC in favor of Zions Bancorporation, N.A. dba Nevada State Bank.
10.2*		Addendum A to Promissory Note, effective as of September 22, 2020 by FHR-Colorado LLC in favor of Zions Bancorporation, N.A. dba Nevada State Bank.
10.3		Fifth Amendment to Casino Operations Lease dated July 31, 2020 by and between Hyatt Equities, L.L.C., as landlord, and Gaming Entertainment (Nevada) LLC, as tenant (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (SEC File No. 1-32583) filed on August 13, 2020).
31.1*		Certification of principal executive officer pursuant to Exchange Act Rule 13a-14(a)/15(d)-14(a), as adopted pursuant to ~~Section~~Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of principal financial officer pursuant to Exchange Act Rule 13a-14(a)/15(d)-14(a), 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.

** Furnished herewith.

Table of Contents



*	~~Filed herewith.~~
†	~~Management contract or compensatory plan or arrangement.~~

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




		FULL HOUSE RESORTS, INC.

Date: November ~~9, 2017~~6, 2020	By:	/s/ DANIEL R. LEE
		Daniel R. Lee Chief Executive Officer (on behalf of the Registrant and as principal executive officer)


Date: November ~~9, 2017~~6, 2020	By:	/s/ LEWIS A. FANGER
		Lewis A. Fanger Chief Financial Officer (on behalf of the Registrant and as principal financial officer and as principal accounting officer)


(Mark One)
~~(Mark One)~~ ☑
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, ~~2017~~2020
or
o ☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to



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

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


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

Large accelerated filer ☐	Accelerated filer ☐	Emerging growth company ☐
Non-accelerated filer ☑
~~Large Accelerated Filer~~ o	~~Accelerated Filer~~ o
~~Non Accelerated Filer~~ o ~~(Do not check if a smaller reporting company)~~	Smaller reporting company ☑þ
~~Emerging growth company~~ o


			Page
					~~Page~~ PART I FINANCIAL INFORMATION
~~PART I. Financial Information~~
Item 1.	Financial Statements (Unaudited)		3
	Consolidated Statements of Operations		3
	Consolidated Balance Sheets		4
	Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity		5
	Consolidated Statements of Cash Flows		6
	Condensed Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17 23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		29 42
Item 4.	Controls and Procedures		29 42

PART ~~II. Other Information~~				II OTHER INFORMATION
Item 1.	Legal Proceedings		30 43
Item 1A.	Risk Factors		30 43
Item 6.5.	~~Exhibits~~Other Information		31 43
Item 6.	Exhibits		44


Signatures		32	45



FULL HOUSE RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues
Casino	$	39,009		$	36,967		$	110,702		$	97,093
Food and beverage	8,760			8,282			24,759			21,438
Hotel	2,408			2,361			6,724			6,488
Other operations	1,234			1,252			3,250			3,094
Gross revenues	51,411			48,862			145,435			128,113
Less promotional allowances	(7,685		)	(7,601		)	(21,968		)	(20,309		)
Net revenues	43,726			41,261			123,467			107,804
Operating costs and expenses
Casino	20,102			19,380			57,556			49,910
Food and beverage	3,466			2,817			9,598			7,090
Hotel	348			297			826			768
Other operations	483			475			1,333			1,236
Selling, general and administrative	13,076			12,747			39,889			36,508
Project development, acquisition costs and other	65			439			249			1,211
Depreciation and amortization	2,193			2,203			6,428			5,795
	39,733			38,358			115,879			102,518
Operating income	3,993			2,903			7,588			5,286
Other (expense) income
Interest expense, net of $77 capitalized for both 2017 periods	(2,718		)	(2,748		)	(8,102		)	(6,740		)
Debt modification costs	—			(24		)	—			(624		)
Adjustment to fair value of warrants	(302		)	181			(272		)	(60		)
	(3,020		)	(2,591		)	(8,374		)	(7,424		)
Income (loss) before income taxes	973			312			(786		)	(2,138		)
Provision for income taxes	184			177			552			458
Net income (loss)	$	789		$	135		$	(1,338	)	$	(2,596	)

Basic income (loss) per share	$	0.03		$	0.01		$	(0.06	)	$	(0.13	)
Diluted income (loss) per share	$	0.03		$	—		$	(0.06	)	$	(0.13	)



FULL HOUSE RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
	September 30, 2017			December 31, 2016
	(Unaudited)
ASSETS
Current assets
Cash and equivalents	$	22,420		$	27,038
Accounts receivable, net of collection allowance of $122 and $53	1,575			1,909
Inventories	1,986			1,329
Prepaid expenses	3,745			2,809
	29,726			33,085
Property and equipment, net	114,551			111,465
Other long-term assets
Goodwill	21,286			21,286
Intangible assets, net of accumulated amortization of $7,756 and $7,732	10,943			10,966
Deposits and other	894			404
	33,123			32,656
	$	177,400		$	177,206
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	5,321		$	4,910
Accrued payroll and other	12,195			11,122
Current portion of long-term debt	1,969			1,688
Current portion of capital lease obligation	413			419
	19,898			18,139

Common stock warrant liability and other long-term obligations	1,589			1,117
Deferred taxes	2,458			1,907
Long-term debt, net of current portion	92,939			94,246
Capital lease obligation, net of current portion	4,978			5,318
	121,862			120,727
Commitments and contingencies (Notes 5 and 7)
Stockholders’ equity
Common stock, $0.0001 par value, 100,000,000 shares authorized; 24,247,418 and 24,221,558 shares issued and 22,890,823 and 22,864,963 shares outstanding	2			2
Additional paid-in capital	51,668			51,271
Treasury stock, 1,356,595 common shares	(1,654		)	(1,654		)
Retained earnings	5,522			6,860
	55,538			56,479
	$	177,400		$	177,206



FULL HOUSE RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited) (In thousands)
	Common stock					Treasury stock
	Shares	Dollars		Additional Paid-in Capital		Shares	Dollars			Retained Earnings			Total Stockholders' Equity
Balance, January 1, 2017	24,221	$	2	$	51,271	1,357	$	(1,654	)	$	6,860		$	56,479
Share-based compensation	26	—		397		—	—			—			397
Net loss	—	—		—		—	—			(1,338		)	(1,338		)
Balance, September 30, 2017	24,247	$	2	$	51,668	1,357	$	(1,654	)	$	5,522		$	55,538



Pro Forma Consolidated Statement of Operations
(In thousands except per share data, unaudited)
	For the Nine Months Ended September 30, 2016
Net revenues	$	117,352
Net loss	(3,372		)
Basic and diluted loss per share	(0.17		)



(In thousands)	September 30, 2017
	(unaudited)
	Outstanding Principal			Unamortized Discount			Unamortized Debt Issuance Costs			Long-term Debt, Net
First Lien Term Loan	$	41,625		$	—		$	(374	)	$	41,251
Revolving Loan	—			—			—			—
Second Lien Term Loan	55,000			(346		)	(997		)	53,657
	96,625			(346		)	(1,371		)	94,908
Less current portion	(1,969		)	—			—			(1,969		)
	$	94,656		$	(346	)	$	(1,371	)	$	92,939



(In thousands)	December 31, 2016
	Outstanding Principal			Unamortized Discount			Unamortized Debt Issuance Costs			Long-term Debt, Net
First Lien Term Loan	$	43,312		$	—		$	(561	)	$	42,751
Revolving Loan	—			—			—			—
Second Lien Term Loan	55,000			(469		)	(1,348		)	53,183
	98,312			(469		)	(1,909		)	95,934
Less current portion	(1,688		)	—			—			(1,688		)
	$	96,624		$	(469	)	$	(1,909	)	$	94,246



(In thousands)	Three Months Ended					Nine Months Ended
	September 30, 2017		September 30, 2016			September 30, 2017			September 30, 2016

Numerator:
Net income (loss) attributable to Full House Resorts, Inc. - basic	$	789	$	135		$	(1,338	)	$	(2,596	)
Adjustment for assumed conversion of warrants	—		(181		)	—			—
Net income (loss) attributable to Full House Resorts, Inc. - diluted	$	789	$	(46	)	$	(1,338	)	$	(2,596	)

Denominator:
Weighted-average common share equivalents - basic	22,891		19,689			22,877			19,666
Potential dilution from share-based awards	772		195			—			—
Potential dilution from assumed conversion of warrants	—		112			—			—
Weighted-average common and common share equivalents - diluted	23,663		19,996			22,877			19,666
Anti-dilutive share-based awards and warrants excluded from the calculation of diluted earnings per share	1,487		494			3,545			3,065



	Number of Stock Options	Weighted Average Exercise Price
Options outstanding at January 1, 2017	2,057,950	$	1.42
Granted	479,990	$	2.32
Exercised	—	n/a
Canceled/Forfeited	—	n/a
Options outstanding at September 30, 2017	2,537,940	$	1.59
Options exercisable at September 30, 2017	1,295,996	$	1.39



(In thousands, unaudited)
	For the Three Months Ended,						For the Nine Months Ended,
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
Net Revenues
Silver Slipper Casino and Hotel	$	16,425		$	14,987		$	49,520		$	44,326
Rising Star Casino Resort	12,698			12,553			37,498			36,852
Bronco Billy's Hotel and Casino	7,505			7,092			20,140			10,427
Northern Nevada Casinos	7,098			6,629			16,309			16,199
	$	43,726		$	41,261		$	123,467		$	107,804

Adjusted Property EBITDA
Silver Slipper Casino and Hotel	$	3,054		$	2,304		$	9,013		$	7,335
Rising Star Casino Resort	728			751			2,671			2,483
Bronco Billy's Hotel and Casino	1,769			1,610			4,092			2,698
Northern Nevada Casinos	1,892			1,864			2,391			3,256
	7,443			6,529			18,167			15,772

Other operating (expenses) income:
Depreciation and amortization	(2,193		)	(2,203		)	(6,428		)	(5,795		)
Corporate expenses	(1,064		)	(889		)	(3,518		)	(3,165		)
Project development and acquisition costs	(53		)	(130		)	(238		)	(902		)
Gain (loss) on asset disposals, net	(12		)	(309		)	2			(309		)
Share-based compensation	(128		)	(95		)	(397		)	(315		)
Operating income	3,993			2,903			7,588			5,286
Other (expense) income:
Interest expense	(2,718		)	(2,748		)	(8,102		)	(6,740		)
Debt modification costs	—			(24		)	—			(624		)
Adjustment to fair value of warrants	(302		)	181			(272		)	(60		)
	(3,020		)	(2,591		)	(8,374		)	(7,424		)
Income (loss) before income taxes	973			312			(786		)	(2,138		)
Provision for income taxes	184			177			552			458
Net income (loss)	$	789		$	135		$	(1,338	)	$	(2,596	)



(In thousands)	Three Months Ended September 30,				Percent Change		Nine Months Ended September 30,						Percent Change
	2017		2016		Percent Change		2017			2016			Percent Change
Net revenues	$	43,726	$	41,261	6.0	%	$	123,467		$	107,804		14.5	%
Operating expenses	39,733		38,358		3.6	%	115,879			102,518			13.0	%
Operating income	3,993		2,903		37.5	%	7,588			5,286			43.5	%
Interest and other non-operating expenses	3,020		2,591		16.6	%	8,374			7,424			12.8	%
Income tax expense	184		177		4.0	%	552			458			20.5	%
Net income (loss)	$	789	$	135	484.4	%	$	(1,338	)	$	(2,596	)	(48.5	)%



For the three months ended September 30, 2017
(In thousands)
	Operating income (loss)			Depreciation and amortization		Loss from asset disposals		Project development and acquisition costs		Share-based compensation		Adjusted EBITDA
Casino properties
Silver Slipper Casino and Hotel	$	2,174		$	872	$	8	$	—	$	—	$	3,054
Rising Star Casino Resort	117			611		—		—		—		728
Bronco Billy's Casino and Hotel	1,300			468		1		—		—		1,769
Northern Nevada Casinos	1,685			207		—		—		—		1,892
	5,276			2,158		9		—		—		7,443
Other operations
Corporate	(1,283		)	35		3		53		128		(1,064		)
	(1,283		)	35		3		53		128		(1,064		)
	$	3,993		$	2,193	$	12	$	53	$	128	$	6,379