UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended ~~September~~June 30, ~~2022~~2023
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission File No. 1-32583

FULL HOUSE RESORTS, INC.

(Exact name of registrant as specified in its charter)


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

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

(702) 221-7800

(Registrant’s telephone number, including area code)

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


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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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

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

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

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

As of ~~November 3, 2022,~~August 4, 2023, there were ~~34,399,084~~34,577,688 shares of Common Stock, $0.0001 par value per share, outstanding.

Table of Contents

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

FORM 10-Q

INDEX


		Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	3
	Consolidated Balance Sheets at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022	4
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	5
	Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	6
	Condensed Notes to Consolidated Financial Statements	8
	Note 1 ⸺ Organization	8
	Note 2 ⸺ Basis of Presentation and Significant Accounting Policies	8
	Note 3 ⸺ Leases	12
	Note 4 ⸺ Long-Term Debt	15
	Note 5 ⸺ Income Taxes	17
	Note 6 ⸺ Commitments and Contingencies	18
	Note 7 ⸺ Earnings (Loss) Per Share	18
	Note 8 ⸺ Share-Based Compensation	19
	Note 9 ⸺ Segment Reporting and Disaggregated Revenue	20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 6.	Exhibits	4041


Signatures		4142

Table of Contents

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,


2022

2021

2022

2021
Revenues








Casino

$
29,721

$
32,506

$
88,293

$
99,217
Food and beverage

6,811

7,092

20,255

20,633
Hotel

2,490

2,469

7,076

7,190
Other operations, including contracted sports wagering

2,371

5,171

11,575

9,848

41,393

47,238

127,199

136,888
Operating costs and expenses








Casino

10,292

11,261

30,273

32,687
Food and beverage

6,814

6,199

20,134

17,487
Hotel

1,256

1,136

3,524

3,332
Other operations

587

576

1,594

1,522
Selling, general and administrative

15,218

14,791

44,795

43,211
Project development costs, net

(149)

318

33

491
Preopening costs

2,594

17

4,914

17
Depreciation and amortization

2,386

1,819

6,012

5,448
Loss on disposal of assets, net

—

2

3

674

38,998

36,119

111,282

104,869
Operating income

2,395

11,119

15,917

32,019
Other expense








Interest expense, net

(5,838)

(6,405)

(19,225)

(17,531)
Loss on modification and extinguishment of debt, net

(105)

—

(4,530)

(6,104)
Adjustment to fair value of warrants

—

—

—

(1,347)

(5,943)

(6,405)

(23,755)

(24,982)
(Loss) income before income taxes

(3,548)

4,714

(7,838)

7,037
Income tax provision (benefit)

29

95

(16)

379
Net (loss) income

$
(3,577)

$
4,619

$
(7,822)

$
6,658

Basic (loss) earnings per share

$
(0.10)

$
0.13

$
(0.23)

$
0.21
Diluted (loss) earnings per share

$
(0.10)

$
0.13

$
(0.23)

$
0.19


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Revenues
Casino	$	45,359	$	29,488	$	81,346	$	58,572
Food and beverage		8,673		6,933		16,333		13,444
Hotel		2,348		2,407		4,492		4,586
Other operations, including contracted sports wagering		3,002		5,555		7,317		9,204
		59,382		44,383		109,488		85,806
Operating costs and expenses
Casino		16,990		10,106		30,334		19,981
Food and beverage		9,030		6,752		16,485		13,320
Hotel		1,228		1,197		2,447		2,268
Other operations		705		545		1,187		1,007
Selling, general and administrative		21,577		14,184		39,806		29,577
Project development costs		17		17		24		182
Preopening costs		1,086		1,534		11,583		2,320
Depreciation and amortization		8,155		1,834		14,014		3,626
(Gain) loss on disposal of assets		—		(5)		—		3
		58,788		36,164		115,880		72,284
Operating income (loss)		594		8,219		(6,392)		13,522
Other (expense) income
Interest expense, net		(5,633)		(6,988)		(10,452)		(13,387)
Loss on modification of debt		—		(19)		—		(4,425)
Gain on insurance settlement		—		—		355		—
		(5,633)		(7,007)		(10,097)		(17,812)
(Loss) income before income taxes		(5,039)		1,212		(16,489)		(4,290)
Income tax provision (benefit)		561		5,567		526		(45)
Net loss	$	(5,600)	$	(4,355)	$	(17,015)	$	(4,245)

Basic loss per share	$	(0.16)	$	(0.13)	$	(0.49)	$	(0.12)
Diluted loss per share	$	(0.16)	$	(0.13)	$	(0.49)	$	(0.12)

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,


2022

2021
ASSETS

Current assets




Cash and equivalents

$
85,712

$
88,721
Restricted cash

156,117

176,572
Accounts receivable, net of reserves of $254 and $257

2,806

4,693
Inventories

1,658

1,660
Prepaid expenses and other

6,512

3,726

252,805

275,372

Property and equipment, net

272,097

149,540
Operating lease right-of-use assets, net

15,556

15,814
Goodwill

21,286

21,286
Other intangible assets, net

10,877

10,896
Deposits and other

2,130

934

$
574,751

$
473,842
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

$
4,701

$
3,874
Construction payable

16,425

4,537
Accrued payroll and related

4,223

5,473
Accrued interest

4,322

9,861
Other accrued liabilities

9,256

10,252
Current portion of operating lease obligations

3,103

3,542
Current portion of finance lease obligation

530

514

42,560

38,053

Operating lease obligations, net of current portion

12,962

12,903
Finance lease obligation, net of current portion

2,384

2,783
Long-term debt, net

401,429

301,619
Deferred income taxes, net

1,039

1,055
Contract liabilities, net of current portion

7,956

4,714

468,330

361,127
Commitments and contingencies (Note 7)




Stockholders’ equity




Common stock, $0.0001 par value, 100,000,000 shares authorized; 35,302,549 and 35,302,549 shares issued and 34,399,084 and 34,242,581 shares outstanding

4

4
Additional paid-in capital

110,249

108,911
Treasury stock, 903,465 and 1,059,968 common shares

(1,102)

(1,292)
(Accumulated deficit) retained earnings

(2,730)

5,092

106,421

112,715

$
574,751

$
473,842


	June 30,		December 31,
	2023		2022
ASSETS
Current assets
Cash and equivalents	$	35,501	$	56,589
Restricted cash		78,078		134,587
Accounts receivable, net of reserves of $216 and $249		6,136		4,082
Inventories		1,868		1,479
Prepaid expenses and other		5,928		6,184
		127,511		202,921

Property and equipment, net		410,496		339,057
Operating lease right-of-use assets, net		46,293		15,771
Finance lease right-of-use assets, net		2,979		3,808
Goodwill		21,286		21,286
Other intangible assets, net		61,103		10,869
Deposits and other		1,466		1,617
	$	671,134	$	595,329
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	6,459	$	4,602
Construction payable		25,890		30,279
Accrued payroll and related		3,247		3,784
Accrued interest		13,867		12,966
Other accrued liabilities		11,759		9,964
Current portion of operating lease obligations		3,588		2,485
Current portion of finance lease obligation		1,605		1,581
		66,415		65,661

Operating lease obligations, net of current portion		42,902		13,418
Finance lease obligations, net of current portion		3,756		4,727
Long-term debt, net		463,654		401,852
Deferred income taxes, net		1,550		1,024
Contract liabilities, net of current portion		8,524		8,856
		586,801		495,538
Commitments and contingencies (Note 6)
Stockholders’ equity
Common stock, $0.0001 par value, 100,000,000 shares authorized; 35,302,549 and 35,302,549 shares issued and 34,577,688 and 34,407,654 shares outstanding		4		4
Additional paid-in capital		111,940		110,590
Treasury stock, 724,861 and 894,895 common shares		(884)		(1,091)
Accumulated deficit		(26,727)		(9,712)
		84,333		99,791
	$	671,134	$	595,329

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)


									Retained							Additional							Total
				Additional					Earnings		Total		Common Stock			Paid-in		Treasury Stock			Accumulated		Stockholders’
	Common Stock			Paid-in		Treasury Stock			(Accumulated		Stockholders’		Shares	Dollars		Capital		Shares	Dollars		Deficit		Equity
	Shares	Dollars		Capital		Shares	Dollars		Deficit)		Equity
Balance, January 1, 2022	35,302	$	4	$	108,911	1,060	$	(1,292)	$	5,092	$	112,715
Options exercised and restricted stocks vested	—		—		14	(103)		125		—		139
Stock-based compensation	—		—		343	—		—		—		343
Net income	—		—		—	—		—		110		110
Balance, March 31, 2022	35,302		4		109,268	957		(1,167)		5,202		113,307
Restricted stocks vested	—		—		(47)	(39)		47		—		—
Stock-based compensation	—		—		487	—		—		—		487
Net loss	—		—		—	—		—		(4,355)		(4,355)
Balance, June 30, 2022	35,302		4		109,708	918		(1,120)		847		109,439
Balance, January 1, 2023													35,302	$	4	$	110,590	895	$	(1,091)	$	(9,712)	$	99,791
Options exercised	—		—		9	(15)		18		—		27	—		—		12	(4)		5		—		17
Stock-based compensation	—		—		532	—		—		—		532	—		—		748	—		—		—		748
Net loss	—		—		—	—		—		(3,577)		(3,577)	—		—		—	—		—		(11,415)		(11,415)
Balance, September 30, 2022	35,302	$	4	$	110,249	903	$	(1,102)	$	(2,730)	$	106,421
Balance, March 31, 2023													35,302		4		111,350	891		(1,086)		(21,127)		89,141
Options exercised and restricted stocks vested													—		—		(65)	(166)		202		—		137
Stock-based compensation													—		—		655	—		—		—		655
Net loss													—		—		—	—		—		(5,600)		(5,600)
Balance, June 30, 2023													35,302	$	4	$	111,940	725	$	(884)	$	(26,727)	$	84,333


									(Accumulated							Additional							Total
				Additional					Deficit)		Total		Common Stock			Paid-in		Treasury Stock			Retained		Stockholders’
	Common Stock			Paid-in		Treasury Stock			Retained		Stockholders’		Shares	Dollars		Capital		Shares	Dollars		Earnings		Equity
	Shares	Dollars		Capital		Shares	Dollars		Earnings		Equity
Balance, January 1, 2021	28,385	$	3	$	64,826	1,261	$	(1,538)	$	(6,614)	$	56,677
Equity offering, net	6,917		1		42,973	—		—		—		42,974
Options exercised	—		—		36	(34)		42		—		78
Balance, January 1, 2022													35,302	$	4	$	108,911	1,060	$	(1,292)	$	5,092	$	112,715
Options exercised and restricted stocks vested													—		—		14	(103)		125		—		139
Stock-based compensation													—		—		343	—		—		—		343
Net income													—		—		—	—		—		110		110
Balance, March 31, 2022													35,302		4		109,268	957		(1,167)		5,202		113,307
Restricted stocks vested													—		—		(47)	(39)		47		—		—
Stock-based compensation	—		—		124	—		—		—		124	—		—		487	—		—		—		487
Net loss	—		—		—	—		—		(3,445)		(3,445)	—		—		—	—		—		(4,355)		(4,355)
Balance, March 31, 2021	35,302		4		107,959	1,227		(1,496)		(10,059)		96,408
Options exercised	—		—		104	(152)		185		—		289
Stock-based compensation	—		—		199	—		—		—		199
Net income	—		—		—	—		—		5,484		5,484
Balance, June 30, 2021	35,302		4		108,262	1,075		(1,311)		(4,575)		102,380
Stock-based compensation	—		—		324	—		—		—		324
Net income	—		—		—	—		—		4,619		4,619
Balance, September 30, 2021	35,302	$	4	$	108,586	1,075	$	(1,311)	$	44	$	107,323
Balance, June 30, 2022													35,302	$	4	$	109,708	918	$	(1,120)	$	847	$	109,439

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				Six Months Ended
	September 30,				June 30,
	2022		2021		2023		2022
Cash flows from operating activities:
Net (loss) income	$	(7,822)	$	6,658
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net loss					$	(17,015)	$	(4,245)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		6,012		5,448		14,014		3,626
Amortization of debt issuance costs, discounts and premiums		1,227		991		1,291		797
Non-cash change in ROU operating lease assets						1,997		1,648
Stock-based compensation		1,362		647		1,403		830
Change in fair value of stock warrants		—		1,347
Loss on disposal of assets, net		3		674
Proceeds from insurance related to property damage		—		1,334
Loss on modification and extinguishment of debt, net		4,530		6,104
Loss on disposal of assets						—		3
Gain on insurance settlement						(355)		—
Loss on modification of debt						—		4,425
Other operating activities						773		—
Deferred income taxes						526		(45)
Increases and decreases in operating assets and liabilities:
Accounts receivable		1,887		360		(2,054)		(4,196)
Prepaid expenses, inventories and other		(2,784)		(3,229)		(133)		(1,309)
Deferred taxes		(16)		379
Common stock warrant liability		—		(4,000)
Operating lease liabilities						(1,933)		(1,747)
Contract liabilities		2,635		(600)		18		3,238
Accounts payable and accrued expenses		(6,994)		3,188
Accounts payable and other liabilities						3,170		1,163
Net cash provided by operating activities		40		19,301		1,702		4,188
Cash flows from investing activities:
Capital expenditures		(116,148)		(17,828)		(89,309)		(64,061)
Proceeds from insurance settlement related to property damage						355		—
Acquisition of intangible assets						(50,250)		—
Other		(1,086)		(164)		—		(965)
Net cash used in investing activities		(117,234)		(17,992)		(139,204)		(65,026)
Cash flows from financing activities:
Proceeds from Senior Secured Notes due 2028 borrowings		100,000		310,000		40,000		100,000
Proceeds from premium on Senior Secured Notes due 2028 borrowings		2,000		—		—		2,000
Proceeds from equity offering, net of issuance costs		—		42,974
Payment of debt discount and issuance costs		(7,945)		(9,421)		(6,490)		(7,841)
Repayment of Senior Secured Notes due 2024		—		(106,825)
Prepayment premiums of Senior Secured Notes due 2024		—		(1,261)
Repayment of finance lease obligation		(383)		(367)
Borrowings under revolving credit facility						36,000		—
Repayment of revolving credit facility borrowings						(9,000)		—
Repayment of finance lease obligations						(759)		(254)
Proceeds from exercise of stock options		166		367		154		139
Other		(108)		24		—		(108)
Net cash provided by financing activities		93,730		235,491		59,905		93,936

Net (decrease) increase in cash, cash equivalents and restricted cash		(23,464)		236,800		(77,597)		33,098
Cash, cash equivalents and restricted cash, beginning of period		265,293		37,698		191,176		265,293
Cash, cash equivalents and restricted cash, end of period	$	241,829	$	274,498	$	113,579	$	298,391

Supplemental Cash Flow Information:
Cash paid for interest, net of amounts capitalized	$	27,726	$	13,180
Non-Cash Investing Activities:
Accounts payable related capital expenditures	$	17,312	$	7,031

See condensed notes to consolidated financial statements.

Table of Contents

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

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

(In thousands)


	Six Months Ended
	June 30,
	2023		2022
Supplemental Cash Flow Disclosure:
Cash paid for interest, net of amounts capitalized	$	10,721	$	13,745

Supplemental Schedule of Non-Cash Investing and Financing Activities:
Accounts payable related capital expenditures	$	25,949	$	12,089
Right-of-use assets obtained in exchange for operating lease liabilities		30,178		264
Right-of-use asset and liability remeasurements:
Operating leases		2,341		—
Financing leases		(207)		—

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,” the “Company,” “we,” “our,” or “us” refer to Full House Resorts, Inc. and its subsidiaries, except where stated or the context otherwise indicates.

The Company currently operates ~~five~~six casinos: ~~four~~five on real estate that we own or lease and one located within a hotel owned by a third party. We are currently constructing ~~two additional properties:~~our seventh property, Chamonix Casino Hotel (“Chamonix”), adjacent to ~~the Company’s~~our existing Bronco Billy’s Casino and Hotel in Cripple Creek, ~~Colorado; and~~Colorado. We are also designing our permanent American Place casino destination, which will be built adjacent to a temporary facility that we opened in February 2023, named The Temporary by American Place (“The Temporary”) ~~in Waukegan, Illinois.~~. We ~~also~~intend to operate The Temporary until the opening of the permanent American Place facility. Additionally, we benefit from seven permitted sports wagering ~~“skins,”~~“skins” – three in Colorado, three in Indiana, and one in ~~Illinois that we expect to receive shortly after the opening of The Temporary. As of September 30, 2022, five of our seven online skins are contracted with other~~Illinois. Other companies ~~and four of which are currently in operation. These contracts allow the counterparties to~~ operate or will operate these online sports wagering ~~sites~~websites under their brands, paying us a percentage of revenues, as defined, ~~in each respective agreement,~~ subject to annual minimum amounts.

~~In December 2021, Full House was selected by~~Starting in the ~~Illinois Gaming Board (“IGB”)~~first quarter of 2023, the Company updated its reportable segments to ~~develop its American Place project in Waukegan, Illinois,~~Midwest & South, West, and Contracted Sports Wagering. This change reflects a northern suburb of Chicago. During the period that the permanent American Place facility is under construction, we intend to operate a temporary casino facility named The Temporary. In May 2022, we commenced construction of The Temporary, which is expected to openrealignment within the ~~next three months, subject to customary regulatory approvals.~~Company as a result of our continued growth. See Note 9 for additional information about the Company’s segments.

The following table ~~identifies~~presents selected information concerning our ~~segments, along with properties and their locations:~~segments:


Segments and Properties		Locations
~~Colorado~~Midwest & South
The Temporary by American Place (opened on February 17, 2023) and American Place (under development)		Waukegan, IL (northern suburb of Chicago)
Silver Slipper Casino and Hotel		Hancock County, MS (near New Orleans)
Rising Star Casino Resort		Rising Sun, IN (near Cincinnati)
West
Bronco Billy’s Casino and Hotel		Cripple Creek, CO (near Colorado Springs)
Chamonix Casino Hotel ~~(under construction)~~(scheduled to open December 26, 2023)		Cripple Creek, CO (near Colorado Springs)
~~Illinois~~
~~The Temporary and American Place (under construction)~~		~~Waukegan, IL (northern suburb of Chicago)~~
~~Indiana~~
~~Rising Star Casino Resort~~		~~Rising Sun, IN (near Cincinnati)~~
~~Mississippi~~
~~Silver Slipper Casino and Hotel~~		~~Hancock County, MS (near New Orleans)~~
~~Nevada~~
Grand Lodge Casino (leased and part of the Hyatt Regency Lake Tahoe Resort, Spa and Casino)		Incline Village, NV (North Shore of Lake Tahoe)
Stockman’s Casino		Fallon, NV (one hour east of Reno)
Contracted Sports Wagering
Three sports wagering websites (“skins”)		Colorado
Three sports wagering websites (“skins”), one of which is currently idle		Indiana
One sports wagering website (“skin”) ~~upon opening of The Temporary~~, commencing in August 2023		Illinois

~~The Company manages its casinos based primarily on geographic regions within the United States and type of income. See Note 10 for further information.~~

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

However, the COVID-19 pandemic and certain precautionary measures, as well as other factors, have created economic uncertainty both in the United States and globally, as well as significant volatility in, and disruption to, financial markets, labor markets and supply chains. Global supply chain disruptions and other world events have resulted in shipping delays, increased shipping costs, supply shortages, and inflationary pressures, including increases in prices for fuel, food, building materials, and other items. These increased costs, labor shortages, and supply shortages continued to put additional constraints on our operating business and our construction projects for the nine months ended September 30, 2022. We do not know when, or if, these cost, labor and supply chain issues will materially alleviate and, accordingly, they may continue to impact our existing business and our construction projects.

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

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. As permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Company’s ~~2021~~2022 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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

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

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

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

●

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

●

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

●

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

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~~The Company utilizes Level 1 inputs when measuring~~Methods and assumptions used to estimate the fair value of ~~its 2028 Notes (see Note 5).~~

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

~~The Company utilizes Level 3 inputs when measuring the fair value of net assets acquired in business combination transactions, subsequent assessments for impairment, and most~~ financial instruments ~~including but not limited~~are affected by the duration of the instruments and other factors used by market participants to ~~the~~estimate value. The carrying amounts for cash and equivalents, restricted cash, accounts receivable, and accounts payable approximate their estimated fair value because of ~~common stock warrants at issuance~~the short durations of the instruments and ~~for recurring changes in the related warrant liability.~~inconsequential rates of interest.

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

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

Accounts Receivable. Accounts receivable consist primarily of casino, hotel and other receivables, are typically non-interest bearing, and are carried net of an appropriate reserve to approximate fair value. Reserves are estimated based on specific review of customer accounts including the customers’ willingness and ability to pay and nature of collateral, if any, as well as historical collection experience and current economic and business conditions. Accounts are written off when management deems the account to be uncollectible and recoveries of accounts previously written off are recorded when received. Management believes that, as of June 30, 2023, no significant concentrations of credit risk existed for which a reserve had not already been recorded.

In ~~May 2022,~~March 2023, Rising Star sold its available “free play” for $2.1 million. We received all of such amount ~~during the third quarter of 2022.~~in July 2023. Because Indiana has a progressive gaming tax system and Rising Star is one of the smaller casinos in the state, the property has consistently sold its ability to deduct “free play” in computing gaming taxes to operators in higher tax tiers. It sold such “free play” in the second quarter of 2022 for a similar amount.

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

Table of ~~September 30, 2022, no significant concentrations of credit risk existed for which a reserve had not already been recorded.~~Contents

Revenue Recognition:

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

~~Gaming revenue~~The transaction price for a casino wager is the difference between gaming wins and losses, not the total amount wagered. ~~The~~As such wagers have similar characteristics, 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~~by recognizing net win per gaming day versus on an individual basis.

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

Many of the Company’s casino customers choose to earn points under its customer loyalty programs. As points are accrued, the Company defers a portion of its ~~gaming~~casino revenue based on the estimated standalone value of loyalty points being earned by the customer. The standalone value of loyalty points is derived from the retail value of food, beverages, hotel rooms, and other goods or services for which such points may be redeemed. A liability related to these customer loyalty points is recorded, net of estimated breakage and other factors, until the customer redeems these points ~~under~~for various loyalty ~~programs by property for various~~program benefits, primarily for “free casino play,” complimentary dining, or hotel stays, among others, depending on each property’s specific offers. Upon redemption, the related revenue is recognized at retail value within the department providing the goods or services. Unredeemed points are forfeited if the customer becomes and remains inactive for a specified period of time. Such liabilities were approximately ~~$0.8~~$0.7 million for each of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, and these amounts are included in “other accrued liabilities” on the consolidated balance sheets.

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

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

Indiana. The Company’s three Sports Agreements commenced operations in December 2019, April 2021 and December 2021. ~~As noted below, one~~One of these Sports Agreements ceased operations in May 2022. Under the Company’s two active Sports Agreements in Indiana, we receive a percentage of revenues (as defined), subject to annual minimums totaling $2.0 million. For its idle skin, the Company continues to evaluate whether to utilize the remaining skin itself or utilize a replacement operator for such skin. There is no certainty that the Company will be able to enter into an agreement with a replacement operator or successfully operate the skin itself.

Colorado. The Company’s three Sports Agreements commenced operations in June 2020, December 2020 and April 2021. ~~As noted below, one~~One of these Sports Agreements ceased operations in May 2022.

~~Illinois.~~ ~~The~~ In December 2022, the Company signed a Sports Agreement with a new third party for this available skin, which upfront fee was capitalized and is being amortized over the 10-year term of the agreement that contractually commenced in ~~May 2022 for Illinois. Such operations are expected to commence shortly after~~March 2023, even though the ~~opening of The Temporary,~~operator is still pending the receipt of customary ~~gaming~~regulatory approvals. Under the Company’s three active Sports Agreements in Colorado, we receive a percentage of revenues (as defined), subject to annual minimums totaling $3.0 million.

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Illinois. In May 2022, the Company signed a Sports Agreement for its sole Illinois sports skin and received an upfront fee of $5.0 million, which was capitalized and will be amortized over the eight-year term of the agreement. The Company will also receive a percentage of revenues (as defined), subject to a minimum of $5.0 million per year. Revenue payments under the agreement are due to begin in August 2023.

In addition to the ~~market access~~“market access” fees, deferred revenue includes ~~the~~quarterly and annual ~~prepayment~~prepayments of contracted revenue, as required in ~~two~~three of the Sports Agreements. As of ~~September~~June 30, ~~2022, $1.5~~2023, $1.3 million of such deferred revenue has been recognized during the year.

Deferred revenues consisted of the following, as discussed above:


(In thousands)		September 30,		December 31,			June 30,		December 31,
	Balance Sheet Location	2022		2021		Balance Sheet Location	2023		2022
Deferred revenue, current	Other accrued liabilities	$	1,215	$	1,822	Other accrued liabilities	$	2,000	$	1,651
Deferred revenue, net of current portion	Contract liabilities, net of current portion		7,956		4,714	Contract liabilities, net of current portion		8,524		8,856
		$	9,171	$	6,536		$	10,524	$	10,507

On May 15, 2022, one of the Company’s contracted parties for sports wagering ceased operations, which created one available skin in each of Colorado and Indiana. Accordingly, this accelerated the recognition of $1.6 million of deferred revenue, which was recognized through the May 2022 termination date, as opposed to the remaining eight years of the original ~~10-year~~ term. The Company is currently evaluating whether to utilize these two remaining skins itself or to find replacement operators for such skins. There is no certainty that the Company will be able to enter into agreements with third-parties related to these skins or operate these skins itself on better terms than the Company’s prior agreements.

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

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

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Income Taxes. For interim income tax reporting for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company estimates its annual effective tax rate and applies it to its year-to-date pretax income or loss.

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

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

Leases. The Company determines if a contract is, or contains, a lease at inception or modification of the agreement. A contract is, or contains, a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period of time in exchange for consideration. Control over the use of the identified asset means that the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

For material leases with terms greater than a year, the Company records right-of-use (“ROU”) assets and lease liabilities on the balance sheet, as measured on a discounted basis. For finance leases, the Company recognizes interest expense associated with the lease liability, ~~and~~as well as depreciation (or amortization) expense associated with the ROU ~~asset; for~~asset, depending on whether those ROU assets are expected to transfer to the Company upon lease expiration. If ownership of a finance lease ROU asset is expected to transfer to the Company upon lease expiration, then it is included with the Company’s property and equipment; other qualifying finance lease ROU assets, based on other classifying criteria under Accounting Standards Codification 842 (“ASC 842”), are disclosed separately as “Finance Lease Right-of-Use Assets, Net.” For operating leases, the Company recognizes straight-line rent expense.

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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.~~commencement, plus any qualifying initial direct costs paid prior to commencement for ROU assets. As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental borrowing rate as estimated by third-party valuation specialists in determining the present value of future payments based on the information available at the commencement date and/or modification date. The expected lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term for operating leases. For finance leases, the ROU asset ~~depreciates~~depreciates/amortizes on a straight-line basis over the shorter of the lease term or useful life of the ROU asset as applicable, and the lease liability accretes interest based on the interest method using the discount rate determined at lease commencement.

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

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

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

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3. LEASES

The Company has no material leases in which it is the lessor. As lessee, the Company has ~~one~~ finance ~~lease~~leases for a hotel and ~~various~~certain equipment and operating leases for land, casino and office space, equipment, ~~buildings,~~ and ~~signage.~~buildings. The Company’s remaining lease terms, including extensions, range from one month to approximately 3699 years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants, but the land ~~lease~~leases at Silver Slipper ~~does~~and The Temporary/American Place do include contingent rent, as further discussed below.

Operating Leases

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

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

Silver Slipper Casino Land Lease through April 2058 and ~~Options~~Option to Purchase. In 2004, the Company’s subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease with Cure Land Company, LLC for approximately 31 acres of marshlands and a seven-acre parcel on which the Silver Slipper Casino and Hotel is situated. ~~The land~~Annual minimum rent is $0.9 million throughout the lease ~~includes fixed, base monthly payments of $77,500~~term until 2058, plus contingent rents of 3% of ~~monthly~~ gross gaming revenue (as defined in the lease) in excess of $3.65 million ~~with no scheduled base rent increases through the remaining lease term ending in 2058.~~per month.

Through October 1, 2027, the Company may buy out the lease for $15.5 million, plus a seller-retained interest in Silver Slipper Casino and Hotel’s operations of 3% of net income (as defined) for 10 years following the purchase date.

Bronco Billy’s / Chamonix Lease through January 2035 and Option to Purchase. The Bronco Billy’s subsidiary leases certain ~~parking lots and buildings,~~parcels, including a portion of the hotel and casino, under a long-term lease. The lease term includes six renewal options in three-year increments to 2035. The Company exercised its third renewal option to extend the lease term through January 2026, with current annual lease payments of $0.4 million. Annual minimum rent will increase to $0.5 million starting in February 2026 with adjustments on each anniversary thereafter, based on the consumer price index. The lease contains a $7.6 million purchase option exercisable at any time during the lease term, or as extended, and a right of first refusal on any sale of the property.

In September 2022, the Company remeasured this lease’s related ROU asset and liability balances on its balance sheet, by factoring in all renewal terms through January 2035 to reflect the partial overlap of Chamonix’s construction on leased land. As a result of that overlap, the Company is deemed likely to exercise each renewal unless it exercises its purchase buyout right.

~~Third Street Corner Building through August 2023 and Option to Purchase.~~ The Company began leasing this building in August 2018. This building is currently used as office space for Chamonix’s construction personnel, obviating the need for construction trailers. The lease had an initial three-year term with annual lease payments of $0.2 million. This was subsequently extended to August 13, 2023, with current annual lease payments of $0.3 million. The Company has the right to purchase the building at any time during the extended lease term for $2.8 million.

Grand Lodge Casino Lease through ~~August 2023.~~December 2024. The Company’s subsidiary, Gaming Entertainment (Nevada), LLC, has a lease with Incline Hotel, LLC, the owner of the Hyatt Regency Lake Tahoe Resort (“Hyatt Lake Tahoe”), to operate the Grand Lodge Casino. It is collateralized by the Company’s interests under the lease and property (as defined in the lease) and is subordinate to the liens of the Notes (see Note 5)4). The lessor has an option to purchase the Company’s leasehold interest and related operating assets of the Grand Lodge Casino, subject to assumption of applicable liabilities. The option price is an amount equal to the Grand Lodge Casino’s positive working capital, plus Grand Lodge Casino’s earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the 12-month period preceding the acquisition (or pro-rated if less than 12 months remain on the lease), plus the fair market value of the Grand Lodge Casino’s personal property.

The current ~~monthly~~annual rent of ~~$166,667~~$2.0 million is applicable through the remaining lease term. In February 2023, the lease was amended to extend the current term through December 31, 2024 (with no changes to rent). Accordingly, the Company remeasured this lease’s related ROU asset and liability balances on its balance sheet upon the effective date of the amendment.

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

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Finance Lease

Rising Star Casino Hotel Lease through October 2027 and Option to Purchase. The Company’s Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a 104-guestroom hotel at Rising Star Casino Resort. At any time during the lease term, the Company has the option to purchase the hotel, and approximately 3.01 acres of land on which it resides, at a price based upon the hotel’s original cost of $7.7 million, reduced by the cumulative principal payments made by the Company during the lease term. At ~~September~~June 30, ~~2022,~~2023, such potential purchase price was ~~$2.9~~$2.5 million. Upon expiration of the lease term in October 2027, (i) the landlord has the right to sell the hotel to the Company, and (ii) the Company has the option to purchase the hotel. In either case, the purchase price is $1 plus closing costs.

~~The components of lease expenses are as follows:~~

(In thousands)



Three Months Ended

Nine Months Ended

Classification within

September 30,

September 30,
Lease Costs

Statement of Operations

2022

2021

2022

2021
Operating leases:








Fixed/base rent

Selling, General and Administrative Expenses

$
1,206

$
1,112

$
3,549

$
3,357
Short-term payments

Selling, General and Administrative Expenses

33

29

103

29
Variable payments

Selling, General and Administrative Expenses

314

385

1,069

1,254
Finance lease:






Amortization of leased assets

Depreciation and Amortization

39

39

118

118
Interest on lease liabilities

Interest Expense, Net

34

38

106

122
Total lease costs

$
1,626

$
1,603

$
4,945

$
4,880

~~Leases recorded on the balance sheet consist of the following:~~

(In thousands)

September 30,

December 31,
Leases

Balance Sheet Classification

2022

2021
Assets




Operating lease assets

Operating Lease Right-of-Use Assets, Net

$
15,556

$
15,814
Finance lease assets

Property and Equipment, Net⁽¹⁾

4,605

4,722
Total lease assets



$
20,161

$
20,536

Liabilities






Current






Operating

Current Portion of Operating Lease Obligations

$
3,103

$
3,542
Finance

Current Portion of Finance Lease Obligation

530

514
Noncurrent



Operating

Operating Lease Obligations, Net of Current Portion

12,962

12,903
Finance

Finance Lease Obligation, Net of Current Portion

2,384

2,783
Total lease liabilities



$
18,979

$
19,742

~~__________~~

~~(1)~~

~~Finance lease assets are recorded net of accumulated amortization of $3.1 million and $3.0 million as of September 30, 2022 and December 31, 2021, respectively.~~

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~~Maturities~~The components of lease ~~liabilities as of September 30, 2022~~expenses are ~~summarized~~ as follows:

(In thousands)

Operating

Financing
Years Ending December 31,

Leases

Lease⁽¹⁾
2022 (excluding the nine months ended September 30, 2022)

$
1,262

$
109
2023

3,694

652
2024

1,819

652
2025

1,543

652
2026

1,403

652
Thereafter

33,019

543
Total future minimum lease payments

42,740

3,260
Less: Amount representing interest

(26,675)

(346)
Present value of lease liabilities

16,065

2,914
Less: Current lease obligations

(3,103)

(530)
Long-term lease obligations

$
12,962

$
2,384

~~__________~~

~~(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, 2022

December 31, 2021
Weighted-average remaining lease term





Operating leases

23.2
years

21.5
years
Finance lease

5.0
years

5.8
years
Weighted-average discount rate





Operating leases

9.70
%

9.32
%
Finance lease

4.50
%

4.50
%

~~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:

2022

2021
Operating cash flows for operating leases

$
3,670

$
3,652
Operating cash flows for finance lease

$
106

$
122
Financing cash flows for finance lease

$
383

$
367


(In thousands)		Three Months Ended				Six Months Ended
	Classification within	June 30,				June 30,
Lease Costs	Statement of Operations	2023		2022		2023		2022
Operating leases:
Fixed/base rent	Selling, General and Administrative Expenses	$	2,170	$	1,172	$	3,962	$	2,337
Short-term payments	Selling, General and Administrative Expenses		—		33		22		70
Variable payments	Selling, General and Administrative Expenses		349		352		654		738
Finance leases:
Amortization of leased assets	Depreciation and Amortization		348		39		701		78
Interest on lease liabilities	Interest Expense, Net		109		35		220		72
Total lease costs		$	2,976	$	1,631	$	5,559	$	3,295

Leases recorded on the balance sheet consist of the following:


(In thousands)
		June 30,		December 31,
Leases	Balance Sheet Classification	2023		2022
Assets
Operating lease assets	Operating Lease Right-of-Use Assets, Net	$	46,293	$	15,771
Finance lease assets	Property and Equipment, Net⁽¹⁾		4,487		4,566
Finance lease assets	Finance Lease Right-of-Use Assets, Net⁽²⁾		2,979		3,808
Total lease assets		$	53,759	$	24,145

Liabilities
Current
Operating	Current Portion of Operating Lease Obligations	$	3,588	$	2,485
Finance	Current Portion of Finance Lease Obligation		1,605		1,581
Noncurrent
Operating	Operating Lease Obligations, Net of Current Portion		42,902		13,418
Finance	Finance Lease Obligation, Net of Current Portion		3,756		4,727
Total lease liabilities		$	51,851	$	22,211

~~4. ACQUISITIONS~~__________

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

(1)	Finance lease assets are recorded net of accumulated amortization of $3.2 million for each of June 30, 2023 and December 31, 2022.

(2)

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

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


(In thousands)
	Operating		Financing
Years Ending December 31,	Leases		Leases
2023 (excluding the six months ended June 30, 2023)	$	3,848	$	979
2024		7,735		1,957
2025		5,722		1,939
2026		4,864		652
2027		4,515		489
Thereafter		316,582		—
Total future minimum lease payments		343,266		6,016
Less: Amount representing interest		(296,776)		(655)
Present value of lease liabilities		46,490		5,361
Less: Current lease obligations		(3,588)		(1,605)
Long-term lease obligations	$	42,902	$	3,756

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


	June 30,		December 31,
Lease Term and Discount Rate	2023		2022
Weighted-average remaining lease term
Operating leases	66.3	years	23.2	years
Finance lease	3.3	years	3.7	years
Weighted-average discount rate
Operating leases	10.89	%	9.73	%
Finance leases	7.74	%	7.08	%

Supplemental cash flow information related to leases is as follows:


(In thousands)	Six Months Ended
	June 30,
Cash paid for amounts included in the measurement of lease liabilities:	2023		2022
Operating cash flows for operating leases	$	3,898	$	2,436
Operating cash flows for finance leases	$	220	$	72
Financing cash flows for finance leases	$	759	$	254

4. LONG-TERM DEBT

Long-term debt consists of the following:

(In thousands)

September 30,

December 31,

2022

2021
Revolving Credit Facility due 2026

$
—

$
—
Senior Secured Notes due 2028⁽¹⁾

410,000

310,000
Less: Unamortized debt issuance costs, discounts and premiums, net

(8,571)

(8,381)

$
401,429

$
301,619

~~__________~~

~~(1)~~

The estimated fair value of these notes was approximately $370.2 million for September 30, 2022 and $327.5 million for December 31, 2021. The fair value was estimated using quoted market prices for these notes.


(In thousands)	June 30,		December 31,
	2023		2022
Revolving Credit Facility due 2026	$	27,000	$	—
8.25% Senior Secured Notes due 2028		450,000		410,000
Less: Unamortized debt issuance costs and discounts/premiums, net		(13,346)		(8,148)
	$	463,654	$	401,852

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Senior Secured Notes due 2028. On February 12, 2021, the Company ~~refinanced all $106.8 million of its outstanding Senior Secured Notes due 2024 (the “Prior Notes”) with the issuance of $310~~issued $310.0 million aggregate principal amount of 8.25% Senior Secured Notes due 2028 (the “2028 Notes”)~~. The net proceeds from the sale of the 2028 Notes were used~~ to ~~redeem~~refinance all of ~~the Prior Notes (including a 0.90% prepayment premium)~~its prior notes and to repurchase all of its outstanding warrants. Additionally, $180 million of bond proceeds were initially placed into a construction reserve account to fund the construction of ~~Chamonix.~~Chamonix, which was later increased to $221 million in January 2022 to reflect an expansion of the project.

On February 7, 2022, the Company closed a private offering ~~of $100~~for an additional $100.0 million ~~aggregate principal amount~~ of ~~additional 8.25%~~ Senior Secured Notes due 2028, ~~(the “Additional Notes”),~~ which sold at a price of 102.0% of such principal amount. Proceeds from ~~the~~this sale ~~of the Additional Notes are being~~were used: (i) to develop, equip and open The Temporary, which the Company intends to operate while it designs and constructs its permanent American Place facility, (ii) to pay the transaction fees and expenses of ~~the~~such offer and sale, ~~of the Additional Notes~~ and (iii) for general corporate purposes. The ~~Additional Notes~~additional notes from this sale were issued pursuant to the indenture, dated as of February 12, 2021 (the ~~“Indenture”~~“Original Indenture”), to which the Company issued the ~~$310~~$310.0 million of 2028 Notes ~~noted above (collectively, the “Notes”).~~described above. In connection with the issuance of the ~~Additional Notes,~~additional notes in February 2022, the Company and the subsidiary guarantors party to the Original Indenture also entered into ~~two~~three Supplemental Indentures with Wilmington Trust, National Association, as ~~trustee, dated~~trustee.

On February ~~1, 2022 and February 7, 2022, respectively. On March 3, 2022,~~21, 2023, the Company ~~entered into a third Supplemental Indenture~~issued an additional $40.0 million of senior secured notes (the “Additional Notes”), thereby increasing the outstanding borrowing under the 2028 Notes to ~~establish a special record date for~~$450.0 million (collectively, the ~~initial interest payment for~~“Notes”). Related to the issuance of the Additional ~~Notes.~~

Notes, the Company further amended the indenture governing the Notes (collectively, the “Amended Indenture”) and amended its revolving credit facility. Proceeds from the offering of the Additional Notes, net of related expenses and discounts, were approximately $34 million and were used: (i) to open The Temporary, including the payment of related Illinois gaming license fees in March 2023, and (ii) for general corporate purposes. The Additional Notes are essentially identical to the 2028 Notes, as they are treated as a single series of senior secured debt securities with the 2028 Notes and also as a single class for all purposes under the Amended Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase.

The Notes bear interest at a fixed rate of 8.25% per year and mature on February 15, 2028. There is no mandatory debt amortization prior to the maturity date. Interest on the Notes is payable on February 15 and August 15 of each ~~year, with the next interest payment due on February 15, 2023.~~

year.

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

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

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

~~Table of Contents~~

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


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

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

~~Under~~On February 21, 2023, the ~~First~~Company entered into a Second Amendment to Credit Agreement with Capital One, which, among other things, increased the amount of additional indebtedness permitted under the Company’s Credit Agreement from $25.0 million to $40.0 million (collectively, the “Credit Facility”). Such amendment permitted the issuance of the Additional Notes, as described above.

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

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

The Credit Facility contains a number of negative covenants that, subject to certain exceptions, are substantially similar to the covenants contained in the Notes. The Credit Facility also requires compliance with a financial covenant as of the last day of each fiscal quarter, such that Adjusted EBITDA (as defined) for the trailing 12-month period must equal or exceed the utilized portion of the Credit Facility, if drawn. ~~The~~As of June 30, 2023, the Company was in compliance with this financial covenant and $27.0 million of borrowings remain outstanding under the Credit Facility.

Fair Value of Long-Term Debt. The estimated fair value of the Notes was approximately $421.6 million for June 30, 2023 and $360.6 million for December 31, 2022, which values were estimated using quoted market prices (Level 1 inputs). The fair value of the Credit Facility approximates its carrying amount as ~~of September 30, 2022.~~it is revolving, variable rate debt, and is classified as a Level 2 measurement.

5. INCOME TAXES

The Company’s effective income tax rates for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 were ~~(0.8%~~(11.1%) and ~~0.2%~~(3.2%), respectively, compared to effective income tax rates of ~~2.0%~~459.3% and ~~5.4%~~1.0% for the corresponding prior-year periods. The ~~change~~changes in the effective income tax rates ~~was~~were primarily due to the Company’s projections for pre-tax book income in 2023, the effects of tax amortization on ~~indefinite lived~~indefinite-lived intangibles in ~~2022,~~2023 and valuation ~~allowances, and certain permanent differences between tax and financial reporting purposes.~~allowances. The Company’s income tax ~~expense~~provision or benefit for interim periods has been determined using an estimate of its annual effective tax rate (“AETR”), adjusted for discrete items. ~~The Company notes this differs from the methodology used in the second quarter of 2022, as the factors that existed as of June 30, 2022 are no longer applicable.~~

The Company continues to assess the realizability of deferred tax assets (“DTAs”) and concluded that it has not met the “more likely than not” threshold. As of ~~September~~June 30, ~~2022,~~2023, the Company continues to provide a valuation allowance against its DTAs that cannot be offset by existing deferred tax liabilities. In accordance with Accounting Standards Codification 740 (“ASC 740”), this assessment has taken into consideration the jurisdictions in which these DTAs reside. ~~The valuation allowance against DTAs has no effect on the actual taxes paid or owed by the Company.~~

In the future, if it is determined that we meet the “more likely than not” threshold of utilizing our deferred tax assets, as required under ASC 740, then we may reverse some or all of our valuation allowance. Such valuation allowance and its potential reversal have no impact on the actual income taxes paid.

1617

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7.6. COMMITMENTS AND CONTINGENCIES ~~AND SUBSEQUENT EVENT~~

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.

~~Options to Lease Land~~

~~Option Agreement for Public Trust Tidelands Lease in Mississippi.~~ The Company has been evaluating the potential construction of an additional hotel tower and related amenities at Silver Slipper, a portion of which would extend out over the adjoining Gulf of Mexico. In contemplation for such potential future expansion, the Company paid $5,000 for an option agreement – entered into by the Company on June 8, 2021 and approved by the Governor of Mississippi on July 13, 2021 – for a 30-year lease of approximately a half-acre of tidelands, with a ~~term extension~~ for another 30 years, if exercised. This initial six-month option could be renewed for three additional six-month periods, with the payment of $5,000 for each extension. In October 2022, the Company subsequently paid $5,000 to exercise its third and final six-month option extension through the end of May 2023.

Upon commencement of the lease, and for the first 18 months or until the beginning of the next six-month period after the opening of commercial operations on the leased premises, whichever occurs sooner, rent would be $10,000 for each ~~six-month~~ period (“Construction Rent”). Construction Rent would terminate no later than 18 months after the commencement of the lease. Thereafter, annual rent would be $105,300, with adjustments, based on the consumer price index on each anniversary. Before construction can commence, additional entitlements are necessary, including certain environmental approvals. There can be no certainty that the tidelands lease option will be exercised or that the contemplated Silver Slipper expansion will be built.

Contracted Sports Wagering in Illinois

In May 2022, the Company entered into an agreement with an affiliate of Circa Sports to jointly develop and manage on-site sportsbooks at both The Temporary and American Place casinos in Illinois. ~~Circa Sports currently operates at Circa Resort & Casino in Las Vegas, and offers online sports wagering in several states.~~ In addition to the on-site sportsbook, Circa Sports will utilize the Company’s expected mobile sports skin to conduct Internet sports wagering throughout Illinois. In exchange for such rights, the Company received a non-refundable market access fee of $5 million in May ~~2022.~~2022, which was recorded as a long-term liability under deferred revenues. The Company will also receive a percentage of revenues (as defined), subject to a minimum of $5 million per year, once Circa Sports launches operations in Illinois. Such launch is ~~anticipated in Spring 2023,~~ contingent upon receipt of customary regulatory approvals. Under the agreement, the Company will begin to receive revenue payments for its Illinois sports skin in August 2023, irrespective of whether its sports wagering operations have begun. The term of the agreement is for eight years, followed by two four-year extension opportunities at the option of Circa Sports.

Contingent Gaming License Fees in Illinois

As required for its gaming licensure at The Temporary/American Place, the Company may be required to make a “Reconciliation Payment” to the State of Illinois. The Reconciliation Payment is calculated three years after the commencement of gaming operations in Illinois in an amount equal to 75% of the adjusted gross receipts for the most lucrative trailing 12-month period of operations, offset by certain licensing fees already paid by the Company in the first quarter of 2023. If such calculation of the Reconciliation Payment results in a negative amount, the Company is not entitled to reimbursement of any licensing fees previously paid. The Reconciliation Payment, if any, is due in annual installments over a period of six years, beginning in the fourth year of gaming operations.

~~Table of Contents~~

8.7. EARNINGS (LOSS) PER SHARE

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


(In thousands)	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Numerator:
Net (loss) income ─ basic	$	(3,577)	$	4,619	$	(7,822)	$	6,658
Net (loss) income ─ diluted	$	(3,577)	$	4,619	$	(7,822)	$	6,658
Net loss ─ basic									$	(5,600)	$	(4,355)	$	(17,015)	$	(4,245)
Net loss ─ diluted									$	(5,600)	$	(4,355)	$	(17,015)	$	(4,245)

Denominator:
Weighted-average common and common share equivalents ─ basic		34,390		34,227		34,339		31,939
Weighted-average common shares ─ basic										34,496		34,364		34,453		34,313
Potential dilution from share-based awards		89		2,409		60		2,400		—		52		—		45
Weighted-average common and common share equivalents ─ diluted		34,479		36,636		34,399		34,339		34,496		34,416		34,453		34,358
Anti-dilutive share-based awards excluded from the calculation of diluted loss per share		3,512		177		2,466		177		4,079		3,477		3,962		1,944

~~9. SHARE-BASED COMPENSATION~~

~~Performance-Based Shares.~~ The Company issued a total of 36,849 performance-based shares to three of the Company’s executives during the first quarter of 2022, of which 5,734 performance-based shares were canceled in April 2022. In the second and third quarters of 2022, an additional 70,834 and 28,986 performance-based shares, respectively, were issued to other Company executives. The vesting for these performance-based shares is based on the compounded annual growth rate of the Company’s Adjusted EBITDA and Free Cash Flow Per Share, as defined, for the three-year periods ending December 31, 2022, December 31, 2023, and December 31, 2024. For the 2022 period, ~~one-sixth of such performance-based shares will vest on the anniversary date of the award if the Company’s annual Adjusted EBITDA for 2022 reflects at least 10% per annum growth since 2019, and~~ ~~one~~-sixth of such performance-based shares will vest on the anniversary date if the Company’s annual Free Cash Flow Per Share for 2022 reflects at least 12% per annum growth since 2019. Vesting of the performance-based shares is similar for the 2023 and 2024 periods.

On March 14, 2022, as the Company exceeded certain growth metrics in 2021, 23,325 previously-issued performance shares vested, resulting in the issuance of a similar number of shares of stock. Similarly, on May 15, 2022, an additional 6,917 performance shares vested.

~~Restricted Stock Awards.~~ On May 19, 2022, the Company issued to non-executive members of its Board of Directors, as compensation for their annual service, a total of 51,849 restricted shares under the 2015 Plan, with a one-year vesting period.

~~As of September 30, 2022, the Company had 1,173,096 share-based awards authorized by shareholders and available for grant from the Company’s 2015 Equity Incentive Plan.~~

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8. SHARE-BASED COMPENSATION

Performance-Based Shares. In January 2023, the Company issued a total of 40,541 performance-based shares to the Company’s CEO under the terms of his employment agreement. In the second quarter of 2023, an additional total of 79,815 performance-based shares were issued to four other Company executives. The vesting for these performance-based shares is based on the compounded annual growth rate of the Company’s Adjusted EBITDA and Free Cash Flow Per Share, as defined, for the three-year periods ending December 31, 2023, December 31, 2024, and December 31, 2025. For the 2023 period, one-sixth of such performance-based shares will vest on the anniversary date of the award if the Company’s annual Adjusted EBITDA for 2023 reflects at least 10% per annum growth since 2020, and one-sixth of such performance-based shares will vest on the anniversary date if the Company’s annual Free Cash Flow Per Share for 2023 reflects at least 12% per annum growth since 2020. Vesting of the performance-based shares is similar for the 2024 and 2025 periods.

In April 2023, the Compensation Committee approved the satisfaction of certain performance criteria related to our operations in 2022. Such performance measures involved multi-year growth rates for EBITDA and free cash flow per share. As a result, a total of 73,885 shares were approved to vest upon the later of (a) such approval by the Compensation Committee or (b) the anniversary date of their grant. During the second quarter of 2023, a total of 64,223 shares vested, with the remainder expected to vest in the following quarter.

Restricted Stock Awards. On May 18, 2023, the Company issued to non-executive members of its Board of Directors, as compensation for their annual service, a total of 70,945 restricted shares under the 2015 Plan with a one-year vesting period.

As of June 30, 2023, the Company had 671,041 share-based awards authorized by shareholders and available for grant from the Company’s 2015 Equity Incentive Plan.

The following table summarizes information related to the Company’s common stock options as of ~~September~~June 30, ~~2022:~~2023:


		Weighted			Weighted
	Number	Average		Number	Average
	of Stock	Exercise		of Stock	Exercise
	Options	Price		Options	Price
Options outstanding at January 1, 2022	3,221,956	$	2.19
Options outstanding at January 1, 2023				3,503,235	$	2.80
Granted	434,598		7.71	350,754		7.40
Exercised	(94,749)		1.76	(53,962)		1.38
Canceled/Forfeited	(50,000)		8.72	(20,000)		6.88
Expired	—		—	(20,000)		3.22
Options outstanding at September 30, 2022	3,511,805	$	2.80
Options exercisable at September 30, 2022	2,825,128	$	1.87
Options outstanding at June 30, 2023				3,760,027	$	3.22
Options exercisable at June 30, 2023				3,039,335	$	2.23

Components of compensation expense are as follows:


(In thousands)	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
Compensation Expense	2022		2021		2022		2021		2023		2022		2023		2022
Stock options	$	325	$	209	$	846	$	445	$	372	$	302	$	702	$	520
Restricted and performance-based shares		207		115		516		202		283		185		701		310
	$	532	$	324	$	1,362	$	647	$	655	$	487	$	1,403	$	830

As of ~~September~~June 30, ~~2022,~~2023, there was approximately ~~$2.3~~$2.9 million of unrecognized compensation cost related to unvested stock options previously granted that is expected to be recognized over a weighted-average period of approximately ~~2.1~~2.2 years. As of such date, there was also ~~$1.3~~$2.0 million of unrecognized compensation cost related to unvested restricted and ~~performance~~performance-based shares, which is expected to be recognized over a weighted-average period of ~~1.5~~1.4 years.

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~~10.~~9. SEGMENT REPORTING AND DISAGGREGATED REVENUE

The Company manages its reporting segments based on geographic regions within the United States and type of income. ~~Its operating~~Starting in the first quarter of 2023, the Company changed its reportable segments ~~as of 2022, are: Mississippi, Indiana, Colorado, Nevada,~~to Midwest & South, West, and Contracted Sports Wagering. This change reflects a realignment within the Company as a result of its continued growth. The Company’s management views the ~~states~~regions where each of its casino resorts are located as ~~operating~~reportable segments, in addition to its contracted sports wagering segment. ~~Operating~~Reportable segments are aggregated based on geography, economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate, and their management and reporting structure.

The Company utilizes Adjusted Segment EBITDA as the measure of segment profit in assessing performance and allocating resources at the reportable segment level. Adjusted Segment EBITDA is defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening 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 segment.

~~Table~~As a result of ~~Contents~~

~~The~~the change in reportable segments described above, the Company has recast previously-reported segment information to conform to the current presentation in the following ~~tables present the Company’s segment information:~~tables:


(In thousands)	Three Months Ended September 30, 2022												Three Months Ended June 30, 2023
									Contracted								Contracted
									Sports								Sports
	Mississippi		Indiana		Colorado		Nevada		Wagering		Total		Midwest & South		West		Wagering		Total
Revenues
Casino	$	13,167	$	6,986	$	3,613	$	5,955	$	—	$	29,721	$	38,281	$	7,078	$	—	$	45,359
Food and beverage		5,042		1,036		497		236		—		6,811		7,894		779		—		8,673
Hotel		1,292		975		223		—		—		2,490		2,229		119		—		2,348
Other operations, including contracted sports wagering		480		642		52		99		1,098		2,371		1,507		113		1,382		3,002
	$	19,981	$	9,639	$	4,385	$	6,290	$	1,098	$	41,393	$	49,911	$	8,089	$	1,382	$	59,382

Adjusted Segment EBITDA	$	4,235	$	1,343	$	36	$	2,280	$	1,083	$	8,977	$	9,391	$	177	$	1,361	$	10,929
Other operating costs and expenses:
Depreciation and amortization												(2,386)								(8,155)
Corporate expenses												(1,219)								(422)
Project development costs												149								(17)
Preopening costs												(2,594)								(1,086)
Stock-based compensation												(532)								(655)
Operating income												2,395								594
Other expenses:
Other expense:
Interest expense, net												(5,838)								(5,633)
Loss on modification of debt												(105)
												(5,943)								(5,633)
Loss before income taxes												(3,548)								(5,039)
Income tax provision												29								561
Net loss											$	(3,577)							$	(5,600)

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(In thousands)	Three Months Ended September 30, 2021												Three Months Ended June 30, 2022
									Contracted								Contracted
									Sports								Sports
	Mississippi		Indiana		Colorado		Nevada		Wagering		Total		Midwest & South		West		Wagering		Total
Revenues
Casino	$	14,578	$	7,906	$	5,288	$	4,734	$	—	$	32,506	$	21,197	$	8,291	$	—	$	29,488
Food and beverage		5,156		891		740		305		—		7,092		6,236		697		—		6,933
Hotel		1,248		990		231		—		—		2,469		2,262		145		—		2,407
Other operations, including contracted sports wagering		556		2,799		81		93		1,642		5,171		3,241		145		2,169		5,555
	$	21,538	$	12,586	$	6,340	$	5,132	$	1,642	$	47,238	$	32,936	$	9,278	$	2,169	$	44,383

Adjusted Segment EBITDA	$	6,485	$	3,816	$	1,543	$	1,537	$	1,645	$	15,026	$	9,149	$	1,684	$	2,196	$	13,029
Other operating costs and expenses:
Depreciation and amortization												(1,819)								(1,834)
Corporate expenses												(1,427)								(943)
Project development costs												(318)								(17)
Preopening costs												(17)								(1,534)
Loss on disposal of assets, net												(2)
Gain on disposal of assets																				5
Stock-based compensation												(324)								(487)
Operating income												11,119								8,219
Other expense:
Other expenses:
Interest expense, net												(6,405)								(6,988)
Loss on modification of debt																				(19)
Income before income taxes												4,714								1,212
Income tax provision												95								5,567
Net income											$	4,619
Net loss																			$	(4,355)

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(In thousands)	Nine Months Ended September 30, 2022												Six Months Ended June 30, 2023
									Contracted								Contracted
									Sports								Sports
	Mississippi		Indiana		Colorado		Nevada		Wagering		Total		Midwest & South		West		Wagering		Total
Revenues
Casino	$	41,930	$	20,817	$	10,736	$	14,810	$	—	$	88,293	$	67,133	$	14,213	$	—	$	81,346
Food and beverage		15,233		2,893		1,345		784		—		20,255		14,791		1,542		—		16,333
Hotel		3,802		2,771		503		—		—		7,076		4,269		223		—		4,492
Other operations, including contracted sports wagering		1,467		3,588		148		274		6,098		11,575		4,520		235		2,562		7,317
	$	62,432	$	30,069	$	12,732	$	15,868	$	6,098	$	127,199	$	90,713	$	16,213	$	2,562	$	109,488

Adjusted Segment EBITDA	$	15,442	$	6,374	$	(49)	$	4,557	$	6,047	$	32,371	$	20,077	$	234	$	2,522	$	22,833
Other operating costs and expenses:
Depreciation and amortization												(6,012)								(14,014)
Corporate expenses												(4,130)								(2,201)
Project development costs, net												(33)
Project development costs																				(24)
Preopening costs												(4,914)								(11,583)
Loss on disposal of assets, net												(3)
Stock-based compensation												(1,362)								(1,403)
Operating income												15,917
Other expenses:
Operating loss																				(6,392)
Other (expense) income:
Interest expense, net												(19,225)								(10,452)
Loss on modification of debt												(4,530)
Gain on insurance settlement																				355
												(23,755)								(10,097)
Loss before income taxes												(7,838)								(16,489)
Income tax benefit												(16)
Income tax provision																				526
Net loss											$	(7,822)							$	(17,015)

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(In thousands)	Nine Months Ended September 30, 2021												Six Months Ended June 30, 2022
									Contracted								Contracted
									Sports								Sports
	Mississippi		Indiana		Colorado		Nevada		Wagering		Total		Midwest & South		West		Wagering		Total
Revenues
Casino	$	47,489	$	22,507	$	16,127	$	13,094	$	—	$	99,217	$	42,595	$	15,977	$	—	$	58,572
Food and beverage		15,411		2,577		1,777		868		—		20,633		12,048		1,396		—		13,444
Hotel		3,687		3,040		463		—		—		7,190		4,305		281		—		4,586
Other operations, including contracted sports wagering		1,546		3,629		259		254		4,160		9,848		3,934		270		5,000		9,204
	$	68,133	$	31,753	$	18,626	$	14,216	$	4,160	$	136,888	$	62,882	$	17,924	$	5,000	$	85,806

Adjusted Segment EBITDA	$	23,097	$	7,615	$	5,092	$	4,173	$	4,122	$	44,099	$	16,239	$	2,191	$	4,964	$	23,394
Other operating costs and expenses:
Depreciation and amortization												(5,448)								(3,626)
Corporate expenses												(4,803)								(2,911)
Project development costs												(491)								(182)
Preopening costs												(17)								(2,320)
Loss on disposal of assets, net												(674)
Loss on disposal of assets																				(3)
Stock-based compensation												(647)								(830)
Operating income												32,019								13,522
Other expenses:
Interest expense, net												(17,531)								(13,387)
Loss on extinguishment of debt												(6,104)
Adjustment to fair value of warrants												(1,347)
Loss on modification of debt																				(4,425)
												(24,982)								(17,812)
Income before income taxes												7,037
Income tax provision												379
Net income											$	6,658
Loss before income taxes																				(4,290)
Income tax benefit																				(45)
Net loss																			$	(4,245)


(In thousands)	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Total Assets
Mississippi	$	83,529	$	85,838
Indiana		34,017		34,857
Colorado		322,261		258,436
Nevada		11,701		13,091
Midwest & South					$	297,499	$	194,033
West						352,554		351,069
Contracted Sports Wagering		1,158		2,168		1,658		1,658
Corporate and Other⁽¹⁾		122,085		79,452
Corporate and Other						19,423		48,569
	$	574,751	$	473,842	$	671,134	$	595,329

~~__________~~

~~(1)~~

~~Includes $44.8 million related to American Place in 2022, which is expected to open within the next three months.~~

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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~~“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, ~~2021,~~2022, which were included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March ~~15, 2022.~~16, 2023. 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,” the “Company,” “we,” “our” or “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 casino gambling, hotel accommodations, dining, golf, RV camping, sports betting, entertainment, and retail outlets, among other amenities. We currently operate ~~five~~six casinos: ~~four~~five on real estate that we own or lease and one located within a hotel owned by a third party. ~~We are currently constructing two additional properties:~~Construction continues for a seventh property, Chamonix Casino Hotel (“Chamonix”), adjacent to our existing Bronco Billy’s Casino and Hotel in Cripple Creek, ~~Colorado; and~~Colorado. We are also designing our permanent American Place casino destination, which will be built adjacent to a temporary facility that we opened in February 2023 named The Temporary by American Place (“The Temporary”) ~~in Waukegan, Illinois.~~. We ~~also~~intend to operate The Temporary until the opening of the permanent American Place facility. Additionally, we benefit from seven permitted sports wagering “skins”: – three in Colorado, three in Indiana, and one in Illinois that we expect to receive shortly after the opening of The Temporary, pending customary regulatory approvals. As of September 30, 2022, five of our seven online skins are contracted with otherIllinois. Other companies ~~and four of which are currently in operation. These contracts allow the counterparties to~~ operate or will operate these online sports wagering ~~sites~~websites under their ~~own~~ brands, paying us a percentage of revenues, as defined, and subject to annual minimum amounts.

In December 2021, we were selected by the Illinois Gaming Board (“IGB”) to develop our American Place project in Waukegan, Illinois, a northern suburb of Chicago. While the permanent American Place facility is under construction, we intend to operate a temporary casino facility named The Temporary. In May 2022, we commenced construction of The Temporary, which is expected to open within the next three months, subject to customary regulatory approvals.

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


Segments and Properties		Locations
~~Colorado~~Midwest & South
The Temporary by American Place (opened on February 17, 2023) and American Place (under development)		Waukegan, IL (northern suburb of Chicago)
Silver Slipper Casino and Hotel		Hancock County, MS (near New Orleans)
Rising Star Casino Resort		Rising Sun, IN (near Cincinnati)
West
Bronco Billy’s Casino and Hotel		Cripple Creek, CO (near Colorado Springs)
Chamonix Casino Hotel ~~(under construction)~~(scheduled to open December 26, 2023)		Cripple Creek, CO (near Colorado Springs)
~~Illinois~~
~~The Temporary and American Place (under construction)~~		~~Waukegan, IL (northern suburb of Chicago)~~
~~Indiana~~
~~Rising Star Casino Resort~~		~~Rising Sun, IN (near Cincinnati)~~
~~Mississippi~~
~~Silver Slipper Casino and Hotel~~		~~Hancock County, MS (near New Orleans)~~
~~Nevada~~
Grand Lodge Casino (leased and part of the Hyatt Regency Lake Tahoe Resort, Spa and Casino)		Incline Village, NV (North Shore of Lake Tahoe)
Stockman’s Casino		Fallon, NV (one hour east of Reno)
Contracted Sports Wagering
Three sports wagering websites (“skins”)		Colorado
Three sports wagering websites (“skins”), one of which is currently idle		Indiana
One sports wagering website (“skin”) ~~upon opening of The Temporary~~, commencing in August 2023		Illinois

We manage our casinos based primarily on geographic regions within the United States and type of income. Starting in the first quarter of 2023, we updated our reportable segments to Midwest & South, West, and Contracted Sports Wagering, reflecting a realignment within the Company as a result of our continued growth.

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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 provide credit at some of our casinos ~~where~~if permitted by local gaming regulations, most of our customers wager with cash or pay for non-gaming services with cash or credit cards. Our gaming revenues are primarily derived from slot machines, but also include table games, keno, and sports betting. In addition, we receive a significant amount of revenue from our hotels and our food and beverage outlets. We also derive revenues from our golf course at Rising Star, 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. We often provide hotel rooms, food and beverages, entertainment, ferry usage, and golf privileges to casino customers on a complimentary basis; the value of such services is included as revenue in those categories, offset by contra-revenue in the casino revenue category. As a result, the casino revenues in our financial statements reflect patron gaming wins and losses, reduced by the retail value of complimentary services, the value of free play provided to customers, the value of points earned by casino customers that can be redeemed for services or free play, and adjustments 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~~especially contrasted with different seasonal quarters, are not necessarily ~~comparable and~~comparable. Results for any particular quarter or year may not be indicative of future periods’ results.

Our market environment is 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 Update.~~The Temporary / American Place. In February 2023, we opened The ~~COVID-19 pandemic continues~~Temporary by American Place, a temporary facility in Waukegan, Illinois, that we will operate while we design and construct the larger, permanent American Place facility. The Temporary currently includes approximately 940 slot machines, 48 table games, two restaurants, and a center bar. We expect to ~~evolve. Governmental authorities continue~~open a fine-dining restaurant and a sportsbook later this year. The permanent American Place facility is expected to ~~update their precautionary measures~~include a world-class casino with a state-of-the-art sportsbook; a premium boutique hotel comprised of 20 luxurious villas; a 1,500-seat live entertainment venue; and ~~promote vaccination programs to manage the spread~~various food and beverage outlets. To accommodate operations for The Temporary, as well as construction of the ~~virus as different variants~~permanent American Place facility, we entered into a 99-year ground lease and purchase option with the City of ~~the virus surface and subside. We have generally benefited from the relaxation of pandemic-related business restrictions since 2021.~~Waukegan. For more information, see Note 3.

~~However,~~Sports Wagering in Colorado. In December 2022, we entered into a contract with a third party to operate mobile sports wagering under our permitted third skin in Colorado. The 10-year agreement began its contractual term in March 2023. Such agreement replaces an unrelated operator that ceased operations in May 2022. In total, we have three sports wagering agreements in Colorado, for which we receive a percentage of revenues (as defined), subject to annual minimums totaling $3 million. For more information, see Note 2.

Sports Wagering in Illinois. In May 2022, we signed a retail and mobile sports wagering contract for Illinois. Upon signing the ~~COVID-19 pandemic~~agreement, we received an upfront fee of $5 million, which was capitalized and ~~certain precautionary and stimulus measures, as well as other factors, have created economic uncertainty both in~~will be amortized over the United States and globally, as well as significant volatility in, and disruption to, financial markets, labor markets and supply chains. Global supply chain disruptions and other world events have resulted in shipping delays, increased shipping costs, supply shortages, and inflationary pressures, including increases in prices for fuel, food, building materials, and other items. These increased costs, labor shortages, and supply shortages continued to put additional constraints on our operating business and our construction projects for the nine months ended September 30, 2022. We do not know when, or if, these cost, labor, and supply chain issues will materially alleviate and, accordingly, they may continue to impact our existing business and our construction projects.

At the same time, government stimulus checks and infrastructure packages can positively affect our businesses. The timing and scale of such packages, however, is inconsistent amongst periods and such government programs are uncertain to continue into the future at the same levels that they have in the past, if at all.

We believe that as the COVID-19 pandemic evolves, the direct and indirect impacts on global macro-economic conditions, as well as conditions specific to us, are becoming more difficult to isolate or quantify. In addition, these direct and indirect factors can make it difficult to isolate and quantify the portion of our costs that are a direct resulteight-year term of the ~~pandemic versus costs arising from factors that may~~agreement upon commencement. We will receive a percentage of revenues (as defined), subject to an annual minimum of $5 million. Under the agreement, the Company will begin to receive revenue payments for its Illinois sports skin in August 2023, irrespective of whether its sports wagering operations have been influenced by the pandemic, including supply chain constraints, inflationary pressures, labor shortages, and changes in the spending pattern of customers. These factors and their effects on our operations may persist for a longer period, even after the COVID-19 pandemic has subsided.

begun. For more information, see Note 6.

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Debt Financing.On In February ~~7, 2022,~~2023, we ~~closed~~issued an additional $40 million of senior secured notes (the “Additional Notes”) and further amended the indenture governing the 2028 Notes (collectively, the “Amended Indenture”). The Additional Notes are treated as a ~~private offering~~single series of ~~$100~~senior secured debt securities with the existing $410 million aggregate principal amount of ~~additional~~ 8.25% Senior Secured Notes due 2028 (the ~~“Additional~~“2028 Notes”)~~, which sold at~~ and as a ~~price of 102.0% of such principal amount.~~single class for all purposes under the Amended Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Proceeds from the ~~sale~~offering of ~~the~~our Additional Notes, ~~are being~~net of related expenses and discounts, were approximately $34 million and were used: (i) to ~~develop, equip and~~ open The Temporary, ~~which we intend to operate while we design~~including the payment of related Illinois gaming license fees in March 2023, and ~~construct the permanent American Place facility,~~ (ii) ~~to pay the transaction fees and expenses of the offer and sale of the Additional Notes and (iii)~~ for general corporate purposes.

Also in February ~~2022,~~2023, we ~~amended~~entered into a Second Amendment to our ~~senior secured revolving credit facility agreement to,~~Credit Agreement with Capital One (the “Credit Facility”), which, among other things, ~~increase its size from $15.0 million to $40.0 million. As~~increased the amount of ~~this report date, there were no drawn amounts~~additional indebtedness permitted under the Credit Facility, ~~or on~~thereby allowing for the ~~outstanding standby letter of credit of $1 million related to the American Place project.~~

~~Sports Wagering in Illinois~~. In May 2022, we entered into an agreement with an affiliate of Circa Sports to jointly develop and manage on-site sportsbooks at both The Temporary and American Place. Circa Sports currently operates at Circa Resort & Casino in Las Vegas, and offers online sports wagering in several states. In addition to the on-site sportsbook, Circa Sports will utilize our expected mobile sports skin in Illinois to conduct Internet sports wagering throughout the state upon the openingissuance of the Temporary (anticipated in Spring 2023), subject to customary regulatory approvals. In exchange for such rights, we received a non-refundable market access fee of $5 million in May 2022 and will also receive a percentage of revenues (as defined) totaling at least $5 million, on an annualized basis, once Circa Sports commences operations in Illinois. The term of the agreement is for eight years, followed by two four-year extension opportunities at the option of Circa Sports.

Additional Notes. For more information, see Note 4.

Key Performance Indicators

We use several key performance indicators to evaluate the operations of our properties. These key operating measures are presented as supplemental disclosures because management uses these measures to better understand period-over-period fluctuations in our casino and hotel operating revenues. These key performance indicators include the following and are disclosed in our discussions, where applicable, for certain jurisdictions on segment performance:

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, and are monitored on a consolidated basis in relation to slot and table game win. Such metrics can be influenced by marketing activity and ~~since reopening our properties, have~~are not necessarily ~~been~~ indicative of profitability trends.

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 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. Both the ~~win/hold~~slot win and ~~win/~~table game hold percentages are monitored on a consolidated basis in our evaluation of Company performance.

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.

Adjusted EBITDA, Adjusted Segment EBITDA, ~~and~~ Adjusted Segment EBITDA ~~Margin:~~Margin and Adjusted Property EBITDA:

Management uses Adjusted EBITDA as a measure of our performance. For a description of Adjusted EBITDA, see “Non-GAAP Financial Measure.” We utilize Adjusted Segment EBITDA, a financial measure in accordance with generally accepted accounting principles in the United States of America (“GAAP”), as the measure of segment profitability in assessing performance and allocating resources at the reportable segment level. For information regarding our operating segments, see Note ~~10 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report.~~9. In addition, we use Adjusted Segment EBITDA Margin, which is calculated by dividing Adjusted Segment EBITDA by the segment’s total revenues.

Same-store Adjusted Segment EBITDA is Adjusted Segment EBITDA further adjusted to exclude the Adjusted Property EBITDA of properties that have not been in operation for a full year. Adjusted Property EBITDA is defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening 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.

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Results of Operations

Consolidated operating results

The following tables summarize our consolidated operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(In thousands)	September 30,				Increase /		September 30,				Increase /		June 30,				Increase /		June 30,				Increase /
	2022		2021		(Decrease)		2022		2021		(Decrease)		2023		2022		(Decrease)		2023		2022		(Decrease)
Revenues	$	41,393	$	47,238	(12.4)	%	$	127,199	$	136,888	(7.1)	%	$	59,382	$	44,383	33.8	%	$	109,488	$	85,806	27.6	%
Operating expenses		38,998		36,119	8.0	%		111,282		104,869	6.1	%		58,788		36,164	62.6	%		115,880		72,284	60.3	%
Operating income		2,395		11,119	(78.5)	%		15,917		32,019	(50.3)	%
Operating income (loss)														594		8,219	(92.8)	%		(6,392)		13,522	(147.3)	%
Interest and other non-operating expenses, net		5,943		6,405	(7.2)	%		23,755		24,982	(4.9)	%		5,633		7,007	(19.6)	%		10,097		17,812	(43.3)	%
Income tax provision (benefit)		29		95	(69.5)	%		(16)		379	(104.2)	%		561		5,567	(89.9)	%		526		(45)	1,268.9	%
Net (loss) income	$	(3,577)	$	4,619	(177.4)	%	$	(7,822)	$	6,658	(217.5)	%
Net loss													$	(5,600)	$	(4,355)	28.6	%	$	(17,015)	$	(4,245)	300.8	%


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(In thousands)	September 30,				Increase /		September 30,				Increase /		June 30,				Increase /		June 30,				Increase /
	2022		2021		(Decrease)		2022		2021		(Decrease)		2023		2022		(Decrease)		2023		2022		(Decrease)
Casino revenues
Slots	$	25,788	$	28,627	(9.9)	%	$	77,151	$	86,243	(10.5)	%	$	38,022	$	25,838	47.2	%	$	69,549	$	51,365	35.4	%
Table games		3,712		3,336	11.3	%		10,524		10,717	(1.8)	%		7,247		3,534	105.1	%		11,599		6,810	70.3	%
Other		221		543	(59.3)	%		618		2,257	(72.6)	%		90		116	(22.4)	%		198		397	(50.1)	%
		29,721		32,506	(8.6)	%		88,293		99,217	(11.0)	%		45,359		29,488	53.8	%		81,346		58,572	38.9	%

Non-casino revenues, net
Food and beverage		6,811		7,092	(4.0)	%		20,255		20,633	(1.8)	%		8,673		6,933	25.1	%		16,333		13,444	21.5	%
Hotel		2,490		2,469	0.9	%		7,076		7,190	(1.6)	%		2,348		2,407	(2.5)	%		4,492		4,586	(2.0)	%
Other		2,371		5,171	(54.1)	%		11,575		9,848	17.5	%		3,002		5,555	(46.0)	%		7,317		9,204	(20.5)	%
		11,672		14,732	(20.8)	%		38,906		37,671	3.3	%		14,023		14,895	(5.9)	%		28,142		27,234	3.3	%
Total revenues	$	41,393	$	47,238	(12.4)	%	$	127,199	$	136,888	(7.1)	%	$	59,382	$	44,383	33.8	%	$	109,488	$	85,806	27.6	%


	Three Months Ended								Nine Months Ended								Three Months Ended								Six Months Ended
	September 30,						Increase /		September 30,						Increase /		June 30,						Increase /		June 30,						Increase /
(In thousands)	2022			2021			(Decrease)		2022			2021⁽³⁾			(Decrease)		2023			2022			(Decrease)		2023			2022			(Decrease)

Slot coin-in	$	485,970		$	505,673		(3.9)	%	$	1,418,874		$	1,470,067		(3.5)	%	$	643,965		$	470,735		36.8	%	$	1,184,199		$	932,903		26.9	%
Slot win⁽¹⁾	$	35,542		$	37,770		(5.9)	%	$	105,018		$	111,633		(5.9)	%	$	46,889		$	35,241		33.1	%	$	87,985		$	69,476		26.6	%
Slot hold percentage⁽²⁾		7.3	%		7.5	%	(0.2)	pts		7.4	%		7.6	%	(0.2)	pts		7.3	%		7.5	%	(0.2)	pts		7.4	%		7.4	%	—	pts
Table game drop	$	21,657		$	21,422		1.1	%	$	55,746		$	58,512		(4.7)	%	$	39,335		$	18,509		112.5	%	$	65,290		$	34,090		91.5	%
Table game win⁽¹⁾	$	3,791		$	3,397		11.6	%	$	10,668		$	10,798		(1.2)	%	$	7,273		$	3,573		103.6	%	$	11,605		$	6,877		68.8	%
Table game hold percentage⁽²⁾		17.5	%		15.9	%	1.6	pts		19.1	%		18.5	%	0.6	pts		18.5	%		19.3	%	(0.8)	pts		17.8	%		20.2	%	(2.4)	pts

__________

(1)	Does not reflect reductions in casino revenues from “discretionary comps” (see Note 2 ~~of our Condensed Notes to Consolidated Financial Statements included in this quarterly report~~ for ~~details~~more information on our customer loyalty programs).

(2)

The three-year averages for slot hold percentage and table game hold percentage were 7.5% and 18.1%, respectively. As a significant portion of our results in the recent and prospective quarters reflect a new property, and the win percentages at that new property may be different from the other casinos in our portfolio, consolidated win percentages in the future may differ from those in the past.

~~(3)~~

Reflects the correction of an immaterial error in the information provided for the nine-month period in the corresponding table in our Quarterly Report on Form 10-Q for the period ended September 30, 2021.

Table of Contents

The following discussion is based on our consolidated financial statements for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

Revenues. Consolidated total revenues ~~decreased~~increased by ~~$5.8 million~~33.8% (or $15.0 million) and ~~$9.7 million~~27.6% (or $23.7 million) for the respective ~~three-~~three and ~~nine-month~~six months ended June 30, 2023. These increases reflect the February 2023 opening of The Temporary, which contributed approximately $20.3 million and $30.7 million, respectively. Lower volumes in both periods at the Company’s other properties contributed to gaming revenue declines of $3.1 million and $6.0 million, respectively. For non-gaming revenue, a timing difference for the $2.1 million sale of “free play” at Rising Star offset the $1.7 million increase in food and beverage revenues for the three months ended ~~September~~June 30, ~~2022, primarily due to the absence of government stimulus programs of the same scale~~2023, as this free play sale was completed in the ~~prior-year periods;~~second quarter of 2022 versus the ~~competitive launch~~first quarter of ~~online sports wagering in nearby Louisiana, which~~2023. For the six months ended June 30, 2023, non-gaming revenues were adversely affected ~~our in-house sportsbook in Mississippi; and construction disruptions at Bronco Billy’s to advance the completion of our Chamonix project. Additionally, our revenues were impacted~~ by ~~factors that are inherently hard to quantify, as discussed in the “~~~~Recent Developments – COVID-19 Pandemic Update~~” section above. These include inflationary pressures, which could affect the spending pattern of customers, as well as labor shortages for us to meet the demands of potential customers. The decline in revenue was offset, in part, by “Other Non-casino Revenues” that included $6.1 million of revenue related to our Contracted Sports Wagering, ~~segment for the nine months ended September 30, 2022, versus $4.2 million in~~as the prior-year ~~period.~~period included an acceleration of deferred revenue for two agreements that ceased operations in May 2022 (see Note 2).

For more information, see “Supplemental Information – Same-store Operating Results.”

Operating Expenses. Consolidated operating expenses increased by ~~$2.9~~62.6% (or $22.6 million) and 60.3% (or $43.6 million) for the three and six months ended June 30, 2023, respectively. These increases were primarily due to the commencement of operations at The Temporary, including $6.9 million in selling, general and administrative costs and $6.3 million in depreciation and amortization for the three months ended June 30, 2023. For the six months ended June 30, 2023, The Temporary contributed to increases in operating expenses, including $9.1 million in selling, general and administrative costs, $10.3 million in depreciation and amortization, and $10.1 million of preopening costs. Operating expenses also included $1.1 million and ~~$6.4~~$1.5 million of preopening costs for the respective three and ~~nine~~six months ended ~~September~~June 30, ~~2022, primarily due~~2023, related to ~~preopening costs for The Temporary (expected~~the construction and development of Chamonix (scheduled to open within the next three months) and for Chamonix (expected to open in mid-2023), as well as higher insurance, food and beverage costs. To a lesser extent, increases in operating expenses during 2022 were also attributed to additional professional fees and other expenses related to our growth.on December 26, 2023).

See further information within our reportable segments described below.

Interest and Other Non-Operating Expenses.

Interest Expense

Interest expense, net, consists of the following:


(In thousands)	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Interest expense (excluding bond fee amortization and premium)	$	8,682	$	6,557	$	24,733	$	17,557
Amortization of debt issuance costs, discounts and premiums		430		357		1,227		991
Interest expense (excluding bond fee amortization and discounts/premiums)									$	10,062	$	8,660	$	19,082	$	16,051
Amortization of debt issuance costs and discounts/premiums										744		411		1,291		797
Capitalized interest		(3,039)		(509)		(6,500)		(1,017)		(4,097)		(2,083)		(7,569)		(3,461)
Interest income and other		(235)		—		(235)		—		(1,076)		—		(2,352)		—
	$	5,838	$	6,405	$	19,225	$	17,531	$	5,633	$	6,988	$	10,452	$	13,387

The ~~increases~~net decreases in interest expense for ~~the three-~~three and ~~nine-month periods~~six months ended June 30, 2023 were primarily due to ~~the February 2022 issuance of the Additional Notes to fund construction of The Temporary, which were offset by~~ increases in capitalized interest related to construction of The Temporary and Chamonix, ~~projects.~~as well as income earned from our cash balances.

Other Non-Operating Expenses, Net

We had no other non-operating expense for the three months ended June 30, 2023. However, for the six months ended June 30, 2023, we had $0.4 million of other non-operating income, consisting of insurance settlement proceeds from hurricane damage at Silver Slipper in 2020. For ~~the respective three-~~three and ~~nine-month periods~~six months ended ~~September~~June 30, 2022, we had ~~approximately $0.1 million~~$19,000 and ~~$4.5~~$4.4 million of other non-operating expenses, ~~primarily~~ consisting of debt modification costs related to our ~~Additional Notes~~notes offering in February 2022. The corresponding prior-year periods had no other non-operating expense for the three-month period and $7.5 million of other non-operating expense for the nine-month period, including $6.1 million for the extinguishment of our Prior Notes and $1.3 million for the settlement of our former warrants.

Table of Contents

Income Tax Expense. We recognized an income tax ~~provision~~provisions of ~~$29,000~~$561,000 and ~~an income tax benefit of $16,000~~$526,000 for the respective three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, which resulted in effective income tax rates of ~~(0.8%~~(11.1%) and ~~0.2%~~(3.2%), respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we recognized a respective income tax ~~provisions~~provision of ~~$95,000~~$5.6 million and ~~$0.4 million,~~an income tax benefit of $45,000, which resulted in effective income tax rates of ~~2.0%~~459.3% and ~~5.4%~~1.0%, respectively. The changes in the effective income tax rates were primarily due to our projections for pre-tax book income in 2023, the effects of tax amortization on ~~indefinite lived~~indefinite-lived intangibles in ~~2022,~~2023 and valuation ~~allowances, and certain permanent differences between tax and financial reporting purposes.~~allowances.

We do not expect to pay any federal income taxes or receive any federal tax refunds related to our ~~2022 results. As~~2023 results, as we have incurred ~~significant~~ losses in prior periods weand anticipate ~~current-year~~an overall taxable ~~income will be offset by tax~~ loss ~~carryforwards from prior years.~~for the period. We continue to evaluate the ability to realize our deferred tax assets and need for a valuation allowance on a quarterly basis. The valuation allowance, and the potential reversal of such allowance, have no bearing on the taxes actually paid by the Company.

Operating Results – Reportable Segments

We manage our casinos based primarily on geographic regions within the United States and type of income. For more information, please refer to our earlier discussion within “Executive Overview” above.

The following table presents detail by segment of our consolidated revenues and Adjusted EBITDA; see “Non-GAAP Financial Measure” for additional information. Additionally, management uses Adjusted Segment EBITDA as the measure of segment profitability in accordance with GAAP.

(In thousands)

Three Months Ended

Nine Months Ended

September 30,

Increase /

September 30,

Increase /


2022

2021

(Decrease)

2022

2021

(Decrease)
Revenues

Mississippi

$
19,981

$
21,538

(7.2)
%

$
62,432

$
68,133

(8.4)
%
Indiana

9,639

12,586

(23.4)
%

30,069

31,753

(5.3)
%
Colorado

4,385

6,340

(30.8)
%

12,732

18,626

(31.6)
%
Nevada

6,290

5,132

22.6
%

15,868

14,216

11.6
%
Contracted Sports Wagering

1,098

1,642

(33.1)
%

6,098

4,160

46.6
%

$
41,393

$
47,238

(12.4)
%

$
127,199

$
136,888

(7.1)
%
Adjusted Segment EBITDA and Adjusted EBITDA

Mississippi

$
4,235

$
6,485

(34.7)
%

$
15,442

$
23,097

(33.1)
%
Indiana

1,343

3,816

(64.8)
%

6,374

7,615

(16.3)
%
Colorado

36

1,543

(97.7)
%

(49)

5,092

(101.0)
%
Nevada

2,280

1,537

48.3
%

4,557

4,173

9.2
%
Contracted Sports Wagering

1,083

1,645

(34.2)
%

6,047

4,122

46.7
%
Adjusted Segment EBITDA

8,977

15,026

(40.3)
%

32,371

44,099

(26.6)
%
Corporate

(1,219)

(1,427)

(14.6)
%

(4,130)

(4,803)

(14.0)
%
Adjusted EBITDA

$
7,758

$
13,599

(43.0)
%

$
28,241

$
39,296

(28.1)
%

Adjusted Segment EBITDA Margin

Mississippi

21.2
%

30.1
%
(8.9)
pts

24.7
%

33.9
%
(9.2)
pts
Indiana

13.9
%

30.3
%
(16.4)
pts

21.2
%

24.0
%
(2.8)
pts
Colorado

0.8
%

24.3
%
(23.5)
pts

(0.4)
%

27.3
%
(27.7)
pts
Nevada

36.2
%

29.9
%
6.3
pts

28.7
%

29.4
%
(0.7)
pts
Contracted Sports Wagering

98.6
%

100.2
%
(1.6)
pts

99.2
%

99.1
%
0.1
pts


(In thousands)	Three Months Ended								Six Months Ended
	June 30,						Increase /		June 30,						Increase /
	2023			2022			(Decrease)		2023			2022			(Decrease)
Revenues
Midwest & South	$	49,911		$	32,936		51.5	%	$	90,713		$	62,882		44.3	%
West		8,089			9,278		(12.8)	%		16,213			17,924		(9.5)	%
Contracted Sports Wagering		1,382			2,169		(36.3)	%		2,562			5,000		(48.8)	%
	$	59,382		$	44,383		33.8	%	$	109,488		$	85,806		27.6	%
Adjusted Segment EBITDA and Adjusted EBITDA
Midwest & South	$	9,391		$	9,149		2.6	%	$	20,077		$	16,239		23.6	%
West		177			1,684		(89.5)	%		234			2,191		(89.3)	%
Contracted Sports Wagering		1,361			2,196		(38.0)	%		2,522			4,964		(49.2)	%
Adjusted Segment EBITDA		10,929			13,029		(16.1)	%		22,833			23,394		(2.4)	%
Corporate		(422)			(943)		(55.2)	%		(2,201)			(2,911)		(24.4)	%
Adjusted EBITDA	$	10,507		$	12,086		(13.1)	%	$	20,632		$	20,483		0.7	%

Adjusted Segment EBITDA Margin
Midwest & South		18.8	%		27.8	%	(9.0)	pts		22.1	%		25.8	%	(3.7)	pts
West		2.2	%		18.2	%	(16.0)	pts		1.4	%		12.2	%	(10.8)	pts
Contracted Sports Wagering		98.5	%		101.2	%	(2.7)	pts		98.4	%		99.3	%	(0.9)	pts

Table of Contents

~~Mississippi~~Supplemental Information – Same-store Operating Results

The following table presents the financial results of Midwest & South Operations on a same-store basis for the three and six months ended June 30, 2023 and 2022 for revenues and Adjusted Segment EBITDA; see “Non-GAAP Financial Measure” for additional information.

Same-store operations exclude results of new and acquired operating segments that have not been in operations for longer than a year, starting from the date of commencement or acquisition through the end of the reporting period. Accordingly, for Midwest & South, we have excluded the results of The Temporary by American Place for periods subsequent to its commencement of operations.


(In thousands)	Three Months Ended								Six Months Ended
	June 30,						Increase /		June 30,						Increase /
	2023			2022			(Decrease)		2023			2022			(Decrease)
Midwest & South same-store total revenues⁽¹⁾	$	29,584		$	32,936		(10.2)	%	$	59,966		$	62,882		(4.6)	%
The Temporary by American Place		20,327			—		N.M.			30,747			—		N.M.
Midwest & South total revenues	$	49,911		$	32,936		51.5	%	$	90,713		$	62,882		44.3	%

Midwest & South same-store Adjusted Segment EBITDA⁽¹⁾	$	5,258		$	9,149		(42.5)	%	$	12,372		$	16,239		(23.8)	%
The Temporary by American Place		4,133			—		N.M.			7,705			—		N.M.
Midwest & South Adjusted Segment EBITDA	$	9,391		$	9,149		2.6	%	$	20,077		$	16,239		23.6	%

Midwest & South same-store Adjusted Segment EBITDA margin⁽¹⁾		17.8	%		27.8	%	(10.0)	pts		20.6	%		25.8	%	(5.2)	pts
The Temporary by American Place		20.3	%		—	%	20.3	pts		25.1	%		—	%	25.1	pts
Midwest & South Adjusted Segment EBITDA margin		18.8	%		27.8	%	(9.0)	pts		22.1	%		25.8	%	(3.7)	pts

__________
N.M. Not meaningful.

(1)	Same-store operations exclude results from The Temporary by American Place, which opened on February 17, 2023.

Midwest & South

Our ~~Mississippi~~Midwest & South segment ~~consists of the~~includes Silver Slipper Casino and ~~Hotel.~~Hotel, Rising Star Casino Resort and The ~~prior-year periods were among the best~~Temporary by American Place, which opened in ~~the property’s history~~Waukegan, Illinois, in ~~terms of casino revenue and total revenue, benefiting from the issuance of government stimulus checks to customers. Compared to the prior-year periods, total~~February 2023. Total revenues ~~during the three and nine months ended September 30, 2022 decreased by 7.2% and 8.4%, respectively, primarily due to declines in casino revenue. Casino revenue~~ for the three and nine months ended September 30, 2022 declined by 9.7% (or $1.4 million) and 11.7% (or $5.6 million), respectively. Slot revenue declined by 7.5% (or $0.9 million) and 9.7% (or $3.8 million) for the respective three- and nine-month periods due to lower volumes. Table games revenue declined by 9.7% and 2.4%, respectively, also due to lower volumes. Other casino revenues decreased by $0.3 million and $1.6 million for the respective three- and nine-month periods, primarily from our on-site sports book, which was affected by the competitive launch of online sports wagering within nearby Louisiana that started in January 2022.

~~Non-casino revenue decreased by 2.1% and 0.7% during~~ the respective three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 increased by 51.5% (or $17.0 million) and 44.3% (or $27.8 million), primarily due to ~~decreases in food~~the addition of The Temporary and ~~beverage revenue~~its casino operations. Excluding results from The Temporary, same-store revenues declined by ~~2.2%~~10.2% (or ~~$0.1~~$3.4 million) and ~~by 1.2%~~4.6% (or ~~$0.2 million), respectively. Hotel revenues increased slightly by 3.5% (or $43,000) and 3.1% (or $0.1~~$2.9 million) for the respective three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, primarily due to ~~higher average daily room rates. Hotel occupancy was 92.4% and 93.1%~~lower casino revenue for the respective three and nine months ended September 30, 2022, compared to 94.0% and 94.2% for the respective prior-year periods. Other non-casino revenue decreased by 13.6% (or $0.1 million) and 5.2% (or $0.1 million) during the respective three and nine months ended September 30, 2022 from fewer ATM transactions and, as a result, reduced ATM commission income.

~~Adjusted Segment EBITDA for the three and nine months ended September 30, 2022 decreased by 34.7% and 33.1%, respectively, reflecting revenue declines from a lack of stimulus payments~~both periods and the ~~launch of online sports wagering in Louisiana mentioned above; increases of $0.5~~$2.1 million and $2.0 million, respectively, to the cost of food; and increases of $0.5 million and $1.2 million, respectively, in property insurance costs. However, we believe that such property insurance costs relative to income will be lower in future years, as the Company’s diversity improves and it becomes less reliant on the Silver Slipper.

~~Indiana~~

Our Indiana segment consists of Rising Star Casino Resort. Similar to the Silver Slipper, total revenues for the prior-year periods benefited from customers receiving government stimulus payments. Additionally, timing differences for Rising Star’s annual sale of “free play” ~~impacted comparisons for the third quarter, though not for the nine-month period.~~at Rising Star ~~sold $2.1 million~~that was outside of ~~“free play” during~~ the ~~second~~current quarter, of 2022, but not until the third quarter in the prior-year period. Moreover, a nearby facility with “historical racing machines” (which are a form of slot machine) opened in September 2022. As a result, for the three and nine months ended September 30, 2022, total revenues decreased by 23.4% and 5.3%, respectively, compared to the prior-year periods.as further discussed below.

Casino revenue ~~for the three and nine months ended September 30, 2022 declined~~increased by ~~11.6%~~80.6% (or ~~$0.9~~$17.1 million) and ~~7.5%~~57.6% (or ~~$1.7 million), respectively. Slot revenue decreased by 11.4% (or $0.8 million) and 4.2% (or $0.8~~$24.5 million) for the respective three and ~~nine~~six months ended ~~September~~June 30, ~~2022 due to lower volumes. Similarly, table game~~2023, with the opening of The Temporary more than offsetting casino revenue ~~declined~~declines at Silver Slipper and Rising Star. For the three months ended June 30, 2023, slot revenue for the segment increased by ~~13.3%~~71.2% (or ~~$0.1~~$13.2 million) and ~~31.3%~~table games revenue increased by 155.3% (or ~~$0.9~~$3.9 million) ~~for~~. For the ~~respective three and nine~~six months ended ~~September~~June 30, ~~2022.~~

~~Non-casino~~2023, slot revenue ~~decreased by 43.3% (or $2.0 million) and increased by 0.1% (or $8,000) during the respective three and nine months ended September 30, 2022,~~ ~~due to the timing of the sale of “free play” for $2.1 million noted above, as well as increases in food and beverage revenue of 16.3%~~ ~~(or $0.1 million)~~ ~~and 12.2%~~ ~~(or $0.3 million)~~for the ~~respective periods in 2022. Hotel revenues declined by 1.5%~~ ~~(or $14,000)~~ ~~and 8.8%~~ ~~(or $0.3 million)~~during the respective three and nine months ended September 30, 2022, due to fewer occupied room-nights. Rising Star had 12,413 occupied room-nights for the third quarter of 2022, compared to 12,808 occupied room-nights for the prior-year period. For the nine-months ended September 30, 2022, Rising Star had 35,742 occupied room-nights, compared to 39,227 occupied room-nights for the prior-year period.

Table of Contents

~~Adjusted Segment EBITDA during~~segment increased by 53.6% (or $20.0 million) and table games revenue increased by 96.5% (or $4.8 million). Excluding results from The Temporary, same-store casino revenue declined by 9.1% (or $1.9 million) and 9.8% (or $4.2 million) for the respective three and ~~nine~~six months ended June 30, 2023, primarily due to lower slot and table games hold percentages at Silver Slipper versus the prior-year periods. To a lesser extent, same-store slot revenue for both periods was adversely impacted by lower slot volumes at Rising Star versus the prior-year periods, most likely due to the opening of a new, competing racetrack casino in September 2022 in Northern Kentucky.

Non-casino revenue declined slightly by 0.9% (or $0.1 million) during the quarter. This decline in the second quarter of 2023 reflects a timing difference for the $2.1 million sale of “free play” at Rising Star, as it was sold in the first quarter of this year versus the second quarter of 2022 (see Note 2). Food and beverage and other non-casino operations for the segment nearly helped to offset the decline during the quarter. Hotel revenues for the segment remained relatively flat for both the three and six months ended June 30, ~~2022 decreased~~2023, as The Temporary does not have hotel operations. For the six months ended June 30, 2023, non-casino revenue increased by ~~64.8% and 16.3%~~16.2% (or $3.3 million), primarily due to increases in food and beverage revenues of $2.7 million, including contributions of $1.4 million from The Temporary.

Adjusted Segment EBITDA increased by 2.6% (or $0.2 million) and 23.6% (or $3.8 million) for the respective three and six months ended June 30, 2023. These increases reflect the opening of The Temporary, which generated $4.1 million and $7.7 million of Adjusted Property EBITDA, offsetting same-store Adjusted Segment EBITDA declines of approximately $3.9 million each for the respective three and six months ended June 30, 2023. Same-store operations were affected by declines in casino revenues; higher operating costs, such as property insurance costs at Silver Slipper; and, for the three-month period, the timing difference for the sale of ~~“free play~~”Rising Star’s free play.

Of note, The Temporary is not yet operating at full capacity. Various factors, including regulatory processes, resulted in ~~an earlier~~the casino operating with certain restrictions for the first quarter and ~~lower volumes. Marketing costs during~~a portion of the ~~three~~second quarter. These restrictions included limitations on operating hours for the table games department, operating hours for the remainder of the casino, and ~~nine months ended September~~maximum wagers for table games. Additionally, the property has continued to overcome staffing constraints by hiring and training new employees, including casino dealers. As new dealers are hired and trained, the Company expects to operate all of its 50 permitted table games at peak periods, whereas it currently operates approximately 30 ~~2022 increased~~table games on a typical weekend evening. The shortage of dealers also affects the number of tables that we operate in non-peak periods. Similarly, due to ~~address lower volumes during 2022,~~staffing constraints, The Temporary operated only one of its major restaurants in the first quarter, followed by a second restaurant that opened in April. The operating hours of both restaurants are expanding gradually, in response to customer demand and in accordance with the hiring of additional employees. A third restaurant, as well as an on-site sportsbook, are expected to open in the ~~2021 periods were assisted by~~second half of the ~~issuance of government stimulus checks to customers.~~year.

~~Colorado~~West

Our ~~Colorado~~West segment includes Grand Lodge Casino, Stockman’s Casino, Bronco Billy’s Casino and Hotel and, the Chamonix project. The Colorado gaming market, including Cripple Creek, has shown significant growth since betting limits were eliminated in May 2021. Bronco Billy’s, however, has incurred significant construction disruption, including temporarily-reduced gaming and restaurant capacity and the temporary absence of all on-site hotel rooms and on-site self-parking. Total revenues during the three and nine months ended September 30, 2022 decreased by 30.8% and 31.6%, respectively, reflecting business disruptions to accommodate the construction of Chamonix.

Casino revenue decreased by 31.7% (or $1.7 million) and 33.4% (or $5.4 million) for the three and nine months ended September 30, 2022, which were largely due to the construction disruptions mentioned above. For the respective three and nine months ended September 30, 2022, slot revenue declined by 32.8% (or $1.7 million) and 35.1% (or $5.5 million). Table games revenue fell by 5.5% (or $12,000) during the quarter due to lower volumes, but rose by 30.6% (or $0.1 million) during the nine months ended September 30, 2022 due to a higher hold percentage and increased volumes. Table games operations in the prior-year period were significantly affected by pandemic-related limitations.

Non-casino revenue decreased by 26.6% (or $0.3 million) and 20.1% (or $0.5 million) for the respective three and nine months ended September 30, 2022, due to declines in food and beverage revenue after the temporary closing of the property’s steakhouse in May 2022 and, to a lesser extent, declines in ATM and related surcharge income.

Adjusted Segment EBITDA for the respective three and nine months ended September 30, 2022 decreased by 97.7% to $36,000 and 101.0% to $(49,000). The decrease during the quarter was due to significant disruptions from the construction of Chamonix as mentioned above. To alleviate the lack of on-site parking, Bronco Billy’s currently offers complimentary valet parking and a free shuttle service to an off-site parking lot, both of which have resulted in increased operating expenses. The casino has also maintained much ofupon its payroll, despite reduced activity levels, anticipating the need for the larger workforce required to open and operate Chamonix. Somewhat offsetting this, some expenses, such as gaming taxes and the cost of food and beverages, vary with activity levels.

In addition to construction disruption due to our neighboring Chamonix project, we are currently undergoing a modest refurbishment of a portion of Bronco Billy’s, expected to cost approximately $2 million. Accordingly, Bronco Billy’s contribution to earnings will likely be impacted until the completion of the casino refurbishment near year-end, the augmentation of its restaurant capacity in the first quarter of 2023, and the expected opening ofin December 2023, will include Chamonix in mid-2023. When Chamonix opens, Bronco Billy’s will share the significant on-site parking garage, valet and surface parking capacity of the new casino, and also benefit from Chamonix’s adjoining 300-guestroom hotel.

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

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~~Nevada~~

~~The Nevada segment consists of the Grand Lodge and Stockman’s casinos.~~ Our Nevada operations have historically been seasonal, with the summer months accounting for a disproportionate share of annual revenues. Additionally, snowfall levels during the winter months can often affect operations, as Grand Lodge Casino is located near several major ski resorts. WeWhile we typically benefit from a “good” snow year, resulting in extended periods of operation at the nearby ski ~~areas.~~areas, excessive snow levels can result in challenging driving conditions or the closure of roads leading to Grand Lodge.

Total revenues ~~during the respective three and nine months ended September 30, 2022 increased~~decreased by ~~22.6% and 11.6%, primarily due to higher casino revenue at Grand Lodge. Casino revenue increased by 25.8%~~12.8% (or $1.2 million) and ~~13.1%~~9.5% (or $1.7 ~~million) for the three and nine months ended September 30, 2022. Slot revenue improved by 12.9% (or $0.5 million) and 10.0% (or $1.1~~ million) for the respective three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, primarily due to ~~increases in slot volumes at Grand Lodge. Table games~~planned business disruptions to accommodate the construction of Chamonix. These significant construction disruptions include temporarily-reduced gaming and restaurant capacity, as well as the temporary absence of all on-site hotel rooms and on-site self-parking. To alleviate the lack of on-site parking, Bronco Billy’s currently offers, and incurs the cost of offering, complimentary valet parking, as well as a free shuttle service to an off-site parking lot.

Casino revenue ~~increased~~decreased by ~~152.0%~~14.6% (or ~~$0.7~~$1.2 million) and ~~34.3%~~11.0% (or ~~$0.7~~$1.8 million) for the respective three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, largely due to ~~increases in~~the construction disruptions mentioned above. Slot revenue declined by 14.4% (or $1.0 million) and 12.6% (or $1.8 million), while table games ~~volume~~revenue declined by 17.5% (or $0.2 million) and ~~higher hold percentages~~remained flat at Grand Lodge. Grand Lodge was also adversely affected in the prior-year’s third quarter by significant wildfires in the area. Additionally, in July 2022, Stockman’s resumed table games operations, which had remained closed since March 2020.

~~Adjusted Segment EBITDA increased to $2.3 million and $4.6~~$1.8 million for the respective three and ~~nine~~six months ended ~~September~~June 30, ~~2022, reflecting improvements~~2023. Declines in ~~casino revenue. In~~gaming volumes during both

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periods were also impacted by adverse weather in Nevada, especially at Grand Lodge, where extremely heavy snowfall in February and March 2023 created challenging driving conditions and trip cancellations to our property. During the ~~corresponding prior-year~~second quarter of 2023, lingering snowfall near Lake Tahoe delayed the return of seasonal residents to Incline Village, which also adversely affected Grand Lodge’s results.

Non-casino revenue was relatively flat for the three and six months ended June 30, 2023. Food and beverage revenues increased by 11.9% (or $0.1 million) and 10.5% (or $0.1 million) for the respective three and six months ended June 30, 2023, which offset declines in hotel revenues for both periods, primarily for the reasons noted above at Bronco Billy’s.

Adjusted Segment EBITDA decreased to $0.2 million each for the three and six months ended June 30, 2023. The decreases for both periods were due to disruptions from the construction of Chamonix described above, including additional operating expenses related to the operation of our new valet and parking shuttle service. The casino has also maintained much of its payroll, despite reduced activity levels, anticipating the need for the larger workforce required to open and operate Chamonix. Declines were also due to continued adverse weather at Grand Lodge.

In addition to construction disruption due to our neighboring Chamonix project, we are currently undergoing a modest refurbishment of a portion of Bronco Billy’s, which began in May 2022. While Bronco Billy’s casino refurbishment was ~~$1.5 million~~completed in December 2022, the restaurant refurbishment will continue to impact the property until its anticipated completion in December 2023. When Chamonix opens, Bronco Billy’s will share the on-site parking garage, valet and ~~$4.2 million.~~surface parking capacity of the new casino, and also benefit from Chamonix’s adjoining 300-guestroom hotel.

Contracted Sports Wagering

The Contracted Sports Wagering segment consists of our on-site and online sports wagering skins in Colorado, Indiana and, upon ~~launch,~~commencement, Illinois.

For the ~~three-months~~three months ended ~~September~~June 30, ~~2022,~~2023, revenues and Adjusted Segment EBITDA were both ~~$1.1~~$1.4 million, a decrease from ~~$1.6~~$2.2 million in the prior-year period. For the ~~nine-months~~six months ended ~~September~~June 30, ~~2022,~~2023, revenues were ~~$6.1~~$2.6 million and Adjusted Segment EBITDA was ~~$6.0~~$2.5 million, ~~an increase~~a decrease from ~~$4.2~~the respective $5.0 million ~~of revenues and $4.1 million of Adjusted Segment EBITDA~~each in the prior-year period. These results reflect ~~an additional skin that~~all three of our permitted skins now contractually ~~went~~ live ~~on December 1, 2021, as well as an acceleration~~in Colorado and two of ~~deferred~~our three skins live in Indiana, while the prior-year periods include accelerated revenue recognition for two agreements that ceased operations in May 2022 ~~when~~as one of the Company’s contracted parties ~~ceased~~ended its online and retail operations. In December 2022, we entered into a sports wagering agreement to replace such operator in Colorado, which went contractually live in March 2023. We are currently evaluating whether to utilize ~~our two idle skins – one~~the remaining skin in ~~each of Colorado and~~ Indiana ~~– by~~ ourselves or to ~~find~~utilize a replacement ~~operators~~operator for such ~~skins. There~~skin. However, there is no certainty that we will be able to enter into ~~agreements~~an agreement with ~~third parties related to these skins~~a replacement operator or successfully operate ~~these skins ourselves on better terms than our prior agreements.~~the skin ourselves.

The results of this segment do not yet include income contribution from our agreement for a third party to operate on-site and online sports betting in Illinois. Under such agreement, we will receive a percentage of revenues, as defined in the contract, subject to an annualized minimum of $5 million, with minimal expected expenses. ~~We anticipate~~Under the agreement, the Company will begin to receive revenue payments for its Illinois sports skin in August 2023, irrespective of whether its sports wagering operations ~~will begin in Spring 2023.~~have begun. For details on our Illinois sports wagering agreement with Circa Sports, ~~which is expected to commence operations shortly after the opening of The Temporary,~~ see “~~Recent Developments – Sports Wagering in Illinois~~~~” as discussed above in the “Executive Overview.”~~Note 6.

Corporate

Corporate expenses for the respective three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 declined by ~~14.6%~~55.2% (or ~~$0.2~~$0.5 million) and ~~14.0%~~24.4% (or $0.7 million), ~~primarily due to a decrease~~with increases in third-party professional services more than offset by decreases in accrued bonus compensation. Corporate expenses were ~~$1.2~~$0.4 million and ~~$1.4~~$0.9 million for the ~~three-months~~three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. For the ~~nine-months~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, corporate expenses were ~~$4.1~~$2.2 million and ~~$4.8~~$2.9 million, respectively.

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Non-GAAP Financial Measure

“Adjusted EBITDA” is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening 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 this measure is (i) a widely used measure of operating performance in the gaming and hospitality industries and (ii) a principal basis for valuation of gaming and hospitality companies. In addition, a version of Adjusted EBITDA (known as Consolidated Cash Flow) is utilized in the covenants within ~~our credit facility,~~the Credit Facility, 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, 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.

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


(In thousands)	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Net (loss) income	$	(3,577)	$	4,619	$	(7,822)	$	6,658
Net loss									$	(5,600)	$	(4,355)	$	(17,015)	$	(4,245)
Income tax provision (benefit)		29		95		(16)		379		561		5,567		526		(45)
Interest expense, net		5,838		6,405		19,225		17,531		5,633		6,988		10,452		13,387
Loss on modification and extinguishment of debt, net		105		—		4,530		6,104
Adjustment to fair value of warrants		—		—		—		1,347
Operating income		2,395		11,119		15,917		32,019
Project development costs, net		(149)		318		33		491
Loss on modification of debt										—		19		—		4,425
Gain on insurance settlement										—		—		(355)		—
Operating income (loss)										594		8,219		(6,392)		13,522
Project development costs										17		17		24		182
Preopening costs		2,594		17		4,914		17		1,086		1,534		11,583		2,320
Depreciation and amortization		2,386		1,819		6,012		5,448		8,155		1,834		14,014		3,626
Loss on disposal of assets, net		—		2		3		674
(Gain) loss on disposal of assets										—		(5)		—		3
Stock-based compensation		532		324		1,362		647		655		487		1,403		830
Adjusted EBITDA	$	7,758	$	13,599	$	28,241	$	39,296	$	10,507	$	12,086	$	20,632	$	20,483

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


Three Months Ended September 30, 2022
Three Months Ended June 30, 2023														Three Months Ended June 30, 2023
(In thousands)	(In thousands)													(In thousands)
																									Adjusted
												Adjusted													Segment
												Segment			Operating		Depreciation		Project				Stock-		EBITDA and
		Operating		Depreciation		Project				Stock-		EBITDA and			Income		and		Development		Preopening		Based		Adjusted
		Income		and		Development		Preopening		Based		Adjusted			(Loss)		Amortization		Costs		Costs		Compensation		EBITDA
		(Loss)		Amortization		Costs		Costs		Compensation		EBITDA
Reporting segments	Reporting segments													Reporting segments
Mississippi		$	3,546	$	689	$	—	$	—	$	—	$	4,235
Indiana			753		590		—		—		—		1,343
Colorado			(682)		361		—		357		—		36
Nevada			1,820		460		—		—		—		2,280
Midwest & South															$	1,830	$	7,556	$	—	$	5	$	—	$	9,391
West																(1,473)		569		—		1,081		—		177
Contracted Sports Wagering			1,083		—		—		—		—		1,083			1,361		—		—		—		—		1,361
			6,520		2,100		—		357		—		8,977			1,718		8,125		—		1,086		—		10,929
Other operations	Other operations													Other operations
Corporate			(4,125)		286		(149)		2,237		532		(1,219)			(1,124)		30		17		—		655		(422)
		$	2,395	$	2,386	$	(149)	$	2,594	$	532	$	7,758		$	594	$	8,155	$	17	$	1,086	$	655	$	10,507


Three Months Ended September 30, 2021
Three Months Ended June 30, 2022																Three Months Ended June 30, 2022
(In thousands)	(In thousands)															(In thousands)
														Adjusted															Adjusted
														Segment															Segment
		Operating		Depreciation		Loss on		Project				Stock-		EBITDA and			Operating		Depreciation		Gain on		Project				Stock-		EBITDA and
		Income		and		Disposal		Development		Preopening		Based		Adjusted			Income		and		Disposal		Development		Preopening		Based		Adjusted
		(Loss)		Amortization		of Assets		Costs		Costs		Compensation		EBITDA			(Loss)		Amortization		of Assets		Costs		Costs		Compensation		EBITDA
Reporting segments	Reporting segments															Reporting segments
Mississippi		$	5,794	$	690	$	1	$	—	$	—	$	—	$	6,485
Indiana			3,247		569		—		—		—		—		3,816
Colorado			1,138		387		1		—		17		—		1,543
Nevada			1,402		135		—		—		—		—		1,537
Midwest & South																	$	7,003	$	1,281	$	—	$	—	$	865	$	—	$	9,149
West																		496		524		(5)		—		669		—		1,684
Contracted Sports Wagering			1,645		—		—		—		—		—		1,645			2,196		—		—		—		—		—		2,196
			13,226		1,781		2		—		17		—		15,026			9,695		1,805		(5)		—		1,534		—		13,029
Other operations	Other operations															Other operations
Corporate			(2,107)		38		—		318		—		324		(1,427)			(1,476)		29		—		17		—		487		(943)
		$	11,119	$	1,819	$	2	$	318	$	17	$	324	$	13,599		$	8,219	$	1,834	$	(5)	$	17	$	1,534	$	487	$	12,086

Operating expenses deducted to arrive at operating income (loss) in the above tables for the three-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 included facility rents related to: (i) ~~Mississippi~~Midwest & South of $1.4 million in 2023 and $0.5 million in 2022, and (ii) West of $0.7 million during each of ~~2022~~2023 and 2021, (ii) Nevada of $0.5 million during each of 2022 and 2021, and (iii) Colorado of $3,000 during 2022 and $0.1 million during 2021. In the third quarter of 2022, $0.2 million of qualifying rent in Colorado was reclassified to preopening costs for Chamonix’s expected opening in mid-2023.2022.

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For the Nine Months Ended September 30, 2022
Six Months Ended June 30, 2023																Six Months Ended June 30, 2023
(In thousands)	(In thousands)															(In thousands)
						Loss /								Adjusted													Adjusted
						(gain)								Segment													Segment
		Operating		Depreciation		on		Project				Stock-		EBITDA and			Operating		Depreciation		Project				Stock-		EBITDA and
		Income		and		Disposal		Development		Preopening		Based		Adjusted			Income		and		Development		Preopening		Based		Adjusted
		(Loss)		Amortization		of Assets		Costs		Costs		Compensation		EBITDA			(Loss)		Amortization		Costs		Costs		Compensation		EBITDA
Reporting segments	Reporting segments															Reporting segments
Mississippi		$	13,359	$	2,075	$	8	$	—	$	—	$	—	$	15,442
Indiana			4,618		1,756		—		—		—		—		6,374
Colorado			(2,126)		1,057		(5)		—		1,025		—		(49)
Nevada			3,781		776		—		—		—		—		4,557
Midwest & South																	$	(2,836)	$	12,812	$	—	$	10,101	$	—	$	20,077
West																		(2,389)		1,141		—		1,482		—		234
Contracted Sports Wagering			6,047		—		—		—		—		—		6,047			2,522		—		—		—		—		2,522
			25,679		5,664		3		—		1,025		—		32,371			(2,703)		13,953		—		11,583		—		22,833
Other operations	Other operations															Other operations
Corporate			(9,762)		348		—		33		3,889		1,362		(4,130)			(3,689)		61		24		—		1,403		(2,201)
		$	15,917	$	6,012	$	3	$	33	$	4,914	$	1,362	$	28,241		$	(6,392)	$	14,014	$	24	$	11,583	$	1,403	$	20,632


For the Nine Months Ended September 30, 2021
Six Months Ended June 30, 2022																Six Months Ended June 30, 2022
(In thousands)	(In thousands)															(In thousands)
														Adjusted															Adjusted
														Segment							Loss (gain)								Segment
		Operating		Depreciation		Loss on		Project				Stock-		EBITDA and			Operating		Depreciation		on		Project				Stock-		EBITDA and
		Income		and		Disposal		Development		Preopening		Based		Adjusted			Income		and		Disposal		Development		Preopening		Based		Adjusted
		(Loss)		Amortization		of Assets		Costs		Costs		Compensation		EBITDA			(Loss)		Amortization		of Assets		Costs		Costs		Compensation		EBITDA
Reporting segments	Reporting segments
Mississippi		$	20,484	$	2,024	$	589	$	—	$	—	$	—	$	23,097
Indiana			5,837		1,778		—		—		—		—		7,615
Colorado			3,871		1,119		85		—		17		—		5,092
Nevada			3,761		412		—		—		—		—		4,173
Midwest & South																	$	12,028	$	2,552	$	8	$	—	$	1,651	$	—	$	16,239
West																		515		1,012		(5)		—		669		—		2,191
Contracted Sports Wagering			4,122		—		—		—		—		—		4,122			4,964		—		—		—		—		—		4,964
			38,075		5,333		674		—		17		—		44,099			17,507		3,564		3		—		2,320		—		23,394
Other operations	Other operations
Corporate			(6,056)		115		—		491		—		647		(4,803)			(3,985)		62		—		182		—		830		(2,911)
		$	32,019	$	5,448	$	674	$	491	$	17	$	647	$	39,296		$	13,522	$	3,626	$	3	$	182	$	2,320	$	830	$	20,483

Operating expenses deducted to arrive at operating income (loss) in the above tables for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 included facility rents related to: (i) ~~Mississippi~~Midwest & South of $2.3 million in 2023 and $1.1 million in 2022, and (ii) West of $1.5 million ~~during 2022~~in 2023 and ~~$1.7~~$1.3 million during 2021, (ii) Nevada of $1.4 million during each of 2022 and 2021, and (iii) Colorado of $9,000 during 2022 and $0.3 million during 2021. During the 2022 period, $0.7 million of qualifying rent in ~~Colorado was reclassified to preopening costs for Chamonix’s expected opening in mid-2023.~~2022.

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Liquidity and Capital Resources

Cash Flows

As of ~~September~~June 30, ~~2022,~~2023, we had ~~$241.8~~$113.6 million of cash and equivalents, including ~~$156.1~~$78.1 million of restricted cash dedicated to the completion of Chamonix’s construction. We estimate that ~~between~~ approximately ~~$7 million and $9~~$15 million of cash is used in our current day-to-day operations, including on-site cash in our slot machines, change and redemption kiosks, and cages. We believe that current cash balances, together with the available borrowing capacity under ~~our revolving credit facility~~the Credit Facility and cash flows from operating activities, will be sufficient to meet our liquidity and capital resource needs for the next 12 months of operations, including construction activities.

Cash flows – operating activities. On a consolidated basis, cash provided by operations during the ~~nine-months~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$40,000,~~$1.7 million, compared to cash provided by operations of ~~$19.3~~$4.2 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. Our operating cash flows decreased in ~~2022~~2023 primarily due to our decrease in ~~revenues and~~ income, which includes preopening expenses of $11.6 million incurred for ~~our upcoming openings of~~ The Temporary (opened in February 2023) and Chamonix.

Cash flows – investing activities. On a consolidated basis, cash used in investing activities during the ~~nine-months~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$117.2~~$139.2 million, ~~which~~ primarily ~~related~~for a gaming license payment of $50.3 million required to open The Temporary/American Place, as well as capital expenditures for Chamonix and The Temporary/American Place. Cash used in investing activities during the prior-year period was ~~$18.0~~$65.0 million, which primarily related to ~~the purchase of Carr Manor~~capital expenditures for Chamonix and ~~other land parcels related to our Chamonix project.~~The Temporary.

Cash flows – financing activities. On a consolidated basis, cash provided by financing activities during the ~~nine-months~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$93.7~~$59.9 million, compared to cash provided by financing activities of ~~$235.5~~$93.9 million in the prior-year period. During 2023, net borrowings from the Credit Facility totaled $27.0 million, and we received $40.0 million of gross proceeds from the issuance of our Additional Notes to open The Temporary. In February 2022, we received $102.0 million of gross proceeds from the issuance of ~~our Additional Notes~~additional notes to ~~construct~~develop The Temporary. In February and March 2021, respectively, we received $310.0 million of gross proceeds from the issuance of our 2028 Notes and gross proceeds of $46.0 million through our underwritten equity offering. These cash inflows in 2021 were offset by the payoff of the Prior Notes (including related prepayment premiums), and expenses related to our debt and equity offerings.

Other Factors Affecting Liquidity

We have significant outstanding debt and contractual obligations, in addition to planned capital expenditures related to the construction of Chamonix ~~The Temporary,~~ and American Place. Our principal debt matures in February 2028. Certain planned capital expenditures designed to grow the Company, such as the permanent American Place facility, ~~and the potential future expansion of Silver Slipper,~~ are likely to require additional financing and/or temporarily reduce the Company’s ability to repay debt.

Our operations are subject to financial, economic, competitive, regulatory and other factors, many of which are beyond our control. Such ~~factors include the potential effects of COVID-19 and its variants. Such~~ future developments are highly uncertain and cannot be accurately predicted at this ~~time, as discussed under~~ ~~“Recent Developments.”~~time.

Debt

Long-term Debt. At ~~September~~June 30, ~~2022,~~2023, we had ~~$410.0~~$450.0 million of principal indebtedness outstanding under the Notes, ~~no drawn amounts~~and $27.0 million outstanding under the Credit ~~Facility, and an outstanding $1 million standby letter of credit related to The Temporary’s construction.~~Facility. We also owe ~~$2.9~~$2.5 million related to our finance lease of a hotel at Rising Star. ~~Substantially~~With the exception of the Credit Facility, we have fixed interest rates on substantially all of our ~~debt has a fixed interest rate.~~

debt. See Note ~~5 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report~~4 for details on our debt obligations.

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Other

Capital Investments. In addition to normal maintenance capital expenditures, we continue to make significant capital investments related to the construction of Chamonix ~~The Temporary~~ and American Place.

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Chamonix. In January 2021, we increased the size of the Chamonix project’s hotel capacity by 67%, to approximately 300 luxury guest rooms and suites from our previously-planned 180 guest rooms. We also revised our construction budget for Chamonix in January 2022, increasing it from $180 million to approximately $250 million, reflecting supply chain issues, inflation, and a difficult construction environment. To fund Chamonix’s construction, we issued our 2028 Notes and placed a portion of such proceeds into a restricted cash account dedicated to the completion of Chamonix’s construction (see Note 54). As of December 31, 2022, approximately $134.6 million of cash was reserved under our ~~Condensed Notes~~bond indentures to ~~Consolidated Financial Statements included in this quarterly report for details on our debt obligations).~~complete the construction of Chamonix. We expect to invest ~~approximately $100~~$115 million ~~for all~~ of ~~2022 and approximately $125 million~~such amount in 2023 and the remaining balance in 2024 (excluding pre-opening expenses and capitalized interest), with an expected opening of Chamonix ~~in mid-2023.~~on December 26, 2023.

The Temporary / American Place. We were selected by the ~~Illinois Gaming Board~~IGB to develop and operate American Place in Waukegan, Illinois. While the larger permanent facility is under construction, we are ~~allowed to operate~~operating The Temporary by American ~~Place. We plan~~Place, which opened in February 2023. During 2023, we expect to invest approximately ~~$40~~$75 million ~~in 2022~~into this project (excluding pre-opening expenses and ~~approximately $60~~capitalized interest), consisting largely of $50 million ~~in 2023 to furnish, outfit and open The Temporary, including significant~~of upfront gaming license payments remitted in the first quarter of 2023 (see Note 2), costs related to the recent completion of The Temporary’s construction, as well as professional fees and ~~the purchase of casino equipment that is expected to be transferred~~limited sitework related to the permanent ~~casino once opened. To fund such construction,~~American Place facility. We will likely need additional financing in ~~February 2022, we issued $100.0 million of Additional Notes and increased~~ the ~~size of our revolving credit facility~~future to ~~$40.0 million (see Note 5 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report for details on our debt obligations).~~complete the permanent American Place facility.

Other Capital Expenditures. Additionally, we may fund various other capital expenditure projects, depending on our financial resources. 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. Our annual capital expenditures typically include some number of new slot machines and related equipment; to some extent, we can coordinate such purchases to match our resources.

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.

Hyatt Owner’s Option to Purchase our Leasehold Interest and Related Assets. Our lease with the owner of the Hyatt Lake Tahoe to operate the Grand Lodge Casino contains an option for the lessor to purchase our leasehold interest and related casino operating assets. The lease, which has been extended several times in the past, ~~currently expires in August 2023.~~was recently extended through December 31, 2024. We believe that we have an excellent and synergistic relationship with ~~Hyatt~~the lessor and hope to again extend the lease before its expiration, but there is no certainty that this will be the case. See Note 3 ~~to the accompanying consolidated financial statements~~ for ~~further~~more information.

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, ~~2021.~~2022. 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, ~~2021.~~2022. There has been no significant change in our estimation methods since the end of ~~2021.~~2022.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) for which the Private Securities Litigation Reform Act of 1995 provides a safe harbor. These forward-looking statements can be identified by use of terms such as “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “future,” “possible,” “seeks,” “may,” “could,” “should,” “will,” “might,” “likely,” “enable,” or similar words or expressions, as well as statements containing phrases such as “in our view,” “we cannot assure you,” “although no assurance can be given,” or “there is no way to anticipate with certainty.” Examples of forward-looking statements include, among others, statements we make regarding our plans, beliefs or expectations regarding our growth strategies; ~~the impact of the coronavirus (COVID-19) pandemic;~~ our expected construction budgets, estimated commencement and completion dates, expected amenities, and our expected operational performance for Chamonix and The ~~Temporary, and~~ Temporary/American Place; our investments in capital improvements and other projects, including the amounts of such investments, the timing of commencement or completion of such capital improvements and projects, and the resulting impact on our financial results; our sports wagering contracts with third-party providers, including expected revenues and expenses, our expectations regarding our ability to replace our terminated sports wagering ~~contracts~~contract in ~~Colorado and~~ Indiana, our ability to operate sports wagering contracts ourselves, and the expected commencement date of our sports wagering contract in Illinois; ~~our ability to obtain the casino license for the Temporary and American Place;~~ management’s expectation to exercise its buyout option on the Silver Slipper Casino and Hotel; our expectations regarding the potential construction of an additional hotel tower and related amenities at Silver Slipper Casino and Hotel; our expectations regarding our ability to extend the lease at the Grand Lodge Casino; adequacy of our financial resources to fund operating requirements and planned capital expenditures and to meet our debt and contractual obligations; expected sources of revenue; anticipated sources of funds; anticipated or potential legislative actions; beliefs in connection with our marketing efforts; factors that affect the financial performance of our properties; adequacy of our insurance; competitive outlook; outcome of legal ~~matters;~~and litigation matters, including those discussed below regarding third party litigation potentially impacting The Temporary/American Place; impact of recently issued accounting standards; and estimates regarding certain accounting and tax matters, among others.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, those risks discussed in Part I, Item 1A—Risk Factors and throughout Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, and in Part II, Item 1A—Risk Factors and elsewhere of this Form 10-Q. In addition, you should consult other disclosures made by us (such as in our other filings with the SEC or in company press releases) for other factors that may cause actual results to differ materially from those projected by us. You should read this Form 10-Q, and the documents that we reference in this Form 10-Q and have filed with the SEC, and our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or 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.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures — As of ~~September~~June 30, ~~2022,~~2023, 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 Exchange Act 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~~June 30, ~~2022,~~2023, 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.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions and other matters arising in the normal course of business. We do not believe that the final outcome of these matters will have a material adverse effect on our consolidated financial position or results of operations. We maintain what we believe is adequate insurance coverage to further mitigate the risks of such proceedings.

Item 1A. Risk Factors

~~There were no material changes from~~In addition to the risk factors ~~set forth~~previously disclosed under Part I, Item 1A “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022, the following risk factor updates were identified:

There is no assurance that our growth projects, including Chamonix and American Place, will not be subject to additional regulatory restrictions, delays, or challenges.

We received approval of our plans for Chamonix from the appropriate Cripple Creek authorities in 2021. Our Development Agreement with such authorities, as amended, requires that we complete the project by December 31, 2023. Otherwise, the City may exercise its right of reversion for previously-vacated rights of way of portions of 2nd Avenue and a nearby alley. As the casino is currently scheduled to open on December 26, 2023, management does not believe that an extension will be necessary. However, there is no certainty that an extension would be granted if it were requested.

Regarding The Temporary and American Place, on October 21, 2019, the Forest County Potawatomi Community, the owner/operator of a casino in downtown Milwaukee and one of the unsuccessful bidders for the Waukegan casino license, sued the City of Waukegan seeking further consideration of its casino proposal.

In its complaint, the plaintiff alleges several violations of law and seeks monetary damages from the City of Waukegan. In January 2020, the City of Waukegan removed the lawsuit to the U.S. District Court for the Northern District of Illinois (the ~~“Annual Report”~~“Federal Action”). The ~~continuing COVID-19 pandemic, including the emergence~~City of ~~new variants,~~Waukegan has ~~heightened, and in some cases manifested, certain of the risks we normally face in our business, including those disclosed~~moved for summary judgment on all claims brought in the ~~Annual Report.~~

Federal Action; such motion has been fully briefed since January 2022, and the parties are waiting for the judge’s ruling on the motion.

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On November 17, 2021, the same plaintiff filed a second lawsuit in the Circuit Court of Cook County against the City of Waukegan, the Illinois Gaming Board (“IGB”), members of the IGB, and the IGB Administrator (the “State Action”). Per the State Action, the plaintiff sought, among other relief, temporary, preliminary, and permanent injunctive relief enjoining the IGB from taking formal steps toward issuing the Waukegan casino license; a declaration that the City failed to comply with the statutory requirements to certify applicants for the IGB; and a finding that the IGB, therefore, had no jurisdiction to issue an owner’s license for the Waukegan casino. The judge denied the plaintiff’s request for a temporary restraining order, which was later affirmed by the Appellate Court. On May 13, 2022, defendants in the State Action filed a motion to dismiss the State Action based upon the plaintiff’s lack of standing relating to the purported lack of compliance by the City with the certification process and that the Illinois Gambling Act does not provide for a private right of action. The trial court granted the motion and the plaintiff appealed. While the appeal was pending, on June 15, 2023, the IGB issued us an owner’s license for The Temporary/American Place, our Waukegan casino. Subsequent to the issuance of the owner’s license, defendants in the State Action sought to dismiss the appeal in the State Action as moot, given the IGB’s issuance of the owner’s license. The court granted such dismissal. However, on July 28, 2023, the Illinois Appellate Court reversed the lower court’s dismissal of the State Action, finding that the plaintiff’s action was not a private right of action under the Illinois Gambling Act and that the plaintiff had standing to pursue its claims. Although we are not a party to either lawsuit, court rulings in these actions could negatively impact our ability to secure financing for American Place, delay the opening of American Place, or otherwise affect our licensing.

Under Illinois law, a temporary casino is permitted to operate for two years, unless the IGB approves an additional year to accommodate appropriate construction. On June 15, 2023, we were approved by the IGB to operate The Temporary for this third year. Given the Potawatomi lawsuits and their possible negative impact on us (including our ability to finance American Place), it is possible that we will not be able to complete construction of American Place prior to the end of the third year, thus resulting in a potential operations gap between the closing of The Temporary and the opening of American Place. We intend to attempt to reduce the operations gap, if any. We could, for example, seek legislative relief so as to allow continued operation of The Temporary, which would permit continued employment and tax revenues while construction of the permanent American Place casino is completed. There is no certainty that such legislative relief would be achieved. Further, completion of casino construction projects such as American Place or Chamonix, generally, can be delayed by any number of items outside of our control, including by weather, labor shortages, supply chain issues or other construction delays. There is no assurance that these projects will not be subject to additional restrictions, delays, or challenges which would negatively impact us.

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Item 6. Exhibits


Exhibit Number		Description
10.1		Employment Agreement, dated May 19, 2022, between Full House Resorts, Inc. and Lewis A. Fanger (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No. 1-32583) filed on May 23, 2022)
31.1*		Certification of principal executive 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
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*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

* Filed herewith.

** Furnished herewith.

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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 7, 2022~~August 8, 2023	By:	/s/ DANIEL R. LEE
		Daniel R. Lee Chief Executive Officer (on behalf of the Registrant and as principal executive officer)


Date: ~~November 7, 2022~~August 8, 2023	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)

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Lease Term and Discount Rate	September 30, 2022		December 31, 2021
Weighted-average remaining lease term
Operating leases	23.2	years	21.5	years
Finance lease	5.0	years	5.8	years
Weighted-average discount rate
Operating leases	9.70	%	9.32	%
Finance lease	4.50	%	4.50	%