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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our results of operations and financial condition should be read together with the other financial information and consolidated financial statements included in this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results anticipated in the forward-looking statements as a result of a variety of factors, including those discussed in Part I, Item 1A. “Risk Factors” and elsewhere in this Annual Report on Form 10-K. 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.”

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, golfing, RV camping, sports betting, entertainment and retail outlets, among other amenities. We currently operate six casinos: five on real estate that we own or lease and one located within a hotel owned by a third party. Construction continues for a seventh property, Chamonix Casino Hotel (“Chamonix”), adjacent to our existing Bronco Billy’s Casino and Hotel in Cripple Creek, Colorado. We are also designing our permanent American Place casino destination, which will be built adjacent to a temporary facility that we opened in February 2023 named The Temporary by American Place (“The Temporary”) (see Note 12 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data”). We intend to operate The Temporary until the opening of American Place. Additionally, we benefit from seven permitted sports wagering “skins” – three in Colorado, three in Indiana, and one in Illinois. Other companies operate or will operate these online sports wagering websites under their brands, paying us a percentage of revenues, as defined, subject to annual minimum amounts.

In addition to our Contracted Sports Wagering segment, we view each of the states that we operate in as distinct operating segments. Our portfolio consists of the following:

​ ​ ​

Segments and Properties ​ Locations

Colorado ​ ​

Bronco Billy’s Casino and Hotel Cripple Creek, CO (near Colorado Springs)

Illinois ​ ​

Indiana ​ ​

Rising Star Casino Resort Rising Sun, IN (near Cincinnati)

Mississippi ​ ​

Silver Slipper Casino and Hotel Hancock County, MS (near New Orleans)

Nevada ​ ​

Stockman’s Casino Fallon, NV (one hour east of Reno)

Contracted Sports Wagering ​ ​

Three sports wagering websites (“skins”) ​ Colorado

Three sports wagering websites (“skins”) ​ Indiana

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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 permitted by gaming regulations, most of our revenues are cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. Our revenues are primarily derived from slot machines, but also include other gaming activities, including table games, keno and sports betting. In addition, we derive a significant amount of revenue from our hotels and our food and beverage outlets. We also derive revenues from our golf course and ferry boat service at Rising Star, our RV parks owned at Rising Star and managed at Silver Slipper, and retail outlets and entertainment. We often provide hotel rooms, food and beverages, entertainment, ferry usage, and golf privileges to 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 set minimum and maximum betting limits for our slot machines and table games based on market conditions, customer demand and other factors. Our gaming revenues are derived from a broad base of guests that includes both high- and low-stakes players. At Silver Slipper, our sports book operations are in partnership with a company specializing in race and sports betting. At Rising Star, Bronco Billy’s, and The Temporary/American Place, we have contracted with other companies to operate our online sports wagering skins under their own brands in exchange for a percentage of revenues, as defined, subject to annual minimum amounts. Our operating results may also be affected by, among other things, overall economic conditions affecting the disposable income of our guests, weather conditions affecting access to our properties, achieving and maintaining cost efficiencies, taxation and other regulatory changes, and competitive factors, including but not limited to, additions and improvements to the competitive supply of gaming facilities, as well as pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases such as the coronavirus.

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

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

American Place. In December 2021, we were selected by the IGB to develop and operate American Place, our proposal for a casino and entertainment destination in Waukegan, Illinois. While the larger, more lavish American Place facility is under construction, we will operate a temporary casino facility, aptly named The Temporary. Opened in February 2023, The Temporary was designed to include approximately 1,000 slot machines, 50 table games, a fine-dining restaurant, two additional restaurants, and a center bar. The permanent American Place facility is expected to include a world-class casino with a state-of-the-art sportsbook; a premium boutique hotel comprised of twenty luxurious villas; a 1,500-seat live entertainment venue; and various food and beverage outlets.

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To accommodate operations for The Temporary, as well as construction of the permanent American Place facility, we entered into a 99-year ground lease (the “Ground Lease”) with the City of Waukegan, Illinois (the “City”) in January 2023 for approximately 32 acres of land(the “City-Owned Parcel”), which is adjacent to a 10-acre parcel of land that we purchased in March 2022 for $7.5 million. Annual rent under the Ground Lease is the greater of (i) $3.0 million or (ii) 2.5% of Adjusted Gross Receipts (as defined) generated by either the Temporary or American Place. The Ground Lease is only terminable to the extent that the Development and Host Community Agreement with the City is terminated. We have the right to purchase the City-Owned Parcel at any time during the term of the Ground Lease for $30 million, but if we do so prior to the opening of American Place, then we must continue to pay rent due to the City under the Ground Lease until the permanent casino is open. For more information, see Note 12 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data.”

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Debt Financing. On February 21, 2023, we issued $40.0 million of Additional Notes. The Additional Notes were issued pursuant to an amended indenture governing the $410 million of Existing Notes. In connection with the issuance of the Additional Notes, we entered into a Fourth Supplemental Indenture with Wilmington Trust, National Association, as trustee, dated February 21, 2023 (as further amended, the “Indenture”). The Additional Notes are treated as a single series of senior secured debt securities with the Existing Notes and as a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Proceeds from the offering, net of related expenses and discounts, were approximately $34 million.

The Notes bear interest at a rate of 8.25% per year and mature on February 15, 2028. Interest on the Notes is payable on February 15 and August 15 in arrears of each year.

Also on February 21, 2023, we entered into a Second Amendment to the Credit Agreement with Capital One, National Association (“Capital One”), which, among other things, increased the amount of additional Indebtedness permitted under our Credit Agreement, dated as of March 31, 2021 (as further amended, the “Credit Agreement”), permitting the issuance of the Additional Notes.

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 Guarantor’s general senior secured obligations, subject to the terms of the Collateral Trust Agreement (as defined in the Indenture), ranking senior in right of payment to all of the Company’s and the Guarantor’s existing and future debt that is expressly subordinated in right of payment to the Notes and the Guarantees, if any, and ranking equally in right of payment with all of the Company’s and the Guarantors’ existing and future senior debt.

The Notes, together with borrowings under the Credit Facility, are equally and ratably secured by a first priority security interest in, subject to certain exceptions and limitations and the terms of the Collateral Trust Agreement, the Company’s and the Guarantors’ furniture, equipment, inventory, accounts receivable, other personal property and real property. Additionally, the Notes (but not the borrowings under the Credit Facility) are secured by a first priority security interest in the securities accounts and the deposit accounts established pursuant to the Cash Collateral and Disbursement Agreement.

Sports Wagering in Illinois. In May 2022, we signed a retail and mobile sports wagering contract for Illinois. Such operations are expected to commence in Spring 2023, pending the receipt of customary gaming approvals. We received an upfront fee of $5 million, which was capitalized and will be amortized over the eight-year term of the agreement that is expected to commence in Spring 2023. We will receive a percentage of revenues (as defined), subject to an annual minimum of $5 million. For more information, see Note 9 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data.”

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 9 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data.”

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COVID-19 Pandemic Update. The COVID-19 pandemic continues to evolve and certain precautionary and stimulus measures, as well as other factors, have created economic uncertainty both in the United States and globally, as well as significant and prolonged 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, labor, 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 year ended December 31, 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.

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We believe that we have a strong balance sheet and sufficient liquidity in place. As of December 31, 2022, we had total cash and cash equivalents of $191.2 million, including $134.6 million of restricted cash reserved to fund the construction of Chamonix, and availability under our revolver. As noted above, we further augmented our liquidity in the first quarter of 2023 through the issuance of $40.0 million of Additional Notes, as well as the drawdown of $36.0 million under our Credit Facility.

Key Performance Indicators

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

Gaming revenue indicators:

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

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

Room revenue indicators:

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

Adjusted EBITDA, Adjusted Segment EBITDA and Adjusted Segment EBITDA Margin:

Management uses Adjusted EBITDA as a measure of our performance. For a description of Adjusted EBITDA see “Non-GAAP Measure.” We utilize Adjusted Segment EBITDA 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 11 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data.” Additionally, we use Adjusted Segment EBITDA Margin, which is calculated by dividing Adjusted Segment EBITDA by the property’s revenues.

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Results of Operations 2022 Compared to 2021

Consolidated operating results

The following tables summarize our consolidated operating results for the years ended December 31, 2022 and 2021:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended ​ ​ ​

(In thousands) ​ December 31, ​ Increase /

Interest and other non-operating expenses, net ​ 27,518 ​ 25,413 8.3 %

Income tax (benefit) expense ​ (31) ​ 435 (107.1) %

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended ​ ​ ​

(In thousands) ​ December 31, ​ Increase /

Casino revenues ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Non-casino revenues, net ​ ​ ​

​

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Year Ended ​ ​

​ December 31, ​ Increase /

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Slot hold percentage(2) ​ 7.4 % ​ ​ 7.6 % ​ (0.2) pts

Table game hold percentage(2) ​ 18.0 % ​ ​ 17.9 % ​ 0.1 pts

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The following discussion is based on our consolidated financial statements for the years ended December 31, 2022 and 2021.

Revenues. Consolidated revenues decreased by 9.4% (or $16.9 million) in 2022, primarily due to a $14.9 million decline in slot revenues from lower volumes at our three properties in Colorado, Mississippi, and Indiana. These lower volumes can be primarily attributed to the absence of government stimulus programs of the same scale as in 2021; construction disruptions at Bronco Billy’s to advance the completion of our Chamonix project; the launch of competing online sports wagering in Louisiana in January 2022; and adverse weather in December 2022 across several properties. Additionally, our revenues were impacted by factors that are inherently hard to quantify, as discussed in the “Recent Developments – COVID-19 Pandemic Update” section. 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. “Other Non-casino Revenues” includes $7.2 million of revenue related to our contracted sports wagering agreements in 2022, compared to $5.9 million in 2021. See “Operating Results – Reportable Segments” below for details.

Operating expenses. Consolidated operating expenses increased by 5.6% (or $8.0 million) in 2022, primarily due to $9.5 million of additional preopening costs for The Temporary and Chamonix and a $2.6 million increase to food and beverage costs. Such amounts were partially offset by a $4.0 million decrease in casino costs tied to lower volumes than in 2021, as noted above.

See further information within our reportable segments described below.

Interest and other non-operating expense, net.

Interest Expense

​ ​ ​ ​ ​ ​ ​

(In thousands) ​ Year Ended

​ ​ December 31,

Amortization of debt issuance costs, discounts and premiums ​ 1,649 ​ 1,349

Interest income and other ​ ​ (1,355) ​ ​ —

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Interest expense decreased marginally due to increases in capitalized interest related to construction of The Temporary and Chamonix projects, as well as interest income earned during the year. Both items more than offset the increased interest expense that resulted from the February 2022 issuance of $100 million of additional senior secured notes. See Note 6 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion.

Other non-operating expense, net

In 2022, we incurred $4.5 million of other non-operating expense, primarily consisting of debt modification costs related to our offering of $100 million of additional notes in February 2022. In 2021, we incurred $1.8 million of other non-operating expense, which included $0.4 million for the extinguishment of prior debts and $1.3 million for the settlement of our former warrants. See Note 6 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion.

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Income taxes. Our effective income tax rates for the years ended December 31, 2022 and 2021 were 0.2% and 3.6%, respectively. Our tax rates differ from the statutory rate of 21.0% primarily due to changes in valuation allowance and items that are permanently treated differently for GAAP and tax purposes. During 2022, we continued to provide a valuation allowance against our deferred tax assets (“DTAs”), net of any available deferred tax liabilities, as applicable, based on our analysis of the timing of reversal of such deferred taxes. For 2022, the valuation allowance was $15.2 million, compared to $9.9 million for 2021. In future years, if it is determined that we meet the more likely than not threshold of utilizing our DTAs, then we may reverse some or all of our valuation allowance.

We do not expect to pay any federal income taxes or receive any federal tax refunds related to our 2022 results. We used net operating loss carryforwards from previous years to offset taxable income generated in 2022. Due to the level of uncertainty regarding sufficient prospective income as measured under GAAP, we maintain a valuation allowance against our DTAs, as mentioned above. See Note 8 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion.

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 the “Executive Overview” section.

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

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(In thousands) ​ Year Ended ​ ​ ​

​ ​ December 31, ​ Increase /

Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​

Adjusted Segment EBITDA and Adjusted EBITDA ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Adjusted Segment EBITDA Margin ​ ​ ​ ​ ​ ​ ​ ​ ​

Mississippi ​ ​ 24.1 % ​ 32.9 % (8.8) pts

Contracted Sports Wagering ​ ​ 99.0 % ​ 99.5 % (0.5) pts

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Mississippi

Our Mississippi segment consists of the Silver Slipper Casino and Hotel. The prior year was among the best in the property’s history in terms of casino revenue and total revenue, benefiting from the issuance of government stimulus checks to customers. Compared to 2021, total revenues during 2022 decreased by 10.8% (or $9.8 million), primarily due to declines in casino revenue of 14.5% (or $9.2 million). During 2022, slot revenue declined by 12.4% (or $6.6 million) due to lower volumes. Other casino revenues declined by $2.2 million during 2022, primarily from our on-site sports book that was impacted by the competitive launch of online sports wagering in January 2022 within nearby Louisiana.

Non-casino revenue decreased by 2.3% (or $0.6 million) during 2022, also due to lower volumes during the year. The majority of our non-casino revenue comes from our food and beverage operations, which revenue declined by 2.6% (or $0.5 million). Hotel revenue rose by 1.1% (or $0.1 million), due to higher average daily room rates as compared to 2021, despite a decline in hotel occupancy rates to 91.7% in 2022, as compared to 93.6% in 2021.

Adjusted Segment EBITDA decreased by 34.7% (or $10.4 million) from the prior year, reflecting revenue declines from a lack of stimulus payments and the launch of online sports wagering in Louisiana mentioned above; a $1.8 million increase in food costs; and a $1.4 million increase in property insurance costs.

Indiana

Our Indiana segment consists of Rising Star Casino Resort. Similar to the Silver Slipper, total revenues for the prior year benefited from customers receiving government stimulus payments. Additionally, a nearby facility with “historical racing machines” (which are a form of slot machine) opened in September 2022. As a result, total revenues for 2022 decreased by 5.7% (or $2.3 million), compared to 2021, due to declines in casino revenue of 7.6% (or $2.2 million). During 2022, slot revenue declined by 5.7% (or $1.5 million) due to lower volumes, while table game revenue declined by $0.7 million.

Non-casino revenue declined by 0.8% (or $0.1 million) during 2022, also from lower volumes. Increases in food and beverage revenue of 12.0% (or $0.4 million) nearly offset decreases in other non-casino revenue (3.1%, or $0.1 million) and hotel revenue (9.7%, or $0.4 million). Total occupied room-nights declined by 9.2% in 2022 to 47,587 room-nights from 51,951 room-nights in 2021, and average daily room rates also declined.

Adjusted Segment EBITDA decreased by 21.2% (or $1.8 million) from the prior year due to lower volumes as discussed above. Lower volumes led to declines in many variable costs, such as gaming taxes, related fees, and payroll. However, marketing costs during 2022 increased by $0.5 million to address lower volumes, as 2021 was assisted by the issuance of government stimulus checks to customers.

Colorado

Our Colorado segment includes 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 for 2022 decreased by 31.6% (or $7.5 million) when compared to 2021, reflecting business disruptions to accommodate the construction of Chamonix.

Casino revenue for 2022 decreased by 33.0% (or $6.7 million), compared to 2021, which was largely due to the construction disruptions mentioned above. Slot revenue declined by 34.5% (or $6.8 million) during 2022. Table games revenue rose by 18.7% (or $0.1 million) during 2022 due to a higher hold percentage and increased volumes versus 2021, when table games operations resumed in February 2021 under pandemic-related constraints.

Non-casino revenue decreased by 23.2% (or $0.8 million) during 2022, due to declines in food and beverage revenue of 26.6% (or $0.6 million) after the temporary closure of the property’s steakhouse since May 2022 and, to a lesser extent, declines in ATM and related surcharge income of $0.1 million.

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Adjusted Segment EBITDA decreased by $6.2 million, from positive Adjusted Segment EBITDA of $5.5 million to an Adjusted Segment EBITDA loss of $688,000, due to significant disruptions in 2022 from the construction of Chamonix, as mentioned above. Similar to Rising Star, lower volumes also led to declines in many variable costs, such as gaming taxes, gaming position fees, and food and beverage costs. 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, resulting in additional expenses. 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.

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. Accordingly, Bronco Billy’s contribution to earnings was impacted by the casino refurbishment (which was completed in December 2022), and will likely continue to be impacted until restaurant work at Bronco Billy’s is completed in the third quarter of 2023 and Chamonix begins its phased opening, potentially also in the third quarter of 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.

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

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. We typically benefit from a “good” snow year, resulting in extended periods of operation at the nearby ski areas, although at times, major snowstorms can restrict access to the property.

Total revenues for 2022 increased by 7.7% (or $1.4 million), compared to 2021, primarily due to higher casino revenue at Grand Lodge. Casino revenue increased by 9.1% (or $1.5 million) in 2022 due to higher revenue from both our slots and table games departments. Slot revenue rose by 5.4% (or $0.8 million) and table games revenue rose by 34.3% (or $0.8 million) in 2022, due to increases in both volumes and higher hold percentages. During the third quarter of 2021, Grand Lodge was adversely affected 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 was relatively flat at $4.9 million each for 2022 and 2021. Increased volumes – largely reflecting the recovery of tourism to the Lake Tahoe region at Grand Lodge during 2022 – resulted in higher variable costs, such as gaming taxes, related fees, and payroll.

Contracted Sports Wagering

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

For 2022, revenues increased by 21.6% or ($1.3 million) and Adjusted Segment EBITDA increased by 21.0% or ($1.2 million), compared to 2021, which results reflect an additional skin that contractually went live on December 1, 2021, as well as an acceleration of deferred revenue for two agreements (one in each of Indiana and Colorado) that ceased operations in May 2022, when one of our contracted parties ceased operations, each in Indiana and Colorado. In December 2022, we entered into a sports wagering agreement to replace such operator in Colorado. We are currently evaluating whether to utilize the remaining skin in Indiana ourselves or to find a replacement operator for such skin. However, there is no certainty that we will be able to enter into an agreement with a replacement operator or successfully operate the skin ourselves.

Additionally, 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 the Illinois sports operations will begin in Spring 2023, subject to customary regulatory approvals. For details, see Note 9 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data.”

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Corporate

Corporate expenses declined by 27.7% (or $2.1 million) in 2022. In 2021, we incurred $2.1 million of costs related to non-recurring corporate initiatives. Additionally, increases to certain third-party costs were offset by a decrease in accrued bonus compensation.

Non-GAAP 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, 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 our operating performance or liquidity.

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

​ ​ ​ ​ ​ ​ ​

(In thousands) ​ Year Ended

​ ​ December 31,

Income tax (benefit) expense ​ ​ (31) ​ ​ 435

Loss on modification and extinguishment of debt, net ​ ​ 4,530 ​ ​ 409

Adjustment to fair value of warrants ​ ​ — ​ ​ 1,347

Project development costs, net ​ ​ 228 ​ ​ 782

Preopening costs ​ ​ 9,558 ​ ​ 17

Depreciation and amortization ​ ​ 7,930 ​ ​ 7,219

Loss on disposal of assets, net ​ ​ 42 ​ ​ 676

Stock-based compensation ​ ​ 1,693 ​ ​ 966

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

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

For the Year Ended December 31, 2022

(In thousands)

​ ​ ​ ​ ​ ​ ​ ​ Loss / ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted

​ ​ ​ ​ ​ ​ ​ ​ (gain) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Segment

​ ​ Operating ​ Depreciation ​ on ​ Project ​ ​ ​ Stock- ​ EBITDA and

​ ​ Income ​ and ​ Disposal ​ Development ​ Preopening ​ Based ​ Adjusted

​ (Loss) Amortization of Assets Costs Costs Compensation EBITDA

Reporting segments ​ ​ ​ ​ ​ ​ ​

Contracted Sports Wagering ​ ​ 7,127 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 7,127

Other operations ​ ​ ​ ​ ​ ​

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

For the Year Ended December 31, 2021

(In thousands)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Segment

​ ​ Operating ​ Depreciation ​ Loss on ​ Project ​ ​ ​ Stock- ​ EBITDA and

​ ​ Income ​ and ​ Disposal ​ Development ​ Preopening ​ Based ​ Adjusted

​ (Loss) Amortization of Assets Costs Costs Compensation EBITDA

Reporting segments ​ ​ ​ ​ ​ ​ ​

Contracted Sports Wagering ​ ​ 5,890 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,890

Other operations ​ ​ ​ ​ ​ ​

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Operating expenses deducted to arrive at operating income (loss) in the above tables include facility rents related to: (i) Mississippi of $2.0 million in 2022 and $2.3 million in 2021, (ii) Nevada of $1.8 million in both 2022 and 2021, and (iii) Colorado of $12,000 in 2022 and $0.6 million in 2021. During 2022, $0.9 million of qualifying rent in Colorado was reclassified to preopening costs for our Chamonix construction project. Finance lease payments of $0.7 million in both 2022 and 2021 related to Rising Star’s smaller hotel within the Indiana segment are not deducted, as such payments are accounted for as interest expense and amortization of debt related to the finance obligation.

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Liquidity and Capital Resources

Cash Flows

As of December 31, 2022, we had $191.2 million of cash and equivalents, including $134.6 million of restricted cash dedicated to the construction of Chamonix. Subsequent to year-end, we closed on the issuance of additional senior secured notes, resulting in net proceeds of approximately $34 million. We currently estimate that between $10 million and $15 million of cash is required for our 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 and cash flows from operating activities across our six properties (including The Temporary, which opened in February 2023), will be sufficient to meet our liquidity and capital resource needs for the next 12 months of operations.

Cash flows – operating activities. On a consolidated basis, cash provided by operations during 2022 was $4.4 million, compared to $29.5 million in 2021. 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 primarily due to decreases in revenues and income, which includes preopening expenses incurred for The Temporary (which opened in February 2023) and Chamonix.

Cash flows – investing activities. On a consolidated basis, cash used in investing activities during 2022 was $172.1 million, primarily related to capital expenditures for Chamonix and The Temporary/American Place. In 2021, such amount was $37.2 million, primarily for our Chamonix construction project and real estate purchases in Cripple Creek, as well as to repair hurricane damage at Silver Slipper.

Cash flows – financing activities. On a consolidated basis, cash provided by financing activities during 2022 was $93.6 million, while cash provided by financing activities during 2021 was $235.3 million. In February 2022, we received $102.0 million of gross proceeds from the issuance of additional senior secured notes to construct The Temporary. In February and March 2021, respectively, we received $310.0 million of gross proceeds from the issuance of our 2028 Notes and $46.0 million of gross proceeds from our underwritten equity offering. These cash inflows in 2021 were partially offset by the payoff of the Prior Notes (including the related prepayment premiums), as well as 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 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, may 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. The extent to which our liquidity in future periods may be affected by COVID-19 and its variants may largely depend on future developments. Such future developments are highly uncertain and cannot be accurately predicted at this time, as discussed under “Recent Developments.”

Long-Term Debt. At December 31, 2022, we had $410.0 million of principal indebtedness outstanding under the Existing Notes as issued in February 2021 and February 2022, and no drawn amounts under the Credit Facility or any outstanding letters of credit. With the exception of our Credit Facility, we have fixed interest rates on the remainder of our debt.

See Note 6 and Note 12 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data” for details on our debt obligations.

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Hyatt Option to Purchase our Leasehold Interest and Related Assets. Our lease with Hyatt to operate the Grand Lodge Casino currently has an option for Hyatt to purchase our leasehold interest and related casino operating assets. The lease, which has been extended several times in the past, was subsequently extended through December 31, 2024. See Note 7 and Note 12 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data” for further information about this option and related rental commitments that could affect our liquidity and capital resources.

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.

Chamonix ⸺ As previously discussed in “Operating Properties — Chamonix Casino and Hotel” under Part I, Item 1. “Business,” 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. To fund Chamonix’s construction, we issued our 2028 Notes and placed a portion of such proceeds into a restricted cash account dedicated to Chamonix’s construction (see Note 6 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data”). As of December 31, 2022, the balance of such restricted cash account was approximately $135 million. We expect to invest all of such amount in 2023, as full completion of construction is expected before the end of 2023.

American Place ⸺ As discussed above in the “Executive Overview,” we were selected by the IGB to develop and operate American Place in Waukegan, Illinois. While the larger permanent facility is under construction, we will operate a temporary casino named The Temporary by American Place, which opened in February 2023. During 2023, we expect to invest approximately $70 million into this project, consisting largely of significant upfront gaming license payments and the recent completion of The Temporary’s construction, as well as professional fees related to the design of the permanent American Place facility. We expect to transfer purchased slot machines and other equipment to the permanent casino once opened. See Note 6 and Note 12 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data.”

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.

Principal Debt Arrangements

See Note 6 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data” for more information.

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Critical Accounting Estimates and Policies

Our consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America. Certain of our accounting policies require that we apply significant judgment in defining the appropriate assumptions for calculating estimates that affect reported amounts and disclosures. By their nature, judgments are subject to an inherent degree of uncertainty, and therefore, actual results may differ from our estimates. We believe the following critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial statements.

Impairment of Long-lived Assets, Goodwill and Indefinite-Lived Intangibles

Our long-lived assets include property and equipment, goodwill, and indefinite-lived intangibles, and are evaluated at least annually (and more frequently when circumstances warrant) to determine if events or changes in circumstances indicate that the carrying value may not be recoverable. Examples of such events or changes in circumstances that might indicate impairment testing is warranted might include, as applicable, an adverse change in the legal, regulatory or business climate relative to gaming nationally or in the jurisdictions in which we operate, or a significant long-term decline in historical or forecasted earnings or cash flows or the fair value of our property or business, possibly as a result of competitive or other economic or political factors. In evaluating whether a loss in value is other than temporary, we consider: (i) the length of time and the extent to which the fair value or market value has been less than cost; (ii) the financial condition and near-term prospects of the casino property, including any specific events which may influence the operations; (iii) our intent related to the asset and ability to retain it for a period of time sufficient to allow for any anticipated recovery in fair value; (iv) the condition and trend of the economic cycle; (v) historical and forecasted financial performance; and (vi) trends in the general market.

We review the carrying value of our property and equipment used in our operations whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from estimated future undiscounted cash flows expected to result from its use and eventual disposition. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is recorded based on the fair value of the asset. Fair value is typically measured using a discounted cash flow model whereby future cash flows are discounted using a weighted-average cost of capital, developed using a standard capital-asset pricing model, based on guideline companies in our industry.

We test our goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter or when a triggering event occurs. For our 2022 and 2021 annual impairment tests, we utilized the option to perform a qualitative analysis for our goodwill and indefinite-lived intangibles and concluded it was more likely than not that the fair values of such intangibles exceeded their carrying values. Any impairment charges incurred are not reversed if a subsequent evaluation concludes a higher valuation than the carrying value. For further discussion of goodwill and other intangible assets, see Note 2 and Note 4 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data.”

Fixed Asset Capitalization and Depreciation Policies

We define fixed assets as certain property and equipment with economic useful lives that extend beyond a year. Such fixed assets are stated at cost. For the majority of our property and equipment, cost was determined at the acquisition date based on estimated fair values. We acquired Bronco Billy’s in May 2016, Silver Slipper in October 2012, Rising Star in April 2011 and Stockman’s in January 2007. Project development costs, which are amounts expended on the pursuit of new business opportunities, acquisition-related costs, as well as other business development activities in the ordinary course of business, are expensed as incurred. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are also expensed as incurred. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. When we construct assets, we capitalize direct costs of the project, including fees paid to architects and contractors and property taxes. Salaries are capitalized only for employees working directly on the project. In addition, interest cost associated with major development and construction projects is capitalized as part of the cost of the project. Interest is typically capitalized on amounts expended on the project using the weighted-average cost of our outstanding borrowings. Capitalization of interest starts when construction activities begin and ceases when construction is substantially complete or development activity is suspended for more than a brief period.

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We must make estimates and assumptions when accounting for capital expenditures. Whether an expenditure is considered a maintenance expense or a capital asset is sometimes a matter of judgment. When constructing or purchasing assets, we must determine whether existing assets are being replaced or otherwise impaired, which also may be a matter of judgment. In addition, our depreciation expense is highly dependent on the assumptions we make about our assets’ estimated useful lives. We determine the estimated useful lives based on our experience with similar assets, engineering studies, and our estimate of the usage of the asset. Whenever events or circumstances occur, which would change the estimated useful life of an asset, we account for the change prospectively.

Income Taxes

We are subject to federal and state taxes in the United States. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our net DTAs. Such valuation allowance was $15.2 million for 2022 and $9.9 million for 2021. We make these estimates and judgments about our future taxable income that are based on assumptions that are consistent with our future plans. Tax laws, regulations, and administrative practices may be subject to change due to economic or political conditions, including fundamental changes to the applicable tax laws.

Our income tax returns are subject to examination by the IRS and other tax authorities. Positions taken in tax returns are sometimes subject to uncertainty in the tax laws and may not ultimately be accepted by the IRS or other tax authorities. We assess our tax positions using a two-step process. A tax position is recognized if it meets a more likely than not threshold. It is then measured at the largest amount of benefit that is greater than 50 percent likely of being realized. Additionally, we recognize accrued interest and penalties, if any, related to unrecognized tax benefits in income tax expense. For further discussion of income taxes, see Note 8 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data.”

Recently Issued Accounting Pronouncements Not Yet Adopted

See Note 2 to the consolidated financial statements set forth in Part II, Item 8. “Financial Statements and Supplementary Data” for a discussion of recently issued accounting pronouncements not yet adopted.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

As a smaller reporting company during the year ended December 31, 2022, as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.

​

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Item 8. Financial Statements and Supplementary Data.

​ ​

Financial Statements: Page

Notes to Consolidated Financial Statements: 60

​ Note 1 ​ Organization 60

​ Note 3 ​ Property and Equipment, Net 66

​ Note 4 ​ Goodwill and Other Intangibles 67

​ Note 5 ​ Accrued Liabilities 69

​ Note 6 ​ Long-Term Debt 69

​ Note 7 ​ Leases 71

​ Note 8 ​ Income Taxes 75

​ Note 9 ​ Commitments and Contingencies 77

​ Note 10 ​ Stock-Based Compensation 78

​ Note 11 ​ Segment Reporting and Disaggregated Revenue 80

​ Note 12 ​ Subsequent Events 82

​

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

To the stockholders and the Board of Directors of Full House Resorts, Inc.

​

Opinion on Internal Control over Financial Reporting

​

We have audited the internal control over financial reporting of Full House Resorts, Inc. and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

​

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022 of the Company and our report dated March 15, 2023, expressed an unqualified opinion on those financial statements.

​

Basis for Opinion

​

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

​

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

​

Definition and Limitations of Internal Control over Financial Reporting

​

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

​

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

​

/s/ Deloitte & Touche LLP

​

Las Vegas, Nevada

March 15, 2023

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

To the stockholders and the Board of Directors of Full House Resorts, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Full House Resorts, Inc. and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Income Taxes ─ Valuation Allowance ─ Refer to Note 8 to the financial statements

Critical Audit Matter Description

The Company recognizes deferred tax assets and liabilities resulting from the future tax consequences attributable to the differences between the financial statements and tax basis of their respective assets and liabilities. The Company provides valuation allowances against deferred tax assets when it is deemed more likely than not that some portion or all of the deferred tax assets will not be realized. Future realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences become deductible. Sources of taxable income include future reversals of deferred tax liabilities, projected future taxable income, ability to carry tax attributes back to prior years, and tax planning strategies.

The Company’s valuation allowance for its US federal and certain state deferred tax assets was $15.2 million as of December 31, 2022. We identified the Company’s valuation allowance analysis and conclusion as a critical audit matter because of the estimates and judgments required by management in determining whether deferred tax assets are more likely than not to be realized, including the projected timing and pattern of future reversals of existing temporary differences and the projection of future sources of taxable income. Auditing management’s projected timing and pattern of future reversals of existing taxable temporary differences and the projection of future sources of taxable income, which affect the recorded valuation allowance, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s valuation allowance analysis included the following, among others:

o Relevant tax laws and regulations;

o Future reversals of deferred tax assets and liabilities;

o Relevant tax planning strategies; and

​

/s/ Deloitte & Touche LLP

​

Las Vegas, Nevada

March 15, 2023

​

We have served as the Company’s auditor since 2019.

​

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

​

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended

​ ​ December 31,

Revenues ​ ​

Other operations, including contracted sports wagering ​ 13,629 ​ 12,757

Operating costs and expenses ​ ​

Selling, general and administrative ​ 59,706 ​ 59,965

Project development costs, net ​ 228 ​ 782

Preopening costs ​ ​ 9,558 ​ ​ 17

Depreciation and amortization ​ 7,930 ​ 7,219

Loss on disposal of assets, net ​ ​ 42 ​ 676

Other expense ​ ​

Loss on modification and extinguishment of debt, net ​ ​ (4,530) ​ ​ (409)

Adjustment to fair value of warrants ​ — ​ (1,347)

(Loss) income before income taxes ​ (14,835) ​ 12,141

Income tax (benefit) expense ​ ​ (31) ​ ​ 435

​ ​ ​ ​ ​ ​ ​

Basic (loss) earnings per share ​ $ (0.43) ​ $ 0.36

Diluted (loss) earnings per share ​ $ (0.43) ​ $ 0.33

​

The accompanying notes are an integral part of these consolidated financial statements.

​

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

ASSETS ​ ​ ​ ​ ​ ​

Current assets ​ ​

Prepaid expenses and other ​ 6,184 ​ 3,726

​ ​ ​ ​ ​ ​ ​

Operating lease right-of-use assets, net ​ ​ 15,771 ​ ​ 15,814

Finance lease right-of-use assets, net ​ ​ 3,808 ​ ​ —

LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​

Current liabilities ​ ​ ​ ​ ​ ​

Accrued payroll and related ​ 3,784 ​ 5,473

Current portion of operating lease obligations ​ ​ 2,485 ​ ​ 3,542

Current portion of finance lease obligation ​ ​ 1,581 ​ ​ 514

​ ​ ​ ​ ​ ​ ​

Operating lease obligations, net of current portion ​ 13,418 ​ 12,903

Finance lease obligations, net of current portion ​ ​ 4,727 ​ ​ 2,783

Deferred income taxes, net ​ 1,024 ​ 1,055

Contract liabilities, net of current portion ​ ​ 8,856 ​ ​ 4,714

Commitments and contingencies (Note 9) ​ ​

Stockholders’ equity ​ ​

(Accumulated deficit) retained earnings ​ (9,712) ​ 5,092

​

The accompanying notes are an integral part of these consolidated financial statements.

​

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Accumulated ​ ​ ​

​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ Deficit) ​ Total

​ ​ Common Stock ​ Paid-in ​ Treasury Stock ​ Retained ​ Stockholders’

​ ​ Shares ​ Dollars ​ Capital ​ Shares ​ Dollars ​ Earnings ​ Equity

Net income ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 11,706 ​ ​ 11,706

Stock-based compensation ​ — ​ ​ — ​ ​ 966 ​ — ​ ​ — ​ ​ — ​ ​ 966

Net loss ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ (14,804) ​ ​ (14,804)

Stock-based compensation ​ — ​ ​ — ​ ​ 1,693 ​ — ​ ​ — ​ ​ — ​ ​ 1,693

​

The accompanying notes are an integral part of these consolidated financial statements.

​

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended

​ ​ December 31,

Cash flows from operating activities: ​ ​

Depreciation and amortization ​ 7,930 ​ 7,219

Amortization of debt issuance costs, discounts and premiums ​ 1,649 ​ 1,349

Non-cash change in ROU operating lease assets ​ ​ 3,397 ​ ​ 3,128

Stock-based compensation ​ 1,693 ​ 966

Change in fair value of stock warrants ​ — ​ 1,347

Loss on disposal of assets, net ​ 42 ​ 676

Proceeds from insurance related to property damage ​ ​ — ​ ​ 1,334

Loss on modification and extinguishment of debt, net ​ ​ 4,530 ​ ​ 409

Other operating activities ​ ​ 319 ​ ​ —

Increases and decreases in operating assets and liabilities: ​ ​ ​ ​ ​

Accounts receivable ​ 611 ​ 211

Prepaid expenses, inventories and other ​ (2,277) ​ (1,414)

Operating lease right-of-use assets ​ ​ (386) ​ ​ —

Deferred taxes ​ (31) ​ 435

Common stock warrant liability ​ ​ — ​ ​ (4,000)

Operating lease liabilities ​ ​ (3,509) ​ ​ (3,334)

Contract liabilities ​ ​ 3,970 ​ ​ (234)

Accounts payable and other liabilities ​ 1,243 ​ 9,706

Net cash provided by operating activities ​ 4,377 ​ 29,504

Cash flows from investing activities: ​ ​ ​ ​ ​

Net cash used in investing activities ​ (172,114) ​ (37,217)

Cash flows from financing activities: ​ ​ ​ ​ ​

Proceeds from equity offering, net of issuance costs ​ ​ — ​ ​ 42,974

Payment of debt discount and issuance costs ​ (7,945) ​ (9,429)

Repayment of Senior Secured Notes due 2024 ​ ​ — ​ ​ (106,825)

Prepayment premiums of Senior Secured Notes due 2024 ​ — ​ (1,261)

Repayment of finance lease obligations ​ ​ (514) ​ ​ (492)

Proceeds from exercise of stock options ​ 187 ​ 392

Net cash provided by financing activities ​ 93,620 ​ 235,308

​ ​ ​ ​ ​ ​ ​

The accompanying notes are an integral part of these consolidated financial statements.

​

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(In thousands)

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended

​ ​ December 31,

Supplemental Cash Flow Disclosure: ​ ​ ​ ​ ​ ​

Cash paid for interest, net of amounts capitalized ​ $ 19,589 ​ $ 12,373

​ ​ ​ ​ ​ ​ ​

Supplemental Schedule of Non-Cash Investing and Financing Activities: ​ ​

Accounts payable related capital expenditures ​ $ 30,995 ​ $ 4,899

Gain on extinguishment of CARES Act unsecured loans ​ ​ — ​ ​ 5,696

Right-of-use assets obtained in exchange for lease liabilities: ​ ​ ​ ​ ​ ​

Operating leases ​ ​ 1,121 ​ ​ —

Financing leases ​ ​ 3,498 ​ ​ —

The accompanying notes are an integral part of these consolidated financial statements.

​

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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

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

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

The following table presents selected information concerning our casino resort properties as of December 31, 2022:

​ ​ ​

Segments and Properties ​ Locations

Colorado ​ ​

Bronco Billy’s Casino and Hotel Cripple Creek, CO (near Colorado Springs)

Illinois ​ ​

Indiana ​ ​

Rising Star Casino Resort Rising Sun, IN (near Cincinnati)

Mississippi ​ ​

Silver Slipper Casino and Hotel Hancock County, MS (near New Orleans)

Nevada ​ ​

Stockman’s Casino Fallon, NV (one hour east of Reno)

Contracted Sports Wagering ​ ​

Three sports wagering websites (“skins”) ​ Colorado

Three sports wagering websites (“skins”) ​ Indiana

​

The Company manages its casinos based primarily on geographic regions within the United States and type of income. See Note 11 for further information.

COVID-19 Pandemic Update. From March 2020 through the date of this report, our operations have been impacted by the novel coronavirus as a global pandemic (“COVID-19”). Although COVID-19 continues to spread throughout the U.S. and the world, the number of newly reported cases has been in overall decline in the U.S., though new variants could result in a reversal of these trends. The onset of COVID-19 resulted in the implementation of significant, government-imposed measures to prevent or reduce its spread, including travel restrictions, business restrictions, closing of borders, “shelter-in-place” orders and business closures. From April 2020 to March 2021, the federal government issued three rounds of stimulus payments for qualified individuals and sponsored certain CARES Act programs to offer economic relief and reduce the financial strain that many consumers and businesses alike felt from COVID-19 and related restrictions.

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While the details of this impact have been disclosed throughout this report, the following discussion of our business focuses on execution of our strategies in a post-pandemic environment based on the assumption that the impact of COVID-19 will eventually diminish and our operations will fully recover. However, the effects of COVID-19 on our operations may persist for a longer period, even after the COVID-19 pandemic has subsided.

​

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Except when otherwise required by accounting principles generally accepted in the United States of America (“GAAP”) and disclosed herein, the Company measures all of its assets and liabilities on the historical cost basis of accounting.

Use of Estimates. The consolidated financial statements have been prepared in conformity with GAAP. These principles require the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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 its 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:

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

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

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

Accounts Receivable. Accounts receivable consist primarily of casino, hotel and other receivables, are typically non-interest bearing, and are carried net of an appropriate reserve to approximate fair value. Reserves are estimated based on specific review of customer accounts including the customers’ willingness and ability to pay and nature of collateral, if any, as well as historical collection experience and current economic and business conditions. Accounts are written off when management deems the account to be uncollectible and recoveries of accounts previously written off are recorded when received. Management believes that, as of December 31, 2022, no significant concentrations of credit risk existed for which a reserve had not already been recorded.

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Inventories. Inventories consist primarily of food, beverage and retail items, and are stated at the lower of cost or net realizable value. Costs are determined using the first-in, first-out and the weighted average methods.

Property and Equipment. Property and equipment are stated at cost and are capitalized and depreciated, while normal repairs and maintenance are expensed in the period incurred. A significant amount of the Company’s property and equipment was acquired through business combinations, and therefore, were recognized at fair value measured at the acquisition date. Gains or losses on dispositions of property and equipment are included in operating expenses, effectively as adjustments to depreciation estimates.

Certain events or changes in circumstances may indicate that the recoverability of the carrying amount of property, plant and equipment should be assessed, including, among others, a significant decrease in market value, a significant change in the business climate in a particular market, or a current period operating or cash flow loss combined with historical losses or projected future losses. For assets to be held and used, the Company reviews for impairment whenever indicators of impairment exist. When such events or changes in circumstances are present, the Company estimates the future cash flows expected to result from the use of the asset (or asset group) and its eventual disposition. These estimated future cash flows are consistent with those we use in our internal planning. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, then the Company would recognize an impairment loss based on the fair value of the asset, typically measured using a discounted cash flow model.

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the lease, whichever is appropriate under the circumstances. The Company determines the estimated useful lives based on our experience with similar assets, estimated usage of the asset, and industry practice. Whenever events or circumstances occur, which change the estimated useful life of an asset, the Company accounts for the change prospectively.

Depreciation and amortization is provided over the following estimated useful lives:

​ ​ ​

​ Estimated

Class of Assets ​ Useful Lives

Land improvements 15 to 18 years

Buildings and improvements 3 to 44 years

Furniture, fixtures and equipment 2 to 10 years

​

Capitalized Interest.Interest costs associated with major construction projects are capitalized and included in the cost of the projects. When no debt is incurred specifically for construction projects, interest is capitalized on amounts expended using the weighted average cost of the Company’s outstanding borrowings. Capitalization of interest ceases when the project is substantially complete or construction activity is suspended for more than a brief period.

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, as well as depreciation (or amortization) expense associated with the ROU asset, depending on whether those ROU assets are expected to transfer to the Company upon lease expiration. If ownership of a finance lease ROU asset is expected to transfer to the Company upon lease expiration, 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 on their own line, “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; as a result, the Company will not allocate contract consideration to the separate lease and non-lease components based on their relative standalone prices.

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

Goodwill and Indefinite-lived Intangible Assets. Goodwill represents the excess of the purchase price of Bronco Billy’s Casino and Hotel, Silver Slipper Casino and Hotel, and Stockman’s Casino over the estimated fair value of their net tangible and other intangible assets on the acquisition date, net of subsequent impairment charges. The Company’s other indefinite-lived intangible assets primarily include certain license rights to conduct gaming in certain jurisdictions and trade names. Goodwill and other indefinite-lived intangible assets are not amortized, but are periodically tested for impairment. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value.

Tests of goodwill and indefinite-lived intangible assets start with a qualitative assessment to determine whether it is necessary to perform a quantitative test. If quantitative tests are performed, the evaluation of goodwill and other indefinite-lived intangible assets requires the use of estimates about future operating results, valuation multiples and discount rates to determine the estimated fair value. Changes in the assumptions can materially affect these estimates. Thus, to the extent that gaming volumes deteriorate in the near future, discount rates increase significantly, or reporting units do not meet projected performance, the Company could have impairments to record in the future and such impairments could be material. These tests for impairment are performed annually during the fourth quarter or when a triggering event occurs.

Finite-lived Intangible Assets. The Company’s finite-lived intangible assets includes land lease acquisition costs and water rights. Finite-lived intangible assets are amortized over the shorter of their contractual or economic lives. The Company periodically evaluates the remaining useful lives of these intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization and the possible need for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, then the Company would recognize an impairment loss.

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 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 such costs to interest expense using the effective interest method over the terms of the modified debt agreement.

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 its revenues are derived from casino gaming, principally slot machines.

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

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

Many of the Company’s customers choose to earn points under its customer loyalty programs. The Company’s properties have separate customer loyalty programs: the Slipper Rewards Club, the Bronco Billy’s Mile High Rewards Club, the Rising Star VIP Club, the Grand Lodge Players Advantage Club®, the Stockman’s Winner’s Club, and American Place’s Legacy Rewards. As points are accrued, the Company defers a portion of its gaming revenue based on the estimated standalone value of loyalty points being earned by the customer. The standalone value of loyalty points is derived from the retail value of food, beverages, hotel rooms, and other goods or services for which such points may be redeemed. A liability related to these customer loyalty points is recorded, net of estimated breakage and other factors, until the customer redeems these points under such loyalty programs for various benefits, such as “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. Liabilities based on the standalone retail value of such benefits was $0.7 million for December 31, 2022 and $0.8 million for December 31, 2021, and these amounts are included in “other accrued liabilities” on the consolidated balance sheets.

Deferred Revenues: Market Access Fees from Sports Wagering Agreements. The Company entered into several agreements with various unaffiliated companies allowing for online sports wagering within Indiana, Colorado and Illinois, as well as on-site sports wagering at Rising Star Casino Resort, Bronco Billy’s Casino and Hotel, and The Temporary/American Place (the “Sports Agreements”). As part of these long-term Sports Agreements, the Company received one-time market access fees, which were recorded as long-term liabilities and are being recognized as revenue ratably over the initial contract terms (or as accelerated due to termination), beginning with the commencement of operations. 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.

​

Indiana. The Company’s three Sports Agreements commenced operations in December 2019, April 2021, and December 2021. As noted above, one of these Sports Agreements ceased operations in May 2022. The Company continues to evaluate whether to utilize the remaining skin itself or to find 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 above, one of these Sports Agreements ceased operations in May 2022. In December 2022, the Company signed a Sports Agreement with a new third party for this available skin, which upfront fee was capitalized and will be amortized over the 10-year term of the agreement that contractually commenced in March 2023, but is still pending the receipt of customary gaming 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 million.

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 that is expected to commence in Spring 2023, pending the receipt of customary gaming approvals. The Company will also receive a percentage of revenues (as defined), subject to a minimum of $5.0 million per year.

In addition to the market access fees, deferred revenue includes the annual prepayment of contracted revenue, as required in two of the Sports Agreements. As of December 31, 2022, $2.0 million of such deferred revenue has been recognized during the year.

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Deferred revenues consisted of the following as discussed above:

​

​ ​ ​ ​ ​ ​ ​ ​ ​

(In thousands) ​ ​ ​ December 31,

Deferred revenue, current ​ Other accrued liabilities ​ $ 1,651 ​ $ 1,822

​

​

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 11.

​

Advertising Costs. Costs for advertising are expensed as incurred, or the first time the advertising takes place, and are included in selling, general and administrative expenses. Total advertising costs were $2.7 million and $2.8 million for the years ended December 31, 2022 and 2021, respectively.

Project Development and Acquisition Costs. Project development and acquisition costs consist of amounts expended on the pursuit of new business opportunities and acquisitions, as well as other business development activities in the ordinary course of business, which are expensed as incurred. During 2022, these costs were primarily associated with our efforts to fund the development of The Temporary during the preliminary stages of the project. In 2021, these costs were associated with our pursuit of available gaming licenses in Waukegan, Illinois, and Terre Haute, Indiana.

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

Stock-based Compensation. Stock-based compensation costs are measured at the grant date, based on the estimated fair value of the award using the Black-Scholes option pricing model for stock options, and based on the closing share price of the Company’s stock on the grant date for other stock-based awards. These costs are recognized as an expense on a straight-line basis over the employee’s requisite service period (the vesting period of the award) net of forfeitures, which are recognized as they occur, and are included within selling, general and administrative expense on the consolidated statements of operations.

Income Taxes. We classify deferred tax assets and liabilities, along with any related valuation allowance, as non-current on the consolidated balance sheets. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are provided against DTAs when it is deemed more likely than not that some portion or all of the DTAs will not be realized within a reasonable time period.

Our income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities. Positions taken in tax returns are sometimes subject to uncertainty in the tax laws and may not ultimately be accepted by the IRS or other tax authorities. We assess our tax positions using a two-step process. A tax position is recognized if it meets a more likely than not” threshold, and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. Additionally, we recognize accrued interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

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

​

Earnings (loss) per share.Earnings (loss) per share is computed by dividing net income (loss) applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the additional dilution for all potentially-dilutive securities, including stock options, restricted stock and performance-based shares, using the treasury stock method.

​

​ ​ ​ ​ ​ ​ ​

(In thousands) ​ Year Ended

​ ​ December 31,

Numerator: ​ ​

Net (loss) income ─ diluted ​ $ (14,804) ​ $ 11,706

​ ​ ​ ​ ​ ​ ​

Denominator: ​ ​

Weighted-average common shares ─ basic ​ 34,355 ​ 32,517

Potential dilution from share-based awards ​ ​ — ​ ​ 2,429

Weighted-average common and common share equivalents ─ diluted ​ 34,355 ​ 34,946

​

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

​

3. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

​ ​ ​ ​ ​ ​ ​

(In thousands) ​ December 31,

Less: Accumulated depreciation ​ (86,494) ​ (79,540)

​

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Property and equipment included assets under finance leases related to our hotel at Rising Star Casino Resort (see Note 7) are as follows:

​

​ ​ ​ ​ ​ ​ ​

(In thousands) ​ December 31,

Leased land and improvements ​ $ 215 ​ $ 215

Leased buildings and improvements ​ ​ 5,787 ​ ​ 5,787

Leased furniture and equipment ​ ​ 1,724 ​ ​ 1,724

Less: Accumulated amortization ​ ​ (3,160) ​ ​ (3,004)

​

​

​

4. GOODWILL AND OTHER INTANGIBLES

Goodwill:

The following table sets forth changes in the carrying value of goodwill by segment:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Mississippi ​ ​ Colorado ​ ​ Nevada ​ ​ Total

Account activity ​ ​ — ​ ​ ​ — ​ ​ ​ — ​ ​ ​ —

Account activity ​ ​ — ​ ​ ​ — ​ ​ ​ — ​ ​ ​ —

​

Other Intangible Assets:

The following tables set forth changes in the carrying value of intangible assets other than goodwill:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(In thousands) ​ December 31, 2022

​ Estimated Gross ​ ​ Other

​ ​ Life ​ Carrying ​ Accumulated ​ Intangible

​ ​ (Years) ​ Value ​ Amortization ​ Assets, Net

Gaming Licenses Indefinite ​ 7,843 ​ — ​ 7,843