EMPIRE RESORTS INC - FORM 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-12522

EMPIRE RESORTS, INC.

(Exact name of registrant as specified in its charter)




Delaware		13-3714474
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

c/o Monticello Casino and Raceway 204 State Route 17B, P.O. Box 5013 Monticello, New York		12701
(Address of principal executive offices)		(Zip Code)

(845) 807-0001

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

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

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

The number of shares outstanding of the issuer’s common stock, as of November 1, 2013 was 36,253,570.

INDEX




		PAGE NO.
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012	1

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012	2

	Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2013 and 2012	3

	Notes to Condensed Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26

Item 4.	Controls and Procedures	26

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

	Signatures	31

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EMPIRE RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for per share data)



	September 30, 2013			December 31, 2012
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	10,548		$	9,063
Restricted cash	1,906			1,240
Accounts receivable, net	1,226			1,006
Prepaid expenses and other current assets	4,914			2,839
Total current assets	18,594			14,148
Property and equipment, net	26,364			26,568
Project development costs	15,678			11,516
Other assets	90			217
Total assets	$	60,726		$	52,449
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,055		$	2,805
Accrued expenses and other current liabilities	9,155			7,405
Total current liabilities	12,210			10,210
Long-term loan, related party	17,426			17,426
Series E preferred stock payable - $10 per share redemption value, 1,551 Shares as of September 30, 2013, (aggregate liquidation value of $29,239 as of September 30, 2013)	22,800			—
Total liabilities	52,436			27,636
Commitments and contingencies
Stockholders’ equity:
Preferred stock, 5,000 shares authorized; $0.01 par value -
Series A, $1,000 per share liquidation value, none issued and outstanding	—			—
Series B, $29 per share liquidation value, 44 shares issued and outstanding	—			—
Series E, $10 per share redemption value, 27 and 1,731 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively (aggregate liquidation value of $497 and $31,237 as of September 30, 2013 and December 31, 2012, respectively)	—			6,855
Common stock, $0.01 par value, 150,000 shares authorized, 36,181 and 30,073 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively	362			300
Additional paid-in capital	157,844			146,083
Accumulated deficit	(149,916		)	(128,425		)
Total stockholders’ equity	8,290			24,813
Total liabilities and stockholders’ equity	$	60,726		$	52,449

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

EMPIRE RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share data) (Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenues:
Gaming	$17,844			$17,593			$49,440			$48,634
Food, beverage, racing & other	3,557			3,096			9,837			9,426
Gross revenues	21,401			20,689			59,277			58,060
Less: Promotional allowances	(1,723		)	(969		)	(3,847		)	(2,199	)
Net revenues	19,678			19,720			55,430			55,861
Costs and expenses:
Gaming	12,943			12,536			36,175			35,082
Food, beverage, racing and other	2,940			2,744			8,441			8,239
Selling, general and administrative	3,773			3,028			10,827			9,131
Stock-based compensation	65			155			215			506
Depreciation	346			346			1,018			1,036
Total costs and expenses	20,067			18,809			56,676			53,994
(Loss) income from operations	(389		)	911			(1,246		)	1,867
Amortization of deferred financing costs	(18		)	(12		)	(54		)	(12	)
Interest expense	(336		)	(286		)	(995		)	(729	)
Interest income	—			1			—			4
(Loss) income before income taxes	(743		)	614			(2,295		)	1,130
Income tax provision	—			(10		)	—			(16	)
Net (loss) income	(743		)	604			(2,295		)	1,114
Undeclared dividends on preferred stock and deemed dividends	(47		)	(388		)	(5,461		)	(1,164	)
Net loss applicable to common shares	$(790)			$216			$(7,756)			$(50)
Weighted average common shares outstanding, basic	36,181			30,116			33,077			29,994
Weighted average common shares outstanding, diluted	36,181			30,286			33,077			29,994
(Loss) income per common share, basic *	$	(0.02	)	$	0.01		$	(0.23	)	*
(Loss) income per common share, diluted *	$	(0.02	)	$	0.01		$	(0.23	)	*

* Less than $0.005

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

EMPIRE RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)



	Nine Months Ended September 30,
	2013			2012
Operating activities:
Net (loss) income	$	(2,295	)	$	1,114
Adjustments to reconcile net (loss) income to net cash (used) provided in operating activities:
Depreciation	1,018			1,036
(Recovery) provision of doubtful accounts	(1		)	25
Loss on disposal of property and equipment	(103		)	(5		)
Stock-based compensation	215			506
Changes in operating assets and liabilities:
Restricted cash –NY Lottery and Purse Accounts	(722		)	(463		)
Accounts receivable	(220		)	(355		)
Prepaid expenses and other current assets	(2,075		)	(1,639		)
Other assets	127			113
Accounts payable	250			(366		)
Accrued expenses and other current liabilities	(491		)	(607		)
Net cash (used) provided in operating activities	(4,297		)	(641		)
Investing activities:
Purchases of property and equipment	(713		)	(185		)
Restricted cash - Racing capital improvement	57			162
Project development costs	(3,212		)	(3,881		)
Net cash used in investing activities	(3,868		)	(3,904		)
Financing activities:
Proceeds from rights offering, net of expenses	11,178			—
Series E preferred shares redemption	(1,528		)	—
Net cash provided in financing activities	9,650			—
Net increase (decrease) in cash and cash equivalents	1,485			(4,545		)
Cash and cash equivalents, beginning of period	9,063			14,601
Cash and cash equivalents, end of period	$	10,548		$	10,056
Supplemental disclosures of cash flow information:
Interest paid	$	999		$	714
Non-cash investing and financing activities:
Common stock issued in settlement of preferred stock dividends	$	205		$	234
Project development costs included in accrued expenses	$	950		$	1,499

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

EMPIRE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note A. Summary of Business and Basis for Presentation

Basis for Presentation

The condensed consolidated financial statements and notes as of September 30, 2013 and December 31, 2012 and for the three and nine months ended September 30, 2013 and 2012 are unaudited and include the accounts of Empire Resorts, Inc. (“Empire”) and subsidiaries (the “Company”).

The condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and the footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) which are, in the Company’s opinion, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2012. The results of operations for the interim period may not be indicative of results to be expected for the full year.

Liquidity

The accompanying consolidated financial statements have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company anticipates that its current cash and cash equivalents balances, cash generated from operations and proceeds from the April 2013 Rights Offering (as defined below) will be sufficient to meet its working capital requirements for at least the next twelve months. The adequacy of these resources to meet the Company’s liquidity needs beyond that period will depend on the Company’s growth, operating results, the status of the Casino Project (as defined below) and ability to refinance or otherwise satisfy its long-term loan with a related party. If construction of the Casino Project is commenced in the next twelve months, or if the Company decides to seek a license to operate a full-scale casino if the Constitutional Amendment is approved, the Company will require additional capital resources. If the Company requires additional capital resources in connection with the Casino Project, pursuing a license to operate a full-scale casino or settlement of, or loss in, any pending litigation, it may raise additional capital in the form of debt or equity. The sale of additional equity could result in further dilution to the Company’s existing stockholders and financing arrangements may not be available to the Company, or may not be available in amounts or on terms acceptable to the Company.

On April 30, 2013, the Company commenced a rights offering of common stock to holders of its common stock and Series B Preferred Stock (the "April 2013 Rights Offering") which expired on May 30, 2013. At the completion of the April 2013 Rights Offering, the Company issued a total of 6,032,153 shares of common stock, raised approximately $11.4 million in gross proceeds and incurred approximately $223,000 in expenses. The Company has used a portion of the net proceeds of the April 2013 Rights Offering to fund the expenses of the Company’s Casino Project (defined below), which includes permitting, infrastructure and shared master planning costs and expenses, and for general working capital purposes.

Nature of Business

Through Empire’s wholly-owned subsidiary, Monticello Raceway Management, Inc. (“MRMI”), the Company currently owns and operates Monticello Casino and Raceway, a 45,000 square foot video gaming machine (“VGM”) and harness horseracing facility located in Monticello, New York, 90 miles northwest of New York City. Monticello Casino and Raceway operates 1,110 VGMs, which includes 20 electronic table game positions (“ETGs”). VGMs are similar to slot machines, but they are connected to a central system and report financial information to the central system. The Company also generates racing revenues through pari-mutuel wagering on the running of live harness horse races, the import simulcasting of harness and thoroughbred horse races from racetracks across the country and internationally, and the export simulcasting of its races to offsite pari-mutuel wagering facilities.

Regulation

On February 1, 2013, the New York State Gaming Commission (“NYSGC”) became effective. The NYSGC was formally created via Chapter 60 of the Laws of 2012 as part of the 2012/2013 Enacted State Budget. The legislation merged the New York Racing and Wagering Board ("RWB") with the New York Lottery ("NYL") into a single state agency. The legislation that created the NYSGC provides that the Board of the NYSGC shall consist of seven members. As of November 4, 2013, four members have been appointed to the Board of the NYSGC. The NYSGC has the authority and responsibility to promulgate

rules and regulations. The legislation specifies that all rules, regulations, acts, orders, determinations and decisions of the NYL and RWB shall continue as rules, regulations, acts, orders, determinations and decisions of the NYSGC until modified or abrogated by the NYSGC and all of the functions and powers and obligations and duties of the RWB and NYL were transferred to the NYSGC. Our VGM, harness horseracing and simulcast activities in the State of New York are overseen by the NYSGC.

Development

EPT Concord II, LLC, ("EPT") a wholly owned subsidiary of Entertainment Properties Trust is the sole owner of 1,500 acres located at the site of the former Concord Resort (the “EPT Property”). On December 14, 2012 (the "Effective Date"), EPT and MRMI entered into a master development agreement (the “MDA”) to develop the EPT Property. The MDA defines and governs the overall relationship between EPT and MRMI with respect to the development, construction, operation, management and disposition of the integrated destination resort and community (the "Project") to be developed by the parties on the EPT Property. The term of the MDA commenced on the Effective Date and shall expire on the earlier of (i) the earliest date on which the Casino Project, the Golf Course Project and the Initial Resort Project (as such terms are defined below and in the MDA) are all open to the general public for business and (ii) sooner termination pursuant to the terms of the MDA. The parties also agreed to continue to cooperate in good faith on the on-going development plans and have agreed to share certain expenses related to the master planning work and common infrastructure work.

The parties envision MRMI developing a comprehensive resort destination that includes a VGM casino and a harness racetrack and may also include one or more hotels, food and beverage outlets, a spa facility, retail venues, space for conferences, meetings, entertainment and special events in a multi-purpose conference space supported by separate meeting rooms and parking facilities (the “Casino Project”). In addition to the Casino Project, the Project is expected to include a golf course and a resort including a variety of amenities.

In accordance with the terms of the MDA, MRMI is responsible for the development and construction of the Casino Project. MRMI shall then be responsible for maintaining and operating the Casino Project in accordance with the operating standards contained in the Casino Lease (as defined below), to be entered into by and between EPT and MRMI prior to the commencement of construction on the Casino Project. MRMI and EPT agreed to cooperate to consult appropriate governmental authorities as to the steps necessary to obtain authorization to relocate the gaming licenses currently used to operate the Monticello Casino and Raceway to the Casino Project such that, upon its substantial completion, MRMI shall be entitled to obtain any required gaming license to operate the Casino Project without the need for any further discretionary action by applicable governmental authorities. The development of the Project, including the Casino Project, is contingent upon various conditions, including obtaining necessary governmental approval, as fully set forth in the MDA, and the Company's ability to obtain necessary financing.

In addition, the parties have agreed that the Project will include an aggregate total “qualified capital investment” of $600 million on the development of the Project in accordance with statutory guidelines that provide favorable tax rate/NYL commission rates if such condition, among others, is met, the compliance with which the parties agree is essential to the success and viability of the Project and the Casino Project. MRMI has agreed to invest a minimum of $300 million in the development and construction of the Casino Project towards such statutory conditions.

On December 21, 2011 (the “Option Effective Date”), MRMI entered into an option agreement with EPT, which was last amended by a letter agreement on August 30, 2013, between EPT and MRMI (the "Letter Agreement" and with the option agreement as amended, the “Option Agreement”). Pursuant to the Option Agreement, EPT granted us a sole and exclusive option (the “Option”) to lease certain portions of the EPT Property pursuant to the terms of a lease negotiated between the parties (the "Casino Lease"). Our rights and obligations pursuant to the Option Agreement are subject to certain existing EPT agreements.

Pursuant to the Option Agreement, the date by which the parties must execute the Casino Lease is initially extended to November 30, 2013 (such date, the “Option Exercise Period End Date”). Such date may be further extended depending on certain specified triggers relating to whether or not a proposed amendment to the New York State Constitution authorizing up to seven non-tribal casinos at locations to be determined by the Legislature (the “Constitutional Amendment”) is approved by voters in a referendum scheduled for November 5, 2013 (such extended date, the “Final Option Exercise Outside Date”).

enter into an agreement to develop a non-tribal casino with someone other than MRMI (each a “Trigger Event”). If a Trigger Event occurs, EPT may, in its sole discretion, extend the Final Option Exercise Outside Date by a maximum of 90 days and, before the Final Option Exercise Outside Date, waive such Trigger Event in writing (in which case the Option Agreement would continue as if such Trigger Event had not occurred).

If the Constitutional Amendment is approved but a Trigger Event has not occurred as of the end of the First Extended Option Exercise Period, (i) MRMI may extend the Option Exercise Period End Date by up to an additional twelve months (the “Second Extended Option Exercise Period”) from November 30, 2014 to November 30, 2015 by making monthly Option Payments at a higher amount. If the Constitutional Amendment is approved but a Trigger Event has not occurred as of the end of the Second Extended Option Exercise Period, MRMI may extend the Option Exercise Period End Date on a monthly basis until the occurrence of a Trigger Event by making monthly Option Payments at an even higher amount. If MRMI exercises the Option and the Casino Lease for the EPT Property is executed between the Parties, any additional amounts paid by MRMI as Option Payments shall constitute prepaid rent and shall be applied against amounts due to EPT as rent under the Casino Lease. Moreover, until the date EPT obtains a Second Tenant Commitment (as defined and discussed below), fifty percent of all payments received by EPT as Option Payments shall be refundable in the event the Option Agreement is terminated.

If the Constitutional Amendment is not approved, MRMI may extend the Option Exercise Period End Date to May 30, 2014 by making monthly Option Payments. If MRMI has not provided EPT with reasonable comfort by May 30, 2014 that MRMI is reasonably likely to obtain the financing necessary to build a proposed casino project at the EPT Property within 90 days, then the Final Option Exercise Outside Date shall not be extended and the Option Agreement and all other agreements shall terminate.

If a Trigger Event occurs, EPT shall have the immediate right to discuss or negotiate with any other entity with respect to developing a casino or seeking a gaming license regarding the EPT Property and, if MRMI has not exercised the Option by the applicable Final Option Exercise Outside Date, EPT shall have the immediate right to enter into an agreement with another entity to develop a casino or seek a gaming license with respect to the EPT Property.

Pursuant to the Letter Agreement, EPT granted to MRMI the option to purchase the EPT Property together with the other property owned by EPT at the site of the former Concord Resort, which option is exercisable upon the occurrence of a Trigger Event or any time between May 1, 2015 and June 30, 2015, at book value as of the date of the Letter Agreement plus capitalized expenses incurred by EPT after the date of the Letter Agreement through the purchase date and related to the development of the property.

The extensions of the Option Exercise Period End Date and the Final Option Exercise Outside Date pursuant to the Letter Agreement are subject to and on the following terms and conditions:


1.	On the date EPT’s Board of Directors provides an irrevocable notice to proceed with the development of the EPT Property in accordance with the terms of the Master Development Agreement, executed by the parties on December 14, 2012, all payments made by MRMI to EPT pursuant to the Option Agreement to date, which total $1,222,603, shall become non-refundable.


2.	EPT will make good faith, commercially reasonable efforts to enter into an agreement with a second tenant for the project at the EPT property by November 1, 2013 (a “Second Tenant Commitment”). In connection with the receipt of a Second Tenant Commitment, MRMI agreed to reimburse certain out-of-pocket costs and expenses incurred by such tenant, subject to a cap.


3.	The Parties will make good faith efforts to execute the Master Declaration by October 31, 2013.

During the term of the Letter Agreement and other agreements of the Parties, MRMI will make good faith efforts to maintain its license to operate a VGM facility or to pursue a casino license if the Constitutional Amendment is approved. If the Constitutional Amendment is approved and MRMI fails to diligently pursue a casino license, MRMI shall notify EPT and the Final Option Exercise Outside Date shall be 60 days following the receipt of such notice by EPT.

tribal casino in its defined region under the Upstate New York State Gaming Economic Development Act anywhere other than at the EPT Property or building or operating a VGM facility anywhere other than at MRMI’s existing site or at the EPT Property for a period of five years following the termination of the Option Agreement.

In connection with the Option Agreement, we paid EPT an option payment in the amount of $750,000 on December 21, 2011 and on March 8, 2013, MRMI paid EPT a pro-rated option payment in the amount of $472,603. On September 18, 2013, EPT’s Board of Directors provided an irrevocable notice to proceed with the development of the EPT Property in accordance with the terms of the MDA. MRMI provided EPT with a certificate of the MRMI Board of Directors which waives MRMI's right to terminate the MDA (as set forth above). Therefore, all payments made by MRMI to EPT pursuant to the Option Agreement to date, which total $1,222,603, have become non-refundable. As of September 30, 2013 approximately $815,000 of the $1,222,603 has been expensed.

In the process of obtaining necessary governmental approval, on March 8, 2012, EPT and MRMI presented an overview of the master plan for redevelopment of the EPT Property to the Town of Thompson Town Board ("Town Board") and formally submitted the proposed redevelopment plan to the Town of Thompson for an assessment of its environmental impact as prescribed by the State Environmental Quality Review provisions of the New York Environmental Conservation Law ("SEQR"). The SEQR hearing was held on August 28, 2012. The SEQR process was continued by the Town Board on January 2, 2013, when the Town Board accepted a Final Environmental Impact Statement for the entire development project, including Phase I, namely, the Casino Project. On January 15, 2013, the Town Board, as Lead Agency, issued an Environmental Findings Statement for the entire development project and held public hearings on the proposed zoning amendments to the Planned Resort Development provisions of the zoning law of the Town of Thompson and regarding a new Comprehensive Development Plan ("CDP") for the entire project site. After the close of the public hearings, the Town Board unanimously approved the zoning amendments and also approved the CDP for the entire site. On February 13, 2013, EPT and MRMI filed a site plan application for Phase I and a subdivision application for the EPT Property with the Town of Thompson Planning Board ("Planning Board") and the Planning Board conducted an informal review of those applications with representatives of EPT and MRMI. The site plan application describes the facilities that will be developed during Phase I. On March 13, 2013, there was a joint public hearing before the Planning Board on the site plan application for Phase I and the subdivision application. On April 10, 2013, the Planning Board granted preliminary site plan approval for Phase I and preliminary subdivision approval for the EPT Property. On July 10, 2013 the Planning Board granted final site plan approval for Phase I. MRMI will be required to submit detailed construction plans to the Town, and receive other regulatory approvals, including approvals from the U.S. Army Corps of Engineers and the New York State departments of Environmental Conservation, Transportation, and Health, prior to the commencement of construction.

On March 19, 2013, the County of Sullivan Industrial Development Agency (“IDA”) approved a Resolution (1) taking official action authorizing the issuance of revenue bonds to enable MRMI to use the industrial development revenue bonds for the financing of the Casino Project; (2) describing the forms of financial assistance being contemplated by the IDA to include: (i) an exemption from New York State (“State”) and local sales and use taxes with respect to certain items used in, or for the acquisition, construction and equipping of, the Casino Project, estimated to be $15 million, (ii) the grant of one or more Mortgage liens on IDA's interest in the Casino Project to secure the bonds and/or any other indebtedness incurred by or for the benefit of MRMI in connection with the Casino Project, which Mortgages would be exempt from all mortgage recording taxes imposed in the State, estimated to be $1.1 million, and (iii) a partial (or full) real property tax abatement, estimated to be $126 million over sixteen (16) years; and (3) appointing MRMI as IDA's agent to undertake the Casino Project. Fees for the utilization of the bonds and other financial assistance would be paid by MRMI to the IDA.

On May 5, 2011, Concord Associates, L.P. (“Concord”) announced that it has agreed to terms with the Mohegan Tribal Gaming Authority (“MTGA”) to develop a new gaming and racing facility on its 116 acre site adjacent to the EPT Property. On May 6, 2011, Empire issued a press release announcing that neither Concord nor MTGA have valid New York State licenses to operate a harness racetrack or VGMs in Sullivan County, prerequisites to the operation of VGMs at the proposed development. As such, the Company cannot predict the outcome of its efforts to implement its plan to develop jointly with EPT the EPT Property.

Note B. Summary of Significant Accounting Policies

Revenue recognition and Promotional allowances

Gaming revenue is the net difference between gaming wagers and payouts for prizes from VGMs, non-subsidized free play and accruals related to the anticipated payout of progressive jackpots. Progressive jackpots contain base jackpots that increase at a progressive rate based on the credits played and are charged to revenue as the amount of the jackpots increase. The Company recognizes gaming revenues before deductions of such related expenses as NYL’s share of VGM revenue and the Monticello Harness Horsemen’s Association and Agriculture and New York State Horse Breeding Development Fund’s contractually required percentages.

Food, beverage, racing and other revenue, includes food and beverage sales, racing revenue earned from pari-mutuel wagering on live harness racing and simulcast signals to and from other tracks and miscellaneous income. The Company recognizes racing revenues before deductions of such related expenses as purses, stakes and awards. The statutory elements of the racing revenues from Off-Track Betting Corporations are recognized as collected, due to uncertainty of receipt of and timing of payments.

Net revenues are recognized net of certain sales incentives in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Certification (“ASC”) 605-50, “Revenue Recognition—Customer Payments and Incentives”.

The retail value of complimentary food, beverage and other items provided to the Company’s guests is included in gross revenues and then deducted as promotional allowances. The estimated cost of providing such food, beverage and other items as promotional allowances is included in food, beverage, racing and other expense. In addition, promotional allowances include non-subsidized free play offered to the Company’s guests based on their relative gaming worth and prizes included in certain promotional marketing programs.

The retail value amounts included in promotional allowances for the three and nine months ended September 30, 2013 and 2012 are as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(in thousands)
Food and beverage	$	537	$	393	$	1,370	$	1,133
Non-subsidized free play	1,072		407		2,045		657
Players club awards	114		169		432		409
Total retail value of promotional allowances	$	1,723	$	969	$	3,847	$	2,199

The estimated cost of providing complimentary food, beverages and other items for the three and nine months ended September 30, 2013 and 2012 are as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(in thousands)
Food and beverage	$	570	$	382	$	1,583	$	1,138
Non-subsidized free play	633		240		1,207		388
Players club awards	114		169		432		409
Total cost of promotional allowances	$	1,317	$	791	$	3,222	$	1,935

Accounts receivable

Accounts receivable, net of allowances, are stated as the amount the Company expects to collect. When required, an allowance for doubtful accounts is recorded based on information on the collectability of specific accounts. Accounts are considered past due or delinquent based on contractual terms, how recently payments have been received and the Company’s judgment of collectability. In the normal course of business, the Company settles wagers for other racetracks and is exposed to credit risk. These wagers are included in accounts receivable. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of September 30, 2013 and

December 31, 2012, the Company recorded an allowance for doubtful accounts of approximately $201,000 and $202,000 respectively.

Earnings (loss) per common share

The Company computes basic earnings (loss) per share by dividing net income (loss) applicable to common shares by the weighted-average common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution of earnings that could occur if securities or contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings (loss) of the entity. Since the effect of common stock equivalents is anti-dilutive with respect to losses, these common stock equivalents have been excluded from the Company’s computation of loss per common share. Therefore, basic and diluted loss per common share for all periods presented in accompanying statement of operations.

The following table shows the approximate number of common stock equivalents outstanding at September 30, 2013 and 2012 that could potentially dilute basic earnings per share in the future.



	Outstanding as of September 30,
	2013	2012
Options	2,171,000	2,077,000
Warrants	1,083,000	1,083,000
Option matching rights	1,224,000	1,276,000
Restricted stock	50,000	170,000
Shares to be issued upon conversion of convertible debt	6,575,000	6,575,000
Total	11,103,000	11,181,000

Fair value

The Company follows the provisions of ASC 820, “Fair Value Measurement,” issued by the FASB for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value, requires certain disclosures and discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The Company chose not to elect the fair value option as prescribed by FASB, for its financial assets and liabilities that had not been previously carried at fair value. The Company’s financial instruments are comprised of current assets, current liabilities and a long-term loan, related party. Current assets and current liabilities approximate fair value due to their short-term nature. As of September 30, 2013, the Company’s management was unable to reasonably estimate the fair value of the long-term loan, related party due to the inability to obtain quotes for similar credit facilities.

Estimates and assumptions

The preparation of financial statements in conformity with GAAP requires 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 may differ from estimates.

Recent accounting pronouncements

The Company does not believe that any recently issued, but not effective, accounting standards, if currently adopted, will have a material effect on its consolidated financial position, results of operations, or cash flows.

Note C. Project Development Costs

On December 21, 2011 (the “Option Effective Date”), MRMI entered into an option agreement with EPT, which was last amended by a letter agreement on August 30, 2013, between EPT and MRMI (as amended, the “Option Agreement”). Pursuant to the Option Agreement, EPT granted us a sole and exclusive option (the “Option”) to lease certain portions of the EPT Property pursuant to the terms of a lease negotiated between the parties. Our rights and obligations pursuant to the Option Agreement are subject to certain existing EPT agreements.

In connection with the Option Agreement, MRMI paid EPT an option payment in the amount of $750,000 on December 21, 2011 and on March 8, 2013, MRMI paid EPT a pro-rated option payment in the amount of $472,603. On September 18, 2013, EPT’s Board of Directors provided an irrevocable notice to proceed with the development of the EPT

Property in accordance with the terms of the MDA. Therefore, all payments made by MRMI to EPT pursuant to the Option Agreement to date, which total $1,222,603, have become non-refundable. As of September 30, 2013 approximately $815,000 of the $1,222,603 has been expensed.

In addition to the Option Payment, project development costs included other direct costs incurred by the Company in consummating the Option Agreement and related lease. At September 30, 2013 and December 31, 2012, project development costs totaled approximately $15.7 million and $11.5 million respectively.

Note D. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are comprised of the following:




	September 30, 2013		December 31, 2012
	(in thousands)
Liability for horseracing purses	$	1,251	$	950
Accrued payroll	1,373		1,143
Accrued redeemable points	403		392
Liability to NYL	1,029		404
Liability for local progressive jackpot	764		556
Accrued professional fees	2,023		3,172
Series E preferred stock - accrued dividend payable	1,291		—
Accrued other	1,021		788
Total accrued expenses and other current liabilities	$	9,155	$	7,405

The amount shown for Series E preferred stock - accrued dividend payable represents the amount of dividends due to a Series E shareholder at December 31, 2013 as a result of a settlement agreement.

Note E. Long-Term Loan, Related Party

On November 17, 2010, Empire entered into a loan agreement (the "Loan Agreement") with Kien Huat Realty III Limited ("Kien Huat"), our largest shareholder, which was represented by a convertible promissory note (the "Note") in the principal amount of $35 million and which had an interest rate of 5%. The Company paid down the principal of the note in the amount of approximately $17.6 million from the proceeds of the rights offering the Company consummated in May 2011. The maturity date for the Note was May 17, 2013.

On August 8, 2012, the Company and Kien Huat entered into Amendment No. 1 (the “Amendment”) to the Loan Agreement. Pursuant to the Amendment, the maturity date of the loan made pursuant to the Loan Agreement (the “Loan”) was extended from May 17, 2013 to December 31, 2014. In consideration of the extension of the maturity date of the Loan, effective as of the Amendment Date, the rate of interest was amended to be 7.5% per annum in place of 5% per annum. In addition, the Company agreed to pay Kien Huat upon execution a one-time fee of $174,261, or 1% of the outstanding principal amount of the Loan as of the date of the Amendment. Except for these amendments, the Loan Agreement remains unchanged and in full force and effect.

Note F. Bryanston Settlement Agreement

Effective as of June 30, 2013 (the “Closing Date”), the Company, Kien Huat, Colin Au Fook Yew (“Au”) and Joseph D'Amato (“D'Amato” and, together with the Company, Kien Huat and Au, the “Company Parties”) consummated the closing of a Settlement Agreement and Release (the “Settlement Agreement”) with Stanley Stephen Tollman (“Tollman”) and Bryanston Group, Inc. (“Bryanston Group” and, together with Tollman, the “Bryanston Parties”) (See also Note I Commitments and Contingencies Legal Proceedings). Pursuant to the Settlement Agreement, the Company Parties and the Bryanston Parties agreed to the settlement of certain claims relating to shares of Series E Preferred Stock of the Company (the “Preferred Stock”) held by the Bryanston Parties and that certain Recapitalization Agreement, dated December 10, 2002, by and between, among others, the Bryanston Parties and a predecessor to the Company (the “Recapitalization Agreement”), pursuant to which the Bryanston Parties acquired the Preferred Stock. On the Closing Date, the Recapitalization Agreement terminated and ceased to have any further force and effect as between the Bryanston Parties and the Company.

In consideration for the mutual release of all claims, Empire shall redeem, purchase and acquire the Preferred Stock from the Bryanston Parties in accordance with the following timeline and payment schedule and based upon the closing by the Company of third party financing in an aggregate amount sufficient to enable the Company to complete the construction of its Casino Project (the “Concord Event”).

On June 30, 2013 all Preferred Stock held by Tollman was redeemed for approximately $1.5 million.

On the earlier to occur of the Concord Event and January 1, 2014, a payment of all dividends accrued and unpaid since December 10, 2002 (the “Accrued Dividends”), approximately $1.3 million, on Tollman's Preferred Stock from funds legally available to the Company to effect such payment are due. This amount is reflected as a current liability as of September 30, 2013.

If the Concord Event occurs on or before December 31, 2013, all Preferred Stock and Accrued Dividends held by Bryanston will be redeemed at $22.8 million from funds legally available to the Company to effect such payment are due.

If the Concord Event occurs after December 31, 2013 and on or before June 30, 2014, all Preferred Stock and Accrued Dividends held by Bryanston redeemed for an amount between $22.8 million and $28.0 million from funds legally available to the Company to effect such payment pro-rated based upon the actual number of days after December 31, 2013 the date that the Preferred Stock is redeemed.

If the Concord Event occurs after June 30, 2014 and on or before December 31, 2014, all Preferred Stock held by Bryanston redeemed for an amount between $28.0 million and the $10 Liquidation Value of the Preferred Stock (as such term is defined in the Recapitalization Agreement) and all Accrued Dividends as of December 31, 2014 from funds legally available to the Company to effect such payment prorated based upon the actual number of days after December 31, 2013 the date that the Preferred Stock is redeemed.

If the Concord Event does not occur before December 31, 2014, the Annual Dividend for calendar year 2014 shall be paid to Bryanston in the amount of approximately $1.2 million prior to the thirtieth (30th) day following December 31, 2014 from funds legally available to the Company to effect such payment.

If the Concord Event occurs after December 31, 2014 and on or before June 30, 2015, all Preferred Stock held by Bryanston shall be redeemed for an amount equal to the Liquidation Value and Accrued Dividends as of the date of the Concord Event from funds legally available to the Company to effect such payment.

If the Concord Event does not occur by June 30, 2015, 150,000 shares of Bryanston's Preferred Stock shall be redeemed on June 30, 2016 for $1.5 million. An additional 150,000 shares of Preferred Stock shall be redeemed for $1.5 million on each June 30 for the next three years from funds legally available to the Company to effect such payment. The balance of the Preferred Stock shall be redeemed in an amount equal to the Liquidation Value and Accrued Dividends on June 30, 2020 from funds legally available to the Company to effect such payment.

As a result of the Settlement Agreement, and pursuant to ASC 480, the Series E Preferred Stock became contractually redeemable subject to the terms and conditions of the Settlement Agreement and has been classified as a liability on the accompanying balance sheet. The amount of the liability of $22.8 million is the amount at which it would be settled if the redemption occurred as of the balance sheet date. The difference between the carrying amount and the amount recorded in the balance sheet at September 30, 2013 pursuant to the Settlement Agreement has been reflected as a deemed dividend during the nine months ended September 30, 2013.

Note G. Stockholders’ Equity

Stock-based compensation expense was approximately $65,000 and $155,000 for the three months ended September 30, 2013 and 2012, respectively and approximately $215,000 and $506,000 for the nine months ended September 30, 2013 and 2012, respectively. As of September 30, 2013, there was approximately $38,000 of total unrecognized compensation cost related to non-vested share-based compensation awards granted under Empire’s plans. That cost is expected to be recognized over the remaining vesting period of less than one year. This expected cost does not include the impact of any future stock-based compensation awards.

On February 12, 2013, Empire's Board of Directors (the "Board") authorized the issuance of 75,530 shares of our common stock in payment of dividends due for the year ended December 31, 2012 on our Series B Preferred Stock. The recorded value of these shares was approximately $167,000.

On April 30, 2013, Empire commenced its April 2013 Rights Offering which expired on May 30, 2013. At the completion of the April 2013 Rights Offering, the Company issued a total of 6,032,153 shares of common stock and raised approximately $11.4 million in gross proceeds.

The Company has used the net proceeds of the April 2013 Rights Offering, which was approximately $11.2 million following the deduction of expenses relating to the April 2013 Rights Offering, to fund the expenses of the Company’s Casino Project, which includes permitting, infrastructure and shared master planning costs and expenses, and for general working capital purposes.

Note H. Concentration

The Company has two debtors, before Accounts Receivable allowances, that consist of Western OTB and Suffolk OTB which represented 18% and 17%, respectively, of the total outstanding accounts receivables as of September 30, 2013. The Company had two debtors, before Accounts Receivable allowances, that consisted of Hawthorne OTB and Suffolk OTB which represented 19% and 15%, respectively, of the total outstanding accounts receivable as of December 31, 2012. On May 11, 2012, Suffolk OTB filed a Chapter 9 Bankruptcy Petition but continues to pay commissions to the Company on a current basis.

Note I. Commitments and Contingencies

Legal Proceedings

Bryanston Group v. Empire Resorts, Inc. and Bryanston Group v. Kien Huat Realty III, Limited

Effective as of June 30, 2013 (the “Closing Date”), the Company Parties consummated the closing of a Settlement Agreement and Release (the “Settlement Agreement”) with the Bryanston Parties relating to the actions entitled Bryanston Group v. Empire Resorts, Inc. pending in the New York Supreme Count (the "New York Court Proceeding") and Bryanston Group v. Kien Huat Realty III, Limited pending in the United States District Court for the Southern District of New York (the "Federal Court Proceeding"). Pursuant to the Settlement Agreement, the Company Parties and the Bryanston Parties agreed to the settlement of claims relating to shares of Series E Preferred Stock of the Company (the “Preferred Stock”) held by the Bryanston Parties and that certain Recapitalization Agreement, dated December 10, 2002, by and between, among others, the Bryanston Parties and a predecessor to the Company (the “Recapitalization Agreement”), pursuant to which the Bryanston Parties acquired the Preferred Stock. On the Closing Date, the Recapitalization Agreement terminated and ceased to have any further force and effect as between the Bryanston Parties and the Company.

In consideration for the mutual release of all claims, Empire agreed to redeem, purchase and acquire the Preferred Stock from the Bryanston Parties in accordance with an agreed upon timeline and payment schedule (as set forth in Part II, Item 1, Legal Proceedings) and based upon the closing by the Company of third party financing in an aggregate amount sufficient to enable the Company to complete the construction of the Casino Project.

As conditions to closing, (i) Bryanston Group delivered a voting proxy on the Preferred Stock they hold to designated officers of the Company, pursuant to which those officers have agreed not to vote the shares; (ii) the parties executed joint stipulations and orders dismissing the New York Court Proceeding and the Federal Court Proceeding and extinguishing all claims of the Bryanston Parties that have been or could have been asserted against the Company Parties or any affiliated persons; (iii) the Board of Directors of Bryanston Group approved the Settlement Agreement and the transactions contemplated thereby before June 30, 2013; and (iv) the Settlement Agreement was reviewed by the NYSGC. The Federal Court Proceeding was dismissed on June 28, 2013 and the New York Court Proceeding was dismissed on June 26, 2013.

The parties further agreed that, in the event of a voluntary or involuntary liquidation, dissolution or winding-up of the Company, Bryanston’s Preferred Stock would retain all rights, rank and priority as enumerated in the Certificate of Designations, Powers, Preferences and Rights of the Series E Preferred Stock. In the event the Company fails to make a payment due and owing to the Bryanston Parties from funds legally available to effect such payment, the Company shall have 45 days to cure such default. If such default is not cured within 45 days, the Company will be obligated to redeem the balance of the Preferred Stock held by Bryanston at the Liquidation Value and Accrued Dividends from funds legally available to effect such payment.

Monticello Raceway Management, Inc. v. Concord Associates L.P.

be developed by Concord at the site of the former Concord Hotel and former Concord Resort or July 31, 2011, we were to continue to pay to the Monticello Harness Horsemen’s Association, Inc. 8.75% of the net win from VGM activities at Monticello Casino and Raceway, and Concord was to pay the difference, if any, between $5 million per year and 8.75% of the net win from VGM activities (“VGM Shortfall”) during such period. As of December 31, 2010, we believe Concord owed us approximately $300,000 for the VGM Shortfall. Concord contested its responsibility to make such VGM Shortfall payments to us. Both parties filed appeals. On March 28, 2013, the Appellate Court ordered the reversal of the denial of our summary judgment and awarded our cross motion to the extent of awarding partial summary judgment on the issue of liability on the breach of contract cause of action. A trial date on the the issue of our damages has been set for December 11, 2013.

Concord Associates, L.P. v. Entertainment Properties Trust

On September 18, 2013, the United States District Court for the Southern District of New York (“SDNY”) granted Motions to Dismiss filed by us and all other defendants. This lawsuit was filed in March 2012, by Concord and various affiliates in the United States District Court for the Southern District of New York ("SDNY") and asserted in an amended complaint various federal antitrust claims against us, EPR, EPT, Genting NY LLC and Kien Huat. The lawsuit arises out of our exclusivity agreement and option agreement with EPT to develop the site of the EPT Property located in Sullivan County, New York. Concord brought federal antitrust claims alleging conspiracy in restraint of trade, conspiracy to monopolize and monopolization. Concord also brought state law claims for tortious interference with contract and business relations. Concord sought damages in an amount to be determined at trial but not less than subject to automatic trebling under federal antitrust laws), unspecified punitive damages and permanent injunctive relief. In its decision, the SDNY dismissed Concord’s federal antitrust claims with prejudice and dismissed Concord's state law claims without prejudice. On October 2, 2013, Concord filed a Motion for Reconsideration and on October 18, 2013, Concord filed a Notice of Appeal. On October 22, 2013, the United States Court of Appeals for the Second Circuit issued a Notice of Stay of Appeal pending the outcome of the Motion for Reconsideration. We believe this lawsuit is without merit and we will aggressively defend our interests.

Concord Associates, L.P. v. Town of Thompson

On October 2, 2013, the New York Supreme Court in Sullivan County (the “Court”) denied in its entirety the Article 78 petition (the “Petition”) filed by Concord on or about May 14, 2013. The Petition named the Town of Thompson and its Town Board and Planning Board, and EPT as respondents. The proceeding challenged the actions and determinations made by the Town Board and the Planning Board regarding the Project in Sullivan County. On or about October 30, 2013, Concord filed a Notice of Appeal. We believe this proceeding is without merit and we will aggressively protect our interests.

Other Proceedings

We are a party from time to time to various other legal actions that arise in the normal course of business. In the opinion of management, the resolution of these other matters will not have a material and adverse effect on our consolidated financial position, results of operations or cash flows.

Note J. Subsequent Events

There are no subsequent events other than those which have been disclosed above.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Management’s Discussion and Analysis of the Financial Condition and Results of Operations should be read together with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Condensed Consolidated Financial Statements and related notes thereto in Empire Resorts, Inc. (“Empire”) and subsidiaries’ (the “Company”, “us”, “our”, or “we”) Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally relate to our strategies, plans and objectives for future operations and are based upon management’s current plans and beliefs or estimates of future results or trends. Forward-looking statements also involve risks and uncertainties, including, but not restricted to, the risks and uncertainties described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict.

You should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we will not update these forward-looking statements, even if our situation changes in the future. We caution the reader that a number of important factors discussed herein, and in other reports filed with the Securities and Exchange Commission, could affect our actual results and cause actual results to differ materially from those discussed in forward-looking statements.

Overview

We were organized as a Delaware corporation on March 19, 1993, and since that time have served as a holding company for various subsidiaries engaged in the hospitality and gaming industries.

Through our wholly-owned subsidiary, Monticello Raceway Management, Inc. (“MRMI”), we currently own and operate Monticello Casino and Raceway, a 45,000 square foot video gaming machine (“VGM”) and harness horseracing facility located in Monticello, New York, 90 miles northwest of New York City. Monticello Casino and Raceway operates 1,110 VGMs which includes 20 electronic table game positions (“ETGs”). VGMs are similar to slot machines, but they are connected to a central system and report financial information to the central system. We also generate racing revenues through pari-mutuel wagering on the running of live harness horse races, the import simulcasting of harness and thoroughbred horse races from racetracks across the country and internationally, and the export simulcasting of our races to offsite pari-mutuel wagering facilities.

Regulation

At its meeting held on January 31, 2013, the New York State Racing and Wagering Board (“RWB”) approved the Company's racetrack and simulcast license applications for the 2013 calendar year. Generally, the annual license renewal process requires the RWB to review the financial responsibility, experience, character and general fitness of MRMI and its management. The tax law was amended on July 30, 2013, to provide that all current VGM licenses shall expire on June 30, 2014. All VGM renewal licenses shall be valid for a period of five (5) years and the New York State Gaming Commission ("NYSGC") may decline to renew licenses, after notice and an opportunity for a hearing, for certain violations of gaming laws or the failure of the licensee or its stockholders to be of the requisite good character or financial fitness.

On February 1, 2013, the NYSGC became effective. The NYSGC was formally created via Chapter 60 of the Laws of 2012 as part of the 2012/2013 Enacted State Budget. The legislation merged the RWB with the New York Lottery ("NYL") into the NYSGC which is a single state agency. The legislation that created the NYSGC provides that the Board of the NYSGC shall consist of seven members. As of November 4, 2013, four members have been appointed to the Board of the NYSGC. The NYSGC has the authority and responsibility to promulgate rules and regulations. The legislation specifies that all rules, regulations, acts, orders, determinations and decisions of the NYL and RWB shall continue as rules, regulations, acts, orders, determinations and decisions of the NYSGC until modified or abrogated by the NYSGC and all of the functions and powers and obligations and duties of the RWB and NYL were transferred to the NYSGC. Our VGM, harness horseracing and simulcast activities in the State of New York are overseen by the NYSGC.

We have joined with other VGM facility operators in New York State to form the New York Gaming Association, whose principal effort is to seek approval for passage of a constitutional amendment authorizing table games at the VGM facilities in New York, which would permit us to develop and operate a full-scale casino which would include slot machines and table game wagering and the extension of credit. Generally, a constitutional amendment must be approved by both houses of the New York State Legislature (“Legislature”), approved again by a newly elected Legislature, and approved by the voters at a general election, in which instance it becomes effective on the following January 1. On March 15, 2012, Governor Andrew Cuomo, Assembly Speaker Sheldon Silver and Senate Majority Leader Dean Skelos announced that a constitutional amendment authorizing up to seven non-tribal casinos at locations to be determined by the Legislature, was approved by the Legislature. On June 21, 2013, the newly elected Legislature passed the amendment. Therefore, there will be a general referendum on November 5, 2013. In October 2013, an Article 78 petition was filed in the New York State Supreme Court (the “Court”) against the Co-Chairs of the New York State Board of Elections (“SBOE”) seeking: (1) a declaration and determination that the SBOE’s dissemination of a ballot proposal and abstract for a proposed constitutional amendment to permit full-scale casino gaming violates the New York State Constitution and Election Law; and (2) an injunction restraining the SBOE from allowing the proposed amendment to be voted upon at the November 5, 2013 general election. On October 16, 2013, the Court granted SBOE’s motion to dismiss the petition. However, there can be no assurance given that an amendment to the New York State Constitution to permit full-scale casino gaming will be passed in a timely manner, or at all, or that, if such amendment were passed, we would be able to effectively develop and operate a full-scale casino.

On July 30, 2013, the Upstate New York Gaming Economic Development Act (“Gaming Act”) (as more fully discussed below) was enacted. Effective immediately, if any existing video lottery gaming licensee pays in excess of one

thousand dollars ($1,000.00) in support of or in opposition to the constitutional amendment regarding full-scale casino gaming, it must be reported to the NYSGC simultaneously with the SBOE filings, if any, with a copy of all communications. The NYSGC will post on its website all campaign receipt/expenditure reports received from the SBOE.

Pursuant to the Gaming Act, if the constitutional amendment is passed in the general voter referendum in November 2013, the Gaming Act would authorize the NYSGC to award up to four (4) upstate destination gaming resort licenses. Up to two (2) destination gaming resorts could be located in a region consisting of Columbia, Delaware, Dutchess, Greene, Orange, Sullivan and Ulster counties (“Hudson Valley-Catskill Area”). In accordance with the Gaming Act, a siting board selected by the NYSGC (the “Siting Board”) is charged with selecting applicants that are qualified to receive a destination gaming resorts license and determining the location of such destination gaming resorts. The NYSGC is not required to issue a license if the Siting Board determines that there are no qualified applicants in a specific region.

If the constitutional amendment is passed and the Company were to be awarded a destination gaming resort license by the NYSGC, the Gaming Act provides the tax rate on slot machines would be 39% and the tax rate on table games would be 10%. However, an applicant may agree to supplement the tax with a binding supplemental fee. The Gaming Act would impose a $500 annual fee on each slot machine and table game. In addition, the Gaming Act would require the Company to maintain the current horsemen and breeder payments and a racetrack location awarded a destination gaming resort license shall maintain the racing activity and race dates.

We are currently evaluating the Gaming Act and its effect on the Company. It is the opinion of management that if the constitutional amendment is passed, the Gaming Act may repeal a favorable tax rate/NYL commission available to the Casino Project (as defined below) and replaces it with the possibility of a NYL commission in addition to the existing NYL commission rate. Therefore, if the Company is not awarded a destination gaming resort license, and the Company were to continue its operations at Monticello Casino and Raceway, the Gaming Act provides that MRMI would receive its current NYL commission rate and would receive an additional commission from NYL based on a rate related to the effective tax rate on all gross gaming revenue at a destination gaming resort(s), if any, developed in the Hudson Valley-Catskill Area. If our current understanding is correct, if the constitutional amendment is passed and the Company develops and operates the Casino Project, the Casino Project would receive a commission from the NYL equal to that which is currently applicable to Monticello Casino and Raceway, plus an additional commission based on a rate related to the effective tax rate on all gross gaming revenue at a destination gaming resort(s), if any, developed in the Hudson Valley-Catskill Area.

The Company believes that if the favorable tax rate/NYL commission for the Casino Project has been repealed, such repeal was inadvertent and the Company has received clarification from legislative staff that the intent of the sponsor of the Gaming Act was to preserve the current provisions authorizing the favorable tax rate/NYL commission available to the Casino Project whether or not the referendum was approved. Further, the clarification states that the interpretation of the Gaming Act is that if the statutory guidelines are met (including an aggregate total “qualified capital investment” of $600 million) the favorable tax rate/NYL commission would be available to the Casino Project, “for a period of forty years”, notwithstanding that another facility might be sited in the region at a higher rate as stated elsewhere in the Gaming Act. Accordingly, we believe that if the favorable tax rate/NYL commission is available to the Casino Project, the provisions regarding the possibility of an additional NYL commission in the Gaming Act would not apply to the Casino Project. The Company is reviewing the Gaming Act and any necessary alternatives regarding the manner in which this may be resolved. However, no assurances can be made that the Company will receive a favorable outcome.

Development

EPT Concord II, LLC ("EPT"), a wholly owned subsidiary of Entertainment Properties Trust is the sole owner of 1,500 acres located at the site of the former Concord Resort (the “EPT Property”). On December 14, 2012 (the "Effective Date"), EPT and MRMI entered into a master development agreement (the “MDA”) to develop the EPT Property. The MDA defines and governs the overall relationship between EPT and MRMI with respect to the development, construction, operation, management and disposition of the integrated destination resort and community (the "Project") to be developed by the parties on the EPT Property. The term of the MDA commenced on the Effective Date and shall expire on the earlier of (i) the earliest date on which the Casino Project, the Golf Course Project and the Initial Resort Project (as such terms are defined below and in the MDA) are all open to the general public for business and (ii) sooner termination pursuant to the terms of the MDA. The parties also agreed to continue to cooperate in good faith on the on-going development plans and have agreed to share certain expenses related to the master planning work and common infrastructure work.

The parties envision us developing a comprehensive resort destination that includes a VGM casino and a harness racetrack and may also include one or more hotels, food and beverage outlets, a spa facility, retail venues, space for conferences, meetings, entertainment and special events in a multi-purpose conference space supported by separate meeting

rooms and parking facilities (the “Casino Project”). In addition to the Casino Project, the Project is expected to include a golf course and a resort including a variety of amenities.

In accordance with the terms of the MDA, we are responsible for the development and construction of the Casino Project. We shall then be responsible for maintaining and operating the Casino Project in accordance with the operating standards contained in the Casino Lease (as defined below), to be entered into by and between EPT and us prior to the commencement of construction on the Casino Project. We and EPT agreed to cooperate to consult appropriate governmental authorities as to the steps necessary to obtain authorization to relocate the gaming licenses currently used to operate the Monticello Casino and Raceway to the Casino Project such that, upon its substantial completion, we shall be entitled to obtain any required gaming license to operate the Casino Project without the need for any further discretionary action by applicable governmental authorities. The development of the Project, including the Casino Project, is contingent upon various conditions, including obtaining necessary governmental approval, as fully set forth in the MDA, and the Company's ability to obtain necessary financing.

In addition, the parties have agreed that the Project will include an aggregate total “qualified capital investment” of $600 million on the development of the Project in accordance with statutory guidelines, the compliance with which the parties agree is essential to the success and viability of the Project. We have agreed to invest a minimum of $300 million in the development and construction of the Casino Project.

On December 21, 2011 (the “Option Effective Date”), MRMI entered into an option agreement with EPT, which was last amended by a letter agreement on August 30, 2013, between EPT and us (the "Letter Agreement" and with the option agreement as amended, the “Option Agreement”). Pursuant to the Option Agreement, EPT granted us a sole and exclusive option (the “Option”) to lease certain portions of the EPT Property pursuant to the terms of a lease negotiated between the parties (the "Casino Lease"). Our rights and obligations pursuant to the Option Agreement are subject to certain existing EPT agreements.

If the Constitutional Amendment is approved, (i) MRMI may extend the Option Exercise Period End Date for up to twelve months (the “First Extended Option Exercise Period”) from November 30, 2013 to November 30, 2014 by making monthly option payments (each an “Option Payment”) and (ii) the Final Option Exercise Outside Date will be extended to a date that is 120 days from the earliest to occur of specified triggers relating to whether MRMI is chosen to receive a license to operate one of seven non-trial casinos authorized by the Constitutional Amendment or 60 days from when affiliates of MRMI enter into an agreement to develop a non-tribal casino with someone other than MRMI (each a “Trigger Event”). If a Trigger Event occurs, EPT may, in its sole discretion, extend the Final Option Exercise Outside Date by a maximum of 90 days and, before the Final Option Exercise Outside Date, waive such Trigger Event in writing (in which case the Option Agreement would continue as if such Trigger Event had not occurred).

The extensions of the Option Exercise Period End Date and the Final Option Exercise Outside Date pursuant to the Letter Agreement are subject to and on the following terms and conditions:


1.	On the date EPT’s Board of Directors provides an irrevocable notice to proceed with the development of the EPT Property in accordance with the terms of the Master Development Agreement, executed by the parties on December 14, 2012, all payments made by MRMI to EPT pursuant to the Option Agreement to date, which total $1,222,603, shall become non-refundable.


2.	EPT will make good faith, commercially reasonable efforts to enter into an agreement with a second tenant for the project at the EPT property by November 1, 2013 (a “Second Tenant Commitment”). In connection with the receipt of a Second Tenant Commitment, MRMI agreed to reimburse certain out-of-pocket costs and expenses incurred by such tenant, subject to a cap.


3.	The Parties will make good faith efforts to execute the Master Declaration by October 31, 2013.

On or prior to September 30, 2013, MRMI shall provide EPT a certificate of the MRMI Board of Directors which, in substance, waives MRMI’s right to terminate the MDA pursuant to Section 14.21 thereof and prohibits MRMI, unless the Option terminates due to the occurrence of a Trigger Event, so long as EPT has provided its notice to proceed, the Master Declaration has been executed and EPT is not in breach of the Option Agreement or any other agreements between the parties, from building or operating a full-scale non-tribal casino in its defined region under the Upstate New York State Gaming Economic Development Act anywhere other than at the EPT Property or building or operating a VGM facility anywhere other than at MRMI’s existing site or at the EPT Property for a period of five years following the termination of the Option Agreement.

In connection with the Option Agreement, we paid EPT an option payment in the amount of $750,000 on December 21, 2011, and on March 8, 2013, we paid EPT a pro-rated option payment in the amount of $472,603. On September 18, 2013, EPT’s Board of Directors provided an irrevocable notice to proceed with the development of the EPT Property in accordance with the terms of the MDA. MRMI provided EPT with a certificate of the MRMI Board of Directors which waives MRMI's right to terminate the MDA (as set forth above). Therefore, all payments made by MRMI to EPT pursuant to the Option Agreement to date, which total $1,222,603, have become non-refundable. As of September 30, 2013 approximately $815,000 of the $1,222,603 has been expensed.

In the process of obtaining necessary governmental approval, on March 8, 2012, EPT and we presented an overview of the master plan for redevelopment of the EPT Property to the Town of Thompson Town Board ("Town Board") and formally submitted the proposed redevelopment plan to the Town of Thompson for an assessment of its environmental impact as prescribed by the State Environmental Quality Review provisions of the New York Environmental Conservation Law ("SEQR"). The SEQR hearing was held on August 28, 2012. The SEQR process was continued by the Town Board on January 2, 2013, when the Town Board accepted a Final Environmental Impact Statement for the entire development project, including Phase I, namely, the Casino Project. On January 15, 2013, the Town Board, as Lead Agency, issued an Environmental Findings Statement for the entire development project and held public hearings on the proposed zoning amendments to the Planned

Resort Development provisions of the zoning law of the Town of Thompson and regarding a new Comprehensive Development Plan ("CDP") for the entire project site. After the close of the public hearings, the Town Board unanimously approved the zoning amendments and also approved the CDP for the entire site. On February 13, 2013, EPT and MRMI filed a site plan application for Phase I and a subdivision application for the EPT Property with the Town of Thompson Planning Board ("Planning Board") and the Planning Board conducted an informal review of those applications with representatives of EPT and us. The site plan application describes the facilities that will be developed during Phase I. On March 13, 2013, there was a joint public hearing before the Planning Board on the site plan application for Phase I and the subdivision application. On April 10, 2013, the Planning Board granted preliminary site plan approval for Phase I and preliminary subdivision approval for the EPT Property. On July 10, 2013, the Planning Board granted final site plan approval for Phase I. MRMI will be required to submit detailed construction plans to the Town, and receive other regulatory approvals, including approvals from the U.S. Army Corps of Engineers and the New York State departments of Environmental Conservation, Transportation, and Health prior to its ability to commence construction.

On March 19, 2013, the County of Sullivan Industrial Development Agency (“IDA”) approved a Resolution (1) taking official action authorizing the issuance of revenue bonds to enable MRMI to use the industrial development revenue bonds for the financing of the Casino Project; (2) describing the forms of financial assistance being contemplated by the IDA to include: (i) an exemption from New York State (“State”) and local sales and use taxes with respect to certain items used in, or for the acquisition, construction and equipping of, the Casino Project, estimated to be $15 million, (ii) the grant of one or more Mortgage liens on IDA's interest in the Casino Project to secure the bonds and/or any other indebtedness incurred by or for the benefit of us in connection with the Casino Project, which Mortgages would be exempt from all mortgage recording taxes imposed in the State, estimated to be $1.1 million, and (iii) a partial (or full) real property tax abatement, estimated to be $126 million over sixteen (16) years; and (3) appointing us as IDA's agent to undertake the Casino Project. Fees for the utilization of the bonds and other financial assistance would be paid by us to the IDA.

Competition

Our gaming operations are located in the Catskills region in the State of New York, which has historically been a resort area, although its popularity declined with the growth of destinations such as Atlantic City and Las Vegas. We are located approximately 90 miles northwest of New York City. There are approximately 17.5 million adults who live within 100 miles of the Catskills area, an area where average per capita income is approximately $35,000. Specifically, Monticello Casino and Raceway is directly adjacent to Highway 17, has highly visible signage and convenient access, and is less than 1,000 feet from the highway’s exit.

Generally, Monticello Casino and Raceway does not compete directly with other harness racing tracks in New York State for live racing patrons. However, Monticello Casino and Raceway does face intense competition for off-track and other legalized wagering at numerous gaming sites within the State of New York and the surrounding region. The inability to compete with larger purses for the races at Monticello Casino and Raceway and the limitation on other forms of legalized wagering that Monticello Casino and Raceway may offer has been a significant limitation on our ability to compete for off-track and other legalized wagering revenues.

In New York, we face competition for guests from Orange, Duchess and Ulster Counties in New York for our VGM operation from a VGM facility at Yonkers Raceway, located within the New York City metropolitan area. Yonkers Raceway has a harness horseracing facility, approximately 5,300 VGMs, food and beverage outlets and other amenities.

On July 30, 2013, Governor Cuomo signed into law the Gaming Act. The Gaming Act amends the racing, pari-mutuel wagering and breeding law, the penal law, the tax law and the state finance law in relation to full-scale gaming and adds a new article that provides the statutory framework for the regulation of full-scale casino gaming if the constitutional amendment to permit full-scale casino gaming is approved by the voters in New York on November 5, 2013. The Gaming Act also amends the executive law, state finance law, Indian law, tax law and the racing, pari-mutuel wagering and breeding law in relation to: authorizing the settlement of disputes between the Oneida Nation of New York, the state, Oneida county and Madison county; identifying nations and tribes; video lottery gaming; administration of certain funds and accounts related to the commercial gaming revenue fund; enacting the state operations budget, in relation to commercial gaming revenues; directing the NYSGC

to annually evaluate video lottery gaming; account wagering on simulcast horse races; and video lottery gaming vendor's fees. There are several different effective dates addressed in the Gaming Act.

Effective immediately are amendments to the penal law to add new definitions and gaming crimes and to address the operation of unlawful electronic sweepstakes. In addition, the Gaming Act immediately authorizes Nassau Off-Track Betting Corporation ("Nassau OTB") and Suffolk Regional Off-Track Betting Corporation ("Suffolk OTB") to file video lottery gaming license applications to establish one video lottery gaming facility each, at an Off-Track Betting site operated by Nassau OTB and Suffolk OTB respectively, with a maximum of one thousand (1,000) VGMs at each site.

Effective on January 1, 2014, the Gaming Act amends the racing, pari-mutuel wagering and breeding law in relation to account wagering. The Gaming Act addresses the requirements for account wagering licenses and sets licensing and wagering fees for out-of-state account wagering licensees. NYSGC began accepting account wagering license applications in October 2013.

If the constitutional amendment to permit full-scale casino gaming is approved by the voters in New York on November 5, 2013, effective on January 1, 2014, the Gaming Act will amend the racing, pari-mutuel wagering and breeding law, the tax law and the state finance law in relation to full-scale casino gaming. The Gaming Act authorizes the NYSGC to award up to four (4) upstate destination gaming resort licenses. Destination gaming resorts are authorized in three regions of the state: the Hudson Valley-Catskill Area; the Albany, Fulton, Montgomery, Rensselaer, Saratoga, Schenectady, Schoharie and Washington counties (“Capital District-Saratoga Area”); and the Broome, Chemung (east of State Route 14), Schuyler (east of State Route 14), Seneca, Tioga, Tompkins, and Wayne (east of State Route 14) counties (“Eastern Southern Tier”). If determined by the Siting Board, one region may have up to two casinos. The NYSGC is not required to issue a license in any region if the Siting Board determines that there are no qualified applicants in a specific region. No destination gaming resorts can be authorized in Westchester, Rockland, New York City or Long Island. There will be a seven (7) year exclusivity period, commencing with the awarding of the license, during which no further destination gaming resorts will be licensed by the NYSGC. If the Legislature authorizes additional destination gaming resort licenses within this period, licensees shall have the right to recover a pro-rata portion of the license fee paid. The NYSGC will appoint the members of the Siting Board which will determine the required minimum amount of capital expenditures, set the license fee required of a destination gaming resort applicant in each region and make the selections. There will be a one million dollar ($1,000,000.00) application fee. The Siting Board will evaluate destination gaming resort applications based on specific criteria which will be weighted as follows: 70 percent of the decision will be based on economic activity and business development factors, 20 percent will be based on local impact and 10 percent will be based on workforce factors. Additionally, local support for the destination gaming resort application must be demonstrated as a threshold application requirement. The duration of the initial licenses will be ten (10) years and the NYSGC will set the duration of, and fee for, renewal licenses. The NYSGC will oversee regulation of destination gaming resorts. The tax rate on slot machines will range from 37% to 45% depending on the region and the tax rate on table games will be 10%. The tax rate of existing video lottery gaming facilities within each region will remain at the existing NYL commission rates and will include an additional commission from NYL based on a rate related to the effective tax rate on all gross gaming revenue at the destination gaming resort(s), if any, developed in the region. Existing payments to the racing industry for purses and breeding will be maintained. The minimum gambling age for destination gaming resorts will be 21, and no smoking will be authorized. Destination gaming resorts will be required to develop comprehensive problem gambling programs, and part of the decision for siting a destination gaming resort will be determined by the quality of the applicant's problem gambling program. All destination gaming resorts will be required to have exclusion policies and self-exclusion programs. Applications must be issued by the Siting Board within 90 days of the appointment of a majority of the Siting Board by the NYSGC. The timing of submitting applications will be set by the Siting Board. As a condition of licensure, licensees are required to commence gaming operations no less than twenty-four months following the award of a license by the NYSGC. The Gaming Act authorizes a state gaming inspector general's position to prevent corruption at the NYSGC.

If the constitutional amendment to permit full-scale casino gaming is not approved by the voters in New York on November 5, 2013, the Gaming Act will amend the racing, pari-mutuel wagering and breeding law and the tax law to authorize one additional video lottery gaming facility in each of the Hudson Valley-Catskill area, the Capital District-Saratoga area, the Eastern Southern Tier and Nassau county. Existing payments to the racing industry for purses and breeding will be maintained.

To a lesser extent, Monticello Casino and Raceway faces competition from two casinos that are in Pennsylvania. Pennsylvania casinos may operate table games and slot machines and have the ability to grant credit to guests of the casino. Pennsylvania legalized the operation of up to 61,000 slot machines at 14 locations throughout the state. As of August 5, 2013, there were twelve casinos in operation within Pennsylvania, with six located at racetracks. One such racetrack facility is the Mohegan Sun at Pocono Downs, which has approximately 2,300 slot machines and 84 table games, including 18 poker tables. The Mohegan Sun at Pocono Downs in Wilkes-Barre, Pennsylvania, is approximately 70 miles southwest of Monticello. In addition, the Mount Airy Casino Resort has approximately 1,875 slot machines and 72 table games, including 10

poker tables, a hotel, spa and a golf course. The Mount Airy Casino Resort is located in Mount Pocono, Pennsylvania, approximately 60 miles southwest of Monticello. The Pennsylvania Gaming Control Board ("PGCB") is currently evaluating proposals from six applicants for an additional license in Philadelphia.

On April 22, 2013, a bill was introduced by the Pennsylvania House of Representatives to provide for the licensing and operation of Internet games as approved by the PGCB. The bill was referred to the House Committee on Gaming Oversight on April 22, 2013.

From time to time, New Jersey has reviewed options to place slot machines in various locations including the Meadowlands Racetrack located in Bergen County, New Jersey. Currently no slot machines or legalized full-scale casino gambling is permitted at the privately-operated Meadowlands Racetrack, and New Jersey Governor Chris Christie and Senate President Stephen Sweeney have stated publicly that they do not currently support permitting any form of gambling other than thoroughbred and harness related racing wagering at the Meadowlands Racetrack.

On November 8, 2011, the voters in New Jersey approved a constitutional amendment permitting the Legislature to authorize by law wagering, at casinos in Atlantic City and at current or former racetracks, on the results of professional, certain college, and amateur sport and athletic events. In January 2012, the New Jersey State Legislature approved a bill that would allow the state Casino Control Commission to issue licenses to casinos and racetracks to accept bets on some professional and collegiate events which was thereafter signed into law by Governor Christie. In October 2012, the final adoption of the regulations for sports wagering was published in the New Jersey Register enabling the New Jersey Division of Gaming Enforcement ("DGE") to begin accepting applications for racetracks and Atlantic City casinos to provide sports wagering. The National Collegiate Athletic Association and several professional sports leagues (collectively, “the Leagues”) filed a Complaint to prevent the implementation of New Jersey's sports wagering law. The Leagues filed a Motion for Summary Judgment and sought to enjoin the implementation of the sports wagering law. The State of New Jersey ("NJ") filed a Cross Motion for Summary Judgment and challenged the constitutionality of the Professional and Amateur Sports Protection Act (“PASPA”). The US District Judge filed an Order determining that PASPA is constitutional, granting the Leagues' Motion for Summary Judgment and a permanent injunction against the implementation of the sports wagering law and denying NJ's Cross Motion for Summary Judgment. NJ filed a Notice of Appeal in the US Court of Appeals for the Third Circuit and on September 17, 2013, the Court of Appeals upheld the District Court's ruling. The ability for racetracks and casinos to offer sports wagering, however, remains pending due to the existing federal ban on such wagering and the outcome of the appeal of the federal lawsuit.

On October 8, 2012, temporary regulations became effective which govern mobile gaming by patrons at Atlantic City casinos. Under New Jersey law, that means the use of iPads, smartphones and other wireless devices, in addition to devices issued by the casino. Mobile gaming will be permitted in any area located within the property boundaries of the casino hotel facility, including any recreation or swimming pool and excluding parking garages and parking areas.

On January 28, 2013, Governor Christie signed legislation that allows New Jersey racetrack customers to place bets on live or simulcast racing using their mobile devices, such as iPads and smartphones. The New Jersey Racing Commission will develop regulations to oversee mobile wagering. Racetrack patrons would set up accounts to place bets while they are on racetrack property. Outside the tracks, the mobile gambling devices would be inoperable. In addition to the Meadowlands Racetrack, there are three other horseracing tracks in New Jersey: Monmouth Park in Monmouth County; Freehold Raceway in Monmouth County; and Atlantic City Race Course in Atlantic County. Mobile gambling will allow racetrack patrons to bet on live or simulcast racing while they are on racetrack property, including the restaurants and outdoor areas, such as the paddock.

On February 25, 2013, Governor Christie signed legislation legalizing Internet gaming. The law authorizes the DGE to license, regulate, investigate and take any other action regarding all aspects of authorized games conducted through the Internet. All hardware, software, and other equipment that is involved with Internet gaming will be located in casino facilities in Atlantic City, NJ. Casino licensees must hold an Internet gaming permit in order to engage in Internet wagering activity. The law provides that wagers may be accepted from individuals who are not physically present in New Jersey if the DGE determines that such wagering is not inconsistent with federal law or the law of the jurisdiction, including any foreign nation, in which any such person is located. The law is effective, however it is inoperative until the DGE selects the date on which it becomes operative, which shall not be less than three (3) months, nor more than nine (9) months, after the date of enactment of the law. The authorization to conduct Internet gaming expires ten (10) years following the operative date established by the DGE. Proposed regulations and amendments to implement mobile and Internet gaming consistent with the enabling statutes were effective on October 21, 2013 with additional temporary regulations that were effective on October 28, 2013. The DGE has approved several Internet Gaming Permit Holders and expects casino licensees to begin internet gaming operations on November 21, 2013.

Results of Operations

The results of operations for three months ended September 30, 2013 and 2012 (unaudited) are summarized below:



	9/30/2013			9/30/2012			Variance			Percentage Variance
	(dollars in thousands)
Revenues:
Gaming	$	17,844		$	17,593		$	251		1	%
Food, beverage, racing and other	3,557			3,096			461			15	%
Gross revenues	21,401			20,689			712			3	%
Less: Promotional allowances	(1,723		)	(969		)	(754		)	(78	)%
Net revenues	19,678			19,720			(42		)	—	%
Costs and expenses:
Gaming	12,943			12,536			(407		)	(3	)%
Food, beverage, racing and other	2,940			2,744			(196		)	(7	)%
Selling, general and administrative	3,773			3,028			(745		)	(25	)%
Stock-based compensation	65			155			90			58	%
Depreciation	346			346			—			—	%
Total costs and expenses	20,067			18,809			(1,258		)	(7	)%
(Loss) income from operations	(389		)	911			(1,300		)	(143	)%
Amortization of deferred financing costs	(18		)	(12		)	(6		)	(50	)%
Interest expense	(336		)	(286		)	(50		)	(17	)%
Interest income	—			1			(1		)	(100	)%
(Loss) income before income taxes	(743		)	614			(1,357		)	(221	)%
Income tax provision	—			(10		)	10			(100	)%
Net (loss) income	$	(743	)	$	604		$	(1,347	)	(223	)%

Gaming revenue

Gaming revenue increased by $251,000 or 1% for the three months ended September 30, 2013, as compared to the three months ended September 30, 2012. As part of our marketing efforts, we substantially increased our non-subsidized free play which has increased our gross gaming revenue and promotional allowances. Our net gaming revenue declined approximately, $413,000 for the three months ended year over year. VGM hold percentage of 7.4% remained unchanged for the three months ended September 30, 2013 and 2012, respectively. The average daily win per unit increased slightly from $172.28 in 2012 to $174.74 in 2013 for the three months. In addition the handle increased approximately $4.2 million or 1.8%, for the three months end September 30, 2013 as compared to September 30, 2012 largely due to the increased free play. During the third quarter we expanded our marketing initiatives to increase frequency of guest visits and increase the percentage of rated play from our guests including guests with lower gaming budgets. Marketing programs are being implemented to refocus our efforts to attract mid and high level player segments.

Food, beverage, racing and other revenue

Food, beverage, racing and other revenue increased by $461,000 or 15%, for the three months ended September 30, 2013 as compared to the three months ended September 30, 2012. Food and beverage increased by $134,000 for the three months ended September 30, 2013 as compared to the three months ended September 30, 2012. Food revenue increased approximately $83,000 and beverage revenue increased approximately $51,000, both largely due to higher complimentary revenue from marketing promotions.. Racing revenue increased by $234,000 for the three months ended September 30, 2013 as compared to September 30, 2012 primarily due to higher Simulcasting revenue during the quarter. In addition, other revenue increased by $93,000 due to an insurance settlement related to damage incurred during Hurricane Sandy in October 2012.

Promotional allowances

Promotional allowances increased by $754,000 or 78%, for the three months ended September 30, 2013, as compared to the three months ended September 30, 2012. This was primarily due to an increase in non-subsidized free play of $665,000. This resulted in an increase in gross gaming revenue and promotional allowances. In addition, food and beverage comps increased by $129,000 and player club awards decreased by $40,000.

Gaming costs

Gaming costs increased by $407,000 or 3%, for the three months ended September 30, 2013, as compared to the three months ended September 30, 2012, due to higher New York Lottery ("NYL") and other commissions of $189,000, resulting from an increase in gaming revenue, including taxable free play, as compared to the same period in the prior year. Gaming wages increased by $85,000 and related benefit costs increased by $100,000 as compared to the same period in the prior year. The increase in benefits and tax costs are largely due to higher medical benefits. In addition, other gaming expenses increased $33,000 as compared to the same period in the prior year.

Food, beverage, racing and other costs

Food, beverage, racing and other costs increased approximately $196,000 or 7%, for the three months ended September 30, 2013, as compared to the three months ended September 30, 2012. Higher purses of $470,000 and wages and related costs of $18,000. These increases were off set by decreases in other costs of service of approximately $292,000. The increase in payroll and related costs is largely due to collective bargaining agreement costs for increased sick, vacation and holiday pay starting in 2013 and higher medical benefit costs.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $745,000 or 25%, for the three months ended September 30, 2013, as compared to the three months ended September 30, 2012, primarily due to higher other selling, general and administrative of $1,049,000. The majority of this pertains to the amortization of the EPR deposits in the amount of $815,000. The EPR Option payments are being amortized over three months and two months have been expensed in the third quarter. This increases was offset by decreases in marketing related expenses of $57,000 and legal and and professional fees related expenses of $247,000.

Stock-based compensation expense

Stock-based compensation expense decreased by $90,000 or 58%, primarily as a result of reduced number of options vesting and granted to directors and officers for the three months ended September 30, 2013 as compared to the three months ended September 30, 2012.

Interest expense

Interest expense increased $50,000 or 17%, for the three months ended September 30, 2013, as compared to the three months ended September 30, 2012. The interest on the loan agreement between the Company and Kien Huat that became effective per the Amendment to the Loan Agreement dated August 9, 2012 increased from 5% to 7.5%.

The results of operations for the nine months ended September 30, 2013 and 2012 (unaudited) are summarized below:



	9/30/2013			9/30/2012			Variance			Percentage Variance
	(dollars in thousands)
Revenues:
Gaming	$	49,440		$	48,634		$	806		2	%
Food, beverage, racing and other	9,837			9,426			411			4	%
Gross revenues	59,277			58,060			1,217			2	%
Less: Promotional allowances	(3,847		)	(2,199		)	(1,648		)	(75	)%
Net revenues	55,430			55,861			(431		)	(1	)%
Costs and expenses:
Gaming	36,175			35,082			(1,093		)	(3	)%
Food, beverage, racing and other	8,441			8,239			(202		)	(2	)%
Selling, general and administrative	10,827			9,131			(1,696		)	(19	)%
Stock-based compensation	215			506			291			58	%
Depreciation	1,018			1,036			18			2	%
Total costs and expenses	56,676			53,994			(2,682		)	(5	)%
(Loss) income from operations	(1,246		)	1,867			(3,113		)	(167	)%
Amortization of deferred financing costs	(54		)	(12		)	(42		)	(350	)%
Interest expense	(995		)	(729		)	(266		)	(36	)%
Interest income	—			4			(4		)	(100	)%
(Loss) income before income taxes	(2,295		)	1,130			(3,425		)	(303	)%
Income tax provision	—			(16		)	16			(100	)%
Net (loss) income	$	(2,295	)	$	1,114		$	(3,409	)	(306	)%

Gaming revenue

Gaming revenue increased by $806,000 or 2% for the nine months ended September 30, 2013, as compared to the months ended September 30, 2012. As part of our marketing efforts, we substantially increased our non-subsidized free play which has increased our gross gaming revenue and promotional allowances. Our net gaming revenue declined approximately, $581,000 for the nine months ended year over year. VGM hold percentage was 7.4% for the nine months ended September 30, 2013 versus 7.2% for the nine months ended 2012. The average daily win per unit increased from $160.49 for the nine months ended September 30, 2012 to $163.15 for the nine months ended September 30, 2013. These offset a slight handle decrease of approximately $1.1 million for the nine months end September 30, 2013 as compared to September 30, 2012. In 2013 we expanded our marketing initiatives to increase frequency of guest visits and increase the percentage of rated play from our guests including guests with lower gaming budgets. Marketing programs are being implemented to refocus our efforts to attract mid and high level player segments.

In addition, 2012 had an additional day of gaming due to leap year and fewer inclement weather days than 2013 that affected our volume.

Food, beverage, racing and other revenue

Food, beverage, racing and other revenue increased by $411,000 or 4%, for the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012. Food and beverage revenue increased by $287,000 and other revenue increased by $239,000 for the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012. The increase in food and beverage revenue was largely due to higher complimentary revenue from marketing promotions and the increase in other revenue is largely due to insurance settlements received related to damage incurred during for Hurricane Sandy in October 2012. These increases were offset by a decrease in racing of $115,000 for the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012. The decrease is primarily due to lower receipt of OTBs statutory payments this quarter versus the same quarter last year. Due to the uncertainty of collection these payments are accounted for as received.

Promotional allowances

Promotional allowances increased by $1,648,000 or 75%, for the nine months ended September 30, 2013, as compared to the nine months ended September 30, 2012, primarily due to a substantial increase in non-subsidized free play of $1,388,000. Part of $1,388,000 year over year increase was due to approximately $195,000 in credits received for free play from the NYL in 2012. The increase in non-subsidized free play increased both gross gaming revenue and promotional allowance. In addition, food and beverage comps increased by $185,000 and player club awards increased by $75,000.

Gaming costs

Gaming costs increased by $1,093,000 or 3%, for the nine months ended September 30, 2013, as compared to the nine months ended September 30, 2012, primarily due to higher NYL and other commissions of $589,000, resulting from an increase in gaming revenue, including taxable free play, as compared to the same period in the prior year. In addition, gaming wages increased by $192,000 and related benefit costs increased by $399,000 as compared to the same period in the prior year. The benefits cost increases are largely due to higher medical benefits. These increases were offset by a reduction in other gaming expenses of $87,000 as compared to the same period in the prior year.

Food, beverage, racing and other costs

Food, beverage, racing and other costs increased approximately $202,000 or 2% for the nine months ended September 30, 2013, as compared to the nine months ended September 30, 2012, primarily due to increased purses expenses of $135,000 and increased food and beverage cost of goods expense in the amount of $103,000. In addition, other food, beverage and racing expenses increased $24,000. These increases were offset by a reduction in wages and related costs in the amount of $60,000.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $1,696,000 or 19%, for the nine months ended September 30, 2013, as compared to the nine months ended September 30, 2012, primarily due to higher other selling, general and administrative expenses of $985,000. The majority of this pertains to the amortization of the EPR deposit in the amount of $815,000 The EPR deposits are being amortized over three months and two months have been expensed year to date. In addition, legal and professional fees were higher in the amount of $778,000. The significant increase in legal and professional fees are largely due to higher than expected legal fees. These increases were offset by lower marketing and related expenses of $67,000.

Stock-based compensation expense

Stock-based compensation decreased by $291,000 or 58%, primarily as a result of reduced number of options vesting and granted to directors and officers for the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012.

Interest expense

Interest expense increased $266,000 or 36%, for the nine months ended September 30, 2013, as compared to the nine months ended September 30, 2012. The interest on the loan agreement between the Company and Kien Huat that became effective per the Amendment to the Loan Agreement dated August 9, 2012 increased from 5% to 7.5%.

Liquidity and Capital Resources

The accompanying consolidated financial statements have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company anticipates that its current cash and cash equivalents balances, cash generated from operations and proceeds from the April 2013 Rights Offering (as defined below) will be sufficient to meet its working capital requirements for at least the next twelve months. The adequacy of these resources to meet the Company’s liquidity needs beyond that period will depend on the Company’s growth, operating results, the status of the Casino Project and ability to refinance or otherwise satisfy its long-term loan with a related party. If construction of the Casino Project is commenced in the next twelve months, or if the Company decides to seek a license to operate a full-scale casino if the Constitutional Amendment is approved, the Company will require additional capital resources. If the Company requires additional capital resources in connection with the Casino Project, pursuing a license to operate a full-scale casino or settlement of, or loss in, any pending litigation, it may raise additional capital in the form of debt or equity. The sale of additional equity could result in further dilution to the Company’s existing stockholders and financing arrangements may not be available to the Company, or may not be available in amounts or on terms acceptable to the Company.

On April 30, 2013, the Company commenced a rights offering of common stock to holders of its common stock and Series B Preferred Stock (the "April 2013 Rights Offering"). The expiration date of the April 2013 Rights Offering was May 30, 2013.

At the completion of the April 2013 Rights Offering, the Company issued a total of 6,032,153 shares of common stock and raised approximately $11.4 million in gross proceeds.

The Company has used net proceeds of the April 2013 Rights Offering, which was approximately $11.2 million following the deduction of expenses relating to the April 2013 Rights Offering, to fund the expenses of the Company’s Casino Project, which includes permitting, infrastructure and shared master planning costs and expenses, and for general working capital purposes.

On November 17, 2010, we entered into a loan agreement (the “Loan Agreement”) with Kien Huat Realty III Limited (“Kien Huat”), our largest stockholder, which was represented by a convertible promissory note (the "Note") in the principal amount of $35,000,000 and which had an interest rate of 5%. The Company paid down the principle of the note in the amount of approximately $17.6 million from the proceeds of the rights offering the Company consummated in May 2011. The maturity date for the Note was May 17, 2013.

As of September 30, 2013, we had total current assets of approximately $18.6 million and current liabilities of approximately $12.2 million. We expect that we will be able to fund our operations with cash flow from operations in the ordinary course of business and with the proceeds of the April 2013 Rights Offering over at least the next twelve months.

Net cash used in operating activities was approximately $4.3 million and $641,000 provided during the nine months ended September 30, 2013 and 2012, respectively, which was primarily the result of the net change in operating assets and liabilities. Included in the decrease was an Empire Zone real estate tax credit due to us of approximately $1.2 million which was received in October 2013 and the remaining Option Agreement prepaid amount of $408,000

Net cash used in investing activities was approximately $3.9 million for the nine months ended September 30, 2013 and 2012, respectively. Project development costs decreased by $669,000 in 2013 compared to 2012 relating to the Sullivan County development project. In addition, restricted cash increased by $105,000 and the purchase of property and equipment increased approximately $528,000.

Net cash provided in financing activities was approximately $9.7 million for the nine months ended September 30, 2013. Approximately $11.4 million was received from the Rights Offering and we incurred approximately $223,000 in expenses pertaining to the Rights Offering. In addition, approximately $1.5 million was utilized for the redemption of a portion of the Series E Preferred Shares. There was no net cash used in or provided by financing activities during the nine months ended September 30, 2012.

On February 12, 2013, our Board authorized the issuance of 75,530 shares of our common stock in payment of dividends due for the year ended December 31, 2012 on our Series B Preferred Stock. The recorded value of these shares was approximately $167,000.

On March 13, 2012, our Board authorized the issuance of 92,414 shares of our common stock in payment of dividends due for the year ended December 31, 2011 on our Series B Preferred Stock. The recorded value of these shares was approximately $234,000.

Our common stock is transferable only subject to the provisions of Section 303 of the Racing, Pari-Mutuel Wagering and Breeding Law, so long as we hold directly or indirectly, a license issued by the NYSGC, and may be subject to compliance with the requirements of other laws pertaining to licenses held directly or indirectly by us. The owners of common stock issued by us may be required by regulatory authorities to possess certain qualifications and may be required to dispose of their common stock if the owner does not possess such qualifications.

Development

On December 14, 2012, EPT Concord II, LLC ("EPT"), a wholly owned subsidiary of Entertainment Properties Trust, and MRMI entered into a master development agreement (the “MDA”) to develop EPT's 1,500 acres located at the site of the former Concord Resort (the “EPT Property”). The MDA defines and governs the overall relationship between EPT and MRMI with respect to the development, construction, operation, management and disposition of the integrated destination resort and community (the "Project") to be developed by the parties on the EPT Property. In accordance with the terms of the MDA, MRMI has agreed to invest a minimum of $300 million in the development and construction of a casino and a harness racetrack and may also include one or more hotels, food and beverage outlets, a spa facility, retail venues, space for conferences, meetings, entertainment and special events in a multi-purpose conference space supported by separate meeting rooms and parking facilities (the “Casino Project”), which is a portion of the larger Project being developed by EPT and us. This amount will likely be needed over the next eighteen months as development continues. To date, our project development costs have included a $750,000 option payment to EPT and an additional prorated option payment of $472,603 by us to EPT. In addition to the option payments to EPT upon extension of the Option, project development costs included other direct costs incurred by the Company in consummating the Option Agreement and related lease, as well as other project development costs for the EPT Property. At September 30, 2013, project development costs totaled approximately $15.7 million. Additional capital resources will be required to meet the Company's obligations with respect to the Project and particularly, the Casino Project, for which additional capital in the form of debt or equity will be required. The sale of additional equity could result in significant dilution of the Company's existing stockholders and financing arrangements may not be available to the Company, or may not be available in the amounts or on terms acceptable to the Company. If required funds are unavailable, or not available on acceptable terms, we may be required to delay, scale back or eliminate some of our obligations with respect to the Project and Casino Project.



ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company and, therefore, we are not required to provide information required by this Item.



ITEM 4.	CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management believes, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

We carried out an evaluation as of September 30, 2013 under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to timely alert them to any material information (including our consolidated subsidiaries) that must be included in our periodic Securities and Exchange Commission filings.

Changes in Our Financial Reporting Internal Controls.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended) during the fiscal quarter ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION



ITEM 1.	LEGAL PROCEEDINGS

Bryanston Group v. Empire Resorts, Inc. and Bryanston Group v. Kien Huat Realty III, Limited

Effective as of June 30, 2013 (the “Closing Date”), the Company, Kien Huat , Colin Au Fook Yew (“Au”) and Joseph D'Amato (“D’Amato”) and, together with the Company, Kien Huat and Au, the “Company Parties”) consummated the closing of a Settlement Agreement and Release (the “Settlement Agreement”) with Stanley Stephen Tollman (“Tollman”) and Bryanston Group, Inc. (“Bryanston Group” and, together with Tollman, the “Bryanston Parties”) relating to the actions entitled Bryanston Group v. Empire Resorts, Inc. pending in the New York Supreme Count (the "New York Court Proceeding") and Bryanston Group v. Kien Huat Realty III, Limited pending in the United States District Court for the Southern District of New York (the "Federal Court Proceeding"). Pursuant to the Settlement Agreement, the Company Parties and the Bryanston Parties agreed to the settlement of claims relating to shares of Series E Preferred Stock of the Company (the “Preferred Stock”) held by the Bryanston Parties and that certain Recapitalization Agreement, dated December 10, 2002, by and between, among others, the Bryanston Parties and a predecessor to the Company (the “Recapitalization Agreement”), pursuant to which the Bryanston Parties acquired the Preferred Stock. On the Closing Date, the Recapitalization Agreement terminated and ceased to have any further force and effect as between the Bryanston Parties and the Company.

In consideration for the mutual release of all claims, Empire agreed to redeem, purchase and acquire the Preferred Stock from the Bryanston Parties in accordance with an agreed upon timeline and payment schedule and based upon the closing by the Company of third party financing in an aggregate amount sufficient to enable the Company to complete the construction of the Casino Project.

Preferred Stock Redemption Schedule



Timeline	Tollman Redemption Payment	Bryanston Group Redemption Payment
On the Closing Date	All Preferred Stock held by Tollman redeemed at approximately $1.528 million.	-
On the earlier to occur of the Concord Event and January 1, 2014	Payment of all dividends accrued and unpaid since December 10, 2002 (the “Accrued Dividends”) on Tollman's Preferred Stock, from funds legally available to the Company to effect such payment.	-
If the Concord Event occurs on or before December 31, 2013	-	All Preferred Stock and Accrued Dividends held by Bryanston redeemed at $22.8 million from funds legally available to the Company to effect such payment.
If the Concord Event occurs after December 31, 2013 and on or before June 30, 2014	-	All Preferred Stock and Accrued Dividends held by Bryanston redeemed for an amount between $22.8 million and $28.0 million from funds legally available to the Company to effect such payment pro-rated based upon the actual number of days after December 31, 2013 the date that the Preferred Stock is redeemed.
If the Concord Event occurs after June 30, 2014 and on or before December 31, 2014	-	All Preferred Stock held by Bryanston redeemed for an amount between $28.0 million and the Liquidation Value of the Preferred Stock (as such term is defined in the Recapitalization Agreement) and all Accrued Dividends as of December 31, 2014 from funds legally available to the Company to effect such payment pro-rated based upon the actual number of days after December 31, 2013 the date that the Preferred Stock is redeemed.
If the Concord Event does not occur before December 31, 2014	-	Annual Dividend for calendar year 2014 shall be paid to Bryanston Group in the amount of approximately $1.240 million prior to the 30th day following December 31, 2014 from funds legally available to the Company to effect such payment.
If the Concord Event occurs after December 31, 2014 and on or before June 30, 2015	-	All Preferred Stock held by Bryanston shall be redeemed for an amount equal to the Liquidation Value and Accrued Dividends as of the date of the Concord Event from funds legally available to the Company to effect such payment.
If the Concord Event does not occur by June 30, 2015	-	150,000 shares of Bryanston's Preferred Stock shall be redeemed on June 30, 2016 for $1.5 million. An additional 150,000 shares of Preferred Stock shall be redeemed for $1.5 million on each June 30 for the next three years from funds legally available to the Company to effect such payment. The balance of the Preferred Stock shall be redeemed in an amount equal to the Liquidation Value and Accrued Dividends on June 30, 2020 from funds legally available to the Company to effect such payment.

Monticello Raceway Management, Inc. v. Concord Associates L.P.

On January 25, 2011, our subsidiary, MRMI, filed a complaint in the Sullivan County Court against Concord, an affiliate of Louis R. Cappelli who is a significant stockholder. The lawsuit seeks amounts that are owed to us under an agreement between Concord, MRMI and the Monticello Harness Horsemen’s Association, Inc. (the “Horsemen’s Agreement”). Pursuant to the Horsemen’s Agreement, until the earlier to occur of the commencement of operations at the gaming facilities to be developed by Concord at the site of the former Concord Hotel and former Concord Resort or July 31, 2011, we were to continue to pay to the Monticello Harness Horsemen’s Association, Inc. 8.75% of the net win from VGM activities at Monticello Casino and Raceway, and Concord was to pay the difference, if any, between $5 million per year and 8.75% of the net win from VGM activities (“VGM Shortfall”) during such period. As of December 31, 2010, we believe Concord owed us

approximately $300,000 for the VGM Shortfall. Concord contested its responsibility to make such VGM Shortfall payments to us. Both parties filed appeals. On March 28, 2013, the Appellate Court ordered the reversal of the denial of our summary judgment and awarded our cross motion to the extent of awarding partial summary judgment on the issue of liability on the breach of contract cause of action. A trial date on the issue of MRMI's damages has been set for December 11, 2013.

Concord Associates, L.P. v. Entertainment Properties Trust

On September 18, 2013, the United States District Court for the Southern District of New York (“SDNY”) granted Motions to Dismiss filed by us and all other defendants. This lawsuit was filed in March 2012, by Concord and various affiliates in the SDNY and asserted in an amended complaint various federal antitrust claims against us, EPR, EPT, Genting NY LLC and Kien Huat. The lawsuit arises out of our exclusivity agreement and option agreement with EPR to develop the site of the EPT Property located in Sullivan County, New York. Concord brought federal antitrust claims alleging conspiracy in restraint of trade, conspiracy to monopolize and monopolization. Concord also brought state law claims for tortious interference with contract and business relations. Concord sought damages in an amount to be determined at trial but not less than $500 million (subject to automatic trebling under federal antitrust laws), unspecified punitive damages and permanent injunctive relief. In its decision, the SDNY dismissed Concord’s federal antitrust claims with prejudice and dismissed Concord's state law claims without prejudice. On October 2, 2013, Concord filed a Motion for Reconsideration and on October 18, 2013, Concord filed a Notice of Appeal. On October 22, 2013, the United States Court of Appeals for the Second Circuit issued a Notice of Stay of Appeal pending the outcome of the Motion for Reconsideration. We will aggressively defend our interests.

Concord Associates, L.P. v. Town of Thompson

Other Proceedings



ITEM 1A.	RISK FACTORS

We are a smaller reporting company and, therefore, we are not required to provide information required by this Item.



ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.



ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.



ITEM 4.	MINE SAFETY DISCLOSURES.

Not applicable.



ITEM 5.	OTHER INFORMATION

None



ITEM 6.	EXHIBITS




10.1			Letter Agreement, dated August 30, 2013, by and between Monticello Raceway Management, Inc. and EPT Concord II, LLC. *

10.2			Letter Agreement, dated August 23, 2013 by and between Monticello Raceway Management, Inc. and EPT Concord II, LLC (1)

10.3			Letter Agreement, dated August 14, 2013, by and between Monticello Raceway Management, Inc. and EPT Concord II, LLC (2)

31.1			Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of the Senior Vice President, Chief Operating Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of the Senior Vice President, Chief Operating Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101			Interactive Data File (XBRL).

* Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the SEC.


(1)	Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.’s Current Report on Form 8-K (an “8-K”), filed with the Securities and Exchange Commission (the “Commission”) on August 27, 2013.


(2)	Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.’s Current Report on Form 8-K (an “8-K”), filed with the Securities and Exchange Commission (the “Commission”) on August 15, 2013.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




				Empire Resorts, Inc.

Dated: November 4, 2013				/s/ Joseph A. D’Amato
				Joseph A. D’Amato
				Chief Executive Officer

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




				Empire Resorts, Inc.
Dated: November 4, 2013				/s/ Laurette J. Pitts
				Laurette J. Pitts
				Senior Vice President, Chief Operating Officer and Chief Financial Officer

EXHIBIT INDEX




10.1			Letter Agreement, dated August 30, 2013, by and between Monticello Raceway Management, Inc. and EPT Concord II, LLC. *

10.2			Letter Agreement, dated August 23, 2013, by and between Monticello Raceway Management, Inc. and EPT Concord II, LLC (1)

10.3			Letter Agreement, dated August 14, 2013, by and between Monticello Raceway Management, Inc. and EPT Concord II, LLC (2)

31.1			Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of the Senior Vice President, Chief Operating Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of the Senior Vice President, Chief Operating Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101			Interactive Data File (XBRL).

* Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the SEC.


(1)	Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.’s Current Report on Form 8-K (an “8-K”), filed with the Securities and Exchange Commission (the “Commission”) on August 27, 2013.


(2)	Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.’s Current Report on Form 8-K (an “8-K”), filed with the Securities and Exchange Commission (the “Commission”) on August 15, 2013.

Large accelerated filer

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company