Empire Resorts Inc.
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549_______________________________________ FORM 10-KxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017OR¨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 ofincorporation or organization) (I.R.S. EmployerIdentification No.) c/o Monticello Casino and Raceway, 204 State Route 17B,P.O. Box 5013, Monticello, NY 12701(Address of principal executive offices) (Zip Code)(845) 807-0001Registrant’s telephone number, including area codeSecurities registered under Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, $.01 par value per share NASDAQ Global MarketSecurities registered under Section 12(g) of the Act:None(Title of class)_______________________________________ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data Filerequired 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 shorterperiod that the registrant was required to submit and post such files). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x 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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer¨ Accelerated filerx Non-accelerated filer¨ Smaller reporting company¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ¨ No xThe aggregate market value of the issuer’s common equity held by non-affiliates, as of June 30, 2017, was $80,576,245 based on the closing price ofthe registrant’s common stock on the NASDAQ Global Market.As of March 15, 2018, there were 32,762,949 shares of the registrant’s common stock outstanding._______________________________________ DOCUMENTS INCORPORATED BY REFERENCENone.INDEX PART I1 ITEM 1.BUSINESS1ITEM 1A.RISK FACTORS10ITEM 1B.UNRESOLVED STAFF COMMENTS21ITEM 2.PROPERTIES21ITEM 3.LEGAL PROCEEDINGS23ITEM 4.MINE SAFETY DISCLOSURES23 PART II23 ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES23ITEM 6.SELECTED FINANCIAL DATA26ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS27ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK38ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA39ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE75ITEM 9A.CONTROLS AND PROCEDURES75ITEM 9B.OTHER INFORMATION76 PART III77 ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE77ITEM 11.EXECUTIVE COMPENSATION82ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS99ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE101ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES104 PART IV104 ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES104 SIGNATURES112 iPART IFORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward-looking statements about management’s current expectations. Examples of such forward-lookingstatements include discussions of the expected results of various strategies. Although we believe that our expectations are based upon reasonableassumptions, there can be no assurance that our financial goals will be realized. Our forward-looking statements concern matters that involve known andunknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially differentfrom the future results, performance or achievements described or implied by such forward-looking statements. Numerous factors may affect our actual resultsand may cause results to differ materially from those expressed in the forward-looking statements made by us or on our behalf. Any statements that are notstatements of historical fact may be forward-looking statements. Among others, we have used the words, “believes,” “anticipates,” “plans,” “estimates,” and“expects” to identify forward-looking statements. Such statements may be considered forward looking statements within the meaning of Section 21E of theSecurities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). Factorsthat could cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statementsinclude, but are not limited to, the risk factors set forth in Item 1A of this Annual Report on Form 10-K. Readers are cautioned not to place undue reliance onthese forward-looking statements, which speak only as of the date of this filing. We assume no obligation to update the forward-looking statements to reflectactual results or changes in the factors affecting such forward-looking statements.Item 1.Business.OverviewEmpire Resorts, Inc. (“Empire,” and, together with its subsidiaries, the “Company,” “us,” “our” or “we”) was organized as a Delaware corporation onMarch 19, 1993, and since that time has served as a holding company for various subsidiaries engaged in the hospitality and gaming industries.Our indirect wholly-owned subsidiary, Montreign Operating Company, LLC, doing business as Resorts World Catskills ("Montreign Operating"), owns andoperates Resorts World Catskills, a casino resort (the "Casino"), which is located in Sullivan County, New York approximately 90 miles from New York City.Montreign Operating is the sole holder of a gaming license (a "Gaming Facility License") issued by the New York State Gaming Commission ("NYSGC") inthe Hudson Valley-Catskill region, which consists of Columbia, Delaware, Dutchess, Greene, Orange, Sullivan and Ulster counties in New York State.Through our wholly-owned subsidiary, Monticello Raceway Management, Inc. ("MRMI"), we own and operate Monticello Casino and Raceway,which began racing operations in 1958 in Monticello, New York, which is proximate to the Casino. Monticello Casino and Raceway currently features avideo gaming machine ("VGM") and harness horseracing facility. We also generate racing revenues through pari-mutuel wagering on the running of liveharness horse races, the import simulcasting of harness and thoroughbred horse races from racetracks across the country and internationally, and the exportsimulcasting of our races to offsite pari-mutuel wagering facilities.Gaming operationsResorts World CatskillsResorts World Catskills is located at the site of a four-season destination resort (“Destination Resort”) being developed on approximately 1,700 acres(the “EPT Property”) in the Town of Thompson, New York. The EPT Property is owned by EPT Concord II, LLC (“EPT”) and EPR Concord II, L.P. (“EPRLP”), two wholly-owned subsidiaries of EPR Properties, which is unrelated to the Company. The Casino is located in the Catskill region of New York State,which has historically been a resort area. The Destination Resort has a dedicated interchange off of New York State Route 17 at Exit 106 that delivers guestsdirectly into the Destination Resort. Our casino operations are overseen by the NYSGC. Gaming at the Casino is permitted 24 hours a day and is limited topersons over the age of 21. Smoking is not permitted in the Casino.1Portions of the Casino opened to the public on February 5, 2018. When complete, the Casino is expected to include:Resorts World Casino (1)Number of Guest Rooms andSuites (2)Approximate Casino SquareFootage (3)SlotsGaming Tables 332100,0002,151154(1) This table reflects the amenities expected to be available once the Casino is fully opened.(2) When complete, the number of guest rooms and suites will include eight 1,000-1,200-square foot garden suites, seven 2,400-square foot two-storytownhouse villas, and 12 penthouse-level suites. The penthouse-level suites, and several rooms beneath the penthouse level, are expected to be completed inlate 2018.(3) The casino floor includes a 6,500-square foot poker room, a 3,800 square-foot VIP/high limit area located on the main gaming floor and a separate 4,000-square foot private gaming area containing private VIP gaming salons.Monticello Casino and RacewayMonticello Casino and Raceway is a VGM and year-round harness horseracing facility. Monticello Casino and Raceway is approximately three milesaway from the Destination Resort, is directly adjacent to New York State Route 17 and has highly visible signage and convenient access from Exit 104 ofNew York State Route 17. VGM OperationsMonticello Casino and Raceway operates VGMs, which includes video lottery terminals (“VLTs”) and 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. ETGs include the gamesof roulette, blackjack and 3-card poker. Monticello Casino and Raceway currently features 1,070 VLTs and 40 ETGs (collectively 1,110 VGMs) on a 45,000-square foot gaming floor with a separate high stakes VGM area. Monticello Casino and Raceway also has three dining options which include a food court,restaurant and sports bar. The VGMs at Monticello Casino and Raceway are owned by New York State and are overseen by the NYSGC. Revenues derived from our VGMoperations consist of VGM revenues and food and beverage revenues. Gross VGM revenues consist of the total amount wagered at our VGMs, less prizesawarded. Video lottery gaming is permitted for no more than 20 consecutive hours per day and on no day can such operation be conducted past 6:00 a.m.Raceway Operations, Simulcasting and Pari-mutuel Wagering ActivitiesRaceway operations, which include live harness horseracing, simulcasting and pari-mutuel wagering activities in New York State, are overseen by theNYSGC. In a letter dated December 15, 2017, the NYSGC approved MRMI’s racetrack and simulcast license renewal applications for calendar year 2018.Generally, the annual license renewal process requires the NYSGC to review the financial responsibility, experience, character and general fitness of MRMIand its management.We derive our racing, simulcasting and pari-mutuel wagering revenue principally from the following:•wagering at Monticello Casino and Raceway on live races run at Monticello Casino and Raceway and races broadcast from out-of-state racetracksusing import simulcasting;•fees from wagering at out-of-state locations and internationally on races run at Monticello Casino and Racewayusing export simulcasting; and•revenue allocations, as prescribed by law, from betting activity at off-track betting facilities in New York State.Simulcasting is the process by which a live horse race held at one facility (the “host track”) is transmitted to another location that allows patrons ofsuch other location to wager on that race. Amounts wagered at each off-track betting location are combined into the appropriate pools at the host track’s totefacility where the final odds and payouts are determined. With the exception of a few holidays, we offer year-round simulcast wagering from racetracks acrossthe country. In addition, races of national interest, such as the Kentucky Derby, Preakness Stakes and Breeders’ Cup supplement our regular simulcastprogramming. We also export live broadcasts of our own races to race tracks, casinos and off-track betting facilities in the United States and internationally.In pari-mutuel wagering, patrons bet against each other rather than against the operator of the facility or with pre-set odds. The amounts wagered form apool of funds from which winnings are paid based on odds determined by the wagering activity.2The racetrack acts as a stakeholder for the wagering patrons and deducts from the amounts wagered a “take-out” or gross commission from which theracetrack pays state and county taxes and racing purses. Our pari-mutuel commission rates are fixed as a percentage of the total handle or amounts wagered.Marketing Our marketing efforts are conducted through various channels. These channels include radio, television, print, outdoor and digital throughout the Hudson-Valley Catskill region and the larger New York City metropolitan area. Our more targeted marketing efforts are conducted through direct mail and email. Wemaintain websites to inform individuals about Resorts World Catskills and Monticello Casino and Raceway and utilize several social media sites to promoteour brands, unique events, and special deals. Further, our direct marketing efforts utilize advanced analytic techniques that identify patron preferences toallow us to make more relevant offers to patrons, influence incremental visits, and help build lasting patron relationships.Resorts World CatskillsWe expect Resorts World Casino will receive patronage from adults residing within the metropolitan New York City area, including New York City,northern and northwestern suburbs of New York City, northern New Jersey and northeastern Pennsylvania. The Casino has an overall drive-time advantagerelative to other full-scale gaming facilities from the northern and northwestern suburbs of New York City and the Company will focus on servicing what webelieve is an unmet demand in the New York metropolitan market.When complete, the Casino will have a range of high-end offerings, including 600 square-foot hotel suites, private gaming salons, poolside townhousevillas and garden suites and a VIP reception area and players’ lounge with private elevator, which are designed to appeal to higher-end gaming patrons in themarket. The Casino is integrated into the master-planned Destination Resort, which will feature a range of year-round amenities. The Casino is alsoconvenient to recreational offerings in the Catskill Mountains.We will leverage the Resorts World and Genting brands, which are well-known hospitality brands in the Asian markets, to target the large regionalAsian gaming market and high-end Asian players. The Casino will offer various Asian-themed amenities, including table games and slot machines, an Asiangaming pit, high-end gaming and private gaming salons, and various authentic Asian food options.We introduced a patron loyalty program to encourage patron relationships with Resorts World Catskills and increase loyalty to the Resorts Worldbrand through unique benefits and rewards, while promoting our brand. When expanded, the patron loyalty program will include a rewards program that willallow patrons to qualify for benefits at participating Resorts World-branded resorts and in both gaming and non-gaming areas. Members may earn points fortheir gaming play which can be redeemed at participating properties. Information from the loyalty and rewards programs will be used to analyze patron usageand preferences by segment and individual player profile.Monticello Casino and RacewayMonticello Casino and Raceway receives patronage from adults residing within the surrounding counties of New York, New Jersey and Pennsylvania.The average drive-time of our current patrons is up to 60 minutes and therefore we focus on a convenience gaming market.Monticello Casino and Raceway's mid-range offerings include gaming and dining options designed to appeal to locals and patrons interested in amore intimate and comfortable setting. Our Players' Club enables patrons to earn points that can be used for free slot play, complimentary food, merchandise,special offers, promotions, VIP invitations, discounts and coupons. The Players' Club also enables patrons to earn points when wagering on racing atMonticello Casino and Raceway.SeasonalityThe gaming market in the northeastern United States is seasonal in nature, with winter weather affecting patrons' ability to reach our facilities.However, because of the overnight accommodations at the Casino, we expect the adverse affects of winter weather to decline.3CompetitionThe casino entertainment industry is highly competitive. The industry is comprised of a diverse group of competitors that vary considerably in sizeand geographic diversity, quality of facilities and amenities available, marketing and growth strategies, and financial condition. Generally, we competedirectly with casino and VGM facilities operating in the immediate and surrounding areas. Due to the geographic proximity, the Casino and MonticelloCasino and Raceway may compete, in part, with each other for gaming patrons. The Casino will compete with other gaming and non-gaming resorts andvacation areas, various other entertainment businesses, and will also compete with other retail facilities, amusement attractions, food and beverage offerings,and entertainment venues.In addition to competition from traditional gaming facilities, which is discussed in more detail below, the Casino and Monticello Casino and Racewayface competition from existing and prospective Internet gaming operations and sports wagering. In the United States, the Unlawful Internet GamblingEnforcement Act of 2006 ("UIGEA") prohibits, among other things, the acceptance by a business of a wager by means of the Internet where such wager isprohibited by any applicable law where initiated, received or otherwise made. Under UIGEA, severe criminal and civil sanctions may be imposed on theowners and operators of such systems and on financial institutions that process wagering transactions in violation of UIGEA. The law contains a safe harborprovision for wagers placed within a single state (disregarding intermediate routing of the transmission) where the method of placing the bet and receivingthe bet is authorized by that state's law, provided the underlying regulations establish appropriate age and location verification. For example, New Jersey lawpermits Atlantic City casinos to conduct Internet gaming by accepting wagers from individuals who are physically present in New Jersey. Additionally,mobile gaming is permitted in any area located within the property boundaries of a casino hotel facility, including any recreation or swimming pool andexcluding parking garages and parking areas. Further, New Jersey law permits racetrack patrons to place bets on live or simulcast racing while they are onracetrack property, including the restaurants and outdoor areas, such as the paddock. New Jersey gaming regulations also authorized skill-based gamingoptions that appeal to a new generation of players. In October 2017, Pennsylvania signed into law new legislation also authorizes interactive gaming in theform of Internet gaming and up to five video gaming terminals at qualified truck stops. The legislation additionally authorizes fantasy sports wagering if andwhen it is permitted under federal law.A number of other states have adopted or are considering adopting legislation to specifically authorize Internet poker and Internet gambling. InFebruary 2018, the governors of New Jersey, Nevada and Delaware announced an agreement to allow Internet poker operators to pool players with partnersites in those states. New York legislators have introduced bills related to Internet gaming and Internet poker. Additionally, two state lotteries offer (and otherstate lotteries are considering offering) Internet instant game sales to in-state lottery customers and a number of other states, including New York, allowsubscription sales of lottery draw games over the Internet. We are unable to determine whether and which, if any, legislation will be enacted and what effect itwould have on our current operations.In addition, the outcome of a U.S. Supreme Court case argued in December 2017, Governor Christopher J. Christie, et al., v. National CollegiateAthletic Association, et al., may affect state and federal policies with respect to sports wagering. This case is expected to address the question of whether theProfessional and Amateur Sports Protection Act of 1992, a federal statute enacted to stop the spread of state-sponsored sports gambling, impermissiblycommandeers the regulatory power of the states. In anticipation of that outcome, certain states, including New York, have adopted or are consideringadopting legislation to legalize sports betting, subject to federal restrictions on sports wagering being lifted. On August 3, 2016, New York Governor Cuomosigned legislation to legalize interactive fantasy sports. The Casino is able to offer sports wagering if and when it is permitted under federal law.Other states, such as Pennsylvania, recently passed a broad gaming expansion bill, which, among other things, authorized Internet gambling in theform of slot machines, table games and poker. This new legislation also authorized Pennsylvania's lottery to distribute lottery products, including instantticket games, through numerous channels including web applications, mobile applications, mobile web, tablets and social media. In addition, this newPennsylvania bill authorized land-based and Internet sports wagering in the event the federal restrictions on sports wagering are lifted. We expect Internetgaming and sport wagering to continue to be the topic of additional legislation, including the expansion of legalization efforts within New York State tovenues other than holders of Gaming Facility Licenses. We are unable to determine whether and which, if any, legislation will be enacted and what effect itwill have on our operations and our prospects. 4Resorts World Catskills We face competition in and from the northeastern Pennsylvania, New Jersey and Connecticut gaming markets in marketing to and attracting patronsfrom the New York City metropolitan area. Pennsylvania casinos are the competitors located closest to our Casino. Pennsylvania casinos operate table gamesand slot machines, grant casino credit and have access to unlimited non-taxable free play. The competing Pennsylvania facilities include the following:Mohegan Sun at Pocono Downs, in Wilkes-Barre, Pennsylvania, located approximately 95 miles southwest of Monticello; Mount Airy Casino Resort inMount Pocono, Pennsylvania, approximately 70 miles southwest of Monticello; and Sands Casino Resort in Bethlehem, Pennsylvania, locatedapproximately 95 miles southwest of Monticello. In addition, in October 2017, Pennsylvania signed into law new legislation that authorized a number ofgaming expansion opportunities. The legislation authorized up to 10 new casino satellite facilities, which would operate between 300 to 750 slot machinesand up to 50 table games each. Licenses for these new facilities are awarded through an auction process that began in January 2018. This legislation alsoauthorizes interactive gaming in the form of Internet gaming and up to five video gaming terminals at qualified truck stops. The legislation additionallyauthorizes fantasy sports wagering if and when it is permitted under federal law. New York State has regulatory limitations on the amount of taxable free playthat may be offered to patrons. This could impact our competitiveness as compared to casinos in neighboring jurisdictions.In addition to facing potential competition from the casinos in Atlantic City, legislators in New Jersey have reviewed options to expand gaming tovarious locations in northern New Jersey which could increase competition. Although New Jersey voters previously defeated a referendum to amend the NewJersey State Constitution to permit two casinos in northern New Jersey, another referendum could be introduced in the future. We are unable to predict theimpact additional gaming opportunities in northern New Jersey will have on our operations. We face competition from Mohegan Sun and Foxwoods Resort Casino, both of which are located on tribal reservations in Connecticut, and fromcertain VGM facilities in New York State, including VGM facilities located at Yonkers Raceway and Aqueduct Racetrack, both of which are within the NewYork City metropolitan area.Further, we also face potential competition from the current or future expansion of state-licensed and tribal gaming in the northeastern United States.Commercial casino gaming has expanded in the northeastern United States and is poised to expand further. These expansions, many of which areconvenience gaming facilities as opposed to destination gaming facilities, may affect our revenues.Monticello Casino and RacewayIn New York State, we face competition for our VGM guests from Orange, Dutchess and Ulster counties in New York and from a VGM facility atYonkers Raceway. To a lesser extent, Monticello Casino and Raceway faces competition from the Pennsylvania casinos, Mohegan Sun at Pocono Downs andMount Airy Casino Resort. These facilities are discussed above.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 NewYork State and the surrounding region. The inability to compete with larger purses for the races at Monticello Casino and Raceway and the limitation onother forms of legalized wagering that Monticello Casino and Raceway may offer has been a significant limitation on our ability to compete for off-track andother legalized wagering revenues.DevelopmentThe Golf Course Project and the Entertainment ProjectIn addition to the Casino, Empire Resorts Real Estate I, LLC ("ERREI") and Empire Resorts Real Estate II, LLC ("ERREII" and, together withMontreign Operating and ERREI, the "Project Parties"), each of which are wholly-owned subsidiaries of Montreign Operating, are developing anentertainment village (the "Entertainment Project") and a golf course (the "Golf Course Project" and, together with the Casino and the Entertainment Project,the "Development Projects"), respectively, at the site of the Destination Resort.On May 24, 2017, the Company received final site plan approval from the Town of Thompson Planning Board ("Planning Board") for theEntertainment Project, which will consist of a non-gaming hotel with 100-200 guest rooms, as well as dining, entertainment and retail offerings. Further, thePlanning Board approved a minor amendment to the Entertainment Project's final site plan on February 14, 2018. The Company expects construction of theEntertainment Project to begin in March 2018. Montreign Operating entered into a construction manager agreement with Arc Building Partners, LLC., whichis a standard construction5manager agreement, with normal and customary terms, and addresses, among other things, the guaranteed maximum price of approximately $32.7 million forthe Entertainment Project, completion commitments and MWBE participation in the Entertainment Project. The Company has obtained final site approval from the Planning Board for, and has begun site preparation of, the redesign of the Golf Course Project.The Planning Board extended this site plan approval until June 2018 to allow the Company to coordinate the commencement of construction and to obtainfinal approval of updates to the wetlands permits from the United States Army Corps of Engineers and the New York State Department of EnvironmentalConservation, if required.In addition to the Development Projects, the Destination Resort will include a waterpark lodge, which subsidiaries of EPR Properties are responsiblefor developing (the “Waterpark” and, together with the Development Projects, the “Initial Projects”).Master Development Agreement and Completion GuarantiesOn December 28, 2015 (the “MDA Effective Date”), the Project Parties, on the one hand, and EPT, EPR LP and Adelaar Developer, LLC (the“Destination Resort Developer,” together with EPT and EPR LP collectively, “EPR”), on the other hand, entered into an Amended and Restated MasterDevelopment Agreement (as amended, the “MDA”), which amends and restates that certain master development agreement by and between EPT and MRMIoriginally executed on December 14, 2012. The MDA defines and governs the overall relationship between EPR and the Project Parties with respect to thedevelopment, construction, operation, management and disposition of the Initial Projects.In accordance with the terms of the MDA, EPR is responsible for the development and construction of the Waterpark and the common infrastructure-related improvements (such as streets, sidewalks, sanitary and storm sewer lines, water, gas, electric, telephone and other utility lines, systems, conduits andother similar facilities) for the Destination Resort. EPR has agreed to make a minimum capital investment of $120 million with respect to the Waterpark andthe infrastructure for the Destination Resort. On December 28, 2015, EPR Properties, a real estate investment trust and the parent company of EPR, enteredinto a Completion Guaranty, guaranteeing completion of the development and construction obligations of EPR described in this paragraph.Neither party has the right to terminate the MDA unless Montreign Operating fails to exercise the Purchase Option (as defined below) prior to itsexpiration in accordance with the terms and conditions of the Purchase Option Agreement (as defined below).On January 24, 2017, the MDA was amended to (a) reflect that EPR has secured bond financing in connection with its infrastructure developmentobligations and (b) account for increases in the common infrastructure budget (and corresponding increases in Empire’s common infrastructure cap amount)in connection with the development of additional roads and increase in the budgeted amounts for New York State electric and gas costs. EPR financed thecosts of the infrastructure by the issuance of tax-exempt bonds by a local development corporation. The debt service for these infrastructure bonds will befunded through special district tax assessments, a portion of which will be allocated to each of the parcels on which the Initial Projects are being built. EPRand the Project Parties have agreed to a capped dollar amount on the special district tax assessment for each of the parcels on which the Development Projectsare being built, above which the Project Parties will not be responsible. The changes to Empire’s common infrastructure cap amount were also reflected ineach of the amendments to the Casino Lease, Golf Course Lease and Entertainment Project Lease.On January 24, 2017, Empire agreed to issue a completion guaranty of up to $30 million for the Casino, under the terms of a term loan agreementnegotiated for the construction of the Casino.Intellectual PropertyRWS License AgreementOn March 31, 2017, Montreign Operating entered into a license agreement (the “RWS License Agreement”) with RW Services Pte Ltd (“RWS”). RWSis an affiliate of Tan Sri Lim Kok Thay, who is a beneficiary of and controls Kien Huat Realty III Limited ("Kien Huat"), Empire's largest stockholder.Pursuant to the RWS License Agreement, RWS granted Montreign Operating the non-exclusive, non-transferable, revocable and limited right to use certain“Genting” and “Resorts World” trademarks (the “RWS Licensed Marks”) in connection with the development, marketing, sales, management and operation(the “Permitted Uses”) of the Development Projects. The right to use the RWS Licensed Marks may be assigned or sublicensed only in certain limitedcircumstances. However, any use of the RWS Licensed Marks for a purpose other than the Permitted Uses will require the prior written consent of RWS. Thename of the Casino is “Resorts World Catskills,” and, notwithstanding the foregoing, the use6of such name is exclusive to Montreign Operating and may be used in connection with on-line gaming in addition to the Permitted Uses.The initial term of the RWS License Agreement will expire on December 31, 2027, and will be extended automatically for additional terms of 12months each, up to a maximum of 39 additional terms, unless either of the parties provides notice to terminate the RWS License Agreement or upon themutual written consent of both parties. Montreign Operating’s rights and obligations under the RWS License Agreement are subject to and governed by therules and regulations applicable to Montreign Operating’s gaming operations at the Casino, and the fiduciary obligations of the boards of directors ofMontreign Operating and Empire, as well as the fiduciary obligations of Kien Huat. Beginning on the date on which the Casino opened to the public,Montreign Operating pays to RWS a fee equivalent to a percentage of Net Revenue (as such term is defined in the RWS License Agreement) generated ineach calendar year from (i) all activity at the Casino, (ii) each specific use of the RWS Licensed Marks in the Entertainment Project or Golf Course and(iii) each specific use of the name Resorts World Catskills in connection with on-line gaming. The percentage of Net Revenue payable as the fee is a lowsingle digit percentage that will increase incrementally between the third year and sixth year of the term of the RWS License Agreement and will remain alow single digit percentage during the entire term of the RWS License Agreement.During the term of the RWS License Agreement, Montreign Operating may participate in the Genting Rewards Alliance loyalty program (the“Alliance”), which would provide central marketing and cross-promotion opportunities for the Development Projects with other members of the Alliance.Montreign Operating’s participation in the Alliance is subject to the provisions of a separate agreement, which is currently being negotiated by the parties.TrademarksOur principal intellectual property consists of trademarks for Montreign Operating and Monticello Casino and Raceway and includes the licenseagreement to use the RWS Licensed Marks. These trademarks are brand names under which we market our properties, venues and services. We consider thesebrand names to be important to our business since they have the effect of developing brand identification. We believe that the name recognition, reputationand image that we develop will attract patrons to our facilities.It is our intent to pursue and maintain the trademark registrations consistent with our goals forbrand development and identification, and enforcement of our rights.Employees and Labor RelationsAs of March 15, 2018, we had approximately 1,600 full-time and 150 part-time employees, which includes employees hired in connection with theCasino. As of December 31, 2017, we had approximately 428 full-time and 37 part-time employees. We had collective bargaining agreements with unionscovering approximately 94 of our employees as of December 31, 2017. The collective bargaining agreement covering approximately 75 employees atMonticello Casino and Raceway is scheduled to expire on March 31, 2018. We will begin negotiations with a bargaining unit for a collective bargainingagreement for certain employee groups at Resorts World Catskills. We consider our employee relations to be good.Regulation and LicensingThe gaming industry is highly regulated and we must maintain our licenses and pay gaming taxes to continue our operations. The Casino andMonticello Casino and Raceway are subject to extensive regulation under the laws, rules, and regulations of New York State. These laws, rules, andregulations generally concern the conduct of operations as well as the responsibility, financial stability, and character of the facilities, owners, managers, andpersons with financial interests in the gaming operations. Individuals and entities, including investors and vendors conducting business with us, must filelicense/registration applications with the NYSGC, and in some instances must submit to background investigations by the New York State Police in order toprove suitability for licensure/registration. Application, fingerprinting and investigative fees must be paid by us or by the individual or entity seekinglicensure or registration. Failure to obtain and maintain a license or registration, as applicable, could require us to sever our relationship with suchindividuals and/or entities, which could have a material adverse effect on our operations or the Development Projects.Our businesses are also subject to various federal, state, and local laws and regulations, in addition to gaming regulations. These laws and regulationsinclude, but are not limited to, restrictions and conditions concerning alcoholic beverages, smoking, environmental matters, employees, currencytransactions, taxation, zoning and building codes, construction, land use, and marketing and advertising. We also deal with significant amounts of cash inour operations and are subject to various reporting and federal anti-money laundering ("AML") laws, as further discussed below. Such laws and regulationscould change or could be interpreted differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations,7or material differences in interpretations by courts or governmental authorities could adversely affect our operations or the Development Projects. Gaming Act and Gaming Facility LicenseThe operations of the Casino are subject to regulation by the NYSGC, Division of Gaming. The Upstate New York Gaming and Economic DevelopmentAct ("Gaming Act") provides, among other things, the statutory framework for the regulation of full-scale casino gaming. The Gaming Act authorized theNYSGC to award up to four Gaming Facility Licenses. Effective March 1, 2016, the NYSGC awarded Montreign Operating the sole Gaming Facility Licensein the Hudson Valley-Catskills region. The Gaming Facility License has an initial duration of 10 years from March 1, 2016 and will be renewable thereafterfor a period of at least an additional 10 years, as determined by the NYSGC. The NYSGC also awarded one Gaming Facility License in the Albany region andtwo Gaming Facility Licenses in the eastern Southern Tier/Finger Lakes region. The Gaming Act provides that no casinos shall be authorized in Bronx,Kings, New York, Queens or Richmond counties. New York State may, however, legislatively authorize additional Gaming Facility Licenses.The Gaming Act provides for a seven-year exclusivity period for holders of Gaming Facility Licenses, commencing March 1, 2016, during which nofurther Gaming Facilities can be licensed by the NYSGC without legislative action. If the New York State legislature authorizes additional Gaming FacilityLicenses within this exclusivity period, holders of the original four Gaming Facility Licenses shall have the right to recover a pro rata portion of the licensefee paid.The Gaming Act imposes a $500 annual fee on each slot machine and table game. The tax rate on slot machines at the Casino is 39% and the tax rate ontable games is 10%. Although free play allowances are not established by the Gaming Act, the NYSGC has promulgated a regulation that limits non-taxablefree play to 15%, although the NYSGC may, at its discretion, authorize deviations from these limitations.Moreover, the Gaming Act deems the Casino to be a New York State agency for its capital projects for the purpose of participation by minority-ownedand woman-owned business enterprises ("MWBEs") and the NYSGC regulations require all contracts with Montreign Operating that are in excess of $25,000to be reviewed by the NYSGC for the purpose of MWBE participation.Regulatory Permits and Approvals Relating to the Development ProjectsThe Casino The Casino received all approvals and permits required to begin construction in February 2015 and began construction soon thereafter. In June 2015,Montreign Operating submitted certain changes in the design of the Casino, which received approval in July 2015. As of February 5, 2018, MontreignOperating had received its Operation Certificate in order to begin gaming operations at the Casino, which is subject to NYSGC's authority to revoke, suspend,limit or otherwise alter such Operation Certificate and shall remain in full force and effect as long as Montreign Operating remains licensed.Entertainment Project and Golf Course ProjectOn December 8, 2016, the Company submitted to the Planning Board an application for site plan approval for the hotel to be located within theEntertainment Project. On May 24, 2017, the Planning Board adopted a resolution granting final site plan approval with conditions for the hotel. ThePlanning Board approved a minor amendment to the final site plan on February 14, 2018. The Company expects construction of the Entertainment Project tobegin in March 2018.The Company has obtained final site approval from the Planning Board for, and has begun site preparation of, the redesign of the Golf Course Project.The Planning Board extended this site plan approval until June 2018 to allow the Company to coordinate the commencement of construction and to obtainfinal approval of updates to the wetlands permits from the United States Army Corps of Engineers and the New York State Department of EnvironmentalConservation, if required. VGM and Racing OperationsOur VGM, harness horseracing and simulcast activities in New York State are overseen by the NYSGC, Division of Lottery and Division of Horse Racingand Pari-Mutuel Wagering, respectively. The NYSGC has the authority and responsibility to promulgate rules and regulations that affect the operations ofour business. In a letter dated December 15, 2017, the NYSGC approved MRMI’s racetrack and simulcast license renewal applications for calendar year 2018.Generally, the annual license8renewal process requires the NYSGC to review the financial responsibility, experience, character and general fitness of MRMI and its management.We generate revenue from our VGM operations by receiving a commission on the gross revenue generated by the VGMs. The rate of this commission isset by statute. From April 1, 2008 until March 31, 2018, the statute provides that 41% of gross VGM revenue be distributed to us as a commission. Effectiveas of April 1, 2018, the statute would reduce the commission rate to 39% of gross VGM revenue. However, with the arrival of casinos into the regions inwhich VGM facilities are currently operating in New York State, the Gaming Act provides that the commission payable to VGM facilities will be increasedover the statutory amount and equalized to the blended tax rate payable by holders of Gaming Facilities Licenses with respect to gross gaming revenuegenerated on table games and slot machines. Accordingly, we expect the commission we receive on our VGM operations for the period following the openingof the Casino will equal the blended tax rate on the Casino's gross gaming revenue. There is also a marketing allowance for racetracks operating video lotteryprograms of 10% on the first $100 million of net revenues generated and 8% thereafter. In addition, the statute provides for subsidized free play allowance of15%.The Gaming Act includes provisions intended to minimize the impact on horsemen of declining revenue at VGM facilities as a result of the introductionof casinos into the region. If VGM facilities are unable to maintain required purse support payments to horsemen at licensed racetracks in amounts equal to atleast the 2013 payment amounts, as adjusted for the consumer price index, the holder of a Gaming Facility License in the region in which the licensedracetrack is located is required to make whole the deficit. Accordingly, if the purse support payments from Monticello Casino and Raceway to the horsemenare below the dollar levels realized in 2013, then the Casino must make whole the deficit.Anti-Money Laundering Laws The operations of the Casino and Monticello Casino and Raceway are subject to federal AML laws. The AML laws relate to the reporting of large cashtransactions and suspicious activity and include screening transactions against lists maintained by the Office of Foreign Assets Control in order to preventthe processing of transactions to or from certain countries, individuals, nationals and entities. Our AML policy was developed by applying a risk-basedapproach and is tailored to our business activities and patron risk profiles. The risk assessment will be updated and revised to reflect changes in our businessto ensure sufficiency and effectiveness of our AML policy. Failure to comply with the AML laws could subject us to significant fines and penalties.Website AccessOur website addresses are www.empireresorts.com, www.rwcatskills.com, and www.monticellocasinoandraceway.com. Our filings with the Securitiesand Exchange Commission are available at no cost on www.empireresorts.com as soon as practicable after the filing of such reports with the Securities andExchange Commission.9Item 1A.Risk Factors.In addition to the other information contained in this report on Form 10-K, the following Risk Factors should be considered carefully in evaluating ourbusiness. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected.Risks Relating to our Substantial IndebtednessOur substantial indebtedness and significant financial commitments, including the fixed component of our rent payments to EPR, could adversely affectour operations and financial results and impact our ability to satisfy our obligations.As of December 31, 2017, we had approximately $466 million of principal amount of indebtedness outstanding, including $450 million of borrowingsoutstanding under the Term B Loan of the Term Loan Facility (with an additional borrowing capacity of $70 million under the Term A Loan of the TermLoan Facility), $16 of borrowings outstanding under the Bangkok Bank Loan (with an additional borrowing capacity of $4 million), no borrowings under theRevolving Credit Facility (with borrowing capacity of $15 million, of which $9 million was drawn on January 23, 2018 and $4 million was drawn onFebruary 12, 2018) and $20 million of borrowing capacity under the Kien Huat Backstop Loan (which capacity can be used solely to repay the BangkokBank Loan). Any increase in the interest rates applicable to our principal debt agreements, which are referenced above, or to our future borrowings, wouldincrease the cost of our indebtedness and reduce the cash flow available to fund our other liquidity needs. To the extent Montreign Operating is unable toproduce cash flow sufficient to service its indebtedness, our ability to make additional investments into Montreign Operating would be limited by thecovenants in the Bangkok Bank Loan and our business, financial condition and results of operation would be materially adversely affected.In addition, our substantial indebtedness and significant financial commitments could have important negative consequences on us, including:•increasing our exposure to general adverse economic and industry conditions;•limiting our flexibility to plan for, or react to, changes in our business and industry;•making it more difficult for us to make payments on our indebtedness; or•placing us at a competitive disadvantage compared to less-leveraged competitors. Moreover, the Entertainment Village and Golf Course will continue to be capital intensive. To the extent that we cannot fund expenditures from theproceeds of the Term Loan Facility and cash generated by our operations, funds must be borrowed or otherwise obtained. These projects may requiresignificant capital commitments, the incurrence of additional debt, guarantees of third-party debt, or the incurrence of contingent liabilities, any or all ofwhich could have an adverse effect on our business, financial condition and results of operations.Current and future economic, capital and credit market conditions could adversely affect our ability to service our indebtedness and to make plannedexpenditures.Our ability to make payments on our indebtedness depends on our ability to generate cash flow in the future. If regional and national economicconditions deteriorate we could experience decreased revenues from our operations attributable to decreases in consumer spending levels and could fail togenerate sufficient cash to fund our liquidity needs or fail to satisfy the financial and other restrictive covenants in our debt instruments. We cannot provideassurance that our business will generate sufficient cash flow from operations. We cannot provide assurance that future borrowings will be available to usunder our Term Loan Facility, Revolving Credit Facility or Bangkok Bank Loan Agreement in an amount sufficient to enable us to pay our indebtedness orto fund our other liquidity needs. We cannot provide assurance that we will be able to access the capital markets in the future to borrow additionalindebtedness on terms that are favorable to us.The agreements governing our Term Loan Facility and other senior indebtedness contain restrictions and limitations that could significantly affect ourability to operate our business, as well as significantly affect our liquidity, and therefore could adversely affect our results of operations.Covenants governing our Term Loan Facility and certain of our other indebtedness restrict, among other things, our ability to:10•pay dividends or distributions, including from subsidiaries to Empire, repurchase or issue equity, prepay certain debt or make certain investments;•incur additional debt, including limiting our ability to borrow further capital needed to complete the Development Projects, if needed;•direct a significant portion of our available cash to the payment of principal and interest on our indebtedness, thereby reducing our use of availablecash to fund our operations, capital expenditures and future business opportunities;•incur liens on assets; and•sell assets or consolidate with another company or sell all or substantially all of our assets.Our ability to comply with these provisions may be affected by events beyond our control. The breach of any such covenants or obligations not otherwisewaived or cured could result in a default under the applicable debt obligations and could trigger acceleration of those obligations, which in turn could triggercross-defaults under other agreements governing our long-term indebtedness. In addition, the Term Loan Agreement requires us to satisfy certain financialcovenants, including a maximum first lien net leverage ratio and a minimum interest coverage ratio. Any default under the Term Loan Facility or the otherprincipal debt agreements could adversely affect our growth, our financial condition, our results of operations and our ability to make payments on our debt.The ability to make payments of principal and interest on indebtedness will depend on the future performance of the Casino, which is subject to generaleconomic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. If sufficientcash flow is not generated from operations to service such debt, we may be required, among other things, to:•seek additional financing in the debt or equity markets;•delay, curtail or abandon altogether our development plans;•refinance or restructure all or a portion of our indebtedness; or•sell selected assets.Such measures might be insufficient to service the indebtedness. In addition, any such financing, refinancing or sale of assets may not be available oncommercially reasonable terms, or at all. If funds are not available when needed, or available on acceptable terms, we may be required to delay, scale back oreliminate some of our obligations with respect to the Development Projects. In addition, we may not be able to grow market share, take advantage of futureopportunities or respond to competitive pressures or unanticipated requirements, which could negatively impact our business, operating results and financialcondition.Defaults under the Term Loan Agreement, the Revolving Credit Agreement or the Bangkok Bank Loan Agreement could result in a substantial loss of ourassets.We have pledged a significant portion of our assets as collateral under the Term Loan Agreement, the Revolving Credit Agreement and the BangkokBank Loan Agreement. A failure to repay any of this indebtedness as it becomes due or to otherwise comply with the covenants contained in any of ourprincipal debt agreements could result in an event of default thereunder. If not cured or waived, an event of default under any of our principal debtagreements could enable the lenders thereunder to declare all borrowings outstanding on such debt, together with accrued and unpaid interest and fees, to bedue and payable and terminate all commitments to extend further credit. The lenders could also elect to foreclose on our assets securing such debt. Suchactions by the lenders could cause cross defaults pursuant to the terms of our principal debt agreements. In such an event, the Company may not be able torefinance or repay all of its indebtedness, pay dividends or have sufficient liquidity to meet operating and capital expenditure requirements. Any suchacceleration could cause us to lose a substantial portion of our assets and will substantially adversely affect our ability to continue our operations.A downgrade in our credit ratings could materially adversely affect our business and financial condition.In connection with the Term Loan Facility and the Revolving Credit Facility, Montreign Operating was required to obtain credit ratings for its debtoffering. Although the maintenance of a certain credit rating is not a condition to the availability of the Term Loan Facility or the Revolving Credit Facility,an adverse change in this credit rating and the credit ratings assigned to our debt securities could adversely affect our business. Such ratings are subject toongoing evaluation by credit rating agencies, and any rating could be changed or withdrawn by a rating agency in the future if, in its judgment,circumstances warrant such action. For example, such ratings could change based upon, among other things, our results of operations and financial condition.If any of the credit rating agencies that have rated our securities downgrades or lowers its credit rating, or if any credit rating agency indicates that ithas placed any such rating on a "watch list" for a possible downgrade or lowering, or otherwise indicates that its outlook for that rating is negative, suchaction could have a material adverse effect on our costs and availability of funding in the future, which could in turn have a material adverse effect on ourfinancial condition, results of operations, cash flows, the trading price of our securities and our ability to satisfy our debt service obligations, among otherobligations.11Risks Relating to our BusinessThe gaming industry in the northeastern United States is highly competitive, with many of our competitors better known and better financed than us.We primarily compete directly with other casino and VGM facilities operating in the immediate and surrounding market areas. The gaming industry inthe northeastern United States is highly competitive and increasingly dominated by multinational corporations or Native American tribes that enjoywidespread name recognition, established brand loyalty, decades of casino operation experience, an array of amenities, high-quality management talent and adiverse portfolio of gaming assets and with substantially greater financial resources.In a broader sense, our gaming operations face competition from all manner of leisure and entertainment activities, including: shopping; athleticevents; television and movies; concerts; and travel. If our competitors operate more successfully than we do, if they attract patrons away from us as a result ofaggressive pricing and promotion, if they are more successful than us in attracting and retaining employees, if their properties are enhanced or expanded, ifthey operate in jurisdictions that give them operating advantages due to differences or changes in gaming regulations or taxes, or if additional hotels andcasinos are established in and around the locations in which we conduct business, we may lose market share or the ability to attract or retain employees. Inparticular, the expansion of casino gaming in or near any geographic area from which we attract or expect to attract a significant number of our patrons couldhave a significant adverse effect on our business, financial condition and results of operations.We expect that competition from internet gaming will continue to grow and intensify.We expect that we will face increased competition from internet gaming as the potential for legalized internet gaming continues to grow. Several statesare currently considering legislation that would legalize internet gaming at the state level. As a result of the Justice Department’s December 2011 opinionconcerning the applicability of the Wire Act to internet gaming, certain states including Nevada, Delaware and New Jersey have enacted legislation toauthorize various forms of intrastate internet gaming. Notably, in February 2013, Nevada amended its internet gaming law to permit Nevada-licensed internetproviders to commence internet poker and to allow the state to enter into agreements with other states to create multi-state on-line poker wagering, and inNovember 2013, New Jersey authorized intrastate internet gaming through Atlantic City casinos. The New Jersey law provides that licensed Atlantic Citycasinos may offer internet gambling games subject to regulations of the New Jersey Division of Gaming Enforcement (the "NJDGE"). The law provides for a15% tax on internet gaming gross revenues and permits New Jersey to enter into agreements with other states to engage in multi-state internet wageringpools. The law has a 10-year sunset provision. A number of New Jersey casinos participate in intrastate internet gaming. Our ability to compete in amarketplace containing multiple virtual casino platforms will depend on our ability to effectively market our gaming products to our patrons in the face ofstiff competition as well as the availability of internet gaming in jurisdictions in which we operate casinos. Furthermore, competition from internet lotteriesand other internet wagering gaming services, which allow their patrons to wager on a wide variety of sporting events and play Las Vegas-style casino gamesfrom home, could divert patrons from our properties and thus adversely affect our business. Such internet wagering services are likely to expand in futureyears and become more accessible to domestic gamblers as a result of initiatives in some states to consider legislation to legalize intrastate internet wagering.There have also been proposals that would specifically legalize internet gaming under federal law.New York State could grant additional Gaming Facility Licenses in our area or in New York City or the surrounding counties earlier than the expectedseven-year blackout period, which could significantly increase the already intense competition in the northeastern United States and cause us to lose or beunable to gain market share.The Gaming Act provides for the award of up to four Gaming Facility Licenses in three regions of upstate New York, including our area, and prohibitsthe issuance of Gaming Facility Licenses in the “downstate” region, which includes New York City and its surrounding counties. The award of such aGaming Facility License is intended to be exclusive for a period of seven years commencing on the date of our award of the Gaming Facility License, whichoccurred in December 2015. We can provide no assurance that the New York State government will not change this law and issue additional Gaming FacilityLicenses before the expiration of this seven-year exclusivity period. If the New York State government were to allow additional competitors to operate in ourarea or in other regions of New York through the grant of additional Gaming Facility Licenses, we would face additional competition, which couldsignificantly increase the already intense competition in the northeastern United States and cause us to lose or be unable to gain market share.Our inability or the inability of our subsidiaries, key personnel, significant stockholders, vendors financial sources or joint venture partners to obtain ormaintain required gaming regulatory licenses, permits or approvals could prevent us from operating our facilities or otherwise adversely impact ourresults of operation.12Gaming is a highly regulated industry that is subject to extensive federal, state, provincial, and/or local laws, regulations and ordinances that areadministered by the relevant regulatory agency or agencies in each jurisdiction. These laws, regulations and ordinances vary from jurisdiction to jurisdiction,but generally concern the responsibilities, financial stability and character of the owners and managers of gaming operations as well as persons financiallyinterested or involved in gaming operations, and often require such parties to obtain certain licenses, permits and approvals. In addition, some of the licensesthat we and our subsidiaries, officers, directors, principal stockholders, financial sources and vendors hold expire after a relatively short period of time andthus require frequent renewals and reevaluations. Obtaining these licenses in the first place and the renewal process involves a subjective determination bythe regulatory agencies. We can provide no assurance that we will be able to continually renew all registrations, permits, approvals or licenses necessary toconduct our operations in the state of New York as intended. If we or our subsidiaries, financial sources or vendors do not obtain and maintain the requiredlicenses, permits and approvals, we or such individuals or entities, may be required to divest any interest in our current or future gaming facilities or ourcurrent gaming facilities risk losing their licenses. These laws, regulations and ordinances may also affect the operations of our gaming facilities or our plansin pursuing future projects. Any adverse developments in the regulation of the gaming industry in New York State could be difficult to comply with andcould significantly increase our costs, which could cause our operations to be unsuccessful.Changes in the laws, regulations, and ordinances (including local laws) to which our gaming operations are subject, and the application or interpretationof existing laws and regulations to our operations, may adversely affect our results of operation.Casino gaming is still a relatively new industry in New York and many of the rules and regulations governing casino gaming are still evolving andsubject to interpretation. Under the Gaming Act, the NYSGC has extensive authority to regulate gaming activities. The NYSGC also has the authority tointerpret the Gaming Act, which has far-reaching effect on our business decisions. For example, the NYSGC decides whether a gaming option available at theCasino constitutes a slot machine or table game and that decision impacts the choices we make on laying out the gaming floor. Certain provisions of thegaming regulations that have significant impact on our operations, such as the allowance for free play, are promulgated by the NYSGC and not established bythe Gaming Act. The NYSGC has further discretion to deviate from the established free play allowance and to revoke such deviation at any time. Moreover,lack of visibility into the applicability of, and the expense related to complying with, specific licensing requirements and background investigations meanswe are unable to pass on these costs to vendors and employees and thereby reduce our costs of operation. The uncertainty surrounding the evolvinginterpretations of the Gaming Act and the regulations promulgated by the NYSGC may hinder our ability to negotiate agreements with third parties, such as avendor or a junket enterprise, and establish policies relating to our workforce because we are unable to effectively judge the relative costs and benefits ofthese relationships. These new or changing regulations and interpretations of the Gaming Act, as well as the uncertainty of the NYSGC's further actions withrespect to such regulations and interpretations could adversely affect our results of operations.Our business is particularly sensitive to reductions in discretionary consumer and corporate spending as a result of global economic conditions.Consumer demand for resort casinos, trade shows and conventions and for the type of luxury amenities that we offer is particularly sensitive to changesin the global economy, which adversely impact discretionary spending on leisure activities. Changes in discretionary consumer spending or consumerpreferences brought about by factors such as perceived or actual general global economic conditions, high unemployment, weakness in housing or oilmarkets, perceived or actual changes in disposable consumer income and wealth, an economic recession and changes in consumer confidence in the globaleconomy, or fears of war and future acts of terrorism have in the past and could in the future reduce patron demand for the luxury amenities and leisureactivities we offer, and may have a significant negative impact on our operating results.The loss or a reduction in the play of our most significant patrons could have a material adverse effect on our business, financial condition, results ofoperations and cash flows. A downturn in economic conditions in the countries in which these patrons reside could cause a reduction in the frequency ofvisits by and revenue generated from these patrons.Also, consumer demographics and preferences may evolve over time, which, for example, has resulted in growth in consumer demand for non-gamingofferings. Our success depends in part on our ability to anticipate the preferences of consumers and react to those trends and any failure to do so maynegatively impact our operating results.13We are subject to greater risks than a geographically diverse company.Our operations are limited to the Catskills region of New York State, which has been affected by a decades-long decline in economic conditions. Weexpect that a majority of the patrons for our Casino will come from the New York metropolitan area. As a result, in addition to our susceptibility to adverseglobal and domestic economic, political and business conditions, any economic downturn in the Catskill region or the New York metropolitan area couldhave a material adverse effect on our operations. An economic downturn would likely cause a decline in the disposable income of consumers, which couldresult in a decrease in the number of patrons at our facilities, the frequency of their visits and the average amount that they would be willing to spend at ourfacilities. We are subject to greater risks than more geographically diversified gaming or resort operations, including:•a downturn in national, regional or local economic conditions;•an increase in competition in New York State or the northeastern United States and Canada, particularly for day-trip patrons residing in the NewYork metropolitan area, including as a result of other gaming and entertainment operations in New York State, Connecticut, New Jersey andPennsylvania;•impeded access due to road construction or closures of primary access routes; and•adverse weather and natural and other disasters in the northeastern United States.The occurrence of any one of the events described above could cause a material disruption in our business and make us unable to generate sufficientcash flow to make payments on our obligations.We are required to pay a portion of our cash flows as fixed and percentage rent under the Casino Lease and as a fee under the RWS License Agreement,which could adversely affect our ability to fund our operations and growth, service our indebtedness and limit our ability to react to competitive andeconomic changes.From March through August 2018, Montreign Operating is required to make monthly fixed rent payments of $1 million under the lease of the parcelon which the Casino was constructed (the "Casino Lease"). Beginning in September 2018, Montreign Operating is required to make annual rent payments of$7.5 million under the Casino Lease, subject to an 8% escalation every five years. In addition to fixed rent, beginning in September 2018 and through theremainder of the term of the Casino Lease, Montreign Operating is obligated to pay an annual percentage rent equal to five percent of the Eligible GamingRevenue (as such term is defined in the Casino Lease) in excess of the base rent. Furthermore, beginning on the date on which the Casino opened to thepublic, Montreign Operating is required to pay RWS a fee equivalent to a percentage of Net Revenue (as such term is defined in the RWS License Agreement)generated in each calendar year for its use of the RWS Licensed Marks. The percentage of Net Revenue payable as the fee is a low single digit percentage thatwill increase incrementally between the third year and sixth year of the term of the RWS License Agreement and will remain a low single digit percentageduring the entire term of the RWS License Agreement. As a result, our ability to fund our own operations, service our debt and otherwise respond tocompetitive and economic changes may be adversely affected. For example, our obligations under the Casino Lease and RWS Agreement may:•make it more difficult for us to satisfy our obligations with respect to our indebtedness and to obtain additional indebtedness; •increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;•require us to dedicate a substantial portion of our cash flow from operations to making rent payments, thereby reducing the availability of our cashflow to fund working capital, capital expenditures, development projects and other general corporate purposes;•limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; •restrict our ability to make acquisitions, divestitures and engage in other significant transactions; and•cause us to lose our rights with respect to the property leased under the Casino Lease or the RWS Licensed Marks if we default on the Casino Leaseor the RWS License Agreement, respectively. Any of the above factors could have a material adverse effect on our business, financial condition and results of operations.We depend on our skilled employees and key personnel and the loss of their services would adversely affect our operations and business strategy.The operation of our businesses requires qualified executives, managers and skilled employees with gaming, hospitality and horse racing industryexperience and qualifications to enable such individuals to obtain and maintain the requisite licenses and approvals from the NYSGC. We also placesubstantial reliance on the gaming, project development and hospitality industry experience and knowledge of the northeastern United States gaming marketpossessed by members of our senior management team. If we are unable to maintain our key personnel and attract new skilled employees with high levels ofexpertise in the gaming areas in which we engage and propose to engage, or are unable to do so without unreasonably increasing our labor costs, the14execution of our business strategy may be hindered and our growth limited. We believe that our success is largely dependent on the continued employmentof our executive management and the hiring of strategic personnel at reasonable costs. Competition for skilled employees and qualified executives is intenseand we can give no assurance that we would be able to hire a qualified replacement with the required level of experience and expertise for any currentmembers of our senior management, if required to do so. Accordingly, if any of our current key executives were unable or unwilling to continue in his or herpresent position, or we were unable to attract a sufficient number of qualified employees at reasonable rates, our business, results of operations and financialcondition would be materially adversely impacted. Additionally, recruiting and hiring a replacement for any skilled employees or executive managementposition could divert the attention of other senior management and increase our operating expenses.Work stoppages, labor problems and unexpected shutdowns may limit our operational flexibility and negatively impact our future profits.We are party to four collective bargaining agreements with different unions at our Monticello Casino and Raceway property. We will beginnegotiations with a negotiating unit for a collective bargaining agreement for certain employee groups at Resorts World Catskills. Further, we expect thatadditional agreements may be added in the future for Resorts World Catskills. The addition of new or changes to the existing collective bargainingagreements could cause significant increases in labor costs, which could have a material adverse effect on our businesses, financial condition and results ofoperations.In addition, the unions with which we have collective bargaining agreements or other unions could seek to organize groups of employees at ourproperties that are not currently represented by unions. Union organization efforts could cause disruptions in our businesses and result in significant costs.Any unexpected shutdown of our properties from a work stoppage or strike action could have a material adverse effect on our businesses and results ofoperations. Moreover, strikes, work stoppages or other job actions could also result in adverse media attention or otherwise discourage patrons, includingconvention and meeting groups, from visiting our properties. We cannot assure that we can be adequately prepared for labor developments that may lead to atemporary or permanent shutdown of any of our properties.We often extend credit, and we may not be able to collect gaming receivables from our credit players or credit play may decrease.We conduct our gaming activities on a credit as well as a cash basis. The casino credit we extend is generally unsecured and due on demand. We willextend casino credit to those patrons whose level of play and financial resources, in the opinion of management, warrant such an extension. Thecollectability of receivables from international patrons could be negatively affected by future business or economic trends or by significant events in thecountries in which these patrons reside.While gaming debts evidenced by a credit instrument, including what is commonly referred to as a "marker," are enforceable under the current laws ofNew York, and judgments on gaming debts are enforceable in all states of the United States under the Full Faith and Credit Clause of the United StatesConstitution, other jurisdictions may determine that direct or indirect enforcement of gaming debts is against public policy. Although courts of some foreignnations will enforce gaming debts directly and the assets in the United States of foreign debtors may be used to satisfy a judgment, judgments on gamingdebts from U.S. courts are not binding on the courts of many foreign nations. We cannot assure that we will be able to collect the full amount of gaming debtsowed to us, even in jurisdictions that enforce them. Changes in economic conditions may make it more difficult to assess creditworthiness and more difficultto collect the full amount of any gaming debt owed to us. Our inability to collect gaming debts could have a significant negative impact on our operatingresults.We face the risk of fraud and cheating.Our gaming patrons may attempt or commit fraud or cheat in order to increase winnings. Acts of fraud or cheating could involve the use of counterfeitchips or other tactics, possibly in collusion with our employees. Internal acts of cheating could also be conducted by employees through collusion withdealers, surveillance staff, floor managers or other casino or gaming area staff. Failure to discover such acts or schemes in a timely manner could result inlosses in our gaming operations. In addition, negative publicity related to such schemes could have an adverse effect on our reputation, potentially causing amaterial adverse effect on our business, financial condition, results of operations and cash flows.Win rates for our gaming operations depend on a variety of factors, some of which are beyond our control.The gaming industry is characterized by an element of chance. In addition to the element of chance, win rates are also affected by other factors, includingplayers’ skill and experience, the mix of games played, the financial resources of players, the spread of table limits, the volume of bets played, the amount oftime played and undiscovered acts of fraud or cheating. Our gross gaming revenues are mainly derived from the difference between our casino winnings andthe casino winnings of our gaming patrons.15Since there is an inherent element of chance in the gaming industry, we do not have full control over our winnings or the winnings of our gaming patrons.In addition, premium gaming is more volatile than other forms of gaming, and variances in win-loss results attributable to high-end gaming may have apositive or negative impact on cash flow and earnings in a particular quarter.Our table games business is subject to volatility which could adversely affect our financial condition.Table gaming, especially high-end table gaming, is more volatile than other forms of gaming, and variances in table games hold percentage may havea positive or negative impact on our quarterly revenues and operating results. Negative variations in quarterly revenues and operating results could adverselyaffect our financial condition.Our business could be affected by weather-related factors.Our results of operations could be adversely affected by weather-related factors, such as hurricanes and blizzards and other unfavorable winter weatherconditions. Such weather conditions may discourage potential patrons from traveling or may deter or prevent patrons from reaching our facilities. If thisoccurs, it could have a material adverse effect on our operating results and ability to meet our financial obligations.Our business is particularly sensitive to energy prices and a rise in energy prices could harm our operating results.We are a large consumer of electricity and other energy and, therefore, higher energy prices may have an adverse effect on our results of operations.Accordingly, increases in energy costs may have a negative impact on our operating results. Additionally, higher electricity and gasoline prices which affectour patrons may result in reduced visitation to Resorts World Catskills and Monticello Casino and Raceway and a reduction in our revenues.Negative conditions affecting the lodging industry may have an adverse effect on our revenues and cash flows.We depend on revenues generated from our hotel, together with revenues generated from other portions of the facilities, to meet our financialobligations and fund our operations. Revenues generated from our hotel are primarily subject to conditions affecting our gaming operations, but are alsosubject to the lodging industry in general, and as a result, our financial performance and cash flows may be affected not only by the conditions in the gamingindustry, but also by those in the lodging industry. Some of these conditions are as follows:•changes in the local, regional or national economic climate, including economic recessions;•changes in local conditions such as the supply of hotel properties;•decreases in the level of demand for hotel rooms and related services;•the attractiveness of our hotel to patrons;•cyclical over-building in the hotel industry;•changes in travel patterns;•public health concerns affecting public accommodations or travel generally or regionally; and•changes in room rates and increases in operating costs due to inflation and other factors.Casinos are subject to Anti-Money Laundering Laws. We deal with significant amounts of cash in the operations and will be subject to various reporting and anti-money laundering regulations. Wecooperate with all such inquiries. Any violation of AML laws or regulations, on which in recent years governmental authorities have been increasinglyfocused, with a particular focus on the gaming industry, by any of our properties could have a material adverse effect on our businesses, performance,prospects, value, financial condition and results of operations.We have implemented internal control policies and procedures and employee training and compliance programs to deter prohibited practices.However, such policies, procedures and programs may not be effective in prohibiting our directors, employees, vendors or agents from violating orcircumventing our policies and the law. If we or our directors, employees, vendors or agents fail to comply with applicable laws or our policies governing ouroperations, we may face investigations, prosecutions and other legal proceedings and actions, which could result in civil penalties, administrative remediesand criminal sanctions. Any such government investigations, prosecutions or other legal proceedings or actions could adversely affect our business,performance, prospects, value, financial condition, and results of operations.16Instability and volatility in the financial markets could have a negative impact on our ability to raise additional capital to expand our businesses.We may need to raise additional capital or incur additional indebtedness to finance our plans for growth. Instability and volatility in the financialmarkets caused by general economic conditions or otherwise may impede our ability to raise capital in the public or private credit or equity markets to fundour business strategy on terms we believe to be reasonable, if at all. Meanwhile, existing indebtedness, such as the Term Loan Facility and Revolving CreditFacility contain restrictive covenants that limit our ability to incur debt at all. Moreover, we may be unable to raise capital on terms acceptable to theCompany. An inability to obtain the capital we need to finance our growth plans may adversely effect our operations and business prospects.We may be subject to environmental liability as a result of unknown environmental hazards.We are subject to various federal, New York State and local environmental laws and regulations that govern our operations and the construction of theDevelopment Projects, including emissions and discharges into the environment, and the storage, handling and disposal of hazardous and non-hazardoussubstances and wastes. Failure to comply with such laws and regulations could result in regulatory fines, legal fees and costs for remediation. Such fines andcosts could be related to our storage, handling and disposal of waste from our racing operations, the existence of asbestos at Monticello Casino and Racewayand the existence of environmental conditions at the site of the Development Projects, which could have a material adverse effect on our businesses, financialcondition or results of operations.Our information technology and other systems are subject to cyber security risk including misappropriation of patron information or other breaches ofinformation security.We rely on information technology and other systems to maintain and transmit patrons' personal and/or financial information, credit card information,mailing lists and other information. We have taken steps designed to safeguard our patrons' personal and financial information and have implementedsystems designed to meet all requirements of the Payment Card Industry standards for data protection. However, our information and processes are subject tothe ever-changing threat of compromised security, in the form of a risk of potential breach, system failure, computer virus or unauthorized or fraudulentaccess or use by unauthorized individuals. The steps we take to deter and mitigate these risks may not be successful, and any resulting compromise or loss ofdata or systems could adversely impact operations or regulatory compliance and could result in remedial expenses, fines, litigation and loss of reputation,potentially impacting our financial results. Although we have invested in and deployed security systems and developed processes that are designed toprotect all sensitive data, prevent data loss and reduce the impact of any security breach, such measures cannot provide absolute security.Risks Relating to the Development ProjectsConstruction at the Development Projects, which is still ongoing, is subject to hazards that may cause personal injury or loss of life, thereby subjecting usto liabilities and possible losses, which may not be covered by insurance.The construction of large-scale properties such as the Development Projects can be dangerous. Construction workers at our projects are subject tohazards that may cause personal injury or loss of life, thereby subjecting the contractor and us to liabilities, possible losses, delays in completion of theprojects and negative publicity. In the event of such accidents, we may stop construction for several days to allow for safety inspections and investigations.We and our contractors will take safety precautions that are consistent with industry practice, but these safety precautions may not be adequate to preventserious personal injuries or further loss of life, damage to property or delays. If accidents occur during the construction of Development Projects, we may besubject to delays, including delays imposed by regulators, liabilities and possible losses, which may not be covered by insurance, and our business, prospectsand reputation may be materially and adversely affected.The costs associated with the Casino and the Development Projects may increase due to risks inherent in the design and development of such projects andtheir construction.The construction of the Development Projects subjects us to significant risks inherent in the construction of a new facility, including unanticipateddesign, construction, regulatory and environmental problems. The Development Projects could also experience:•changes to plans and specifications (some of which may require the approval of the NYSGC), even after the opening of such facilities;17•delays and significant cost increases;•shortages of materials;•shortages of skilled labor or work stoppages for contractors and subcontractors;•inability of contractors and subcontractors to obtain and maintain required licenses issued by the NYSGC;•inability to meet MWBE participation goals;•labor disputes or work stoppages;•disputes with and defaults by contractors and subcontractors;•health and safety incidents and site accidents;•engineering problems, including defective plans and specifications;•poor performance or nonperformance by any third parties on whom we place reliance;•changes in laws and regulations, or in the interpretation and enforcement of laws and regulations, applicable to gaming;•unforeseen construction scheduling, engineering, environmental, permitting, construction or geological problems;•environmental issues, including the discovery of unknown environmental contamination;•weather interference, floods, fires or other casualty losses;•other unanticipated circumstances or cost increases; and•failure to obtain necessary licenses, permits, entitlements or other governmental approvals with respect to the Entertainment Project and Golf CourseProject.The occurrence of any of these development and construction risks could increase the total costs of the Development Projects or delay or prevent theconstruction or opening or otherwise affect the design and features of the Development Projects, all of which could materially adversely affect our financialcondition and cause us to require additional external financing.The Casino has limited operating history and the Entertainment Project and the Golf Course have no operating history. Our expectations for theoperations of such properties may not serve as an adequate basis to judge our future operating results and prospects.There is no historical information available about the Entertainment Project or the Golf Course Project upon which you can base your evaluation oftheir respective business plans and prospects. The Casino has recently begun to generate revenue and the Entertainment Project and Golf Project will begingenerating revenue when they are open to the public. As a result, you should consider our business and prospects in light of the risks, expenses andchallenges that we will face as a company seeking to develop and operate a major new development project and gaming businesses in a rapidly growing andintensely competitive market.We have encountered and will continue to encounter risks and difficulties frequently experienced by companies developing a major new project, andthose risks and difficulties may be heightened in a rapidly developing market such as the gaming market in the northeastern United States. Some of the risksrelate to our ability to:•complete our construction projects within their anticipated time schedules and budgets;•attract and retain patrons and qualified employees;•operate, support, expand and develop our operations and our facilities;•maintain effective control of our operating costs and expenses;•develop and maintain internal personnel, systems and procedures to assure compliance with the extensive regulatory requirements applicable to thegaming business;•respond to changes in our regulatory environment; and•respond to competitive market conditions.If we are unable to complete any of these tasks, we may be unable to complete and operate the Development Projects in the manner we contemplate andgenerate revenues in the amounts and by the times we anticipate. We may also be unable to meet the conditions to draw on the Term A Loan in order to fundour development and construction activities. If any of these events were to occur, it would have a material adverse effect on our business and prospects,financial condition, results of operations and cash flows.Even if the Casino, the Entertainment Project and the Golf Course Project are completed as planned and opened, they may not be financially successful,which would limit our cash flow and would materially adversely affect our operations and our ability to repay our debt.Even if the Casino, the Entertainment Project and the Golf Course Project are completed as planned, one or more still may not be a financially successfulventure or generate the cash flows that we anticipate. We cannot assure that the level of consumer demand for the Casino or for the type of luxury amenitiesthat we will offer will meet our expectations, and we may not attract the level of patronage that we are seeking. If the Casino, the Entertainment Project or theGolf Course Project do not attract18sufficient business, this will limit our cash flow and would materially adversely affect our operations and our ability to service payments under our debtagreements. Additionally, the demands imposed by new developments on our managerial, operational and other resources may impact our operation of ourexisting Monticello Casino and Raceay facility. If any of these issues were to occur, it could adversely affect our prospects, financial condition, or results ofoperations.Our business depends on a strong brand and if we are not able to build, maintain and enhance our brand, our ability to expand our market will beimpaired and our business and operating results will be harmed.On March 31, 2017, we entered into the RWS License Agreement, pursuant to which RWS granted to Montreign Operating the non-exclusive, non-transferable, revocable and limited to right to use certain “Genting” and “Resorts World” trademarks. Building, maintaining and enhancing our brand mayrequire us to make substantial investments and these investments may not be successful. If we fail to promote and maintain our brand, or if we incur excessiveexpenses in this effort, our business, operating results and financial condition will be materially adversely affected. We anticipate that, as our market becomesincreasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive.We consider the Resorts World brand name under which we market our facility, property and services to be important to our business since it has theeffect of developing brand identification. We believe that the name recognition, reputation and image that we have developed attract patrons to ourfacilities. We anticipate the possibility that income generated from high-end gaming patrons can cause variability in our results.Risks Relating to our Ownership StructureStockholders’ ability to influence corporate decisions may be limited because our major stockholder owns a large percentage of our common stock.Kien Huat is the beneficial holder of 28,914,606 shares of our common stock, representing approximately 88.0% of our voting power as of March 15,2018. Under the terms of an investment agreement dated November 12, 2009 (the “Investment Agreement”), between the Company and Kien Huat, if anyoption or warrant outstanding as of the final closing under the Investment Agreement, or the first 200,000 shares granted to directors or officers who served insuch capacity as of the final closing date under the Investment Agreement, are exercised, Kien Huat has the right (following notice of such exercise) topurchase an equal number of additional shares of our common stock as are issued upon such exercise at the exercise price for the applicable option or warrant(such rights the "Option Matching Rights"). As of December 31, 2017, Kien Huat had approximately 3,000 Option Matching Rights.Under the terms of the Investment Agreement, Kien Huat is also entitled to recommend three directors candidates whom we are required to cause to beelected or appointed to our Board of Directors (“Board”), subject to the satisfaction of all legal and governance requirements regarding service as a directorand to the reasonable approval of the Corporate Governance and Nominations Committee of our Board. Kien Huat will continue to be entitled to recommendthree directors candidates for so long as it owns at least 24% of our voting power outstanding at such time, after which the number of directors whom KienHuat will be entitled to designate for election to our Board will be reduced proportionally to Kien Huat’s percentage of ownership. Under the InvestmentAgreement, for so long as Kien Huat is entitled to recommend nominees to serve as Board members, among other things, Kien Huat will have the right tonominate one of its director designees to serve as the Chairman of the Board. Emanuel Pearlman has been appointed to serve as Chairman of the Boardpursuant to Kien Huat’s recommendation. Until such time as Kien Huat ceases to own capital stock with at least 30% of our voting power outstanding at suchtime, our Board will be prohibited under the terms of the Investment Agreement from taking certain actions relating to fundamental transactions involving usand our subsidiaries and certain other matters without the affirmative vote of the directors recommended by Kien Huat and elected by shareholders.Consequently, Kien Huat has the ability to exert significant influence over our policies and affairs, including the election of our Board and the approval ofany action requiring a stockholder vote, such as approving amendments to our certificate of incorporation and mergers or sales of substantially all of ourassets, as well as other matters. Although Kien Huat has expressed no interest in doing so, Kien Huat is not restricted from acquiring additional shares of ourcommon stock, including through open market purchases. However, on February 17, 2016,and as amended on December 28, 2017, we entered into a letteragreement with Kien Huat (the "Kien Huat Letter Agreement"), wherein Kien Huat agreed, for a period of four years from the date of the Kien Huat LetterAgreement, to seek certain approvals of the Board of Directors and minority shareholders in connection with any "going-private" transaction.Notwithstanding the Kien Huat Letter Agreement, this concentration of voting power could delay or prevent an acquisition of our Company on terms thatother stockholders may desire or force the sale of our company on terms undesirable to other stockholders.19Risks Relating to the Market Value of Our Common StockThe Racing, Pari-Mutuel Wagering and Breeding Law of New York State requires our stockholders to possess certain qualifications. If the NYSGCbelieves a stockholder does not meet their subjective determination, a stockholder may be forced to sell any stock they hold and such sale may result in amaterial loss of investment value for the stockholder.The Racing, Pari-Mutuel Wagering and Breeding Law of New York State requires our stockholders to possess certain qualifications. A failure topossess such qualifications could lead to a material loss of investment by either us or our stockholders, as it would require divestiture of the stockholder’sdirect or indirect interest in us. Consequently, should any stockholder ever fail to meet the qualifications necessary to own a direct or indirect interest in us asdetermined by NYSGC, such stockholder could be forced to liquidate all interests in us. Should such stockholder be forced to liquidate these interests withina relatively short period of time, such stockholder would likely be forced to sell at a discount, causing a material loss of investment value.The market price of our common stock is volatile, leading to the possibility of its value being depressed at a time when our stockholders want to sell theirholdings.The market price of our common stock has in the past been, and may in the future continue to be, volatile. For instance, between January 1, 2017 andMarch 10, 2018, the closing price of our common stock has ranged between $15.49 and $30.98 per share. A variety of events may cause the market price ofour common stock to fluctuate significantly, including, but not necessarily limited to the following:•quarter-to-quarter variations in operating results;•day traders;•adverse or positive news reports or public announcements; and•market conditions for the gaming industry.In addition, the stock market in recent years has experienced significant price and volume fluctuations. This volatility has had a substantial effect onthe market prices of companies, at times for reasons unrelated to their operating performance. These market fluctuations may adversely affect the price of ourcommon stock and other interests in the Company at a time when our stockholders want to sell their interest in us.If we fail to meet the applicable continued listing requirements of NASDAQ Global Market, NASDAQ may delist our common stock, in which case theliquidity and market price of our common stock could decline.Our common stock is currently listed on the NASDAQ Global Market. In order to maintain that listing, we must satisfy certain continued listingrequirements. If we are deficient in maintaining the necessary listing requirements, our common stock may be delisted. If our common stock is delisted, anactive trading market for our common stock may not be sustained and the market price of our common stock could decline.We do not anticipate declaring any dividends in the foreseeable future.During the past three fiscal years, we did not declare or pay any cash dividends with respect to our common stock and we do not anticipate declaringany cash dividends on our common stock in the foreseeable future. We intend to retain all future earnings for use in the development of our business. Therecan be no assurance that we will have, at any time, sufficient surplus under Delaware law to be able to pay any dividends.Future sales of our common stock by our insiders may cause our stock price to decline.A portion of our outstanding shares are held by directors and executive officers and a significant portion of our outstanding shares are held by KienHuat, our largest stockholder. Resales of a substantial number of shares of our stock by these stockholders, announcements of the proposed resale ofsubstantial amounts of our stock, or the perception that substantial resales may be made by such stockholders could adversely impact the market price of ourstock. Some of our directors and executive officers have entered into Rule 10b5-1 trading plans pursuant to which they have arranged to sell shares of ourcommon stock from time to time in the future. Actual or potential sales by these insiders, including those under a prearranged Rule 10b5-1 trading plan mayadversely impact the market price of our stock.20Future sales of shares of our common stock in the public market could adversely affect the trading price of shares of our common stock and our ability toraise funds in new stock offerings.Future sales of substantial amounts of shares of our common stock in the public market, including pursuant to the Second Amendment to theCommitment Letter or the effective shelf registration statement, or the perception that such sales are likely to occur could affect the market price of ourcommon stock. Kien Huat’s stock ownership may also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control ofus, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.Risks Relating to our Racing OperationsThe continuing decline in the popularity of horse racing, decline of the horse population and increasing competition in simulcasting could adverselyimpact the business of Monticello Casino and Raceway.Since the mid-1980s, there has been a general decline in the number of people attending and wagering at live horse races at North American racetracksdue to a number of factors, including increased competition from other forms of gaming, unwillingness of guests to travel a significant distance to racetracksand the increasing availability of off-track wagering. The declining attendance at live horse racing events has prompted racetracks to rely increasingly onrevenues from inter-track, off-track and account wagering markets. The industry-wide focus on inter-track, off-track and account wagering markets hasincreased competition among racetracks for outlets to simulcast their live races. In 2017, 2016 and 2015, we generated approximately $2.9 million, $2.9million and $3.3 million, respectively, of revenues from the import and export simulcasting of out-of-state racing, of which approximately $1.4 million, $1.4million and $1.7 million, respectively, were due to the horsemen. A continued decrease in attendance at live events and in on-track wagering, continueddecline in the horse population and available drivers, as well as increased competition in the inter-track, off-track and account wagering markets, could leadto a decrease in the amount wagered at Monticello Casino and Raceway. Our business plan anticipates the possibility of Monticello Casino and Racewayattracting new guests to our racetrack wagering operations through VGMs in order to offset the general decline in raceway attendance. However, even if ourVGM operations attract new guests to our racetrack, we may not be able to generate profit from operations. Public tastes are unpredictable and subject tochange. Any further decline in interest in horse racing or any change in public tastes may adversely affect our revenues and, therefore, limit our ability tomake a positive contribution to our results of operation. Item 1B.Unresolved Staff Comments.None. Item 2.Properties.The Casino and the Related Development ProjectsThe Casino is located at the site of the Destination Resort being developed on approximately 1,700 acres in the Town of Thompson in SullivanCounty, New York, which is owned by EPR Properties, an entity unrelated to the Company. The Entertainment Project and the Golf Course are beingdeveloped on parcels adjacent to the Casino. The Company also has opportunities for future expansion on the existing and adjacent parcels within theDestination Resort. The Project Parties lease from subsidiaries of EPR Properties the parcels on which the Development Projects are located. The terms of suchleases are described below. Casino LeaseOn December 28, 2015, Montreign Operating entered into the Casino Lease with EPT for the lease of the parcel on which the Casino was constructed(the "Casino Parcel"). The Casino Lease has a term that expires on the earlier of (i) March 31, 2086 and (ii) Montreign Operating giving EPT written notice ofits election to terminate the Casino Lease (the "Termination Option") at least 12 months prior to each of the 20th, 30th, 40th, 50th and 60th anniversaries ofthe commencement of the Casino Lease (each such anniversary, an "Option Date"). Upon Montreign Operating's timely notice of exercise of its TerminationOption, the Casino Lease will be automatically terminated effective as of the applicable Option Date.The following table represents the future fixed rent payments under the Casino Lease at December 31, 2017:Year ending December 31,Fixed Rent Payments due by Period (in thousands)2018 (1) (2)$10,5002019 (2)7,5002020 (2)7,5002021 (2)8,0002022 (2)8,0002023 to 2056 (2)346,624(1)From March 1, 2017 through August 31, 2018, fixed rent is $1 million per month.(2)From September 1, 2018 through the remainder of the term of the Casino Lease, fixed rent will equal $7.5 million per year, subject to an eightpercent escalation every five years (the "Base Amount").In addition to fixed rent, beginning in September 2018 and through the remainder of the term of the Casino Lease (the "Percentage Rent Period"),Montreign Operating is obligated to pay an annual percentage rent equal to five percent of the Eligible Gaming Revenue (as such term is defined in theCasino Lease) in excess of the Base Amount for the Percentage Rent Period. Additionally, the lease is a net lease, and Montreign Operating has an obligationto pay the rent payable under the Casino Lease and other costs related to Montreign Operating's use and operation of the Casino Parcel, including the specialdistrict tax assessments allocated to the Casino Parcel, not to exceed the capped dollar amount applicable to the Casino Parcel.Golf Course LeaseOn December 28, 2015, ERREI entered into a sublease ("the Golf Course Lease") with the Destination Resort Developer for the lease of the parcel onwhich the Golf Course will be developed (the "Golf Course Parcel"). The terms of the Golf Course Lease are substantially similar to the Casino Lease, subjectto the material differences described below. Under the Golf Course Lease, there is no percentage rent due. The following table represents the future fixed rent payments under the Golf Course Lease at December 31, 2017:Year ending December 31,Fixed Rent Payments due by Period (in thousands)2018 (1) (2)$02019 (2)1252020 (2)1502021 (2)1502022 (2)1502023 to 2056 (2) (3)7,675(1)From the date the Golf Course Lease commenced and until the date on which the Golf Course opens for business, which is expected to be in Spring2019 (the "Golf Course Opening Date"), fixed rent payments will equal $0.(2)From the Golf Course Opening Date and continuing for the 10 years thereafter, fixed rent will equal $150,000 per year.(3)From March 2029 through the remainder of the term of the Golf Course Lease, fixed rent will equal $250,000 per year.The Golf Course Lease is a net lease and ERREI is obligated to pay the rent payable under the Golf Course Lease and other costs related to ERREI'suse and operation of the Golf Course Parcel, including the special district tax assessments allocated to21the Golf Course Parcel, not to exceed the capped dollar amount applicable to the Golf Course Parcel. This obligation will not be assessed against ERREI priorto December 2020.Entertainment Project LeaseOn December 28, 2015, ERREII entered into a sublease (the "Entertainment Project Lease") with the Destination Resort Developer, for the lease of theparcel on which the Entertainment Project will be built (the "Entertainment Project Parcel" and, together with the Casino Parcel and the Golf Course Parcel,the "Project Parcels"). The terms of the Entertainment Project Lease are substantially similar to the Casino Lease, subject to the material differences describedbelow. Under the Entertainment Project Lease, there is no percentage rent due.The following table represents the future fixed rent payments under the Entertainment Project Lease at December 31, 2017:Year ending December 31,Fixed Rent Payments due by Period (in thousands)2018 (1) (2)$122019 (2)1502020 (2)1502021 (2)1502022 (2)1502023 to 2056 (2) (3)7,713(1)From the date the Entertainment Project Lease commenced and until the date on which Entertainment Project opens for business, which is expectedto be December 2018 (the Entertainment Project Opening Date"), fixed rent payments will equal $0.(2)From the Entertainment Project Opening Date and continuing for the 10 years thereafter, fixed rent will equal $150,000 per year.(3)From September 2028 through the remainder of the term of the Entertainment Project Lease, fixed rent will equal $250,000 per year.The Entertainment Project Lease is a net lease and ERREII is obligated to pay the rent payable under the Entertainment Project Lease and other costsrelated to ERREII's use and operation of the Entertainment Project Parcel, including the special district tax assessments allocated to the Entertainment ProjectParcel, not to exceed the capped dollar amount applicable to the Entertainment Project Parcel. This obligation will not be assessed against ERREII prior toDecember 2020.On January 24, 2017, each of the Casino Lease, the Golf Course Lease and the Entertainment Project Lease were amended to correct scrivener’s errorsin the legal descriptions of the Project Parcels.Purchase Option AgreementOn December 28, 2015, Montreign Operating and EPT, EPR Concord II, Destination Report Developer and EPR Concord II, L.P. ("EPR LP" andtogether with EPT and Destination Resort Developer, "EPR") entered into a Purchase Option Agreement (the "Purchase Option Agreement"), pursuant towhich EPR granted to Montreign Operating the option to purchase (the "Purchase Option") all, but not fewer than all, of the Project Parcels for a purchaseprice of $175 million ($200 million after the sixth anniversary on March 1, 2022, less a credit of up to $25 million for certain previous payments made by theProject Parties). The Purchase Option commenced on December 28, 2015 and will expire on the earlier to occur of (i) the natural expiration of the term of theCasino Lease and (ii) 90 days following the earlier termination of the Casino Lease, if otherwise terminated in accordance with its terms (the “PurchaseOption Period”).Under the Purchase Option Agreement, EPR also granted to Montreign Operating the option (the "Resort Project Purchase Option") to purchase notless than all of the balance of the contiguous acres owned by EPR (the "EPR Property"), excluding the Development Project Parcels and the Waterpark (the"Resort Property"), for an additional fee. The Resort Project Purchase Option may be exercised only simultaneously with or after the exercise of the PurchaseOption. The Resort Project Purchase Option22commenced on December 28, 2015 and will expire on the earlier to occur of (a) the expiration of the Purchase Option Period or (b) March 1, 2026.Under the Purchase Option Agreement, EPR also granted to Montreign Operating a right of first offer ("ROFO") with respect to all or any portion of theResort Property. Under the terms of the ROFO, if EPR makes an offer to or rejects an offer made by Montreign Operating, then EPR shall be precluded for aperiod of six months from transferring the designated portion of the Resort Property at a price and on terms which are on the whole substantially equivalent toor worse than those proposed or accepted by Montreign Operating. The ROFO commenced on December 28, 2015 and will continue in full force and effectuntil EPR has sold, leased, licensed or otherwise transferred all of the Resort Property.Monticello LandMonticello Casino and Raceway is located on a 232-acre parcel of land in Monticello, New York, which is held in fee by MRMI. Monticello Casino andRaceway includes a clubhouse bar, pari-mutuel wagering facilities (including simulcasting), a paddock, exterior barns and related facilities for the horses,drivers, and trainers. In addition, our VGM operation is conducted in the renovated lower level of the grandstand portion of Monticello Casino and Raceway,which includes a 45,000-square foot gaming floor. The corporate offices of the Company are located on the second floor of the building at Monticello Casinoand Raceway.Item 3.Legal Proceedings.We are a party from time to time to various legal actions that arise in the normal course of business. In the opinion of management, the resolution ofthese other matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.Item 4.Mine Safety Disclosures.Not applicable.PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Market InformationOur common stock is listed on the NASDAQ Global Market under the symbol “NYNY”. The following table sets forth the high and low sale prices for thecommon stock for the periods indicated, as reported by the NASDAQ Global Market: High LowYear ended December 31, 2016 First Quarter$18.70 $11.38Second Quarter20.00 12.65Third Quarter20.38 14.78Fourth Quarter25.19 17.87Year ended December 31, 2017 First Quarter$24.90 $20.45Second Quarter25.50 22.50Third Quarter24.70 20.75Fourth Quarter29.10 20.75HoldersAccording to Continental Stock Transfer & Trust Company, there were approximately 183 holders of record of our common stock at March 12, 2018.23DividendsDuring the past three fiscal years, we did not declare or pay any cash dividends with respect to our common stock and we do not anticipate declaring anycash dividends on our common stock in the foreseeable future. We intend to retain all future earnings for use in the development of our business. There canbe no assurance that we will have, at any time, sufficient surplus under Delaware law to be able to pay any dividends.Pursuant to the terms of the Bangkok Bank Loan Agreement, neither Empire nor any of its subsidiaries are permitted to declare or pay any dividends ormake other payments to purchase, redeem, retire or otherwise acquire any capital stock of the Company. Such restriction will lapse upon the payment in fullof any amounts outstanding under the Bangkok Bank Loan Agreement. Notwithstanding the foregoing, so long as no event of default has occurred,subsidiaries of Empire are permitted to pay dividends to Empire and Empire may pay dividends on the Series B Preferred Stock and for withholding taxespayable in connection with equity compensation programs.The Board authorized the cash payment of Series B Preferred Stock quarterly dividends for the 2017 calendar year. Payments in the amount of $32,087were made on April 3, 2017, July 3, 2017, October 2, 2017 and January 2, 2018, respectively.Securities Authorized for Issuance Under Equity Compensation PlansThe following table provides information as of December 31, 2017 with respect to the shares of our common stock that may be issued under ourexisting equity compensation plans: (1) (2) Number ofsecurities to beissued uponexercise ofoutstandingoptions, warrantsand rights or vesting ofrestricted stock units (column - a) Weighted-average exerciseprice ofoutstandingoptions, warrantsand rights or vesting ofrestricted stock units(column - b) Number ofsecuritiesremainingavailable forfuture issuanceunder equitycompensationplans(excludingsecuritiesreflected incolumn (a))(column - c)2005 - Equity compensation plan approved by security holders147,000 $29.64 —2015 - Equity compensation plan approved by security holders73,000 $24.08 2,425,934Total220,000 $27.79 2,425,934 (1)These amounts reflect stock options granted under our 2005 Equity Incentive Plan (pursuant to which no grants may be made on or after May 23,2015, but such grants may extend beyond that date) and awards that may be granted under our 2015 Equity Incentive Plan.24Performance GraphThe following graph shows a comparison of the five-year total cumulative returns of an investment of $100 in cash on December 31, 2012 in (i) ourcommon stock, (ii) the Nasdaq Composite Index, (iii) S&P 500, and (iv) the Dow Jones U.S. Gambling Index. All values assume reinvestment of the fullamount of all dividends (to date, we have not declared any dividends).This stock performance graph will not be deemed “filed” with the SEC or subject to Section 18 of the Securities Exchange Act, nor shall it be deemedincorporated by reference in any of our filings under the Securities Act of 1933, as amended (the “Securities Act”).Comparison of cumulative total return on investment since December 31, 2012: Period Ending 12/31/201212/31/201312/31/201412/31/201512/31/201612/31/2017Empire Resorts Inc.100.00220.00352.73163.64206.82245.45S&P 500100.00129.60144.36143.31156.98187.47Dow Jones U.S. Gambling Index100.00168.66133.5798.95122.89167.26Nasdaq Composite Index100.00138.22156.85165.84178.28228.6325Item 6.Selected Financial DataThe following table presents our selected consolidated financial data for the five most recent fiscal years, which is derived from our audited consolidatedfinancial statements and the notes to those statements. Because the data in this table does not provide all of the data contained in our consolidated financialstatements, including the related notes, you should read "Management's Discussion and Analysis of Financial Condition and Results of Operations," and ourconsolidated financial statements, including the related notes, contained elsewhere in this document and other data we have filed with the U.S. Securities andExchange Commission. Fiscal Year Ended December 31, (amounts in thousands, except pershare data): 20172016201520142013Statement of Operations Gross revenues $69,893$70,301$71,634$69,514$76,418Less: Promotional allowances (4,042)(2,847)(3,468)(4,288)(5,457)Net revenues 65,85167,45468,16665,22670,961Total operating costs and expenses 95,76891,137102,12679,91291,081Loss from operations (29,917)(23,683)(33,960)(14,686)(20,120)Interest expense (19,269)(524)(2,643)(9,219)(1,405)Interest income 2,84210———Loss before income taxes (46,344)(24,197)(36,603)(23,905)(21,525)Income tax provision ——7717Net loss (46,344)(24,197)(36,610)(23,912)(21,542)Dividends on preferred stock (128)(168)(178)(188)(5,508)Net loss applicable to common stockholders $(46,472)$(24,365)$(36,788)$(24,100)$(27,050) Weighted average common shares outstanding: Basic 30,98128,22110,7499,2868,501Diluted 30,98128,22110,7499,2868,501Loss per common share: Basic $(1.50)$(0.86)$(3.42)$(2.60)$(3.18)Diluted $(1.50)$(0.86)$(3.42)$(2.60)$(3.18)Other Data: Net cash provided by / (used in): Operating activities $(33,933)$(12,921)$(31,380)$(15,492)$(4,342)Investing activities, including capital costs (432,306)(236,196)(20,298)(1,549)(6,567)Financing activities 465,607253,71751,65515,9509,372Capitalized Development Projects costs (300,277)(157,305)(4,074)—— Balance Sheet Data: Cash and cash equivalents $10,380$11,012$6,412$6,435$7,526Total assets 832,238339,75865,41839,86739,047Total long-term debt 497,095—17,42617,42617,426Series E Preferred Stock payable, includingcurrent portion ——30,48030,48022,800Stockholders' equity/(deficit) 271,321279,566(1,459)(17,101)(9,775) Operating Data: Total number of video gaming machines 1,1101,1101,1101,1101,110Total number of electronic table game positions 4040402020Total number of video lottery terminals 1,0701,0701,0701,0901,090 26Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated Financial Statementsand Notes thereto appearing elsewhere in this document.OverviewEmpire Resorts, Inc. (“Empire,” and, together with its subsidiaries, the “Company,” “us,” “our” or “we”) was organized as a Delaware corporation onMarch 19, 1993, and since that time has served as a holding company for various subsidiaries engaged in the hospitality and gaming industries.Our indirect wholly-owned subsidiary, Montreign Operating Company, LLC, doing business as Resorts World Catskills ("Montreign Operating"), owns andoperates Resorts World Catskills, a casino resort (the "Casino"), which is located in Sullivan County, New York, approximately 90 miles from New York City.Montreign Operating is the sole holder of a gaming license ( a "Gaming Facility License") issued by the New York State Gaming Commission ("NYSGC") inthe Hudson Valley-Catskill region, which consists of Columbia, Delaware, Dutchess, Greene, Orange, Sullivan and Ulster counties in New York State.Through our wholly-owned subsidiary, Monticello Raceway Management, Inc. ("MRMI"), we own and operate Monticello Casino and Raceway,which began racing operations in 1958 in Monticello, New York, which is proximate to the Casino. Monticello Casino and Raceway currently features avideo gaming machine ("VGM") and harness horseracing facility. We also generate racing revenues through pari-mutuel wagering on the running of liveharness horse races, the import simulcasting of harness and thoroughbred horse races from racetracks across the country and internationally, and the exportsimulcasting of our races to offsite pari-mutuel wagering facilities.Off-Balance Sheet ArrangementsNone.Critical Accounting PoliciesThe preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requiresmanagement to make estimates and assumptions that affect the amounts reported in the financial statements and judgments related to the application ofcertain accounting policies.While we base our estimates on historical experience, current information and other factors deemed relevant, actual results could differ from thoseestimates. We consider accounting estimates to be critical to our reported financial results if (i) the accounting estimate requires us to make assumptionsabout matters that are uncertain and (ii) different estimates that we reasonably could have used for the accounting estimate in the current period, or changes inthe accounting estimate that are reasonably likely to occur from period to period, would have a material impact on our financial statements.We consider our policies for revenue recognition to be critical due to the continuously evolving standards and industry practice related to revenuerecognition, changes which could materially impact the way we report revenues. Accounting polices related to: accounts receivable, impairment of long-lived assets, stock-based compensation, fair value and income taxes are also considered to be critical as these policies involve considerable subjectivejudgment and estimation by management. Critical accounting policies, and our procedures related to these policies, are described in detail below.Revenue recognition and Promotional allowancesGaming revenue is the net difference between gaming wagers and payouts for prizes from VGMs, non-subsidized free play and accruals related to theanticipated payout of progressive jackpots. Progressive jackpots contain base jackpots that increase at a progressive rate based on the credits played and arecharged to revenue as the amount of the jackpots increase. The Company recognizes gaming revenues before deductions of such related expenses as NYSGCshare of VGM revenue and the Monticello Harness Horsemen’s Association (the “MHHA”) and Agriculture and New York State Horse Breeding DevelopmentFund’s contractually required shares of revenue.Food, beverage, racing and other revenue, includes food and beverage sales, racing revenue earned from pari-mutuel wagering on live harness racingand simulcast signals to and from other tracks and miscellaneous income. We recognize racing revenues before deductions of such related expenses as purses,stakes and awards. Some elements of the racing revenues from Off-Track Betting Corporations (“OTBs”) are recognized as collected, due to uncertainty ofreceipt of and timing of payments.27Net revenues are recognized net of certain sales incentives in accordance with Financial Accounting Standards Board (“FASB”) Accounting StandardsCertification (“ASC”) 605-50, “Revenue Recognition—Customer Payments and Incentives”.The retail value of complimentary food, beverages and other items provided to our guests is included in gross revenues and then deducted aspromotional 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 relativegaming worth and prizes included in certain promotional marketing programs.Accounts receivableAccounts receivable, net of allowances, are stated at the amount we expect to collect. When required, an allowance for doubtful accounts is recordedbased on information on the collectability of specific accounts. Accounts are considered past due or delinquent based on contractual terms and how recentlypayments have been received and the Company's judgment of collectability. In the normal course of business, the Company settles wagers for otherracetracks and are exposed to credit risk. These wagers are included in accounts receivable. Account balances are charged against the allowance after allmeans of collection have been exhausted and the potential for recovery is considered remote.Impairment of long-lived assetsThe Company periodically reviews the carrying value of our long-lived assets in relation to historical results, as well as management’s best estimate offuture trends, events and overall business climate. If such reviews indicate an issue as to whether the carrying value of such assets may not be recoverable, theCompany will then estimate the future cash flows generated by such assets (undiscounted and without interest charges). If such future cash flows areinsufficient to recover the carrying amount of the assets, then impairment is triggered and the carrying value of any impaired assets would then be reduced tofair value.Stock-based compensationThe cost of all stock-based awards to employees, including grants of employee stock options, restricted stock and restricted stock units ("RSU's"), isrecognized in the financial statements based on the fair value of the awards at grant date. The fair value of stock option awards is determined using the Black-Scholes valuation model on the date of grant. The fair value of restricted stock awards is equal to the market price of our common stock on the date of grant.The fair value of stock-based awards is recognized as stock-based compensation expense on a straight-line basis over the requisite service period from thedate of grant.Fair valueThe Company follows the provisions of ASC 820, “Fair Value Measurement,” issued by the FASB for financial assets and liabilities. This standarddefines 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 ofan asset or replacement cost). The Company chose not to elect the fair value option as prescribed by FASB, for our financial assets and liabilities that had notbeen previously carried at fair value. The Company's financial instruments are comprised of current assets, restricted cash and investments, Interest Rate Cap,current liabilities and long-term loans. Current assets and current liabilities approximate fair value due to their short-term nature.Development Project costsBecause the Company's application for a Gaming Facility License was submitted in a competitive environment and the Company could not be certain itwould be awarded a Gaming Facility License, all costs incurred for the Development Projects were expensed until the Company was awarded a GamingFacility License on December 21, 2015. Once awarded the Gaming Facility License, the Company began capitalizing qualifying expenditures on theDevelopment Projects during the fourth quarter of 2015.28Results of Operations - Fiscal 2017 Compared to Fiscal 2016The results of operations for the years ended December 31, 2017 and 2016 are summarized below (dollars in the table in thousands): 2017 2016 Variance $ Variance %Revenues: Gaming$60,540 $59,633 $907 2 %Food, beverage, racing and other9,353 10,668 (1,315) (12)%Gross revenues69,893 70,301 (408) (1)%Less: Promotional allowances(4,042) (2,847) (1,195) 42 %Net revenues65,851 67,454 (1,603) (2)%Costs and expenses: Gaming44,486 44,238 248 1 %Food, beverage, racing and other9,709 10,174 (465) (5)%Selling, general and administrative15,743 19,692 (3,949) (20)%Development Projects21,558 12,970 8,588 66 %Stock-based compensation2,755 2,722 33 1 %Depreciation1,517 1,341 176 13 %Total costs and expenses95,768 91,137 4,631 5 %Loss from operations(29,917) (23,683) (6,234) 26 %Interest expense(19,269) (524) (18,745) — %Interest income2,842 10 2,832 — %Loss before income taxes(46,344) (24,197) (22,147) 92 %Income tax provision— — — — %Net loss$(46,344) $(24,197) $(22,147) 92 % Gaming revenueGaming revenue increased by $907,000, or 2%, for the 12 months ended December 31, 2017 ("fiscal 2017") as compared to the 12 months endedDecember 31, 2016 ("fiscal 2016"), from $59.6 million to $60.5 million. The increase in non-subsidized free play of $1.7 million, was a primary driver for therevenue increase. Handle decreased by approximately $10.1 million, or 1.1%, for the same period. The average daily win per unit decreased from $147.05 infiscal 2016 to $143.11 in fiscal 2017. VGM hold percentage remained unchanged at 6.4% in fiscal 2017 versus fiscal 2016. The severe weather during thefirst quarter of 2017 significantly impacted gaming revenue. During the second and third quarters of 2017, we made a concentrated effort to reduce ourmarketing to lower-tier unprofitable player segments and we increased our marketing efforts to regain mid- and high-level tier players. While this results inlower overall win due to fewer players, it generally increases overall player profitability. We expect the opening of the Casino to cause a reduction in VGMrevenues, offset by an increase in the commission we receive on such VGM revenues pursuant to the Gaming Act. Food, beverage, racing and other revenueFood, beverage, racing and other revenue decreased by $1.3 million, or 12%, in fiscal 2017 as compared to fiscal 2016, from $10.7 million to $9.4million. Racing revenue decreased by $138,000 in fiscal 2017 as compared to fiscal 2016. The decrease in racing revenue was primarily due to a decrease inthe horse population and the number of available drivers during fiscal 2017, resulting in fewer races.Food and beverage revenue decreased by $1.0 million in fiscal 2017 as compared to fiscal 2016. During the fourth quarter of 2016, the Companyrenovated the Terrace Room, which was closed from November 5 through December 19, 2016. The Terrace Room reopened as the Upper Deck as an a la carterestaurant on December 19, 2016. The Company closed the buffet restaurant Monticello Casino and Raceway on December 19, 2016. The Company openedthe new sports bar, named the Press Box, in May 2017. The sports bar has gained revenue volumes in late 2017, but did not make-up for the loss in businessfrom the buffet closure. These changes, along with the business disruption during the construction period, caused the reduction in food and beverage29revenues during fiscal 2017, as compared to the prior year. Other revenue decreased by approximately $167,000 in fiscal 2017, principally due to a decreasein ATM revenue and an increase in fixed asset disposals in fiscal 2017. Promotional allowancesPromotional allowances increased by $1.2 million, or 42%, in fiscal 2017 as compared to fiscal 2016, from $2.8 million to $4.0 million. Non-subsidized free play (free play subject to NYSGC and other commissions) increased approximately $1.7 million. Coupons, discounts and promotionsdecreased by $454,000 in fiscal 2017 due to the reduction in promotional activity after closing of the buffet and renovation of the Terrace Room. PlayersClub awards decreased by $103,000 in fiscal 2017 as compared to fiscal 2016. Gaming costsGaming costs increased by approximately $248,000, or 1%, in fiscal 2017 as compared to fiscal 2016, from $44.2 million to $44.5 million, primarilydue to higher NYSGC and other commissions of $537,000, resulting from higher gaming revenue. Partially offsetting these increases were decreases ingaming wages and related benefits of $192,000 as compared to fiscal 2016, primarily due to lower payroll related expenses. Other gaming expenses decreasedby approximately $96,000, primarily due to lower utilities expenses.Food, beverage, racing and other costsFood, beverage, racing and other costs decreased approximately $465,000, or 5%, in fiscal 2017 as compared to fiscal 2016, from $10.2 million to $9.7million. The decrease was primarily caused by the decrease in cost of sales of $466,000 in fiscal 2017 as compared to fiscal 2016, caused by lower food andbeverage revenues resulting from the buffet closure. Additionally, purses were $52,000 lower than fiscal 2016 due to fewer races and kitchen repairs andmaintenance was $41,000 lower than fiscal 2016. Partially offsetting these decreases was an increase of $81,000 due to New York State mandated horse drugtesting. Selling, general and administrative expensesSelling, general and administrative expenses decreased approximately $3.9 million, or 20%, in fiscal 2017 as compared to fiscal 2016, from $19.7million to $15.7 million. Legal fees decreased approximately $1.0 million, attributable to legal fees incurred in fiscal 2016 related to financing efforts for theCasino. Additionally, a $758,000 charge was recorded in the fourth quarter of 2016 related to a contingent matter which was settled in the first quarter of2017. Other professional service fees decreased approximately $2.0 million related to the decrease lobbying expenses in fiscal 2017. Consulting feesdecreased $847,000, primarily due to costs incurred in fiscal 2016 for financing efforts not consummated related to the Development Projects. Director feesdecreased $352,000 in fiscal 2017, due to the creation of the Executive Chairman position in 2016. These savings were partially offset by increases in payrolland related payroll benefits of $631,000, due to the increase in staffing during fiscal 2017 and the impact of the full year annual salary for the ExecutiveChairman position. Real estate taxes increased $292,000 in fiscal 2017, due to the phase out of the Empire Zone Tax Credit. Insurance expense increased$170,000 in fiscal 2017, primarily due to higher director and officer insurance premiums. Development Projects costsDevelopment projects costs increased by $8.6 million, or 66%, in fiscal 2017 as compared to fiscal 2016, from approximately $13.0 million to $21.6million. Payroll and related benefits costs increased $4.1 million in fiscal 2017, as the Company hired the management team and staff for the new Casino,primarily during latter part of 2017. Bank fees increased approximately $2.0 million, due to fees associated with the Term Loan Facility. Marketing expensesincreased $856,000, due to efforts to increase branding. Professional fees increased $475,000, primarily due to higher lobbying and consulting fees. Landlease and rents increased $365,000 as compared to fiscal 2016, and real estate taxes increased $243,000, primarily due to higher assessed valuations for theproperty. Other development costs increased approximately $850,000, due to pre-opening expenses incurred in preparation for the Casino opening.30Stock-based compensation expenseStock-based compensation increased by $33,000, or 1%, in fiscal 2017 as compared to fiscal 2016, from $2.7 million to approximately $2.8 million.This increase was primarily due to the amortization of compensation expense attributable to restricted stock grants, primarily for those issued during fiscal2016. In addition, this amount included a $600,000 annual charge for compensation granted to the horsemen based on a contractual agreement pursuant tothe MHHA agreement. Interest expenseInterest expense increased $18.7 million in fiscal 2017 as compared to fiscal 2016, from $524,000 to approximately $19.3 million. The increase ininterest expense was primarily due to borrowing under the Term B Loan Facility and the Kien Huat Montreign Loan and is inclusive of $2.1 million ofamortized debt issuance costs.Interest incomeInterest income increased approximately $2.8 million in fiscal 2017 as compared to fiscal 2016. The increase in interest income is due to interestreceived on the investment of unused restricted cash and investments for Development Projects.Results of Operations - Fiscal 2016 Compared to Fiscal 2015The results of operations for the years ended December 31, 2016 and 2015 are summarized below (dollars in thousands): 2016 2015 Variance $ Variance %Revenues: Gaming$59,633 $60,463 $(830) (1)%Food, beverage, racing and other10,668 11,171 (503) (5)%Gross revenues70,301 71,634 (1,333) (2)%Less: Promotional allowances(2,847) (3,468) 621 18 %Net revenues67,454 68,166 (712) (1)%Costs and expenses: Gaming44,238 44,525 (287) (1)%Food, beverage, racing and other10,174 10,493 (319) (3)%Selling, general and administrative19,692 12,648 7,044 56 %Development Projects12,970 32,514 (19,544) (60)%Stock-based compensation2,722 596 2,126 357 %Depreciation1,341 1,350 (9) (1)%Total costs and expenses91,137 102,126 (10,989) (11)%Loss from operations(23,683) (33,960) 10,277 30 %Interest expense(524) (2,643) 2,119 80 %Interest income10 — 10 — %Loss before income taxes(24,197) (36,603) 12,406 34 %Income tax provision— 7 (7) (100)%Net loss$(24,197) $(36,610) $12,413 34 % 31Gaming revenueGaming revenue decreased by $830,000, or 1%, for the 12 months ended December 31, 2016 ("fiscal 2016") as compared to the 12 months endedDecember 31, 2015 ("fiscal 2015"), from $60.5 million to $59.6 million. The decrease in non-subsidized free play of $735,000, was a primary driver for therevenue decrease. Handle increased by approximately $23.6 million, or 2.7%, for the same period. The average daily win per unit decreased from $149.24 infiscal 2015 to $147.05 in fiscal 2016. VGM hold percentage decreased to 6.4% in 2016 versus 6.8% in fiscal 2015. The severe weather during the first quarterof 2015 significantly impacted gaming revenue. During the second and third quarters, we made a concentrated effort to reduce our marketing to lower-tierunprofitable segments and we increased our marketing efforts to regain mid- and high-level tier players. While this results in lower overall win, it generallyincreases overall player profitability. During the first quarter of 2016, we benefited from milder weather as compared to 2015, resulting in an increase inrevenue of $2.3 million. Food, beverage, racing and other revenueFood, beverage, racing and other revenue decreased by $503,000, or 5%, for fiscal 2016 as compared to fiscal 2015, from $11.2 million to $10.7million. Racing revenue decreased by $220,000 in fiscal 2016 as compared to fiscal 2015. The decrease in racing revenue was primarily due to the reducedhorse population and the number of available drivers during fiscal 2016, resulting in fewer races.Food and beverage revenue decreased by $322,000 in fiscal 2016 as compared to fiscal 2015. During the fourth quarter, the Company renovated theTerrace Room, which was closed from November 5 through December 19, 2016. The Terrace Room reopened as the Upper Deck as an a la carte restaurant onDecember 19, 2016. The Company closed the buffet restaurant at Monticello Casino and Raceway on December 19, 2016. These changes, along with thebusiness disruption during the construction period, caused the reduction in food and beverage revenues during the fourth quarter, as compared to the prioryear. Other revenue increased by approximately $39,000 in fiscal 2016, principally due to an increase in ATM revenue. Promotional allowancesPromotional allowances decreased by $621,000, or 18%, in fiscal 2016 as compared to fiscal 2015, from $3.5 million to $2.8 million. Non-subsidizedfree play (free play subject to NYSGC and other commissions) decreased approximately $741,000. Food and beverage complimentaries decreased by $28,000during fiscal 2016 due to the closing of the buffet on December 19, 2016 and renovation of the Terrace Room, which was closed from November 5 throughDecember 19, 2016. The Terrace Room reopened as the Upper Deck on December 19, 2016. These decreases were partially offset by Players Club awards,which increased by $148,000 in fiscal 2016 as compared to fiscal 2015. Gaming costsGaming costs decreased by approximately $287,000, or 1%, in fiscal 2016 as compared to fiscal 2015, from $44.5 million to $44.2 million, primarilydue to lower NYSGC and other commissions of $477,000, resulting from lower gaming revenue. Other gaming expenses decreased by approximately$72,000, primarily due to lower utilities expense. Partially offsetting these decreases were increases in gaming wages and related benefits increased byapproximately $262,000 in fiscal 2016 as compared to fiscal 2015, due to higher labor and payroll related expenses.Food, beverage, racing and other costsFood, beverage, racing and other costs decreased approximately $319,000, or 3%, in fiscal 2016 as compared to fiscal 2015, from $10.5 million to$10.2 million. Cost of sales decreased by $173,000 in fiscal 2016 as compared to fiscal 2015, primarily due to lower revenues. Additionally, racing payrolland benefits decreased by $97,000 and food and beverage related expenses decreased slightly by $49,000. Selling, general and administrative expensesSelling, general and administrative expenses increased approximately $7.0 million, or 56%, in fiscal 2016 as compared to fiscal 2015, from $12.6million to $19.7 million. Legal and accounting fees increased approximately $1.9 million, attributable to increased legal fees in fiscal 2016 related tofinancing efforts for the Casino. Other professional service fees increased $2.0 million related to lobbying costs incurred in fiscal 2016. Consulting feesincreased $1.5 million, of which $1.0 million was due to costs incurred with financing efforts not consummated related to the Development Projects.Additionally, a $758,000 charge was recorded in the fourth quarter of 2016 related to a contingent matter which was settled in the first quarter of 2017.Marketing-related expenses32increased $251,000, primarily due to increased promotions, premium game fees, advertising and agency fees. Payroll and related benefits costs increasedapproximately $572,000, primarily due to the new Executive Chairman position. Real estate taxes increased $392,000, due to the phase out of the EmpireZone Tax Credit. New York State franchise taxes increased $119,000 during fiscal 2016, due to the increase in the Company's stockholder equity. Theseincreases were partially offset by savings in director fees of $441,000 and insurance expense of $117,000 as compared to fiscal 2015. Development Projects costsDevelopment Projects costs decreased by $19.5 million, or 60%, in fiscal 2016 as compared to the fiscal 2015 period, from $32.5 million to $13.0million. Development costs in fiscal 2016 were approximately $13.0 million and consisted of $10.4 million of land lease expenses, $400,000 of real estatetaxes, $324,000 in consultants and other professional service fees, $482,000 of insurance expenses, $164,000 in legal fees and $1.2 million of pre-openingexpenses primarily related to payroll and benefits, and marketing costs. Development costs significantly decreased in fiscal 2016 as compared to fiscal 2015,due the capitalization of certain development costs starting in December 2015 after the award of the Gaming Facility License to the Company by the NYSGC.Stock-based compensation expenseStock-based compensation increased by $2.1 million, or 357%, in fiscal 2016 as compared to fiscal 2015, from $596,000 to $2.7 million. This increasewas primarily due to the amortization of compensation expense attributable to restricted stock grants issued during 2016. In addition, this amount included a$600,000 accrual for compensation granted to the horsemen based on a contractual agreement pursuant to the MHHA agreement. Interest expenseInterest expense decreased $2.1 million, or 80%, in fiscal 2016 as compared to fiscal 2015, from $2.6 million to $524,000. The decrease in interestexpense was due to the redemption of the Series E Preferred Stock on March 6, 2016 and the conversion of the 2010 Kien Huat Note on March 17, 2016.Increases in the redemption value of our Series E Preferred Stock were recorded as a non-cash charge to interest expense in the amount of $231,000 and $1.2million in fiscal 2016 and fiscal 2015, respectively.33Liquidity and Capital Resources The accompanying consolidated financial statements have been prepared on a basis that contemplates the realization of assets and the satisfaction ofliabilities and commitments in the normal course of business. The Company anticipates that it will have sufficient resources to meet the working capitalrequirements of the Company and the expected costs of the Development Projects for at least the next 12 months. This assessment is based on the Company’scurrent cash and cash equivalents, including cash deposited as performance bonds to guarantee the completion of the Development Projects, cash generatedfrom operations, as well as the net proceeds of the debt financings the Company has consummated in fiscal 2017 and the additional financings the Companyanticipates consummating during the next 12 months. Cash FlowsHistorically and prospectively, our primary sources of liquidity and capital resources have been and will continue to be cash flow from operations,borrowings from banks and proceeds from the issuance of debt and equity securities. Based on our current level of operations and our expected results ofoperations of the Casino over the next 12 months, we believe that cash generated from operations and cash on hand, together with amounts available underour Term Loan Facility, Revolving Credit Facility and Bangkok Bank Loan, will be adequate to meet our anticipated debt service requirements, capitalexpenditures and working capital needs for the next 12 months. However, we cannot be certain that our business will generate sufficient cash flow fromoperations, that our anticipated earnings from the Casino will be realized, or that future borrowings will be available under our Term Loan Facility orotherwise to enable us to service our indebtedness or to make anticipated capital expenditures. Our future operating performance and our ability to serviceour debt will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. See “Risk Factors”of this Annual Report on Form 10‑K for a discussion of the risks related to our liquidity and capital structure.Net cash used in operating activities was approximately $33.9 million, $12.9 million and $31.4 million during fiscal 2017, 2016 and 2015,respectively. We continue to generate net losses and negative cash flows from operating activities, due to the expenses we are incurring related to theDevelopment Projects. We incurred $21.6 million, $13.0 million and $32.5 million of Development Projects costs during fiscal 2017, 2016 and 2015,respectively. Operating activity for fiscal 2017 was significantly affected by increased Casino development expenses of $8.6 million, along with higherinterest expense of $18.7 million during fiscal 2017. Our operating cash flows in fiscal 2017 were negatively impacted by severe weather during the firstquarter that caused a reduction in revenues. The decrease in cash flow in fiscal 2017 was primarily due to the increase in Development Projects expenses asthe Company hired the management team and staff for the new Casino, as well as the development of a branding strategy and pre-opening expenses for theCasino.We have had continuing net losses and negative cash flow from operating activities, including a loss from operations of $29.9 million in fiscal 2017.The net loss in fiscal 2017 was inclusive of Development Projects costs of $21.6 million. Interest expense was $19.3 million in fiscal 2017. Net cash used in investing activities was approximately $432.3 million, $236.5 million and $20.3 million during fiscal 2017, 2016 and 2015,respectively. The increase in fiscal 2017 over fiscal 2016 was due primarily to a greater usage of restricted cash and investments for the Development Projectsand higher capitalized Development Project costs of $99.1 million and $143.0 million, respectively. In fiscal 2017, we also made a $20.0 million payment fora cash collateral bond as required for the Casino. In fiscal 2016, we made payments of $15.0 million for the cash collateral bond and $51.0 million for alicense fee related to the Casino. Additionally, in fiscal 2017, we incurred Development Project costs of $300.3 million that were capitalized, and cash andinvestments that were restricted for the Development Projects were $110.0 million. At December 31, 2017, our total assets included approximately $136.4million of remaining net proceeds available from the Term Loan Facility and Kien Huat Montreign Loan, which are presented on the Consolidated BalanceSheet as a non-current asset (restricted cash and investments for Development Projects). The proceeds of the Term Loan Facility and the Kien Huat MontreignLoan may be used solely to pay for costs relating to the Development Projects.Net cash provided by financing activities was approximately $465.6 million, $253.7 million and $51.7 million during fiscal 2017, 2016 and 2015,respectively. Approximately $450.0 million was borrowed pursuant to the Term Loan Facility in fiscal 2017, and an additional $32.0 million was borrowedfrom Kien Huat pursuant to the Kien Huat Montreign Loan. These amounts were partially offset by payments of $32.0 million of debt issuance costs andInterest Rate Cap fees. Furthermore, approximately $16.0 million was borrowed pursuant to the Bangkok Bank Loan in December 2017. In connection withthe Bangkok Bank Loan, the Kien Huat Montreign Loan was exchanged for common stock of Empire in full satisfaction of such loan. At December 31, 2017,the Company had $31.1 million of equipment loans outstanding for the purchase of slot machines, equipment and software for the Casino. During fiscal2016, approximately $286.0 million was received from the January 2016 Rights Offering, which was34net of approximately $4.0 million of expenses, and $30.7 million of such proceeds was used to redeem the Series E Preferred Stock. In fiscal 2015,approximately $49.5 million of net proceeds were received from the 2015 Rights Offering. The Company received approximately $2.7 million in proceedsfrom the exercise of options and warrants during fiscal 2015. In addition during fiscal 2015, the Company redeemed 26,667 shares of its Series E PreferredStock for approximately $533,000.Development Project ExpendituresThe Company expects the Development Projects will cost approximately $920 million, which includes $744 million of anticipated costs forconstruction of the Development Projects, $81 million for contingency and interest reserves, $51 million for the Gaming Facility License fee and $44 millionof original issue discount and financing and legal fees. As of December 31, 2017, the Company has incurred an aggregate total of $687.8 million related to the Development Projects, including $566.8million of capitalized Development Projects costs, $39.1 million of interest expense related to bank debt for the Development Projects, $51.0 million for theGaming facility License and incurred $30.9 million of debt issuance costs related to the Development Projects. Principal Debt ArrangementsTerm Loan AgreementOn January 24, 2017, Montreign Operating entered into the Building Term Loan Agreement (the “Original Term Loan Agreement”), among MontreignOperating, the lenders from time to time party thereto, and Credit Suisse AG, Cayman Islands Branch (“Credit Suisse”), as administrative agent. On May 26,2017 , the parties entered into the first amendment to the Term Loan Agreement and certain ancillary agreements (the “Amended Term Loan Agreement” and,together with the Original Term Loan Agreement, the “Term Loan Agreement”). In the aggregate, the Term Loan Agreement provides Montreign Operatingwith loans in principal amount of $520 million (the “Term Loan Facility”). All of the borrowings under the Term Loan Agreement will be used to fund thecosts of the Development Projects.The Term Loan Agreement provides Montreign Operating with senior secured first lien term loans consisting of $70 million of Term A Loans and $450million of Term B Loans. The obligations of Montreign Operating under the Term Loan Facility are guaranteed by the Montreign Subsidiaries and aresecured by security interests in substantially all of the assets of the Project Parties, as well as by a pledge of the membership interests in Montreign Operating.In connection with the Term Loan Facility, Empire provided a completion guaranty capped at $30 million on the completion of construction of the Casinoand the Entertainment Project. Interest accrues on outstanding borrowings under the Term A Loan at a rate equal to LIBOR plus 5.0% per annum, or analternate base rate plus 4.0% per annum. Interest accrues on outstanding borrowings under the Term B Loan at a rate equal to LIBOR (with a LIBOR floor of1%) plus 8.25% per annum, or an alternate base rate plus 7.25% per annum. As of December 31, 2017, no borrowings were outstanding under the Term ALoan and $450 million was outstanding under the Term B Loan.As a condition to the Term Loan Agreement, the net proceeds from the Term B Loan and the Kien Huat Montreign Loan, which is discussed below,were deposited into an account controlled by the lenders under the Term Loan Facility. Any drawings on the Term A Loan, which may be made only after allof the proceeds of the Term B Loan have been deployed in the construction of the Development Projects or the operations of the Project Parties, will also bedeposited into the same lender-controlled account. The Company further funded this lender-controlled account with approximately $9.9 million in December2017 pursuant to the Term Loan Agreement from the proceeds of the Bangkok Bank Loan, which is discussed below. In order to access the funds (includingthe net proceeds from the Term Loan Facility and the Kien Huat Montreign Loan) held in these lender-controlled accounts, Montreign Operating must satisfythe applicable disbursement conditions set forth in the Term Loan Agreement and ancillary agreements, such as providing evidence that the withdrawn fundsare used for permitted purposes in connection with the Development Projects.The Term Loan Agreement restricts the Project Parties from incurring additional indebtedness except for, among other things, obligations pursuant tohedging agreements required under the Term Loan Agreement, capital lease obligations and purchase money indebtedness (including FF&E financing) in anamount not exceeding $40 million, subordinated indebtedness so long as the proceeds are applied pursuant to the terms of the Term Loan Agreement andother indebtedness not exceeding $10 million. Also, the Project Parties may not make any dividend or other distribution, redeem or otherwise acquire anyequity securities or subordinated indebtedness. Moreover, the Project Projects are restricted from entering into advisory, management or consultingagreements with an affiliate of any Project Party, including Empire, except for payments pursuant to tax sharing agreements, distributions in an amount notexceeding 1% of the net revenues of the Project Parties in any fiscal year, repurchase of capital stock of the Company in an amount not exceeding $1 millionand required by the NYSGC, and certain available amounts of cash based on the application of financial covenants.35The Term Loan Agreement requires Montreign Operating to maintain specified financial ratios and to satisfy certain financial tests, includinginterest coverage and senior leverage ratios. These financial covenants will be applicable beginning with the first fiscal quarter following the "full opening"of the Casino, as such term is defined in the Term Loan Agreement. Additionally, Montreign's capital expenditures cannot exceed the limitations set forth inthe Term Loan Agreement in any fiscal year and excess cash flow, as such term is defined in the Term Loan Agreement, must be applied towards repaying ofthe Term Loan commencing with the fiscal year in which the "full opening" of the Casino occurs. At December 31, 2017, Montreign Operating was incompliance with all the required financial covenants. On March 1, 2018, the Company contributed $2.7 million to an interest reserve fund under the TermLoan Agreement. This contribution reflects the additional interest to be paid on the Term Loan Facility as a result of the Company's deferral of thecompletion of 15 VIP suites at the Casino from March 1, 2018 to March 23, 2018.Revolving Credit AgreementOn January 24, 2017, Montreign Operating also entered into a revolving credit agreement, which was subsequently amended on May 24, 2017 andDecember 7, 2017 (as amended, the “Revolving Credit Agreement”) among Montreign Operating, the lenders from time to time party thereto, and Fifth ThirdBank, as administrative agent. The Revolving Credit Agreement provides for loans or other extensions of credit to be made to Montreign Operating in anaggregate principal amount of up to $15 million (including a letter of credit sub-facility of $10 million) (the “Revolving Credit Facility”), the proceeds ofwhich may be used for working capital needs, capital expenditures and other general corporate purposes following the initial opening of the Casino to thepublic. Interest will accrue on outstanding borrowings at a rate equal to LIBOR plus 5.0% per annum, or an alternate base rate plus 4.0% per annum. TheRevolving Credit Facility will mature on January 24, 2022. On January 23, 2018, the Company drew $9 million on the Revolving Credit Facility, and onFebruary 9, 2018, the Company drew down $4 million, after the opening of the Casino. Kien Huat Montreign Loan AgreementOn January 24, 2017, Montreign Holding entered into a loan agreement (the "Kien Huat Montreign Loan Agreement") with Kien Huat Realty IIILimited ("Kien Huat"), Empire's largest stockholder. Pursuant to the Kien Huat Montreign Loan Agreement, Montreign Holding obtained from Kien Huat aloan in the principal amount of $32.3 million (the "Kien Huat Montreign Loan"). The net proceeds of the Kien Huat Montreign Loan were used as a capitalcontribution to Montreign Operating for use towards the expenses of the Development Projects. The obligations of Montreign Holding under the Kien HuatMontreign Loan Agreement were secured by a pledge of all the membership interests in Montreign Holding.Concurrently with and as a condition to the closing of the Bangkok Bank Loan Agreement, which is discussed below, on December 28, 2017, Empire,Montreign Holding, and Kien Huat entered into a Note Exchange Agreement (the “Kien Huat Note Exchange Agreement”). The Kien Huat Note ExchangeAgreement provides for the issuance of 1,379,873 shares of common stock Kien Huat in full satisfaction of the Kien Huat Montreign Loan. In connectionwith the satisfaction in full of the Kien Huat Montreign Loan pursuant to the Kien Huat Note Exchange Agreement, Empire's pledge of its membershipinterests in Montreign Holding was released.To support the Company's financing needs for the Development Projects, Kien Huat entered into a series of commitment letters with the Company, whichwas last amended on September 22, 2015 (as amended, the "Kien Huat Commitment Letter"). Pursuant to the Kien Huat Commitment Letter, Kien Huat had anoutstanding obligation to participate in, and backstop, a rights offering in an amount not to exceed $35 million (the "Follow-On Rights Offering"). Inconnection with the Kien Huat Note Exchange Agreement, on December 28, 2017, the Company and Kien Huat further amended the Kien Huat CommitmentLetter to terminate Kien Huat's obligation to backstop the Follow-on Rights Offering.Bangkok Bank Loan AgreementOn December 28, 2017, the Company entered into a Delayed Draw Term Loan Credit Agreement (the “Bangkok Bank Loan Agreement”) withBangkok Bank PCL, New York Branch (“Bangkok Bank”), as lender, and MRMI, as guarantor. The Bangkok Bank Loan Agreement provides for loans to bemade to the Company in an aggregate principal amount of up to $20 million (the “Bangkok Bank Loan”).Interest will accrue on outstanding borrowings under the Bangkok Bank Loan Agreement at a rate equal to LIBOR plus 6.25%, or an alternate base rateplus 5.25% per annum. In addition, the Company will pay commitment fee to Bangkok Bank equal to the undrawn amount of the Bangkok Bank Loancommitment multiplied by a rate equal to 1.50% per annum. The Bangkok Bank Loan will mature on December 28, 2019. The Bangkok Bank Loan isguaranteed by MRMI and is secured by a security interest in Monticello Casino and Raceway. The Bangkok Bank Loan Agreement contains customaryrepresentations and warranties and affirmative covenants, negative covenants and financial covenants, including representations, warranties and covenantsthat,36among other things, restrict the ability of the Company and MRMI to incur additional debt, incur or permit liens on assets, make investments andacquisitions, consolidate or merge with any other company, engage in certain transactions with affiliates, or make dividends or other distributions.The Company borrowed $16 million at the closing of the Bangkok Bank Loan. Of this amount, the Company contributed approximately $9.9million to Montreign Operating pursuant to the terms of the Term Loan Agreement, as discussed above. The remaining balance of the Bangkok Bank Loandrawn down is available for the general corporate purposes of the Company.Kien Huat Backstop Loan AgreementConcurrently with and as a condition to the closing of the Bangkok Bank Loan Agreement, on December 28, 2017, Empire and Kien Huat entered intoa loan agreement (the “Kien Huat Backstop Loan Agreement”), providing for loans to Empire in an aggregate principal amount of up to $20 million (the“Kien Huat Backstop Loan”). Any amounts borrowed under the Kien Huat Backstop Loan will be used exclusively to make payments required under theBangkok Bank Loan Agreement and will mature on the one-year anniversary of the Maturity Date of the Bangkok Bank Loan, or such earlier date that theBangkok Bank Loan is terminated (the “Backstop Maturity Date”). As of December 31, 2017, no amounts had been borrowed under the Kien Huat BackstopLoan.Equipment Loan AgreementsThe Company has entered into several long-term financing agreements related to the purchase of its slot machines, equipment and software for theCasino' s hotel, information technology and other operations. The amount financed was $31.1 million and the terms of these agreements run between six and36 months. The stated interest rates for these loans are between zero and eight % per annum. The Company has imputed interest, on several equipment loanswith stated interest rates of 0%, using the Company's cost of funds rate of approximately 10%.The weighted average of the monthly repayments isapproximately $1.0 million.Other Factors Affecting Liquidity The Company may also raise additional equity or debt capital or enter into arrangements to secure necessary financing to fund the completion of theDevelopment Projects, to meet obligations under the Term Loan Facility or for the general corporate purposes of the Company. Such arrangements may takethe form of loans, strategic agreements, joint ventures or other agreements. The sale of additional equity could result in additional dilution to the Company’sexisting stockholders, and financing arrangements may not be available to us, or may not be available in sufficient amounts or on acceptable terms.On October 14, 2016, we filed a universal shelf registration statement on Form S-3 (the "Shelf Registration Statement") covering the offer and sale of$250 million of our securities. The Shelf Registration Statement, which also carried over $83.8 million of our securities registered on an expiring shelfregistration statement that remained unsold, was declared effective on November 17, 2016. As of March 15, 2018, we had up to approximately $333.0 millionavailable for future issuances under the Shelf Registration Statement. Unless otherwise indicated in a prospectus supplement, the Company expects the netproceeds from the sale of securities will be used to support the Development Projects, capital expenditures at MRMI, working capital and for other generalcorporate purposes. The Company may also use a portion of the net proceeds to acquire or invest in businesses, products and technologies that arecomplementary to our business.From time to time, we may pursue various strategic business opportunities. These opportunities may include proposed development and/ormanagement of, investment in or ownership of additional gaming operations through direct investments, acquisitions, joint venture arrangements and othertransactions. We are not currently exploring such opportunities. We can provide no assurance that we will successfully identify such opportunities or that, ifwe identify and pursue any of these opportunities, any of them will be consummated.Our common stock is transferable subject to the provisions of Section 303 of the Racing, Pari-Mutuel Wagering and Breeding Law, so long as we holddirectly or indirectly, a racetrack license issued by the NYSGC, and may be subject to compliance with the requirements of other laws pertaining to licensesheld directly or indirectly by us. The owners of common stock issued by us may be required by regulatory authorities to possess certain qualifications andmay be required to dispose of their common stock if the owner does not possess such qualifications.37Contractual Obligations Payments due by period(in thousands) Total Less than1 year 1 – 3years 3 – 5years Years 6 - 40Casino Lease (a)$388,124 $10,500 $15,000 $16,000 $346,624Golf Course Lease (b)8,250 — 275 300 7,675Entertainment Project Lease (c)8,325 12 300 300 7,713Term Loan B (d)450,000 3,3754,5009,000 9,000 428,625Equipment Loans (e)31,095 11,213 19,033 849 —Bangkok Bank Loan (f)16,000 — 16,000 — —Operating leases (g)5,158 2,223 2,739 196 —Total$906,952$27,323 $62,347 $26,645 $790,637(a)Annual fixed rent payments under the Casino Lease are as follows: (i) beginning March 2017 through August 2018 payments of $1 million permonth; (ii) beginning September 2018 payments of $625,000 per month escalating every five years by 8% through the end of the lease term.(b)Annual fixed rent payments under the Golf Course lease are as follows: (i) $0 prior to the date the Golf Course opens for business to the public (the“Golf Course Opening Date”), which is expected to be in the Spring of 2019; (ii) $150,000 for the first 10 years following the Golf Course OpeningDate; and (iii) $250,000 thereafter for the remainder of the term of the Golf Course Lease.(c)Annual fixed rent payments under the Entertainment Project Lease are as follows: (i) $0 prior to the date any portion of Entertainment Project firstopens for business to the public (the “EV Opening Date”), which is expected to be in September of 2018; (ii) $150,000 for the first 10 years followingthe EV Opening Date; and (iii) $250,000 thereafter for the remainder of the term of the Entertainment Project Lease.(d)The Term B Loan is a variable rate instrument, accordingly the payments reflected above include only principal amounts.(e)Equipment loan payments, primarily for the purchase of slot machines, software and other equipment for the Casino. The repayment period terms arebetween 24 and 36 months. These amounts exclude interest payments.(f)The Bangkok Bank Loan is a variable rate instrument, accordingly the payments reflected above include only principal amounts.(g)Operating lease payments for the short-term lease of slot machines, copiers and other Casino equipment. The lease periods extend from six months to36 months.Item 7A.Quantitative and Qualitative Disclosures About Market Risk.Market risk is the risk of loss arising from adverse changes in market rates and prices, including interest rates, commodity prices and equity prices. Wecurrently have invested a portion of the available proceeds from the Term B Loan in short-term commercial paper and U.S. Treasury Notes with maturities ofless than one year. At December 31, 2017, our investments totaled approximately $94.5 million. The investment maturity dates approximate the dates uponwhich the proceeds will be used under the terms of the Term Loan Facility to fund the Development Projects. We believe the short-term nature of theseinvestments limits our exposure to interest rate risk.The interest rate on the Term B Loan entered into on January 24, 2017, contains a variable component based on one-month LIBOR. However, theInterest Rate Cap entered into in February 2017 provided a limit on our exposure to increases in one-month LIBOR on $415 million from May 1, 2017through February 28, 2018 and, for a portion of our Term B Loan balance, provides a limit on our exposure through July 31, 2019. In addition, the Companyhad $16.0 million of delayed draw term loans outstanding at December 31, 2017, under the Bangkok Bank Loan. The Bangkok Bank Loan matures onDecember 28, 2019. The interest rate on the Bangkok Bank Loan entered into on December 28, 2017, contains a variable component based on one-monthLIBOR. Accordingly, based on outstanding borrowings at December 31, 2017, a one-point increase in LIBOR would increase interest expense (prior tointerest capitalization) by approximately $4.1 million for the next 12-month period ending December 31, 2018. 38Item 8.Financial Statements and Supplementary Data. PageFinancial Statements as of December 31, 2017 and 2016 and for the three years ended December 31, 2017: Report of Independent Registered Public Accounting Firm on Financial Statements40Report of Independent Registered Public Accounting Firm on Internal Controls over Financial Reporting41Consolidated Balance Sheets42Consolidated Statements of Operations and Comprehensive Loss43Consolidated Statements of Stockholders' Equity/(Deficit)44Consolidated Statements of Cash Flows45Notes to Consolidated Financial Statements4639Report of Independent Registered Public Accounting FirmOn Financial StatementsTo the Stockholders and Board of Directors of Empire Resorts, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Empire Resorts, Inc. and subsidiaries (the Company) as of December 31, 2017 and 2016,the related consolidated statements of operations and comprehensive loss, stockholders’ equity/(deficit), and cash flows for each of the three years in theperiod ended December 31, 2017, and the related notes and the financial statement schedule listed in Item 15 (collectively referred to as the "consolidatedfinancial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company atDecember 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, inconformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the PCAOB), the Company'sinternal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework), as applicable and our report dated March 16, 2018 expressed anunqualified opinion thereon.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion./s/ Ernst & Young LLPWe have served as the Company's auditor since 2012.Philadelphia, PennsylvaniaMarch 16, 201840Report of Independent Registered Public Accounting FirmOn Internal Control Over Financial ReportingTo the Stockholders and Board of Directors of Empire Resorts, Inc.Opinion on Internal Control over Financial ReportingWe have audited Empire Resorts, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2017, based on criteriaestablished in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)(the COSO criteria). In our opinion, Empire Resorts, Inc. and subsidiaries maintained, in all material respects, effective internal control over financialreporting as of December 31, 2017, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2017 consolidatedfinancial statements of the Company and our report dated March 16, 2018 expressed an unqualified opinion thereon.Basis for OpinionThe Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ Ernst & Young LLPPhiladelphia, PennsylvaniaMarch 16, 201841EMPIRE RESORTS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands) December 31, December 31, 2017 2016Assets Current assets: Cash and cash equivalents$10,380 $11,012Restricted cash693 1,078Accounts receivable, net1,273 921Prepaid expenses and other current assets3,550 4,335Total current assets15,896 17,346Property and equipment, net26,863 26,415Capitalized Development Projects costs566,797 202,438Restricted cash and investments for Development Projects136,431 26,384Intangible assets51,000 51,000Cash collateral for deposit bond35,000 15,000Other assets251 1,175Total assets$832,238 $339,758Liabilities and Stockholders’ equity Current liabilities: Accounts payable$2,686 $2,268 Current portion of long-term debt14,588 — Current portion of capital leases— —Accrued Development Projects costs71,712 41,933Accrued expenses and other current liabilities7,320 7,347Total current liabilities96,306 51,548Long-term debt, net of current portion455,148 —Other long-term liabilities9,463 8,644Total liabilities560,917 60,192Stockholders’ equity: Preferred Stock, 5,000 shares authorized; $0.01 par value Series B, $29 per share liquidation value, 44 shares issued and outstanding— —Common stock, $0.01 par value, 150,000 shares authorized, 32,560 and 31,156 shares issued andoutstanding at December 31, 2017 and 2016, respectively326 312 Additional paid-in capital572,342 533,813 Accumulated other comprehensive loss(315) — Accumulated deficit(301,032) (254,559)Total stockholders’ equity271,321 279,566Total liabilities and stockholders’ equity$832,238 $339,758The accompanying notes are an integral part of these consolidated financial statements.42EMPIRE RESORTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSYEARS ENDED DECEMBER 31,(In thousands, except for per share data) 201720162015Revenues: Gaming$60,540$59,633$60,463Food, beverage, racing and other9,35310,66811,171Gross revenues69,89370,30171,634Less: Promotional allowances(4,042)(2,847)(3,468)Net revenues65,85167,45468,166Operating costs and expenses: Gaming44,48644,23844,525Food, beverage, racing and other9,70910,17410,493Selling, general and administrative15,74319,69212,648Development Projects21,55812,97032,514Stock-based compensation2,7552,722596Depreciation1,5171,3411,350Total operating costs and expenses95,76891,137102,126Loss from operations(29,917)(23,683)(33,960)Interest expense(19,269)(524)(2,643)Interest income2,84210—Loss before income taxes(46,344)(24,197)(36,603)Income tax provision——7Net loss(46,344)(24,197)(36,610)Dividends on preferred stock(128)(168)(178)Net loss applicable to common stockholders$(46,472)$(24,365)$(36,788) Weighted average common shares outstanding: Basic30,98128,22110,749Diluted30,98128,22110,749Loss per common share: Basic$(1.50)$(0.86)$(3.42)Diluted$(1.50)$(0.86)$(3.42) Comprehensive loss: Net loss$(46,344)$(24,197)$(36,610)Other comprehensive loss: Unrealized loss on Interest Rate Cap$(315)$—$—Comprehensive loss$(46,659)$(24,197)$(36,610)The accompanying notes are an integral part of these consolidated financial statements.43EMPIRE RESORTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)YEARS ENDED DECEMBER 31, 2017, 2016 and 2015(In thousands) Preferred Stock* Common Stock Additionalpaid-incapital OtherComprehensiveLoss Accumulateddeficit TotalStockholders’Equity/(Deficit) Series B Series E Shares Amount Shares Amount Shares Amount Balances,December 31, 201444 $— 28 $1 7,901 $79 $176,117 $— $(193,297) $(17,101)Redemption ofSeries E PreferredStock— — (28) (1) — — (533) — (534)Declared and paiddividends onpreferred stock— — — — 5 — 159 (160) (1)Common stockissued fromexercise of rightsoffering— — — — 1,409 14 49,514 — 49,528Stock issuance— — — — 123 1 — — 1Options exercised— — — — 40 1 160 — 162Stock-basedcompensation— — — — — — 596 — 596Warrants exercised— — — — 83 1 2,499 — 2,500Net loss— — — — — — — (36,610) (36,610)Balances,December 31, 201544 — — — 9,561 96 228,512 — (230,067) (1,459)Declared and paiddividends onpreferred stock— — — — — — — (295) (295)Redemption ofSeries E PreferredStock— — — — 1,332 14 17,412 — 17,426Common stockissued fromexercise of rightsoffering— — — — 20,139 201 285,802 — 286,003Stock-basedcompensation— — — — — — 2,122 — 2,122Other— — — — 124 1 (35) — (34)Net loss— — — — — — — (24,197) (24,197)Balances,December 31, 201644 — — — 31,156 312 533,813 — (254,559) 279,566Declared and paiddividends onpreferred stock— — — — — — — (129) (129)Options exercised— — — — 2 — 16 — 16Stock-basedcompensation— — — — — — 2,155 — 2,155Stock issued forlegal settlement— — — — 34 — 758 — 758Restricted stockforfeited for taxpayment— — — — (12) — (275) — (275)Kien Huat noteconversion— — — — 1,380 14 35,875 — 35,889Comprehensiveloss (315) — (315)Net loss— — — — — — — (46,344) (46,344)Balances,December 31, 201744 $— — $— 32,560 $326 $572,342 $(315) $(301,032) $271,321 The accompanying notes are an integral part of these consolidated financial statements.44EMPIRE RESORTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2017 2016 2015Cash flows provided by (used in) operating activities:(in thousands)Net loss$(46,344) $(24,197) $(36,610)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation1,517 1,341 1,350Amortization of debt issuance costs2,091 105 —Provision / (Recovery) for doubtful accounts— — 10Non-cash interest expense3,846 231 1,241Loss on disposal of property and equipment42 5 1Stock-based compensation2,755 2,722 596Changes in operating assets and liabilities: Restricted cash - NYSGC Lottery and Purse Accounts371 268 354Accounts receivable(352) 235 (117)Prepaid expenses and other current assets785 506 (544)Other assets— — 3Accounts payable418 1,024 (962)Accrued expenses and other current liabilities938 4,839 3,298Net cash used in operating activities(33,933) (12,921) (31,380)Cash flows provided by (used in) investing activities: Purchase of property and equipment(2,007) (1,974) (767)Capitalized Development Project costs(300,277) (157,305) (4,074)Net change in restricted cash and investments for Development Projects(110,047) (10,912) (15,472)Restricted cash - racing capital improvement14 (5) 15Other11 — —Cash collateral for deposit bond(20,000) (15,000) —License fee payment for the Casino— (51,000) —Net cash used in investing activities(432,306) (236,196) (20,298)Cash flows provided by (used in) financing activities: Proceeds from Term Loan B450,000 — —Proceeds from related party equity contribution32,000 — —Proceeds from Bangkok Bank Loan16,000——Proceeds from rights offering, net of expenses— 286,003 49,528Series E Preferred Stock and dividend redemption— (30,711) (533)Series B Preferred Stock dividend payment(128) (263) —Proceeds from exercise of stock options and warrants16 54 2,660Payment of debt issuance costs and Interest Rate Cap fees(32,006) (1,278) — Other payments(275) (88) —Net cash provided by financing activities465,607 253,717 51,655Net increase (decrease) in cash and cash equivalents(632) 4,600 (23)Cash and cash equivalents, beginning of year11,012 6,412 6,435Cash and cash equivalents, end of year$10,380 $11,012 $6,412Supplemental disclosures of cash flow information: Interest paid$38,755 $407 $1,398Income taxes paid$— $— $—Non-cash investing and financing activities: Common stock issued in settlement of preferred stock dividends$— $— $159Conversion of long-term loan, related party into equity$35,875 $17,426 $—Project development costs included in accrued expenses$71,713 $40,783 $6,331The accompanying notes are an integral part of these consolidated financial statements.45EMPIRE RESORTS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote A. Organization and Nature of BusinessBasis for PresentationEmpire Resorts, Inc. (“Empire,” and, together with its subsidiaries, the “Company,” “us,” “our” or “we”) was organized as a Delaware corporation onMarch 19, 1993, and since that time has served as a holding company for various subsidiaries engaged in the hospitality and gaming industries.Our indirect, wholly-owned subsidiary, Montreign Operating Company, LLC doing business as Resorts World Catskills "Montreign Operating"), ownsand operates Resorts World Catskills, a casino resort (the "Casino"), which is located in Sullivan County, New York, approximately 90 miles from New YorkCity. Montreign Operating is the sole holder of a gaming license (a "Gaming Facility License") in the Hudson Valley-Catskill region, which consists ofColumbia, Delaware, Dutchess, Greene, Orange, Sullivan and Ulster counties in New York State.Through our wholly-owned subsidiary, Monticello Raceway Management, Inc. ("MRMI"), we own and operate Monticello Casino and Raceway,which began racing operations in 1958 in Monticello, New York, which is proximate to the Casino. Monticello Casino and Raceway currently features avideo gaming machine ("VGM") and harness horseracing facility. We also generate racing revenues through pari-mutuel wagering on the running of liveharness horse races, the import simulcasting of harness and thoroughbred horse races from racetracks across the country and internationally, and the exportsimulcasting of its races to offsite pari-mutuel wagering facilities. Liquidity and Capital ResourcesHistorically and prospectively, our primary sources of liquidity and capital resources have been and will continue to be cash flow from operations,borrowings from banks and proceeds from the issuance of debt and equity securities. Based on our current level of operations and our expected results ofoperations of the Casino over the next 12 months, we believe that cash generated from operations and cash on hand, together with amounts available underour Term Loan Facility, Revolving Credit Facility and Bangkok Bank Loan, will be adequate to meet our anticipated debt service requirements, capitalexpenditures and working capital needs for the next 12 months. However, we cannot be certain that our business will generate sufficient cash flow fromoperations, that our anticipated earnings from the Casino will be realized, or that future borrowings will be available under our Term Loan Facility orotherwise to enable us to service our indebtedness or to make anticipated capital expenditures. Our future operating performance and our ability to serviceour debt will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.Note B. Summary of Significant Accounting PoliciesPrinciples of consolidationThe consolidated financial statements include Empire’s accounts and their wholly-owned subsidiaries. All inter-company balances and transactionsare eliminated in consolidation.Estimates and assumptionsThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results may differ from estimates.ReclassificationsCertain amounts in the accompanying consolidated financial statements for fiscal 2016 and 2015 have been reclassified to conform to presentation infiscal 2017, most notably amortization of debt issuance costs has been included within interest expense on the Statement of Operations.46Revenue recognition and Promotional allowancesGaming revenue is the net difference between gaming wagers and payouts for prizes from VGMs, non-subsidized free play and accruals related to theanticipated payout of progressive jackpots. Progressive jackpots contain base jackpots that increase at a progressive rate based on the credits played and arecharged to revenue as the amount of the jackpots increase. The Company recognizes gaming revenues before deductions of such related expenses asNYSGC’s share of VGM revenue and the Monticello Harness Horsemen’s Association (the “MHHA”) and Agriculture and New York State Horse BreedingDevelopment 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 racingand simulcast signals to and from other tracks and miscellaneous income. The Company recognizes racing revenues before deductions of such relatedexpenses as purses, stakes and awards. Some elements of the racing revenues from Off-Track Betting Corporations (“OTBs”) are recognized as collected, dueto 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 StandardsCertification (“ASC”) 605-50, “Revenue Recognition—Customer Payments and Incentives”.The retail value of complimentary food, beverages and other items provided to the Company’s guests is included in gross revenues and then deductedas 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 relativegaming worth and prizes included in certain promotional marketing programs.As described below in "Recently Issued Accounting Pronouncements," the accounting related to our revenues, including complimentary revenue, willbe impacted by the adoption of ASC 606 during the first quarter of 2018.The retail value amounts included in promotional allowances for the years ended December 31, 2017, 2016 and 2015 were as follows: Year ended December 31, 2017 2016 2015 (in thousands)Food and beverage$1,000 $1,486 $1,553Non-subsidized free play2,718 978 1,720Players Club awards324 383 195Total retail value of promotional allowances$4,042 $2,847 $3,468The estimated cost of providing complimentary food, beverages and other items for the years ended December 31, 2017, 2016 and 2015 were asfollows: Year ended December 31, 2017 2016 2015 (in thousands)Food and beverage$1,750 $2,080 $2,109Non-subsidized free play1,603 577 1,015Players Club awards324 383 195Total cost of promotional allowances$3,677 $3,040 $3,319Cash and cash equivalentsCash and cash equivalents include cash on account, demand deposits and certificates of deposit with original maturities of three months or less atacquisition. The Company maintains significant cash balances with financial institutions, which are not covered by the Federal Deposit InsuranceCorporation. The Company has not incurred any losses in such accounts and believes it is not exposed to any significant credit risk on cash.Restricted cashThe Company has three types of restricted cash accounts.47Approximately $368,000 of cash is held in reserve in accordance with NYSGC regulations as of December 31, 2017 as listed below. The Companygranted the NYSGC a security interest in the segregated cash account used to deposit NYSGC’s share of net win in accordance with the NYSGC Rules andRegulations.Under New York State Racing, Pari-Mutuel Wagering and Breeding Law, MRMI is obliged to withhold a certain percentage of certain types of racingand pari-mutuel wagers towards the establishment of a pool of money, the use of which is restricted to the funding of approved capital improvements.Periodically during the year, MRMI petitions the NYSGC to certify that the noted expenditures are eligible for reimbursement from the capital improvementfund. The balance in this account was approximately $25,000 and $39,000 at December 31, 2017 and 2016, respectively. In April 2005, the New York lawgoverning VGM operations was modified to provide an increase in the revenues retained by the VGM operator. A portion of that increase was designated as areimbursement of marketing expenses incurred by the VGM operator. The amount of revenues directed toward this reimbursement is deposited in a bankaccount under the control of the NYSGC and the VGM operator. The funds are transferred from this account to the VGM operator upon the approval byNYSGC officials of the reimbursement requests submitted by the VGM operator. The balance in this account was approximately $343,000 and $354,000 atDecember 31, 2017 and 2016, respectively.In addition to the NYSGC restricted cash balances listed above, the Company established an account to segregate amounts collected and payable toMonticello Harness Horsemen’s Association (the “MHHA”) and pursuant to its contract. The balance in this account was approximately $324,000 and$685,000 at December 31, 2017 and 2016, respectively.Restricted cash and investments for Development ProjectsRestricted cash and investments for Development Projects represented the remaining funds from the Term Loan Facility and the Kien Huat MontreignLoan to be utilized for the Development Projects. At December 31, 2017, restricted cash and investments for Development Projects balance of $136.4 millionis comprised of cash balances of approximately $11.2 million, cash equivalents of approximately $30.7 million and short-term investments maturing withinone year of approximately $94.5 million. At December 31, 2017, short-term marketable securities were comprised of commercial paper of approximately$59.4 million and U. S. Treasury Notes of approximately $35.1 million, all with maturities of less than one year. The short-term marketable securities arerecorded at amortized cost, which approximates fair value due to their short-term nature.Accounts receivableAccounts receivable, net of allowances, are stated at the amount the Company expects to collect. When required, an allowance for doubtful accounts isrecorded based on information on the collectability of specific accounts. Accounts are considered past due or delinquent based on contractual terms, howrecently payments have been received and the Company’s judgment of collectability. In the normal course of business, the Company settles wagers for otherracetracks and is exposed to credit risk. These wagers are included in accounts receivable. Account balances are charged against the allowance after all meansof collection have been exhausted and the potential for recovery is considered remote. The Company recorded an allowance for doubtful accounts ofapproximately $171,000 and $171,000, as of December 31, 2017 and 2016, respectively.Property and equipmentProperty and equipment is stated at cost less accumulated depreciation. The Company provides for depreciation on property and equipment used byapplying the straight-line method over the following estimated useful lives:AssetsEstimatedUsefulLivesVehicles5-10 yearsFurniture, fixtures and equipment5-10 yearsLand improvements5-20 yearsBuilding improvements5-40 yearsBuildings40 yearsCapitalized InterestInterest costs incurred in connection with the construction of the Casino and the Development Projects have been capitalized in the cost of the projects.Capitalization will cease when the Casino or the other Development projects are substantially complete or if development activity is suspended for anextended period of time.48The Company capitalized $29.1 million of interest charges for the year ended December 31,2017. The Company did not recognize any capitalizedinterest charges for the fiscal years ended December 31, 2016 and 2015.Debt issuance costsDebt issuance costs are amortized on a straight-line basis which approximates the effective interest method over the term of the related debt. Theamortization is included within interest expense and is included as a component of the capitalized interest costs.Development Projects Costs The Company's application for a Gaming Facility License was submitted in a competitive environment and the Company could not be certain it wouldbe awarded a Gaming Facility License, accordingly all costs incurred for the Development Projects were expensed until the Company was awarded a GamingLicense on December 21, 2015. Once awarded the Gaming Facility License, the Company began capitalizing qualifying expenditures on the DevelopmentProjects during the fourth quarter of 2015. Impairment of long-lived assetsThe Company periodically reviews the carrying value of its long-lived assets in relation to historical results, as well as management’s best estimate offuture trends, events and overall business climate. If such reviews indicate an issue as to whether the carrying value of such assets may not be recoverable, theCompany will then estimate the future cash flows generated by such assets (undiscounted and without interest charges). If such future cash flows areinsufficient to recover the carrying amount of the assets, then impairment is triggered and the carrying value of any impaired assets would then be reduced tofair value.Loss contingenciesThere are times when non-recurring events may occur that require management to consider whether an accrual for a loss contingency is appropriate.Accruals for loss contingencies typically relate to certain legal proceedings, customer and other claims and litigation. As required by generally acceptedaccounting principles in the United States of America (“GAAP”), the Company determines whether an accrual for a loss contingency is appropriate byassessing whether a loss is deemed probable and can be reasonably estimated. The Company analyzes its legal proceedings and other claims based onavailable information to assess potential liability. The Company develops its views on estimated losses in consultation with outside counsel handling itsdefense in these matters, which involves an analysis of potential results assuming a combination of litigation and settlement strategies.Other long-term liabilitiesThe difference between our cash payments and straight-line rent on our land leases of $8.3 million at December 31, 2017 is included in other long-termliabilities.Common stock - loss per shareThe Company computes basic loss per share by dividing net loss applicable to common shares by the weighted-average common shares outstanding forthe period. Diluted loss per share reflects the potential dilution of earnings that could occur if securities or contracts to issue common stock were exercised orconverted into common stock or resulted in the issuance of common stock that then shared in the loss of the entity. Since the effect of common stockequivalents is anti-dilutive with respect to losses, these common stock equivalents have been excluded from the Company’s computation of loss per commonshare. Therefore, basic and diluted loss per common share for the years ended December 31, 2017, 2016 and 2015 were the same.49The following table shows the approximate number of common stock equivalents outstanding at December 31, 2017, 2016 and 2015 that couldpotentially dilute basic loss per share in the future, but were not included in the calculation of diluted loss per share for the years ended December 31, 2017,2016 and 2015, because their inclusion would have been anti-dilutive: Outstanding at December 31, 2017 2016 2015Restricted stock139,000 216,000 137,000Warrants133,000 133,000 133,000Restricted stock units ("RSU's)73,000 — —Option Matching Rights3,000 21,000 229,000Options13,000 34,000 57,000Shares to be issued upon conversion of long-term loan, related party— — 1,332,000Total361,000 404,000 1,888,000Pursuant to the terms of the Investment Agreement (defined in Note J), Kien Huat has the right to purchase an equal number of additional shares ofcommon stock as are issued upon the exercise of certain options and warrants (the "Option Matching Rights"). On February 17, 2016, the Company providedwritten notice to Kien Huat regarding the exercise of certain Option Matching Rights to elect whether to exercise such Option Matching Rights. On February17, 2016, Kien Huat declined to exercise the Option Matching Rights to purchase 204,706 shares of common stock. On January 24, 2018, Kien Huatexercised its option to purchase 1,666 shares of common stock due to a recent option exercise.Interest Rate Cap AgreementIn February 2017, the Company entered into an interest rate cap agreement with Credit Suisse AG, International to limit its exposure to increases ininterest rates on its Term B Loan (as defined below) from May 1, 2017 through February 28, 2018 and then for a portion of the balance of its Term B Loanthrough July 31, 2019 (the "Interest Rate Cap"). The Company paid $675,000 for the Interest Rate Cap. The cost of the Interest Rate Cap is amortized over itsterm as interest expense. The fair value of the Interest Rate Cap was $251,000 at December 31, 2017 and is presented at fair value as "Other Assets" on theConsolidated Balance Sheet. The difference between the fair value and amortized cost is recorded as an adjustment to accumulated other comprehensive loss.Accumulated Other Comprehensive LossAs of December 31, 2017, accumulated other comprehensive loss of $315,000 consisted solely of the fair value adjustment relating to the Interest RateCap.Fair valueThe Company follows the provisions of ASC 820, “Fair Value Measurement,” issued by the FASB for financial assets and liabilities. This standarddefines 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 ofan asset or replacement cost). The Company chose not to elect the fair value option as prescribed by the FASB, for its financial assets and liabilities that hadnot been previously carried at fair value. The Company’s financial instruments are primarily comprised of current assets, restricted cash and investments,Interest Rate Cap, current liabilities and long-term debt. Current assets, investments and current liabilities approximate fair value due to their short-termnature.In determining fair value, the Company uses quoted prices and observable inputs. Observable inputs are inputs that market participants would use inpricing the asset or liability based on market data obtained from sources independent of the Company. The fair value hierarchy of observable inputs used by the Company is broken down into three levels based on the source of inputs as follows:- Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.- Level 2 - Valuations based on inputs that are observable inputs and quoted prices in active markets for similar assets and liabilities.50- Level 3 - Valuations based on inputs that are unobservable and models that are significant to the overall fair value measurement. The following table presents the carrying amount, fair values and classification level within the fair value hierarchy of financial instruments measuredor disclosed at fair value on a recurring basis: December 31, 2017 December 31, 2016 CarryingAmount Fair Value CarryingAmount Fair Value Level of Fair ValueHierarchyAssets: (in thousands) Cash and cash equivalents $10,380 $10,380 $11,012 $11,012 Level 1 Restricted cash 693 693 1,078 1,078 Level 1 Interest Rate Cap 251 251 — — Level 2 Restricted cash and investments forDevelopment Projects: Cash and cash equivalents 41,920 41,920 — — Level 1 Marketable securities 94,511 94,209 — — Level 2 Liabilities: Term B Loan 450,000 449,749 — — Level 2 Bangkok Bank Loan 16,000 16,000 — — Level 3 Equipment loans 31,095 31,095 — — Level 3The fair value of cash and cash equivalents and restricted cash are based on the fair values of identical assets in active markets. The Company used athird party to complete the valuation of its Interest Rate Cap, which is considered a Level 2 asset and is measured at fair value on a recurring basis usingwidely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows for the Interest Rate Cap. At December 31, 2017,the the estimated fair value of the Company's investments in marketable securities was $94.2 million and the carrying value was approximately $94.5million. At December 31, 2017, the estimated fair value of the Company's outstanding Term B Loan was approximately $449.7 million and the carryingvalue was approximately $450.0 million. The fair value of the Bangkok Bank Loan and the equipment loans approximate carrying value, due to theCompany entering those agreements in close proximity to December 31, 2017.AdvertisingThe Company records in selling, general and administrative expense the costs of general advertising, promotion and marketing programs at the timethose costs are incurred. Advertising expense was approximately, $1.4 million, $1.1 million, and $1.1 million for the years ended December 31, 2017, 2016and 2015, respectively.Stock-based compensationThe cost of all share-based awards to employees, including grants of employee stock options and restricted stock, is recognized in the financialstatements based on the fair value of the awards at grant date. The fair value of stock option awards is determined using the Black-Scholes valuation modelon the date of grant. The fair value of restricted stock awards is equal to the market price of Empire’s common stock on the date of grant. The fair value ofshare-based awards is recognized as stock-based compensation expense on a straight-line basis over the requisite service period from the date of grant. As ofDecember 31, 2017, there was approximately $1.7 million of total unrecognized compensation cost related to non-vested share-based compensationarrangements granted under the Company’s equity compensation plan. That cost is expected to be recognized over a period of 2.50 years. This expected costdoes not include the impact of any future stock-based compensation awards.51Income taxesThe Company applies the asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets andliabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductibleamounts, based on enacted tax laws and rates for the periods in which the differences are expected to affect taxable income. Valuation allowances areestablished, when necessary, to reduce deferred tax assets to the amount expected to be realized.Intangible AssetsIn accordance with ASC 350, Intangibles - Goodwill and Other, the Company amortizes intangible assets over their estimated useful lives unless theCompany determines their lives to be indefinite.As a condition of the Gaming Facility License, the Company was granted a gaming license, for which it paid $51 million on February 25, 2016. The termof the gaming license is 10 years; however, amortization did not commence until the completion of construction and the opening to the general public of theCasino in February 2018. Amortization will be recognized on a straight-line basis beginning in February 2018 and continuing until the license is up forrenewal in 2026. During the period that the Company is not amortizing the intangible asset, the Company will assess it for impairment annually or morefrequently if events or changes in circumstances indicate that the asset might be impaired.Recent accounting pronouncementsIn May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" (Topic606), which introduced new revenue recognitionguidance, which will supersede nearly all existing revenue recognition guidance. The core principle of the guidance is that an entity should recognizerevenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. To achieve the core principle, the new guidance implements a five-step process for customer contract revenuerecognition. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows arising fromcontracts with customers. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods withinthat reporting period. Entities can transition to the new guidance either retrospectively or as a cumulative-effect adjustment as of the date of adoption.The Company has identified and implemented changes to its accounting policies and practices, business processes and controls to support the newrevenue recognition standard. The Company is continuing its assessment of potential changes to the Company's financial disclosures related to revenuerecognition will have on its consolidated financial statements and footnote disclosures. the Company anticipates adopting this accounting standard duringthe first quarter of 2018 with a cumulative-effect adjustment as of the date of adoption. However, the Company has identified a few significant impacts. Underthe new guidance, the Company expects it will no longer be permitted to recognize revenues for goods and services provided to customers for free, as aninducement to gamble, as gross revenue with a corresponding offset to promotional allowances to arrive at net revenues. The Company expects the majorityof such amounts will offset gaming revenues. In addition, accounting for complimentaries and loyalty points granted under the Company’s customer loyaltyprogram may also change. Under the new guidance, complimentaries and loyalty points earned by customers through past revenue transactions will beidentified as separate performance obligations and recorded as a reduction in gaming revenues when earned at the retail value of such benefits owed to thecustomer (less estimated breakage). When customers redeem such benefits and the performance obligation is fulfilled by the Company, revenue will berecognized in the department that provides the goods or services (e.g., hotel, food and beverage, or entertainment). In addition, given that customer rewards isan aspirational loyalty program with multiple customer tiers, which provide certain benefits to tier members, the Company will need to assess if such benefitsare deemed to be separate performance obligations under the new guidance.In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue fromContracts with Customers, which introduced a new standard related to revenue recognition, ASC Topic 606, Revenue from Contracts with Customers (“ASC606” or the “new revenue standard”). Under ASC 606, recognition of revenue occurs when a customer obtains control of promised goods or services in anamount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. In addition, the new revenue standardrequires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. Subsequent to May 2014, theFASB issued additional ASU's to provide clarifying guidance and deferred the effective date to years beginning after December 15, 2017, including interimperiods within that reporting period. Entities can transition to the new guidance either retrospectively or using the modified retrospective approach includingrecording a cumulative effect adjustment for the impact of adopting ASC 606 as of the date of adoption (January 1, 2018).52The modified retrospective approach requires the Company to provide disclosures in the notes that accompany the consolidated financial statementsdescribing the financial statement line items impacted by ASC 606. The Company is adopting ASC 606 during the first quarter 2018 using the modifiedretrospective approachThe Company has concluded that the adoption of the new revenue standard principally affects (1) how it measures the liability associated with ourloyalty program and (2) the classification and the measurement, of revenues and expenses among gaming, food and beverage, lodging, and retail,entertainment and other.Under our loyalty program, guests earn points based on their level of play, which may be redeemed for various benefits, such as free play, dining, orother amenities. Prior to the adoption of ASC 606, the Company determined its liability for unredeemed points based on the estimated costs of services ormerchandise to be provided and estimated redemption rates.Upon adoption of ASC 606, points awarded under our loyalty program are considered a material right given to players based on their gaming play andthe promise to provide points to players is required to be accounted for as a separate performance obligation. In addition, certain tier benefits associated withour loyalty program represent material rights in a manner similar to player points, which results in such benefits constituting separate performanceobligations. Therefore, ASC 606 requires us to allocate the revenues associated with the players’ activity between gaming revenue and the value of the pointsand certain tier benefits, if applicable. The measurement of the liability is based on the estimated standalone selling price of the points earned after factoringin the likelihood of redemption. The revenue associated with the points earned will be recognized in the period in which they are redeemed.In addition to the above, prior to the adoption of ASC 606, complimentary revenues pertaining to food and beverage, and other amenities, wereincluded in gross revenues and also deducted as a promotional allowance in the Consolidated Statements of Operations and Comprehensive Loss. However,subsequent to the adoption of ASC 606, food and beverage, lodging and other services furnished to our guests on a complimentary basis will be measured atthe estimated standalone selling prices and included as revenues within food and beverage, lodging, and retail, entertainment and other, as appropriate, witha corresponding decrease in gaming revenues, in the Consolidated Statements of Operations.The amounts relating to promotional allowances and estimated costs of providing complimentary goods and services for the years ended December 31,2017, 2016 and 2015, are presented tabularly in “Revenue Recognition and promotional allowances” above. Lastly, we expect that the cumulative effectadjustment to our accumulated deficit upon adoption of ASC 606 will not be significant. In February 2016, FASB issued ASU 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), which provides guidance for accounting for leases. Under ASU 2016-02, the Company will be required to recognize the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 will take effectfor public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The standard must be adopted using amodified retrospective approach and provides for certain practical expedients. Early adoption is permitted. The Company has not yet completed itsassessment of the impact of the new standard on the Company's consolidated financial statements. The Company currently anticipates adopting this standardduring the first quarter of 2019.In August 2016, FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash (“ASU 2016-18”), which provides guidance foraccounting for restricted cash transactions. Under ASU 2016-18, several aspects of the accounting for restricted cash transactions are simplified, including thepresentation and classification of cash receipts and cash payments in the statement of cash flows. ASU 2016-18 will take effect for public companies for fiscalyears, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company currently anticipatesadopting this standard during the first quarter of 2018 and is currently evaluating the impact that this guidance will have on its financial statements.In January 2017, FASB issued ASU 2017-18, Statement of Cash Flows (Topic 230), Restricted Cash (“ASU 2016-18”), which eliminates the secondstep in the goodwill impairment test that requires an entity to determine the implied fair value of the reporting unit's goodwill. Going forward, an entitywould recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with theimpairment loss not to exceed the amount of goodwill allocated to the reporting unit. ASU 2017-18 will take effect for public companies for fiscal years, andinterim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact, ifany, that this guidance will have on its financial statements.53Note C. Prepaid Expenses and Other AssetsThe Company has participated in the New York State Empire Zones real estate tax credit program for over 10 years. Under this program, the Companyreceives a refund for real estate taxes paid during the year, after the end of New York State's fiscal year. Beginning in 2014, the amount of the tax creditreceived is reduced by 20% each year until the tax credit ends for the Company at December 31, 2017. For the year ended December 31, 2017, the Companywill receive a 20% refund for real estate taxes paid. The amounts of the unreceived real estate tax credits are included in prepaid expenses and other currentassets on the accompanying consolidated balance sheet at December 31, 2017 and 2016, and were approximately $814,000 and $1.3 million, respectively.Prepaid expenses and other current assets, as presented on the balance sheet are comprised of the following at December 31, 2017 and 2016: 12/31/2017 12/31/2016 (in thousands) Empire zone real estate tax credit $814 $1,325Prepaid real estate taxes 443 558Prepaid insurance 327 919Inventory 174 177Prepaid gaming expenses 74 61Development escrow & security refundable deposit 780 623Prepaid other 938 672Total prepaid expenses and other current assets $3,550 $4,335Note D. Property and EquipmentProperty and equipment at December 31, 2017 and 2016 consists of: 12/31/2017 12/31/2016 (in thousands) Land$770 $770Land improvements1,759 1,758Buildings4,727 4,727Building improvements29,874 28,088Vehicles355 307Furniture, fixtures and equipment5,196 4,278Construction in Progress77 919 42,758 40,847Less: Accumulated depreciation(15,895) (14,432) $26,863 $26,415Depreciation expense was approximately $1.5 million, $1.3 million and $1.4 million for years ended December 31, 2017, 2016 and 2015, respectively.The VGMs at MRMI are owned by the NYSGC and, accordingly, the Company's consolidated financial statements include neither the cost nor thedepreciation of those devices.54Note E. Development Projects CostsCapitalized Project Development CostsOnce it was awarded the Gaming Facility License on December 21, 2015, the Company began capitalizing certain Project Development costs duringthe fourth quarter of 2015. At December 31, 2017 and 2016, total Capitalized Project Development costs incurred were approximately $566.8 million and$202.4 million, respectively. Total Capitalized Project Development costs at December 31, 2017 consisted of $560.2 million of construction costs, sitedevelopment, contractor insurance, general conditions, architectural fees, construction manager fees, and approximately $6.6 million of professional servicefees such legal and accounting fees and is reflected on the balance sheet as Capitalized Development Project costs. Total Capitalized Development Projectcosts at December 31, 2016 consisted of $198.9 million of construction costs, site development, contractor insurance, general conditions, architectural fees,construction manager fees, and approximately $3.5 million of professional service fees such as legal fees and accounting fees.In 2017, total Development Projects costs incurred were approximately $392.2 million, of which $370.7 million was capitalized and $21.6 million wasexpensed. Development Project costs consisted of $10.7 million of land lease costs and rents, $4.9 million of salary and related benefits, $2.0 million of bankcharges, $892,000 of marketing expenses, $643,000 of real estate taxes, $571,000 of insurance expense, $607,000 in consultants and other professionalservice fees, $317,000 in legal fees and approximately $490,000 of pre-opening expenses, including travel, relocation, recruiting and other start-up costs.In 2016, total Development Projects costs incurred were approximately $205.0 million, of which $192.0 million was capitalized and $13.0 million wasexpensed. Development Project expenses consisted of $10.4 million of land lease costs, $400,000 of real estate taxes, $482,000 of insurance expense,$324,000 in consultants and other professional service fees, $164,000 in legal fees and $1.2 million of pre-opening expenses, including salary and relatedbenefits, as well as, marketing expenses.Cash Collateral for Deposit BondIn February 2016 and June 2017, the Company deposited $15 million and $20 million in performance bonds to guarantee the completion of theDevelopment Projects. On December 28, 2017, the Company notified the NYSGC that it had expended 85% of the Company's proposed Minimum CapitalInvestment (as defined below). On January 4, 2018, the NYSGC notified the Company that it had confirmed that the Minimum Capital Investment criteria hasbeen reached and the funds were returned to the Company for use toward Development Projects expenses.Restricted Cash and Investments for Development ProjectsAt December 31, 2017, the $136.4 million of restricted cash and investments for Development Projects represented the remaining funds from the TermLoan Facility and the Kien Huat Montreign Loan to be utilized for the Development Projects. This consists of cash and cash equivalents totaling $41.9million and short-term marketable securities totaling $94.5 million, which were comprised of commercial paper and U. S. Treasury Notes with maturities ofless than one year. At December 31, 2016, the $26.4 million of restricted cash and investments for Development Projects on the Consolidated Balance Sheetrepresented the remaining funds from the January 2016 Rights Offering (defined below) to be utilized for the Development Projects.55Note F. Accrued Expenses and Other Current LiabilitiesAccrued Development Projects costs at December 31, 2017 and 2016 were $71.7 million and $41.9 million, respectively, and were primarilycomprised of amounts due to the Construction Manager for costs incurred for the Development Projects, as well as amounts due to the architect and othervendors.Accrued expenses and other current liabilities, as presented on the balance sheet are comprised of the following at December 31, 2017 and 2016: 12/31/2017 12/31/2016 (in thousands) Liability for horseracing purses$886 $1,139Accrued payroll1,715 1,897Accrued redeemable points271 167Liability to NYSGC1,507 360Liability for local progressive jackpot1,110 907Accrued settlement liability— 758Accrued professional fees744 308Federal tax withholding payable— 78Accrued other1,087 1,733Total accrued expenses and other current liabilities$7,320 $7,347Note G. Long-Term DebtLong-term debt consisted of the following at December 31, 2017 and 2016: 12/31/2017 12/31/2016 Term B Loan $450,000 $—Bangkok Bank Loan 16,000 —Equipment loans 31,095 —Total long-term debt 497,095 —Debt issuance costs (27,359) —Total long-term debt, net 469,736 —Less: Current portion of long-term debt (14,588) $—Long term-debt, net of current portion $455,148 $—Term Loan AgreementOn January 24, 2017, Montreign Operating entered into the Building Term Loan Agreement (the “Original Term Loan Agreement”), among MontreignOperating, the lenders from time to time party thereto, and Credit Suisse AG, Cayman Islands Branch (“Credit Suisse”), as administrative agent. On May 26,2017 , the parties entered into the first amendment to the Term Loan Agreement and certain ancillary agreements (the “Amended Term Loan Agreement” and,together with the Original Term Loan Agreement, the “Term Loan Agreement”). The Amended Term Loan Agreement increased the aggregate principalamount of the Term B Loan issued under the Original Term Loan Agreement on substantially the same terms and conditions as the Original Term LoanAgreement, which terms are discussed below. In the aggregate, the Term Loan Agreement provides Montreign Operating with loans in principal amount of$520 million (the “Term Loan Facility”). All of the borrowings under the Term Loan Agreement will be used to fund the costs of the Development Projects.56Pursuant to the Original Term Loan Agreement, the Term Loan Facility consisted of $70 million of Term A loans (the “Term A Loan”) and $415 millionof Term B loans (the “Term B Loan”). The Term B Loan was priced at 98.12% of the principal amount and borrowed in full on January 24, 2017. Proceeds ofthe Term B Loan were used to pay fees and expenses related to the financing and fund various lender-controlled accounts. In the event that the Term B Loanis prepaid or repaid in whole or in part for any reason other than as a result of scheduled amortization and certain other exceptions, Montreign Operating isrequired to pay prepayment premiums based on a make-whole if the prepayment occurs from January 24, 2017 to (but excluding) the 30th-month anniversaryfollowing the Original Loan Closing Date, and a 2% and 1% premium if the prepayment occurs from the 30th Month to (but excluding) the 42nd-monthanniversary of January 24, 2017 and from the 42nd Month to (but excluding) the 54th-month anniversary of January 24, 2017, respectively.The Term A Loan may be borrowed during the period from January 24, 2017 to July 24, 2018, subject to meeting the conditions set forth in the TermLoan Agreement at the time of the borrowing. The Term A Loan will mature on January 24, 2022 and the Term B Loan will mature on January 24, 2023.Interest accrues on outstanding borrowings under the Term A Loan at a rate equal to LIBOR plus 5.0% per annum, or an alternate base rate plus 4.0% perannum. Interest accrues on outstanding borrowings under the Term B Loan at a rate equal to LIBOR (with a LIBOR floor of 1%) plus 8.25% per annum, or analternate base rate plus 7.25% per annum. In addition, Montreign Operating will pay a commitment fee to each Term A Loan lender equal to the undrawnamount of such lender’s commitment multiplied by a rate equal to 2.5% per annum for the period commencing on January 24, 2017 through March 24, 2018and 5.0% per annum thereafter.As a condition to the Term Loan Agreement, the net proceeds from the Term B Loan and the Kien Huat Montreign Loan, which is discussed below,were deposited into an account controlled by the lenders under the Term Loan Facility. Any drawings on the Term A Loan, which may be made only after allof the proceeds of the Term B Loan have been deployed in the construction of the Development Projects or the operations of the Project Parties, will also bedeposited into the same lender-controlled account. The Company further funded this lender-controlled account with approximately $9.9 million in December2017 pursuant to the Term Loan Agreement from the proceeds of the Bangkok Bank Loan, which is discussed below. In order to access the funds (includingthe net proceeds from the Term Loan Facility and the Kien Huat Montreign Loan) held in these lender-controlled accounts, Montreign Operating must satisfythe applicable disbursement conditions set forth in the Term Loan Agreement and ancillary agreements, such as providing evidence that the withdrawn fundsare used for permitted purposes in connection with the Development Projects.The Term Loan Agreement restricts the Project Parties from incurring additional indebtedness except for, among other things, obligations pursuant tohedging agreements required under the Term Loan Agreement, capital lease obligations and purchase money indebtedness (including FF&E financing) in anamount not exceeding $40 million, subordinated indebtedness so long as the proceeds are applied pursuant to the terms of the Term Loan Agreement andother indebtedness not exceeding $10 million. Also, the Project Parties may not make any dividend or other distribution, redeem or otherwise acquire anyequity securities or subordinated indebtedness. Moreover, the Project Projects are restricted from entering into advisory, management or consultingagreements with an affiliate of any Project Party, including Empire, except for payments pursuant to tax sharing agreements, distributions in an amount notexceeding 1% of the net revenues of the Project Parties in any fiscal year, repurchase of capital stock of the Company in an amount not exceeding $1 millionand required by the NYSGC, and certain available amounts of cash based on the application of financial covenants. Pursuant to the Amended Term Loan Agreement, the aggregate principal amount of the Term B Loan increased by $35 million from $415 million to$450 million. This additional amount was borrowed in full on May 24, 2017 and the proceeds were used to pay fees and expenses related to the financingand fund various lender-controlled accounts. The additional $35 million principal amount of the Term B Loan was priced at 99.75% of the principal amountand was issued under substantially the same terms and conditions as the Original Term Loan Agreement except the requirement to contribute additionalequity to Montreign Operating was reduced. Pursuant to the Amended Term Loan Agreement, on December 28, 2017, Empire contributed additional equityto Montreign Operating of approximately $9.9 million, which takes into account approximately $600,000 of equity contributions made to the Project Parties,including Montreign Operating, since January 24, 2017. Empire contributed approximately $9.9 million to the equity of Montreign Operating from the netproceeds of the Bangkok Bank Loan, which Montreign then deposited into the lender-controlled account that holds the net proceeds from the Term LoanFacility and the Kien Huat Montreign Loan.As of December 31, 2017, $450 million was outstanding under the Term B Loan and there were no borrowings outstanding under the Term A Loan.Since the initial opening of the Casino on February 5, 2018, we have been required to make principal payments under the Term B Loan at the end of eachcalendar quarter, for which the first payment shall be made by June 30, 2018. The Company will repay one percent of the original principal balance each yearin quarterly payments of approximately $1.1 million, beginning in June 2018.57Revolving Credit AgreementOn January 24, 2017, Montreign Operating also entered into a Revolving Credit Agreement (as amended, the “Revolving Credit Agreement”) amongMontreign Operating, the lenders from time to time party thereto, and Fifth Third Bank, as administrative agent. The Revolving Credit Agreement providesfor loans or other extensions of credit to be made to Montreign Operating in an aggregate principal amount of up to $15 million (including a letter of creditsub-facility of $10 million) (the “Revolving Credit Facility”), the proceeds of which may be used for working capital needs, capital expenditures and othergeneral corporate purposes following the opening of specified Casino amenities to the public. Concurrently with the Term Loan Amendment, on May 24,2017, Montreign Operating amended the Revolving Credit Agreement to, among other things, permit Montreign Operating to increase the aggregateprincipal amount of the Term B Loan under the Term Loan Amendment. The Revolving Credit Facility will mature on January 24, 2022. Interest will accrueon outstanding borrowings at a rate equal to LIBOR plus 5.0% per annum, or an alternate base rate plus 4.0% per annum. As of December 31, 2017, $0 hadbeen drawn down on the Revolving Credit Facility.On December 7, 2017, Montreign Operating, ERREI, ERREII (together with ERREI, the “Montreign Subsidiary Guarantors”), the Administrative Agent,and the Required Lenders (as such term is defined in the Revolving Credit Agreement) entered into a Second Amendment to the Revolving Credit Agreement(the "Second Revolving Credit Amendment"). The Second Revolving Credit Amendment enables Montreign Operating to borrow up to $15 million (but notobtain a letter of credit) under the Revolving Credit Facility with a narrowed scope of amenities at the opening of the Casino, subject to the receipt ofNYSGC approval to open the Casino to the public. On February 5, 2018, Montreign Operating received an operation certificate from the NYSGC tocommence gaming operations at the Casino. Other than an amendment relating to a narrowed scope of amenities at the opening of the Casino, the RevolvingCredit Agreement remains unchanged and in full force and effect. Subsequent to December 31, 2017, the Company began to draw on the Revolving CreditFacility primarily to fund the Casino. The Company drew $9.0 million on January 23, 2018 and $4.0 million on February 9, 2018, at an interest rate ofLIBOR plus 5.0%.Pursuant to the Amended Revolving Credit Agreement, Montreign Operating and the Montreign Subsidiary Guarantors each affirmed and ratified theirobligations pursuant to the Revolving Credit Facility and all related agreements, including the guarantees of the Montreign Subsidiary Guarantors.Collateral and Other Provisions of the Term Loan Agreement and Revolving Credit AgreementThe Term Loan Facility and the Revolving Credit Facility are each guaranteed by the Montreign Subsidiaries and are secured by security interests insubstantially all the real and personal property of Montreign Operating and the Montreign Subsidiaries and by a pledge of all the membership interests ofMontreign Operating held by Montreign Holding. In addition, Empire delivered a completion guaranty in connection with the Term Loan Facilityguaranteeing the completion of the construction of the Casino and the Entertainment Project. Empire’s liability under the completion guaranty (excludinglender’s enforcement costs) is capped at $30 million.The Term Loan Agreement and the Revolving Credit Agreement contain representations and warranties, affirmative covenants, negative covenants andfinancial covenants that are usual and customary, including representations, warranties and covenants that, among other things, restrict the ability ofMontreign Operating and the Montreign Subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidateor merge with any other company, or make dividends or other distributions. As of December 31, 2017, the Company was in compliance with all respectivecovenant requirements under the Term Loan Facility and the Revolving Credit Facility. On March 1, 2018, the Company contributed $2.7 million to aninterest reserve fund under the Term Loan Agreement. This contribution reflects the additional interest to be paid on the Term Loan Facility as a result of theCompany's deferral of the completion of 15 VIP suites at the Casino from March 1, 2018 to March 23, 2018.Obligations under the Term Loan Agreement and the Revolving Credit Agreement may be accelerated upon certain customary events of default (subjectto grace periods, as appropriate), including, among others: nonpayment of principal, interest or fees, breach of the affirmative or negative covenants,revocation of a gaming license for seven consecutive business days, and a Change of control (as such term is defined in the Term Loan Agreement) ofMontreign Operating. Bangkok Bank Loan AgreementOn December 28, 2017, the Company entered into a Delayed Draw Term Loan Credit Agreement (the “Bangkok Bank Loan Agreement”), withBangkok Bank PCL, New York Branch (“Bangkok Bank”), as lender, and MRMI, as guarantor. The Bangkok Bank Loan Agreement provides for loans to bemade to the Company in an aggregate principal amount of up to $20 million (the “Bangkok Bank Loan”).58The Bangkok Bank Loan may be borrowed in up to five installments, each in multiples of $500,000, from time to time until December 28, 2019 orearlier if Bangkok Bank Loan becomes due and payable earlier, whether by acceleration or otherwise. The maturity of the Bangkok Bank Loan may beextended in the sole discretion of Bangkok Bank for additional one-year periods with other terms and conditions as may be agreed by the Company andBangkok Bank. Any such extension of the Bangkok Bank Loan maturity will be subject to a 1% extension fee.Interest will accrue on outstanding borrowings under the Bangkok Bank Loan Agreement at a rate equal to LIBOR plus 6.25%, or an alternate base rateplus 5.25% per annum. In addition, the Company will pay commitment fee to Bangkok Bank equal to the undrawn amount of the Bangkok Bank Loancommitment multiplied by a rate equal to 1.50% per annum. The Bangkok Bank Loan will mature on December 28, 2019. Such commitment fee will bepayable on the last business day of each quarter beginning on March 31, 2018. The Bangkok Bank Loan may be prepaid in whole or in part without premiumor penalty, subject to the payment of a 2.0% prepayment fee.The Bangkok Bank Loan is guaranteed by MRMI and is secured by a security interest in Monticello Casino and Raceway. The Bangkok Bank LoanAgreement contains customary representations and warranties and affirmative covenants, negative covenants and financial covenants, includingrepresentations, warranties and covenants that, among other things, restrict the ability of the Company and MRMI to incur additional debt, incur or permitliens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in certain transactions with affiliates, or makedividends or other distributions. Obligations under the Bangkok Bank Loan Agreement may be accelerated upon certain customary events of default (subjectto grace periods, as applicable), including among others, nonpayment of principal, interest or fees, breach of the affirmative or negative covenants, revocationof a gaming license after the expiration of certain cure periods, and a change of control of the Company. The Company is in compliance with the covenantterms as of December 31, 2017.The Company borrowed $16 million at the closing of the Bangkok Bank Loan. Of this amount, the Company contributed approximately $9.9 millionto Montreign Operating pursuant to the terms of the Term Loan Agreement, as discussed above. The remaining balance of the Bangkok Bank Loan drawndown is available for the general corporate purposes of the Company.Financial Covenants of the Principal Credit AgreementsThe Term Loan Facility contains certain covenants that, subject to certain significant exceptions limit, among other thongs, the Company's ability toincur additional debt, pay dividends or distributions, make certain investments, create liens on assets, enter into transactions with affiliates, merge orconsolidate with another company or transfer and sell assets.In addition, the Bangkok Bank Loan Agreement contains a financial covenant that restricts the maximum total leverage ratio of the Company, whichfinancial covenant is applicable beginning with the fiscal quarter ended December 31, 2018.Equipment LoansThe Company has entered into several financing agreements related to the purchase of its slot machines, equipment and software for its telephone, hoteland Casino operations. The amount financed was $31.1 million and the terms of these agreements run between six and 36 months. The stated interest rates forthese loans are between zero and eight per annum. The Company has imputed interest, on several equipment loans with stated interest rates of 0%, using theCompany's cost of funds rate of approximately 10%. The weighted average of the monthly repayments is approximately $1.0 million.The following table lists the annual principal repayments due for the Company's long term debt as of December 31, 2017: Year ending December 31,Totals (in thousands)2018$14,588201933,625202010,40820215,34920224,5002023428,625Totals$497,09559Note H. Long-Term Loans, Related PartyKien Huat Montreign Loan Agreement and Kien Huat Note Exchange AgreementOn January 24, 2017, Kien Huat and Montreign Holding entered into a loan agreement (the “Kien Huat Montreign Loan Agreement”), pursuant towhich Montreign Holding obtained from Kien Huat a loan in the principal amount of $32.3 million (the "Kien Huat Montreign Loan"), the net proceeds ofwhich were used as a capital contribution to Montreign Operating for use towards the expenses of the Development Projects. The Kien Huat Montreign Loanwas to mature on February 24, 2024 (the “Kien Huat Loan Maturity Date”).The Kien Huat Montreign Loan bore interest at a rate of 12% per annum. Prior to the Kien Huat Loan Maturity Date, interest on the Kien HuatMontreign Loan was accrued and added to the outstanding principal of the Kien Huat Montreign Loan (the “Principal Indebtedness”) on the first businessday of each calendar month beginning on February 1, 2017 (each an “Interest Payment Date”) and thereafter was deemed to be part of the PrincipalIndebtedness. The Principal Indebtedness, including all interest due through the applicable Interest Payment Date and other amounts due under the KienHuat Montreign Loan, was payable in cash on the Kien Huat Loan Maturity Date. Notwithstanding the foregoing, Montreign Holding was required to pay incash to Kien Huat, at the end of any “accrual period” (as defined in Section 1275(a)(5) of the Internal Revenue Code of 1986, as amended (the “Code”))ending after the fifth anniversary of the Loan Closing Date, the aggregate amount by which (x) the sum of (i) the amount of accrued interest on the Kien HuatMontreign Loan that has been added to the Principal Indebtedness plus (ii) any other accrued but unpaid original issue discount (as determined underSection 163(i) of the Code) on the Kien Huat Montreign Loan from the closing date through the end of such accrual period, in each case that has not beenpaid in cash, exceeds (y) the product of (i) the “issue price” (as defined for purposes of the Code) and (ii) the “yield to maturity” (as defined for purposes ofthe Code). In addition to the interest payable on the Kien Huat Montreign Loan, Kien Huat was entitled to a commitment fee of 1%, which fee was added tothe Principal Indebtedness of the Kien Huat Montreign Loan. The Kien Huat Montreign Loan could be repaid at any time without penalty.The obligations of Montreign Holding under the Kien Huat Montreign Loan Agreement were secured by a pledge of all the membership interests ofMontreign Holding by Empire. The Kien Huat Montreign Loan Agreement contained representations and warranties and affirmative covenants that are usualand customary, including representations, warranties and covenants that, among other things, restrict Montreign Holding’s use of the proceeds of the KienHuat Montreign Loan to expenses relating to the Development Projects. Obligations under the Kien Huat Montreign Loan Agreement may have beenaccelerated upon certain customary events of default (subject to grace periods, as appropriate), including, among others, nonpayment of principal, interest orfees, breach of the affirmative covenants and a default with respect to the payment of principal or interest under the Term Loan Facility by MontreignOperating or acceleration of the Term Loan Facility for any reason.Concurrently with and as a condition to the closing of the Bangkok Bank Loan Agreement, on December 28, 2017, Empire, Montreign Holding, andKien Huat entered into a Note Exchange Agreement (the “Kien Huat Note Exchange Agreement”). The Kien Huat Note Exchange Agreement provides for theissuance of 1,379,873 shares of common stock (the “Exchange Shares”) to Kien Huat in full satisfaction of the Kien Huat Montreign Loan. On December 28,2017, total indebtedness outstanding under the Kien Huat Montreign Loan was $36.2 million. Such total indebtedness outstanding under the Kien HuatMontreign Loan was exchanged for the Exchange Shares at an exchange rate of $26.21, which exchange rate represents the volume-weighted average price ofthe Company’s common stock for the 30-day period immediately preceding the date on which the Kien Huat Note Exchange Agreement was executed. Inconnection with the satisfaction in full of the Kien Huat Montreign Loan pursuant to the Kien Huat Note Exchange Agreement, Empire's pledge of itsmembership interests in Montreign Holding was released. The Exchange Shares were issued pursuant to an exemption from the registration requirement of theSecurities Act provided in Section 4(a)(2) of the Securities Act.Kien Huat Backstop Loan AgreementConcurrently with and as a condition to the closing of the Bangkok Bank Loan Agreement, on December 28, 2017, Empire and Kien Huat entered intoa loan agreement (the “Kien Huat Backstop Loan Agreement”), providing for loans to Empire in an aggregate principal amount of up to $20 million (the“Kien Huat Backstop Loan”). Any amounts borrowed under the Kien Huat Backstop Loan will be used exclusively to make payments required under theBangkok Bank Loan Agreement and will mature on the one-year anniversary of the Maturity Date of the Bangkok Bank Loan, or such earlier date that theBangkok Bank Loan is terminated (the “Backstop Maturity Date”). As of December 31, 2017, no amounts had been borrowed under the Kien Huat BackstopLoan.The Kien Huat Backstop Loan bears interest at a rate of 12% per annum. Prior to the Backstop Maturity Date, interest on any principal amountoutstanding under the Kien Huat Backstop Loan will accrue and be added to the outstanding principal of60the Kien Huat Backstop Loan on the first business day of each calendar month beginning on January 1, 2018 and will thereafter be deemed to be part of theprincipal indebtedness. The Kien Huat Backstop Loan, including all interest and any other amounts due under the Kien Huat Backstop Loan, shall bepayable in cash on the Backstop Maturity Date. Kien Huat was paid a commitment fee of $200,000 on December 28, 2017.The Kien Huat Backstop Loan Agreement contains representations and warranties and affirmative covenants that are usual and customary, includingrepresentations, warranties and covenants that restrict the Company’s use of the proceeds of the Kien Huat Backstop Loan to pay amounts due and payableunder the Bangkok Bank Loan. Obligations under the Kien Huat Backstop Loan Agreement may be accelerated upon certain customary events of default(subject to grace periods, as appropriate), including among others: nonpayment of principal, interest or fees; and breach of the affirmative covenants. Kien Huat Construction Loan Agreement On October 13, 2016, Montreign Operating and Kien Huat entered into a loan agreement (the "Kien Huat Construction Loan Agreement"). Pursuant tothe Kien Huat Construction Loan Agreement, Kien Huat agreed to make available to Montreign Operating up to an aggregate of $50 million of loans to paythe expenses of the Casino while the debt financing for the Development Projects was being finalized. In connection with the closing of the Term LoanFacility and the Kien Huat Montreign Loan, on January 24, 2017, the Kien Huat Construction Loan Agreement expired pursuant to its terms without beingutilized by Montreign Operating. Montreign Operating paid Kien Huat a commitment fee of $500,000 upon execution of the Kien Huat Construction Loan.The commitment fee was capitalized and was included in "Other Assets" at December 31, 2016. It was charged to "Interest Expense " on the ConsolidatedStatement of Operations on January 24, 2017, upon the issuance of the Kien Huat Montreign Loan Agreement. Conversion of Kien Huat NoteOn November 17, 2010, Empire entered into a loan agreement (the "2010 Kien Huat Loan Agreement") with Kien Huat pursuant to which Empire issueda convertible promissory note (the "2010 Kien Huat Note") in the original principal amount of $35 million, of which $17.4 million was outstanding as ofDecember 31, 2015. On February 17, 2016, upon consummation of the January 2016 Rights Offering, the 2010 Kien Huat Note was converted into 1,332,058shares of common stock (the "Note Conversion") in accordance with the terms of the 2010 Kien Huat Loan Agreement.The Company recognized approximately $178,000 and $1.3 million in interest expense associated with the 2010 Kien Huat Note during the years endedDecember 31, 2016 and 2015, respectively.61Note I. Stockholders’ EquityAuthorized CapitalOn November 1, 2016, Empire filed the Second Amended and Restated Certificate of Incorporation (the "Restated Charter”) with the Secretary of Stateof the State of Delaware. Pursuant to Restated Charter, Empire’s authorized capital stock consists of 155 million shares, of which 150 million shares arecommon stock and five million shares are preferred stock.Common StockOur common stock is transferable only subject to the provisions of Section 303 of the Racing, Pari-Mutuel Wagering and Breeding Law, so long as wehold directly or indirectly, a license issued by the NYSGC, and may be subject to compliance with the requirements of other laws pertaining to licenses helddirectly or indirectly by us. The owners of common stock issued by us may be required by regulatory authorities to possess certain qualifications and may berequired to dispose of their common stock if the owner does not possess such qualifications. January 2016 Rights OfferingOn January 4, 2016, we commenced a rights offering (the "January 2016 Rights Offering") of transferable subscription rights to holders of record of ourcommon stock and Series B Preferred Stock as of January 4, 2016 to purchase up to 20,138,888 shares of our common stock. In connection with the January2016 Rights Offering, on December 31, 2015, the Company and Kien Huat entered into a standby purchase agreement (the "January 2016 Standby PurchaseAgreement"). Pursuant to the January 2016 Standby Purchase Agreement, Kien Huat agreed to (i) exercise its basic subscription rights to acquireapproximately $30 million of our common stock within 10 days of the commencement of the January 2016 Rights Offering with a closing proximate theretoand (ii) to exercise the remainder of its basic subscription rights prior to the expiration date of the January 2016 Rights Offering. In addition, Kien Huatagreed it would exercise all rights not otherwise exercised by the other holders in the January 2016 Rights Offering in an aggregate amount not toexceed $290 million.The January 2016 Rights Offering closed on February 17, 2016. The Company issued a total of 20,138,888 shares of common stock for aggregate grossproceeds of approximately $290 million. This includes 176,086 shares issued to holders upon exercise of their basic subscription and over-subscriptionrights and 13,136,817 shares issued to Kien Huat upon exercise of its basic subscription rights. Kien Huat also acquired the remaining 6,825,985 shares notsold in the January 2016 Rights Offering pursuant to the January 2016 Standby Purchase Agreement. The net proceeds of the January 2016 Rights Offeringwere approximately $286.0 million, which were used (i) to pay the pre-opening expenses relating to the construction of the Casino, (ii) to redeem theoutstanding shares of the Series E Preferred Stock in accordance with the terms of the Settlement Agreement on March 7, 2016 and (iii) for the workingcapital needs of the Company. Pursuant to the January 2016 Standby Purchase Agreement, we paid Kien Huat a commitment fee of $1.5 million which isequal to 0.5% of the maximum amount of the January 2016 Rights Offering, and reimbursed Kien Huat for expenses in the amount of $50,000.January 2015 Rights OfferingOn January 5, 2015, the Company commenced a rights offering (the "January 2015 Rights Offering") of non-transferable subscription rights to holdersof record of our common stock and Series B Preferred Stock as of January 2, 2015 to purchase up to 1,408,451 shares of our common stock. In connectionwith the January 2015 Rights Offering, on January 2, 2015, the Company and Kien Huat entered into a standby purchase agreement (the "January 2015Standby Purchase Agreement").Pursuant to the January 2015 Standby Purchase Agreement, Kien Huat agreed to exercise in full its basic subscription rightsgranted in the January 2015 Rights Offering within 10 days of its grant. In addition, Kien Huat agreed it would exercise all rights not otherwise exercised bythe other holders in the January 2015 Rights Offering in an aggregate amount not to exceed $50 million.The January 2015 Rights Offering closed on February 6, 2015. The Company issued a total of 1,408,451 shares of common stock for aggregate grossproceeds of approximately $50 million. This includes 10,658 shares issued to holders upon exercise of their basic subscription rights and over-subscriptionrights and 864,360 shares issued to Kien Huat upon exercise of its basic subscription rights. Kien Huat also acquired the remaining 533,433 shares not sold inthe January 2015 Rights Offering pursuant to the terms of the January 2015 Standby Purchase Agreement. The net proceeds of the January 2015 RightsOffering were approximately $49.5 million, which were used to pay the expenses of the Casino. Pursuant to the January 2015 Standby Purchase Agreement,we paid Kien Huat a commitment fee of $250,000, which is equal to 0.5% of the maximum amount of the January 2015 Rights Offering and reimbursed KienHuat for expenses in the amount of $40,000. 62Restriction on Ability to Pay DividendsPursuant to the terms of the Bangkok Bank Loan Agreement, neither Empire nor any of its subsidiaries are permitted to declare or pay any dividends ormake other payments to purchase, redeem, retire or otherwise acquire any capital stock of the Company. Such restriction will lapse upon the payment in fullof any amounts outstanding under the Bangkok Bank Loan Agreement. Notwithstanding the foregoing, so long as no event of default has occurred,subsidiaries of Empire are permitted to pay dividends to Empire and Empire may pay dividends on the Series B Preferred Stock and for withholding taxespayable in connection with equity compensation programs.Preferred Stock and Dividends The Company’s Series B Preferred Stock has voting rights of 0.054 votes per share and each share is convertible into 0.054 shares of common stock. Ithas a liquidation value of $29 per share and is entitled to annual cumulative dividends of $2.90 per share payable quarterly in cash. The Company has theright to pay the dividends on an annual basis by issuing shares of its common stock at the rate of $3.77 per share. The value of common shares issued aspayment is based upon the average closing price for the common shares for the 20 trading days preceding January 30 of the year following that for which thedividends are due. At December 31, 2017 and 2016, there were 44,258 shares of Series B Preferred Shares outstanding.The Board authorized the cash payment of the Series B Preferred Stock dividends on March 8, 2016. Quarterly payments in the amount of $32,087were made on April 1, 2016, July 1, 2016, October 3, 2016 and January 3, 2017 for the 2016 period. Quarterly payments in the amount of $32,087 were madeon April 3, 2017, July 3, 2017, October 2, 2016 and January 2, 2018 for the 2017 period.On March 2, 2016, our Board authorized the cash payment of dividends due for the year ended December 31, 2015 on our Series B Preferred Stock inthe amount of approximately $167,000. At December 31, 2015, the Company had undeclared cash dividends on the Series B Preferred Stock ofapproximately $167,000 and payment was made on March 2, 2016. The cash dividend was calculated as if it were a dividend issued in shares of our commentstock, which in accordance with the terms of the Series B Preferred stock, means the amount of the cash payment is the annual cash dividend value (as if ithad been paid quarterly) multiplied by 1.3.Bryanston Settlement AgreementEffective as of June 30, 2013, the Company and its affiliates consummated the closing of a Settlement Agreement and Release (as amended, the“Bryanston Settlement Agreement”) with Bryanston Group, Inc. and its affiliates (the “Bryanston Parties”). Pursuant to ASC 480, the Series E Preferred Stockheld by the Bryanston Parties became contractually redeemable subject to the terms and conditions of the Bryanston Settlement Agreement and was recordedas a liability on the December 31, 2015 balance sheet. On March 7, 2016, the Company redeemed the outstanding Series E Preferred Stock held by the Bryanston Group for approximately $30.7 million pursuantto the terms of the Settlement Agreement. Because the event that caused the entire liability to become due occurred during 2016, the liability was recordedpursuant to the payment terms in place at December 31, 2015 of which $1.5 million was recorded as a current liability and the remainder as a long termliability at December 31, 2015.Interest expense associated with the change in the redemption amount of the liability was $231,000 and $1.2 million for the years ended December 31,2016 and 2015, respectively.63Note J. Warrants, Restricted Stock, Restricted Stock Units, Options and Option Matching RightsWarrantsDuring 2015, the Company issued an aggregate of 83,334 shares of common stock at $30.00 per share from the exercise of warrants from a warrantholder. The Company received proceeds of $2.5 million from the exercise of these warrants.As of December 31, 2017, there are outstanding warrants to purchase an aggregate of approximately 133,300 shares of Empire’s common stock at$30.00 per share with an expiration date of May 10, 2020.On November 3, 2014, MRMI and the Monticello Harness Horsemen’s Association (the “MHHA”) entered into an agreement that governs the conductof MRMI and MHHA relating to horseracing purse payments, the simulcasting of horse races and certain other payments (the “2014 MHHA Agreement”).Pursuant to the 2014 MHHA Agreement, on March 15, 2018, Empire issued to MHHA 200,000 shares of common stock and a warrant to purchase 60,000shares of common stock at $81.50 per share, the proceeds of any sales of which will provide additional monies for the harness horsemen’s purse account.Under the terms of the 2014 MHHA Agreement, the MHHA may dispose of the common stock beginning six months after receipt the common stock, subjectto limitations upon the quantity of common shares disposed at any one time, as prescribed by the MHHA Agreement.Restricted Stock, Restricted Stock Units and OptionsSecond Amended and Restated 2005 Equity Incentive PlanIn May 2015, the Company's Second Amended and Restated 2005 Equity Incentive Plan (the “2005 Equity Incentive Plan”) expired. Options topurchase approximately 13,300 shares of common stock were outstanding as of December 31, 2017 under the 2005 Equity Incentive Plan. Although the 2005Equity Incentive Plan expired, the approximately 13,300 options still outstanding under such plan are still exercisable.2015 Equity Incentive PlanIn September 2015, our Board approved, and in November 2015, our stockholders approved the Company's 2015 Equity Incentive Plan (the "2015Equity Incentive Plan"). The 2015 Equity Incentive Plan provides for an aggregate of 2,600,707 shares of common stock to be available for Awards. AtDecember 31, 2017, a total of 2,425,934 shares were available for future issuance under the 2015 Equity Incentive Plan.Stock-based compensation expense was approximately $2.8 million, $2.7 million and $596,000 for the years ended December 31, 2017, 2016 and2015, respectively. As of December 31, 2017, there was approximately $1.7 million of total unrecognized compensation cost related to non-vested share-based compensation awards granted under the 2005 and 2015 Equity Incentive Plans. That cost is expected to be recognized over the remaining vestingperiod of 2.50 years. This expected cost does not include the impact of any future stock-based compensation awards.In 2017, 2016 and 2015, the Company received approximately $16,000, $54,000 and $160,000, respectively, in proceeds from shares of commonstock issued as a result of the exercise of stock options. No options were granted in 2017, 2016 and 2015.64The following table reflects stock option activity in 2017, 2016 and 2015: Number ofshares Range of exerciseprices per share Weightedaverage exerciseprice per share Weightedaverage remainingcontractual life(years)Options outstanding at December 31, 2014156,200 $7.95 - $131.10 $33.25 1.47Options exercised in 2015(81,600) $13.95-$27.15 Forfeited in 2015(18,000) $13.95 -$127.95 Options outstanding at December 31, 201556,600 $7.95 - $131.10 $48.50 2.61Options exercised in 2016(18,000) $7.95-$9.90 Forfeited in 2016(5,000) $14.85 -$82.95 Options outstanding at December 31, 201633,600 $7.95 - $131.10 $68.92 1.11Options exercised in 2017(2,000) 7.95 Forfeited in 2017(18,300) $14.85 -$131.10 Options outstanding at December 31, 201713,300 $15.00 - $40.05 $26.03 0.74The following table reflects restricted stock and restricted stock unit activity in 2017, 2016 and 2015: Number of Restricted Shares Number of Restricted StockUnitsOutstanding at December 31, 2014 37,000 —Grants in 2015 120,000 —Vested in 2015 (20,000) —Outstanding at December 31, 2015 137,000 —Grants in 2016 105,000 —Vested in 2016 (22,000) —Forfeited in 2016 (4,000) —Outstanding at December 31, 2016 216,000 —Grants in 2017 1,000 74,500Vested in 2017 (55,000) —Forfeited in 2017 (22,000) (1,600)Outstanding at December 31, 2017 140,000 72,900Option Matching RightsOn August 19, 2009, the Company entered into an investment agreement (the "Investment Agreement") with Kien Huat, pursuant to which Kien Huatpurchased shares of common stock of the Company during the year ended December 31, 2009. Under the Investment Agreement, if any options or warrantsoutstanding at the time of the final closing under the Investment Agreement, or the first 200,000 granted to directors or officers as of the final closing dateunder the Investment Agreement, are exercised, Kien Huat has the right to purchase an equal number of additional shares of common stock as are issued uponsuch exercise at the exercise price for the applicable option or warrant. The Company refers to these rights as the “Option Matching Rights”.Pursuant to the terms of the Investment Agreement, the Company is required to provide notice (an “Option Exercise Notice”) of any exercise within fivebusiness days, after which notice is received, Kien Huat is required to notify the Company of whether it decides to exercise such Option Matching Rightswithin 10 business days. The Company did not provide such notice to Kien Huat pursuant to the Investment Agreement. On December 31, 2015, theCompany and Kien Huat entered into a letter agreement (the “OMR Letter Agreement”) pursuant to which the parties agreed that, as a result of theCompany’s failure to provide the Option Exercise Notice, Kien Huat’s right to elect to purchase an equal number of shares had not yet vested and wouldinure to Kien Huat’s benefit only upon the Company’s delivery of such Option Exercise Notice. To fulfill the Company’s obligations pursuant65to the Investment Agreement pursuant to the OMR Letter Agreement, the Company provided the Option Exercise Notice as of December 31, 2015 forapproximately 204,706 shares of common stock as required by the Investment Agreement. Kien Huat had ten business days following the date on which theCompany’s Chief Compliance Officer provides written notice that Kien Huat is no longer unable to exercise the Option Matching Rights pursuant to theCompany’s Insider Trading Policy (the “Effective Date Notice”) to elect whether to exercise such Option Matching Rights.On February 17, 2016, the Company provided the Effective Date Notice to Kien Huat regarding Kien Huat's election to exercise its Option MatchingRights. On February 17, 2016, Kien Huat declined to exercise the Option Matching Rights to purchase 204,706 shares of common stock. At December 31,2017, there were approximately 3,000 Option Matching Rights outstanding with various exercise prices and expiration dates through July 2018. On January24, 2018, Kien Huat elected to exercise its Option matching Rights for 1,666 shares of the Company's common stock, after a former officer exercised hisStock Option which was due to expire on January 15, 2018. The Option Matching Rights were exercised at a price of $14.95 per share.Note K. ConcentrationAs of December 31, 2017, the Company had one debtor that consisted of greater than 10% of accounts receivable. Hawthorne OTB represented 13.0%of the total net outstanding racing- related accounts receivable.As of December 31, 2016, the Company had one debtor that consisted of greater than 10% of accounts receivable. Hawthorne OTB represented 16.9%of the total net outstanding racing- related accounts receivable.Note L. Employee Benefit PlansEmpire 401(k) PlanOur eligible employees may participate in a Company-sponsored 401(k) benefit plan (the “Plan”). The Company established the Plan to provideemployees with the opportunity to accumulate pre-tax assets, and to provide employer contributions for eligible employees for their retirement and otherneeds. It is intended to be administered in accordance with all applicable federal laws and regulations. The Plan covers substantially all employees nototherwise covered by plans resulting from collective bargaining agreements. The Plan permits employees to defer a portion of their compensation as a pre-taxdeferral up to statutory maximums. Effective July 2016, the Company makes a matching contribution for eligible salaried employees as follows: 50%matching contribution for an employee contribution of up to 4% of compensation. Eligible employees shall be 100% vested in the portion of their accountsderived from the Company’s matching contributions. Matching contributions for the years ended December 31, 2017, 2016 and 2015 were approximately$243,000, $142,000 and $96,000, respectively. As of December 31, 2017, the Plan had 291 participants.Deferred Compensation PlanThe Company adopted a deferred compensation plan (the "Deferred Compensation Plan"), which is effective on January 1, 2017. The DeferredCompensation Plan is a non-qualified deferred compensation plan under which eligible participants may elect to defer the receipt of current compensation.Eligible participants include select employees of the Company, including its executive officers. Pursuant to the Deferred Compensation Plan and subject toapplicable tax laws, participants may elect to defer up to 50% of their base salary and up to 100% of any cash bonus. In addition to elective deferrals, theDeferred Compensation Plan permits the Company to make discretionary contributions. Participants may elect to receive payment of their vested accountbalances in a single cash payment or in annual installments for a period of five, 10 or 15 years. Payments will be made or commence upon the earliest of aparticipant’s separation from service, death or disability. If a participant so elects, payments will be deferred until a fixed and determinable date. The obligations incurred by the Company under the Deferred Compensation Plan will be unsecured general obligations of the Company to pay thecompensation deferred in accordance with the terms of the Deferred Compensation Plan and will rank equally with other unsecured and unsubordinatedindebtedness of the Company. Because the Company has subsidiaries, the right of the Company, and hence the right of creditors of the Company (includingeligible participants in the Deferred Compensation Plan), to participate in a distribution of the assets of a subsidiary upon its liquidation or reorganization orotherwise, necessarily is subject to the prior claims of creditors of the subsidiary, except to the extent that claims of the Company itself as a creditor may berecognized. At December 31, 2017, the plan had assets of approximately$11,000.66Note M. Income TaxesThe Tax Cuts and Jobs Act (the "2017 Tax Act") was signed into law on December 22, 2017. The 2017 Tax Act significantly revises the U.S. corporateincome tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions and introducing new taxregimes. The 2017 Tax Act also enhanced and extended through 2026 the option to claim accelerated depreciation deductions on qualified property. Inresponse to U.S. tax reform, the Staff of the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB No. 118”) to provideguidance to registrants in applying ASC Topic 740 in connection with U.S. tax reform. SAB No. 118 provides that in the period of enactment, the income taxeffects of U.S. tax reform may be reported as a provisional amount based on a reasonable estimate (to the extent a reasonable estimate can be determined),which would be subject to adjustment during a “measurement period.” The measurement period begins in the reporting period of the U.S. tax reform’senactment and ends when a registrant has obtained, prepared and analyzed the information that was needed in order to complete the accounting requirementsunder ASC Topic 740. SAB No. 118 also describes supplemental disclosure that should accompany the provisional amounts.We have not completed our determination of the accounting implications of the 2017 Tax Act on our tax accruals. However, we have reasonablyestimated the effects of the 2017 Tax Act and recorded provisional amounts in our financial statements as of December 31, 2017. Due to our operating losses,the 2017 Tax Act did not impact our 2017 operating results or income tax expense. The primary impact of the 2017 Tax Act was the remeasurement of ourdeferred tax assets, based upon the new U.S. statutory corporate tax rate of 21% and the required change to the related valuation allowance. As we completeour analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, the IRS,and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for incometaxes in the period in which the adjustments are made.Empire and all of its subsidiaries file a consolidated income tax return. At December 31, 2017 and 2016, the estimated deferred income tax assets andliability were comprised of the following: 12/31/2017 12/31/2016 (in thousands)Deferred tax assets: Net operating loss carryforwards$40,502 $57,327Stock—based compensation2,097 2,863Development costs27,213 26,805Other1,396 1,939Net deferred tax assets71,208 88,934Valuation allowance(71,208) (88,934)Deferred tax assets, net$— $—The valuation allowance decreased approximately $17.7 million during the year ended December 31, 2017, primarily due to the impact of theremeasurement of the net deferred tax assets, based upon the the new U.S. statutory corporate tax rate of 21%, offset by current year activity which increasedthe net deferred tax assets prior to their remeasurement for the new tax rate. The valuation allowance increased approximately $2.8 million during the yearended December 31, 2016. Of the $155.6 million in net operating loss carryforwards approximately $74.7 million is readily available as of December 31,2017.There are limits on the Company’s ability to use its current net operating loss carryforwards, potentially increasing the future tax liability of theCompany if it were to generate taxable income. As of December 31, 2017, the Company had net operating loss carryforwards of approximately $155.6million that expire between 2018 and 2037. The 2004 merger of the Company’s operations with Catskills Development LLC and the investment by KienHuat in 2009 will limit the amount usable in any year of its net operating losses due to the change in control of the Company within the meaning of the taxlaws.67The following is a reconciliation of the federal statutory tax rate to the Company’s effective tax rate: Year endedDecember 31, 2017 2016 2015Tax provision at federal statutory tax rate35.0 % 35.0 % 35.0 %New York State income taxes, net— % — % (0.1)%Non-deductible interest— % (0.3)% (1.2)%Permanent items(3.1)% (3.5)% (2.5)%Change in valuation allowance(31.9)% (31.2)% (31.4)%Effective tax rate— % — % (0.2)%As of December 31, 2017, the Company does not have any uncertain tax positions. As a result, there are no unrecognized tax benefits as ofDecember 31, 2017. If the Company was to incur any interest and penalties in connection with income tax deficiencies, the Company would classify interestwithin interest expense and classify penalties as selling, general and administrative expenses within the consolidated statement of operations.The Company files tax returns in the U.S. federal jurisdiction, as well as New York and Delaware. All of its federal and state tax filings as ofDecember 31, 2016 have been timely filed. The Company is subject to U.S. federal or New York State income tax examinations by tax authorities for yearsafter 2013. During the periods open to examination, the Company has net operating loss and tax credit carryforwards that have attributes from closed periods.Since these net operating loss and tax credit carryforwards may be utilized in future periods, they remain subject to examination.Note N. Related Party TransactionsMoelis AgreementsOn December 9, 2013, the Company executed a letter agreement (the "Moelis Letter Agreement") pursuant to which it engaged Moelis & CompanyLLC ("Moelis") to act as its financial advisor in connection with the Casino. Pursuant to the Moelis Letter Agreement, we agreed to pay Moelis a retainer feein the aggregate amount of $250,000, of which $150,000 was payable upon execution and $100,000 of which was paid within 90 days after execution. In theevent a financing is consummated, the Moelis Letter Agreement contemplates additional transaction-based fees would be earned by Moelis. During 2015, we paid Moelis approximately $428,000 for professional services, travel and expenses.At the close of the January 2016 Rights Offering, Moelis was paid approximately $2.1 million for financial advisory services in connection with theCasino pursuant to the Moelis letter Agreement.On January 24, 2017, in connection with the closing of the Term Loan Facility and the Revolving Credit Facility, Moelis was paid approximately $2.5million for financial advisory services pursuant to the Moelis Letter Agreement.In March 2017, Montreign Operating entered into an engagement agreement with Moelis (the "Moelis-Montreign Engagement Agreement") pursuantto which Moelis will act as exclusive financial advisor to Montreign Operating. Pursuant to the Moelis-Montreign Engagement Agreement, Moelis is entitledto an advisory fee of $100,000, which was paid upon execution, and the reimbursement of expenses up to $75,000. The Moelis-Montreign EngagementAgreement terminated on December 31, 2017.On May 16, 2017, Moelis and the Company entered into a letter agreement reinstating and amending the Moelis Engagement Letter (the "UpdatedMoelis Engagement Letter"). Pursuant to the Updated Moelis Engagement Letter, Moelis will act as non-exclusive financial advisor to the Company inconnection with certain debt and equity financing and corporate transactions the Company may undertake. The Updated Moelis Engagement Letterdescribes the fees that will be due to Moelis for each transaction in which the Company engages. If the Company engages in a covered transaction at any timewithin 12 months of the termination of the Updated Moelis Engagement Letter for any reason other than for cause by the Company, Moelis will be entitled toreceive a transaction fee according to the schedule provided therein. The Updated Moelis Engagement Letter terminated on December 31, 2017. On May 26, 2017, in connection with the closing of the Amended Term Loan Agreement, Moelis was paid approximately $178,000 for financialadvisory services pursuant to the Moelis-Montreign Engagement Letter.68Gregg Polle, a director of the Company, is a Managing Director of Moelis. Mr. Polle refrained from participating in the discussion of the Moelis LetterAgreement and the Moelis-Montreign Engagement Agreement and the determination of whether to enter into such agreements.Kien Huat Letter AgreementOn February 17, 2016, Kien Huat and the Company entered into a letter agreement (the "Kien Huat Letter Agreement") pursuant to which, during theperiod commencing on February 17, 2016 and ending on the earlier of (i) the three-year anniversary of the closing of the January 2016 Rights Offering and(ii) the one-year anniversary of the opening of the Casino, Kien Huat has agreed not to take certain actions with respect to the Company. In particular, duringsuch time period, Kien Huat has agreed not to, and to cause the Kien Huat Parties not to, take certain actions in furtherance of a “going-private” transaction(as such term is defined in the Kien Huat Letter Agreement) involving the Company unless such transaction is subject to the approval of (x) holders of amajority of the votes represented by the common stock, Series B Preferred Stock and any other capital stock of the Company entitled to vote together withthe common stock in the election of the Board (other than any such capital stock owned by any Kien Huat Parties) and (x) either (A) a majority ofdisinterested members of the Board or (y) a committee of the Board composed of disinterested members of the Board. In addition, during such period, theCompany and Kien Huat have agreed to cooperate to ensure that, to the greatest extent possible, the Board includes no fewer than three independent directors(the definition of independence as determined under the standards of The Nasdaq Stock Market or any other securities exchange on which the common stockof the Company is then listed).On December 28, 2017, the Company and Kien Huat amended the Kien Huat Letter Agreement to extend by one year Kien Huat’s obligation not toengage in a going-private transaction with Empire without the prior approval of the majority of Empire’s minority shareholders and a majority of thedisinterested directors of Empire. As a result of the amendment, such restriction now covers a period ending in February 2020. Other than this one-yearextension, all other terms of the Kien Huat Letter Agreement remain unchanged.Commitment Letter from Kien Huat To support the Company's financing needs for the Development Projects, Kien Huat entered into a series of commitment letters with the Company,which was last amended on September 22, 2015 (as amended, the "Kien Huat Commitment Letter"). Pursuant to the Kien Huat Commitment Letter, Kien Huatcommitted to an equity investment in the Company in the aggregate amount of $375 million in support of the Development Projects, the redemption of theSeries E Preferred Stock and for working capital purposes. Kien Huat has invested an aggregate of $340 million of such commitment pursuant to the January2015 Standby Purchase Agreement and the January 2016 Standby Purchase Agreement. Kien Huat also agreed to participate in, and backstop, a follow-onrights offering on the same terms and conditions and at the same subscription price as the January 2016 Rights Offering, in an amount not to exceed $35million (the "Follow-On Rights Offering").In connection with the Kien Huat Note Exchange Agreement, on December 28, 2017, the Company and Kien Huat further amended the Kien HuatCommitment Letter (the "Commitment Amendment"). Pursuant to the Commitment Amendment, Kien Huat’s obligation to participate in, and backstop theFollow-On Rights Offering was terminated. Other than the termination of such follow-on standby purchase commitment, all other terms of the Kien HuatCommitment Letter remain unchangedRWS License AgreementOn March 31, 2017, Montreign Operating entered into a license agreement (the “RWS License Agreement”) with RW Services Pte Ltd (“RWS”). RWSis an affiliate of Tan Sri Lim Kok Thay, who is a beneficiary of and controls Kien Huat. Pursuant to the RWS License Agreement, RWS granted MontreignOperating the non-exclusive, non-transferable, revocable and limited right to use certain “Genting” and “Resorts World” trademarks (the “RWS LicensedMarks”) in connection with the development, marketing, sales, management and operation (the “Permitted Uses”) of the Development Projects. The right touse the RWS Licensed Marks may be assigned or sublicensed only in certain limited circumstances. However, any use of the RWS Licensed Marks for apurpose other than the Permitted Uses will require the prior written consent of RWS. The name of the Casino is “Resorts World Catskills,” and,notwithstanding the foregoing, the use of such name is exclusive to Montreign Operating and may be used in connection with on-line gaming in addition tothe Permitted Uses.The initial term of the RWS License Agreement will expire on December 31, 2027, and will be extended automatically for additional terms of 12months each, up to a maximum of 39 additional terms, unless either of the parties provides notice to terminate the RWS License Agreement or upon themutual written consent of both parties. Montreign Operating’s rights and obligations under the RWS License Agreement are subject to and governed by therules and regulations applicable to Montreign Operating’s gaming operations at the Casino, and the fiduciary obligations of the boards of directors ofMontreign Operating and Empire, as69well as the fiduciary obligations of Kien Huat. Beginning on the date on which the Casino opened to the public, Montreign Operating pays to RWS a feeequivalent to a percentage of Net Revenue (as such term is defined in the RWS License Agreement) generated in each calendar year from (i) all activity at theCasino, (ii) each specific use of the RWS Licensed Marks in the Entertainment Project or Golf Course and (iii) each specific use of the name Resorts WorldCatskills in connection with on-line gaming. The percentage of Net Revenue payable as the fee is a low single digit percentage that will increaseincrementally between the third year and sixth year of the term of the RWS License Agreement and will remain a low single digit percentage during the entireterm of the RWS License Agreement.During the term of the RWS License Agreement, Montreign Operating may participate in the Genting Rewards Alliance loyalty program (the“Alliance”), which will provide central marketing and cross-promotion opportunities for the Development Projects with other members of the Alliance.Montreign Operating’s participation in the Alliance is subject to the provisions of a separate agreement, which is currently being negotiated by the parties.Mr. Lim, our Director, is also a director of Resorts World Inc. Pte Ltd., the parent company of RWS.Investment Agreement with Kien HuatOn August 19, 2009, the Company entered into that certain investment agreement (the “Investment Agreement”) with Kien Huat , pursuant to whichwe issued 6,901,208 shares of common stock, representing just under 50% of our voting power at the time. Under the terms of the Investment Agreement,Kien Huat is entitled to recommend three directors whom we are required to cause to be elected or appointed to our Board, subject to the satisfaction of alllegal and governance requirements regarding service as a member of our Board and to the reasonable approval of the Governance Committee of the Board ofDirectors. In 2017, Kien Huat recommended Messrs. Pearlman, Eller and Lim for appointment to the Board of Directors pursuant to the InvestmentAgreement. Kien Huat will continue to be entitled to recommend three nominees for directors for so long as it owns at least 24% of our voting poweroutstanding at such time, after which the number of directors whom Kien Huat will be entitled to designate for election or appointment to the Board ofDirectors will be reduced proportionally to Kien Huat’s percentage of ownership. Under the Investment Agreement, for so long as Kien Huat is entitled todesignate nominees for directors to the Board, among other things, Kien Huat will have the right to nominate one of its nominees elected to serve as a directorto serve as the Chairman of the Board, and Mr. Pearlman has been appointed to serve as Executive Chairman of the Board pursuant to Kien Huat’srecommendation. Until such time as Kien Huat ceases to own capital stock with at least 30% of our voting power outstanding at such time, the Board ofDirectors will be prohibited under the terms of the Investment Agreement from taking certain actions relating to fundamental transactions involving us andour subsidiaries and certain other matters without the affirmative vote of the directors nominated by Kien Huat.Registration RightsPursuant to the terms of the Investment Agreement, on August 19, 2009, the Company entered into a Registration Rights Agreement with the KienHuat (the “Registration Rights Agreement”). The Registration Rights Agreement provides, among other things, that Kien Huat may require that the Companyfile one or more “resale” registration statements, registering under the Securities Act of 1933, as amended, the offer and sale of all of the common stock issuedor to be issued to Kien Huat pursuant to the Investment Agreement as well as any shares acquired by way of a share dividend or share split or in connectionwith a combination of such shares, recapitalization, merger, consolidation or other reorganization with respect to such shares. In addition, pursuant to theKien Huat Commitment Letter, the Company agreed to register for resale all of the shares of common stock issued to Kien Huat in the 2015 Rights Offeringand the 2016 Rights Offering, as well as the Follow-on Rights Offering, if any, as well as any other unregistered shares of common stock held by Kien Huat.On February 23, 2016, the Company filed a registration statement on Form S-3 (No. 333-309662) registering for resale all of the shares of common stock heldby Kien Huat, which registration statement is currently pending with the Securities and Exchange Commission. Note O. Commitments and Contingencies The Company is a party from time to time to various legal actions that arise in the normal course of business. In the opinion of management, theresolution of these other matters will not have a material and adverse effect on our consolidated financial position, results of operations or cash flows.70Operating LeasesThe following table represents the minimum lease payments: Payments due by Period Year ending December 31, Total Payments (in thousands) 2018 $12,7612019 9,3532020 8,9612021 8,4962022 8,3002023 to 2056 361,986Total $409,857The details of operating lease commitments are described below.Casino LeaseOn December 28, 2015 , Montreign Operating entered into a lease (the "Casino Lease") with EPT for the lease of the parcel on which the Casino is beingbuilt (the "Casino Parcel'). The Casino Lease has a term that expires on the earlier of (i) March 31, 2086, and (ii) Montreign Operating giving EPT writtennotice of its election to terminate the Casino Lease (the “Termination Option”) at least 12 months prior to any one of five Option Dates (as defined below).The option dates (each an "Option Date") under the Casino Lease mean each of the 20th, 30th, 40th, 50th and 60th anniversaries of the commencement of theCasino Lease. Upon Montreign Operating's timely notice of exercise of its Termination Option, the Casino Lease will be automatically terminated effectiveas of the applicable Option Date.The following table represents the fixed rent payments under the Casino Lease:Year ending December 31,Fixed Rent Payments due by Period (in thousands)2018 (1) (2)$10,5002019 (2)7,5002020 (2)7,5002021 (2)8,0002022 (2)8,0002023 to 2056 (2)346,624(1)From March 1, 2017 through August 31, 2018, fixed rent is $1 million per month.(2)From September 1, 2018 through the remainder of the term of the Casino Lease, fixed rent will equal $7.5 million per year, subject to an eightpercent escalation every five years ("Base Amount").In addition to the annual fixed rent, beginning September 2018 and through the remainder of the term of the Casino Lease (the “Percentage RentPeriod”), Montreign Operating is obligated to pay an annual percentage rent equal to five percent of the Eligible Gaming Revenue (as such term is defined inthe Casino Lease) in excess of the Base Amount for the Percentage Rent Period. Additionally, the lease is a net lease, and Montreign Operating has anobligation to pay the rent payable under the Casino Lease and other costs related to Montreign Operating's use and operation of the Casino Parcel, includingthe special district tax assessments allocated to the Casino Parcel, not to exceed the capped dollar amount applicable to the Casino Parcel.71Golf Course LeaseOn December 28, 2015, ERREI entered into a sublease (the “Golf Course Lease”) with the Adelaar Developer, LLC (the "Destination Resort Developer")for the lease of the Golf Course Parcel. The terms of the Golf Course Lease are substantially similar to the Casino Lease, subject to the material differencesdescribed below. Under the Golf Course Lease, there is no percentage rent due. Fixed rent payments under the Golf Course Lease are represented in the tablebelow:Year ending December 31,Fixed Rent Payments due by Period (in thousands)2018 (1)$—2019 (1) (2)1252020 (2)1502021 (2)1502022 (2)1502023 to 2056 (2) (3)7,675(1)From the date the Golf Course Lease commenced (the “Golf Course Lease Commencement Date”) and until the date on which the Golf Course opensfor business, which is expected to be in Spring 2019 (the “Golf Course Opening Date”), fixed rent payments shall equal $0.(2)From the Golf Course Opening Date and continuing for the 10 years thereafter, fixed rent will equal $150,000 peryear.(3)From March 2029 through the remainder of the term of the Golf Course Lease, fixed rent will equal $250,000 per year.The Golf Course Lease is a net lease and ERREI is obligated to pay the rent payable under the Golf Course Lease and other costs related to ERREI's useand operation of the Golf Course Parcel, including the special district tax assessments allocated to the Golf Course Parcel, not to exceed the capped dollaramount applicable to the Golf Course Parcel. This obligation shall not be assessed against ERREI prior to 60 months following the Golf Course LeaseCommencement Date.Entertainment Project LeaseOn December 28, 2015, ERREII entered into a sublease (the “Entertainment Project Lease”) with the Destination Resort Developer, for the lease of theEntertainment Project Parcel. The terms of the Entertainment Project Lease are substantially similar to the Casino Lease, subject to the material differencesdescribed below. Under the Entertainment Project Lease, there is no percentage rent due. Fixed rent payments under the Entertainment Project Lease arerepresented in the table below:Year ending December 31,Fixed Rent Payments due by Period (in thousands)2018 (1) (2)$122019 (2)1502020 (2)1502021 (2)1502022 (2)1502023 to 2056 (2) (3)7,713(1)From the date the Entertainment Project Lease commenced (the “Entertainment Project Lease Commencement Date”) and until the date on which theEntertainment Village opens for business, which is expected to be December 2018 (the “Entertainment Project Opening Date”), fixed rent paymentswill equal $0.(2)From the Entertainment Project Opening Date and continuing for the 10 years thereafter, fixed rent will equal $150,000 per year.(3)From September 2028 through the remainder of the term of the Entertainment Project Lease, fixed rent will equal $250,000 per year.72The Entertainment Project Lease is a net lease and ERREII is obligated to pay the rent payable under the Entertainment Project Lease and other costsrelated to ERREII's use and operation of the Entertainment Project Parcel, including the special district tax assessments allocated to the Entertainment ProjectParcel, not to exceed the capped dollar amount applicable to the Entertainment Project Parcel. This obligation shall not be assessed against ERREII prior to60 months following the Entertainment Project Lease Commencement Date.Purchase Option AgreementOn December 28, 2015, Montreign Operating and EPR entered into a Purchase Option Agreement (the “Purchase Option Agreement”), pursuant to whichEPR granted to Montreign Operating the option (the “Purchase Option”) to purchase all, but not fewer than all, of the Development Project Parcels for apurchase price of $175 million, ($200 million after the sixth anniversary of the License Award Effective Date), less a credit of up to $25 million for certainprevious payments made by the Project Parties. The Purchase Option commenced on December 28, 2015 and shall expire on the earlier to occur of (i) thenatural expiration of the term of the Casino Lease and (ii) 90 days following the earlier termination of the Casino Lease, if otherwise terminated in accordancewith its terms (the “Purchase Option Period”).Under the Purchase Option Agreement, EPR also granted to Montreign Operating the option (the “Resort Project Purchase Option”) to purchase not lessthan all of the balance of the EPR Property, excluding the Development Project Parcels and the Waterpark (the “Resort Property”) for an additional fee. TheResort Project Purchase Option may be exercised only simultaneously with or after the exercise of the Purchase Option. The Resort Project Purchase Optioncommenced on December 28, 2015 and shall expire on the earlier to occur of (a) the expiration of the Purchase Option Period or (b) March 1, 2026.Under the Purchase Option Agreement, EPR also granted to Montreign a right of first offer (“ROFO”) with respect to all or any portion of the ResortProperty. Under the terms of the ROFO, if EPR makes an offer to or rejects an offer made by Montreign Operating, then EPR shall be precluded for a period ofsix months from transferring the designated portion of the Resort Property at a price and on terms which are on the whole substantially equivalent to or worsethan those proposed or accepted by Montreign Operating. The ROFO commenced on the Effective Date and shall continue in full force and effect until EPRhas sold, leased, licensed or otherwise transferred all of the Resort Property.Note P. Loss Per ShareAs previously discussed in Note I, the Company completed a rights offering during January 2016. As per ASC 260-10-55-13 to ASC 260-10-55-14, arights issue in which the exercise price at issuance is less than the fair value of the stock contains a bonus element that is somewhat similar to a stockdividend. If a rights issue contains a bonus element and the rights issue is offered to all existing shareholders, basic and diluted earnings per share shall beadjusted retroactively for the bonus element for all periods presented. Since the Company offered the right to all existing shareholders at a 20% discount, abonus element was present. The Company determined the bonus element to be an additional 1.458 million shares which would be added to the denominatorthat was used in computing basic and diluted earnings per share in 2015. The calculation of the bonus element gave rise to the following adjustments to theweighted average number of common shares and loss per common share for the year ended December 31, 2015: Year ended December 31, 2015 (in thousands, except per share ) Weighted average number of common shares, as reported 9,291 Adjustment 1,458 Weighted average number of common shares, as adjusted 10,749 Loss per common share, as reported $(4.00) Adjustment $0.58 Loss per common shares, as adjusted $(3.42) 73Note Q. Summarized Quarterly Data (Unaudited)The following table summarizes the quarterly results of operations for the years ended December 31, 2017 and 2016: Fiscal Quarter Quarter 1 Quarter 2 Quarter 3 Quarter 42017 (in thousands, expect per share data) Net revenues $14,769 $17,186 $18,713 $15,183 Loss from operations (6,356) (6,830) (6,844) (9,887) Net loss (11,451) (11,916) (10,872) (12,105) Loss per common share: Loss per common share, basic $(0.37) $(0.39) $(0.35) $(0.39) Loss per common share, diluted $(0.37) $(0.39) $(0.35) $(0.39) 2016 Net revenues $16,205 $17,405 $18,530 $15,314 Loss from operations (4,764) (7,047) (5,388) (6,484) Net loss (5,177) (7,045) (5,388) (6,587) Loss per common share: Loss per common share, basic $(0.26) $(0.23) $(0.18) $(0.19) Loss per common share, diluted $(0.26) $(0.23) $(0.18) $(0.19) 74Note R. Subsequent EventsOn February 5, 2018, Montreign Operating received an Operation Certificate from the NYSGC to commence gaming operations at the Casino and, onFebruary 8, 2018, the Casino opened to the public.On November 3, 2014, MRMI and the Monticello Harness Horsemen’s Association (the “MHHA”) entered into an agreement that governs the conductof MRMI and MHHA relating to horseracing purse payments, the simulcasting of horse races and certain other payments (the “2014 MHHA Agreement”).Pursuant to the 2014 MHHA Agreement, on March 15, 2018, Empire issued to MHHA 200,000 shares of common stock and a warrant to purchase 60,000shares of common stock at $81.50 per share, the proceeds of any sales of which will provide additional monies for the harness horsemen’s purse account.Under the terms of the 2014 MHHA Agreement, the MHHA may dispose of the common stock beginning six months after receipt the common stock, subjectto limitations upon the quantity of common shares disposed at any one time, as prescribed by the MHHA Agreement. See Note J for a discussion of this event.The Company drew $9.0 million on January 23, 2018 and $4.0 million on February 9, 2018, at LIBOR plus 5.0% interest rates under the RevolvingCredit Facility. See Note G for a discussion of the terms of the Revolving Credit Agreement.On January 4, 2018, the NYSGC notified the Company that it had confirmed that the Minimum Capital Investment criteria has been reached and the$35 million in performance bonds held in trust were returned to the Company for use toward Development Projects expenses. See Note E for a discussion ofthis event.Item 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. None.Item 9A.Controls and Procedures.We carried out an evaluation as of December 31, 2017 under the supervision and with the participation of management, including our Chief ExecutiveOfficer and Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as required by Rule 13a-15 ofthe Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that ourdisclosure controls and procedures are effective.The evaluation of Empire Resorts, Inc.’s disclosure controls and procedures and internal control over financial reporting included a review of ourobjectives and processes, implementation by us and the effect on the information generated for use in this Annual Report. In the course of this evaluation andin accordance with Section 302 of the Sarbanes Oxley Act of 2002, we sought to identify material weaknesses in our controls, to determine whether we hadidentified any acts of fraud involving personnel who have a significant role in our internal control over financial reporting that would have a material effecton our consolidated financial statements, and to confirm that any necessary corrective action, including process improvements, were being undertaken. Ourevaluation of our disclosure controls and procedures is done quarterly and management reports the effectiveness of our controls and procedures in ourperiodic reports filed with the Securities and Exchange Commission. Our internal control over financial reporting is also evaluated on an ongoing basis byour internal auditors and by other individuals in our organization. The overall goals of these evaluation activities are to monitor our disclosure controls andprocedures and internal control over financial reporting and to make modifications as necessary. We periodically evaluate our processes and procedures andmake improvements as required.Because of inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detectmisstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequatebecause of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Management applies its judgment inassessing the benefits of controls relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provideabsolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls is basedin part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its statedgoals under all potential future conditions, regardless of how remote.Disclosure Controls and ProceduresDisclosure controls and procedures are designed with the objective of ensuring that (i) information required to be disclosed in our reports filed under theExchange Act is recorded, processed, summarized and reported within the time periods specified in75the rules and forms of the Securities and Exchange Commission and (ii) information is accumulated and communicated to management, including our ChiefExecutive Officer and Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosures. Based on their evaluation, our ChiefExecutive Officer and Chief Accounting Officer have concluded that our disclosure controls and procedures are effective.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in ExchangeAct Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief AccountingOfficer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework 2013 framework (the "COSO criteria") issued by the Committee of Sponsoring Organizations of the Treadway Commission. Internalcontrol over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that(a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;(b) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of the ourmanagement and directors; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition ofthe Company’s assets that could have a material effect on the financial statements. Based on our evaluation under the COSO criteria, our managementconcluded that our internal control over financial reporting was effective as of December 31, 2017.There were no changes in our internal controls over financial reporting during the fourth quarter of the year ended December 31, 2017 that havematerially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.Ernst & Young LLP, the Company’s independent registered public accounting firm, that audited the consolidated financial statements included in thisAnnual Report on Form 10-K, issued an attestation report on the Company’s internal control over financial reporting within this report.Item 9B.Other Information.On March 13, 2018, the Compensation Committee approved a 5% cost of living increase to Mr. Pearlman's annual base salary. Effectiveimmediately, Mr. Pearlman's annual base salary was increased to $682,500.76PART IIIItem 10.Directors, Executive Officers and Corporate Governance.Directors and Executive OfficersOur directors and executive officers are as follows:Name Age Position Emanuel R. Pearlman 57 Executive Chairman of the BoardRyan Eller 42 President, Chief Executive Officer and DirectorKeith L. Horn 59 DirectorEdmund Marinucci 68 DirectorNancy A. Palumbo 57 DirectorGregg Polle 57 DirectorGerard Ewe Keng Lim 49 DirectorNanette L. Horner 53 Executive Vice President, Chief Counsel and Chief Compliance OfficerJamie M. Sanko 41 Chief Accounting OfficerCharles Degliomini 59 Executive Vice President of Governmental Affairs and CorporateCommunicationsKevin D. Kline 49 Chief Operating Officer and General Manager of Montreign OperatingCompany, LLC.The terms of all of our current directors will expire at the 2018 Annual Meeting of Stockholders, and all directors will be up for election for one-yearterms at the 2018 Annual Meeting of Stockholders and at every subsequent annual meeting of stockholders. Any director chosen as a result of a newlycreated directorship or to fill a vacancy on the Board would hold office for a term expiring at the next annual meeting of stockholders. This does not changethe present number of directors or the Board’s authority to change that number and to fill any vacancies or newly created directorships.The business experience of each or our directors and executive officers is as follows:Emanuel R. Pearlman has served as a director since May 2010 and as the Executive Chairman of the Board since June 2016. Mr. Pearlman served asNon-Executive Chairman of the Board from September 2010 through May 2016. He is the Chairman and Chief Executive Officer of Liberation InvestmentGroup, LLC, a New York-based investment management and financial consulting firm, which he founded in January 2003. Mr. Pearlman has been a memberof the board of directors of CEVA Logistics since June 2013, and has been a director of Network-1 Technologies, Inc. (NYSE MKT:NTIP) since 2012, wherehe serves as Chairman of the Audit Committee and a member of the Corporate Governance Committee. From May through September of 2017, Mr. Pearlmanserved on the board of directors of ClubCorp Holdings, Inc. (NYSE:MYCC) where he served on the Strategic Review Committee, and from 2009 to 2014, heserved as the sole independent director of Fontainebleau Miami JV LLC, which currently owns and operates the Fontainebleau Hotel in Miami Beach. Healso served as a director of of Multimedia Games, Inc. (NASDAQ-GS:MGAM) from October 2006 to March 2010. Mr. Pearlman holds an MBA from HarvardBusiness School and a B.A. in Economics from Duke University.Ryan Eller has served as a director since September 2017. Mr. Eller served as our President and Chief Operating Officer from March 2017 throughJune 2017 and became our President and Chief Executive Officer in June 2017. From June 2013 to March 2017, Mr. Eller served in various executive officerpositions with Genting New York LLC (“Genting NY”), which operates Resorts World Casino New York City (“RWNYC”). From June 2013 to October 2014,Mr. Eller served as Chief Financial Officer and from October 2014 to March 2017, Mr. Eller served as President of Genting NY. During his tenure at GentingNY, Mr. Eller oversaw RWNYC’s planning with respect to a $315 million expansion to add 1,000 video lottery terminals, a new hotel and conventioncomplex. Concurrently with his position at Genting NY, from October 2014 to March 2017, Mr. Eller served as Senior Vice President of Development ofGenting Americas Inc. (“Genting Americas”), an indirect, wholly-owned subsidiary of Genting Malaysia Berhad (“Genting Malaysia”), which is also theparent entity of Genting NY. In his role with Genting Americas, Mr. Eller oversaw the design and development of the Resorts World Las Vegas integratedresort, a $4 billion project on the Las Vegas Strip. From September 2012 to June 2013, Mr. Eller served as Executive Vice President and Chief FinancialOfficer of Choctaw Resort Development Enterprise, a wholly-owned enterprise of the Mississippi Band of Choctaw Indians, which operates three casinosincluding the Pearl River Resort, a fully integrated casino and resort facility that includes two casinos, a golf course and waterpark in Choctaw, Mississippi.In this role, Mr. Eller was responsible for the overall financial operations of the Choctaw’s gaming and77resort enterprises as well as a restructuring of the property’s operations following an extended period of distress. From September 2007 to September 2012,Mr. Eller served as Treasurer and Executive Director of Finance of PCI Gaming Authority, a business enterprise created by the Poarch Band of Creek Indians,where he helped design, open and operate three casino and hotels representing capital investments over $600 million. At PCI Gaming Authority, Mr. Elleralso directed operations and oversaw efforts to acquire and integrate pari-mutuel wagering facilities in Florida and Alabama. From 2006 to 2007, Mr. Ellerserved as Regional Manager, Planning and Analysis at Caesar’s Entertainment, Inc., where he led a team responsible for strategic, operational and marketinganalysis. Mr. Eller served in the United States Marine Corps from 1997 to 2004 where he attained the rank of Major, holds an MBA with honors from HarvardBusiness School and a bachelor’s degree with distinction from the U.S. Naval Academy.Keith L. Horn has served as a director of the Company since April 2016. He served as Chief Operating Officer and a member of the ManagementCommittee of Elliott Management Corporation (“Elliott”), a global, multi-strategy private investment fund with more than $30 billion of assets undermanagement, from 2003 to 2015. Mr. Horn’s role at Elliott encompassed, among other things, direct responsibility for operations, accounting, finance, IT,applications development, human resources, compliance and all aspects of infrastructure and security. From 2011 to 2015, Mr. Horn served as a member ofthe board of directors of the Managed Funds Association, and was also a member of such board’s Executive Committee and served as Chairman of itsNominating Committee and Chairman of its International Affairs Committee. Prior to joining Elliott, beginning in 1987, Mr. Horn spent 16 years at MerrillLynch serving in various capacities, including global head of Leveraged Finance, head of Latin America Debt, Chief of Staff to the Chairman and Presidentand a managing director in High Yield Finance and Investment Banking. Mr. Horn began his career in private practice as a corporate and securities attorney.He is a member of the Binghamton University Foundation board of directors and the Vice Chairman of the Foundation’s Investment Committee. In addition,Mr. Horn is a member of the Board of Directors of PeacePlayers International. He recently joined the board of directors of ShopOne Centers REIT, Inc. Mr.Horn received his J.D. cum laude from Georgetown University Law Center and holds B.A. degrees in Economics and Political Science from BinghamtonUniversity, where he graduated Phi Beta Kappa with highest honors.Edmund Marinucci has served as a director since March 2014. Mr. Marinucci has been a partner at PCH Hotels, LLC, a boutique hotel and resortoperator based in San Francisco that is an operating division of Pacific Union Company since 1983. From October 1983 to December 2008, Mr. Marinucciserved as President of PCH Hotels, LLC. During his tenure as President, PCH Hotels owned and managed properties in the U.S. and the Caribbean. Suchproperties included Meadowood Resort (Napa, California), Windermere Island Club (Bahamas), Divi Resorts (Aruba), Downtown Athletic Club (New YorkCity), Frangipani Resort (Anguilla) and Marriott Resort (Grand Cayman). During his presidency of PCH Hotels, he oversaw the ground-up development ofThe Hotel Griffon and the renovation and repositioning of the Drisco Hotel (each in San Francisco). Prior to PCH Hotels, Mr. Marinucci served as Director ofDevelopment for HCP Hotels/Aston Resorts in Hawaii. In such position, Mr. Marinucci oversaw all development aspects of the hotel group and grewinventory from 15 to 20 hotel resorts. From 1978 to 1981, Mr. Marinucci served as Director of Resort Operations for Kapalua Resort Maui in Hawaii. While atKapalua Resort Maui, Mr. Marinucci was responsible for the daily operations of the resort, including the Kapalua Bay Hotel, 150 rental villas, two golfcourses, The Bay and The Village. He currently serves on the board of directors of The Dominick, a five-star boutique hotel located in Soho in New YorkCity. Mr. Marinucci previously served on the board of directors of Jameson Inns/Colony Capital, a private hotel and resort company, and from November2009 to January 2018, he served on the board of directors of Miami JV Member LLC, a private hotel and resort company known as the Fountainbleu. Mr.Marinucci is a member of The Cornell Hotel Society. Mr. Marinucci received a BS in Hotel Administration from the Cornell University School of HotelAdministration.Nancy A. Palumbo has served as director since June 2009. Ms. Palumbo also acts as an independent consultant in the areas of strategic marketing,corporate communications and business development. Ms. Palumbo has also served as a principal in CRAMN LLC, a global business development company.From March 2009 to December 2010, she served as President of the Green Planet Group, a company that advised on solar and renewable energy solutions.Prior to joining Green Planet Group, from May 2007 to March 2009, Ms. Palumbo was the General Manager for Walker Digital Lottery and from October2006 to May 2007, she served as the Senior Vice President for Strategic Marketing and Corporate Communications for the New York Daily News. FromJanuary 2004 to October 2006, Ms. Palumbo served as the Director of the New York Lottery, where she managed a $6 billion a year business and oversaw theopening of six video gaming facilities. From February 1995 to January 2004, Ms. Palumbo served as the Executive Deputy Commissioner for the Office ofParks Recreation and Historic Preservation for the State of New York, where she was instrumental in developing public-private partnerships to generateadditional revenue to expand park services. Ms. Palumbo is a graduate of St. Bonaventure University.Gregg Polle was elected to serve as a director in December 2010. Mr. Polle is a Managing Director for Moelis & Company, an investment bank thatprovides financial advisory services and capital raising solutions to clients in connection with mergers and acquisitions, restructurings and other strategicmatters. He has also served as an investment banker with Citigroup Inc. (“Citigroup”) and its predecessors Salomon Brothers and Salomon Smith Barney from1983 until November 2008. Mr. Polle most recently served as head of the global industrial group at Citigroup and previously was the co-head of Citigroup’sglobal mergers78and acquisitions group. Mr. Polle was a private investor from November 2008 through July 2011. Mr. Polle received a B.S. in Economics from the WhartonSchool of the University of Pennsylvania.Gerard Ewe Keng Lim has served as a director in September 2017. Mr. Lim serves as a director of Kien Huat Realty III Limited (“Kien Huat”), theCompany’s largest stockholder. Since February 2009, Mr. Lim has served as General Manager of Kien Huat Realty Sdn Berhad (“KHRSB”), which is aholding company that is a substantial shareholder of Genting Berhad. He was appointed as a director of KHRSB in September 2017. Genting Berhad is theholding company for the Genting Group, a multi-national conglomerate that includes, among other things, hospitality and casino holdings worldwide. Mr.Lim also serves as director of Golden Hope Limited (“Golden Hope”), which acts as trustee for a private unit trust primarily involved in investment holding.Golden Hope as trustee of the unit trust is an affiliate of Kien Huat and a substantial shareholder of Genting Hong Kong Limited (formerly known as StarCruises Limited) which is publicly traded in Hong Kong. In his position as General Manager of KHRSB and director of KHRSB and Golden Hope, and in hispositions as director of various subsidiaries and affiliates of KHRSB and Golden Hope, Mr. Lim oversees the investments of KHRSB and Golden Hope invarious concerns, including a ski resort, casino resorts, genomics, real estate and leisure lifestyle companies. Mr. Lim also serves as a director of ResortsWorld Inc Pte Ltd., an affiliate of the Genting Group and the parent entity of Resorts World Services Pte. Ltd., from which the Company licenses the “ResortsWorld” and “Genting” brand names. Mr. Lim also serves as a director of Grand Banks Yachts Limited, a company publicly traded in Singapore withsignificant subsidiaries in the business of manufacturing and selling luxury yachts worldwide. Genting Hong Kong Limited indirectly holds a substantialownership interest in Grand Banks Yachts Limited. Prior to joining KHRSB and Golden Hope, from 1997 to 2007, Mr. Lim held various positions withGenting Hong Kong Limited. Most recently, Mr. Lim served as its Chief Financial Officer from 2004 to 2007. Mr. Lim holds a Bachelor of Science inChemical Engineering from the University of Birmingham and a Master’s degree in Business Administration from the University of Aston.Nanette L. Horner joined the Company in July 2010 and currently serves as Executive Vice President, Chief Counsel and Chief Compliance Officer.Ms. Horner has been an attorney in the gaming industry since 1996. Prior to her employment with the Company, Ms. Horner was a regulator with thePennsylvania Gaming Control Board ("PGCB") from August 2005 to June 2010 where she served as Deputy Chief Counsel assigned to the Bureau ofLicensing. In September 2006, Ms. Horner was named the PGCB's first director of the Office of Compulsive and Problem Gambling. She is a member of theBoard of Directors for the National Council on Problem Gambling, and is a member of American Mensa and the International Masters of Gaming Law.Jamie M. Sanko has served as Chief Accounting Officer since December 2017. Prior to joining the Company, from December 2014 to December 2017,Mr. Sanko served as the chief financial officer of Genting Americas Inc., where he was responsible for financial oversight of operations in New York, Miami,Bimini and Las Vegas. From January 2011 to October 2014, Mr. Sanko served as the Director of Finance and as of October 2014, the Chief Financial Officerfor Resorts World Casino in New York City. From July 2008 to November 2011, Mr. Sanko was the Reconciliation Manager and Trade Services Manager forDuPont Capital Management in Wilmington, Delaware. From 2003 to 2007, Mr. Sanko was an audit manager and audit senior for Ernst & Young LLP, wherehe served as the engagement executive for various public companies as well as non-public partnerships. Mr. Sanko earned his Bachelor’s degree from LaSalleUniversity and his MBA from Drexel University.Charles Degliomini joined the Company in 2004 and currently serves as Executive Vice President of Governmental Affairs and CorporateCommunications. Since 2011, Mr. Degliomini has served as a director of the New York Gaming Association, a not-or-profit trade association created toadvance the interests of New York State's nine racetrack casinos. He is a member of the board of directors of the Sullivan County Chamber of Commerce, aswell as the Community Foundation of Orange ans Sullivan counties, which currently manages more than 280 permanent charities for individuals, families,businesses and organizations. Mr. Degliomini is also a member of the board of directors of the Orange and Sullivan County Boys and Girls Club. Mr.Degliomini served in the General Services Administration as chief of staff to the Regional Administrator from 1985 to 1998, and was the New York Statecommunications director for Reagan-Bush in 1984. Mr. Degliomini has a B.A. in Political Science from Queens College.Kevin D. Kline has served as Chief Operating Officer and General Manager of Montreign Operating since December 2017. Prior to joining MontreignOperating, from March 2016 to December 2017, Mr. Kline was a principal of Kline Edge Enterprises LLC and provided management and operationalconsulting for entrepreneurial clients. From January 2011 to November 2015, Mr. Kline served as the Senior Vice President and General Manager of theHorseshoe Casino Cincinnati, formerly a Caesars Entertainment branded property. Mr. Kline was involved in the design and construction of the 23-acre siteand, upon opening, oversaw the overall daily operations of the property, which included 1,700 team members. From November 2015 to March 2016, Mr.Kline served as a Senior Vice President of Caesars Entertainment Corp. (Nasdaq: CZR) and assisted in the transfer of the ownership and management rights toHorseshoe Casino Cincinnati in connection with the bankruptcy filing of certain subsidiaries of Caesars Entertainment Corp. From July 2005 to December2010, Mr. Kline served as the Vice President and Assistant General Manager for the Horseshoe Hammond Casino, a Caesars Entertainment branded propertyin the Chicagoland market. While the Horseshoe Hammond Casino continued to operate in an existing facility, Mr. Kline led the teams responsible for thedesign and construction of a new $500 million casino site. Upon the opening of the new facility in August 2008, Mr. Kline led the management andoperations of the new property, which included 2,300 team members. From March 1999 to June 2005, Mr. Kline served in79various capacities within the Harrah’s Entertainment organization. From March 2005 to June 2005, Mr. Kline served as a member of the integration teamcreated in connection with the merger of Caesars Entertainment Corp. and Harrah’s Entertainment Corp., which was consummated in 2005. In particular,Mr. Kline’s focus on the integration team was the strategic development and optimization of the player experience of key customers within both the Caesarsand Harrah’s organizations. From February 2002 to March 2005, Mr. Kline served as the Vice President of Casino Marketing for Harrah’s Entertainment inNew Orleans where he, along with the management team, transitioned the property and business during a restructuring period. Mr. Kline worked on buildingrelationships with local hotel, restaurant and entertainment venues and integrating the property with the Harrah’s Total Rewards loyalty program to attractexisting customers and to establish the property as a premium enterprise destination for program members and the company. From December 2000 toFebruary 2002, Mr. Kline served as the Vice President of Casino Marketing for The Rio All-Suite Hotel and Casino in Las Vegas, also a Harrah’s property,where he was responsible for restructuring the property’s multi-channel sales function and implementing strategies to drive high-valued national andinternational customer trips to the property. Prior to his involvement with specific Harrah’s properties, from March 1999 to December 2000, Mr. Kline servedas Vice President of VIP marketing, where he was responsible for the strategic marketing initiatives related to the company’s VIP marketing segment. Prior tojoining the Harrah’s organization, Mr. Kline served in various marketing roles within the Trump casino organization. From March 2011 to March 2018,Mr. Kline served as a board member of the Cincinnati USA Convention and Visitors Bureau. From 2013 to February 2018, Mr. Kline served as a boardmember of the Alzheimer's Association of Greater Cincinnati. Mr. Klein currently serves as a board member of the Cincinnati Brewery District CommunityUrban Redevelopment Corporation. Mr. Kline also serves as an executive in residence for CincyTech, a Cincinnati-based start-up accelerator. Mr. Kline has aBachelor’s degree in Business from James Madison University and a Master’s of Management degree from Cornell University’s School of HotelAdministration with concentrations in finance and real estate finance.Director IndependenceThe Board evaluates the independence of each nominee for election as a director of our Company in accordance with the NASDAQ listing rules (the“NASDAQ Listing Rules”) of the NASDAQ Stock Market LLC (“NASDAQ”). Pursuant to these rules, a majority of our Board must be “independent directors”within the meaning of the NASDAQ Listing Rules, and all directors who sit on our Corporate Governance and Nominations Committee, Audit Committee andCompensation Committee must also be independent directors.The NASDAQ definition of “independence” includes a series of objective tests, such as the director or director nominee is not, and was not during thelast three years, an employee of the Company and has not received certain payments from, or engaged in various types of business dealings with, theCompany. In addition, as further required by the NASDAQ Listing Rules, the Board has made a subjective determination as to each independent director thatno relationships exist which, in the opinion of the Board, would interfere with such individual’s exercise of independent judgment in carrying out his or herresponsibilities as a director. In making these determinations, the Board reviewed and discussed information provided by the directors with regard to eachdirector’s business and personal activities as they may relate to Company and its management.As a result, the Board has affirmatively determined that none of our directors has a material relationship with the Company other than Ryan Eller, whoserves as our President and Chief Executive Officer, Emanuel R. Pearlman, who serves as Executive Chairman of the Board and Gerard Lim, who serves as adirector of Kien Huat, Empire's largest stockholder. The Board has also affirmatively determined that all members of our Audit Committee, CorporateGovernance and Nominations Committee and Compensation Committee are independent directors.Audit Committee and Audit Committee Financial ExpertWe have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act and NASDAQListing Rules. The Audit Committee is comprised of Mr. Horn, Ms. Palumbo and Mr. Polle. Mr. Horn serves as Chairman of the Audit Committee. Our Boardhas determined that Mr. Horn and Mr. Polle qualify as audit committee financial experts as defined by Securities and Exchange Commission rules, based onhis education, experience and background. Please see the biographical information above for a description of Mr. Horn's and Mr. Polle's relevant experience.Code of Conduct and Business EthicsWe adopted a Code of Business Conduct and Ethics, applicable to all employees, and a Code of Ethics for the Principal Executive Officer and SeniorFinancial Officer(s), each of which is available on our internet website (www.empireresorts.com) and will be provided in print without charge to anystockholder who submits a request in writing to Empire Resorts, Inc. Investor Relations, c/o Monticello Casino and Raceway, 204 State Route 17B, P.O. Box5013, Monticello, New York 12701. Any amendment to and waivers from the Code of Ethics with respect to the Company’s Chief Executive Officer or ChiefFinancial Officer will be posted on the Company’s website.80Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than ten percent of ourcommon stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percentbeneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of suchforms furnished to us and written representations from our executive officers and directors, we believe that during the year ended December 31, 2017 therewere no delinquent filers with the exception of a Form 3 that was to be filed by Mr. Eller on March 27, 2017 in connection with his appointment as Presidentof the Company. Mr. Eller filed such form on June 7, 2017. 81Item 11.Executive Compensation.Summary Compensation TableThe following table sets forth all information concerning the compensation earned, for the fiscal years ended December 31, 2017, 2016 and 2015 forservices rendered to us by persons who served as our CEO and CFO during 2017, 2016 and 2015, as well as each of our three other most highly compensatedexecutive officers who were serving as executive officers at the end of 2017, 2016 and 2015, all of whom we refer to herein collectively as our “NamedExecutive Officers.”Name and Principal PositionYear Salary ($) Bonus ($) Restricted StockAwards ($)(11) All OtherCompensation ($) Total ($)Emanuel R. Pearlman (1)2017 650,000(1)200,000 611,250 36,000(1) 1,497,250Executive Chairman of the Board2016 357,500(1)200,000 — 17,500(1) 575,000 Ryan Eller (2)2017 438,461 200,000 489,000 19,900(2) 1,147,361 President and Chief Executive Officer Joseph A. D’Amato (3)2017 240,073 — 760,938 20,872(3) 1,021,883Former Chief Executive Officer2016 398,269 200,000 205,000 33,540(4) 836,809 2015 375,000 225,000 651,250 31,418(5) 1,282,668 Laurette J. Pitts (6)2017 273,900 — 24,950 7,113(6) 305,963Former Executive Vice President, ChiefFinancial Officer2016 240,000 65,000 — — 305,000 2015 240,000 100,000 260,500 — 600,500 Nanette L. Horner2017 225,000 78,000 24,950 14,400(7) 342,350Executive Vice President, Chief Counseland Chief Compliance Officer2016 225,000 50,000 — 14,400(7) 289,400 2015 225,000 100,000 260,500 14,400(7) 599,900 Jamie M. Sanko (8)2017 4,808 — — — 4,808Chief Accounting Officer Charles Degliomini2017 257,500 77,250 24,950 3,600(9) 363,300Executive Vice President ofGovernmental Affairs and CorporateCommunications2016 257,500 50,000 — — 307,500 2015 260,000 100,000 260,500 — 620,500 Kevin D. Kline (10)2017 17,692 — — — 17,692Chief Operating Officer and GeneralManager of Montreign OperatingCompany, LLC (1)Mr. Pearlman served as a non-employee director until May 31, 2016, whereupon he became the Executive Chairman of the Board of Directors and aCompany employee. Mr. Pearlman is paid an annual salary of $650,000 in his role as Executive Chairman but does not have an employmentagreement with the Company. All Other Compensation includes $36,000 and8217,500 paid to an entity wholly-owned by Mr. Pearlman as reimbursement for medical benefits and administrative expenses provided by such entityin lieu of Company benefits, for the 2017 and 2016 periods, respectively.(2)Mr. Eller joined the Company on March 27, 2017. All Other Compensation consists of $19,900 in housing and travel allowance.(3)Mr. D'Amato retired on June 1, 2017. All Other Compensation consists of $10,650 in housing allowance, $5,084 in allocation of personal use of aCompany vehicle, and $5,138 for an excess life insurance policy paid by the Company.(4)All Other Compensation consists of $23,368 in housing allowance, $5,034 in allocation of personal use of a Company vehicle, and $5,138 for anexcess life insurance policy paid by the Company.(5)All Other Compensation consists of $22,228 in housing allowance, $4,052 in allocation of personal use of a Company vehicle, and $5,138 for anexcess life insurance policy paid by the Company.(6)Ms. Pitts resigned effective December 4, 2017. All Other Compensation consists of $4,800 in housing and travel allowance.(7)All Other Compensation consists of $14,400 in housing and travel allowance.(8)Mr. Sanko joined the Company on December 12, 2017.(9)All Other Compensation consists of $3,600 in housing and travel allowance.(10)Mr. Kline joined the Company on December 12, 2017.(11)These amounts reflect the aggregate grant date fair value of restricted stock granted in the year ended December 31, 2017 under our 2005 EquityIncentive Plan computed in accordance with ASC Topic 718 (formerly SFAS No. 123(R)). Please see Notes B and I to our consolidated financialstatements contained in this Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for more information. The grant dates for theRestricted Stock are June 6, 2017, May 1, 2017, August 2, 2016, May 5, 2015, August 11, 2014 and November 12, 2013, respectively.Narrative Disclosure to Summary Compensation TableThe following is a description of our current executive employment agreements:Emanuel PearlmanMr. Pearlman does not have an employment agreement with the Company. Mr. Pearlman receives an annual base salary of $650,000 and is reimbursedfor medical benefits and administrative expenses incurred by an entity controlled by Mr. Pearlman in lieu of receiving such benefits from the Company. Mr.Pearlman is is eligible to receive such incentive compensation and bonuses as the Compensation Committee deems appropriate.On March 13, 2018, the Compensation Committee approved a 5% cost of living increase to Mr. Pearlman's annual base salary. Effective immediately,Mr. Pearlman's annual base salary was increased to $682,500.Joseph A. D’AmatoOn November 26, 2012, the Company entered into an employment agreement with Mr. D’Amato, which was amended on May 29, 2014 and June 30,2015, pursuant to which Mr. D’Amato served as the Company's Chief Executive Officer. Mr. D’Amato received an annual base salary of $375,000.On August 2, 2016, the Company entered into an Amended and Restated Employment Agreement with Mr. D’Amato, which agreement was effective asof July 1, 2016, pursuant to which Mr. D’Amato’s base salary was increased from $375,000 to $425,000. In addition, Mr. D’Amato was granted 12,500 sharesof common stock subject to the 2015 Equity Incentive Plan. One-half of the shares vested on August 2, 2016 and the remaining shares vested immediatelyupon Mr. D’Amato’s retirement as discussed below. Mr. D’Amato retired on June 1, 2017 and resigned from his position as a director of the Company and as Chief Executive Officer. In connection withMr. D’Amato’s retirement, all shares of restricted stock held by Mr. D’Amato that were subject to vesting conditions became vested immediately upon hisretirement.Ryan EllerOn March 27, 2017, the Company entered into an employment agreement with Mr. Eller (the “Eller Employment Agreement”) pursuant to whichMr. Eller became the Company's President and Chief Operating Officer. Upon Mr. D’Amato’s retirement, effective June 1, 2017, Mr. Eller became theCompany’s President and Chief Executive Officer . The Eller Employment Agreement remained in full force and effect after such appointment. Mr. Eller’semployment agreement provides for a term ending on February 28, 2021 unless the relationship is earlier terminated by either party in accordance with theprovisions of the Eller Employment Agreement. Mr. Eller receives an annual base salary of $600,000 and is eligible to receive such incentive compensation83and bonuses as the Compensation Committee deems appropriate. Mr. Eller receives a monthly housing allowance in the amount of $1,600 plus utilityexpenses. In addition, Mr. Eller is entitled to an automobile allowance of $1,500 a month.In the event that the Company terminates Mr. Eller’s employment for Cause (as defined in the Eller Employment Agreement) or Mr. Eller resignswithout Good Reason (as defined in the Eller Employment Agreement), the Company’s obligations are limited generally to paying Mr. Eller his base salary,unpaid expenses and any benefits to which Mr. Eller is entitled through the termination date (collectively “Accrued Obligations”). In the event Mr. Eller’semployment is terminated as a result of death or disability, Mr. Eller or his estate, as the case may be, is entitled to receive the Accrued Obligations and anyunvested options held by Mr. Eller shall become vested immediately and remain exercisable through the remainder of its original term. In the event that theCompany terminates Mr. Eller’s employment without Cause or Mr. Eller resigns with Good Reason, the Company is obligated to pay (i) the AccruedObligation, (ii) a pro rata portion of any bonus awarded pursuant to a bonus plan in which he is a participant (based on the days worked during the applicableyear) and (iii) Mr. Eller’s compensation for the lesser of (A) 18 months or (B) the remainder of the term of the agreement and accelerate the vesting of theoptions granted in contemplation of the agreement, which options shall remain exercisable through the remainder of its original term. In the event that theCompany terminates Mr. Eller’s employment without Cause or Mr. Eller resigns with Good Reason on or following a Change of Control (as defined in theEller Employment Agreement), the Company is obligated to pay (i) the Accrued Obligations, (ii) a pro rata portion of any bonus awarded pursuant to a bonusplan in which he is a participant, and (iii) Mr. Eller’s compensation for the greater of (A) 24 months or (B) the remainder of the term of the agreement andaccelerate the vesting of the options held by Mr. Eller, which options shall remain exercisable through the remainder of their original term.The Company has agreed to customary indemnification for Mr. Eller for any claims arising out of his service to the Company. In addition, Mr. Elleragreed to non-competition and non-solicitation provisions that extend for a post-termination period ranging from three months to one year following the dateof termination depending on the reason for termination. Notwithstanding the foregoing, following the termination of the Eller Employment Agreement,Mr. Eller shall be entitled to be employed by, consult with or participate in the management, operation or control of Genting Berhad, Genting Malaysia,Genting Hong Kong Limited, or affiliates thereof, or any other entity in which Mr. Lim or any member of the Lim family has, directly or indirectly, invested,without the prior written consent of the Board of Directors of the Company. Mr. Eller has also agreed to customary terms concerning the protection andconfidentiality of Company information.Laurette J. PittsOn August 17, 2012, the Company entered into an employment agreement with Ms. Pitts pursuant to which Ms. Pitts became the Company’s ChiefOperating Officer and continued to serve as the Company’s Senior Vice President and Chief Financial Officer. Pursuant to such employment agreement,which was amended as of May 29, 2014, when she was promoted to Executive Vice President, and also on June 30, 2015, Ms. Pitts had an annual base salaryof $240,000 and certain incentive compensation and bonuses. On July 31, 2017, the Compensation Committee approved a monthly lodging and travelexpense allowance for Ms. Pitts and an annual base salary increase to $255,000. The perquisite of $1,200 per month was payable for the remaining term ofMs. Pitts' employment agreement.Effective December 4, 2017, Ms. Pitts resigned from her position of Executive Vice President and Chief Financial Officer.Nanette L. HornerOn August 22, 2012, the Company entered into an employment agreement with Ms. Horner (the "Horner Employment Agreement"), pursuant to whichMs. Horner served as the Company’s Senior Vice President, Chief Compliance Officer and Chief Counsel. The Horner Employment Agreement provided aninitial term ending on December 31, 2014, unless earlier terminated by either party in accordance with the provisions thereof. Ms. Horner received a basesalary of $215,000 and such incentive compensation and bonuses, if any, (i) as the Compensation Committee in its discretion may determine, and (ii) towhich Ms. Horner may become entitled pursuant to the terms of any incentive compensation or bonus program, plan or agreement from time to time in effectin which she is a participant. Ms. Horner also receives a monthly lodging and travel expense allowance of $1,200. In the event that the Company terminatesMs. Horner’s employment with Cause (as defined in the Horner Employment Agreement) or Ms. Horner resigns without Good Reason (as defined in theHorner Employment Agreement), the Company’s obligations are limited generally to paying Ms. Horner her base salary, unpaid expenses and any benefits towhich Ms. Horner is entitled through the termination date (the “Accrued Compensation”). In the event that Ms. Horner’s employment is terminated as a resultof death or disability, Ms. Horner’s or her estate, as the case may be, is entitled to receive the Accrued Obligations and any unvested options held by Ms.Horner shall become vested immediately and remain exercisable through the remainder of its original five-year term. In the event that the Companyterminates Ms. Horner’s employment without Cause or Ms. Horner resigns with Good Reason, the Company is obligated to pay (i) the AccruedCompensation, (ii) a pro rata portion of any bonus awarded pursuant to any annual bonus plan in which she is a participant (based on the days worked duringthe applicable year) and (iii) Ms, Horner's compensation84for the lesser of (A) 18 months or (B) the remainder of the term of the agreement and accelerate the vesting of the options granted in contemplation of theagreement, which options shall remain exercisable through the remainder of its original five-year term. In the event that the Company terminates Ms. Horner’semployment without Cause or Ms. Horner resigns with Good Reason on or following a Change in Control (as defined in the Horner Employment Agreement),the Company is generally obligated to continue to pay Ms. Horner’s compensation for the greater of (i) 24 months or (ii) the remainder of the term of theagreement and accelerate the vesting of the options held by Ms. Horner, which options shall remain exercisable through the remainder of its original five-yearterm.On May 30, 2014, the Company entered into Amendment No. 1 to the Horner Employment Agreement, whichamendment was effective as of July 1, 2014. Pursuant to such amendment, (i) the termination date of Ms. Horner’s employment agreement was extended fromDecember 31, 2014 to December 31, 2015, (ii) her base salary was increased from $215,000 to $225,000 and (iii) “Executive Vice President” was added to hertitle. In addition, pursuant to the amendment, the definition of “Change in Control” was amended such that a change in the majority of the Board as a resultof a financing, merger, combination, acquisition, takeover or other non-ordinary course transaction without the approval of the current members of the Boardwould constitute a Change in Control.On June 30, 2015, the Company entered into Amendment No. 2 to the Horner Employment Agreement extending the termination date of suchagreement to December 31, 2018.On January 18, 2018, the Compensation Committee took action to increase Ms. Horner's base salary from $225,000 to $260,000, effectiveimmediately.Jamie SankoOn December 12, 2017, the Company entered into an employment agreement with Mr. Sanko, pursuant to which Mr. Sanko became the Company'sChief Accounting Officer (the “Sanko Employment Agreement”). The Sanko Employment Agreement provides for a term ending on December 11, 2020,unless the relationship is earlier terminated by either party in accordance with the provisions of the Sanko Employment Agreement. From the date on whichthe Sanko Employment Agreement was executed through December 31, 2018, Mr. Sanko will receive an annual base salary of $250,000. From January 1,2019 through the remainder of the term of the Sanko Employment Agreement, Mr. Sanko will receive an annual base salary of $400,000. The base salary maybe further adjusted at the discretion of the Board of Directors of the Company. Mr. Sanko will be eligible to receive such incentive compensation andbonuses as the Compensation Committee may deem appropriate. Mr. Sanko is entitled to reimbursement of certain reasonable expenses not to exceed$10,000 incurred in connection with his relocation to Sullivan County, New York, or a neighboring county in New York. In addition, Mr. Sanko is entitled toreceive a travel and lodging allowance in the amount of $1,200 per month.In the event that the Company terminates Mr. Sanko’s employment with Cause (as defined in the Sanko Employment Agreement) or Mr. Sankoresigns without Good Reason (as defined in the Sanko Employment Agreement), the Company’s obligations are limited generally to paying Mr. Sanko hisbase salary, unpaid expenses and any benefits to which Mr. Sanko is entitled through the termination date (collectively “Accrued Obligations”). In the eventMr. Sanko’s employment is terminated as a result of death or disability, Mr. Sanko or his estate, as the case may be, is entitled to receive the AccruedObligations, any unvested equity award held by Mr. Sanko shall become vested immediately and any options held by Mr. Sanko shall remain exercisablethrough the remainder of their original term. In the event that the Company terminates Mr. Sanko’s employment without Cause or Mr. Sanko resigns withGood Reason, the Company is obligated to pay (i) the Accrued Obligation, (ii) a pro rata portion of any bonus awarded pursuant to a bonus plan in which heis a participant (based on the days worked during the applicable year) and (iii) Mr. Sanko’s compensation for the lesser of (A) 18 months or (B) the remainderof the term of the Sanko Employment Agreement and accelerate the vesting of any equity award granted at the discretion of the Company’s compensationcommittee, and any options held by Mr. Sanko shall remain exercisable through the remainder of their original term. In the event that the Companyterminates Mr. Sanko’s employment without Cause or Mr. Sanko resigns with Good Reason on or following a Change of Control (as defined in the SankoEmployment Agreement), the Company is obligated to pay (i) the Accrued Obligations, (ii) a pro rata portion of any bonus awarded pursuant to a bonus planin which he is a participant (based on the days worked during the applicable year), and (iii) Mr. Sanko’s compensation for the greater of (A) 24 months or(B) the remainder of the term of the agreement and accelerate the vesting of any equity award granted to Mr. Sanko at the discretion of the CompensationCommittee, and any options held by Mr. Sanko shall remain exercisable through the remainder of their original term.The Company has agreed to customary indemnification for Mr. Sanko for any claims arising out of his service to the Company. In addition, Mr. Sankohas agreed to non-competition and non-solicitation provisions that extend for a post-termination period ranging from three months to one year following thedate of termination depending on the reason for termination. Notwithstanding the foregoing, following the termination of the Sanko Employment Agreement,Mr. Sanko shall be entitled to85be employed by, consult with or participate in the management, operation or control of Genting Berhad, Genting Malaysia Berhad, Genting Hong KongLimited, or affiliates thereof, or any other entity in which Mr. Lim or any member of the Lim family has, directly or indirectly, invested, without the priorwritten consent of the Board of Directors of the Company. Mr. Sanko has also agreed to customary terms concerning the protection and confidentiality ofcompany information.Charles A. DegliominiOn December 7, 2012, the Company entered into an employment agreement with Mr. Degliomini (the "Degliomini Employment Agreement"),pursuant to which Mr. Degliomini served as Executive Vice President of Governmental Affairs and Corporate Communications. The Degliomini EmploymentAgreement provided for a term ending on December 31, 2014, unless Mr. Degliomini’s employment is terminated by either party in accordance with theprovisions thereof. Mr. Degliomini received a base salary at the annual rate of $250,000 and such incentive compensation and bonuses, if any, (i) as theCompensation Committee in its discretion may determine, and (ii) to which Mr. Degliomini may become entitled pursuant to the terms of any incentivecompensation or bonus program, plan or agreement from time to time in effect in which he is a participant. In the event that the Company terminatesMr. Degliomini’s employment with Cause (as defined in the Degliomini Employment Agreement) or Mr. Degliomini resigns without Good Reason (asdefined in the Degliomini Employment Agreement), the Company’s obligations are limited generally to paying Mr. Degliomini his base salary, unpaidexpenses and any benefits to which Mr. Degliomini in entitled through the termination date (collectively “Accrued Obligations”). In the event Mr.Degliomini’s employment is terminated as a result of death or disability, Mr. Degliomini’s or his estate, as the case may be, is entitled to receive the AccruedObligations and any unvested options held by Mr. Degliomini shall become vested immediately and remain exercisable through the remainder of its originalfive-year term. In the event that the Company terminates Mr. Degliomini’s employment without Cause or Mr. Degliomini resigns with Good Reason, theCompany is obligated to pay (i) the Accrued Obligations, (ii) a pro rata portion of any bonus awarded pursuant to a bonus plan in which he is a participant(based on the days worked during the applicable year) and (iii) Mr. Degliomini’s compensation for the lesser of (A) 18 months or (B) the remainder of the termof the agreement and accelerate the vesting of the options granted in contemplation of the agreement, which options shall remain exercisable through theremainder of its original five-year term. In the event that the Company terminates Mr. Degliomini’s employment without Cause or Mr. Degliomini resignswith Good Reason on or following a Change in Control (as defined in the Degliomini Employment Agreement), the Company is generally obligated tocontinue to pay Mr. Degliomini’s compensation for the greater of (i) 24 months or (ii) the remainder of the term of the agreement and accelerate the vesting ofthe options granted in contemplation of the agreement, which options shall remain exercisable through the remainder of its original five-year term.On August 24, 2014, the Company entered into Amendment No. 1 to the Degliomini Employment Agreement. Pursuant to such amendment, (i) thetermination date of Mr. Degliomini’s employment agreement was extended from December 31, 2014 to December 31, 2015 and (ii) his base salary wasincreased from $250,000 to $257,000. In addition, pursuant to the amendment, the definition of “Change in Control” was amended such that a change in themajority of the Board as a result of a financing, merger, combination, acquisition, takeover or other non-ordinary course transaction without the approval ofthe current members of the Board would constitute a Change in Control.On June 30, 2015, the Company entered into Amendment No. 2 to the Degliomini Employment Agreement extending the termination date of suchagreement from December 31, 2015 to December 31, 2018.On July 31, 2017, the Compensation Committee approved a lodging and travel expense allowance for Mr. Degliomini of $1,200 per month.Kevin KlineOn December 12, 2017, Montreign Operating entered into an employment agreement with Mr. Kline (the “Kline Employment Agreement”), pursuantto which Mr. Kline became Chief Operating Officer and General Manager of Montreign Operating. The Kline Employment Agreement provides for a termending on December 11, 2020 unless the relationship is earlier terminated by either party in accordance with the provisions of the Kline EmploymentAgreement. Mr. Kline will receive an annual base salary of $400,000 and will be eligible to receive such incentive compensation and bonuses st theCompensation Committee may deem appropriate. Mr. Kline is entitled to reimbursement of certain reasonable expenses not to exceed $20,000 incurred inconnection with his relocation to Sullivan County, New York, or a neighboring county in New York. In addition, Mr. Kline is entitled to receive a travel andlodging allowance in the amount of $1,200 per month. In connection with his employment, Mr. Kline shall receive a one-time cash bonus of $10,000.In the event that Montreign terminates Mr. Kline’s employment with Cause (as defined in the Kline Employment Agreement) or Mr. Kline resignswithout Good Reason (as defined in the Kline Employment Agreement), Montreign’s obligations are limited generally to paying Mr. Kline his base salary,unpaid expenses and any benefits to which Mr. Kline is entitled through the termination86date (collectively “Accrued Obligations”). In the event Mr. Kline’s employment is terminated as a result of death or disability, Mr. Kline or his estate, as thecase may be, is entitled to receive the Accrued Obligations, any unvested equity award granted to Mr. Kline at the discretion of the Company’s compensationcommittee shall become vested immediately and any options held by Mr. Kline shall remain exercisable through the remainder of their original term. In theevent that Montreign terminates Mr. Kline’s employment without Cause or Mr. Kline resigns with Good Reason, Montreign Operating is obligated to pay(i) the Accrued Obligation, (ii) a pro rata portion of any bonus awarded pursuant to a bonus plan in which he is a participant (based on the days workedduring the applicable year) and (iii) Mr. Kline’s compensation for the lesser of (A) 18 months or (B) the remainder of the term of the Kline EmploymentAgreement and accelerate the vesting of any equity award granted at the discretion of the Company’s compensation committee, and any options held byMr. Kline shall remain exercisable through the remainder of their original term. In the event that Montreign Operating terminates the Kline EmploymentAgreement without Cause or Mr. Kline resigns with Good Reason on or following a Change of Control (as defined in the Kline Employment Agreement),Montreign Operating is obligated to pay (i) the Accrued Obligations, (ii) a pro rata portion of any bonus awarded pursuant to a bonus plan in which he is aparticipant, and (iii) Mr. Kline’s compensation for the greater of (A) 24 months or (B) the remainder of the term of the agreement and accelerate the vesting ofany equity award granted to Mr. Kline at the discretion of the Compensation Committee, and any options held by Mr. Kline shall remain exercisable throughthe remainder of their original term.Outstanding Equity Awards at Fiscal Year-EndThe following table sets forth information concerning the outstanding equity awards of each of the Named Executive Officers as of December 31,2017: Option Awards Stock AwardsNameNumber ofSecuritiesUnderlyingUnexercisedOptions:Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions:Unexercisable OptionExercise Price($) Option ExpirationDate Number ofShares of StockThat Have NotVested Market Valueof Shares ofStock ThatHave NotVested ($) Emanuel R. Pearlman— 2,000 24.75 11/11/2018(1) 50,000 1,350,000 (2) 56,250 1,518,750 (3) 25,000 675,000 (4)Ryan Eller— — — 20,000 540,000 (4) Nanette L. Horner— — — 10,000 270,000 (2) 1,000 27,000 (5)Charles Degliomini— — — 10,000 270,000 (2) 1,000 27,000 (5) (1)Grant date November 12, 2013 of restricted stock award; vesting 25% on grant date, 25% on 2/12/2014, 25% on 5/12/2014 and 25% on 8/12/2014;10-year term.(2)Grant date May 5, 2015 of restricted stock award; vesting 50% on which the NYSGC authorizes the opening of the Casino to the public ("CasinoDate"), 50% at the six-month anniversary of the Casino Date; immediate vesting in the event of a Change in Control (as defined in the award).(3)Grant date March 16, 2016 of restricted stock award; vesting 25% on 3/16/2018, 25% on 3/16/2019 and 25% on 3/16/2020.(4)Grant date June 5, 2017 of restricted stock unit award; vesting 33.33% on 6/05/2018, 33.33% on 6/05/2019 and 33.34% on 6/05/2020.(5)Grant date May 1, 2017 of restricted stock unit award; vesting 33.33% on 5/01/2018, 33.33% on 5/01/2019 and 33.34% on 5/01/2020.87Outstanding Equity Awards Narrative DisclosureSecond Amended and Restated 2005 Equity Incentive PlanIn May 2015, the 2005 Equity Incentive Plan expired. Options to purchase 13,288 shares of common stock were outstanding as of December 31, 2017under the 2005 Equity Incentive Plan. Although the 2005 Equity Incentive Plan expired, the 13,288 options still outstanding under such plan are stillexercisable. In September 2015, the Board approved, and in November 2015, our stockholders approved, a new 2015 Equity Incentive Plan, which isdiscussed below.2015 Equity Incentive PlanIn September 2015, the Board approved, and in November 2015, our stockholders approved the Company's 2015 Equity Incentive Plan (the "2015Equity Incentive Plan"). The purpose of the 2015 Equity Incentive Plan is (i) to align our interests and recipients of options under the Plan by increasing theproprietary interest of such recipients in our growth and success, and (ii) to advance our interests by providing additional incentives to officers, keyemployees and well-qualified non-employee directors and consultants who provide services to us, who are responsible for our management and growth, orotherwise contribute to the conduct and direction of our business, operations and affairs. AdministrationThe Compensation Committee will administer the 2015 Equity Incentive Plan. The Compensation Committee will have the authority, withoutlimitation (i) to designate participants to receive awards, (ii) determine the types of awards to be granted to participants, (iii) determine the number of sharesof common stock to be covered by awards, (iv) determine the terms and conditions of any awards granted under the Plan, (v) determine to what extent andunder what circumstances awards may be settled in cash, shares of common stock, other securities, other Awards or other property, or canceled, forfeited orsuspended, (vi) determine whether, to what extent, and under what circumstances the delivery of cash, common stock, other securities, other awards or otherproperty and other amounts payable with respect to an award shall be made, (vii) interpret, administer, reconcile any inconsistency in, settle any controversyregarding, correct any defect in and/or complete any omission in this Plan and any instrument or agreement relating to, or award granted under, this Plan,(viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Compensation Committee shall deem appropriate for theproper administration of this Plan, (ix) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, awards, (x) reprice existing awards orto grant awards in connection with or in consideration of the cancellation of an outstanding Award with a higher price, and (xi) make any other determinationand take any other action that the Compensation Committee deems necessary or desirable for the administration of this Plan. The Compensation Committeewill have full discretion to administer and interpret the Plan and to adopt such rules, regulations and procedures as it deems necessary or advisable and todetermine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised.EligibilityEmployees, directors, officers, advisers and consultants of the Company or its affiliates are eligible to participate in the 2015 Equity Incentive Planand are referred to as “Participants.” The Compensation Committee has the sole and complete authority to determine who will be granted an award under the2015 Equity Incentive Plan, however, it may delegate such authority to one or more officers of the Company under the circumstances set forth in the 2015Equity Incentive Plan.Number of Shares AuthorizedThe 2015 Equity Incentive Plan provided for an aggregate of 952,498 shares of common stock to be available for Awards. Subject to adjustmentsbased on the terms of the 2015 Equity Incentive Plan, on the 90th day after the Company was awarded a Gaming Facility License (the “Trigger Date”), themaximum shares of common stock available for Awards were to automatically increase by the lesser of: (i) 1,633,209 shares of common stock; (ii) suchnumber of shares as would increase the aggregate number of shares of common stock available for Awards to 10% of the issued and outstanding shares ofcommon stock as of the Trigger Date; and (iii) such number of shares of common stock as the Compensation Committee would otherwise determine. OnMarch 8, 2016, pursuant to the terms of the 2015 Equity Incentive Plan, the Board of Directors determined to increase the number of shares available for grantunder such plan by 1,663,209 shares for a total amount of shares available for grants of 2,600,707. Such change was effective as of March 20, 2016. AtDecember 31, 2017, a total of 2,425,934 shares were available for future issuance under the 2015 Equity Incentive Plan.The number of shares available for grant pursuant to Awards under the 2015 Equity Incentive Plan is referred to as the “Available Shares”. If an Awardis forfeited, canceled, or if any Option terminates, expires or lapses without being exercised, the common stock subject to such Award will again be madeavailable for future grant. However, shares that are used to pay the88exercise price of an Option or that are withheld to satisfy the Participant’s tax withholding obligation will not be available for re-grant under the 2015 EquityIncentive Plan. If there is any change in the Company’s corporate capitalization or structure, the Compensation Committee in its sole discretion may makesubstitutions or adjustments to the number of shares of common stock reserved for issuance under the 2015 Equity Incentive Plan, the number of sharescovered by Awards then outstanding under the Plan, the limitations on Awards under the 2015 Equity Incentive Plan, the exercise price of outstandingOptions and such other equitable substitution or adjustments as it may determine appropriate.The 2015 Equity Incentive Plan will have a term of 10 years and no further Awards may be granted under the 2015 Equity Incentive Plan after thatdate.Awards Available for GrantThe Compensation Committee may grant awards of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, RestrictedStock Awards, Restricted Stock Units, Stock Bonus Awards, Performance Compensation Awards (including cash bonus awards) or any combination of theforegoing, as each type of award is described in the 2015 Equity Incentive Plan. Notwithstanding, the Compensation Committee may not grant to any oneperson in any one calendar year awards (i) for more than 50% of the Available Shares in the aggregate or (ii) payable in cash in an amount exceeding $10million in the aggregate.OptionsThe Compensation Committee will be authorized to grant Options to purchase common stock that are either “qualified,” meaning they are intended tosatisfy the requirements of Code Section 422 for Incentive Stock Options, or “non-qualified,” meaning they are not intended to satisfy the requirements ofSection 422 of the Code. Options granted under the 2015 Equity Incentive Plan will be subject to the terms and conditions established by the CompensationCommittee. Under the terms of the 2015 Equity Incentive Plan, unless the Compensation Committee determines otherwise in the case of an Optionsubstituted for another Option in connection with a corporate transaction, the exercise price of the Options will not be less than the fair market value (asdetermined under the Plan) of the shares of common stock on the date of grant. Options granted under the 2015 Equity Incentive Plan will be subject to suchterms, including the exercise price and the conditions and timing of exercise, as may be determined by the Compensation Committee and specified in theapplicable award agreement. The maximum term of an Option granted under the 2015 Equity Incentive Plan will be 10 years from the date of grant (or fiveyears in the case of an Incentive Stock Option granted to a 10% stockholder). Payment in respect of the exercise of an Option may be made in cash or bycheck, by surrender of unrestricted shares of common stock (at their fair market value on the date of exercise) that have been held by the participant for anyperiod deemed necessary by the Company’s accountants to avoid an additional compensation charge or have been purchased on the open market, or theCompensation Committee may, in its discretion and to the extent permitted by law, allow such payment to be made through a broker-assisted cashlessexercise mechanism, a net exercise method, or by such other method as the Compensation Committee may determine to be appropriate.Stock Appreciation RightsThe Compensation Committee will be authorized to award Stock Appreciation Rights ("SARs") under the 2015 Equity Incentive Plan. SARs will besubject to such terms and conditions as established by the Compensation Committee. A SAR is a contractual right that allows a participant to receive, eitherin the form of cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. A SAR grantedunder the 2015 Equity Incentive Plan may be granted in tandem with an option and SARs may also be awarded to a participant independent of the grant of anOption. SARs granted in connection with an Option shall be subject to terms similar to the Option which corresponds to such SARs. SARs shall be subject toterms established by the Compensation Committee and reflected in the award agreement.Restricted StockThe Compensation Committee will be authorized to award Restricted Stock under the 2015 Equity Incentive Plan. Unless otherwise provided by theCompensation Committee and specified in an award agreement, restrictions on Restricted Stock will lapse after three years of service with the Company. TheCompensation Committee will determine the terms of such Restricted Stock awards. Restricted Stock are shares of common stock that generally are non-transferable and subject to other restrictions determined by the Compensation Committee for a specified period. Unless the Compensation Committeedetermines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the restricted period, then anyunvested restricted stock will be forfeited.89Restricted Stock Unit AwardsThe Compensation Committee will be authorized to award Restricted Stock Unit awards. Unless otherwise provided by the Compensation Committeeand specified in an award agreement, Restricted Stock Units will vest after three years of service with the Company. The Compensation Committee willdetermine the terms of such Restricted Stock Units. Unless the Compensation Committee determines otherwise or specifies otherwise in an award agreement,if the participant terminates employment or services during the period of time over which all or a portion of the units are to be earned, then any unvestedunits will be forfeited. At the election of the Compensation Committee, the participant will receive a number of shares of common stock equal to the numberof units earned or an amount in cash equal to the fair market value of that number of shares at the expiration of the period over which the units are to beearned or at a later date selected by the Compensation Committee.Stock Bonus AwardsThe Compensation Committee will be authorized to grant awards of unrestricted shares of common stock or other Awards denominated in shares ofcommon stock, either alone or in tandem with other Awards, under such terms and conditions as the Compensation Committee may determine.Performance Compensation AwardsThe Compensation Committee will be authorized to grant any award under the 2015 Equity Incentive Plan in the form of a Performance CompensationAward exempt from the requirements of Section 162(m) of the Code by conditioning the vesting of the Award on the attainment of specific performancecriteria of the Company and/or one or more Affiliates, divisions or operational units, or any combination thereof, as determined by the CompensationCommittee. The Compensation Committee will select the performance criteria based on one or more of the following factors: (i) revenue; (ii) sales; (iii) profit(net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures); (iv) earnings (EBIT, EBITDA, earnings per share,or other corporate profit measures); (v) net income (before or after taxes, operating income or other income measures); (vi) cash (cash flow, cash generation orother cash measures); (vii) stock price or performance; (viii) total stockholder return (stock price appreciation plus reinvested dividends divided bybeginning share price); (ix) economic value added; (x) return measures (including, but not limited to, return on assets, capital, equity, investments or sales,and cash flow return on assets, capital, equity, or sales); (xi) market share; (xii) improvements in capital structure; (xiii) expenses (expense management,expense ratio, expense efficiency ratios or other expense measures); (xiv) business expansion or consolidation (acquisitions and divestitures); (xv) internalrate of return or increase in net present value; (xvi) working capital targets relating to inventory and/or accounts receivable; (xvii) inventory management;(xviii) service or product delivery or quality; (xix) customer satisfaction; (xx) employee retention; (xxi) safety standards; (xxii) productivity measures;(xxiii) cost reduction measures; and/or (xxiv) strategic plan development and implementation.TransferabilityEach award may be exercised during the participant’s lifetime only by the participant or, if permissible under applicable law, by the participant’sguardian or legal representative and may not be otherwise transferred or encumbered by a participant other than by will or by the laws of descent anddistribution. The Compensation Committee, however, may permit awards (other than Incentive Stock Options) to be transferred to family members, a trust forthe benefit of such family members, a partnership or limited liability company whose partners or stockholders are the participant and his or her familymembers or anyone else approved by it.AmendmentThe 2015 Equity Incentive Plan will have a term of 10 years. The Company’s Board of Directors may amend, suspend or terminate the 2015 EquityIncentive Plan at any time; however, shareholder approval to amend the 2015 Equity Incentive Plan may be necessary if the law or SEC so requires. Noamendment, suspension or termination will impair the rights of any Participant or recipient of any award without the consent of the Participant or recipient.Effective as of January 1, 2017, the 2015 Equity Incentive Plan was amended and restated to increase the permissible tax withholding on Awards in theform of common stock from the minimum statutory requirement to the maximum individual statutory rate.90Change in ControlExcept to the extent otherwise provided in an award, in the event of a Change in Control, all outstanding Options and equity awards (other thanperformance compensation awards) issued under the 2015 Equity Incentive Plan will become fully vested and performance compensation awards will vest, asdetermined by the Compensation Committee, based on the level of attainment of the specified performance goals. In general, the Compensation Committeemay, in its discretion, cancel outstanding awards and pay the value of such awards to the participants in connection with a Change in Control. TheCompensation Committee can also provide otherwise in an award under the 2015 Equity Incentive Plan. For purposes of the 2015 Equity Incentive Plan,unless an award agreement states otherwise or contains a different definition, "Change in Control" shall be deemed to occur upon:(i) a tender offer (or series of related offers) shall be made and consummated for the ownership of 50% or more of the outstanding voting securities ofthe Company, unless as a result of such tender offer more than 50% of the outstanding voting securities of the surviving or resulting corporation or entityshall be owned in the aggregate by (A) the shareholders of the Company (as of the time immediately prior to the commencement of such offer), or (B) anyemployee benefit plan of the Company or its subsidiaries, and their affiliates;(ii) the Company shall be merged or consolidated with another corporation, unless as a result of such merger or consolidation more than 50% of theoutstanding voting securities of the surviving or resulting corporation or entity shall be owned in the aggregate by (A) the shareholders of the Company (asof the time immediately prior to such transaction); provided, that a merger or consolidation of the Company with another company which is controlled bypersons owning more than 50% of the outstanding voting securities of the Company shall constitute a Change in Control unless the CompensationCommittee, in its discretion, determine otherwise, or (B) any employee benefit plan of the Company or its subsidiaries, and their affiliates;(iii) the Company shall sell substantially all of its assets to another entity that is not wholly owned by the Company, unless as a result of such salemore than 50% of such assets shall be owned in the aggregate by (A) the shareholders of the Company (as of the time immediately prior to such transaction),or (B) any employee benefit plan of the Company or its subsidiaries, and their affiliates;(iv) a Person, as defined in the 2015 Equity Incentive Plan, shall acquire 50% or more of the outstanding voting securities of the Company (whetherdirectly, indirectly, beneficially or of record), unless as a result of such acquisition more than 50% of the outstanding voting securities of the surviving orresulting corporation or entity shall be owned in the aggregate by (A) the shareholders of the Company (as of the time immediately prior to the firstacquisition of such securities by such Person), or (B) any employee benefit plan of the Company or its subsidiaries, and their affiliates; or(v) the individuals who, as of the date hereof, constitute the members of the Board (the "Current Board Members") cease, by reason of a financing,merger, combination, acquisition, takeover or other non-ordinary course transaction affecting the Company, to constitute at least a majority of the membersof the Board unless such change is approved by the Current Board Members.Option Exercises and Stock VestedThe following information sets forth stock options exercised by, and stock vested for, the executive officers during the year ended December 31, 2017: OPTION AWARDS STOCK AWARDSNameNumber ofSharesAcquired onExercise (#)ValueRealized onExercise ($) Number ofSharesAcquired onVesting (#) ValueRealized onVesting ($)Emanuel R. Pearlman (1) — — 11,628 493,125 Joseph A. D’Amato (2) — — 31,250 760,938(1) - On January 6, 2017, 3,000 shares of restricted stock vested for Mr. Pearlman of which 1,750 shares were withheld to satisfy tax obligations relating tothe vesting. On March 15, 2017, 18,750 shares of restricted stock vested for Mr. Pearlman of which 10,378 shares were withheld to satisfy taxobligations relating to the vesting.(2) - On June 1, 2017, 32,250 shares of restricted stock vested for Mr. D'Amato under the terms of his employment agreement.91Pension BenefitsNone of our employees participates in or has account balances in qualified or non-qualified defined benefit plans sponsored by us. Our CompensationCommittee may elect to adopt qualified or non-qualified benefit plans in the future if it determines that doing so is in the Company's best interests.Deferred Compensation PlanThe Company adopted a deferred compensation plan (the "Deferred Compensation Plan"), which was effective on January 1, 2017. The DeferredCompensation Plan is a non-qualified deferred compensation plan under which eligible participants may elect to defer the receipt of current compensation.Eligible participants include select employees of the Company, including its executive officers. Pursuant to the Deferred Compensation Plan and subject toapplicable tax laws, participants may elect to defer up to 50% of their base salary and up to 100% of any cash bonus. In addition to elective deferrals, theDeferred Compensation Plan permits the Company to make discretionary contributions. Participants may elect to receive payment of their vested accountbalances in a single cash payment or in annual installments for a period of five, 10 or 15 years. Payments will be made or commence upon the earliest of aparticipant’s separation from service, death or disability. If a participant so elects, payments will be deferred until a fixed and determinable date.The obligations incurred by the Company under the Deferred Compensation Plan will be unsecured general obligations of the Company to pay thecompensation deferred in accordance with the terms of the Deferred Compensation Plan and will rank equally with other unsecured and unsubordinatedindebtedness of the Company. Because the Company has subsidiaries, the right of the Company, and hence the right of creditors of the Company (includingeligible participants in the Deferred Compensation Plan), to participate in a distribution of the assets of a subsidiary upon its liquidation or reorganization orotherwise, necessarily is subject to the prior claims of creditors of the subsidiary, except to the extent that claims of the Company itself as a creditor may berecognized.Grants of Plan-Based Awards in 2017 All OtherStockAwards:Number ofShares ofStocks orUnits (#)All OtherOptionAwards: Numberof SecuritiesUnderlyingOptions (#)Exerciseor BasePrice ofOptionAwards ($/share)Closing stockprice onAward date($/ share)GrantDate FairValue ofStock and OptionAwards Estimated Future PayoutsUnder Non-Equity IncentivePlan AwardsEstimated Future PayoutsUnder Equity Incentive PlanAwardsNameGrantDateThreshold($)Target($)Maximum($)Threshold(#)Target(#) (1) (2)Maximum(#)Emanuel R.Pearlman6/5/2017————25,000————$24.45$611,250Ryan Eller6/5/2017————20,000————$24.45$489,000Nanette L.Horner5/1/2017————1,000————$24.95$24,950CharlesDegliomini5/1/2017————1,000————$24.95$24,950 (1)The stock awards disclosed in this item consists of 45,000 restricted stock units ("RSUs") issued under our 2015 Equity Incentive Plan, which vestannually in three equal installments, with the first installment vesting on June 5, 2018; provided, however, that all such RSUs will vest immediately ifMr. Pearlman or Mr. Eller is terminated for any reason other than for cause.(2)The stock awards disclosed in this item consists of 2,000 RSU's issued under our 2015 Equity Incentive Plan, which vest annually in three equalinstallments, with the first installment vesting on May 1, 2018.92Potential Payments Under Severance/Change in Control ArrangementsThe table below sets forth potential payments payable to our current executive officers in the event of a termination of employment under variouscircumstances. For purposes of calculating the potential payments set forth in the table below, we have assumed that (i) the date of termination wasDecember 31, 2017 and (ii) the stock price was $27.00, which was the closing market price of our common stock on December 29, 2017, the last business dayof the 2017 fiscal year. Name If Company TerminatesExecutive Without Cause orExecutive Resigns withGood Reason Termination Following a Changein Control without Cause orExecutive Resigns with GoodReasonEmanuel R. Pearlman Restricted Stock vesting $— $3,543,750Total $— $3,543,750 Ryan Eller Cash Payment/Restricted Stock vesting $2,096,986 $2,636,986Total $2,096,986 $2,636,986 Nanette L. Horner Cash Payment/Restricted Stock vesting $303,000 $635,000Total $303,000 $635,000 Jamie M. Sanko Cash Payment $1,028,000 $1,028,000Total $1,028,000 $1,028,000 Charles Degliomini Cash Payment/Restricted Stock vesting $334,750 $631,750Total $334,750 $631,750 Kevin Kline Cash Payment $1,178,000 $1,178,000Total $1,178,000 $1,178,000For each of our executive officers, in their employment agreements the term “change in control” shall be deemed to have occurred if:i. a tender offer (or series of related offers) shall be made and consummated for the ownership of 50% or more of the outstanding voting securities of theCompany, unless as a result of such tender offer more than 50% of the outstanding voting securities of the surviving or resulting corporation shall beowned in the aggregate by the shareholders of the Company (as of the time immediately prior to the commencement of such offer), any employeebenefit plan of the Company or its Subsidiaries, and their affiliates;ii. the Company shall be merged or consolidated with another corporation, unless as a result of such merger or consolidation more than 50% of theoutstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the shareholders of the Company (as of thetime immediately prior to such transaction), any employee benefit plan of the Company or its Subsidiaries, and their affiliates;iii. the Company shall sell substantially all of its assets to another corporation that is not wholly owned by the Company, unless as a result of such salemore than 50% of such assets shall be owned in the aggregate by the shareholders of the Company (as of the time immediately prior to suchtransaction), any employee benefit plan of the Company or its Subsidiaries and their affiliates;iv. a Person (as defined below) shall acquire 50% or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially orof record), unless as a result of such acquisition more than 50% of the outstanding voting securities93of the surviving or resulting corporation shall be owned in the aggregate by the shareholders of the Company (as of the time immediately prior to thefirst acquisition of such securities by such Person), any employee benefit plan of the Company or its Subsidiaries, and their affiliates; orv. the individuals who, as of the date hereof, constitute the members of the Board (the “Current Board Members”) cease, by reason of a financing, merger,combination, acquisition, takeover or other non-ordinary course transaction affecting the Company, to constitute at least a majority of the members ofthe Board unless such change is approved by the Current Board Members.Compensation Discussion and AnalysisObjectives of Our Compensation ProgramOur compensation programs are intended to encourage executives and other key personnel to create sustainable growth in value for our stockholders. Inparticular, the objectives of our programs are to:•attract, retain, and motivate superior talent;•ensure that compensation is commensurate with our performance and stockholder returns;•provide performance awards for the achievement of strategic objectives that are critical to our long term growth; and•ensure that our executive officers and key personnel have financial incentives to achieve sustainable growth in stockholder value.Executive Compensation Decisions--The Role of the Compensation Committee, the Chief Executive Officer and Advisory Vote on ExecutiveCompensationThe Compensation Committee is responsible for evaluating and approving the compensation of our executive officers. The Compensation Committeeconsiders recommendations from our President and Chief Executive Officer with respect to executive compensation matters, except regarding his owncompensation. Although the advisory shareholder vote on executive compensation is non-binding, the Committee has considered, and will continue toconsider, the outcome of this vote when making compensation decisions for our President and Chief Executive Officer and other named executive officers.Our Executive Compensation Program and RiskWe do not believe that our compensation programs are structured to reward inappropriate risk-taking, and have concluded that our compensationpolicies and practices are not reasonably likely to result in a material adverse effect on our businesses, for several reasons, including the following:•We provide a mix of variable performance-based annual cash compensation (at the discretion of our Compensation Committee), fixed cashcompensation in the form of base salaries, and long-term equity compensation in the form of equity awards. We believe this combination of variableand fixed cash compensation and a long-term equity interest which vest over time, provides appropriate incentives and rewards management, whileat the same time encourages appropriate, but not excessive, levels of risk assumption.•The design of our compensation programs, including the Compensation Committee's consideration of executives' performance in making bonuscompensation decisions, encourages executives to remain focused on both the short-term and long-term success of the Company's operational anddevelopment objectives; as a result, any incentive to take short-term risks is mitigated by the necessity for us to achieve success and maintainshareholder value over the long-term. In this regard, a portion of compensation is delivered to executives in the form of an annual bonus, and aportion of the compensation of our senior executives is based on the Compensation Committee's assessment of annual performance.•A portion of compensation to our senior executives is delivered through the use of equity awards, a portion of which vested upon the Casino'sopening in February 2017 and an additional portion of which will vest six months following the opening of the Casino. Additional equity awardsgranted in 2017 vest over a three-year period beginning in 2018. The Compensation Committee believes that these equity incentive awards focusour executives on the long-term success of the Company, align their interests with those of our shareholders and, because of the multi-year vestingfeature, subject management to the long-term consequences of risks undertaken to achieve short-term objectives.94Determination of Compensation LevelsIn setting compensation levels, including bonus for our senior executives, under our performance bonus plan, and the mix of compensation for fiscal2017, the Compensation Committee considered several factors. These include cash bonuses based on the Company's progress with the construction of theCasino and the planning and design of the Entertainment Project and Golf Course Project, existing employment agreements with individual executives, thedesire to motivate the executives and align the compensation of the executives with the financial performance of the Company by providing incentives, andthe Compensation Committee's subjective assessment of the individual's experience, responsibilities, management, leadership abilities and job performance.The Compensation Committee has, from time to time, used focused marketplace compensation analysis and reviewed compensation levels at companies ofsimilar type and size for comparison purposes in connection with the recruitment and retention of our executive officers.In March 2017, the Compensation Committee engaged the advisory firm of Aethos Consulting Group ("Aethos") as a compensation consultant, toassist the Compensation Committee in developing compensation packages for its executive officers and to ensure that the Company meets applicable marketstandards in order to retain and attract talent. In particular, the Compensation Committee commissioned Aethos to provide a market analysis report andadvise on the long-term incentive values for its Executive Chairman and the President and Chief Executive Officer. Aethos provided comparisons to theCompany’s peers in the gaming and resort industries, which assisted the Compensation Committee in setting compensation levels for senior executives infiscal 2017.Elements of Our Executive Compensation StructureOur compensation structure consists of two tiers of remuneration. The first tier consists of base pay, and retirement, health, and welfare benefits. Thesecond tier consists of both short- and long-term incentive compensation.Base PayBase compensation for each of our Named Executive Officers, other than Mr. Pearlman, has been established pursuant to their respective employmentagreements with the Company. Base pay and benefits are designed to be sufficiently competitive to attract and retain world class executives. In the past, theCompensation Committee has retained the discretion to review executive officers’ base pay, and to make increases based on executive performance andmarket norms. In July 2017 and January 2018, the Compensation Committee took action to increase the base salaries for Messes. Pitts and Horner. TheCompensation Committee has also recommended increases when executives have been promoted, or their responsibilities have otherwise been expanded.Equity-based CompensationEquity-based compensation is designed to provide incentives to our executive officers to build stockholder value over the long-term by aligning theirinterests with the interest of stockholders. Since 2005, we have granted equity-based awards in the form of restricted stock, options and restricted stock units,as the Compensation Committee determined this was an effective vehicle for the motivation and retention of our executive officers. On June 5, 2017, Mr. Pearlman was granted 25,000 RSU's under the 2015 Equity Incentive Plan, one-third of such RSU's, or 8,333.33 RSU's, will vestannually over the three-year period ending June 5, 2020. The RSU's are subject to immediate vesting (i) in the event that Mr. Pearlman is removed from theBoard of Directors other than for Cause (as defined in the 2015 Equity Incentive Plan), or (ii) in the event of a Change in Control, as such term is defined inthe 2015 Equity Incentive Plan, subject to Mr. Pearlman’s continued employment or service to the Company.On June 5, 2017, Mr. Eller was granted 20,000 RSU's under the 2015 Equity Incentive Plan, one-third of such RSU's, or 6,666.67 RSU's, will vestannually over the three-year period ending June 5, 2020. The RSU's are subject to immediate vesting (i) in the event that Mr. Eller is removed from hisposition as President and Chief Executive Officer of the Company other than for Cause (as defined in the 2015 Equity Incentive Plan), or (ii) in the event of aChange in Control, as such term is defined in the 2015 Equity Incentive Plan, subject to Mr. Eller’s continued employment or service to the Company.On May 1, 2017, Ms. Pitts was granted 1,000 RSU's under the 2015 Equity Incentive Plan, one-third of such RSU's, or 333.33 RSUs, will vest annuallyover the three-year period ending May 1, 2020. The RSU's are subject to immediate vesting in the event of a Change in Control, as such term is defined in the2015 Equity Incentive Plan, subject to Ms. Pitts’ continued employment or service to the Company. Ms. Pitts resigned her positions with the Companyeffective December 4, 2017 and forfeited all RSU's, none of which were vested at that date.95On May 1, 2017, Ms. Horner was granted 1,000 RSUs under the 2015 Equity Incentive Plan, one-third of such RSU's, or 333.33 RSU's, will vestannually over a three-year period ending May 1, 2020. The RSU's are subject to immediate vesting in the event of a Change in Control, as such term isdefined in the 2015 Equity Incentive Plan, subject to Ms. Horner’s continued employment or service to the Company.On May 1, 2017, Mr. Degliomini was granted 1,000 restricted stock units (“RSUs”) under the 2015 Equity Incentive Plan, one-third of such RSU's, or333.33 RSU's, will vest annually over the three-year period ending May 1, 2020. The RSU's are subject to immediate vesting in the event of a Change inControl, as such term is defined in the 2015 Equity Incentive Plan, subject to Mr. Degliomini's continued employment or service to the Company. The Compensation Committee believes that the Company generally benefits from the retention and risk mitigation elements provided by a multi-yearvesting period and has determined that delayed vesting aligns an executive's compensation interests with the longer-term business strategies and tactics ofthe Company over the vesting period. The Committee also believes that the vesting over a multiple-year period reduces the motivation to engage in short-term strategies that may increase the Company's share price in the near term but may not create the best foundation for maximizing long-term stockholdervalue. The long-term vesting requirement is therefore also considered a disincentive to excessive risk taking by management as any adverse consequences ofsuch risks would be reflected in the value of the equity awards by the time those awards vest.In September 2015, the Board approved and, in November 2015, stockholders approved, the 2015 Equity Incentive Plan, pursuant to which any futureequity incentive awards will be made to the Named Executive Officers. At December 31, 2017, a total of 2,425,934 shares were available for future issuanceunder the 2015 Equity Incentive Plan.The Compensation Committee may grant awards of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted StockAwards, Restricted Stock Units, Stock Bonus Awards, Performance Compensation Awards (including cash bonus awards) or any combination of theforegoing.The Compensation Committee believes that equity-based compensation provides an incentive that focuses the executive' attention on managing ourCompany from the perspective of an owner with an equity stake in the business. In determining the amount of equity-based compensation to be awarded toour named executive officers, the Compensation Committee takes into consideration, among other things, the level of the officer's responsibility,performance of the officer, other compensation elements and the amount of previous equity grants awarded to the individual. In addition, with respect torecruiting an executive officer to join our Company, the amount of equity consideration may be negotiated to reflect the amount necessary to hire the desiredperson. The size of such awards would be based on the Compensation Committee view on the prospective officer's potential to have an impact on ourprofitability, growth and financial position. The Compensation Committee may also seek input from its compensation consultant. Cash Bonus Accrual for Senior ExecutivesThe Board determined to set aside $700,000 for possible award to Mr. Pearlman, Mr. Eller, Ms. Horner, Mr. Degliomini and Mr. Keith Kabeary withrespect to the fiscal year ended December 31, 2017. Bonuses to the eligible officers named were determined at the discretion of the CompensationCommittee.After the conclusion of fiscal 2017 and the preparation of the Company's audited financial statements, the Compensation Committee held meetings toconsider the extent to pay bonuses to the senior executives. The 2017 bonuses for the senior executives were discretionary and based primarily upon asubjective analysis by the Compensation Committee of the individual performance of each senior executive. Cash awards were paid in the first quarter of thecurrent fiscal year and are reflected in the Summary Compensation Table above.Pay Ratio DisclosureIn August 2015, pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd - Frank Act”), the Securities andExchange Commission (“SEC”) adopted a rule requiring annual disclosure of the ratio of the median employee’s annual total compensation to the totalannual compensation of the principal executive officer ("PEO”). The Company’s PEO is Mr. Eller. The purpose of the new required disclosure is to provide ameasure of the equitability of pay within the organization. We identified the median employee by examining the 2017 total cash compensation for all individuals, excluding our CEO, who were employed by usas of December 31, 2017. We included all employees, whether employed on a full-time, part-time, or seasonal basis. We did not make any assumptions,adjustments, or estimates with respect to total cash compensation], and we96annualized the compensation for any full-time employees that were not employed by us for all of 2017. We believe the use of total cash compensation for allemployees is a consistently applied compensation measure because we do not widely distribute annual equity awards to employees. Approximately 1%percent of our employees receive annual equity awards.After identifying the median employee based on total cash compensation, we calculated annual total compensation for such employee using the samemethodology we use for our named executive officers as set forth in the 2017 Summary Compensation Table later in this proxy statement. For simplicity, thevalue of the Company’s 401(k) plan and medical benefits provided was excluded as all employees including the PEO are offered the exact same benefits andthe Company utilizes the Internal Revenue Service safe harbor provision for 401(k) discrimination testing.As illustrated in the table below, our 2017 PEO to median employee pay ratio is 18.68:1.00. Median Employee total annual compensation $34,112 Mr. Eller (‟PEO”) total annual compensation $637,200 Ratio of PEO to Median Employee Compensation 18.68 to 1.00 Director CompensationDirectors who are also our officers are not separately compensated for their service as directors. Our non-employee directors received the followingaggregate amounts of compensation for 2017: NameFees earned or paid incash ($) Restricted stock unitawards($) (1) Othercompensation ($) Total ($)Gregg Polle153,000 (2) $89,000 $0 $242,000Nancy Palumbo120,000 (3) 89,000 — 209,000Edmund Marinucci133,000 (4) 89,000 — 222,000Keith Horn110,000 (5) 89,000 — 199,000Gerard Ewe Keng Lim14,306 (6) 109,256(6)— 123,562 (1)4,000 shares, with a grant date of November 1, 2017, were issued to each outside Director under the Company's 2015 Equity Incentive Plan. Restrictedstock unit amount is equal to the grant date fair value of the grants.(2)Consists of: (i) $50,000 annual cash compensation for non-employee directors; (ii) $10,000 for service on the Audit Committee; (iii) $10,000 forservice on the Compensation Committee; (iv) $10,000 for service on the Corporate Governance and Nominations Committee; (v) $10,000 for serviceon the Regulatory Compliance Committee; (vi) $48,000 for service on the Strategic Development Committee and (vii) $15,000 for service as LeadDirector during 2017.(3)Consists of: (i) $50,000 annual cash compensation for non-employee directors; (ii) $10,000 for service on the Audit Committee; (iii) $10,000 forservice on the Compensation Committee; (iv) $10,000 for service on the Regulatory Compliance Committee; (v) $10,000 for service on the CorporateGovernance and Nominations Committee; (vi) $15,000 for acting as Chairman of the Compensation Committee; and (vii) $15,000 for acting asChairman of the Regulatory Compliance Committee.(4)Consists of: (i) $50,000 annual cash compensation for non-employee directors; (ii) $15,000 for acting as Chairman of the Corporate Governance andNominations Committee; (iii) $48,000 for service on the Strategic Development Committee; (iv) $10,000 for service on the CompensationCommittee; (v) $10,000 for service on the Corporate Governance Committee.(5)Consists of: (i) $50,000 annual cash compensation for non-employee directors; (ii) $40,000 for acting as Chairman of the Audit Committee; (iii)$10,000 for service on the Regulatory Compliance Committee; and (iii) $10,000 for service on the Audit Committee.(6)Mr. Lim became director on September 18, 2017. Consists of $14,306 of cash compensation, which is a pro-rated portion of the annual cashcompensation for non-employee directors from September 18, 2017 to December 31, 2017. Mr. Lim was granted 875 shares of Restricted Stock onSeptember 18, 2017, upon his appointment to the Board.97Cash CompensationEach non-employee member of the Board receives annual cash compensation for non-employee directors of $50,000. The chairperson of (i) the AuditCommittee receives annual compensation of $40,000, (ii) the Compensation Committee receives annual compensation of $15,000, (iii) the CorporateGovernance and Nominations Committee receives annual compensation of $15,000; (iv) the Regulatory Compliance Committee receives annualcompensation of $15,000 and (v) the Strategic Development Committee receives annual compensation of $48,000. Annual compensation for each member ofthe Audit Committee, Compensation Committee, Corporate Governance and Nominations Committee and Regulatory Compliance Committee is $10,000 percommittee, including for the chairperson of such committee. Annual compensation for each member of the Strategic Development Committee is $48,000 permember. Compensation for the Lead Director is $15,000 annually.Stock CompensationIn November 2017, the non-employee directors of the Company received an annual grant of 4,000 shares of RSUs, with such restricted stock unitsvesting on January 4, 2019. Further, on September 18, 2017, upon his appointment to the Board, Mr. Lim was granted 875 shares of restricted stock, withsuch shares vesting on January 5, 2018.In November 2016, the non-employee directors of the Company received an annual grant of 3,000 shares of restricted stock, with such shares vesting onJanuary 5, 2018.Compensation Committee Interlocks and Insider ParticipationNone of our executive officers serves as a member of the Compensation Committee of our board of directors, or other committee serving an equivalentfunction. None of the members of our Compensation Committee has ever been our employee or one of our officers.Compensation Committee ReportWe have reviewed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with the Company's management. Based onsuch review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this ProxyStatement and incorporated by reference into the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017.Compensation CommitteeNancy PalumboGregg PolleEdmund Marinucci 98Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The following table sets forth information concerning beneficial ownership of our capital stock outstanding at March 15, 2018 by (i) each stockholderknown to be the beneficial owner of more than five percent of any class of our voting securities then outstanding, (ii) each of our directors, (iii) each of our“named executive officers” as defined in Item 402(a)(3) of Regulation S-K promulgated under the Exchange Act, and (iv) our current directors and executiveofficers, as a group.The information regarding beneficial ownership of our common stock has been presented in accordance with the rules of the Commission. Under theserules, a person may be deemed to beneficially own any shares of capital stock as to which such person, directly or indirectly, has or shares voting power orinvestment power, and to beneficially own any shares of our capital stock as to which such person has the right to acquire voting or investment power within60 days through the exercise of any stock option or other right. The percentage of beneficial ownership as to any person as of a particular date is calculatedby dividing (a) (i) the number of shares beneficially owned by such person plus (ii) the number of shares as to which such person has the right to acquirevoting or investment power within 60 days by (b) the total number of shares outstanding as of such date, plus any shares that such person has the right toacquire from us within 60 days. Including those shares in the tables does not, however, constitute an admission that the named stockholder is a direct orindirect beneficial owner of those shares. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power(or shares that power with that person’s spouse) with respect to all shares of capital stock listed as owned by that person or entity.Name and Address ofBeneficial Owner (1)Common Stock Beneficially Owned Series B Preferred StockBeneficially Owned DirectorsShares Percentage Shares Percentage Emanuel R. Pearlman182,859(2)* — — Ryan Eller40,000(3)* — — Nancy Palumbo23,372(4)* — — Gregg Polle23,176(5)* — — Edmund Marinucci12,244(6)* — — Keith L. Horn9,250(7)* — — Gerard Ewe Keng Lim4,875(8)* — — Current Officers Nanette L. Horner18,752(9)* — — Charles Degliomini15,594(10)* — — Jamie M. Sanko10,000(11)* — — Kevin Kline10,000(12)* — — Directors and Officers as a Group (11 people)350,122 * — — Stockholders Kien Huat Realty III Limitedc/o Kien Huat Realty Sdn Bhd.22nd Floor Wisma GentingJalan Sultan Ismail50250 Kuala LumpurMalaysia28,914,606(13)88.0% — — Patricia Cohen6138 S. Hampshire Ct.Windermere, FL 34786— 44,258 100% *less than 1%(1)Unless otherwise indicated, the address of each stockholder, director, and executive officer listed above is Empire Resorts, Inc., c/o MonticelloCasino and Raceway, Route 17B, P.O. Box 5013, Monticello, New York 12701.(2)Consists of 49,609 shares of our common stock owned directly by Emanuel R. Pearlman; options that are currently exercisable into 2,000 shares ofour common stock; 56,250 shares of restricted stock issued pursuant to the Company's 2015 Equity Incentive Plan which vest as to 18,750 shares oneach of March 16, 2018, March 16, 2019 and March 16,992020; 25,000 shares of restricted stock issued pursuant to the Company's 2005 Equity Incentive Plan which currently have voting rights and vest onAugust 5, 2018; however, there is immediate vesting in the event (i) Mr. Pearlman is removed from the Board other than for cause, (ii) if he is notrenominated by Kien Huat to stand for election to the Board, or (iii) upon a Change in Control (as defined in the award); 25,000 shares of restrictedstock units issued pursuant to the Company's 2015 Equity Incentive Plan which vest as follows: 8,333 shares vest on June 5, 2018, 8,333 shares veston June 5, 2019 and 8,334 shares vest on June 5, 2020; and 25,000 restricted stock units issued pursuant to the Company's 2015 Equity IncentivePlan which vest as follows: 8,333 shares vest on March 13, 2019, 8,333 shares vest on March 13, 2020 and 8,334 shares vest on March 13, 2021;however, there is immediate vesting in the event Mr. Pearlman is (i) terminated by the Company other than for cause (as such term is defined in theaward), (ii) removed from the Board other than for cause or he is not re-nominated by Kien Huat to stand for election to the Board, or (iii) upon aChange in Control (as defined in the award).(3)Consists of 40,000 shares of restricted stock units issued pursuant to the Company's 2015 Equity Incentive Plan. On June 5, 2017, Mr. Eller wasgranted 20,000 restricted stock units, which vest as follows; 6,667 shares vest on June 5, 2018, 6,667 shares vest on June 5, 2019 and 6,666 sharesvest on June 5, 2020; however, there is immediate vesting in the event of a Change in Control (as defined in the award). On March 13, 2018, Mr.Eller was granted 20,000 restricted stock units, which vest as follows: 6,667 shares vest on March 13, 2019, 6,667 shares vest on March 13, 2020 and6,666 shares vest on March 13, 2021; however, there is immediate vesting in the event Mr. Eller is (i) terminated by the Company other than forcause (as such term is defined in the award), (ii) removed from the Board other than for cause or he is not re-nominated by Kien Huat to stand forelection to the Board, or (iii) upon a Change in Control (as defined in the award).(4)Consists of 17,372 shares of our common stock owned directly by Nancy Palumbo and options that are currently exercisable into 2,000 shares of ourcommon stock and 4,000 shares of restricted stock units issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on January 4,2019.(5)Consists of 17,176 shares of our common stock owned directly by Gregg Polle, options that are currently exercisable into 2,000 shares of ourcommon stock and 4,000 shares of restricted stock units issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on January 4,2019.(6)Consists of 6,622 shares of our common stock owned directly by Edmund Marinucci and options that are currently exercisable into 1,622 shares ofour common stock and 4,000 shares of restricted stock units issued pursuant to the Company's 2015 Equity Incentive Plan which vest on January 4,2019.(7)Consists of 5,250 shares of our common stock owned directly by Keith Horn and 4,000 shares of restricted stock units issued pursuant to theCompany’s 2015 Equity Incentive Plan which vest on January 4, 2019.(8)Consists of 875 shares of our common stock owned directly by Gerard Lim and 4,000 shares of restricted stock units pursuant to the Company's 2015Equity Incentive Plan which vest on January 4, 2019.(9)Consists of 3,691 shares of our common stock owned directly by Nanette Horner; 5,000 shares of restricted stock pursuant to the Company's 2005Equity Incentive Plan which currently have voting rights and vest on August 5, 2018; however, there is immediate vesting in the event of a Changein Control (as defined in the award); 1,000 restricted stock units issued pursuant to the Company's 2015 Equity Incentive Plan which vest as follows:333 shares vest on May 1, 2018, 333 shares vest on May 1, 2019 and 334 shares vest on May 1, 2020; however, there is immediate vesting in theevent of a Change in Control (as defined in the award); and 6,600 shares of restricted stock units issued pursuant to the Company's 2015 EquityIncentive Plan which vest as follows: 2,200 shares vest on March 12, 2019, 2,200 shares vest on March 12, 2020 and 2,200 shares vest on March 12,2021; however, there is immediate vesting in the event of a Change in Control (as defined in the award).(10)Consists of 526 shares of our common stock owned directly by Charles Degliomini; 5,000 shares of restricted stock pursuant to the Company's 2005Equity Incentive Plan which currently have voting rights and vest on August 5, 2018; however, there is immediate vesting in the event of a Changein Control (as defined in the award); 1,000 shares of restricted stock units issued pursuant to the Company's 2015 Equity Incentive Plan which vestas follows: 333 shares vest on May 1, 2018, 333 shares vest on May 1, 2019 and 334 shares vest on May 1, 2020; however, there is immediatevesting in the event of a Change in Control (as defined in the award); and 6,600 restricted stock units issued pursuant to the Company's 2015 EquityIncentive Plan which vest as follows: 2,200 shares vest on March 12, 2019, 2,200 shares vest on March 12, 2020 and 2,200 shares vest on March 12,2021; however, there is immediate vesting in the event of a Change in Control (as defined in the award).(11)Consists of 10,000 shares of restricted stock units issued pursuant to the Company's 2015 Equity Incentive Plan which vest as follows: 3,333 shares veston March 13, 2019, 3,333 shares vest on March 13, 2020 and 3,334 shares vest on March 13, 2021; however, there is immediate vesting in theevent of a Change in Control (as defined in the award).(12)Consists of 10,000 shares of restricted stock units issued pursuant to the Company's 2015 Equity Incentive Plan which vest as follows: 3,333 shares veston March 13, 2019, 3,333 shares vest on March 13, 2020 and 3,334 shares vest on March 13, 2021; however, there is immediate vesting in theevent of a Change in Control (as defined in the award).100(13)Based solely on the Schedule 13D/A filed jointly by Kien Huat and Tan Sri Lim Kok Thay on January 24, 2018. Tan Sri Lim is a director of KienHuat and Kien Huat is indirectly controlled by Tan Sri Lim. Tan Sri Lim and Kien Huat share voting and dispositive power over the equitysecurities.Item 13.Certain Relationships and Related Transactions, and Director Independence.Commitment Letter from Kien Huat To support the Company's financing needs for the Development Projects, Kien Huat entered into a series of commitment letters with the Company, whichwas last amended on September 22, 2015 (as amended, the "Kien Huat Commitment Letter"). Pursuant to the Kien Huat Commitment Letter, Kien Huatcommitted to an equity investment in the Company in the aggregate amount of $375 million in support of the Development Projects, the redemption of theSeries E Preferred Stock and for working capital purposes. Kien Huat has invested an aggregate of $340 million of such commitment pursuant to the January2015 Standby Purchase Agreement and the January 2016 Standby Purchase Agreement. Kien Huat also agreed to participate in, and backstop, a follow-onrights offering on the same terms and conditions and at the same subscription price as the January 2016 Rights Offering, in an amount not to exceed $35million (the "Follow-On Rights Offering").On December 28, 2017, the Company and Kien Huat amended the Kien Huat Commitment such that Kien Huat’s obligation to participate in, andbackstop, the January 2016 Rights Offering was terminated. Other than the termination of such follow-on standby purchase commitment, all other terms ofthe Commitment Letter remain unchanged.Kien Huat Montreign Loan Agreement and Kien Huat Note Exchange AgreementOn January 24, 2017, Kien Huat and Montreign Holding entered into the Kien Huat Montreign Loan Agreement, pursuant to which Montreign Holdingobtained from Kien Huat a loan in the principal amount of $32.3 million, of which $32.0 million was used as a capital contribution to Montreign Operatingfor use towards the development and operating expenses of the Development Projects. The Kien Huat Montreign Loan was to mature on February 24, 2024(the "Kien Huat Loan Maturity Date").The Kien Huat Montreign Loan bore interest at a rate of 12% per annum. Prior to the Kien Huat Loan Maturity Date,interest on the Kien Huat Montreign Loan was accrued and added to the outstanding principal of the Kien Huat Montreign Loan. The principal indebtedness,including all interest due and other amounts due under the Kien Huat Montreign Loan, was payable in cash on the Kien Huat Loan Maturity Date. In additionto the interest payable on the Kien Huat Montreign Loan, Kien Huat received to a commitment fee of 1%, which fee was added to the principal indebtednessof the Kien Huat Montreign Loan. The obligations of Montreign Holding under the Kien Huat Montreign Loan Agreement were secured by a pledge of allthe membership interests of Montreign Holding owned by Empire. The Kien Huat Montreign Loan could be repaid at any time without penalty.On December 28, 2017, concurrently with and as a condition to the closing of the Bangkok Bank Loan Agreement, Empire, Montreign Holding, andKien Huat entered into a Note Exchange Agreement (the “Kien Huat Note Exchange Agreement”). The Kien Huat Note Exchange Agreement provides for theissuance of 1,379,873 shares of common stock (the “Exchange Shares”) to Kien Huat in full satisfaction of the Kien Huat Montreign Loan. On December 28,2017, total indebtedness outstanding under the Kien Huat Montreign Loan was $36.2 million. Such total indebtedness outstanding under the Kien HuatMontreign Loan was exchanged for the Exchange Shares at an exchange rate of $26.21, which exchange rate represents the volume-weighted average price ofthe Company’s common stock for the 30-day period immediately preceding the date on which the Kien Huat Note Exchange Agreement was executed. Inconnection with the satisfaction in full of the Kien Huat Montreign Loan pursuant to the Kien Huat Note Exchange Agreement, Empire's pledge of itsmembership interests in Montreign Holding was released. The Exchange Shares were issued pursuant to an exemption from the registration requirement of theSecurities Act provided in Section 4(a)(2) of the Securities Act.Kien Huat Backstop Loan AgreementOn December 28, 2017, concurrently with and as a condition to the closing of the Bangkok Bank Loan Agreement, the Company and Kien Huat enteredinto a loan agreement (the “Kien Huat Backstop Loan Agreement”), providing for loans to Empire in an aggregate principal amount of up to $20 million (the“Kien Huat Backstop Loan”). Any amounts borrowed under the Kien Huat Backstop Loan will be used exclusively to make payments required under theBangkok Bank Loan Agreement and will mature on the one-year anniversary of the Maturity Date of the Bangkok Bank Loan, or such earlier date that theBangkok Bank Loan is terminated (the “Backstop Maturity Date”). As of December 31, 2018, no amounts had been borrowed under the Kien Huat Loan.101The Kien Huat Backstop Loan bears interest at a rate of 12% per annum. Prior to the Backstop Maturity Date, interest on any principal amountoutstanding under the Kien Huat Backstop Loan will accrue and be added to the outstanding principal of the Kien Huat Backstop Loan on the first businessday of each calendar month beginning on January 1, 2018 and will thereafter be deemed to be part of the principal indebtedness. The Kien Huat BackstopLoan, including all interest and any other amounts due under the Kien Huat Backstop Loan, will be payable in cash on the Backstop Maturity Date. KienHuat was paid a commitment fee of $200,000 on December 28, 2017.The Kien Huat Backstop Loan Agreement contains customary representations and warranties and affirmative covenants, including representations,warranties and covenants that restrict the Company’s use of the proceeds of the Kien Huat Backstop Loan to pay amounts due and payable under theBangkok Bank Loan. Obligations under the Kien Huat Backstop Loan Agreement may be accelerated upon certain customary events of default (subject tograce periods, as applicable), including among others: nonpayment of principal, interest or fees; and breach of the affirmative covenants.Kien Huat Letter AgreementAs a result of Kien Huat’s increased proportionate ownership following the consummation of the January 2016 Rights Offering and the NoteConversion, at the request of the Company, on February 17, 2016, Kien Huat and the Company entered into a letter agreement (the "Kien Huat LetterAgreement") pursuant to which, during the period commencing on February 17, 2016 and ending on the earlier of (i) the three-year anniversary of the closingof the Rights Offering and (ii) the one-year anniversary of the opening of the Casino, Kien Huat has agreed not to take certain actions with respect to theCompany. In particular, during such time period, Kien Huat has agreed not to, and to cause the Kien Huat Parties not to, take certain actions in furtherance ofa “going-private” transaction (as such term is defined in the Letter Agreement) involving the Company unless such transaction is subject to the approval of(x) holders of a majority of the votes represented by the common stock, Series B Preferred Stock and any other capital stock of the Company entitled to votetogether with the common stock in the election of the Board (other than any such capital stock owned by any Kien Huat Parties) and either (A) a majority ofdisinterested members of the Board or (B) a committee of the Board composed of disinterested members of the Board. In addition, during such period, theCompany and Kien Huat have agreed to cooperate to ensure that, to the greatest extent possible, the Board includes no fewer than three independent directors(the definition of independence as determined under the standards of The NASDAQ Stock Market or any other securities exchange on which the commonstock of the Company is then listed).On December 28, 2017, Empire and Kien Huat amended the Kien Huat Letter Agreement to extend by one year Kien Huat’s obligation not to engage ina going-private transaction with Empire without the prior approval of the majority of Empire’s minority shareholders and a majority of the disinteresteddirectors of Empire. As a result of the amendment, such restriction now covers a period ending on or about February 2020. Other than this one-year extension,all other terms of the Kien Huat Letter Agreement remain unchanged.Kien Huat Construction Loan AgreementOn October 13, 2016, Montreign Operating and Kien Huat entered into a loan agreement (the "Kien Huat Construction Loan Agreement"). Pursuant tothe Kien Huat Construction Loan Agreement, Kien Huat agreed to make available to Montreign Operating up to an aggregate of $50 million of loans to paythe expenses of the Casino while the debt financing for the Development Projects was finalized. The term of the Kien Huat Construction Loan Agreementwould expire on the earlier of (i) the consummation of financing in an amount no less than the remaining contract amount under the Casino constructioncontract and (ii) October 13, 2017. On January 24, 2017, in connection with the closing of the Term Loan Facility and the Kien Huat Montreign Loan, theKien Huat Construction Loan Agreement expired on its terms without being utilized by Montreign Operating. Montreign Operating paid Kien Huat acommitment fee of $500,000 upon execution of the Kien Huat Construction Loan. The commitment fee was capitalized and was included in Other Assets atDecember 31, 2016. It was written off on January 24, 2017 upon the issuance of the Kien Huat Montreign Loan.Moelis & CompanyOn December 9, 2013, the Company executed a letter agreement, as supplemented by a letter dated May 20, 2015 (together, the "Moelis LetterAgreement") pursuant to which it engaged Moelis & Company LLC ("Moelis") to act as its financial advisor in connection with the Casino. Pursuant to theMoelis Letter Agreement, we agreed to pay Moelis a retainer fee in the aggregate amount of $250,000, of which $150,000 was payable upon execution and$100,000 of which was paid within 90 days after execution. In the event a financing is consummated, the Moelis Letter Agreement contemplates additionaltransaction-based fees would be earned by Moelis.During 2015, we paid Moelis approximately $428,000 for professional services, travel and expenses.102At the close of the January 2016 Rights Offering Moelis was paid approximately $2.1 million for financial advisory services in connection to with theCasino, pursuant to the Moelis Letter Agreement.On January 24, 2017, in connection with the closing of the Term Loan Facility and the Revolving Credit Agreement, Moelis was paid approximately$2.5 million for financial advisory services pursuant to the Moelis Engagement Letter Agreement.In March 2017, Montreign Operating entered into an engagement agreement with Moelis (the "Moelis-Montreign Engagement Agreement") pursuantto which Moelis will act as exclusive financial advisor to Montreign Operating. Pursuant to the Moelis-Montreign Engagement Agreement, Moelis is entitledto an advisory fee of $100,000, which is payable upon execution, and the reimbursement of expenses up to $75,000. The Moelis-Montreign EngagementAgreement terminated on December 31, 2017.On May 16, 2017, Moelis and the Company entered into a letter agreement reinstating and amending the Moelis Engagement Letter (the “UpdatedMoelis Engagement Letter”). Pursuant to the Updated Moelis Engagement Letter, Moelis will act as non-exclusive financial advisor to the Company inconnection with certain debt and equity financing and corporate transactions the Company may undertake. The Updated Moelis Engagement Letter providesthe fees that will be due to Moelis for each transaction in which the Company engages. If the Company engages in a covered transaction at any time within12 months of the termination of the Updated Moelis Engagement Letter for any reason other than for cause by the Company, the Moelis will be entitled toreceive a transaction fee according to the schedule provided therein. The Updated Moelis Engagement Letter terminated on December 31, 2017.On May 26, 2017, in connection with the closing of the Amended Term Loan Agreement, Moelis was paid approximately $178,000 for financialadvisory services pursuant to the Moelis-Montreign Engagement Letter.Gregg Polle, a director of the Company, is a Managing Director of Moelis. Mr. Polle refrained from participating in the discussion of the Moelis LetterAgreement and the Moelis-Montreign Engagement Agreement and the determination of whether to enter into such agreements.RWS License AgreementOn March 31, 2017, Montreign Operating entered into a license agreement (the “RWS License Agreement”) with RW Services Pte Ltd (“RWS”). RWSis an affiliate of Tan Sri Lim Kok Thay, who is a beneficiary of and controls Kien Huat. Pursuant to the RWS License Agreement, RWS granted MontreignOperating the non-exclusive, non-transferable, revocable and limited right to use certain “Genting” and “Resorts World” trademarks (the “RWS LicensedMarks”) in connection with the development, marketing, sales, management and operation (the “Permitted Uses”) of the Development Projects. The right touse the RWS Licensed Marks may be assigned or sublicensed only in certain limited circumstances. However, any use of the RWS Licensed Marks for apurpose other than the Permitted Uses will require the prior written consent of RWS. The name of the Casino is “Resorts World Catskills,” and,notwithstanding the foregoing, the use of such name is exclusive to Montreign Operating and may be used in connection with on-line gaming in addition tothe Permitted Uses.The initial term of the RWS License Agreement will expire on December 31, 2027, and will be extended automatically for additional terms of 12months each, up to a maximum of 39 additional terms, unless either of the parties provides notice to terminate the RWS License Agreement or upon themutual written consent of both parties. Montreign Operating’s rights and obligations under the RWS License Agreement are subject to and governed by therules and regulations applicable to Montreign Operating’s gaming operations at the Casino, and the fiduciary obligations of the boards of directors ofMontreign Operating and Empire, as well as the fiduciary obligations of Kien Huat. Beginning on the date on which the Casino opened to the public,Montreign Operating pays to RWS a fee equivalent to a percentage of Net Revenue (as such term is defined in the RWS License Agreement) generated ineach calendar year from (i) all activity at the Casino, (ii) each specific use of the RWS Licensed Marks in the Entertainment Project or Golf Course and(iii) each specific use of the name Resorts World Catskills in connection with on-line gaming. The percentage of Net Revenue payable as the fee is a lowsingle digit percentage that will increase incrementally between the third year and sixth year of the term of the RWS License Agreement and will remain alow single digit percentage during the entire term of the RWS License Agreement.During the term of the RWS License Agreement, Montreign Operating may participate in the Genting Rewards Alliance loyalty program (the“Alliance”), which will provide central marketing and cross-promotion opportunities for the Development Projects with other members of the Alliance.Montreign Operating’s participation in the Alliance is subject to the provisions of a separate agreement, which is currently being negotiated by the parties.Mr. Lim, our Director, is also a director of Resorts World Inc. Pte Ltd., the parent company of RWS.103Audit Committee ReviewOur audit committee charter provides that the Audit Committee will review and approve all transactions between the Company and its officers,directors, director nominees, principal stockholders and their immediate family members. We expect that any such transactions will be arm's-length and onterms no less favorable to it than it could obtain from unaffiliated third parties.Item 14.Principal Accounting Fees and Services.Our principal accountant for the audit and review of our annual and quarterly financial statements was Ernst & Young, LLP ("E&Y"). The followingtable shows the fees paid or accrued by us to E&Y during these periods: Type of Service2017 2016 2015 Audit Fees (1)$845,000 $911,000 $921,000 Audit-Related Fees (2)24,000 25,000 23,000 Tax Fees (3)99,000 88,000 71,000 Total$968,000 $1,024,000 $1,015,000 (1)Comprised of the audit of our annual financial statements, internal controls over financial reporting, reviews of our quarterly financial statements,various SEC filings and statutory audits.(2)Comprised of services rendered in connection with our audit of the Company’s employee benefit plan.(3)Comprised of services for tax compliance and tax return preparation.In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee established policies and procedures under which all audit and non-auditservices performed by our principal accountants must be approved in advance by the Audit Committee. As provided in the Sarbanes-Oxley Act of 2002, allaudit and non-audit services to be provided after May 6, 2003 must be pre-approved by the Audit Committee in accordance with these policies andprocedures.PART IVItem 15.Exhibits, Financial Statement Schedules.Financial StatementsSchedule II—Valuation and Qualifying AccountsEmpire Resorts, Inc. and SubsidiariesValuation and Qualifying AccountsDecember 31, 2017, 2016 and 2015(in thousands)DescriptionBalance atbeginning ofyear Additioncharged tocosts andexpenses Otheradditions(deductions) Lessdeductions Balance atend of yearYear ended December 31, 2017 Allowance for doubtful accounts$171 $— $— $— $171Deferred tax asset valuation allowance$88,934 $17,492 $— $(35,218) $71,208Year ended December 31, 2016 Allowance for doubtful accounts$171 $— $— $— $171Deferred tax asset valuation allowance$86,092 $— $2,842 $— $88,934Year ended December 31, 2015 Allowance for doubtful accounts$161 $10 $— $— $171Deferred tax asset valuation allowance$72,104 $— $13,988 $— $86,092104Exhibits3.1 Second Amended and Restated Certificate of Incorporation, dated November 1, 2016. (1)3.2 Third Amended and Restated By-Laws, as most recently amended on November 2, 2016. (2)4.1 Form of Common Stock Certificate. (3)4.2 Certificate of Designations, Preferences and Rights of Series B Preferred Stock dated July 31, 1996. (4)4.3 Certificate of Designation setting forth the Preferences, Rights and Limitations of Series B Preferred Stock and Series C Preferred Stock, datedMay 29, 1998. (5)4.4 Certificate of Amendment to the Certificate of Designation setting forth the Preferences, Rights and Limitations of Series B Preferred Stockand Series C Preferred Stock, dated June 13, 2001. (6)4.5 Certificate of Designations setting forth the Preferences, Rights and Limitations of Series D Preferred Stock, dated February 7, 2000. (7)4.6 Certificate of the Designations, Powers, Preferences and Rights of the Series E Preferred Stock, dated December 10, 2002. (8)4.7 Certificate of Amendment of Certificate of the Designations, Powers, Preferences and Other Rights and Qualifications of the Series E PreferredStock, dated January 12, 2004. (9)4.8 Certificate of Designations of Series A Junior Participating Preferred Stock, dated March 24, 2008. (10)4.9 Certificate of Amendment to the Certificate of Designations of Series A Junior Participating Preferred Stock, dated August 19, 2009. (11)4.10 Common Stock Purchase Warrant, dated May 11, 2010, by and between Empire Resorts, Inc. and Joseph Bernstein, to purchase 2,000,000shares of Common Stock. (12)4.11 Letter Agreement, dated February 17, 2016, by and between Empire Resorts, Inc. and Kien Huat Realty III Limited (13)4.12 Amendment to Letter Agreement, dated as of December 28, 2017, by and between Empire Resorts, Inc. and Kien Huat Realty III Limited (14)10.1 Investment Agreement, dated as of August 19, 2009, by and between Empire Resorts, Inc. and Kien Huat Realty III Limited. (15)10.2 Registration Rights Agreement, dated as of August 19, 2009, by and between Empire Resorts, Inc. and Kien Huat Realty III Limited. (16)10.3 First Amendment and Clarification to the Investment Agreement dated as of September 30, 2009, between Empire Resorts, Inc. and Kien HuatRealty III Limited. (17)10.4 Letter Agreement, dated December 31, 2015, by and between Empire Resorts, Inc. and Kien Huat Realty III Limited, relating to the InvestmentAgreement, dated August 19, 2009 (18)10.5 Settlement Agreement and Release, dated as of May 11, 2010, by and among Empire Resorts, Inc., Kien Huat, Kok Thay Lim, Au Fook Yew,G. Michael Brown, and Joseph Bernstein. (19)10.6 Loan Agreement dated as of November 17, 2010 between Empire Resorts, Inc. and Kien Huat Realty III Limited. (20)10.7 Amendment No. 1 to the Loan Agreement, dated August 8, 2012, by and between Empire Resorts, Inc. and Kien Huat Realty III Limited. (21)10.8 Amendment No. 2 to the Loan Agreement, dated December 18, 2013, by and between Empire Resorts, Inc. and Kien Huat Realty III Limited(22)10.9 Amendment No. 3 to the Loan Agreement, dated as of March 3, 2015, by and between Empire Resorts, Inc. and Kien Huat Realty III Limited(23)10.10 Convertible Promissory Note issued on November 17, 2010 by Empire Resorts, Inc. in favor of Kien Huat Realty III Limited. (24)10.11 + Amended and Restated Master Development Agreement, dated December 28, 2015, by and between Montreign Operating Company LLC,Empire Resorts Real Estate I, LLC, Empire Resorts Real Estate II LLC, EPT Concord II, LLC, EPR Concord II, L.P. and Adelaar Developer,LLC (25)10.12 First Amendment to Amended and Restated Master Development Agreement, dated January 24, 2017, by and between Montreign OperatingCompany LLC, Empire Resorts Real Estate I, LLC, Empire Resorts Real Estate II LLC, EPT Concord II, LLC, EPR Concord II, L.P. andAdelaar Developer, LLC (26)10.13 + Purchase Option Agreement, dated December 28, 2015, by and between Montreign Operating Company LLC, EPT Concord II, LLC and EPRConcord II, L.P. (27)10510.14 First Amendment to Purchase Option Agreement, dated January 24, 2017, by and between Montreign Operating Company LLC, EPT ConcordII, LLC and EPR Concord II, L.P. (28)10.15 Completion Guaranty, dated December 28, 2015, by Empire Resorts, Inc. for the benefit of EPR Concord II, L.P., EPT Concord II, LLC,Adelaar Developer, LLC and EPR Properties (29)10.16 Completion Guaranty, dated December 28, 2015, by EPR Properties for the benefit of Montreign Operating Company LLC, Empire ResortsReal Estate I, LLC, Empire Resorts Real Estate II, LLC and Empire Resorts, Inc. (30)10.17 + Lease, dated December 28, 2015, by and between EPT Concord II, LLC and Montreign Operating Company, LLC, relating to the CasinoParcel (31)10.18 First Amendment to Casino Lease, dated January 24, 2017, by and between EPT Concord II, LLC and Montreign Operating Company, LLC(32)10.19 + Lease, dated December 28, 2015, by and between Adelaar Developer, LLC and Empire Resorts Real Estate II, LLC, relating to theEntertainment Project Parcel (33)10.20 First Amendment to Entertainment Project Sub-Lease, dated January 24, 2017, by and between Adelaar Developer, LLC and Empire ResortsReal Estate II, LLC (34)10.21 + Lease, dated December 28, 2015, by and between Adelaar Developer, LLC and Empire Resorts Real Estate I, LLC, relating to the Golf CourseParcel (35)10.22 First Amendment to Golf Course Lease, dated January 24, 2017, by and between Adelaar Developer, LLC and Empire Resorts Real Estate I,LLC (36)10.23 Standby Purchase Agreement, dated December 31, 2015, by and between Empire Resorts, Inc. and Kien Huat Realty III Limited (37)10.24 Standby Purchase Agreement, dated January 2, 2015, by and between Empire Resorts, Inc. and Kien Huat Realty III Limited (38)10.25 Empire Resorts, Inc. 2005 Second Amended and Restated Equity Incentive Plan (39)10.26 Empire Resorts, Inc. 2015 Amended and Restated Equity Incentive Plan (40)10.27 Form of Option Award under the Empire Resorts, Inc. 2015 Equity Incentive Plan (41)10.28 Form of Restricted Stock Award under the Empire Resorts, Inc. 2015 Equity Incentive Plan (42)10.29 Form of Restricted Stock Unit Award under the Empire Resorts, Inc. 2015 Equity Incentive Plan (43)10.30 Form of Stock Appreciation Right Award under the Empire Resorts, Inc. 2015 Equity Incentive Plan (44)10.31 Form of Stock Award under the Empire Resorts, Inc. 2015 Equity Incentive Plan (45)10.32 Empire Resorts, Inc. Nonqualified Deferred Compensation Plan, effective as of January 1, 2017 (46)10.33 Employment Agreement, dated December 7, 2012, by and between Empire Resorts, Inc. and Charles A. Degliomini (47)10.34 Employment Agreement, dated August 22, 2012, by and between Empire Resorts, Inc. and Nanette L. Horner (48)10.35 Amendment No. 1 to Employment Agreement, dated May 30, 2014, by and between Empire Resorts Inc. and Nanette L. Horner (49)10.36 Amendment No. 1 to Employment Agreement, dated August 24, 2014, by and between Empire Resorts Inc. and Charles A. Degliomini (50)10.37 Amendment No. 2 to Employment Agreement, dated June 30, 2015, by and between Empire Resorts, Inc. and Nanette L. Horner (51)10.38 Amendment No. 2 to Employment Agreement, dated June 30, 2015, by and between Empire Resorts, Inc. and Charles A. Degliomini (52)10.39 Building Term Loan Agreement among Montreign Operating Company, LLC, the Lenders and Credit Suisse AG, Cayman Islands Branch,dated as of January 24, 2017 (53)10.40 Form of Term A Note (54)10.41 Form of Term B Note (55)10.42 Form of Subsidiary Guaranty made by Montreign Operating Company, LLC in favor of Credit Suisse AG, Cayman Islands Branch, dated as ofJanuary 24, 2017 (56)10.43 Pledge and Security Agreement among Montreign Operating Company, LLC, the Grantors and Credit Suisse AG, Cayman Islands Branch,dated as of January 24, 2017 (57)10.44 Equity Pledge Agreement by Montreign Holding Company, LLC as Pledgor and Credit Suisse AG, Cayman Islands Branch as CollateralAgent, dated as of January 24, 2017 (58)10.45 Completion Guaranty by Empire Resorts, Inc. in favor of Credit Suisse AG, Cayman Islands Branch, dated as of January 24, 2017 (59)10610.46 Project Disbursement Agreement among Credit Suisse AG, Cayman Islands Branch as the Disbursement Agent, Credit Suisse AG, CaymanIslands Branch as the Administrative Agent, Credit Suisse AG, Cayman Islands Branch as the Collateral Agent, Montreign OperatingCompany, LLC as the Borrower and Empire Resorts Real Estate II, LLC as the EV Subsidiary, dated as of January 24, 2017 (60)10.47 Building Loan Disbursement Agreement among Credit Suisse AG, Cayman Islands Branch as the Disbursement Agent, Credit Suisse AG,Cayman Islands Branch as the Administrative Agent, Credit Suisse AG, Cayman Islands Branch as the Collateral Agent, Montreign OperatingCompany, LLC as the Borrower and Empire Resorts Real Estate II, LLC as the EV Subsidiary, dated as of January 24, 2017 (61)10.48 Revolving Credit Agreement among Montreign Operating Company, LLC, the Lenders and Fifth Third Bank, dated as of January 24, 2017(62)10.49 Form of Note (63)10.50 Subsidiary Guaranty made by Montreign Operating Company, LLC in favor of Fifth Third Bank, dated as of January 24, 2017 (64)10.51 Pledge and Security Agreement among Montreign Operating Company, LLC, each of the other Grantors and Fifth Third Bank, dated as ofJanuary 24, 2017 (65)10.52 Equity Pledge Agreement by Montreign Holding Company, LLC as Pledgor and Fifth Third Bank as Collateral Agent, dated as of January 24,2017. (66)10.53 Loan Agreement between Montreign Holding Company, LLC and Kien Huat Realty III Limited, dated as of January 24, 2017 (67)10.54 Form of Promissory Note (68)10.55 Pledge and Security Agreement by Empire Resorts, Inc. in favor of Kien Huat Realty III Limited, dated as of January 24, 2017 (69)10.56+ RWS License Agreement, dated as of March 31, 2017, between Montreign Operating Company, LLC, an indirect, wholly-owned subsidiary ofEmpire Resorts, Inc., and RWS Services Pte Ltd. (70)10.57 Employment Agreement, dated as March 27, 2017, by and between Empire Resorts, Inc. and Ryan Eller. (71)10.58 First Amendment to Building Term Loan Agreement, Building Loan Agreement and Project Disbursement Agreement, among Credit SuisseAG, Cayman Islands Branch as the Disbursement Agent, Credit Suisse AG, Cayman Islands Branch as the Administrative Agent, Credit SuisseAG, Cayman Islands Branch as the Collateral Agent, Montreign Operating Company, LLC as the Borrower and Empire Resorts Real Estate II,LLC as the EV Subsidiary, dated as of May 26, 2017 (72)10.59 First Amendment to Revolving Credit Agreement among Montreign Operating Company, LLC, the Lenders and Fifth Third Bank, dated as ofMay 26, 2017 (73)10.60 Second Amendment to Revolving Credit Agreement among Montreign Operating Company, LLC, the Lenders and Fifth Third Bank, dated asof December 7, 2017 (74)10.61 Employment Agreement, effective December 12, 2017, by and between Empire Resorts, Inc. and Jamie M. Sanko. (75)10.62 Employment Agreement, effective December 12, 2017, by and between Empire Resorts, Inc. and Kevin D. Kline. (76)10.63 Delayed Draw Term Credit Agreement among Empire Resorts, Inc., Bangkok Bank PLC, New York Branch, and Monticello RacewayManagement, Inc., as guarantor, dated as of December 28, 2017 (77)10.64 Loan Agreement, among Empire Resorts, Inc. and Kien Huat Realty III Limited, dated as of December 28, 2017 (78)10.65 Form of Promissory Note (to be issued to Kien Huat realty III Limited) (79)10.66 Note Exchange Agreement, among Empire Resorts, Inc., Montreign Holding company, LLC and Kien Huat Realty III Limited, dated as ofDecember 28, 2017 (80)14.1 Code of Business Conduct and Ethics. (81)14.2 Code of Ethics for the Principal Executive Officer and Senior Financial Officer(s). (82)21.1 * List of Subsidiaries.23.1 * Consent of Ernst & Young LLP.31.1 * Section 302 Certification of Principal Executive Officer.31.2 * Section 302 Certification of Principal Financial Officer.32.1 * Section 906 Certification of Principal Executive Officer and Principal Financial Officer.101 Interactive Data File (XBRL). * Filed herewith.+Confidential information has been omitted and confidential treatment has been granted with respect to the omitted107information.(1)Incorporated by reference to Exhibit 3.1 to Empire Resorts, Inc.'s Form 10-K for the year ended December 31, 2016 (the "2016 10-K"), filed with theCommission on March 13, 2017. (2)Incorporated by reference to Exhibit 3.2 of Empire Resorts, Inc.’s Current Report on Form 8-K (an “8-K”), filed with the Securities and ExchangeCommission (the “Commission”) on November 2, 2016.(3)Incorporated by reference to Exhibit 4.1 to the 2016 10-K.(4)Incorporated by reference to Exhibit 4.2 to Empire Resorts, Inc.'s 10-K for the year ended December 31, 2003 (the "2003 10-K"), filed with the Commission on March 30, 2004.(5)Incorporated by reference to Exhibit 4.3 to the 2003 10-K.(6)Incorporated by reference to Exhibit 4.4 to the 2003 10-K.(7)Incorporated by reference to Exhibit 4 to Empire Resorts, Inc.'s 8-K, filed with the Commission on February 15, 2000.(8)Incorporated by reference to Exhibit 4.5 to the 2003 10-K(9)Incorporated by reference to Exhibit 4.6 to the 2003 10-K (10)Incorporated by reference to Exhibit 3.1 to Empire Resort, Inc.’s 8-K, filed with the Commission on March 24, 2008.(11)Incorporated by reference to Exhibit 4.1 to Empire Resorts, Inc.’s 8-K, filed with the Commission on August 19, 2009 (the "8/19/09 8-K").(12)Incorporated by reference to Exhibit 4.10 to the Registration Statement on Form S-1, filed with the Commission on December 11, 2013. (13)Incorporated by reference to Exhibit 4.1 to Empire Resorts, Inc.'s Current Report on Form 8-K, filed with the Commission on February 18, 2016.(14)Incorporated by reference to Exhibit 4.1 to Empire Resorts, Inc.'s Current Report on Form 8-K, filed with the Commission on January 3, 2018.(15)Incorporated by reference to Exhibit 10.1 of the 8/19/09 8-K.(16)Incorporated by reference to Exhibit 10.2 to the 8/19/09 8-K(17)Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.’s 8-K, filed with the Commission on October 5, 2009 (the “10/5/09 8-K”).(18)Incorporated by reference to Exhibit 10.4 to Empire Resorts, Inc.’s 10-K for the year ended December 31,2015, filed with the Commission on March 10, 2016 (the “2015 10-K”).(19) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.’s Quarterly Report on Form 10-Q (a“10-Q”), filed with the Commission on May 17, 2010.(20) Incorporated by reference to Exhibit 4.2 to Empire Resorts, Inc.'s 8-K, filed with the Commission onNovember 19, 2010 (the "11/19/10 8-K").(21) Incorporated by reference to Exhibit 10.4 to Empire Resorts, Inc.’s 10-Q for the period ended June 30,2012, filed with the Commission on August 14, 2012(22) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s 8-K, filed with the Commission onDecember 19, 2013108(23) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s 8-K, filed with the Commission on March 3,2015.(24) Incorporated by reference to Exhibit 4.1 to the 11/19/10 8-K.(25) Incorporated by reference to Exhibit 10.12 to Empire Resorts, Inc.'s 2015 10-K.(26) Incorporated by reference to Exhibit 10.12 to Empire Resorts, Inc.'s 2016 10-K.(27) Incorporated by reference to Exhibit 10.13 to Empire Resorts, Inc.'s 2015 10-K.(28) Incorporated by reference to Exhibit 10.14 to Empire Resorts, Inc.'s 2016 10-K.(29) Incorporated by reference to Exhibit 10.14 to Empire Resorts, Inc.'s 2015 10-K.(30) Incorporated by reference to Exhibit 10.15 to Empire Resorts, Inc.'s 2015 10-K.(31) Incorporated by reference to Exhibit 10.16 to Empire Resorts, Inc.'s 2015 10-K.(32) Incorporated by reference to Exhibit 10.18 to Empire Resorts, Inc.'s 2016 10-K.(33) Incorporated by reference to Exhibit 10.17 to Empire Resorts, Inc.'s 2015 10-K.(34) Incorporated by reference to Exhibit 10.20 to Empire Resorts, Inc.'s 2016 10-K.(35) Incorporated by reference to Exhibit 10.18 to Empire Resorts, Inc.'s 2015 10-K.(36) Incorporated by reference to Exhibit 10.22 to Empire Resorts, Inc.'s 2016 10-K.(37) Incorporated by reference to Exhibit 99.1 to Empire Resorts, Inc.'s 8-K, filed with the Commission onJanuary 4, 2016.(38) Incorporated by Reference to Exhibit 99.1 to the Company’s 8-K as filed with the Commission on January5, 2015(39) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s 8-K, filed with the Commission onAugust 19, 2005.(40) Incorporated by reference to Exhibit 10.26 to Empire Resorts, Inc.'s 2016 10-K.(41) Incorporated by reference to Exhibit 10.23 to the 2015 10-K.(42) Incorporated by reference to Exhibit 10.24 to the 2015 10-K.(43) Incorporated by reference to Exhibit 10.25 to the 2015 10-K.(44) Incorporated by reference to Exhibit 10.26 to the 2015 10-K.(45) Incorporated by reference to Exhibit 10.27 to the 2015 10-K.(46) Incorporated by reference to Exhibit 10.1 of Empire Resorts, Inc.’s 8-K, as filed with the Commission onDecember 7, 2016(47) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s 8-K, filed with the Commission onDecember 13, 2012.(48) Incorporated by reference to Exhibit 10.2 to Empire Resorts, Inc.'s 8-K, filed with the Commission onAugust 23, 2012.109(49) Incorporated by reference to Exhibit 10.3 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onJune 3, 2014.(50) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onAugust 26, 2014.(51) Incorporated by reference to Exhibit 10.4 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onJuly 7, 2015.(52) Incorporated by reference to Exhibit 10.3 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onJuly 7, 2015.(53) Incorporated by reference to Exhibit 10.43 to the 2016 10-K.(54) Incorporated by reference to Exhibit 10.44 to the 2016 10-K.(55) Incorporated by reference to Exhibit 10.45 to the 2016 10-K.(56) Incorporated by reference to Exhibit 10.46 to the 2016 10-K.(57)Incorporated by reference to Exhibit 10.47 to the 2016 10-K(58) Incorporated by reference to Exhibit 10.48 to the 2016 10-K.(59) Incorporated by reference to Exhibit 10.49 to the 2016 10-K.(60) Incorporated by reference to Exhibit 10.50 to the 2016 10-K.(61) Incorporated by reference to Exhibit 10.51 to the 2016 10-K.(62)Incorporated by reference to Exhibit 10.52 to the 2016 10-K(63) Incorporated by reference to Exhibit 10.53 to the 2016 10-K.(64) Incorporated by reference to Exhibit 10.54 to the 2016 10-K.(65)Incorporated by reference to Exhibit 10.55 to the 2016 10-K(66) Incorporated by reference to Exhibit 10.56 to the 2016 10-K.(67) Incorporated by reference to Exhibit 10.57 to the 2016 10-K.(68)Incorporated by reference to Exhibit 10.58 to the 2016 10-K(69)Incorporated by reference to Exhibit 10.59 to the 2016 10-K(70) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s Form 10-Q, for the quarter ended March 31, 2017, filed with the Commission onMay 4, 2017.(71) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onMarch 27, 2017.(72) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onJune 1, 2017.(73) Incorporated by reference to Exhibit 10.2 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onJune 1, 2017.110(74) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onDecember 13, 2017.(75) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onDecember 14, 2017.(76) Incorporated by reference to Exhibit 10.2 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onDecember 14, 2017.(77) Incorporated by reference to Exhibit 10.1 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onJanuary 3, 2018.(78) Incorporated by reference to Exhibit 10.2 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onJanuary 3, 2018.(79) Incorporated by reference to Exhibit 10.3 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onJanuary 3, 2018.(80) Incorporated by reference to Exhibit 10.4 to Empire Resorts, Inc.'s Form 8-K, filed with the Commission onJanuary 3, 2018.(81) Incorporated by reference to Exhibit 14.1 to Empire Resorts, Inc.'s Current Report on Form 8-K/A, filedwith the Commission on November 16, 2011 (the "11/16/11 8-K").(82) Incorporated by reference to Exhibit 14.2 to the 11.16.11 8-K. 111SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized. EMPIRE RESORTS, INC. By: /s/ Ryan Eller Name: Ryan Eller Title:President and Chief Executive Officer Date:March 16, 2018Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated. Signature Title Date /s/ Ryan Eller President, Chief Executive Officer and Director(Principal Executive Officer) March 16, 2018Ryan Eller /s/ Jamie Sanko Chief Accounting Officer (Principal Financial and Accounting Officer) March 16, 2018Jamie Sanko /s/ Emanuel R. Pearlman Executive Chairman of the Board March 16, 2018Emanuel R. Pearlman /s/ Edmund Marinucci Director March 16, 2018Edmund Marinucci /s/ Keith L. Horn Director March 16, 2018Keith L. Horn /s/ Nancy A. Palumbo Director March 16, 2018Nancy A. Palumbo /s/ Gregg Polle Director March 16, 2018Gregg Polle /s/ Gerard Ewe Keng Lim Director March 16, 2018Gerard Ewe Keng Lim 112Index to Exhibits 23.1 Consent of Independent Registered Accounting Firm. 31.1 Section 302 Certification of Principal Executive Officer. 31.2 Section 302 Certification of Principal Financial Officer. 32.1 Section 906 Certification of Principal Executive Officer and Principal Financial Officer. 101 Interactive Data File (XBRL). 113Exhibit 21.1List of Subsidiaries of Empire Resorts, Inc.: Name State of Incorporation/FormationAlpha Monticello, Inc. DelawareAlpha Casino Management Inc. DelawareMonticello Raceway Management, Inc. New YorkMontreign Holding Company, LLC New YorkMontreign Operating Company, LLC New YorkEmpire Resorts Real Estate I, LLC New YorkEmpire Resorts Real Estate II, LLC New York Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the following Registration Statements:•Registration Statement (Form S-3 No. 333-214119) of Empire Resorts, Inc.,•Registration Statement (Form S-8 No. 333-215484) pertaining to the Empire Resorts, Inc. Executive Deferredcompensation Plan, and•Registration Statement (Form S-8 No. 333-208791) pertaining to the Empire Resorts, Inc. 2015 Equity Incentive Plan;of our reports dated March 16, 2018, with respect to the consolidated financial statements and schedule of Empire Resorts, Inc. andsubsidiaries and the effectiveness of internal control over financial reporting of Empire Resorts, Inc. and subsidiaries included in thisAnnual Report (Form 10-K) of Empire Resorts, Inc. for the year ended December 31, 2017./s/ Ernst & Young LLPPhiladelphia, PennsylvaniaMarch 16, 2018Exhibit 31.1CERTIFICATION PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002I, Ryan Eller, certify that:1.I have reviewed this annual report on Form 10-K of Empire Resorts, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: March 16, 2018/s/ Ryan Eller Ryan Eller Chief Executive Officer (Principal ExecutiveOfficer)Exhibit 31.2CERTIFICATION PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002I, Jamie M. Sanko, certify that:1.I have reviewed this annual report on Form 10-K of Empire Resorts, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: March 16, 2018/s/ Jamie M. Sanko Jamie M. Sanko Chief Accounting Officer (Principal Financial andAccounting Officer)Exhibit 32.1CERTIFICATION PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. §1350), the undersigned, Ryan Eller, Chief Executive Officer of Empire Resorts, Inc., aDelaware corporation (the “Company”), and Jamie M. Sanko, Chief Accounting Officer of the Company, do hereby certify, to his and her knowledge, that:The Annual Report Form 10-K for the year ended December 31, 2017 of the Company (the “Report”) fully complies with the requirements of section 13(a) or15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company. By: /s/ Ryan EllerMarch 16, 2018Ryan Eller Chief Executive Officer (Principal ExecutiveOfficer) By:/s/ Jamie M. SankoMarch 16, 2018Jamie M. Sanko Chief Accounting Officer (Principal Financial andAccounting Officer)A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signaturesthat appear in typed form within the electronic version of this written statement required by Section 906, has been provided to Empire Resorts, Inc. and willbe retained by Empire Resorts, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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