Business Operations	12 Months Ended
Dec. 31, 2012
Business Operations
Business Operations	NOTE 1—Business Operations References in this document to “we,” “us” and “our” mean Dover Downs Gaming & Entertainment, Inc. and/or its wholly owned subsidiaries, as appropriate. We are a premier gaming and entertainment resort destination whose operations consist of: · Dover Downs Casino — a 165,000-square foot casino complex featuring popular table games, including craps, roulette and card games such as blackjack, Spanish 21, baccarat, 3-card and pai gow poker, the latest in slot machine offerings, multi-player electronic table games, the Crown Royal poker room, a Race & Sports Book operation, the Dover Downs’ Fire & Ice Lounge, the Festival Buffet, Doc Magrogan’s Oyster House, Frankie’s Italian restaurant, as well as several bars, restaurants and four retail outlets; · Dover Downs Hotel and Conference Center — a 500 room AAA Four Diamond hotel with a full-service spa/salon, conference, banquet, ballroom and concert hall facilities; and · Dover Downs Raceway — a harness racing track with pari-mutuel wagering on live and simulcast horse races. All of our operations are located at our entertainment complex in Dover, the capital of the State of Delaware. Dover Downs Gaming & Entertainment, Inc. is a public holding company that has two wholly owned subsidiaries: Dover Downs, Inc. and Dover Downs Gaming Management Corp. Dover Downs, Inc. was incorporated in 1967 and began motorsports and harness racing operations in 1969. In June of 1994, legislation authorizing video lottery operations in the State of Delaware (the “State”) was adopted. Our casino operations began on December 29, 1995. As a result of several restructurings, Dover Downs, Inc. became a wholly owned subsidiary of Dover Motorsports, Inc. (formerly known as Dover Downs Entertainment, Inc.) (“DVD”), and became the operating entity for all of DVD’s gaming operations. Dover Downs Gaming & Entertainment, Inc. was incorporated in the State in December of 2001 as a wholly owned subsidiary of DVD. Effective March 31, 2002, DVD completed a tax-free spin-off of its gaming operations by contributing 100% of the issued and outstanding common stock of Dover Downs, Inc. to Dover Downs Gaming & Entertainment, Inc., and subsequently distributing 100% of our issued and outstanding common stock to DVD stockholders. Immediately following the spin-off, Dover Downs Gaming & Entertainment, Inc. became an independent publicly traded company. Dover Downs, Inc. is authorized to conduct video lottery, sports wagering, table game and internet gaming operations as one of three “Licensed Agents” under the Delaware State Lottery Code. Licensing, administration and control of gaming operations in Delaware is under the Delaware State Lottery Office and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement. Our license from the Delaware Harness Racing Commission (the “Commission”) to hold harness race meetings on our premises and to offer pari-mutuel wagering on live and simulcast horse races must be renewed on an annual basis. In order to maintain our gaming license, we are required to maintain our harness horse racing license. We have received an annual license from the Commission for the past 44 consecutive years and management believes that our relationship with the Commission remains good. Due to the nature of our business activities, we are subject to various federal, state and local regulations. As part of our license arrangements, we are subject to various taxes and fees which are subject to change by the Delaware legislature. Additional gaming venues have recently opened in Maryland, Pennsylvania and New Jersey. These new venues — particularly a large casino at Arundel Mills Mall in Maryland which opened in June 2012 — are having a significant adverse effect on our visitation numbers, our revenues and our profitability. Management has estimated that approximately 34% of our total gaming win comes from Maryland patrons and approximately 65% of our Capital Club® member gaming win comes from out of state patrons. On June 28, 2012, the State enacted the Delaware Gaming Competitiveness Act of 2012 (the “Act”), under which Delaware’s video lottery agents will be authorized to offer, through their websites, internet versions of their table games (including poker) and video lottery offerings. All games will remain under the control and operation of the Delaware Lottery. These internet gaming offerings capitalize on a recent United States Department of Justice ruling clarifying that wagering within a state’s boundaries does not violate the federal Wire Act. Internet lottery games will, at least initially, be offered solely to persons within the State of Delaware. This territorial limitation would not apply to gaming pursuant to an interstate compact. Internet gaming participation will be limited to persons who meet the age requirements for equivalent non-internet games. Revenues from the internet versions of table games and video lottery games will be distributed generally pursuant to the formula currently applicable to those games, with the exception that internet service provider costs will be deducted first, and the Delaware Lottery will retain the first $3.75 million of state-wide net proceeds. The Act also eliminates and restructures certain fees currently paid by video lottery agents to incentivize agents to make capital expenditures, spend on marketing and promotions, and make debt service payments. For the period July 1, 2011 to June 30, 2012, we paid a $1,540,000 gaming license fee which has been eliminated beginning July 1, 2012. For the period July 1, 2012 to June 30, 2013, we paid a $2,241,000 table game license fee which will be reduced beginning July 1, 2013. Based on current business levels, we estimate that this fee will be approximately $1,000,000 for the period July 1, 2013 to June 30, 2014. We anticipate that we will begin offering internet gaming in the third quarter of 2013 once the Delaware Lottery adopts regulations and secures contracts with internet service providers. In January 2010, the Delaware legislature authorized table games at the facilities of the State’s three video lottery agents. In June 2010, we opened our table game operations with a full complement of table games. The Crown Royal poker room opened in July 2010.

NOTE 1—Business Operations

References in this document to “we,” “us” and “our” mean Dover Downs Gaming & Entertainment, Inc. and/or its wholly owned subsidiaries, as appropriate.

We are a premier gaming and entertainment resort destination whose operations consist of:

· Dover Downs Casino — a 165,000-square foot casino complex featuring popular table games, including craps, roulette and card games such as blackjack, Spanish 21, baccarat, 3-card and pai gow poker, the latest in slot machine offerings, multi-player electronic table games, the Crown Royal poker room, a Race & Sports Book operation, the Dover Downs’ Fire & Ice Lounge, the Festival Buffet, Doc Magrogan’s Oyster House, Frankie’s Italian restaurant, as well as several bars, restaurants and four retail outlets;

· Dover Downs Hotel and Conference Center — a 500 room AAA Four Diamond hotel with a full-service spa/salon, conference, banquet, ballroom and concert hall facilities; and

· Dover Downs Raceway — a harness racing track with pari-mutuel wagering on live and simulcast horse races.

All of our operations are located at our entertainment complex in Dover, the capital of the State of Delaware.

Dover Downs Gaming & Entertainment, Inc. is a public holding company that has two wholly owned subsidiaries: Dover Downs, Inc. and Dover Downs Gaming Management Corp. Dover Downs, Inc. was incorporated in 1967 and began motorsports and harness racing operations in 1969. In June of 1994, legislation authorizing video lottery operations in the State of Delaware (the “State”) was adopted. Our casino operations began on December 29, 1995. As a result of several restructurings, Dover Downs, Inc. became a wholly owned subsidiary of Dover Motorsports, Inc. (formerly known as Dover Downs Entertainment, Inc.) (“DVD”), and became the operating entity for all of DVD’s gaming operations.

Dover Downs Gaming & Entertainment, Inc. was incorporated in the State in December of 2001 as a wholly owned subsidiary of DVD. Effective March 31, 2002, DVD completed a tax-free spin-off of its gaming operations by contributing 100% of the issued and outstanding common stock of Dover Downs, Inc. to Dover Downs Gaming & Entertainment, Inc., and subsequently distributing 100% of our issued and outstanding common stock to DVD stockholders. Immediately following the spin-off, Dover Downs Gaming & Entertainment, Inc. became an independent publicly traded company.

Dover Downs, Inc. is authorized to conduct video lottery, sports wagering, table game and internet gaming operations as one of three “Licensed Agents” under the Delaware State Lottery Code. Licensing, administration and control of gaming operations in Delaware is under the Delaware State Lottery Office and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement.

Our license from the Delaware Harness Racing Commission (the “Commission”) to hold harness race meetings on our premises and to offer pari-mutuel wagering on live and simulcast horse races must be renewed on an annual basis. In order to maintain our gaming license, we are required to maintain our harness horse racing license. We have received an annual license from the Commission for the past 44 consecutive years and management believes that our relationship with the Commission remains good.

Due to the nature of our business activities, we are subject to various federal, state and local regulations. As part of our license arrangements, we are subject to various taxes and fees which are subject to change by the Delaware legislature.

Additional gaming venues have recently opened in Maryland, Pennsylvania and New Jersey. These new venues — particularly a large casino at Arundel Mills Mall in Maryland which opened in June 2012 — are having a significant adverse effect on our visitation numbers, our revenues and our profitability. Management has estimated that approximately 34% of our total gaming win comes from Maryland patrons and approximately 65% of our Capital Club® member gaming win comes from out of state patrons.

On June 28, 2012, the State enacted the Delaware Gaming Competitiveness Act of 2012 (the “Act”), under which Delaware’s video lottery agents will be authorized to offer, through their websites, internet versions of their table games (including poker) and video lottery offerings. All games will remain under the control and operation of the Delaware Lottery. These internet gaming offerings capitalize on a recent United States Department of Justice ruling clarifying that wagering within a state’s boundaries does not violate the federal Wire Act.

Internet lottery games will, at least initially, be offered solely to persons within the State of Delaware. This territorial limitation would not apply to gaming pursuant to an interstate compact. Internet gaming participation will be limited to persons who meet the age requirements for equivalent non-internet games.

Revenues from the internet versions of table games and video lottery games will be distributed generally pursuant to the formula currently applicable to those games, with the exception that internet service provider costs will be deducted first, and the Delaware Lottery will retain the first $3.75 million of state-wide net proceeds. The Act also eliminates and restructures certain fees currently paid by video lottery agents to incentivize agents to make capital expenditures, spend on marketing and promotions, and make debt service payments. For the period July 1, 2011 to June 30, 2012, we paid a $1,540,000 gaming license fee which has been eliminated beginning July 1, 2012. For the period July 1, 2012 to June 30, 2013, we paid a $2,241,000 table game license fee which will be reduced beginning July 1, 2013. Based on current business levels, we estimate that this fee will be approximately $1,000,000 for the period July 1, 2013 to June 30, 2014.

We anticipate that we will begin offering internet gaming in the third quarter of 2013 once the Delaware Lottery adopts regulations and secures contracts with internet service providers.

In January 2010, the Delaware legislature authorized table games at the facilities of the State’s three video lottery agents. In June 2010, we opened our table game operations with a full complement of table games. The Crown Royal poker room opened in July 2010.