10-Q

United States

Securities and Exchange Commission

Washington, D.C.  20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2014

Commission file number      1-16791

Dover Downs Gaming & Entertainment, Inc.

(Exact name of registrant as specified in its charter)

Delaware	51-0414140
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification No.)

1131 North DuPont Highway, Dover, Delaware 19901

(Address of principal executive offices)

(302) 674-4600

(Registrant’s telephone number, including area code)

N/A

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

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

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

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

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

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

As of October 31, 2014, the number of shares of each class of the registrant’s common stock outstanding is as follows:

Common Stock -	17,880,650 shares
Class A Common Stock -	14,870,673 shares

Part I — Financial Information

Item 1. Financial Statements

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

AND COMPREHENSIVE INCOME (LOSS)

In Thousands, Except Per Share Amounts

(Unaudited)

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2014			2013			2014			2013
Revenues:
Gaming	$	41,349		$	43,736		$	120,415		$	132,216
Other operating	6,639			6,337			19,256			18,423
	47,988			50,073			139,671			150,639
Expenses:
Gaming	38,260			41,105			113,626			123,530
Other operating	4,638			4,407			13,691			13,039
General and administrative	1,468			1,354			4,284			4,310
Depreciation	2,196			2,378			6,764			7,411
	46,562			49,244			138,365			148,290
Operating earnings	1,426			829			1,306			2,349
Interest expense	(412		)	(460		)	(1,312		)	(1,267		)
Earnings (loss) before income taxes	1,014			369			(6		)	1,082
Income tax expense	(315		)	(146		)	(184		)	(651		)
Net earnings (loss)	699			223			(190		)	431
Change in pension net actuarial loss and prior service cost, net of income taxes	1			15			3			45
Unrealized (loss) gain on available-for-sale securities, net of income taxes	(5		)	4			1			7
Comprehensive income (loss)	$	695		$	242		$	(186	)	$	483
Net earnings (loss) per common share:
Basic	$	0.02		$	0.01		$	(0.01	)	$	0.01
Diluted	$	0.02		$	0.01		$	(0.01	)	$	0.01

The Notes to the Consolidated Financial Statements are an integral part of these consolidated financial statements.

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DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

In Thousands, Except Share and Per Share Amounts

(Unaudited)

	September 30,			December 31,
	2014			2013
ASSETS
Current assets:
Cash	$	11,075		$	12,950
Accounts receivable	3,500			4,248
Due from State of Delaware	8,568			8,225
Inventories	1,932			1,957
Prepaid expenses and other	3,398			2,432
Receivable from Dover Motorsports, Inc.	29			—
Income taxes receivable	—			138
Deferred income taxes	1,296			1,268
Total current assets	29,798			31,218
Property and equipment, net	154,469			160,570
Other assets	883			932
Total assets	$	185,150		$	192,720
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,087		$	4,480
Purses due horsemen	8,607			7,978
Accrued liabilities	10,552			10,513
Payable to Dover Motorsports, Inc.	—			4
Income taxes payable	322			—
Deferred revenue	450			463
Revolving line of credit	40,500			47,040
Total current liabilities	63,518			70,478
Liability for pension benefits	3,013			3,353
Deferred income taxes	2,304			2,725
Total liabilities	68,835			76,556
Commitments and contingencies (see Notes to the Consolidated Financial Statements)
Stockholders’ equity:
Preferred stock, $0.10 par value; 1,000,000 shares authorized; shares issued and outstanding: none	—			—
Common stock, $0.10 par value; 74,000,000 shares authorized; shares issued and outstanding: 17,880,650 and 17,736,479, respectively	1,788			1,774
Class A common stock, $0.10 par value; 50,000,000 shares authorized; shares issued and outstanding: 14,870,673 and 14,870,673, respectively	1,487			1,487
Additional paid-in capital	4,986			4,663
Retained earnings	109,145			109,335
Accumulated other comprehensive loss	(1,091		)	(1,095		)
Total stockholders’ equity	116,315			116,164
Total liabilities and stockholders’ equity	$	185,150		$	192,720

The Notes to the Consolidated Financial Statements are an integral part of these consolidated financial statements.

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DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In Thousands

(Unaudited)

	Nine Months Ended  September 30,
	2014			2013
Operating activities:
Net (loss) earnings	$	(190	)	$	431
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Depreciation	6,764			7,411
Amortization of credit facility origination fees	106			140
Stock-based compensation	441			525
Deferred income taxes	(435		)	(333		)
Gain from insurance settlement	—			(22		)
Changes in assets and liabilities:
Accounts receivable	748			405
Due from State of Delaware	(343		)	407
Inventories	25			(112		)
Prepaid expenses and other	(934		)	(799		)
Receivable from/payable to Dover Motorsports, Inc.	(33		)	(12		)
Accounts payable	(1,393		)	(424		)
Purses due horsemen	629			(523		)
Accrued liabilities	39			(503		)
Income taxes payable/receivable	443			262
Deferred revenue	(13		)	(9		)
Other liabilities	(335		)	(20		)
Net cash provided by operating activities	5,519			6,824
Investing activities:
Capital expenditures	(640		)	(1,283		)
Insurance settlement proceeds	—			74
Purchase of available-for-sale securities	(28		)	(27		)
Proceeds from sale of available-for-sale securities	26			25
Net cash used in investing activities	(642		)	(1,211		)
Financing activities:
Borrowings from revolving line of credit	81,470			56,140
Repayments of revolving line of credit	(88,010		)	(62,140		)
Repurchase of common stock	(104		)	(144		)
Credit facility fees	(108		)	(70		)
Net cash used in financing activities	(6,752		)	(6,214		)
Net decrease in cash	(1,875		)	(601		)
Cash, beginning of period	12,950			14,993
Cash, end of period	$	11,075		$	14,392
Supplemental information:
Interest paid	$	1,226		$	1,106
Income tax payments	$	175		$	722

The Notes to the Consolidated Financial Statements are an integral part of these consolidated financial statements.

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DOVER DOWNS GAMING & ENTERTAINMENT, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — Basis of Presentation

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

The accompanying consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and U.S. generally accepted accounting principles, and accordingly do not include all of the information and disclosures required for audited financial statements.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our latest Annual Report on Form 10-K filed on March 7, 2014.  In the opinion of management, these consolidated financial statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods presented.  Operating results for the three and nine-month periods ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

NOTE 2 - Business Operations

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

In February 2013, we opened a Herschel’s Famous 34 Pub & Grill in Athens, Georgia, which has since been rebranded as Herschel’s 34 Chicken & Ribs Kitchen.  Herschel’s 34 is a 110-seat sports-themed restaurant owned and operated by us on approximately 4,100 square feet of leased property.  We have license rights to the name and likeness of former college and professional football star Herschel Walker for restaurant operations.

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 45 consecutive years and management believes that our relationship with the Commission remains good.

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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.

In recent years, additional gaming venues have opened in Maryland, Pennsylvania and New Jersey and more are expected to open. These venues are having a significant adverse effect on our visitation numbers, our revenues and our profitability.  Management has estimated that approximately 30% of our gaming win comes from Maryland patrons and approximately 64% of our Capital Club® member gaming win comes from out of state patrons.

In June 2012, the State enacted the Delaware Gaming Competitiveness Act of 2012 (the “Act”), under which Delaware’s video lottery agents are authorized to offer, through their websites, internet versions of their table games (including poker) and video lottery offerings.  All games remain under the control and operation of the Delaware Lottery.  Revenues from the internet versions of table games and video lottery games are distributed generally pursuant to the formula currently applicable to those games physically located within our casino, with the exception that internet service provider costs are deducted first, and the Delaware Lottery retains the first $3.75 million of state-wide net proceeds.  We began offering internet gaming in the fourth quarter of 2013; to date operating results from internet gaming have not been material.  Internet lottery games are, at least initially, offered solely to persons located within the State of Delaware.  This territorial limitation would not apply to gaming pursuant to an interstate compact, such as the one announced in February 2014 between Delaware and Nevada.  Internet gaming participation is limited to persons who meet the age requirements for equivalent non-internet games.

The Act also eliminated the gaming license fee and restructured the table game license fee currently paid by video lottery agents to incentivize agents to make capital expenditures, spend on marketing and promotions, and make debt service payments.  In June 2012, we paid a $2,241,000 table game license fee, which was for the period July 1, 2012 to June 30, 2013.  This fee decreased to $1,017,000 for the period July 1, 2013 to June 30, 2014 and was paid in June 2013.  The fee increased slightly to $1,071,000 for the period July 1, 2014 to June 30, 2015 and was paid in June 2014.

In July 2013, the State enacted a bond and capital improvements bill which appropriated $8,000,000 to the Department of Finance to be used to offset increases in vendor costs that the three Delaware video lottery agents would otherwise pay for the period July 1, 2013 to June 30, 2014.  The State used $875,000 of the amount appropriated to offset increases in our vendor costs.  Additionally, the bill created a Lottery & Gaming Study Commission responsible for examining the competitive marketplace confronting the Delaware gaming industry, including the business performance and business plans of existing lottery agents, the marketing efforts and investments made by Delaware video lottery agents, and the division of revenue from the video lottery, sports lottery, table games and internet gaming.  The commission’s findings and recommendations were released in March 2014 and included: the State sharing certain vendor costs that the three Delaware video lottery agents currently pay associated with slot machines; reducing the State’s share of table game win; and eliminating the annual table game license fee.  On July 1, 2014, the Delaware legislature approved the vendor cost sharing recommendation.  The State estimates this will provide $9,900,000 to be used toward vendor costs for the three Delaware video lottery agents for the fiscal year July 1, 2014 to June 30, 2015.  This is being allocated among the three video lottery agents based on their relative portion of industry-wide slot revenues.  For the third quarter of 2014, our video lottery vendor costs were reduced by approximately $1,000,000 as a result of the cost sharing arrangement.  The recommendations to reduce the State’s share of gross table game revenues and eliminate the table game license fee were not part of the legislation that was passed.  The commission reconvened in September 2014 to consider previous and make further recommendations relative to the gaming industry.

Even with partial legislative relief, we may be unable to refinance or extend the maturity of our credit facility on favorable terms or may default on our obligations, we may be unable to allocate sufficient resources to marketing and promotions in order to compete effectively in the regional marketplace, we may be unable to allocate sufficient resources to maintaining our facility, and we may be required to take other actions in order to manage expenses - especially with respect to operations that have operated at a loss, such as table games and internet gaming.  Such actions could adversely affect our business, financial condition, operating results and cash flow.

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NOTE 3 - Summary of Significant Accounting Policies

Basis of consolidation and presentation—The consolidated financial statements include the accounts of Dover Downs Gaming & Entertainment, Inc. and its wholly owned subsidiaries.  Intercompany transactions and balances have been eliminated.

Accounts receivable—Accounts receivable are stated at their estimated collectible amount and primarily consist of casino, hotel and other receivables which arise in the normal course of business.  We issue credit in the form of “markers” to approved casino customers who are investigated as to their credit worthiness.

Investments—Investments, which consist of mutual funds, are classified as available-for-sale and reported at fair-value in other assets in our consolidated balance sheets.  Changes in fair value are reported in other comprehensive income (loss).  See NOTE 6 — Stockholders’ Equity and NOTE 7 — Fair Value Measurements for further discussion.

Property and equipment—Property and equipment is stated at cost.  Depreciation is provided for financial reporting purposes using the straight-line method over the asset’s estimated useful life.  Accumulated depreciation was $122,373,000 and $115,790,000 as of September 30, 2014 and December 31, 2013, respectively.

We perform reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.  An impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its fair value.  Generally, fair value will be determined using valuation techniques such as the present value of future cash flows.

Income taxes—Deferred income taxes are provided on all differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements based upon enacted statutory tax rates in effect at the balance sheet date.  Tax years after 2010 remain open to examination for federal and state income tax purposes.

Point loyalty program—We currently have a point loyalty program for our customers which allows them to earn points based on the volume of their gaming activity.  All reward points earned by customers are expensed in the period they are earned.  The estimated amount of points redeemable for cash is recorded as a reduction of gaming revenue and the estimated amount of points redeemable for services and merchandise is recorded as gaming expense.  In determining the amount of the liability, which was $1,857,000 and $1,930,000, respectively, at September 30, 2014 and December 31, 2013, we estimate a redemption rate, a cost of rewards to be offered and the mix of cash, goods and services for which reward points will be redeemed.  We use historical data to estimate those amounts.

Revenue and expense recognition—Gaming revenues represent (i) the net win from slot machine, table games, internet gaming and sports wagering and (ii) commissions from pari-mutuel wagering.  Other operating revenues consist of hotel rooms revenue, food and beverage sales and other miscellaneous income.  Revenues do not include the retail amount of hotel rooms, food and beverage and other miscellaneous goods and services provided without charge to customers as promotional items of $4,588,000 and $13,661,000, and $5,283,000 and $15,251,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively.  The estimated direct cost of providing these items has been charged to the casino through interdepartmental allocations and is included in gaming expenses in the consolidated statements of earnings.

For the casino operations, the difference between the amount wagered by bettors and the amount paid out to bettors is referred to as the win.  The win is included in the amount recorded in our consolidated financial statements as gaming revenue.  The Delaware State Lottery Office sweeps the win from the casino operations, collects the State’s share of the win and the amount due to the vendors under contract with the State who provide the slot machines and associated computer systems, collects the amount allocable to purses for harness horse racing and remits the remainder to us as our commission for acting as a Licensed Agent.  Gaming expenses include the amounts collected by the State (i) for the State’s share of the win, (ii) for remittance to the providers of the slot machines and associated computer systems, and (iii) for harness horse racing purses.  We recognize revenues from sports wagering

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commissions when the event occurs.  We recognize revenues from pari-mutuel commissions earned from live harness horse racing and importing of simulcast signals from other race tracks when the race occurs. Revenues from hotel rooms, food and beverage sales and other miscellaneous income are recognized at the time the service is provided.  Amounts received in advance for hotel rooms, convention bookings and advance ticket sales are recorded as deferred revenue until the services are provided to the customer, at which point revenue is recognized.

Advertising costs—The cost of general advertising is charged to operations as incurred.  Advertising expenses were $663,000 and $1,705,000, and $734,000 and $1,757,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively.

Net earnings (loss) per common share—Nonvested share-based payment awards that include rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating securities, and the two-class method of computing basic and diluted net earnings (loss) per common share (“EPS”)  is applied for all periods presented.  The following table sets forth the computation of EPS (in thousands, except per share amounts):

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2014		2013		2014			2013
Net earnings (loss) per common share — basic:
Net earnings (loss)	$	699	$	223	$	(190	)	$	431
Allocation to nonvested restricted stock awards	17		6		—			11
Net earnings (loss) available to common stockholders	$	682	$	217	$	(190	)	$	420
Weighted-average shares outstanding	31,962		31,849		31,961			31,848
Net earnings (loss) per common share — basic	$	0.02	$	0.01	$	(0.01	)	$	0.01
Net earnings (loss) per common share — diluted:
Net earnings (loss)	$	699	$	223	$	(190	)	$	431
Allocation to nonvested restricted stock awards	17		6		—			11
Net earnings (loss) available to common stockholders	$	682	$	217	$	(190	)	$	420
Weighted-average shares and dilutive shares outstanding	31,962		31,849		31,961			31,848
Net earnings (loss) per common share — diluted	$	0.02	$	0.01	$	(0.01	)	$	0.01

There were no options outstanding during the three and nine-month periods ended September 30, 2014 or 2013.

Accounting for stock-based compensation—We recorded total stock-based compensation expense for our restricted stock awards of $140,000 and $441,000, and $158,000 and $525,000 as general and administrative expenses for the three and nine-month periods ended September 30, 2014 and 2013, respectively.  We recorded income tax benefit (expense) of $56,000 and ($6,000), and $64,000 and $5,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively, related to our restricted stock awards.

Use of estimates—The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events.  These estimates and the underlying assumptions affect the reported amounts of assets and liabilities, disclosures about contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  These estimates and assumptions are based on our best estimates and judgment.  We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances.  We adjust such estimates and assumptions when facts and circumstances dictate.  Illiquid credit markets, volatile equity markets and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions.  As future events and their effects cannot be determined with precision, actual results could differ from these estimates.  Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

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NOTE 4 — Credit Facility

On August 14, 2014, we modified our credit agreement with our bank group.  The credit facility was modified to: extend the maturity date to September 30, 2015; provide the bank group with a mortgage on and security interest in all real and personal property owned by our wholly owned subsidiary Dover Downs, Inc.; adjust the maximum borrowing limit to $55,000,000 as of August 14, 2014, to $50,000,000 as of December 31, 2014 and to $47,500,000 as of June 30, 2015; and modify the required maximum ratio of funded debt to earnings before interest, taxes, depreciation and amortization (the “leverage ratio”) and the minimum consolidated earnings before interest, taxes, depreciation and amortization requirement.  Interest is based upon LIBOR plus a margin that varies between 150 and 350 basis points (325 basis points at September 30, 2014) depending on the leverage ratio.  Material adverse changes in our results of operations could impact our ability to satisfy these requirements.  In addition, the credit agreement includes a material adverse change clause and prohibits the payment of dividends.  The credit facility provides for seasonal funding needs, capital improvements and other general corporate purposes.  At September 30, 2014, there was $40,500,000 outstanding at a weighted average interest rate of 3.41% and $14,500,000 was available pursuant to the facility.  Additionally, we were in compliance with all terms of the facility at September 30, 2014 and we expect to be in compliance with the financial covenants and all other covenants for all measurement periods through September 30, 2015, the expiration date of the facility.

The credit facility is classified as a current liability as of September 30, 2014 in our consolidated balance sheets as the facility expires on September 30, 2015.  We will seek to refinance or extend the maturity of this obligation prior to its expiration date; however, there is no assurance that we will be able to execute this refinancing or extension or, if we are able to refinance or extend this obligation, that the terms of such refinancing or extension would be as favorable as the terms of our existing credit facility.  These factors raise substantial doubt about our ability to continue as a going concern.  The accompanying financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 5 — Pension Plans

We maintain a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011.  All of our full time employees were eligible to participate in this qualified pension plan.  Benefits provided by our qualified pension plan were based on years of service and employees’ remuneration over their term of employment.  We also maintain a non-qualified, non-contributory defined benefit pension plan, the excess plan, for certain employees that has been frozen since July 2011.  This excess plan provided benefits that would otherwise be provided under the qualified pension plan but for maximum benefit and compensation limits applicable under federal tax law.  The cost associated with the excess plan is determined using the same actuarial methods and assumptions as those used for our qualified pension plan. The assets for the excess plan aggregate $280,000 and $269,000 as of September 30, 2014 and December 31, 2013, respectively, and are recorded in other assets in our consolidated balance sheets (see NOTE 7 — Fair Value Measurements).

On June 15, 2011, we decided to freeze participation and benefit accruals under our pension plans, primarily to reduce some of the impact on earnings and volatility in cash flows that can accompany the maintenance of a defined benefit plan.  The freeze was effective July 31, 2011.  Compensation earned by employees up to July 31, 2011 is used for purposes of calculating benefits under our pension plan with no future benefit accruals after this date.  Participants as of July 31, 2011 continue to earn vesting credit with respect to their frozen accrued benefits as they continue to work.

The components of net periodic pension income for our defined benefit pension plans are as follows:

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2014			2013			2014			2013
Interest cost	$	217,000		$	213,000		$	651,000		$	639,000
Expected return on plan assets	(276,000		)	(246,000		)	(827,000		)	(740,000		)
Recognized net actuarial loss	2,000			25,000			5,000			75,000
	$	(57,000	)	$	(8,000	)	$	(171,000	)	$	(26,000	)

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We contributed $95,000 and $140,000 to our defined benefit pension plans during the three and nine-month periods ended September 30, 2014.  We do not expect to make any further contributions to our defined benefit pension plans in 2014.  We did not contribute to our defined benefit pension plans in 2013.

Effective December 1, 2012, we created a new non-elective, non-qualified supplemental executive retirement plan (“SERP”) in connection with the freezing of our pension plan.  Its purpose is to provide deferred compensation to certain highly compensated employees that approximates the value of benefits lost by the freezing of the pension plan which are not offset by our enhanced matching contribution in our 401(k)  plan.  The SERP is a discretionary defined contribution plan and contributions made to the SERP in any given year are not guaranteed and will be at the sole discretion of our Compensation and Stock Incentive Committee.  During the three and nine-month periods ended September 30, 2014 and 2013, we recorded expenses of $30,000 and $90,000, and $30,000 and $90,000, respectively, related to the SERP.  During the nine months ended September 30, 2014 and 2013, we contributed $115,000 and $107,000 to the plan, respectively.  The liability for pension benefits was $88,000 and $113,000 as of September 30, 2014 and December 31, 2013, respectively.

We maintain a defined contribution 401(k) plan which permits participation by substantially all employees.  Our matching contributions to the 401(k) plan were $223,000 and $615,000, and $198,000 and $620,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively.

NOTE 6 — Stockholders’ Equity

Changes in the components of stockholders’ equity are as follows (in thousands, except per share amounts):

	Common  Stock			Class A Common  Stock		Additional Paid-in  Capital			Retained  Earnings			Accumulated Other Comprehensive Loss
Balance at December 31, 2013	$	1,774		$	1,487	$	4,663		$	109,335		$	(1,095	)
Net loss	—			—		—			(190		)	—
Issuance of nonvested stock awards, net of forfeitures	21			—		(21		)	—			—
Stock-based compensation	—			—		441			—			—
Change in net actuarial loss and prior service cost, net of income tax expense of $2	—			—		—			—			3
Unrealized gain on available-for-sale securities, net of income tax expense of $1	—			—		—			—			1
Repurchase and retirement of common stock	(7		)	—		(97		)	—			—
Balance at September 30, 2014	$	1,788		$	1,487	$	4,986		$	109,145		$	(1,091	)

As of September 30, 2014 and December 31, 2013, accumulated other comprehensive loss consists of the following:

	September 30, 2014			December 31, 2013
Net actuarial loss and prior service cost not yet recognized in net periodic benefit cost, net of income tax benefit of $770,000 and $772,000, respectively	$	(1,120,000	)	$	(1,123,000	)
Accumulated unrealized gain on available-for-sale securities, net of income tax expense of $21,000 and $20,000, respectively	29,000			28,000
Accumulated other comprehensive loss	$	(1,091,000	)	$	(1,095,000	)

On October 28, 2014, we were notified by the New York Stock Exchange (“NYSE”) that the average closing price of our common stock had fallen below $1.00 per share over a period of 30 consecutive trading days, which is the minimum average share price for continued listing on the NYSE.  Under NYSE rules, we have six months following receipt of the notification, subject to possible extension, to regain compliance with the minimum share price requirement or be subject to delisting.  We will monitor the price for our common stock and will consider available options to resolve the deficiency and regain compliance with the NYSE listing standards.  If we are not able to regain compliance, our stock will be delisted from trading on the NYSE.  This would result in the need to

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find another market on which our stock can be listed or cause our stock to cease trading on an active market, which could result in a reduction in the liquidity for our stock and a reduction in demand for our stock.

On January 23, 2013, our Board of Directors suspended the quarterly dividend.  In addition, our credit facility prohibits the payment of dividends.  See NOTE 4 — Credit Facility.

On October 23, 2002, our Board of Directors authorized the repurchase of up to 3,000,000 shares of our outstanding common stock.  The purchases may be made in the open market or in privately negotiated transactions as conditions warrant.  The repurchase authorization has no expiration date, does not obligate us to acquire any specific number of shares and may be suspended at any time.  No purchases of our equity securities were made pursuant to this authorization during the first nine months of 2014 or 2013.  At September 30, 2014, we had remaining repurchase authority of 1,653,333 shares.  At present we are not permitted to make such purchases under our credit facility.

We have a stock incentive plan which provides for the grant of up to 2,000,000 shares of common stock to our officers and key employees through stock options and/or awards valued in whole or in part by reference to our common stock, such as nonvested restricted stock awards.  Under the plan, nonvested restricted stock vests an aggregate of twenty percent each year beginning on the second anniversary date of the grant.  The aggregate market value of the nonvested restricted stock at the date of issuance is being amortized on a straight-line basis over the six-year period.  We granted 211,000 and 205,500 stock awards under this plan during the nine months ended September 30, 2014 and 2013, respectively.  As of September 30, 2014, there were 563,975 shares available for granting options or stock awards.

During the nine months ended September 30, 2014 and 2013, we purchased and retired 66,829 and 61,869 shares of our outstanding common stock for $104,000 and $144,000, respectively.  These purchases were made from employees in connection with the vesting of restricted stock awards under our stock incentive plan and were not pursuant to the aforementioned repurchase authorization.  Since the vesting of a restricted stock award is a taxable event to our employees for which income tax withholding is required, the plan allows employees to surrender to us some of the shares that would otherwise have vested in satisfaction of their tax liability.  The surrender of these shares is treated by us as a purchase of the shares.

NOTE 7 — Fair Value Measurements

Our financial instruments are classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following table summarizes the valuation of our financial instrument pricing levels as of September 30, 2014 and December 31, 2013:

	Total		Level 1		Level 2		Level 3
September 30, 2014
Available-for-sale securities	$	280,000	$	280,000	$	—	$	—
December 31, 2013
Available-for-sale securities	$	269,000	$	269,000	$	—	$	—

Our investments in available-for-sale securities consist of mutual funds.  These investments are included in other assets on our consolidated balance sheets.

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The carrying amounts of other financial instruments reported in our consolidated balance sheets for current assets and current liabilities approximates their fair values because of the short maturity of these instruments.

At September 30, 2014 and December 31, 2013, there was $40,500,000 and $47,040,000, respectively, outstanding under our revolving credit agreement.  The borrowings under our revolving credit agreement bear interest at the variable rate described in NOTE 4 — Credit Facility and therefore we believe approximate fair value.

NOTE 8 - Related Party Transactions

During the three and nine-month periods ended September 30, 2014 and 2013, we allocated costs of $473,000 and $1,465,000, and $496,000 and $1,416,000, respectively to DVD, a company related through common ownership, for certain administrative and operating services, including leased space.  DVD allocated certain administrative and operating service costs of $35,000 and $194,000, and $45,000 and $180,000, respectively, to us for the three and nine-month periods ended September 30, 2014 and 2013.  The allocations were based on an analysis of each company’s share of the costs.  In connection with DVD’s 2014 and 2013 NASCAR event weekends at Dover International Speedway, we provided certain services, primarily catering, for which DVD was invoiced $353,000 and $693,000, and $400,000 and $793,000 during the three and nine-month periods ended September 30, 2014 and 2013, respectively.  Additionally, DVD invoiced us $94,000 and $193,000, and $119,000 and $271,000, during the three and nine-month periods ended September 30, 2014 and 2013, respectively for tickets to DVD’s NASCAR event weekends at Dover International Speedway.  As of September 30, 2014 and December 31, 2013, our consolidated balance sheets included a $29,000 receivable from and a $4,000 payable to DVD, respectively, for the aforementioned items.  These items were settled in October 2014 and January of 2014, respectively.  The net costs incurred by each company for these services are not necessarily indicative of the costs that would have been incurred if the companies had been unrelated entities and/or had otherwise independently managed these functions; however, management believes that these costs are reasonable.

Prior to our spin-off from DVD in 2002, both companies shared certain real property in Dover, Delaware.  At the time of the spin-off, some of this real property was transferred to us to ensure that the real property holdings of each company was aligned with its past uses and future business needs.  During our harness racing season, we have historically used the 5/8-mile harness racing track that is located on DVD’s property and is on the inside of its one-mile motorsports superspeedway.  In order to continue this historic use, DVD granted a perpetual easement to the harness track to us at the time of the spin-off.  This perpetual easement allows us to have exclusive use of the harness track during the period beginning November 1 of each year and ending April 30 of the following year, together with set up and tear down rights for the two weeks before and after such period.  The easement requires that we maintain the harness track but does not require the payment of any rent.

Various easements and agreements relative to access, utilities and parking have also been entered into between us and DVD relative to our respective Dover, Delaware facilities.  DVD pays rent to us for the lease of its principal executive office space.  We also allow DVD to use our indoor grandstands in connection with DVD’s two annual motorsports weekends.  We do not assess rent for this nominal use and may discontinue the use at our discretion.

Henry B. Tippie, Chairman of our Board of Directors, controls in excess of fifty percent of our voting power.  Mr. Tippie’s voting control emanates from his direct and indirect holdings of common stock and Class A common stock, from his status as trustee of the RMT Trust, our largest stockholder, and from certain shares as to which he has voting rights pursuant to a voting agreement with R. Randall Rollins, one of our directors.  This means that Mr. Tippie has the ability to determine the outcome of our election of directors and to determine the outcome of many significant corporate transactions, many of which only require the approval of a majority of our voting power.

Patrick J. Bagley, Timothy R. Horne, Denis McGlynn, Jeffrey W. Rollins, R. Randall Rollins, Richard K. Struthers and Henry B. Tippie are all Directors of ours and DVD.  Denis McGlynn is the President and Chief Executive Officer of both companies, Klaus M. Belohoubek is the Senior Vice President — General Counsel and Secretary of both companies and Timothy R. Horne is the Senior Vice President — Finance and Chief Financial Officer of both companies.  Mr. Tippie controls in excess of fifty percent of the voting power of DVD.

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NOTE 9 — Commitments and Contingencies

We are a party to ordinary routine litigation incidental to our business.  Management does not believe that the resolution of any of these matters is likely to have a material adverse effect on our results of operations, financial position or cash flows.

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

The following discussion is based upon and should be read together with the consolidated financial statements and notes thereto included elsewhere in this document.

Dover Downs Gaming & Entertainment, Inc. is 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 gaming operations are located at our entertainment complex in Dover, the capital of the State of Delaware.

In February 2013, we opened a Herschel’s Famous 34 Pub & Grill in Athens, Georgia, which has since been rebranded as Herschel’s 34 Chicken & Ribs Kitchen.  Herschel’s 34 is a 110-seat sports-themed restaurant owned and operated by us on approximately 4,100 square feet of leased property.  We have license rights to the name and likeness of former college and professional football star Herschel Walker for restaurant operations.

On June 28, 2012, the State enacted the Delaware Gaming Competitiveness Act of 2012 (the “Act”), under which Delaware’s video lottery agents are authorized to offer, through their websites, internet versions of their table games (including poker) and video lottery offerings.  All games remain under the control and operation of the Delaware Lottery.  We began offering internet gaming in the fourth quarter of 2013; to date operating results from internet gaming have not been material.

Approximately 90% of our revenue is gaming revenue.  Several factors contribute to the win for any gaming company, including, but not limited to:

·Proximity to major population bases,

·Competition in the market,

·The quantity and types of slot machines and table games available,

·The quality of the physical property,

·Other amenities offered on site,

·Customer service levels,

·Marketing programs, and

·General economic conditions.

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Our entertainment complex is located in Dover, the capital of the State of Delaware.  We draw patrons from several major metropolitan areas. Philadelphia, Baltimore and Washington, D.C. are all within a two hour drive.  According to the 2010 United States Census, approximately 36.8 million people live within 150 miles of our complex.  There are significant barriers to entry related to the gaming business in Delaware.  By law, currently only the three existing horse racing facilities in the State are allowed to have a video lottery gaming license.  In recent years, additional gaming venues have opened in Maryland, Pennsylvania and New Jersey and more are expected to open.  These venues are having a significant adverse effect on our visitation numbers, our revenues and our profitability.  Our property is similar to properties found in the country’s largest gaming markets.  Our luxury hotel is the only casino-hotel in Delaware, providing a strong marketing tool, especially to higher-end players.  We also utilize our slot marketing system to allow for more efficient marketing programs and the highest levels of customer service.  Our facility offers approximately 35,000 square feet of conference space — the most space of any hotel in Delaware.

Because all of our gaming operations are located at one facility, we face the risk of increased competition from the legalization of new or additional gaming venues.  We have therefore focused on creating the region’s premier gaming destination and building and rewarding customer loyalty through innovative marketing efforts, unparalleled customer service and a variety of amenities.

Results of Operations

Gaming revenues represent (i) the net win from slot machine, table games, internet gaming and sports wagering and (ii) commissions from pari-mutuel wagering.  Other operating revenues consist of hotel rooms revenue, food and beverage sales and other miscellaneous income.  Revenues do not include the retail amount of hotel rooms, food and beverage and other miscellaneous goods and services provided without charge to customers as promotional items.  The estimated direct cost of providing these items has been charged to the casino through interdepartmental allocations and is included in gaming expenses in the consolidated statement of operations.

For the casino operations, the difference between the amount wagered by bettors and the amount paid out to bettors is referred to as the win.  The win is included in the amount recorded in our consolidated financial statements as gaming revenue.  The Delaware State Lottery Office sweeps the win from the casino operations, collects the State’s share of the win and the amount due to the vendors under contract with the State who provide the slot machines and associated computer systems, collects the amount allocable to purses for harness horse racing and remits the remainder to us as our commission for acting as a Licensed Agent.  Gaming expenses include the amounts collected by the State (i) for the State’s share of the win, (ii) for remittance to the providers of the slot machines and associated computer systems, and (iii) for harness horse racing purses.  We recognize revenues from sports wagering commissions when the event occurs.  We recognize revenues from pari-mutuel commissions earned from live harness horse racing and importing of simulcast signals from other race tracks when the race occurs.  Revenues from hotel rooms, food and beverage sales and other miscellaneous income are recognized at the time the service is provided.

Three Months Ended September 30, 2014 vs. Three Months Ended September 30, 2013

Gaming revenues decreased by $2,387,000, or 5.5%, to $41,349,000 in the third quarter of 2014 primarily as a result of lower win from slot machine play.  We believe that attendance at our facility continues to be negatively impacted from the overall increased competition in regional gaming markets and general economic conditions.

Other operating revenues were $6,639,000 in the third quarter of 2014 as compared to $6,337,000 in the third quarter of 2013.  Rooms revenue increased $296,000 to $1,856,000 in the third quarter of 2014 as compared to $1,560,000 in the third quarter of 2013 due to higher convention sales.  Food and beverage revenues increased $86,000 to $3,947,000 in the third quarter of 2014 from $3,861,000 in the third quarter of 2013 due to higher sales in our Festival Buffet and continuing growth in our banquet revenues; however, these increases were partially offset by lower revenues in many of our other food and beverage outlets from the lower casino attendance.  Additionally, we held fewer live concert and boxing events in the third quarter of 2014 as compared to the same period in the prior year which partially offset the increases in rooms and food and beverage revenues.  Other operating revenues do not include the retail amount of promotional allowances which are provided to customers on a complimentary basis of $4,588,000 and $5,283,000 in the third quarter of 2014 and 2013, respectively.

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Gaming expenses decreased by $2,845,000 primarily from lower gaming taxes as a result of the lower gaming revenues and the reduction in our video lottery vendor costs from recently passed legislation.  On July 1, 2014, the Delaware legislature approved a vendor cost sharing arrangement.  The State estimates this will provide $9,900,000 to be used toward vendor costs for the three Delaware video lottery agents for the fiscal year July 1, 2014 to June 30, 2015.  This is being allocated among the three video lottery agents based on their relative portion of industry-wide slot revenues.  For the third quarter of 2014, our video lottery vendor costs were reduced by approximately $1,000,000 as a result of the cost sharing arrangement.  Marketing expenses were also lower in the third quarter of 2014.

Other operating expenses increased to $4,638,000 in the third quarter of 2014 due to the higher other operating revenues.

General and administrative expenses increased to $1,468,000 in the third quarter of 2014 as compared to $1,354,000 in the third quarter of 2013 due primarily to higher professional fees.

Depreciation expense decreased to $2,196,000 in the third quarter of 2014 from $2,378,000 in the third quarter of 2013 as a result of certain assets becoming fully depreciated.

Interest expense decreased by $48,000 primarily due to lower borrowings in the third quarter of 2014.  This decrease was partially offset by higher interest rates in the third quarter of 2014.

Our effective income tax rate was 31.1% in the third quarter of 2014 as compared to 39.6% in the third quarter of 2013.  The lower rate in the third quarter of 2014 was the result of a change in our projected pre-tax earnings for 2014 due to the legislation enacted for the casino industry by the Delaware legislature which is effective July 1, 2014.  We expect our effective income tax rate to approximate 12.9% in the fourth quarter of 2014.

Nine Months Ended September 30, 2014 vs. Nine Months Ended September 30, 2013

Gaming revenues decreased by $11,801,000, or 8.9%, to $120,415,000 in the first nine months of 2014 as a result of lower win from slot machine play and lower table game revenue.  We believe that attendance at our facility continues to be negatively impacted from the overall increased competition in regional gaming markets.  Inclement weather during the first quarter of 2014 also negatively impacted our gaming operations.

Other operating revenues were $19,256,000 in the first nine months of 2014 as compared to $18,423,000 in the first nine months of 2013.  Rooms revenue increased $547,000 to $4,913,000 in the first nine months of 2014 as compared to $4,366,000 in the first nine months of 2013 due primarily to higher convention sales.  Food and beverage revenues increased $675,000 to $11,789,000 in the first nine months of 2014 from $11,114,000 in the first nine months of 2013 due to continuing growth in our banquet revenues and higher sales in our Festival Buffet and at our concession locations throughout the Firefly Music Festival which is held on Dover International Speedway’s property adjacent to us.  These increases were partially offset by lower revenues in many of our other food and beverage outlets from the lower casino attendance.  Additionally, we held fewer live concert and boxing events in the first nine months of 2014 as compared to the same period in the prior year which partially offset the increases in rooms and food and beverage revenues.  Other operating revenues do not include the retail amount of promotional allowances which are provided to customers on a complimentary basis of $13,661,000 and $15,251,000 in the first nine months of 2014 and 2013, respectively.

Gaming expenses decreased by $9,904,000 primarily from lower gaming taxes as a result of the lower gaming revenues and the reduction in our video lottery vendor costs from recently passed legislation.  Marketing and other expenses were also lower in the first nine months of 2014.

Other operating expenses increased to $13,691,000 in the first nine months of 2014 from $13,039,000 in the first nine months of 2013 due to the higher other operating revenues.

General and administrative expenses remained consistent at $4,284,000 in the first nine months of 2014 as compared to $4,310,000 in the first nine months of 2013.

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Depreciation expense decreased to $6,764,000 in the first nine months of 2014 from $7,411,000 in the first nine months of 2013 as a result of certain assets becoming fully depreciated.

Interest expense increased by $45,000 primarily due to higher interest rates in the first nine months of 2014.  This increase was partially offset by the lower borrowings in the first nine months of 2014.

Our effective income tax rates were impacted by the non-deductible portion of the restricted stock awards that vested during the first quarter of 2014 and 2013.  We expect our effective income tax rate to approximate 12.9% in the fourth quarter of 2014.

Liquidity and Capital Resources

Net cash provided by operating activities was $5,519,000 in the first nine months of 2014 compared to $6,824,000 in the first nine months of 2013.  The decrease in net cash from operating activities was primarily due to lower earnings before depreciation.

Net cash used in investing activities was $642,000 in the first nine months of 2014 compared to $1,211,000 in the first nine months of 2013 and was primarily related to capital improvements in both periods.  Capital expenditures in the first nine months of 2014 related primarily to information systems and facility and equipment upgrades.  Capital expenditures in the first nine months of 2013 related to assets purchased for our new Herschel’s 34 and casino and hotel facility improvements.

Net cash used in financing activities was $6,752,000 in the first nine months of 2014 compared to $6,214,000 in the first nine months of 2013.  During the first nine months of 2014, we had net repayments of $6,540,000 on our credit facility compared to $6,000,000 during the first nine months of 2013.  We repurchased and retired $104,000 of our outstanding common stock during the first nine months of 2014 compared to $144,000 during the first nine months of 2013.  These purchases were made from employees in connection with the vesting of restricted stock awards under our stock incentive plan.  As a result of amending our credit agreement in August 2014 and March 2013, we paid $108,000 and $70,000 in bank fees, respectively.

On October 23, 2002, our Board of Directors authorized the repurchase of up to 3,000,000 shares of our outstanding common stock.  The purchases may be made in the open market or in privately negotiated transactions as conditions warrant.  The repurchase authorization has no expiration date, does not obligate us to acquire any specific number of shares and may be suspended at any time.  No purchases of our equity securities were made pursuant to this authorization during the first nine months of 2014 or 2013.  At September 30, 2014, we had remaining repurchase authority of 1,653,333 shares. At present we are not permitted to make such purchases under our credit facility.

Based on current business conditions, we expect to make capital expenditures of approximately $500,000 during the remainder of 2014.

On August 14, 2014, we modified our credit agreement with our bank group.  The credit facility was modified to: extend the maturity date to September 30, 2015; provide the bank group with a mortgage on and security interest in all real and personal property owned by our wholly owned subsidiary Dover Downs, Inc.; adjust the maximum borrowing limit to $55,000,000 as of August 14, 2014, to $50,000,000 as of December 31, 2014 and to $47,500,000 as of June 30, 2015; and modify the required maximum ratio of funded debt to earnings before interest, taxes, depreciation and amortization (the “leverage ratio”) and the minimum consolidated earnings before interest, taxes, depreciation and amortization requirement.  Interest is based upon LIBOR plus a margin that varies between 150 and 350 basis points (325 basis points at September 30, 2014) depending on the leverage ratio.  Material adverse changes in our results of operations could impact our ability to satisfy these requirements.  In addition, the credit agreement includes a material adverse change clause and prohibits the payment of dividends.  The credit facility provides for seasonal funding needs, capital improvements and other general corporate purposes.  At September 30, 2014, there was $40,500,000 outstanding at a weighted average interest rate of 3.41% and $14,500,000 was available pursuant to the facility.  Additionally, we were in compliance with all terms of the facility at September 30, 2014 and we expect to be in compliance with the financial covenants and all other covenants for all measurement periods through September 30, 2015, the expiration date of the facility.

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The credit facility is classified as a current liability as of September 30, 2014 in our consolidated balance sheets as the facility expires on September 30, 2015.  We will seek to refinance or extend the maturity of this obligation prior to its expiration date; however, there is no assurance that we will be able to execute this refinancing or extension or, if we are able to refinance or extend this obligation, that the terms of such refinancing or extension would be as favorable as the terms of our existing credit facility.  These factors raise substantial doubt about our ability to continue as a going concern.

While we believe that our net cash flows from operating activities and funds available from our credit facility will be sufficient to provide for our working capital needs and capital spending requirements for the foreseeable future, we will need to refinance or extend the maturity of our outstanding credit facility prior to its expiration on September 30, 2015.

In recent years, additional gaming venues have opened in Maryland, Pennsylvania and New Jersey and more are expected to open.  These venues are having a significant adverse effect on our visitation numbers, our revenues and our profitability. Management has estimated that approximately 30% of our gaming win comes from Maryland patrons and approximately 64% of our Capital Club® member gaming win comes from out-of-state patrons.

The Delaware legislature has worked with the gaming industry in recent years to increase the State’s gaming offerings, but it has done so while steadily increasing the State’s share of the industry’s gaming revenues and adding to various costs that the industry incurs to do business.  In July 2008, the State’s share of our gaming revenues was increased.  In May 2009, an additional and significant increase in the State’s share of our gaming revenues was legislated in connection with the reintroduction of limited sports betting in the State.  This was the fifth increase in the State’s share of gaming revenues.  In January 2010, the State authorized table games, but imposed a license fee and a high tax rate on table game revenues.  During this period, our revenues declined and our ability to compete with the growing number of competitors in the Mid-Atlantic region was impeded.  In recognition of the State’s high gaming tax burden and its effect on the industry, the legislature has attempted several times since 2011 to reduce this tax burden in an effort to stabilize the industry, preserve jobs and protect the State’s revenue stream.

In June 2012, the State enacted the Delaware Gaming Competitiveness Act of 2012, which eliminated the gaming license fee and restructured the table game license fee currently paid by video lottery agents to incentivize agents to make capital expenditures, spend on marketing and promotions, and make debt service payments.  In June 2012, we paid a $2,241,000 table game license fee, which was for the period July 1, 2012 to June 30, 2013.  This fee decreased to $1,017,000 for the period July 1, 2013 to June 30, 2014 and was paid in June 2013.  The fee increased slightly to $1,071,000 for the period July 1, 2014 to June 30, 2015 and was paid in June 2014.

In July 2013, the State enacted a bond and capital improvements bill which appropriated $8,000,000 to the Department of Finance to be used to offset increases in vendor costs that the three Delaware video lottery agents would otherwise pay for the period July 1, 2013 to June 30, 2014.  The State used $875,000 of the amount appropriated to offset increases in our vendor costs. Additionally, the bill created a Lottery & Gaming Study Commission responsible for examining the competitive marketplace confronting the Delaware gaming industry, including the business performance and business plans of existing lottery agents, the marketing efforts and investments made by Delaware video lottery agents, and the division of revenue from the video lottery, sports lottery, table games and internet gaming.  The commission’s findings and recommendations were released in March 2014 and included: the State sharing certain vendor costs that the three Delaware video lottery agents currently pay associated with slot machines; reducing the State’s share of table game win; and eliminating the annual table game license fee.  On July 1, 2014, the Delaware legislature approved the vendor cost sharing recommendation.  The State estimates this will provide $9,900,000 to be used toward vendor costs for the three Delaware video lottery agents for the fiscal year July 1, 2014 to June 30, 2015.  This is being allocated among the three video lottery agents based on their relative portion of industry-wide slot revenues.  For the third quarter of 2014, our video lottery vendor costs were reduced by approximately $1,000,000 as a result of the cost sharing arrangement.  The recommendations to reduce the State’s share of gross table game revenues and eliminate the table game license fee were not part of the legislation that was passed.  The commission reconvened in September 2014 to consider previous and make further recommendations relative to the gaming industry.

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Even with partial legislative relief, we may be unable to refinance or extend the maturity of our credit facility on favorable terms or may default on our obligations, we may be unable to allocate sufficient resources to marketing and promotions in order to compete effectively in the regional marketplace, we may be unable to allocate sufficient resources to maintaining our facility, and we may be required to take other actions in order to manage expenses - especially with respect to operations that have operated at a loss, such as table games and internet gaming.  Such actions could adversely affect our business, financial condition, operating results and cash flow.

Contractual Obligations

At September 30, 2014, we had the following contractual obligations:

			Payments Due by Period
	Total		2014		2015 – 2016		2017 – 2018		Thereafter
Revolving line of credit(a)	$	40,500,000	$	—	$	40,500,000	$	—	$	—
Estimated interest payments on revolving line of credit(b)	1,379,000		345,000		1,034,000		—		—
Operating lease	252,000		21,000		168,000		63,000		—
	$	42,176,000	$	411,000	$	41,702,000	$	63,000	$	—

(a) Our current credit facility expires on September 30, 2015.

(b) The future interest payments on our revolving credit agreement were estimated using the current outstanding principal as of September 30, 2014 and current interest rates.

Related Party Transactions

See NOTE 8 — Related Party Transactions to our consolidated financial statements included elsewhere in this document for a full description of related party transactions.

Critical Accounting Policies

For a summary of our critical accounting policies and the means by which we develop estimates thereon, see “Part II - Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” in our 2013 Annual Report on Form 10-K. There have been no material changes to our critical accounting policies from those included in our 2013 Annual Report on Form 10-K.

Recent Accounting Pronouncements

There have been no new accounting pronouncements made effective during the three months ended September 30, 2014, or that are not yet effective, that have significance, or potential significance, to our consolidated financial statements.

Factors That May Affect Operating Results; Forward-Looking Statements

This report and the documents incorporated by reference may contain forward-looking statements.  In Item 1A of this report, we disclose the important factors that could cause our actual results to differ from our expectations.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

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Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors.

Based on their evaluation as of September 30, 2014, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2014 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

Part II — Other Information

Item 1.Legal Proceedings

We are a party to ordinary routine litigation incidental to our business.  Management does not believe that the resolution of any of these matters is likely to have a material adverse effect on our results of operations, financial condition or cash flows.

Item 1A.Risk Factors

In addition to historical information, this report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to our financial condition, profitability, liquidity, resources, business outlook, possible acquisitions, market forces, corporate strategies, consumer preferences, contractual commitments, legal matters, capital requirements and other matters.  Documents incorporated by reference into this report may also contain forward-looking statements.  The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements.  To comply with the terms of the safe harbor, we note that a variety of factors could cause our actual results and experience to differ substantially from the anticipated results or other expectations expressed in our forward-looking statements.  When words and expressions such as: “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely” or similar words or expressions are used, as well as phrases such as “in our view,” “there can be no assurance” or “there is no way to anticipate with certainty,” forward-looking statements may be involved.

In the section that follows below, in cautionary statements made elsewhere in this report, and in other filings we have made with the SEC, we list important factors that could cause our actual results to differ from our expectations.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors described below and other factors set forth in or incorporated by reference in this report.

These factors and cautionary statements apply to all future forward-looking statements we make.  Many of these factors are beyond our ability to control or predict.  Do not put undue reliance on forward-looking statements or project any future results based on such statements or on present or prior earnings levels.

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Additional information concerning these, or other factors, which could cause the actual results to differ materially from those in our forward-looking statements is contained from time to time in our other SEC filings.  Copies of those filings are available from us and/or the SEC.

We Have a Significant Amount of Indebtedness

As of September 30, 2014, we had total outstanding long-term debt of $40,500,000 under our credit facility.  The facility is classified as a current liability as of September 30, 2014 in our consolidated balance sheets as the facility expires on September 30, 2015.  We will seek to refinance or extend the maturity of this obligation prior to its expiration date; however, there is no assurance that we will be able to execute this refinancing or extension or, if we are able to refinance or extend this obligation, that the terms of such refinancing or extension would be as favorable as the terms of our existing credit facility.  These factors raise substantial doubt about our ability to continue as a going concern.  This indebtedness and any future increases in our outstanding borrowings or decreases in our results of operations could:

·make it more difficult for us to satisfy our debt obligations;

·increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;

·increase our costs or create difficulties in refinancing or replacing our outstanding obligations;

·require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, dividends 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;

·subject us to the risks that interest rates and our interest expense will increase; and

·place us at a competitive disadvantage compared to competitors that have less relative debt.

In addition, our credit facility contains financial ratios that we are required to meet and other restrictive covenants that, among other things, limit or restrict our ability to borrow additional funds, make acquisitions, create liens on our properties and make investments.  Our ability to meet these financial ratios and covenants can be affected by events beyond our control, and there can be no assurance that we will meet them.  If there were an event of default under our credit facility, the lenders could elect to declare all amounts outstanding to be immediately due and payable.

In recent years, additional gaming venues are having a significant adverse effect on our visitation numbers, our revenues and our profitability.

Our Gaming Activities Compete Directly With Other Gaming Facilities And Other Entertainment Businesses

We compete in local and regional markets with horse tracks and racinos, off-track betting parlors, state run lotteries, casinos, internet gambling and other forms of gaming.  In a broader sense, our gaming operations face competition from all manner of leisure and entertainment activities, including shopping, collegiate and professional athletic events, television and movies, concerts and travel.  Many of our gaming competitors are in jurisdictions with a lower tax burden.  As gambling opportunities in the region continue to proliferate, there can be no assurance that we will maintain our state or regional market share or be able to compete effectively with our competitors and this could adversely affect our business, financial condition and overall profitability.

The introduction or expansion of gaming in neighboring jurisdictions, particularly Maryland, Virginia, West Virginia, Washington, D.C., Pennsylvania or New Jersey, the proliferation of internet gaming or the legalization of additional gaming venues in Delaware, could have a material adverse effect on our cash flows and results of operations.  Delaware is surrounded by jurisdictions which permit slot machines, such as Pennsylvania, New Jersey, Maryland and West Virginia, and all of these jurisdictions also permit table games.

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In recent years, additional gaming venues have opened in Maryland, Pennsylvania and New Jersey and more are expected to open. These venues are having a significant adverse effect on our visitation numbers, our revenues and our profitability. Management has estimated that approximately 30% of our gaming win comes from Maryland patrons and approximately 64% of our Capital Club® member gaming win comes from out of state patrons.

All states in our geographic region have state-run lotteries.  State run lotteries are no longer prohibited by federal law from offering lottery products or other gaming opportunities over the internet or through mobile applications if permitted by state law.

Delaware, Nevada and New Jersey have passed legislation authorizing internet gaming and other states are pursuing or exploring the legalization of internet gaming in various forms — from state run lotteries to privately run casino games, including online poker.  States are aggressively seeking new revenue streams through gaming.  New Jersey is also pursuing sports betting despite a federal law that prohibits it from doing so.

All Of Our Facilities Are In One Location

Our gaming facilities are located adjacent to one another at a single location in Dover, Delaware.  Any prolonged disruption of operations at these facilities due to damage or destruction, inclement weather, natural disaster, work stoppages or other reasons could adversely affect our financial condition and results of operations.  We maintain property and business interruption insurance to protect against certain types of disruption, but there can be no assurance that the proceeds of such insurance would be adequate to repair or rebuild our facilities or to otherwise compensate us for lost profits.

The Revocation, Suspension Or Modification Of Our Gaming Licenses Would Adversely Affect Our Gaming Business

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 gaming license has no expiration date and does not need to be renewed annually.  However, to maintain our gaming license, we must remain licensed for harness horse racing by the Delaware Harness Racing Commission and conduct at least 80 live race days each racing season, subject to the availability of harness race horses.  Our license from the Racing Commission must be renewed on an annual basis.  The Racing Commission has broad discretion to reject any application for a license or suspend or revoke a license once it is issued.  The Director of the Delaware State Lottery Office has broad discretion to revoke, suspend or modify the terms of our gaming license.  Any modification or termination of existing licensing regulations or any revocation, suspension or modification of our licenses could adversely affect our business, financial condition and overall profitability.

Our Gaming Activities Are Subject To Extensive Government Regulation And Any Additional Government Regulation Or Taxation Of Gaming Activities Could Substantially Reduce Our Revenue Or Profit

Slot machine gaming, table games, sports betting, internet gaming, harness horse racing and pari-mutuel wagering are subject to extensive government regulation.  Delaware law regulates the win we are entitled to retain and the percentage of commission we are entitled to receive from our gaming revenues, which comprises a significant portion of our overall revenues.  The State granted us a license to conduct our gaming operations and a license to conduct harness horse races and pari-mutuel wagering.  The laws under which these licenses are granted could be modified or repealed at any time and we could be required to terminate our gaming operations.  If we are required to terminate our gaming operations or if the amount of the commission we receive from the State for conducting our gaming operations is decreased, our business operations and overall profitability would be significantly impaired.

The Delaware legislature has worked with the gaming industry in recent years to increase the State’s gaming offerings, but it has done so while steadily increasing the State’s share of the industry’s gaming revenues and adding to various costs that the industry incurs to do business.  In July 2008, the State’s share of our gaming revenues was increased.  In May 2009, an additional and significant increase in the State’s share of our gaming revenues was legislated in connection with the reintroduction of limited sports betting in the State.  This was the fifth increase in the State’s share of gaming revenues.  In January 2010, the State authorized table games, but imposed a license fee

21

and a high tax rate on table game revenues.  During this period, our revenues declined and our ability to compete with the growing number of competitors in the Mid-Atlantic region was impeded.  In recognition of the State’s high gaming tax burden and its effect on the industry, the legislature has attempted several times since 2011 to reduce this tax burden in an effort to stabilize the industry, preserve jobs and protect the State’s revenue stream.

In June 2012, the State enacted the Delaware Gaming Competitiveness Act of 2012 (the “Act”), under which Delaware’s video lottery agents are authorized to offer, through their websites, internet versions of their table games (including poker and bingo) and video lottery offerings.  There have been discussions in Congress to regulate various forms of internet gaming and it is possible that new federal laws may preempt state laws relative to the regulation or taxation of internet gaming.  Internet gaming may even be proscribed entirely by federal law much as sports betting is proscribed by federal law in all but four states.

In July 2013, the State enacted a bond and capital improvements bill which appropriated $8,000,000 to the Department of Finance to be used to offset increases in vendor costs that the three Delaware video lottery agents would otherwise pay for the period July 1, 2013 to June 30, 2014.  The State used $875,000 of the amount appropriated to offset increases in our vendor costs.  Additionally, the bill created a Lottery & Gaming Study Commission responsible for examining the competitive marketplace confronting the Delaware gaming industry, including the business performance and business plans of existing lottery agents, the marketing efforts and investments made by Delaware video lottery agents, and the division of revenue from the video lottery, sports lottery, table games and internet gaming.  The commission’s findings and recommendations were released in March 2014 and included: the State sharing certain vendor costs that the three Delaware video lottery agents currently pay associated with slot machines; reducing the State’s share of table game win; and eliminating the annual table game license fee.  On July 1, 2014, the Delaware legislature approved the vendor cost sharing recommendation.  The State estimates this will provide $9,900,000 to be used toward vendor costs for the three Delaware video lottery agents for the fiscal year July 1, 2014 to June 30, 2015.  This is being allocated among the three video lottery agents based on their relative portion of industry-wide slot revenues.  For the third quarter of 2014, our video lottery vendor costs were reduced by approximately $1,000,000 as a result of the cost sharing arrangement.  The recommendations to reduce the State’s share of gross table game revenues and eliminate the table game license fee were not part of the legislation that was passed.  The commission reconvened in September 2014 to consider previous and make further recommendations relative to the gaming industry.

Even with partial legislative relief, we may be unable to refinance or extend the maturity of our credit facility on favorable terms or may default on our obligations, we may be unable to allocate sufficient resources to marketing and promotions in order to compete effectively in the regional marketplace, we may be unable to allocate sufficient resources to maintaining our facility, and we may be required to take other actions employees in order to manage expenses - especially with respect to operations that have operated at a loss, such as table games and internet gaming.  Such actions could adversely affect our business, financial condition, operating results and cash flow.

We believe that the prospect of significant additional tax revenue is one of the primary reasons why jurisdictions have legalized gaming.  As a result, gaming operators are typically subject to significant taxes and fees in addition to normal federal and state corporate income taxes.  These taxes and fees are subject to increase at any time.  We pay substantial taxes and fees with respect to our operations and the State’s share of our gaming win has been increased several times.  In addition, any material increase in taxes or fees, or the adoption of additional taxes or fees, may have a material adverse effect on our future financial results.

We are subject to various federal, state and local laws and regulations in addition to gaming regulations.  These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, employees, currency transactions, taxation, zoning and building codes, and marketing and advertising.  Laws and regulations governing the use and development of real estate may delay or complicate any improvements we choose to make and/or increase the costs of any improvements or our costs of operating.

If it is determined that damage to persons or property or contamination of the environment has been caused or exacerbated by the operation or conduct of our business or by pollutants, substances, contaminants or wastes used, generated or disposed of by us, or if pollutants, substances, contaminants or wastes are found on our property, we may be held liable for such damage and may be required to pay the cost of investigation and/or remediation of such contamination or any related damage.

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Laws and regulations are always subject to change, can be interpreted differently in the future, and new laws and regulations may be enacted which could adversely affect the tax, regulatory, operational or other aspects of our gaming operations.  Furthermore, noncompliance with one or more of these laws and regulations could result in the imposition of substantial penalties against us or adversely affect our gaming license.

We Do Not Own Or Lease Our Slot Machines And Related Technology

We do not own or lease the slot machines or computer systems used by the State in connection with our video lottery gaming operations.  The Lottery Director enters into contracts directly with the providers of the slot machines and computer systems and we are not a party to those negotiations.  At our expense, the State purchases or leases all equipment and the Lottery Director licenses all technology providers.  Similarly, but at no expense to us, the Lottery Director contracts directly with service providers for internet gaming.  Our operations could be disrupted if a licensed technology provider violates its agreement with the State or ceases to be licensed for any reason.  Such an event would be outside of our control and could adversely affect our gaming revenues.

Due to Our Concentrated Stock Ownership, Stockholders May Have No Effective Voice In Our Management

We have elected to be treated as a “controlled corporation” as defined by New York Stock Exchange Rule 303A.  We are a controlled corporation because a single person, Henry B. Tippie, the Chairman of our Board of Directors, controls in excess of fifty percent of our voting power.  This means that he has the ability to determine the outcome of the election of directors at our annual meetings and to determine the outcome of many significant corporate transactions, many of which only require the approval of a majority of our voting power.  Such a concentration of voting power could also have the effect of delaying or preventing a third party from acquiring us at a premium.  In addition, as a controlled corporation, we are not required to comply with certain New York Stock Exchange rules.

Our Success Depends on the Availability and Performance of Key Personnel

Our continued success depends upon the availability and performance of our senior management team which possesses unique and extensive industry knowledge and experience.  Our inability to retain and attract key employees in the future could have a negative effect on our operations and business plans.

We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or conditions.  New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements.  Given these risks and uncertainties, stockholders should not overly rely or attach undue weight to our forward-looking statements as an indication of our actual future results.

We May Not Be Able To Maintain Our Listing With The NYSE

On October 28, 2014, we were notified by the New York Stock Exchange (“NYSE”) that the average closing price of our common stock had fallen below $1.00 per share over a period of 30 consecutive trading days, which is the minimum average share price for continued listing on the NYSE under the NYSE Listed Company Manual.

Under NYSE rules, we have six months following receipt of the notification, subject to possible extension, to regain compliance with the minimum share price requirement or be subject to delisting.  We can also regain compliance at any time during the six-month cure period if our common stock has a closing share price of at least $1.00 on the last trading day of any calendar month during the period and also has an average closing share price of at least $1.00 over the 30-trading day period ending on the last trading day of that month.

Our common stock, continues to trade on the NYSE under the symbol “DDE” but is assigned a “.BC” indicator by the NYSE to signify that we are not currently in compliance with NYSE continued listing standards.

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On October 29, 2014, we notified the NYSE of our intent to cure this price deficiency.  We will monitor the price for our common stock and will consider available options to resolve the deficiency and regain compliance with the NYSE listing standards.

If we are not able to regain compliance with NYSE listing standards, our stock will be delisted from trading on the NYSE.  The delisting of our stock from trading on the NYSE would result in the need to find another market on which our stock can be listed or cause our stock to cease trading on an active market, which could result in a reduction in the liquidity for our stock and a reduction in demand for our stock.

Non-compliance with NYSE continued listing standards or delisting from the NYSE could negatively impact us, including, without limitation, our relationships with stockholders, businesses and lenders, our access to debt and equity financing, and our ability to attract and retain personnel by means of equity compensation.  This, in turn, could materially and adversely affect our business, financial condition and results of operations.  Securities traded in the over-the-counter market generally have significantly less liquidity than securities traded on a national securities exchange, through factors such as a reduction in the number of investors that will consider investing in the securities, the number of market makers in the securities, reduction in securities analyst and news media coverage and lower market prices than might otherwise be obtained.

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

On October 23, 2002, our Board of Directors authorized the repurchase of up to 3,000,000 shares of our outstanding common stock.  The purchases may be made in the open market or in privately negotiated transactions as conditions warrant.  The repurchase authorization has no expiration date, does not obligate us to acquire any specific number of shares and may be suspended at any time.  No repurchases were made in the first nine months of 2014 and we had remaining purchase authority of 1,653,333 shares.  At present we are not permitted to make such purchases under our credit facility.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

None.

Item 6.Exhibits

31.1Certification of Chief Executive Officer pursuant to Rule 13a-14(a)

31.2Certification of Chief Financial Officer pursuant to Rule 13a-14(a)

32.1Certification of Chief Executive Officer Pursuant to 18 U.S.C. Sec. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2Certification of Chief Financial Officer Pursuant to 18 U.S.C. Sec. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

24

101The following materials from the Dover Downs Gaming & Entertainment, Inc. quarterly report on Form 10-Q for the quarter ended September 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss) for the quarter and nine months ended September 30, 2014 and 2013; (ii) Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013; (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013; and (iv)  Notes to the Consolidated Financial Statements.

Signatures

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

DATED:	November 5, 2014	Dover Downs Gaming & Entertainment, Inc.
		Registrant
		/s/ Denis McGlynn
		Denis McGlynn
		President, Chief Executive Officer
		and Director
		(Principal Executive Officer)
		/s/ Timothy R. Horne
		Timothy R. Horne
		Senior Vice President-Finance,
		Treasurer, Chief Financial Officer
		and Director
		(Principal Financial and Accounting Officer)

25

EX-31.1

Exhibit 31.1

Certification

I, Denis McGlynn, President, Chief Executive Officer and Director of Dover Downs Gaming & Entertainment, Inc. (the “registrant”), certify that:

1.I have reviewed this quarterly report on Form 10-Q of the registrant;

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 the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial 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 in Exchange 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 within those 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 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors:

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2014

/s/ Denis McGlynn

Denis McGlynn

President, Chief Executive Officer and Director

EX-31.2

Exhibit 31.2

Certification

I, Timothy R. Horne, Senior Vice President-Finance, Treasurer and Chief Financial Officer of Dover Downs Gaming & Entertainment, Inc. (the “registrant”), certify that:

1.I have reviewed this quarterly report on Form 10-Q of the registrant;

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 the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial 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 in Exchange 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 within those 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 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors:

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2014

/s/ Timothy R. Horne

Timothy R. Horne

Senior Vice President-Finance, Treasurer, Chief Financial Officer and Director

EX-32.1

Exhibit 32.1

Dover Downs Gaming & Entertainment, Inc.

Certification Pursuant to 18 U.S.C. Sec. 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Dover Downs Gaming & Entertainment, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission (the “Report”), I, Denis McGlynn, President, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 5, 2014

/s/ Denis McGlynn

Denis McGlynn

President, Chief Executive

Officer and Director

This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

EX-32.2

Exhibit 32.2

Dover Downs Gaming & Entertainment, Inc.

Certification Pursuant to 18 U.S.C. Sec. 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Dover Downs Gaming & Entertainment, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission (the “Report”), I, Timothy R. Horne, Senior Vice President-Finance, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 5, 2014

/s/ Timothy R. Horne

Timothy R. Horne

Senior Vice President-Finance,

Treasurer, Chief Financial Officer

and Director

This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

XML

Pension Plans (Details 2) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Change in benefit obligation:
Interest cost	$ 217,000	$ 213,000	$ 651,000	$ 639,000
Change in plan assets:
Employer contribution	95,000		140,000
Obligations recognized in consolidated balance sheets
Liability for pension benefits	3,013,000		3,013,000		3,353,000
Components of net periodic pension cost
Interest cost	217,000	213,000	651,000	639,000
Expected return on plan assets	(276,000)	(246,000)	(827,000)	(740,000)
Recognized net actuarial loss	2,000	25,000	5,000	75,000
Total net periodic pension cost	(57,000)	(8,000)	(171,000)	(26,000)
Employer contribution	$ 95,000		$ 140,000

XML

Credit Facility

9 Months Ended

Sep. 30, 2014

Credit Facility

Credit Facility

NOTE 4 — Credit Facility

On August 14, 2014, we modified our credit agreement with our bank group.  The credit facility was modified to: extend the maturity date to September 30, 2015; provide the bank group with a mortgage on and security interest in all real and personal property owned by our wholly owned subsidiary Dover Downs, Inc.; adjust the maximum borrowing limit to $55,000,000 as of August 14, 2014, to $50,000,000 as of December 31, 2014 and to $47,500,000 as of June 30, 2015; and modify the required maximum ratio of funded debt to earnings before interest, taxes, depreciation and amortization (the “leverage ratio”) and the minimum consolidated earnings before interest, taxes, depreciation and amortization requirement.  Interest is based upon LIBOR plus a margin that varies between 150 and 350 basis points (325 basis points at September 30, 2014) depending on the leverage ratio.  Material adverse changes in our results of operations could impact our ability to satisfy these requirements.  In addition, the credit agreement includes a material adverse change clause and prohibits the payment of dividends.  The credit facility provides for seasonal funding needs, capital improvements and other general corporate purposes.  At September 30, 2014, there was $40,500,000 outstanding at a weighted average interest rate of 3.41% and $14,500,000 was available pursuant to the facility.  Additionally, we were in compliance with all terms of the facility at September 30, 2014 and we expect to be in compliance with the financial covenants and all other covenants for all measurement periods through September 30, 2015, the expiration date of the facility.

The credit facility is classified as a current liability as of September 30, 2014 in our consolidated balance sheets as the facility expires on September 30, 2015.  We will seek to refinance or extend the maturity of this obligation prior to its expiration date; however, there is no assurance that we will be able to execute this refinancing or extension or, if we are able to refinance or extend this obligation, that the terms of such refinancing or extension would be as favorable as the terms of our existing credit facility.  These factors raise substantial doubt about our ability to continue as a going concern.  The accompanying financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

XML

Stockholders' Equity (Details 3) (USD $)	0 Months Ended	9 Months Ended
	Oct. 28, 2014	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013	Oct. 23, 2002
Preferred Stock, Shares Authorized		1,000,000		1,000,000
Preferred Stock, Par or Stated Value Per Share		$ 0.10		$ 0.10
Period of time to regain compliance	P6M
Number of shares of outstanding common stock authorized to be repurchased					3,000,000
Purchases made pursuant to repurchase authorization (in shares)		0	0
Number of remaining shares of common stock authorized to be repurchased		1,653,333
Number of common stock shares purchased and retired		66,829	61,869
Amount of common stock purchased and retired		$ 104,000	$ 144,000
Maximum
Share Price	$ 1.00
Minimum
Consecutive trading days that average share price had fallen	P30D
Common stock.
Common Stock, Shares Authorized		74,000,000		74,000,000
Common stock, par value (in dollars per share)		$ 0.10		$ 0.10
Class A common stock
Common Stock, Shares Authorized		50,000,000		50,000,000
Common stock, par value (in dollars per share)		$ 0.10		$ 0.10

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Stockholders' Equity (Details 2) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Accumulated other comprehensive loss
Net actuarial loss and prior service cost not yet recognized in net periodic benefit cost, net of income tax benefit	$ 1,120,000	$ 1,123,000
Accumulated unrealized gain on available-for-sale securities, net of income tax expense of $24,000 and $20,000, respectively	29,000	28,000
Accumulated other comprehensive loss	(1,091,000)	(1,095,000)
Income tax benefit of net actuarial loss and prior service cost not yet recognized in net periodic benefit cost	770,000	772,000
Income tax expense of accumulated unrealized gain on available-for-sale securities	$ 21,000	$ 20,000

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Stockholders' Equity (Details 4) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Stockholders' Equity
Common stock shares reserved for issuance under the 2012 Stock Incentive Plan	2,000,000		2,000,000
Shares granted under the 2012 Stock Incentive Plan			211,000	205,500
Shares available for granting options or stock awards	563,975		563,975
Stockholders' Equity
Shares available for granting options or stock awards	563,975		563,975
Options granted (in shares)			211,000	205,500
Compensation Expense	$ 140,000	$ 158,000	$ 441,000	$ 525,000
Nonvested restricted stock
Stockholders' Equity
Vesting percentage on each anniversary of the grant date			20.00%
Service period to amortize aggregate market value of the nonvested restricted stock			6 years

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Fair Value Measurements (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Credit facility.
Fair Value Measurements
Amount outstanding under revolving credit agreement	$ 40,500,000	$ 47,040,000
Total
Fair Value Measurements
Available-for-sale securities	280,000	269,000
Level 1
Fair Value Measurements
Available-for-sale securities	$ 280,000	$ 269,000

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

NOTE 3 - Summary of Significant Accounting Policies

Basis of consolidation and presentation—The consolidated financial statements include the accounts of Dover Downs Gaming & Entertainment, Inc. and its wholly owned subsidiaries.  Intercompany transactions and balances have been eliminated.

Accounts receivable—Accounts receivable are stated at their estimated collectible amount and primarily consist of casino, hotel and other receivables which arise in the normal course of business.  We issue credit in the form of “markers” to approved casino customers who are investigated as to their credit worthiness.

Investments—Investments, which consist of mutual funds, are classified as available-for-sale and reported at fair-value in other assets in our consolidated balance sheets.  Changes in fair value are reported in other comprehensive income (loss).  See NOTE 6 — Stockholders’ Equity and NOTE 7 — Fair Value Measurements for further discussion.

Property and equipment—Property and equipment is stated at cost.  Depreciation is provided for financial reporting purposes using the straight-line method over the asset’s estimated useful life.  Accumulated depreciation was $122,373,000 and $115,790,000 as of September 30, 2014 and December 31, 2013, respectively.

We perform reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.  An impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its fair value.  Generally, fair value will be determined using valuation techniques such as the present value of future cash flows.

Income taxes—Deferred income taxes are provided on all differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements based upon enacted statutory tax rates in effect at the balance sheet date.  Tax years after 2010 remain open to examination for federal and state income tax purposes.

Point loyalty program—We currently have a point loyalty program for our customers which allows them to earn points based on the volume of their gaming activity.  All reward points earned by customers are expensed in the period they are earned.  The estimated amount of points redeemable for cash is recorded as a reduction of gaming revenue and the estimated amount of points redeemable for services and merchandise is recorded as gaming expense.  In determining the amount of the liability, which was $1,857,000 and $1,930,000, respectively, at September 30, 2014 and December 31, 2013, we estimate a redemption rate, a cost of rewards to be offered and the mix of cash, goods and services for which reward points will be redeemed.  We use historical data to estimate those amounts.

Revenue and expense recognition—Gaming revenues represent (i) the net win from slot machine, table games, internet gaming and sports wagering and (ii) commissions from pari-mutuel wagering.  Other operating revenues consist of hotel rooms revenue, food and beverage sales and other miscellaneous income.  Revenues do not include the retail amount of hotel rooms, food and beverage and other miscellaneous goods and services provided without charge to customers as promotional items of $4,588,000 and $13,661,000, and $5,283,000 and $15,251,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively.  The estimated direct cost of providing these items has been charged to the casino through interdepartmental allocations and is included in gaming expenses in the consolidated statements of earnings.

For the casino operations, the difference between the amount wagered by bettors and the amount paid out to bettors is referred to as the win.  The win is included in the amount recorded in our consolidated financial statements as gaming revenue.  The Delaware State Lottery Office sweeps the win from the casino operations, collects the State’s share of the win and the amount due to the vendors under contract with the State who provide the slot machines and associated computer systems, collects the amount allocable to purses for harness horse racing and remits the remainder to us as our commission for acting as a Licensed Agent.  Gaming expenses include the amounts collected by the State (i) for the State’s share of the win, (ii) for remittance to the providers of the slot machines and associated computer systems, and (iii) for harness horse racing purses.  We recognize revenues from sports wagering commissions when the event occurs.  We recognize revenues from pari-mutuel commissions earned from live harness horse racing and importing of simulcast signals from other race tracks when the race occurs. Revenues from hotel rooms, food and beverage sales and other miscellaneous income are recognized at the time the service is provided.  Amounts received in advance for hotel rooms, convention bookings and advance ticket sales are recorded as deferred revenue until the services are provided to the customer, at which point revenue is recognized.

Advertising costs—The cost of general advertising is charged to operations as incurred.  Advertising expenses were $663,000 and $1,705,000, and $734,000 and $1,757,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively.

Net earnings (loss) per common share—Nonvested share-based payment awards that include rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating securities, and the two-class method of computing basic and diluted net earnings (loss) per common share (“EPS”)  is applied for all periods presented.  The following table sets forth the computation of EPS (in thousands, except per share amounts):

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2014		2013		2014			2013
Net earnings (loss) per common share — basic:
Net earnings (loss)	$	699	$	223	$	(190	)	$	431
Allocation to nonvested restricted stock awards	17		6		—			11
Net earnings (loss) available to common stockholders	$	682	$	217	$	(190	)	$	420
Weighted-average shares outstanding	31,962		31,849		31,961			31,848
Net earnings (loss) per common share — basic	$	0.02	$	0.01	$	(0.01	)	$	0.01
Net earnings (loss) per common share — diluted:
Net earnings (loss)	$	699	$	223	$	(190	)	$	431
Allocation to nonvested restricted stock awards	17		6		—			11
Net earnings (loss) available to common stockholders	$	682	$	217	$	(190	)	$	420
Weighted-average shares and dilutive shares outstanding	31,962		31,849		31,961			31,848
Net earnings (loss) per common share — diluted	$	0.02	$	0.01	$	(0.01	)	$	0.01

There were no options outstanding during the three and nine-month periods ended September 30, 2014 or 2013.

Accounting for stock-based compensation—We recorded total stock-based compensation expense for our restricted stock awards of $140,000 and $441,000, and $158,000 and $525,000 as general and administrative expenses for the three and nine-month periods ended September 30, 2014 and 2013, respectively.  We recorded income tax benefit (expense) of $56,000 and ($6,000), and $64,000 and $5,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively, related to our restricted stock awards.

Use of estimates—The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events.  These estimates and the underlying assumptions affect the reported amounts of assets and liabilities, disclosures about contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  These estimates and assumptions are based on our best estimates and judgment.  We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances.  We adjust such estimates and assumptions when facts and circumstances dictate.  Illiquid credit markets, volatile equity markets and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions.  As future events and their effects cannot be determined with precision, actual results could differ from these estimates.  Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

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Related Party Transactions (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Related Party Transactions
Payable to DVD					$ 4,000
Receivable from DVD	29,000		29,000
NASCAR event at Dover International Speedway
Related Party Transactions
Costs allocated to the entity by DVD	94,000
Dover Motorsports, Inc. (DVD)
Related Party Transactions
Harness racing track length (in miles)	0.625		0.625
Motorsports superspeedway length (in miles)	1		1
Period for set up and tear down rights			14 days
Number of annual motorsports weekends	2		2
Dover Motorsports, Inc. (DVD) | Allocation of costs of administrative and operating services
Related Party Transactions
Costs allocated to DVD	473,000	496,000	1,465,000	1,416,000
Costs allocated to the entity by DVD	35,000	45,000	194,000	180,000
Dover Motorsports, Inc. (DVD) | NASCAR event at Dover International Speedway
Related Party Transactions
Costs allocated to DVD	353,000	400,000	693,000	793,000
Costs allocated to the entity by DVD		119,000	193,000	271,000
Payable to DVD					4,000
Receivable from DVD	$ 29,000,000		$ 29,000,000
Chairman of board of directors
Related Party Transactions
Minimum percentage of voting power controlled by related party	50.00%		50.00%
Minimum percentage of voting power of Gaming controlled by other related party	50.00%		50.00%

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CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Revenues:
Gaming	$ 41,349	$ 43,736	$ 120,415	$ 132,216
Other operating	6,639	6,337	19,256	18,423
Total revenues	47,988	50,073	139,671	150,639
Expenses:
Gaming	38,260	41,105	113,626	123,530
Other operating	4,638	4,407	13,691	13,039
General and administrative	1,468	1,354	4,284	4,310
Depreciation	2,196	2,378	6,764	7,411
Total expenses	46,562	49,244	138,365	148,290
Operating earnings (loss)	1,426	829	1,306	2,349
Interest expense	(412)	(460)	(1,312)	(1,267)
Earnings (loss) before income taxes	1,014	369	(6)	1,082
Income tax (expense) benefit	(315)	(146)	(184)	(651)
Net earnings (loss)	699	223	(190)	431
Unrealized gain on available-for-sale securities, net of income taxes	(5)	4	1	7
Change in pension net actuarial loss and prior service cost, net of income taxes	1	15	3	45
Comprehensive income (loss)	$ 695	$ 242	$ (186)	$ 483
Net earnings (loss) per common share:
Basic (in dollars per share)	$ 0.02	$ 0.01	$ (0.01)	$ 0.01
Diluted (in dollars per share)	$ 0.02	$ 0.01	$ (0.01)	$ 0.01

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Basis of Presentation

9 Months Ended

Sep. 30, 2014

Basis of Presentation

Basis of Presentation

NOTE 1 — Basis of Presentation

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

The accompanying consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and U.S. generally accepted accounting principles, and accordingly do not include all of the information and disclosures required for audited financial statements.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our latest Annual Report on Form 10-K filed on March 7, 2014.  In the opinion of management, these consolidated financial statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods presented.  Operating results for the three and nine-month periods ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

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Summary of Significant Accounting Policies (Details 2) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net earnings (loss) per common share - basic:
Net loss	$ 699,000	$ 223,000	$ (190,000)	$ 431,000
Allocation to nonvested restricted stock awards	17,000	6,000		11,000
Net earnings (loss) available to common stockholders	682,000	217,000	(190,000)	420,000
Weighted-average shares outstanding	31,962,000	31,849,000	31,961,000	31,848,000
Net loss per common share - basic (in dollars per share)	$ 0.02	$ 0.01	$ (0.01)	$ 0.01
Net earnings (loss) per common share - diluted:
Net loss	699,000	223,000	(190,000)	431,000
Allocation to nonvested restricted stock awards	17,000	6,000		11,000
Net earnings (loss) available to common stockholders	682,000	217,000	(190,000)	420,000
Weighted-average shares and dilutive shares outstanding	31,962,000	31,849,000	31,961,000	31,848,000
Net loss per common share - diluted (in dollars per share)	$ 0.02	$ 0.01	$ (0.01)	$ 0.01
Anti-dilutive securities not included in the computation of diluted EPS (in shares)	0	0	0	0
Accounting for stock-based compensation
Stock-based compensation expense for restricted stock awards	140,000	158,000	441,000	525,000
Income tax expense related to restricted stock awards	$ 56,000	$ 64,000	$ (6,000)	$ 5,000

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Pension Plans (Details) (Excess plan, USD $)	Sep. 30, 2014	Dec. 31, 2013
Excess plan
Pension Plans
Fair values of pension assets	$ 280,000	$ 269,000

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Business Operations

9 Months Ended

Sep. 30, 2014

Business Operations

Business Operations

NOTE 2 - Business Operations

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

In February 2013, we opened a Herschel’s Famous 34 Pub & Grill in Athens, Georgia, which has since been rebranded as Herschel’s 34 Chicken & Ribs Kitchen.  Herschel’s 34 is a 110-seat sports-themed restaurant owned and operated by us on approximately 4,100 square feet of leased property.  We have license rights to the name and likeness of former college and professional football star Herschel Walker for restaurant operations.

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 45 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.

In recent years, additional gaming venues have opened in Maryland, Pennsylvania and New Jersey and more are expected to open. These venues are having a significant adverse effect on our visitation numbers, our revenues and our profitability.  Management has estimated that approximately 30% of our gaming win comes from Maryland patrons and approximately 64% of our Capital Club® member gaming win comes from out of state patrons.

In June 2012, the State enacted the Delaware Gaming Competitiveness Act of 2012 (the “Act”), under which Delaware’s video lottery agents are authorized to offer, through their websites, internet versions of their table games (including poker) and video lottery offerings.  All games remain under the control and operation of the Delaware Lottery.  Revenues from the internet versions of table games and video lottery games are distributed generally pursuant to the formula currently applicable to those games physically located within our casino, with the exception that internet service provider costs are deducted first, and the Delaware Lottery retains the first $3.75 million of state-wide net proceeds.  We began offering internet gaming in the fourth quarter of 2013; to date operating results from internet gaming have not been material.  Internet lottery games are, at least initially, offered solely to persons located within the State of Delaware.  This territorial limitation would not apply to gaming pursuant to an interstate compact, such as the one announced in February 2014 between Delaware and Nevada.  Internet gaming participation is limited to persons who meet the age requirements for equivalent non-internet games.

The Act also eliminated the gaming license fee and restructured the table game license fee currently paid by video lottery agents to incentivize agents to make capital expenditures, spend on marketing and promotions, and make debt service payments.  In June 2012, we paid a $2,241,000 table game license fee, which was for the period July 1, 2012 to June 30, 2013.  This fee decreased to $1,017,000 for the period July 1, 2013 to June 30, 2014 and was paid in June 2013.  The fee increased slightly to $1,071,000 for the period July 1, 2014 to June 30, 2015 and was paid in June 2014.

In July 2013, the State enacted a bond and capital improvements bill which appropriated $8,000,000 to the Department of Finance to be used to offset increases in vendor costs that the three Delaware video lottery agents would otherwise pay for the period July 1, 2013 to June 30, 2014.  The State used $875,000 of the amount appropriated to offset increases in our vendor costs.  Additionally, the bill created a Lottery & Gaming Study Commission responsible for examining the competitive marketplace confronting the Delaware gaming industry, including the business performance and business plans of existing lottery agents, the marketing efforts and investments made by Delaware video lottery agents, and the division of revenue from the video lottery, sports lottery, table games and internet gaming.  The commission’s findings and recommendations were released in March 2014 and included: the State sharing certain vendor costs that the three Delaware video lottery agents currently pay associated with slot machines; reducing the State’s share of table game win; and eliminating the annual table game license fee.  On July 1, 2014, the Delaware legislature approved the vendor cost sharing recommendation.  The State estimates this will provide $9,900,000 to be used toward vendor costs for the three Delaware video lottery agents for the fiscal year July 1, 2014 to June 30, 2015.  This is being allocated among the three video lottery agents based on their relative portion of industry-wide slot revenues.  For the third quarter of 2014, our video lottery vendor costs were reduced by approximately $1,000,000 as a result of the cost sharing arrangement.  The recommendations to reduce the State’s share of gross table game revenues and eliminate the table game license fee were not part of the legislation that was passed.  The commission reconvened in September 2014 to consider previous and make further recommendations relative to the gaming industry.

Even with partial legislative relief, we may be unable to refinance or extend the maturity of our credit facility on favorable terms or may default on our obligations, we may be unable to allocate sufficient resources to marketing and promotions in order to compete effectively in the regional marketplace, we may be unable to allocate sufficient resources to maintaining our facility, and we may be required to take other actions in order to manage expenses - especially with respect to operations that have operated at a loss, such as table games and internet gaming.  Such actions could adversely affect our business, financial condition, operating results and cash flow.

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CONSOLIDATED BALANCE SHEETS (USD $)	Sep. 30, 2014	Dec. 31, 2013
Current assets:
Cash	$ 11,075,000	$ 12,950,000
Accounts receivable	3,500,000	4,248,000
Due from State of Delaware	8,568,000	8,225,000
Inventories	1,932,000	1,957,000
Prepaid expenses and other	3,398,000	2,432,000
Receivable from Dover Motorsports, Inc.	29,000
Income taxes receivable		138,000
Deferred income taxes	1,296,000	1,268,000
Total current assets	29,798,000	31,218,000
Property and equipment, net	154,469,000	160,570,000
Other assets	883,000	932,000
Total assets	185,150,000	192,720,000
Current liabilities:
Accounts payable	3,087,000	4,480,000
Purses due horsemen	8,607,000	7,978,000
Accrued liabilities	10,552,000	10,513,000
Payable to Dover Motorsports, Inc.		4,000
Income taxes payable	322,000
Deferred revenue	450,000	463,000
Revolving line of credit	40,500,000	47,040,000
Total current liabilities	63,518,000	70,478,000
Liability for pension benefits	3,013,000	3,353,000
Deferred income taxes	2,304,000	2,725,000
Total liabilities	68,835,000	76,556,000
Commitments and contingencies (see Notes to the Consolidated Financial Statements)
Stockholders' equity:
Preferred stock, $0.10 par value; 1,000,000 shares authorized; shares issued and outstanding: none
Additional paid-in capital	4,986,000	4,663,000
Retained earnings	109,145,000	109,335,000
Accumulated other comprehensive loss	(1,091,000)	(1,095,000)
Total stockholders' equity	116,315,000	116,164,000
Total liabilities and stockholders' equity	185,150,000	192,720,000
Common stock.
Stockholders' equity:
Common stock	1,788,000	1,774,000
Class A common stock
Stockholders' equity:
Common stock	$ 1,487,000	$ 1,487,000

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Pension Plans (Tables)

9 Months Ended

Sep. 30, 2014

Pension Plans

Schedule of components of net periodic pension income

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2014			2013			2014			2013
Interest cost	$	217,000		$	213,000		$	651,000		$	639,000
Expected return on plan assets	(276,000		)	(246,000		)	(827,000		)	(740,000		)
Recognized net actuarial loss	2,000			25,000			5,000			75,000
	$	(57,000	)	$	(8,000	)	$	(171,000	)	$	(26,000	)

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Oct. 31, 2014 Common stock.	Oct. 31, 2014 Class A common stock
Entity Registrant Name	DOVER DOWNS GAMING & ENTERTAINMENT INC
Entity Central Index Key	0001162556
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		17,880,650	14,870,673
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2014

Stockholders' Equity

Schedule of changes in the components of stockholders' equity

Changes in the components of stockholders’ equity are as follows (in thousands, except per share amounts):

	Common  Stock			Class A Common  Stock		Additional Paid-in  Capital			Retained  Earnings			Accumulated Other Comprehensive Loss
Balance at December 31, 2013	$	1,774		$	1,487	$	4,663		$	109,335		$	(1,095	)
Net loss	—			—		—			(190		)	—
Issuance of nonvested stock awards, net of forfeitures	21			—		(21		)	—			—
Stock-based compensation	—			—		441			—			—
Change in net actuarial loss and prior service cost, net of income tax expense of $2	—			—		—			—			3
Unrealized gain on available-for-sale securities, net of income tax expense of $1	—			—		—			—			1
Repurchase and retirement of common stock	(7		)	—		(97		)	—			—
Balance at September 30, 2014	$	1,788		$	1,487	$	4,986		$	109,145		$	(1,091	)

Schedule of accumulated other comprehensive loss

	September 30, 2014			December 31, 2013
Net actuarial loss and prior service cost not yet recognized in net periodic benefit cost, net of income tax benefit of $770,000 and $772,000, respectively	$	(1,120,000	)	$	(1,123,000	)
Accumulated unrealized gain on available-for-sale securities, net of income tax expense of $21,000 and $20,000, respectively	29,000			28,000
Accumulated other comprehensive loss	$	(1,091,000	)	$	(1,095,000	)

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock.
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized	74,000,000	74,000,000
Common stock, shares issued	17,880,650	17,736,479
Common stock, shares outstanding	17,880,650	17,736,479
Class A common stock
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	14,870,673	14,870,673
Common stock, shares outstanding	14,870,673	14,870,673

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Fair Value Measurements

9 Months Ended

Sep. 30, 2014

Fair Value Measurements

Fair Value Measurements

NOTE 7 — Fair Value Measurements

Our financial instruments are classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following table summarizes the valuation of our financial instrument pricing levels as of September 30, 2014 and December 31, 2013:

	Total		Level 1		Level 2		Level 3
September 30, 2014
Available-for-sale securities	$	280,000	$	280,000	$	—	$	—
December 31, 2013
Available-for-sale securities	$	269,000	$	269,000	$	—	$	—

Our investments in available-for-sale securities consist of mutual funds.  These investments are included in other assets on our consolidated balance sheets.

The carrying amounts of other financial instruments reported in our consolidated balance sheets for current assets and current liabilities approximates their fair values because of the short maturity of these instruments.

At September 30, 2014 and December 31, 2013, there was $40,500,000 and $47,040,000, respectively, outstanding under our revolving credit agreement.  The borrowings under our revolving credit agreement bear interest at the variable rate described in NOTE 4 — Credit Facility and therefore we believe approximate fair value.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2014

Stockholders' Equity

Stockholders' Equity

NOTE 6 — Stockholders’ Equity

Changes in the components of stockholders’ equity are as follows (in thousands, except per share amounts):

	Common  Stock			Class A Common  Stock		Additional Paid-in  Capital			Retained  Earnings			Accumulated Other Comprehensive Loss
Balance at December 31, 2013	$	1,774		$	1,487	$	4,663		$	109,335		$	(1,095	)
Net loss	—			—		—			(190		)	—
Issuance of nonvested stock awards, net of forfeitures	21			—		(21		)	—			—
Stock-based compensation	—			—		441			—			—
Change in net actuarial loss and prior service cost, net of income tax expense of $2	—			—		—			—			3
Unrealized gain on available-for-sale securities, net of income tax expense of $1	—			—		—			—			1
Repurchase and retirement of common stock	(7		)	—		(97		)	—			—
Balance at September 30, 2014	$	1,788		$	1,487	$	4,986		$	109,145		$	(1,091	)

As of September 30, 2014 and December 31, 2013, accumulated other comprehensive loss consists of the following:

	September 30, 2014			December 31, 2013
Net actuarial loss and prior service cost not yet recognized in net periodic benefit cost, net of income tax benefit of $770,000 and $772,000, respectively	$	(1,120,000	)	$	(1,123,000	)
Accumulated unrealized gain on available-for-sale securities, net of income tax expense of $21,000 and $20,000, respectively	29,000			28,000
Accumulated other comprehensive loss	$	(1,091,000	)	$	(1,095,000	)

On October 28, 2014, we were notified by the New York Stock Exchange (“NYSE”) that the average closing price of our common stock had fallen below $1.00 per share over a period of 30 consecutive trading days, which is the minimum average share price for continued listing on the NYSE.  Under NYSE rules, we have six months following receipt of the notification, subject to possible extension, to regain compliance with the minimum share price requirement or be subject to delisting.  We will monitor the price for our common stock and will consider available options to resolve the deficiency and regain compliance with the NYSE listing standards.  If we are not able to regain compliance, our stock will be delisted from trading on the NYSE.  This would result in the need to find another market on which our stock can be listed or cause our stock to cease trading on an active market, which could result in a reduction in the liquidity for our stock and a reduction in demand for our stock.

On January 23, 2013, our Board of Directors suspended the quarterly dividend.  In addition, our credit facility prohibits the payment of dividends.  See NOTE 4 — Credit Facility.

On October 23, 2002, our Board of Directors authorized the repurchase of up to 3,000,000 shares of our outstanding common stock.  The purchases may be made in the open market or in privately negotiated transactions as conditions warrant.  The repurchase authorization has no expiration date, does not obligate us to acquire any specific number of shares and may be suspended at any time.  No purchases of our equity securities were made pursuant to this authorization during the first nine months of 2014 or 2013.  At September 30, 2014, we had remaining repurchase authority of 1,653,333 shares.  At present we are not permitted to make such purchases under our credit facility.

We have a stock incentive plan which provides for the grant of up to 2,000,000 shares of common stock to our officers and key employees through stock options and/or awards valued in whole or in part by reference to our common stock, such as nonvested restricted stock awards.  Under the plan, nonvested restricted stock vests an aggregate of twenty percent each year beginning on the second anniversary date of the grant.  The aggregate market value of the nonvested restricted stock at the date of issuance is being amortized on a straight-line basis over the six-year period.  We granted 211,000 and 205,500 stock awards under this plan during the nine months ended September 30, 2014 and 2013, respectively.  As of September 30, 2014, there were 563,975 shares available for granting options or stock awards.

During the nine months ended September 30, 2014 and 2013, we purchased and retired 66,829 and 61,869 shares of our outstanding common stock for $104,000 and $144,000, respectively.  These purchases were made from employees in connection with the vesting of restricted stock awards under our stock incentive plan and were not pursuant to the aforementioned repurchase authorization.  Since the vesting of a restricted stock award is a taxable event to our employees for which income tax withholding is required, the plan allows employees to surrender to us some of the shares that would otherwise have vested in satisfaction of their tax liability.  The surrender of these shares is treated by us as a purchase of the shares.

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Credit Facility (Details) (Credit facility., USD $)	9 Months Ended
	Sep. 30, 2014	Jun. 30, 2015	Dec. 31, 2014	Aug. 14, 2014	Dec. 31, 2013
Credit Facility
Maximum borrowing capacity		$ 47,500,000	$ 50,000,000	$ 55,000,000
Percentage points added to the reference rate	3.25%
Outstanding borrowings	40,500,000				47,040,000
Weighted average interest rate on the amount outstanding (as a percent)	3.41%
Amount available for borrowing pursuant to the facility	$ 14,500,000
Minimum
Credit Facility
Percentage points added to the reference rate	1.50%
Maximum
Credit Facility
Percentage points added to the reference rate	3.50%

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Measurements

Summary of valuation of financial instrument

	Total		Level 1		Level 2		Level 3
September 30, 2014
Available-for-sale securities	$	280,000	$	280,000	$	—	$	—
December 31, 2013
Available-for-sale securities	$	269,000	$	269,000	$	—	$	—

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies

Basis of consolidation and presentation

Basis of consolidation and presentation—The consolidated financial statements include the accounts of Dover Downs Gaming & Entertainment, Inc. and its wholly owned subsidiaries.  Intercompany transactions and balances have been eliminated.

Accounts receivable

Accounts receivable—Accounts receivable are stated at their estimated collectible amount and primarily consist of casino, hotel and other receivables which arise in the normal course of business.  We issue credit in the form of “markers” to approved casino customers who are investigated as to their credit worthiness.

Investments

Investments—Investments, which consist of mutual funds, are classified as available-for-sale and reported at fair-value in other assets in our consolidated balance sheets.  Changes in fair value are reported in other comprehensive income (loss).  See NOTE 6 — Stockholders’ Equity and NOTE 7 — Fair Value Measurements for further discussion.

Property and equipment

Property and equipment—Property and equipment is stated at cost.  Depreciation is provided for financial reporting purposes using the straight-line method over the asset’s estimated useful life.  Accumulated depreciation was $122,373,000 and $115,790,000 as of September 30, 2014 and December 31, 2013, respectively.

We perform reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.  An impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its fair value.  Generally, fair value will be determined using valuation techniques such as the present value of future cash flows.

Income taxes

Income taxes—Deferred income taxes are provided on all differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements based upon enacted statutory tax rates in effect at the balance sheet date.  Tax years after 2010 remain open to examination for federal and state income tax purposes.

Point loyalty program

Point loyalty program—We currently have a point loyalty program for our customers which allows them to earn points based on the volume of their gaming activity.  All reward points earned by customers are expensed in the period they are earned.  The estimated amount of points redeemable for cash is recorded as a reduction of gaming revenue and the estimated amount of points redeemable for services and merchandise is recorded as gaming expense.  In determining the amount of the liability, which was $1,857,000 and $1,930,000, respectively, at September 30, 2014 and December 31, 2013, we estimate a redemption rate, a cost of rewards to be offered and the mix of cash, goods and services for which reward points will be redeemed.  We use historical data to estimate those amounts.

Revenue and expense recognition

Revenue and expense recognition—Gaming revenues represent (i) the net win from slot machine, table games, internet gaming and sports wagering and (ii) commissions from pari-mutuel wagering.  Other operating revenues consist of hotel rooms revenue, food and beverage sales and other miscellaneous income.  Revenues do not include the retail amount of hotel rooms, food and beverage and other miscellaneous goods and services provided without charge to customers as promotional items of $4,588,000 and $13,661,000, and $5,283,000 and $15,251,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively.  The estimated direct cost of providing these items has been charged to the casino through interdepartmental allocations and is included in gaming expenses in the consolidated statements of earnings.

For the casino operations, the difference between the amount wagered by bettors and the amount paid out to bettors is referred to as the win.  The win is included in the amount recorded in our consolidated financial statements as gaming revenue.  The Delaware State Lottery Office sweeps the win from the casino operations, collects the State’s share of the win and the amount due to the vendors under contract with the State who provide the slot machines and associated computer systems, collects the amount allocable to purses for harness horse racing and remits the remainder to us as our commission for acting as a Licensed Agent.  Gaming expenses include the amounts collected by the State (i) for the State’s share of the win, (ii) for remittance to the providers of the slot machines and associated computer systems, and (iii) for harness horse racing purses.  We recognize revenues from sports wagering commissions when the event occurs.  We recognize revenues from pari-mutuel commissions earned from live harness horse racing and importing of simulcast signals from other race tracks when the race occurs. Revenues from hotel rooms, food and beverage sales and other miscellaneous income are recognized at the time the service is provided.  Amounts received in advance for hotel rooms, convention bookings and advance ticket sales are recorded as deferred revenue until the services are provided to the customer, at which point revenue is recognized.

Advertising costs

Advertising costs—The cost of general advertising is charged to operations as incurred.  Advertising expenses were $663,000 and $1,705,000, and $734,000 and $1,757,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively.

Net earnings (loss) per common share

Net earnings (loss) per common share—Nonvested share-based payment awards that include rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating securities, and the two-class method of computing basic and diluted net earnings (loss) per common share (“EPS”)  is applied for all periods presented.  The following table sets forth the computation of EPS (in thousands, except per share amounts):

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2014		2013		2014			2013
Net earnings (loss) per common share — basic:
Net earnings (loss)	$	699	$	223	$	(190	)	$	431
Allocation to nonvested restricted stock awards	17		6		—			11
Net earnings (loss) available to common stockholders	$	682	$	217	$	(190	)	$	420
Weighted-average shares outstanding	31,962		31,849		31,961			31,848
Net earnings (loss) per common share — basic	$	0.02	$	0.01	$	(0.01	)	$	0.01
Net earnings (loss) per common share — diluted:
Net earnings (loss)	$	699	$	223	$	(190	)	$	431
Allocation to nonvested restricted stock awards	17		6		—			11
Net earnings (loss) available to common stockholders	$	682	$	217	$	(190	)	$	420
Weighted-average shares and dilutive shares outstanding	31,962		31,849		31,961			31,848
Net earnings (loss) per common share — diluted	$	0.02	$	0.01	$	(0.01	)	$	0.01

There were no options outstanding during the three and nine-month periods ended September 30, 2014 or 2013.

Accounting for stock-based compensation

Accounting for stock-based compensation—We recorded total stock-based compensation expense for our restricted stock awards of $140,000 and $441,000, and $158,000 and $525,000 as general and administrative expenses for the three and nine-month periods ended September 30, 2014 and 2013, respectively.  We recorded income tax benefit (expense) of $56,000 and ($6,000), and $64,000 and $5,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively, related to our restricted stock awards.

Use of estimates

Use of estimates—The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events.  These estimates and the underlying assumptions affect the reported amounts of assets and liabilities, disclosures about contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  These estimates and assumptions are based on our best estimates and judgment.  We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances.  We adjust such estimates and assumptions when facts and circumstances dictate.  Illiquid credit markets, volatile equity markets and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions.  As future events and their effects cannot be determined with precision, actual results could differ from these estimates.  Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

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Related Party Transactions

9 Months Ended

Sep. 30, 2014

Related Party Transactions

Related Party Transactions

NOTE 8 - Related Party Transactions

During the three and nine-month periods ended September 30, 2014 and 2013, we allocated costs of $473,000 and $1,465,000, and $496,000 and $1,416,000, respectively to DVD, a company related through common ownership, for certain administrative and operating services, including leased space.  DVD allocated certain administrative and operating service costs of $35,000 and $194,000, and $45,000 and $180,000, respectively, to us for the three and nine-month periods ended September 30, 2014 and 2013.  The allocations were based on an analysis of each company’s share of the costs.  In connection with DVD’s 2014 and 2013 NASCAR event weekends at Dover International Speedway, we provided certain services, primarily catering, for which DVD was invoiced $353,000 and $693,000, and $400,000 and $793,000 during the three and nine-month periods ended September 30, 2014 and 2013, respectively.  Additionally, DVD invoiced us $94,000 and $193,000, and $119,000 and $271,000, during the three and nine-month periods ended September 30, 2014 and 2013, respectively for tickets to DVD’s NASCAR event weekends at Dover International Speedway.  As of September 30, 2014 and December 31, 2013, our consolidated balance sheets included a $29,000 receivable from and a $4,000 payable to DVD, respectively, for the aforementioned items.  These items were settled in October 2014 and January of 2014, respectively.  The net costs incurred by each company for these services are not necessarily indicative of the costs that would have been incurred if the companies had been unrelated entities and/or had otherwise independently managed these functions; however, management believes that these costs are reasonable.

Prior to our spin-off from DVD in 2002, both companies shared certain real property in Dover, Delaware.  At the time of the spin-off, some of this real property was transferred to us to ensure that the real property holdings of each company was aligned with its past uses and future business needs.  During our harness racing season, we have historically used the 5/8-mile harness racing track that is located on DVD’s property and is on the inside of its one-mile motorsports superspeedway.  In order to continue this historic use, DVD granted a perpetual easement to the harness track to us at the time of the spin-off.  This perpetual easement allows us to have exclusive use of the harness track during the period beginning November 1 of each year and ending April 30 of the following year, together with set up and tear down rights for the two weeks before and after such period.  The easement requires that we maintain the harness track but does not require the payment of any rent.

Various easements and agreements relative to access, utilities and parking have also been entered into between us and DVD relative to our respective Dover, Delaware facilities.  DVD pays rent to us for the lease of its principal executive office space.  We also allow DVD to use our indoor grandstands in connection with DVD’s two annual motorsports weekends.  We do not assess rent for this nominal use and may discontinue the use at our discretion.

Henry B. Tippie, Chairman of our Board of Directors, controls in excess of fifty percent of our voting power.  Mr. Tippie’s voting control emanates from his direct and indirect holdings of common stock and Class A common stock, from his status as trustee of the RMT Trust, our largest stockholder, and from certain shares as to which he has voting rights pursuant to a voting agreement with R. Randall Rollins, one of our directors.  This means that Mr. Tippie has the ability to determine the outcome of our election of directors and to determine the outcome of many significant corporate transactions, many of which only require the approval of a majority of our voting power.

Patrick J. Bagley, Timothy R. Horne, Denis McGlynn, Jeffrey W. Rollins, R. Randall Rollins, Richard K. Struthers and Henry B. Tippie are all Directors of ours and DVD.  Denis McGlynn is the President and Chief Executive Officer of both companies, Klaus M. Belohoubek is the Senior Vice President — General Counsel and Secretary of both companies and Timothy R. Horne is the Senior Vice President — Finance and Chief Financial Officer of both companies.  Mr. Tippie controls in excess of fifty percent of the voting power of DVD.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies

Commitments and Contingencies

NOTE 9 — Commitments and Contingencies

We are a party to ordinary routine litigation incidental to our business.  Management does not believe that the resolution of any of these matters is likely to have a material adverse effect on our results of operations, financial position or cash flows.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies

Schedule of computation of basic and diluted EPS

The following table sets forth the computation of EPS (in thousands, except per share amounts):

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2014		2013		2014			2013
Net earnings (loss) per common share — basic:
Net earnings (loss)	$	699	$	223	$	(190	)	$	431
Allocation to nonvested restricted stock awards	17		6		—			11
Net earnings (loss) available to common stockholders	$	682	$	217	$	(190	)	$	420
Weighted-average shares outstanding	31,962		31,849		31,961			31,848
Net earnings (loss) per common share — basic	$	0.02	$	0.01	$	(0.01	)	$	0.01
Net earnings (loss) per common share — diluted:
Net earnings (loss)	$	699	$	223	$	(190	)	$	431
Allocation to nonvested restricted stock awards	17		6		—			11
Net earnings (loss) available to common stockholders	$	682	$	217	$	(190	)	$	420
Weighted-average shares and dilutive shares outstanding	31,962		31,849		31,961			31,848
Net earnings (loss) per common share — diluted	$	0.02	$	0.01	$	(0.01	)	$	0.01

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Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Property and Equipment
Accumulated depreciation	$ 122,373,000		$ 122,373,000		$ 115,790,000
Point loyalty program
Point loyalty program	1,857,000		1,857,000		1,930,000
Revenue and expense recognition
Goods and services provided without charge to customers as promotional items	4,588,000	5,283,000	13,661,000	15,251,000
Advertising costs
Advertising expenses	$ 663,000	$ 734,000	$ 1,705,000	$ 1,757,000

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Pension Plans (Details 3) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
SERP
Defined contribution plan disclosures
Expense recorded	$ 30,000	$ 30,000	$ 90,000	$ 90,000
Employer contributions	115,000		115,000	107,000
Liability for benefits	88,000		88,000		113,000
Defined contribution 401 (k) plan)
Defined contribution plan disclosures
Expense recorded	$ 223,000	$ 198,000	$ 615,000	$ 620,000

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Operating activities:
Net loss	$ (190)	$ 431
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation	6,764	7,411
Amortization of credit facility origination fees	106	140
Stock-based compensation	441	525
Deferred income taxes	(435)	(333)
Gain from insurance settlement		(22)
Changes in assets and liabilities:
Accounts receivable	748	405
Due from State of Delaware	(343)	407
Inventories	25	(112)
Prepaid expenses and other	(934)	(799)
Receivable from/payable to Dover Motorsports, Inc.	(33)	(12)
Accounts payable	(1,393)	(424)
Purses due horsemen	629	(523)
Accrued liabilities	39	(503)
Income taxes payable/receivable	443	262
Deferred revenue	(13)	(9)
Other liabilities	(335)	(20)
Net cash provided by operating activities	5,519	6,824
Investing activities:
Capital expenditures	(640)	(1,283)
Insurance settlement proceeds		74
Purchase of available-for-sale securities	(28)	(27)
Proceeds from sale of available-for-sale securities	26	25
Net cash used in investing activities	(642)	(1,211)
Financing activities:
Borrowings from revolving line of credit	81,470	56,140
Repayments of revolving line of credit	(88,010)	(62,140)
Repurchase of common stock	(104)	(144)
Credit facility fees	(108)	(70)
Net cash used in financing activities	(6,752)	(6,214)
Net decrease in cash	(1,875)	(601)
Cash, beginning of period	12,950	14,993
Cash, end of period	11,075	14,392
Supplemental information:
Interest paid	1,226	1,106
Income tax payments	$ 175	$ 722

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Pension Plans

9 Months Ended

Sep. 30, 2014

Pension Plans

Pension Plans

NOTE 5 — Pension Plans

We maintain a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011.  All of our full time employees were eligible to participate in this qualified pension plan.  Benefits provided by our qualified pension plan were based on years of service and employees’ remuneration over their term of employment.  We also maintain a non-qualified, non-contributory defined benefit pension plan, the excess plan, for certain employees that has been frozen since July 2011.  This excess plan provided benefits that would otherwise be provided under the qualified pension plan but for maximum benefit and compensation limits applicable under federal tax law.  The cost associated with the excess plan is determined using the same actuarial methods and assumptions as those used for our qualified pension plan. The assets for the excess plan aggregate $280,000 and $269,000 as of September 30, 2014 and December 31, 2013, respectively, and are recorded in other assets in our consolidated balance sheets (see NOTE 7 — Fair Value Measurements).

On June 15, 2011, we decided to freeze participation and benefit accruals under our pension plans, primarily to reduce some of the impact on earnings and volatility in cash flows that can accompany the maintenance of a defined benefit plan.  The freeze was effective July 31, 2011.  Compensation earned by employees up to July 31, 2011 is used for purposes of calculating benefits under our pension plan with no future benefit accruals after this date.  Participants as of July 31, 2011 continue to earn vesting credit with respect to their frozen accrued benefits as they continue to work.

The components of net periodic pension income for our defined benefit pension plans are as follows:

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2014			2013			2014			2013
Interest cost	$	217,000		$	213,000		$	651,000		$	639,000
Expected return on plan assets	(276,000		)	(246,000		)	(827,000		)	(740,000		)
Recognized net actuarial loss	2,000			25,000			5,000			75,000
	$	(57,000	)	$	(8,000	)	$	(171,000	)	$	(26,000	)

We contributed $95,000 and $140,000 to our defined benefit pension plans during the three and nine-month periods ended September 30, 2014.  We do not expect to make any further contributions to our defined benefit pension plans in 2014.  We did not contribute to our defined benefit pension plans in 2013.

Effective December 1, 2012, we created a new non-elective, non-qualified supplemental executive retirement plan (“SERP”) in connection with the freezing of our pension plan.  Its purpose is to provide deferred compensation to certain highly compensated employees that approximates the value of benefits lost by the freezing of the pension plan which are not offset by our enhanced matching contribution in our 401(k)  plan.  The SERP is a discretionary defined contribution plan and contributions made to the SERP in any given year are not guaranteed and will be at the sole discretion of our Compensation and Stock Incentive Committee.  During the three and nine-month periods ended September 30, 2014 and 2013, we recorded expenses of $30,000 and $90,000, and $30,000 and $90,000, respectively, related to the SERP.  During the nine months ended September 30, 2014 and 2013, we contributed $115,000 and $107,000 to the plan, respectively.  The liability for pension benefits was $88,000 and $113,000 as of September 30, 2014 and December 31, 2013, respectively.

We maintain a defined contribution 401(k) plan which permits participation by substantially all employees.  Our matching contributions to the 401(k) plan were $223,000 and $615,000, and $198,000 and $620,000 for the three and nine-month periods ended September 30, 2014 and 2013, respectively.

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Stockholders' Equity (Details) (USD $)	3 Months Ended		9 Months Ended					9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 Common Stock Common stock.	Sep. 30, 2014 Common Stock Class A common stock	Dec. 31, 2013 Common Stock Class A common stock	Sep. 30, 2014 Additional Paid-in Capital	Sep. 30, 2014 Retained Earnings	Sep. 30, 2014 Accumulated Other Comprehensive Loss
Changes in the components of stockholders' equity
Balance at the beginning of the period			$ 116,164,000		$ 1,774,000	$ 1,487,000	$ 1,487,000	$ 4,663,000	$ 109,335,000	$ (1,095,000)
Net loss	699,000	223,000	(190,000)	431,000					(190,000)
Issuance of nonvested stock awards, net of forfeitures					21,000			(21,000)
Stock-based compensation								441,000
Change in net actuarial loss and prior service cost, net of income tax expense of $2										3,000
Unrealized gain on available-for-sale securities, net of income tax expense of $1	(5,000)	4,000	1,000	7,000						1,000
Repurchase and retirement of common stock			(104,000)	(144,000)	(7,000)			(97,000)
Balance at the end of the period	$ 116,315,000		$ 116,315,000		$ 1,788,000	$ 1,487,000	$ 1,487,000	$ 4,986,000	$ 109,145,000	$ (1,091,000)

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Business Operations (Details) (USD $)	1 Months Ended				3 Months Ended	9 Months Ended
	Jun. 30, 2014	Jul. 31, 2013 item	Jun. 30, 2013	Jun. 30, 2012	Sep. 30, 2014 sqft room item	Sep. 30, 2014 sqft room item	Jul. 01, 2014	Jul. 02, 2013 item	Feb. 28, 2013 sqft item
Business Operations
Area of casino (in square feet)					165,000	165,000
Number of retail outlets					4	4
Number of rooms in AAA Four Diamond hotel					500	500
Number of seats in sports-themed restaurant									110
Area of leased property (in square feet)									4,100
Number of Licensed Agents under Delaware State Lottery Code					3	3		3
Number of consecutive years for which annual license has been received from the Harness Racing Commission						45 years
State-wide net proceeds to be retained in lottery					$ 3,750,000	$ 3,750,000
Table game license fee paid	1,071,000		1,017,000	2,241,000
Business operations
Amount appropriated to Department of Finance under a bond and capital improvements bill								8,000,000
Number of agents used to offset increases in vendor costs		3
Amount used by the state to offset the increases in vendor costs		875,000
Amount of financial relief approved by the Delaware legislative							9,900,000
Amount of video lottery vendor costs reduced					$ 1,000,000
Gaming win | Geographic concentration risk | Maryland patrons
Business operations
Estimated percentage of gaming win attributable to patrons						30.00%
Capital Club member gaming win | Geographic concentration risk | Out of state patrons
Business operations
Estimated percentage of gaming win attributable to patrons						64.00%