Basis for Presentation and Nature of Business

Basis for Presentation

The condensed consolidated financial statements and notes as of September 30, 2015 and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014 are unaudited and include the accounts of Empire Resorts, Inc. (“Empire”) and subsidiaries (together with its subsidiaries, the “Company”).

The condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and the footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) which are, in the Company’s opinion, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014. The results of operations for the interim period may not be indicative of results to be expected for the full year.

Nature of Business

Through Empire’s wholly-owned subsidiary, Monticello Raceway Management, Inc. ("MRMI"), we currently own and operate Monticello Casino and Raceway, a 45,000 square foot video gaming machine ("VGM") and harness horseracing facility located in Monticello, New York, 90 miles northwest of New York City. Monticello Casino and Raceway operates 1,110 VGMs, which includes 1,080 video lottery terminals ("VLTs") and 30 electronic game positions ("ETGs"). VGMs are similar to slot machines, but they are connected to a central system and report financial information to the central system. The 2015-2016 New York State Budget (the "Budget") expands the statutory definition of Video Lottery Gaming which enables MRMI to operate ETGs of the games of blackjack and 3-card poker. MRMI has begun to add ETGs of the game of blackjack to its facility and will add other games as they are approved by the NYSGC (defined below). We also generate racing revenues through pari-mutuel wagering on the running of live harness horse races, the import simulcasting of harness and thoroughbred horse races from racetracks across the country and internationally, and the export simulcasting of our races to offsite pari-mutuel wagering facilities.

In a letter dated December 30, 2014, the New York State Gaming Commission ("NYSGC") approved MRMI's racetrack and simulcast license renewal applications for calendar year 2015. Generally, the annual license renewal process requires the NYSGC to review the financial responsibility, experience, character and general fitness of MRMI and its management.

Casino Project

Montreign Operating Company, LLC ("Montreign"), a wholly owned subsidiary of Empire, has been selected as the sole casino applicant eligible to apply to the NYSGC for a gaming facility license (a "Gaming Facility License") to operate a resort casino in the Catskill/Hudson Valley Region One (“Region One” or "our Area"). On December 17, 2014, the New York State Gaming Facility Location Board (the “Siting Board”) unanimously selected Montreign's proposal to build a resort casino to be located at the site of a four-season destination resort planned for the Town of Thompson in Sullivan County 90 miles from New York City ("Adelaar" or the "Adelaar Project"). The NYSGC will award a Gaming Facility License to each applicant upon confirmation of such applicant's suitability and its ability to complete the Gaming Facility (as defined below). At the NYSGC's September 24, 2015 public meeting, the Executive Director said that the NYSGC remains "on track to take licensing action by the end of the calendar year" 2015.

The Adelaar Project is to be located on 1,500 acres (the "EPT Property") owned by EPT Concord II, LLC ("EPT") and EPR Concord II, LP, each a wholly-owned subsidiary of EPR Properties Trust (together with its subsidiaries, "EPR"). The casino resort, to be called "Montreign Resort Casino," is part of the initial phase of Adelaar, which will also include an indoor Waterpark Lodge (the "Waterpark"), Rees Jones redesigned "Monster" Golf Course (the "Golf Course") and an Entertainment Village, which will include retail, restaurants, shopping and entertainment (the "Entertainment Village"). Together with Montreign Resort Casino, this initial phase of the Adelaar Project is referred to as the "Gaming Facility." The Company and EPR have entered into various agreements in connection with the Adelaar Project and Casino Project, including the Master Development Agreement and Option Agreement, which are discussed below. Over the past four (4) years, the Company has expended substantial time and resources on designing Montreign Resort Casino and, in conjunction with EPR, working with local, state and federal agencies and officials to obtain the necessary permits and approvals to begin construction. The development of the Adelaar Project and the Montreign Resort Casino are contingent upon various conditions, including obtaining all necessary governmental approvals, including the award of the Gaming Facility License, and the Company's ability to obtain necessary financing.

Master Development Agreement

On December 14, 2012 (the "Effective Date"), EPT and the Company entered into the Master Development Agreement ("MDA") to develop the EPT Property. The MDA defines and governs the overall relationship between EPT and the Company with respect to the development, construction, operation, management and disposition of the Adelaar Project to be developed by the parties on the EPT Property. The term of the MDA commenced on the Effective Date and shall expire on the earlier of (i) the earliest date on which the Casino Project (as defined below), the Golf Course Project and the Initial Resort Project (as such terms are defined in the MDA) are all open to the general public for business and (ii) the sooner termination pursuant to the terms of the MDA. The parties also agreed to continue to cooperate in good faith with the on-going development plans and have agreed to share certain mutually agreed upon expenses including expenses relating to common infrastructure work. Either party has the right to terminate the MDA prior to the execution of a lease between EPT and the Company with respect to the EPT Property prior to the commencement of construction on the Casino Project (the "Casino Lease"). Following the payment of any additional amounts accrued pursuant to the MDA as of the date of termination, neither party shall have any obligations under the MDA.

In accordance with the terms of the MDA, the Company shall be responsible for the development and construction of the Casino Project. Once the development of the Casino Project is completed, the Company shall then be responsible for maintaining and operating the Casino Project in accordance with the operating standards contained in the Casino Lease.

The Company and EPT agreed to cooperate with each other and appropriate governmental authorities and to provide such information as may be reasonably requested by such governmental authorities in order to obtain and maintain all gaming and related licenses required to operate the Casino Project. In accordance with the terms of the Option Agreement, which is discussed below, we waived our right to terminate the MDA pursuant to specified provisions therein and, unless the Option terminates due to the occurrence of a Trigger Event, which is defined below, so long as EPT has provided its notice to proceed, the Master Declaration has been executed and EPT is not in breach of the Option Agreement or any other agreements between the parties, we are prohibited from building or operating a Gaming Facility in our Area anywhere other than at the EPT Property or building or operating a VGM facility anywhere other than at MRMI’s existing site or at the EPT Property for a period of five (5) years following the termination of the Option Agreement.

Option Agreement

On December 21, 2011 (the “Option Effective Date”), the Company entered into an option agreement with EPT, which was last amended by a letter agreement dated June 20, 2014, between EPT and the Company (as amended, the “Option Agreement”). Pursuant to the Option Agreement, EPT granted us a sole and exclusive option (the “Option”) to lease portions of the EPT Property on which Montreign Resort Casino will be located pursuant to the terms of the form of Casino Lease negotiated between the parties. Our rights and obligations pursuant to the Option Agreement are subject to certain existing EPT agreements.

Among other things, the Option Agreement reflects the parties' agreement of when the Company must decide whether it will lease certain portions of the EPT Property. Pursuant to the Option Agreement, on November 30, 2013, the Company exercised its right to extend the date by which it must make such determination (the "Option Exercise Period End Date") for up to a twelve (12) month period ending November 30, 2014 (the "First Extended Option Exercise Period"). In addition, the final date by which the Company must decide whether or not to execute the Casino Lease (the "Final Option Exercise Outside Date") was extended to a date that is (i) one hundred twenty (120) days from the earliest to occur of specified triggers relating to whether the Company is chosen to receive a Gaming Facility license or (ii) sixty (60) days from when affiliates of MRMI enter into an agreement to develop a gaming facility with someone other than MRMI (each a "Trigger Event"). In consideration of such extension, the Company made monthly option payments (each an “Option Payment”). If a Trigger Event occurs, EPT may, at its sole discretion, extend the Final Option Exercise Outside Date by a maximum of ninety (90) days and, before the Final Option Exercise Outside Date, waive such Trigger Event in writing (in which case the Option Agreement would continue as if such Trigger Event had not occurred).

Because a Trigger Event did not occur as of the end of the First Extended Option Exercise Period, (i) the Company exercised its right to extend the Option Exercise Period End Date by up to an additional twelve (12) months (the “Second Extended Option Exercise Period”) from November 30, 2014 to November 30, 2015 by making monthly Option Payments of $375,000 per month. We are making such monthly Option Payments. If a Trigger Event has not occurred as of the end of the Second Extended Option Exercise Period, the Company may extend the Option Exercise Period End Date on a monthly basis until the occurrence of a Trigger Event by making monthly Option Payments at an even higher amount. If the Company exercises the Option and the Casino Lease is executed between the parties, any Option Payments made by the Company shall constitute prepaid rent and shall be applied against amounts due to EPT as rent under the Casino Lease.

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

During the term of the Option Agreement, the Company agreed to make a good faith effort to pursue a Gaming Facility License. If the Company fails to diligently pursue the Gaming Facility License, the Company shall notify EPT and the Final Option Exercise Outside Date shall be sixty (60) days following the receipt of such notice by EPT. In furtherance of the Adelaar Project and the Casino Project, EPT and the Company negotiated the terms of a Master Declaration that was executed by EPT on December 6, 2013, which addresses the covenants, conditions, easements and restrictions of the Concord Resorts Master Association, LLC for the Adelaar Project.

EPT also granted the Company the option to purchase the EPT Property, together with the other property owned by EPT at the site of the former Concord Resort, which option was exercisable any time between May 1, 2015 and September 30, 2015, at book value as of August 30, 2013 plus capitalized expenses incurred by EPT after such date through the purchase date and related to the development of the EPT Property. The Company did not exercise such option.

Pursuant to the Option Agreement, we have made cumulative life to date option payments to EPT in the amount of $8.0 million as of September 30, 2015.

Pursuant to the June 20, 2014 letter agreement to amend the Option Agreement, the Company and EPT agreed to amend the terms of the Casino Lease to expire on the earlier of: (i) the last day of the calendar month that is seventy (70) years after the commencement of the Casino Lease, and (ii) upon the Company giving EPT written notice of its election to terminate the Casino Lease (the “Termination Option”) at least twelve (12) months prior to any one of five (5) Option Dates (as defined below). The Option Dates under the letter agreement mean each of the twentieth (20th), thirtieth (30th), fortieth (40th), fiftieth (50th) and sixtieth (60th) anniversary of the commencement of the ground lease. Upon the Company's timely notice of exercise of its Termination Option, the Casino Lease shall be automatically terminated effective as of the applicable Option Date. Additionally, within sixty (60) days after a Gaming Facility License has been awarded to Montreign, MRMI will assign, and Montreign will assume, the Option and Casino Lease to own or acquire the land through a tenancy for a term of seventy (70) years. The remaining terms and conditions of the Option Agreement remain unchanged.

Montreign Resort Casino

Montreign's proposal to build a Gaming Facility at Adelaar that was selected by the Siting Board anticipates that our minimum capital investment, without the license fee, would be approximately $452 million. The Gaming Facility selected by the Siting Board contemplates the following elements:

• Montreign Resort Casino (defined above as Casino Project): An 18-story casino, hotel and entertainment complex

featuring an 80,000 sq.ft. casino (with 61 table games and 2,150 state-of-the-art slot machines), 391 luxury rooms designed to meet the 4-star and 4-diamond standards of Forbes® and AAA®, multiple dining and entertainment options, and meeting and conference space.

• Indoor Waterpark Lodge: A 350 room, family-style, non-gaming resort featuring a wide range of amenities including the excitement of an 80,000 sq.ft. indoor water park, dining facilities and other recreational opportunities. The Indoor Waterpark Lodge will be the first resort hotel with an indoor waterpark in the Catskills region.

• Entertainment Village: A pedestrian-friendly, 200,000 sq.ft. entertainment village featuring multiple dining opportunities and specialty retail shops.

• Monster Golf Course: This famous course will be redesigned and improved by Rees Jones, “The Open Doctor”. It will be playable by golfers of every skill level and is yet another amenity to complement Montreign Resort Casino, which will lease and manage the course.

Since our selection by the Siting Board, we have submitted to the NYSGC proposed changes to Montreign Resort Casino (the "Proposed Changes"), and other changes to the Gaming Facility, as described below. The Proposed Changes would require an increase to our previously projected minimum capital investment in Montreign Resort Casino (including the Proposed Changes, the "Casino Project") to be approximately $650 million which includes the Company's expanded role in the development of Adelaar, but excludes the license fee, for a combined anticipated investment in the Gaming Facility by the Company and EPR of $1.3 billion. We expect that the Proposed Changes will provide incremental profit and cash flow to support the additional investment.

The differences between the proposal submitted by Montreign that was selected by the Siting Board and the Proposed Changes include the following:



Selected Plan	Proposed Plan
80,000 sq. ft. casino with 61 table games	Approximately 95,200 sq. ft. casino with approximately 102 table games Additionally, there will be a poker room and private gaming areas with a lounge
391 luxury rooms designed to meet the 4-star and 4-diamond standards of Forbes® and AAA®	Approximately 333 luxury rooms including 249 rooms of approximately 600 sq. ft. each, 60 suites of approximately 900 sq. ft. each, Penthouse level with 9 suites of approximately 1,100 to 2,300 sq. ft. each with butler service available, 8 garden suites of approximately 1,200 sq. ft. each and 7 two-story villas of approximately 1,800 sq. ft. each, all of which will be designed to meet the 5-star and 5-diamond standards of Forbes® and AAA®
20,000 sq. ft. meeting and conference space in the M Centre	Approximately 27,000 sq. ft. meeting and conference space in the M Centre

The Proposed Changes include several minor changes to the building’s footprint. The hotel tower would be elongated by approximately 50 feet and a new basement level would be added under the main entrance of the Montreign Resort Casino. The overall square footage of the footprint of the building would not, however, increase. Minor modifications to the porte-cochere and loading areas would also be required. Many of the interior spaces are being redesigned. The size and number of restaurants would increase and include the addition of an upscale Asian restaurant. On-site parking would decrease by approximately 53 spaces to 3,389. Additionally, due to the increased meeting and conference space, the showroom will be removed. The Proposed Changes are subject to the approval of, among others, the NYSGC. The Company received the approval of the Town Board of the Town of Thompson (the "Town Board") and the Planning Board of the Town of Thompson (the "Planning Board") in relation to the Proposed Changes. In accordance with the Report and Findings of the Siting Board dated February 27, 2015, which is available on the NYSGC's website, the NYSGC must ensure that Montreign substantially fulfills the commitments and executes the development plans presented in response to the Request for Applications ("RFA") that Montreign submitted to the Siting Board and to ensure that any changes do not increase Montreign's debt-to-equity ratio substantially beyond the levels presented by Montreign in its response to the RFA and/or standard industry practices. Therefore, we expect the increase in the minimum capital investment for the proposed plan to be financed by additional equity and debt financing in substantially the same debt-to-equity ratio previously considered.

In addition to the Proposed Changes, certain amendments to the Waterpark and the Entertainment Village have been submitted to the NYSGC. It is expected that the Waterpark will be relocated to a site that provides space for future expansion, dependent on market demand. The initial design of the Waterpark has been revised to address present market conditions and will include approximately 300 family style suites (in place of 350 suites originally proposed) and a 75,000 square foot indoor waterpark (in place of an 80,000 square foot waterpark originally proposed). The development of the Entertainment Village is expected to be built-out in phases with the initial phase being approximately 50,000 square feet. At full build-out, the Entertainment Village will be approximately 150,000-200,000 square feet, depending on market demand. Minor changes are anticipated to the Golf Course. The expansion of the Company's role in the development of Adelaar and the changes to the Gaming Facility are subject to NYSGC and other approvals and will further increase the Company's financing in connection with the Adelaar Project.

On September 3, 2015, MRMI and EPT entered into a non-binding term sheet (the “Term Sheet”) reflecting general terms of a proposed amendment to the Option Agreement. The Term Sheet contemplates, among other things, amendments to the Option Agreement that would require MRMI and/or its affiliates to lease the parcels on which the Golf Course and Entertainment Village will be located in addition to the Casino Project parcel in connection with the exercise of the Option Agreement for the portion of the EPT Property on which the Casino Project will be built. The Term Sheet also includes proposed terms on which MRMI and/or its affiliates would be responsible for developing the Golf Course and Entertainment Village, in addition to the Montreign Resort Casino, and EPR would be responsible for developing the Waterpark. The Company anticipates investing approximately $15 million for the redesign of the Golf Course and approximately $25 million for the development of the Entertainment Village.

The Term Sheet also contemplates a separate purchase option agreement granting MRMI and/or its affiliates the right to purchase all three, but not less than all three, of the Casino Project, Golf Course and Entertainment Village parcels at a purchase price that increases over time and also a purchase option with respect to, and a right of first offer for, the remaining undeveloped portions of the EPT Property for ten (10) years. MRMI and EPT are negotiating the terms of the definitive documents. The Term Sheet is for discussion purposes only and is not binding on either MRMI or EPT until definitive agreements are executed and the terms of such definitive agreements may be subject to regulatory review and/or approval.

Liquidity

The accompanying condensed consolidated financial statements have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company anticipates that its current cash and cash equivalents balances and cash generated from operations will not be sufficient to meet the working capital requirements of our current operations for the next twelve months unless the Company is awarded a Gaming Facility License (in which case the Kien Huat Note (as defined below) will be converted into common stock of the Company, subject to the conditions described below) or the Kien Huat Note is renegotiated to extend the maturity date. If we are awarded a Gaming Facility License, we will require additional capital resources to finance the Casino Project and our expanded role in the development of Adelaar if we agree on definitive terms with EPR and its subsidiaries. To fund our role in the development of the Adelaar Project, we may seek to enter into strategic agreements, joint ventures or similar agreements or we may sell additional debt or equity in public or private transactions. The sale of additional equity could result in additional dilution to the Company’s existing stockholders and financing arrangements may not be available to us, or may not be available in amounts or on acceptable terms.

As of September 30, 2015, we had total current assets of approximately $13.4 million and current liabilities of approximately $34.7 million, including the $17.4 million convertible promissory note ("Kien Huat Note") issued to Kien Huat Realty III Limited ("Kien Huat"), our largest stockholder. As of September 30, 2015, our total assets included approximately $34.1 million of remaining net proceeds from the January 2015 Rights Offering (as defined and discussed below) which are presented on the balance sheet as a non-current asset. The proceeds of the January 2015 Rights Offering, which were approximately $49.5 million, may be used solely to pay for the expenses relating to the pursuit of a Gaming Facility License and for development purposes. In the nine months ended September 30, 2015, we incurred $22.8 million of development expenses for the Casino Project, of which $15.4 million was disbursed through September 30, 2015. If the Company is not awarded a Gaming Facility License, the remaining portion of the proceeds of the January 2015 Rights Offering, after the payment of all outstanding expenses incurred by the Company in pursuit of the Gaming Facility License, may be used for general working capital of the Company, including the repayment of the Kien Huat Note. A failure to obtain a Gaming Facility License constitutes an immediate event of default under the Kien Huat Note. If the Kien Huat Note is not converted into shares of our common stock or if an event of default occurs prior to its maturity date of March 15, 2016, we may need to repay the Kien Huat Note in full or renegotiate the terms of the Kien Huat Note. However, there can be no assurance that the Company will be successful in renegotiating the Kien Huat Note to extend its maturity and potentially revising other terms. If the Company is unable to amend the Kien Huat Note prior to its maturity or if we default on the Kien Huat Note as a result of the Company's failure to obtain a Gaming Facility License, it would have a material adverse effect on the Company.

We have had continuing net losses and negative cash flow from operating activities, including a loss from operations of $22.8 million for the nine months ended September 30, 2015. The net losses for the nine months ended September 30, 2015 were primarily related to the Company’s on-going expenditures with respect to the Casino Project, which expenses can not be capitalized unless and until the Company is awarded a Gaming Facility License. As discussed above, in the nine months ended September 30, 2015 we incurred $22.8 million of development expenses for the Casino Project, of which $15.4 million was disbursed from cash through September 30, 2015. Until such time as the Company is awarded a Gaming Facility License and the expenses of the development may be capitalized, the on-going expenditures with respect to the Casino Project will continue to negatively impact our results of operations. Although the NYSGC has stated its intention to award a Gaming Facility License prior to the end of calendar year 2015, there is no guarantee or assurance that the NYSGC will award us a Gaming Facility License prior to the end of the year, if at all. The Company has adequate funds to support the development activities to which it has committed with respect to the Casino Project.

Pursuant to the RFA, a holder of a Gaming Facility License must pay a minimum licensing fee within thirty (30) days after the award of a Gaming Facility License, which in our case would be $51 million. In the event the Company is awarded a Gaming Facility License, the Company currently anticipates financing the associated costs and expenses of the license award and the development of the Casino Project, including the licensing fee, and, if the Company and EPR agree to definitive terms, the development of the Golf Course and Entertainment Village, with a combination of debt and equity financing. The Proposed Changes and the Company's expanded role in the development of Adelaar would increase our previously projected minimum capital investment in the Gaming Facility to be approximately $650 million excluding the license fee, for a combined anticipated investment in the Gaming Facility by the Company and EPR of $1.3 billion.

To support the Proposed Changes and the expansion of the Company's role in the development of Adelaar, the Company entered into amendments to the debt and equity financing commitments initially obtained in June 2014 in support of Montreign's application for a Gaming Facility License. For the debt portion of the Company's financing, in June 2014 Credit Suisse AG ("Credit Suisse") committed to provide a senior secured credit facility ("CS Credit Commitment") of up to a maximum amount of $478 million. On September 22, 2015, Credit Suisse and the Company entered into a further amendment to the CS Credit Commitment increasing the financing commitment of Credit Suisse up to a maximum of $545 million. The CS Credit Commitment provides that Credit Suisse may change the terms of the credit facility to ensure successful syndication. The CS Credit Commitment is subject to various conditions precedent, including the Company’s receipt of a Gaming Facility License and evidence of an equity investment in the Company, in an amount which increased from an aggregate total of $150 million to an aggregate total of $301 million, of which $50 million was raised in the January 2015 Rights Offering discussed below. With respect to the $301 million equity investment the Company is required to evidence, the Company is permitted to take into account an estimated $10 million of the amounts expended on the Casino Project prior to January 2015.

We may launch a rights offering to our existing equity holders in an amount necessary to meet the equity investment requirements of the CS Credit Commitment and to redeem certain outstanding Series E Preferred Stock of the Company in accordance with an existing settlement agreement. On June 26, 2014, the Company and Kien Huat entered into a letter agreement (as amended, the "Commitment Letter"), pursuant to which Kien Huat committed to exercise its proportionate share of subscription rights if the Company commended a rights offering on the terms described in the Commitment Letter to meet the requirements of the CS Credit Commitment (the “Casino Project Rights Offering”). Kien Huat agreed it would enter into a standby purchase agreement to exercise all subscription rights not exercised by other holders in the Casino Project Rights Offering, upon the same terms as the other holders. For such commitment, the Company agreed to pay Kien Huat a fee of 1.0% of the maximum amount that may be raised in the Casino Project Rights Offering, of which 0.5% was paid upon execution of the Commitment Letter and the remaining 0.5% is due if the Casino Project Rights Offering is launched. In addition, the Company has agreed to pay for or reimburse Kien Huat for all of its out-of-pocket expenses in connection with the negotiation, execution and delivery of the Commitment Letter and the consummation of the transactions contemplated thereby.

On January 5, 2015, the Company commenced a rights offering (the “January 2015 Rights Offering”) for aggregate gross proceeds of $50 million to raise a portion of the equity financing necessary to develop the Casino Project. In partial satisfaction of Kien Huat's obligations pursuant to the Commitment Letter, in connection with the January 2015 Rights Offering, on January 2, 2015, the Company and Kien Huat entered into a standby purchase agreement (the “January 2015 Standby Purchase Agreement”). Pursuant to the January 2015 Standby Purchase Agreement, Kien Huat agreed to exercise in full its basic subscription rights granted in the January 2015 Rights Offering within ten (10) days of its grant. In addition, Kien Huat agreed it would exercise all rights not otherwise exercised by the other holders in an aggregate amount not to exceed $50 million. On January 2, 2015, the Company and Kien Huat amended the Commitment Letter, pursuant to which Kien Huat agreed to waive, solely with respect to the January 2015 Rights Offering, the condition precedent to the Casino Project Rights Offering that the Gaming Facility License shall have been awarded to Montreign. Under the January 2015 Standby Purchase Agreement, the Company paid Kien Huat a portion of the commitment fee described in the Commitment Letter in the amount of $250,000 and reimbursed Kien Huat for its expenses in an amount not exceeding $40,000. The January 2015 Rights Offering closed on February 6, 2015 and the Company received net proceeds of approximately $49.5 million, which are being used for the expenses relating to the pursuit of the Gaming Facility License and for development purposes.

To meet the revised requirements of the CS Credit Commitment, as well as to support the contemplated changes to the Casino Project and the expansion of the Company's role at Adelaar, on September 22, 2015, the Company and Kien Huat entered into a second amendment commitment letter (the “Second Amendment” or the “Second Amendment to the Commitment Letter”), whereby Kien Huat increased its overall equity investment commitment to the Company from $150 million plus the amount necessary to redeem the Series E Preferred Stock to an aggregate total of $375 million, which amounts include $50 million invested in the January 2015 Rights Offering pursuant to the January 2015 Standby Purchase Agreement. The proceeds of the Project Rights Offerings (as defined below) will be used to finance the Casino Project and the Company's expanded role in the development of Adelaar, the redemption of the Series E Preferred Stock and for the general working capital purposes of the Company. Pursuant to the Second Amendment, Kien Huat has agreed to participate in, and backstop (pursuant to the terms and conditions of standby purchase agreements, which we refer to as “Project Standby Purchase Agreements”), two additional rights offerings in support of the Company’s Casino Project and, if the Company enters into definitive documents as contemplated by the Term Sheet, further involvement in the development of Adelaar, as well as to support the working capital needs of the Company and the redemption of the Series E Preferred Stock. The first additional rights offering (the “License Grant Rights Offering”), if launched, would commence no later than ten days following the Company being granted a Gaming Facility License. Kien Huat has agreed to participate in, and backstop, the License Grant Rights Offering in an amount not to exceed $290 million. In addition, the Company may determine to commence a further subsequent rights offering (the “Follow-On Rights Offering” and, together with the License Grant Rights Offering, the “Project Rights Offerings”). Kien Huat has agreed to participate in, and backstop, such Follow-On Rights Offering on the same terms and conditions and at the same subscription price as the License Grant Rights Offering in an amount not to exceed (i) $325 million less (ii) the amount of the License Grant Rights Offering. Pursuant to the Second Amendment, the percentage of Kien Huat’s aggregate equity commitment payable to Kien Huat as the commitment fee remains unchanged from the Commitment Letter and is equal to 1% of the aggregate gross proceeds of the January 2015 Rights Offering, the License Grant Rights Offering and the Follow-On Rights Offering. $900,000 of the commitment fee was paid upon execution of the Commitment Letter in June 2014 and $250,000 was paid upon closing of the January 2015 Rights Offering. An additional $975,000 of the commitment fee was paid upon execution of the Second Amendment. An additional fee of 0.5% of the gross proceeds of each of the License Grant Rights Offering and the Follow-On Rights Offering would be payable upon the closing of such rights offerings.

On October 5, 2015, the holder of a majority of Empire's voting stock acted by written consent to approve the issuance of our common stock to Kien Huat upon the terms and conditions of the Second Amendment to the Commitment Letter and the agreements contemplated by the Second Amendment if the Company decides to launch one or both of the Project Rights Offerings. Pursuant to the Delaware General Corporation Law and the Securities Exchange Act of 1934, as amended, such actions will be effective on November 5, 2015, which is at least 20 days after the mailing of notice of such action to the remaining holders of the Company's voting securities.

On January 3, 2014, we filed a Registration Statement on Form S-3, which was declared effective on February 12, 2014, covering the offer and sale of up to $250 million of our securities. As of November 1, 2015, we had up to $186.6 million available for future issuances under the S-3, which we may use in connection with financing the Casino Project, and if the Company enters into definitive documents as contemplated by the Term Sheet, our expanded role in the development of the Adelaar Project. In addition to the debt and equity financings discussed above, any further changes to the Casino Project may increase the minimum capital investment from the Company and will require us to seek additional sources of debt and equity financing. The expansion of the Company’s role at Adelaar, if definitive documents are entered into with EPR and its subsidiaries, will further increase the Company's financing requirements. The sale of additional equity will result in additional dilution to the Company’s existing stockholders and financing arrangements may not be available to the Company, or may not be available in amounts or on terms acceptable to the Company.

On March 3, 2015, the Company and Kien Huat entered into Amendment No. 3 (the "Third Amendment") to the loan agreement dated November 17, 2010 and amended on August 8, 2012, December 18, 2013 and March 3, 2015 (the "Loan Agreement"). Pursuant to the Third Amendment, among other things, the maturity date of the Kien Huat Note (defined and discussed in Note E) was extended from March 15, 2015 to March 15, 2016. Additionally, pursuant to the Third Amendment, the Loan Agreement was amended to add the denial of a Gaming Facility License to the Company as an event of default.

In the event the Company is granted a Gaming Facility License, and so long as the Company’s Form S-3 remains effective and the Company is not deemed an “ineligible issuer” pursuant to the Securities Act of 1933, as amended (collectively the “Conversion Conditions”), the Kien Huat Note will be converted into shares of the Company’s common stock upon the earlier of (i) the consummation of the License Grant Rights Offering and (ii) the maturity date of March 15, 2016. In the event the Kien Huat Note is converted into common stock pursuant to the Second Amendment to the Commitment Letter, the Company and Kien Huat have agreed that the Kien Huat Note would be convertible into shares of common stock of the Company at a conversion rate of 382.202837 shares of common stock per $1,000 in principal amount, which represents a conversion price of approximately $2.6164 per share. The conversion rate and conversion price are subject to further adjustment pursuant to the Loan Agreement in the event of certain dilutive issuances by the Company. In the event we are not granted a Gaming Facility License, we will be in default on the Kien Huat Note and we may refinance or attempt to extend the term of the Kien Huat Note at that time. However, there can be no assurance that the Company will be successful in refinancing the Kien Huat Note or amending its terms. If the Company is unable to refinance or amend the Kien Huat Note at that time, it would have a material adverse effect on the Company.

Regulation

VGM and Racing Operations

Our VGM and harness horseracing and simulcast operations are overseen by the NYSGC. The legislation that created the NYSGC provides that the Board of the NYSGC shall consist of seven (7) appointed members. On August 24, 2015, the Chair of the NYSGC resigned. As of November 1, 2015, the Board of the NYSGC consists of five (5) members. The NYSGC has the authority and responsibility to promulgate rules and regulations that affect the operations of our business. Our VGM, harness horseracing and simulcast activities in the State of New York are overseen by the NYSGC, Division of Lottery and Division of Horse Racing, respectively.

In addition to receiving 41% of our VGM revenue from our operations at Monticello Casino and Raceway through March 31, 2016, the law provides for a subsidized free play allowance of 10% during the three and nine months ending September 30, 2014 and 15% during the three and nine months ending September 30, 2015.

Casino Gaming

The Upstate New York Gaming and Economic Development Act ("Gaming Act"), among other things, provides the statutory framework for the regulation of full-scale casino gaming. The Gaming Act authorizes the NYSGC to award up to four (4) Gaming Facility Licenses. Gaming Facilities are authorized in three (3) regions of the state: the Columbia, Delaware, Dutchess, Greene, Orange, Sullivan and Ulster counties, which is referred to as the "Hudson Valley-Catskills Area" and in which we are located; the Albany, Fulton, Montgomery, Rensselaer, Saratoga, Schenectady, Schoharie and Washington counties (the "Capital Region"); and the Broome, Chemung (east of State Route 14), Schuyler (east of State Route 14), Seneca, Tioga, Tompkins, and Wayne (east of State Route 14) counties (the "Finger Lakes Region"). Up to two (2) Gaming Facilities can be located in any of the three (3) regions. No Gaming Facilities can be authorized in Putnam county, Westchester county, Rockland county, New York City or Long Island.

Further, the Gaming Act authorizes Nassau Off-Track Betting Corporation ("Nassau OTB") and Suffolk Regional Off-Track Betting Corporation ("Suffolk OTB") to file video lottery gaming license applications to establish one (1) VGM facility each, at an Off-Track Betting site operated by Nassau OTB and Suffolk OTB respectively, with a maximum of one thousand (1,000) VGMs at each site.

In accordance with the Gaming Act, the Siting Board is charged with selecting applicants that are qualified to receive a Gaming Facility License and determining the location of such Gaming Facilities. On December 17, 2014, the Siting Board selected one applicant in each region. On October 14, 2015, the Siting Board selected an additional applicant for the Finger Lakes Region. Once the Gaming Facility Licenses are awarded by the NYSGC, there will be a seven (7) year exclusivity period for holders of Gaming Facility Licenses, commencing with the awarding of the license, during which no further Gaming Facilities will be licensed by the NYSGC. If the Legislature authorizes additional Gaming Facility Licenses within this period, licensees shall have the right to recover a pro-rata portion of the license fee paid.

In connection with the RFA, we paid to the NYSGC an application fee of $1 million ("Application Fee") to help defray the costs associated with the processing of the application and investigation of our application. However, if the costs of processing, investigation and related costs exceed the Application Fee, we shall be required to pay the additional amount to the NYSGC within thirty (30) days after notification of insufficient fees. If the investigation costs are below the amount of the Application Fee paid, any unexpended portion shall be returned to us.

Pursuant to the RFA, a holder of a Gaming Facility License must pay a minimum licensing fee within thirty (30) days after the award of a Gaming Facility License. Our licensing fee will be $51 million. The duration of the initial licenses will be ten (10) years and the NYSGC will set the duration of, and fee for, renewal licenses. The NYSGC will oversee regulation of Gaming Facilities.

The tax rate on slot machines at Montreign Resort Casino will be 39% and the tax rate on table games will be 10%. The tax rate on VGM operations at Monticello Casino and Raceway will remain at the existing NYSGC commission rates and is expected to include an additional commission from NYSGC based on a rate related to the effective tax rate on all gross gaming revenue at the Gaming Facility developed by Montreign. Existing payments to the racing industry for purses and breeding will be maintained. The minimum gambling age for Montreign will be 21, and no smoking will be authorized in any indoor areas. As a condition of licensure, Montreign will be required to commence gaming operations no more than twenty-four months following the award of a Gaming Facility License by the NYSGC.

The Gaming Act imposes a $500 annual fee on each slot machine and table game. In addition, the Gaming Act requires the maintenance of the horsemen and breeder payments at the 2013 dollar level to be adjusted annually pursuant to changes in the consumer price index.

Regulatory Permits and Approvals

Town of Thompson

In January, 2013, the Town Board of the Town of Thompson, in which the EPT Property is located, unanimously approved certain zoning amendments necessary for the development of the Adelaar Project and the Comprehensive Development Plan for the entire project site. Moreover, in July 2013, the Planning Board granted final site plan approval for the Casino Project. On April 17, 2014, an application for a Minor Amendment to the Site Development Plan Approval for the Casino Project was made to the Planning Board. The Minor Site Plan Amendment included a minor design change, and an increase in the number of hotel rooms and additional parking for the Casino Project. By Resolution dated June 3, 2014, the Town Board determined that no further environmental review under the State Environmental Quality Review Act ("SEQRA") was required in connection with the proposed Minor Site Plan Amendment and issued a Negative Declaration of Environmental Significance. The Planning Board approved the Minor Site Plan Amendment by Resolution dated June 11, 2014. On August 13, 2014, the Planning Board adopted a resolution approving the Final Subdivision Plat for the Adelaar Project and the Casino Project parcels. On January 5, 2015, the New York State Department of Environmental Conservation issued a Freshwater Wetlands Permit, Stream Disturbance Permit and Water Quality Certification authorizing disturbances to certain state regulated wetlands and stream corridors necessary to facilitate the development. On January 6, 2015, the Town issued a local building department permit authorizing the removal of certain trees necessary to facilitate the development. On February 20, 2015, the U.S. Army Corps of Engineers issued a Wetlands Permit authorizing discharges to certain federally regulated wetlands on the EPT Property.

On June 3, 2015, the Company, as co-Applicant, submitted to the Planning Board an application for a minor amendment to the final site plan approval for the Casino Project reflecting the Proposed Changes discussed above (the “Proposed Amendment”). By Resolution dated July 21, 2015, the Town Board determined that no further environmental review under SEQRA was required in connection with the Proposed Amendment and issued a Negative Declaration of Environmental Significance. The Planning Board approved the Proposed Amendment by Resolution dated July 22, 2015.

County of Sullivan Industrial Development Agency

On March 19, 2013, the County of Sullivan Industrial Development Agency (“IDA”) approved a Resolution (1) taking official action authorizing the issuance of revenue bonds to enable the Company to use the industrial development revenue bonds for the financing of the Casino Project; (2) appointing the Company as IDA's agent to undertake the Casino Project; and (3) describing the forms of financial assistance being contemplated by the IDA to include: (i) an exemption from New York State (“State”) and local sales and use taxes with respect to certain items used in, or for the acquisition, construction and equipping of, the Casino Project (the "Tax Benefit"), (ii) the grant of one or more mortgage liens on IDA's interest in the Casino Project to secure the bonds and/or any other indebtedness incurred by or for the benefit of the Company in connection with the Casino Project, which Mortgages would be exempt from all mortgage recording taxes imposed in the State and (iii) a partial (or full) real property tax abatement over sixteen (16) years. In connection with the IDA application, the benefit of the exemption from the mortgage recording taxes imposed in the State was estimated to be $1.1 million, and the partial (or full) real property tax abatement was estimated to be $126 million over sixteen (16) years. The benefit of the exemption from the mortgage recording taxes will be based upon the mortgage amount and the amount of the real property tax abatement will be based upon a formula that considers the assessed value determined by the Town. Fees for the utilization of the bonds and other financial assistance would be paid by the Company to the IDA. In September 2014, MRMI, Montreign, and the IDA entered into agreements providing certain financial benefits for the acquisition, construction and financing of the Casino Project consistent with the IDA’s Destination Resort Program policy. The IDA authorized the execution of these agreements pursuant to a resolution adopted on September 3, 2014. Consistent with the IDA resolution, the IDA, MRMI and Montreign executed an Agent Agreement, Lease Agreement, Leaseback Agreement, payment in lieu of tax ("PILOT") Agreement, and related documents, (together the "IDA Documents") which will become effective upon certain conditions, including the awarding of a Gaming Facility License to Montreign.

As the Company is currently undertaking site preparation for the Casino Project in anticipation of the award of a Gaming Facility License, on May 26, 2015, the IDA took action to allow the Company to obtain the Tax Benefit with respect to its eligible Casino Project expenses immediately. In connection with this authorization, the Company paid to the IDA an administrative fee of $150,000 and was permitted to defer an escrow payment in the amount of $100,000 until a building permit for the construction of the Casino Project is issued.

On August 14, 2015, the Company applied to the IDA to increase the Tax Benefit as a result of the Proposed Changes. On September 18, 2015, the IDA adopted a Resolution approving (i) an increase in the Tax Benefit from approximately $15 million so that such benefit does not exceed $35 million; (ii) a proportionate increase in the annual rent to the IDA to $166,000; (iii) an increase in the Total Value Subject to PILOT from $53.5 million to $65 million; and (iv) a proportionate increase in the IDA transaction fee by $82,500, subject to the issuance of a Gaming Facility License. The Company and the IDA entered into and amended, as required, the IDA Documents consistent with the IDA Resolution as a result of the Proposed Changes.