UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

 

 

Payment of Filing Fee (Check the appropriate box):

 

April 23, 2020

 

Dear Fellow Shareholders:

 

At the moment, the coronavirus pandemic easily overshadows everything else in our Company and our country. As with almost all casino companies, our operations are closed in order to slow the spread of the novel coronavirus (COVID-19). As a result of our closures, we’ve been forced to lay off 98% of our team members, which has been painful for everyone at our Company. The remaining core employees are standing by, maintaining our properties, and preparing for the day that we can reopen.

 

Like all casino stocks and the stock market in general, our stock price has been pummeled. Investors are understandably focused on survivability, rather than past results or future prospects. The shift in focus happened fast, as the scale of the pandemic and its disruption became obvious.

 

We have shrunk our payroll significantly and many variable costs are not incurred while operations are closed. Yet, our debts remain outstanding and continue to accrue interest during the pandemic period. Other expenses, like real estate taxes, insurance, utility costs, and many of our leases, continue to cost money, even while operations are closed. The debt covenants of many companies, including ours, did not anticipate an extended period where all operations would be closed. Accordingly, some companies will need to seek relief from lenders for covenant breaches and there is no certainty that such relief will be given. There are several unprecedented Federal and State relief programs in process. We may very well qualify for some of those programs, but the specific rules are still evolving and, as a result, we cannot assure you that we will be able to qualify for any of these programs.

 

We intend to be a survivor. We believe that we have excellent relationships with our lenders. They recently agreed to waive the relevant March 31 covenants in our loan agreements in recognition of the circumstances. We expect to have that agreement executed imminently. We had roughly $21.4 million in cash or equivalents as of last week and we estimate our “burn rate” of minimal expenses with operations closed is in the neighborhood of $3 million per month, including debt service. We are also significantly diversifying our income with the introduction of mobile sports betting in Indiana and Colorado, which should be a significant income source apart from our brick-and-mortar casinos.  

 

Under these challenging circumstances, we have reasons for optimism.

 

As I write this, respected public health officials are now saying that the pandemic in the U.S. may be nearing its peak.  Sadly, an unknown number of people will probably lose their lives before it is over.  However, the total death toll seems likely to be less than was once feared.  These forecasts differ by model and by region, but many of these models have life returning to normal, or at least some semblance of a new “normal,” by the end of the second quarter. There will still be uncertainties — for example, the state of the economy and the amount of mobility that will be permitted — but the trend appears that it will be toward normality.

   

The “new normal” will be familiar to us, but different. For example, the custom of shaking hands may never be the same. It stems from medieval times, where one showed that there was not a weapon held in the right hand. Today, we are all aware that each hand might harbor hidden viruses and it is better for all concerned if the two hands do not touch. Ultimately, nice smiles and a nod suffice as a safer and more considerate greeting. The Japanese are ahead of us on this; they traditionally bow politely rather than shake hands.

 

“Social distancing” has become a part of our lexicon. We wash our hands more often and are more careful to use soap. We might be more likely to stay home when sick, or to wear masks when we have a common cold so as not to spread our germs. Food

workers, in particular, are paying more attention to wearing gloves and other good sanitary practices — practices introduced decades ago in hospitals and dental practices. It’s sad that we’ve been forced to adapt these practices because of a deadly new virus, but the practices themselves are good. They should ultimately reduce the spread of many diseases, helping us all to remain healthy.

 

We intend for our Company to survive and rebound in the “new normal.”  Most of our revenues stem from slot machines. It is relatively easy to employ social distancing in a sea of slot machines. Rarely are our slot floors at greater than 50% occupancy; we’ve always chosen to have enough slot machines so that our customers can find the games and denominations that they desire, even on busy evenings. A married couple might choose to sit together, but it is relatively easy for that couple, or an individual, to find slot machines where there are adjoining empty seats.

 

We are planning measures that will help. We intend to use infrared devices to attempt to stop individuals with fevers, both customers and employees, from entering our casinos.  We will allow customers to block adjoining machines to ensure social distancing. We will provide gloves, masks and hand sanitizer for those who want them. We will continuously wipe and disinfect our slot machines, paying particular attention to high-touch surfaces including buttons and screens. We intend to rapidly implement any new technology that comes along that can help make our customers less susceptible to the spread of the disease.

 

In some of our restaurants, we are removing seats where appropriate to increase the distance between tables. In other restaurants, we are installing dividers between tables. At our buffets, we will have properly-trained and protected employees plate the food, rather than have many different customers handle the same serving utensils.  We will offer disposable menus in every restaurant and we will not have condiments and other typically-shared items on the tables.  We are planning alternatives for our customers where the food is delivered from the kitchen in a sealed fashion.

 

We believe there will be some necessary changes in the way that we operate for at least some period of time after we reopen. It is complicated to ensure social distancing at a traditional table game, for example. We plan to offer “stadium gaming” at some of our properties as an alternative, where customers are playing blackjack, craps or roulette at podium devices spaced an appropriate distance apart. It provides a table games-like experience while ensuring social distancing.

 

We anticipate that, at least in some markets and for some period of time, valet parking might be less popular, as customers may not want someone else’s hands on their car’s steering wheel or dashboard. In lieu of valet parking, we have acquired golf cart-type vehicles that can offer customers a ride from self-park areas to the front door.

 

We intend to be careful in our handling of money, to protect both customers and employees. A virus can survive for some period of time on a coin, a chip, or a dollar bill. A “ticket in-ticket out” (TITO) ticket is much less likely to be handled by multiple people. There are also many systems that securely handle transactions digitally, ranging from “Apple Pay” or similar at our cash registers to working with regulators to allow credits to be transferred digitally from slot machine to slot machine, or even to be used to buy meals or other services.  The technology exists, and we already have much of it installed, to have a cashless casino hotel, which could happen if the regulations are revised appropriately.

 

We’ve always been fastidious at cleaning our guest rooms, but now intend to do so with even better training and attention. We intend to pre-register a greater proportion of our guests to reduce interactions at the front desk, providing both better service and improved social distancing.

 

Of course, it may be some time before we can again sponsor concerts and other group events. We look forward to that day, but it may be at least several months away.

 

Amongst the side effects of the pandemic is an uncertain economy. Unemployment has soared and the ramifications of a widespread shutdown may stretch for many months. On the other hand, the government stimulus programs are also unprecedented

in both breadth and scope. When we are allowed to reopen, we intend to do so cautiously, anticipating that it might take some time for business activity to recover. However, we also will be prepared to expand our operations if and when activity warrants.

 

We are fortunate in that, while small, we are diverse and operate primarily in the regional gaming business. Our customers are local. Almost no one flies to visit our casinos; our customers drive to us from their homes that are generally less than an hour away. Decisions are typically made to visit us one or two days ahead of time, versus visits to destination resorts that are often booked months in advance. We have almost no meeting and convention business, something we sometimes rue, as it can be profitable. Today we are happy that we don’t rely upon it. In our opinion, it may take many months and perhaps years for the meeting and convention business to recover from this pandemic.

 

We have not experienced a crisis exactly like this before. However, when we’ve been forced to close by hurricanes, flooding rivers, snowstorms and forest fires, our business has generally rebounded quickly when the crisis passed. Even after 9/11, when all air service was halted, regional gaming generally fared better than destination gaming. The same has also been true in recessions. We offer a comparatively inexpensive gaming experience, one that is often still affordable in recessionary times.

 

Sports Betting

 

Our business was in the process of diversifying when the pandemic hit. Sports betting has been offered for many years within Nevada. Our casino at Lake Tahoe has a small outsourced sportsbook and customers in Fallon can place sports bets at a kiosk within the casino. Mississippi approved sports betting within the casino in 2018 and our sports desk in the Silver Slipper opened in September of that year. That sportsbook directly contributed almost a million dollars to our Adjusted Property EBITDA in 2019, while also attracting incremental business to our casino.

 

In two of the states where we operate, Indiana and Colorado, sports betting was legalized during 2019, in both cases tied to physical casinos operating in the state. Customers can make bets within the casino, as in Mississippi and Nevada, but also over the internet. Online sports betting has been legal for a few years in New Jersey and has proven to be a large and reliable revenue stream. Because of our small size and limited geographic reach, we have chosen to participate in sports betting with companies that specialize in this field.

 

We have a total of six contracts with three companies introducing mobile sports betting in Indiana and Colorado. Those companies are Churchill Downs, Wynn Interactive, and a well-established, private European company named Smarkets.  Even though professional sports activities are largely temporarily limited, those companies continue to work towards receiving the appropriate gaming licensees, including having their websites and gaming applications tested and approved. One of those licensees began operations in Indiana on December 30, 2019. The Colorado regulators intend to begin allowing sports betting within a few weeks and we expect all six of our contracts between the two states to be up and running during 2020.

 

Each of those six contracts is unique, but they all have certain common attributes. We receive a percentage of the net gaming revenues. We share in the revenues even of patrons who have never visited our casinos. We were paid a total of $6 million, termed “market access fees,” after the signing of the six contracts. While those fees are non-refundable and qualify as income, GAAP requires us to capitalize that income and bring it onto the income statement over the initial ten-year lives of the contracts.  There is also a guaranteed minimum annual fee in each contract and the fee begins accruing with the acceptance of the first bet. The sum of the minimum guarantees is $7 million per year. As noted, the contracts have ten-year terms, with each of our partners having renewal rights for two additional five-year terms. If any one of the six contracts results in a percentage of revenues exceeding the minimum guarantee, then our mobile sports betting revenues should exceed $7 million per year. We have very few expenses related to this new revenue source, and we should not incur anything resembling the maintenance capital expenditures of the traditional casino business. We expect this business to materially increase our cash flows from operations.

 

Recognize that mobile sports betting can be very profitable. There is no investment in brick-and-mortar. It doesn’t require a large number of employees. The software developed for one jurisdiction will usually suffice in most jurisdictions. The gaming taxes

are generally variable. Much of the investment is in customer acquisition, which involves advertising (largely online) and incentives and promotions that may be offered. The betting activity usually involves public sporting events and the sports betting operations generally do not have to fund such events.

 

It also involves a clientele that is largely different from the clientele of our casinos. Hence, we view it as complementary rather than competitive with our core business.

 

We chose to participate in sports betting with others, rather than develop this business alone. We did not have the in-house expertise, although presumably it could be hired or sub-contracted. More importantly, in sports betting, there are sometimes large sums bet on one statistical event, resulting in potential risk for the casino operator. Our casinos and their soon-to-be operable mobile sports operations in Colorado and Indiana have effectively four “home” NFL teams — the Denver Broncos, the Indianapolis Colts, and the close-to-Indiana Chicago Bears and Cincinnati Bengals. The single biggest betting event of the year is typically the Super Bowl. If any of these four teams is in the Super Bowl and playing against any of the other 28 teams that are not in our market area, we might have an unbalanced book.

 

We experienced some of this first-hand recently at our sports betting desk at the Silver Slipper. At that property, we do carry some risk, operating in partnership with a well-established sportsbook operator. This past January, the football team from Louisiana State University (LSU), in nearby Baton Rouge, won the NCAA National Championship. Although we ordinarily love to root for the local team, we lost almost $300,000 at our sportsbook that day on that one game. That sportsbook is quite small compared to the bets that might be taken online in a more populous region, such as Indiana and Colorado. The experience, however, endorsed our earlier decision to participate in the mobile sports betting business in a more risk-averse way.

 

We feel differently about the broader online gaming business. This is where customers can play their favorite table games and slot machines on the internet, potentially winning or losing on the game. New Jersey launched online gaming in 2013 and it has grown into a significant business.  Today, it is still double the size of the state’s online sports betting, which launched in 2018. It does not seem to have had a negative impact on the revenues of the brick-and-mortar casinos in Atlantic City.  Delaware, Pennsylvania, West Virginia and Michigan have recently legalized online gaming, and we believe that other states will eventually follow. The technology behind online gaming is simpler than sports betting and is readily available. The risk to the house is really no different from the gaming risks that we incur every day, wherein there are a large number of individual statistical events and the outcome is highly predictable. If and when online gaming may become legalized in the jurisdictions in which we operate, we may choose to offer it directly to our existing and potential clientele. 

 

2019 Results

 

While this is only April, the past calendar year seems to have ended a long time ago. Results from that year may be only partially indicative of what we might achieve as we reopen.

 

There were positives and negatives in the year.

 

On the positive side, our most important property — the Silver Slipper in Hancock County, Mississippi, near New Orleans — had a record year, with $73.2 million of revenue. Adjusted Property EBITDA of $13.2 million was 8.5% above that earned in 2018.  This was its most profitable year since it opened in 2006. Over the past five years, we added a hotel, a swimming pool and beach club, and an oyster bar. We recently refurbished the casino, the porte cochere, and the buffet and upgraded the slot machine player system. Largely as a result of those improvements, Adjusted Property EBITDA has increased 75% from what the property achieved in 2014.

 

We had some challenges at Rising Star, in Rising Sun, Indiana. We faced some new competition, with a new casino in nearby Louisville, Kentucky, and significant enhancements at other regional competitors. During several key months in the spring and summer, the main highway leading to the property was being repaved, making it significantly easier to visit competing casinos.

The ferry service that we introduced in mid-2018 helped offset some of that disruption.  We temporarily waived the fees to build ferry ridership and offset the highway construction, but still incurred the significant costs to operate the ferry. We started charging again for the ferry in early March, except for casino customers, and intend to continue with this policy when we are allowed to reopen.

 

Beginning in August, we attempted a different marketing approach, with some broad-based efforts targeting a somewhat different clientele. Frankly, it didn’t work. The increase in marketing costs did not result in a commensurate increase in revenues. We changed course and invested in a new slot system, replacing a system that was some 20 years old. The new system offers a much better customer experience, but also provides us with much better customer information, allowing us to target our marketing more effectively. We then had difficulties with the installation of that system. During the installation, we were required to effectively do a factory reset of every slot machine. We had not foreseen that the rebooting process would result in the failure of many of our machines. At one point in November, half of our slot machines were out of service. We installed the same system in the same timeframe in Cripple Creek, Colorado, where different regulations did not require a reboot of each machine, and the installation was completed quickly with minimal disruption.

 

We were overcoming these challenges in the first part of 2020, but then the pandemic forced us to shut down.  We’ve used the shut-down period since mid-March as an opportunity to revisit our staffing requirements and our players’ club program at Rising Star. We intend to introduce a new, revised players’ club when we reopen.

 

At Bronco Billy’s, in Colorado, we have been preparing to build a four-star hotel attached to our casino. This is an underserved market, where casino revenues per capita are much lower than in comparable markets. While there are plenty of slot machines in Cripple Creek, in our opinion, there are not enough hotel rooms. Furthermore, the quality of the hotel rooms is not high. That is an opportunity.

 

In the past two years, we assembled quite a bit of land and received city approval to close two public rights-of-way. The planned hotel would replace much of the surface parking used today by customers of Bronco Billy’s.  Hence, Phase One required the construction of a parking garage prior to the construction of the new hotel. We raised the money, through debt and the issuance of some equity, earmarked to build the garage. We began construction, relocating several utilities, gas lines and storm sewers in this historic town and demolishing several buildings. We were flattening the site and beginning the installation of the foundations for the garage when the pandemic hit. We temporarily stopped construction of the garage to ensure that the Company would have the resources to fund the minimal required expenditures during a potentially protracted shutdown. Because no one can be sure how long we might be closed, or how quickly our business might rebound after reopening, we thought it prudent to conserve our resources.

 

It is also possible that the financial market for casinos will remain difficult for an extended period. We have not yet raised the funding for the hotel, which is the larger, second phase of the project. There is little impetus for us to complete the garage today and then have to wait for an extended period of time for the financial markets to stabilize to where we can fund the hotel on terms that are favorable to shareholders. We also have to weigh construction of that hotel against other alternatives that we might have. We continue to believe that the hotel in Cripple Creek would achieve a high return on investment, but these are very uncertain times, fraught with both risks and opportunities. At the moment, we are on the sidelines, monitoring the pandemic, the economy, the financial markets and our other opportunities.

 

Meanwhile, we attempted something small in Cripple Creek that wasn’t successful. As we assembled land for the larger project, we ended up leasing, with a right to buy, a building at the corner of Bennett Avenue (the “Las Vegas Strip of Cripple Creek”) and Third Street. That building, while built to resemble the surrounding buildings built in the late 1800s, was actually built in the 1990s and operated for several years as a casino. It failed, due largely to the overhead costs of a small casino and its lack of parking, despite being on one of the town’s most important corners. We received regulatory approval to operate it as an adjunct of Bronco Billy’s, sharing its overhead, although it is not physically attached to our main casino. In November 2018, we reopened it with a Christmas theme, which is something we’ve used successfully on a seasonal basis at Rising Star.

 

In effect, it proved our original thesis that Cripple Creek has too many slot machines and not enough hotel rooms. Our overall revenues rose, but that was not sufficient to offset the operating costs and rent at the satellite casino. It almost single-handedly resulted in the decline in our Cripple Creek Adjusted Property EBITDA from $4.8 million in 2017 to $3.0 in 2019. It was not large enough or special enough to move the needle on the numbers of people coming to Cripple Creek, or on how long they stayed and what they spent during their stay.

 

We closed the Christmas Casino in March, coincidentally only a few hours before we were forced to close all of our Colorado operations. We plan to reopen Bronco Billy’s without the Christmas Casino, hopefully consolidating its revenues back into the one property and materially saving on our expenses. Our lease and purchase option for that building have approximately 16 months to go, not including our potential renewal options. We will reexamine what to do with the property after we have reopened and had several months to reestablish operations.

 

In Northern Nevada, our operations consist of the Grand Lodge and Stockman’s casinos. Combined, operating results were modestly below the prior year. At Grand Lodge, a lower table games hold percentage affected results. Results at Stockman’s reflect a temporary decrease in activity at the nearby Fallon Naval Air Station. That air base continues to expand, which should benefit our operations in the longer-term.

 

The current situation is challenging. Yet, we believe that we have the resources to withstand a temporary closure, even if it is a few months in duration. Our small group of core people is still here, working hard and deferring one-third of our pay, hoping to reopen better and stronger than we were previously.

 

Especially in these difficult times, I thank everyone for your support and understanding. We will continue to do the best we can to be proper stewards of your invested capital.

 

/s/ Daniel R. Lee

Daniel R. Lee

President and Chief Executive Officer

 

Note: This letter supplants the glossy annual reports that are still prepared by some companies; such a report would not be economical for our small company. For a full description of our financial results, please see our annual report on Form 10-K that was filed with the Securities and Exchange Commission and that is available on our website, at www.fullhouseresorts.com.

 

This letter and the accompanying Notice and proxy statement contain statements that are “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Some forward-looking statements in this letter include, but are not limited to, the statements regarding our expectation to qualify for federal and state relief programs in response to COVID-19; our intention to survive the pandemic and rebound; our intentions to make changes to our casino and hotel operations and to implement adaptive measures as a result of COVID-19, including, but not limited to, employing social distancing measures, wiping and disinfecting surfaces, changes in food service, and implementing gaming alternatives such as “stadium gaming”; our expectations regarding changes in certain aspects of our operations, including valet parking, handling of financial transactions, cleaning of guest rooms and pre-registrations; expectations regarding resumption of concerts and group events; our intention to exercise caution upon reopening; our anticipation that it may take time for business to recover and our ability to expand when needed; our expectations regarding our new sports betting operations, including timing for launch of such operations and the anticipated impact on our cash flows; our intention to introduce a new player’s club and to waive ferryboat fees for casino customers when reopened at Rising Star; our belief that the hotel in Cripple Creek would achieve a high return on investment; and our belief that we have the resources to withstand a temporary closure of our casinos. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the control of Full House, including our ability to qualify for and successfully

access federal and state relief in connection with COVID-19; our ability to successfully implement our sports betting operations in the anticipated time frame and to accurately forecast its impact on our cash flows; risks related to entering into sports betting operations (including our ability to establish and maintain relationships with key partners or vendors, the ability and/or willingness of our partners to sustain sports betting operations should they experience an extended period of unprofitability, and the ability to replace existing partners or vendors on similar terms as our existing revenue guarantees); delays in timing for Colorado regulators to begin allowing sports betting; the ability of the sports betting companies to obtain appropriate gaming licenses and obtain and maintain the necessary approvals (including in Colorado, Indiana, Nevada and Mississippi); changes in our business strategies; the ability to amend our debt covenants on reasonable terms, if at all; disruptions in our operations (including construction projects) and loss of revenue due to the coronavirus outbreak; general macroeconomic conditions; actions by government officials at the federal, state or local level with respect to steps to be taken, including, without limitation, temporary or extended shutdowns, social distancing and shelter-in place orders, in connection with the coronavirus outbreak; our ability to effectively manage and control expenses during temporary or extended shutdown periods; the impact of temporary or extended shutdowns on our ability to maintain compliance with the terms and conditions of our debt instruments and other material contracts; our ability to maintain strong relationships with regulators, employees, lenders, suppliers, customers, insurance carriers, and other stakeholders; and the impact of any uninsured losses.  Information concerning potential risk factors that could affect our financial condition and results of operations is included in the reports we file with the Securities and Exchange Commission, including, but not limited to, our Form 10-K for the most recently ended fiscal year and our other periodic reports filed with the Securities and Exchange Commission. We are under no obligation to (and expressly disclaim any such obligation to) update or revise the forward-looking statements as a result of new information, future events or otherwise. Actual results may differ materially from those indicated in the forward- looking statements.

 

This letter also contains supplemental financial information and should only be viewed in conjunction with our audited financial results reported using U.S. generally accepted accounting principles (GAAP) and as filed with the Securities and Exchange Commission. A reconciliation between non-GAAP measures such as Adjusted EBITDA and GAAP measures is attached as Annex 1 to this proxy statement and can also be found in the Company’s Form 10-K for the fiscal year ended December 31, 2019.

 

 

FULL HOUSE RESORTS, INC.

1980 Festival Plaza Drive, Suite 680

Las Vegas, Nevada 89135

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

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April 23, 2020

 

Dear Stockholder:

 

Recent weeks have resulted in difficult times for our country. While the spread of COVID-19 has resulted in the temporary shutdown of many businesses, including our own casinos, we understand the necessity for such measures. We hope this letter finds you in good health.

 

As of the date of this letter, we have sadly reduced our staffing levels to approximately 30 employees, plus a small number of surveillance and security personnel, down from approximately 1,600 on March 1, 2020. We are hoping for the pandemic to pass as quickly as possible, and eagerly await notice from our various state governments permitting us to reopen our doors.  It has been an extremely painful time for our associates, and we look forward to the day that we can welcome them back, many of whom have been with the company for over a decade. I have waived my board fees until we reopen 100% of our properties.

 

Last year was a challenging one, but we have tried to make the most of an emerging opportunity in mobile sports betting, and that should help us in the future. In addition, our largest and most important property, the Silver Slipper, continued to thrive and had a record year.

 

In the category of capital allocation, during the past five years, we have invested significantly in capital expenditures and an acquisition. Our properties look better than they have in years.

 

While we have made progress, and through December 31, 2019, our stock had appreciated 66%, 40% and 139% over the last one, three and five years, the economic uncertainty created by COVID-19 has resulted in steep losses for investors in most publicly traded gaming companies, including our own. I believe that recessions are a fact of life and we will do our best to navigate the ongoing recession and economic uncertainty to come out a stronger company. We are accountable to you, as shareholders, and we will strive to build value.

 

The spread of COVID-19 has also led to our first-ever virtual shareholder meeting. Our Annual Meeting of Stockholders will be held virtually at 9:00 a.m., Pacific Time, on June 11, 2020, and we invite you to participate. The following items will be on the agenda:

 

1.

Election of six members to our board of directors to serve until our next annual meeting of stockholders or until their successors are duly elected and qualified;

2.

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2020;

3.

An advisory vote to approve the compensation of our named executive officers; and

4.

Transaction of such other business as may properly come before the annual meeting, including any adjournments or postponements thereof.

 

Craig Thomas and Ellis Landau are not continuing their service on the board. I would like to thank both of them for their hard work and independence. I will miss their wise counsel, and I wish them the best in their future endeavors.

 

Our board of directors has fixed the close of business on April 14, 2020 as the record date for determining those stockholders entitled to notice of, and to vote at, the annual meeting and any adjournments or postponements thereof.

 

Just like many of you, management and the board have a substantial amount invested in the company, and we are committed to reopening as quickly and efficiently as possible. We appreciate your investment in Full House Resorts and look forward to your participation in the upcoming meeting.

 

I encourage you to take care of yourself and your community.

	Sincerely,
	/s/ Bradley M. Tirpak
	Bradley M. Tirpak
	Chairman

 

This proxy statement, including the form of proxy, the letter from our President and Chief Executive Officer, and our 2019 Annual Report, are first being mailed to stockholders on or about April 23, 2020.

 

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TABLE OF CONTENTS

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PROXY STATEMENT	1
ABOUT THE MEETING	1
PROPOSAL ONE ELECTION OF OFFICERS	5
CORPORATE GOVERNANCE	9
INFORMATION CONCERNING EXECUTIVE OFFICERS	15
EXECUTIVE COMPENSATION	16
PROPOSAL TWO RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	24
PROPOSAL THREE ADVISORY VOTE ON EXECUTIVE COMPENSATION	27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	28
OTHER MATTERS	29
ANNEX 1 GAAP TO NON-GAAP RECONCILIATIONS	32

 

 

 

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PROXY STATEMENT

________________________________________

 

 

This proxy statement is furnished in connection with the solicitation by the board of directors of Full House Resorts, Inc. (referred to herein as “we”,  “us”,  “our” and the “Company”) of proxies for use at our 2020 Annual Meeting of Stockholders to be held virtually at 9:00 a.m., Pacific Time, on June 11, 2020, and to any adjournments or postponements.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR

THE STOCKHOLDER MEETING TO BE HELD VIRTUALLY ON JUNE 11, 2020

 

This proxy statement, form of proxy and our annual report on Form 10-K are also available free of charge on our website at www.fullhouseresorts.com and at www.proxyvote.com.

 

 

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ABOUT THE MEETING

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What is a virtual annual meeting?

 

This year’s annual meeting will be online and a completely virtual meeting of stockholders due to the ongoing public health impact of the coronavirus (COVID-19) outbreak. This decision was made in light of the protocols that federal, state, and local governments have imposed and takes into account the health and safety of our stockholders, directors and members of management. You may attend, vote, and submit questions before and during the annual meeting via live audio webcast on the Internet by visiting www.virtualshareholdermeeting.com/FLL2020. You will not be able to attend the annual meeting in person. There will be no physical location for stockholders to attend.

 

You will need your control number included on your proxy card in order to be able to attend, submit questions that are pertinent to the meeting, and vote during the virtual annual meeting. We encourage you to access the annual meeting webcast prior to the start time. Online check-in will begin, and stockholders may begin submitting written questions, shortly before the start of the meeting. You should allow ample time for the check-in procedures.

 

If you wish to submit a question, you may do so during the meeting at www.virtualshareholdermeeting.com/FLL2020. Questions pertinent to meeting matters will be recognized and answered during the meeting, subject to time constraints. We reserve the right to edit or reject questions that are profane or otherwise inappropriate. Detailed guidelines for submitting written questions during the meeting will be available at www.virtualshareholdermeeting.com/FLL2020.

 

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting or submitting questions. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the annual meeting login page.

 

What is the purpose of the annual meeting?

 

At the virtual annual meeting, stockholders will act upon the matters outlined in the accompanying notice of meeting, including:

 

 

The stockholders will also transact any other business that properly comes before the virtual meeting.

 

Who is entitled to vote?

 

Only stockholders of record at the close of business on the record date, April 14, 2020, are entitled to receive notice of the annual meeting and to vote the shares of our common stock that they held on that date at the meeting, or any postponement or adjournment of the meeting. Each outstanding share of common stock entitles its holder to cast one vote on each matter to be voted upon.

 

What is the difference between a stockholder of record and a beneficial owner?

 

If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered the “stockholder of record” with respect to those shares. If your shares are held by a brokerage firm, bank, trustee or other agent (“nominee”), you are considered the “beneficial owner” of shares held in “street name”. As the beneficial owner, you have the right to direct your nominee on how to vote your shares by following their instructions for voting included in the enclosed proxy materials.

 

Who can attend the virtual meeting?

 

All stockholders as of the record date, or their duly appointed proxies, may attend the virtual annual meeting. To be admitted to the annual meeting at www.virtualshareholdermeeting.com/FLL2020, you must enter the control number located on your proxy card. Beneficial owners as of the record date who wish to attend the virtual meeting should follow the instructions from their nominee included in their proxy materials.

 

What constitutes a quorum?

 

The presence at the virtual meeting, in person or by proxy, of the holders of 40% of the total number of shares of our common stock and preferred stock outstanding on the record date will constitute a quorum, permitting the meeting to conduct its business. As of the record date, 27,075,962 shares of our common stock were outstanding and held by approximately 77 stockholders of record. As of the record date, no shares of our preferred stock were outstanding. Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of shares considered to be present at the meeting for purposes of determining a quorum.

 

If less than 40% of outstanding shares entitled to vote are represented at the virtual meeting, a majority of the shares present at the meeting may adjourn the meeting to another date, time or place, and notice need not be given of the new date, time or place if the new date, time or place is announced at the virtual meeting before an adjournment is taken.

 

How do I vote?

 

If you are a stockholder of record, you may vote:

 

 

If you are a beneficial owner of shares held in street name, you must follow the voting procedures of your nominee included in your proxy materials. Beneficial owners who wish to vote in person at the virtual meeting must first request and obtain a legal proxy from their nominee.

 

If I plan to attend the virtual annual meeting, should I still vote by proxy?

 

Yes. Casting your vote in advance does not affect your right to attend the virtual annual meeting.

 

If you vote in advance and also attend the virtual meeting, you do not need to vote again at the meeting unless you want to change your vote.

 

May I change my vote after I return my proxy card?

 

Yes. Even after you have submitted your proxy, you may change your vote at any time before the proxy is exercised by filing with our Secretary either a notice of revocation or a duly executed proxy bearing a later date. The powers of the proxy holders will be suspended if you attend the virtual meeting and so request, although attendance at the virtual meeting will not by itself revoke a previously granted proxy. If your shares are held in street name, you must contact your broker or nominee to change your vote or obtain a proxy to vote your shares if you wish to cast your vote in person at the meeting.

 

What are the Board’s recommendations?

 

The enclosed proxy is solicited on behalf of our board of directors (the “Board”). Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of our Board. The recommendation of our Board for each item in this proxy statement is set forth below:

 

Proposal			Board Recommendation
1.	Election of six members to our board of directors to serve until our next annual meeting of stockholders or until their successors are duly elected and qualified.		FOR each director nominee
2.	Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2020.		FOR
3.	Approval, on an advisory basis, of the compensation of our named executive officers.		FOR

 

What happens if additional matters are presented at the annual meeting?

 

Our Board does not know of any other matters that may be brought before the meeting nor does it foresee or have reason to believe that the proxy holders will have to vote for substitute or alternate board nominees. In the event that any other matter should properly come before the meeting or any nominee is not available for election, the proxy holders will vote as recommended by our Board, or if no recommendation is given, in accordance with their best judgment.

 

What vote is required to approve each item?

 

Proposal			Votes Required for Approval		Abstentions
1.	Election of directors		Majority of votes cast		No impact
2.	Ratification of Deloitte & Touche LLP as our auditors		Majority of votes cast		No impact
3.	Advisory vote to approve compensation of named executive officers		Majority of votes cast		No impact

 

For any other item that may properly come before the meeting, the affirmative vote of a majority of the votes cast at the virtual meeting, either in person or by proxy, will be required for approval, unless otherwise required by law.

 

How are abstentions treated?

 

Abstentions will not be counted as votes cast in the final tally of votes with regard to any proposal. Therefore, abstentions will have no effect on the outcome of any proposal. As stated above, abstentions will be counted for the purpose of determining whether a quorum is present.

 

What are “broker non-votes” and how are they treated?

 

If your shares are held by a broker on your behalf (that is, in “street name”), and you do not instruct the broker as to how to vote these shares on Proposals 1 or 3, the broker may not exercise discretion to vote for or against Proposals 1 and 3. This would be a “broker non-vote” and these shares will not be counted as having been voted on the applicable proposal. With respect to Proposal 2, the broker may exercise its discretion to vote for or against that proposal in the absence of your instruction. Please instruct your bank or broker so your vote can be counted.

 

What is the effect of the advisory vote on Proposal 3?

 

Proposal 3 (“Say on Pay”) is an advisory vote. This means that while we ask stockholders to approve resolutions regarding this proposal, this is not an action that requires stockholder approval. If a majority of votes are cast “FOR” the Say on Pay proposal, we will consider the proposal to be approved. Although the advisory vote on this proposal is non-binding, our Board and its compensation committee will review the results of the vote and take them into account in making determinations concerning executive compensation.

 

Do I have dissenter’s or appraisal rights?

 

You have no dissenter’s or appraisal rights in connection with any of the proposals described herein.

 

Where can I find voting results of the virtual annual meeting?

 

We will announce the results for the proposals voted upon at the annual meeting and publish final detailed voting results in a Form 8-K filed within four business days after the virtual annual meeting.

 

Who should I call with other questions?

 

If you have additional questions about this proxy statement or the meeting or would like additional copies of this proxy statement or our 2019 Annual Report, please contact: Full House Resorts, Inc., 1980 Festival Plaza Drive, Suite 680, Las Vegas, Nevada 89135, Telephone: (702) 221-7800.

 

________________________________________

 

PROPOSAL ONE:

ELECTION OF DIRECTORS

________________________________________

 

 

Our Amended and Restated By-laws (the “By-laws”) provide that the number of directors constituting our Board shall be fixed from time to time by our Board. Our Board currently consists of seven directors. The nominees to be voted on by stockholders at this meeting are Kenneth R. Adams, Carl G. Braunlich, Lewis A. Fanger, Daniel R. Lee, Kathleen Marshall and Bradley M. Tirpak. Two individuals who are presently serving as directors, Mr. Landau and Mr. Thomas, will not be seeking another term. Mr. Landau opted to retire after five years on the Board and we thank him for his service. The nominating and corporate governance committee chose to not recommend Mr. Thomas for re-election to the Board and a majority of the Board voted to follow that recommendation. On April 20, 2020, subsequent to being given such notice, Mr. Thomas resigned from the Company’s Board, effective on such date. Directors are elected by a majority of the votes cast, assuming a quorum is present. The term of office of each director ends at the next annual meeting of stockholders or when his or her successor is elected and qualified.

 

All nominees have consented to be named and have indicated their intent to serve if elected. We have no reason to believe that any of these nominees are unavailable for election. However, if any of the nominees become unavailable for any reason, the persons named as proxies may vote for the election of such person or persons for such office as our Board may recommend in the place of such nominee or nominees. It is intended that proxies, unless marked to the contrary, will be voted in favor of the election of each of the nominees.

 

Director Nominees

 

We believe that each nominee possesses the experience, skills and qualities to fully perform his or her duties as a director and to contribute to our success. In addition, each nominee is being nominated because they each possess high standards of personal integrity, are accomplished in their field, have an understanding of the interests and issues that are important to our stockholders and are able to dedicate sufficient time to fulfilling their obligations as a director.

 

Each nominee’s biography containing information regarding the individual’s service as a director, business experience, director positions held currently or within the last five years and other pertinent information about the particular experience, qualifications, attributes and skills that led our Board to conclude that such person should serve as a director appears on the following pages.

 

Our Board believes Mr. Adams is qualified to serve as a Director due to his over 40 years of gaming industry experience, including specific experience as a casino owner and operator, his knowledge of the casino industry, and his continuing analysis and review of the industry.

 

 

 

 

Our Board believes that Dr. Braunlich is qualified to serve as a Director due to his knowledge of and experience gained over 15 years in the casino resort industry, including as a consultant to the casino resort industry, as well as over twenty years as a faculty member of hotel management schools.

 

 

 

 

Chief Financial Officer and Treasurer 42 June 2019

Lewis A. Fanger Director, Senior Vice President, Chief Financial Officer and Treasurer Age: 42 Director Since: June 2019

Mr. Fanger was appointed as our Senior Vice President, Chief Financial Officer and Treasurer on January 30, 2015. Prior to joining the Company, Mr. Fanger served from June 2013 through February 2015 as a Vice President of Wynn Resorts, Limited, a leading owner and operator of resort casinos and a member of the S&P 500 and Nasdaq-100 indexes. At Wynn Resorts, Mr. Fanger oversaw the investor relations functions for both its Nasdaq and Hong Kong Stock Exchange-listed stocks and assisted with the company’s development efforts, including in Asia. From August 2011 to June 2013, Mr. Fanger was Senior Vice President and Chief Financial Officer of Creative Casinos, LLC, the original developer of the Golden Nugget resort casino in Lake Charles, Louisiana. Mr. Fanger also served from July 2003 to August 2011 at Pinnacle Entertainment, Inc. in various capacities, including as Vice President of Finance, where he oversaw the treasury and investor relations functions of the company. Prior to that, Mr. Fanger worked as an equity research associate in the gaming group at Bear, Stearns & Co. in New York. Mr. Fanger earned a bachelor’s degree in industrial engineering and a master’s degree in business administration, both from Stanford University.

 

Our Board believes that Mr. Fanger is qualified to serve as a Director due to his knowledge and experience in the casino industry, including at several leaders in both regional and destination gaming, and his financial expertise from his time working in both investment banking and equity research.

 

 

 

 

Our Board believes that Mr. Lee is qualified to serve as a Director due to his extensive experience in the financial services industry, his experience and knowledge in the gaming, lodging and securities industries and his executive management experience as Chief Executive Officer and Chief Financial Officer of large public corporations.

 

 

 

 

Our Board believes that Ms. Marshall is qualified to serve as a Director due to her knowledge of and experience in the casino industry and her background in audit and as a financial officer for casino and casino-related companies.

 

 

 

 

Our Board believes that Mr. Tirpak is qualified to serve as a Director due to his knowledge and experience in investing, capital allocation and corporate governance, as well as his experience serving on the boards of publicly traded companies.

 

 

________________________________________

 

CORPORATE GOVERNANCE

________________________________________

 

 

Board Leadership Structure

 

Our Board has not adopted a formal policy regarding the need to separate or combine the offices of Chairman of the Board and Chief Executive Officer. Instead, our Board remains free to make this determination from time to time in a manner that seems most appropriate for us. We currently have separate persons serving as the Chief Executive Officer and as Chairman of the Board, in recognition of the differences between the two roles. Our Chairman is responsible for setting the agenda for each of the meetings of our Board and the annual meetings of stockholders, and our Chief Executive Officer is responsible for our strategic direction and the general management of its business, financial affairs and day-to-day operations. We believe this structure promotes active participation of the independent directors and strengthens the role of our Board in fulfilling both its oversight responsibility and fiduciary duties to our stockholders, while recognizing our day-to-day management direction by the Chief Executive Officer. Accordingly, we believe this structure has been the best governance model for us and our stockholders to date.

 

Mr. Tirpak currently serves as our Chairman and Dr. Braunlich currently serves as our Vice Chairman of the Board. Mr. Tirpak and Dr. Braunlich are both independent directors. During 2019, the independent directors met twice in conjunction with our regular Board meetings. All of our Board committees are compromised only of independent directors except for our compliance committee, which includes Mr. Lee, our President and Chief Executive Officer. Each committee is chaired by an independent director. Our Board leadership structure is commonly utilized by other public companies in the United States of comparable size and scope. We believe that an independent Chairman and Vice Chairman and only independent directors serving on our Board committees (other than the compliance committee) provide an effective and balanced leadership structure. With experienced and participating independent directors, we believe we have the proper leadership structure.

 

Independence of Directors

 

Under the corporate governance standards of the Nasdaq Stock Market LLC (“Nasdaq”), at least a majority of our Board and all of the members of our audit committee, compensation committee, and the nominating and corporate governance committee must meet the test of independence as defined by the listing requirements of Nasdaq. Our Board, in the exercise of its reasonable business judgment, has determined that Mr. Adams, Dr. Braunlich, Ms. Marshall, Mr. Landau, Mr. Thomas and Mr. Tirpak qualify as independent directors, pursuant to Nasdaq and rules and regulations of the Securities and Exchange Commission (“SEC”). In making the determination of independence, our Board undertook a review of director independence, which includes a review of each director’s responses to questionnaires asking about any relationships with us. This review is designed to identify and evaluate any transactions or relationships between a director or any member of his or her immediate family and us, or members of our management or other members of our Board, and all relevant facts and circumstances regarding any such transactions or relationships. In addition, our Board considered the recommendations of our nominating and corporate governance committee, which also considered whether such directors would be deemed to be “independent”.

 

Meetings

 

During 2019, our Board held eight meetings. Each of our directors attended at least 75% of the aggregate of (i) the total number of meetings of the Board that were held during the period in which he or she was a director and (ii) the total number of meetings of all committees on which he or she served that were held during the period in which he or she was a director. We have no specific requirements regarding attendance at the annual meeting of stockholders by our directors. In 2019, all of our directors attended the annual meeting in person and made themselves available for stockholder interaction.

Board Committees

 

Our Board has four standing committees: the audit committee, the compensation committee, the nominating and corporate governance committee, and the compliance committee, each of which operates under a written charter adopted by our Board. A current copy of each of the audit committee, compensation committee, compliance committee, and nominating and corporate governance committee charters is available through the “Investors - Governance Documents” link on our website, www.fullhouseresorts.com. The following table illustrates the current membership of each of our Board’s committees:

 

						Nominating and
						Corporate
Director		Audit		Compensation		Governance		Compliance
Kenneth R. Adams		●						Chair
Carl G. Braunlich				Chair		●		●
Ellis Landau				●
Daniel R. Lee								●
Kathleen M. Marshall		Chair				●		●
Bradley M. Tirpak		●

 

As discussed above, Mr. Landau has opted to retire. Separately, Mr. Thomas was not re-nominated by the Board for re-election and, subsequent to such notice, resigned from the Board on April 20, 2020. We have not yet determined who will replace Mr. Landau and Mr. Thomas on the compensation committee, or Mr. Thomas on the nominating and corporate governance committee.

 

Audit Committee

 

The audit committee is comprised of three members: Ms. Marshall, Mr. Adams and Mr. Tirpak. Ms. Marshall serves as chair and financial expert on the audit committee. Our Board has determined that Ms. Marshall is an audit committee financial expert as defined by the rules and regulations of the SEC. Our Board, in its reasonable judgment, has determined that each member of the audit committee is independent, as defined under the applicable Nasdaq listing standards, and meets the enhanced independence standards for audit committee members required by the SEC. Our audit committee held nine meetings in 2019.

 

Among its responsibilities, the audit committee:

 

 

Please refer to the audit committee report, which is set forth below, for a further description of our audit committee’s responsibilities and its recommendations with respect to our audited consolidated financial statements for the year ended December 31, 2019.

 

Compensation Committee

 

The compensation committee is currently comprised of two members, Dr. Braunlich and Mr. Landau, as Mr. Thomas resigned on April 20, 2020, as noted above. Dr. Braunlich serves as chair of the compensation committee. Our Board, in its reasonable judgment, has determined that each member of the compensation committee is independent as defined under the applicable Nasdaq listing standards, Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The compensation committee held five meetings in 2019. The compensation committee is generally responsible for reviewing and making recommendations to our Board regarding all forms of compensation to be provided to our executive officers, directors and, where appropriate, employees.

 

Among its responsibilities, the compensation committee:

 

 

Management provides recommendations to the compensation committee on the amount and type of executive compensation (other than that of the recommending executive), as well as individual performance objectives for bonuses and incentive compensation, and the compensation committee reviews and considers these recommendations. In formulating its recommendations to the Board, the compensation committee additionally considers our performance as a whole. The compensation committee determines the achievement of the individual performance objectives, which are based on specific goals consistent with the annual business plan, and recommends individual bonus and incentive compensation amounts to the Board.

The compensation committee may delegate its authority to subcommittees or the chair of the committee when it deems appropriate and in our best interest. 

 

The compensation committee reviews a number of factors when evaluating compensation of executives, including any potential base salary increases. Such factors include, but are not limited to, a periodic review of our peer group within the gaming industry for equivalent positions of companies of similar size and status, external market conditions, and individual factors. Such individual factors include the executive’s experience, tenure, education, job performance, contributions to our operational and financial results, complexity of the executive’s responsibilities and any unique skills or qualities the executive possesses.

 

In 2019, the compensation committee authorized a compensation study for our senior management team, including our CEO, CFO and General Counsel. The compensation study utilized a peer group consisting of: Butler National, Canterbury Park Holdings, Century Casinos, Empire Resorts, Galaxy Gaming, Golden Entertainment, Great Canadian Gaming, Inspired Entertainment, Monarch Casino and Resort, Red Lion Hotels & Resorts, Thunderbird Resorts, TransAct Technologies, and Twin River Worldwide Holdings. Using compensation figures from 2018, the study noted that the base salaries of the CEO, CFO and General Counsel were below the market 25th percentile, between the median and the 75th percentile, and below the 25th percentile, respectively. Regarding total direct compensation, the study noted that such amounts for the CEO, CFO and General Counsel were all at or below the market 25th percentile.

 

Compensation Committee Interlocks and Insider Participation

 

None of the members of the compensation committee were at any time during 2019, or at any other time, an officer or employee of our Company, or was formerly an officer of our Company. During 2019, none of our executive officers served as a director of another entity, one of whose executive officers served on the compensation committee, and none of our executive officers served as a member of the compensation committee of another entity, whose executive officers served as a member of our Board. There were no transactions in 2019 between us and any directors who served as compensation committee members for any part of 2019 that would require disclosure by us under SEC rules requiring disclosure of certain relationships and related party transactions.

 

Nominating and Corporate Governance Committee

 

The nominating and corporate governance committee is currently comprised of two members, Dr. Braunlich and Ms. Marshall. As noted above, subsequent to being notified that he was not re-nominated by the Board for re-election, Mr. Thomas resigned from the Company’s Board and as chair of the nominating and corporate governance committee, effective as of April 20, 2020. The nominating and corporate governance committee held one meeting in 2019.

 

The nominating and corporate governance committee is generally responsible for assisting our Board with respect to nominating new directors.

 

Among its responsibilities, the nominating and corporate governance committee:

 

·

determines, and periodically reviews, specific, minimum qualifications and characteristics that must be met by a nominee for a position on the Board or on a Board committee;

·

determines, and periodically reviews, (i) whether there are any specific qualities or skills that are necessary for one or more directors to possess, (ii) the overall diversity of the Board, and (iii) any other areas that may be expected to contribute to an effective Board;

·

identifies, evaluates, proposes, approves and recommends for Board approval nominees for election or appointment to the Board, including nominees for director to be submitted to a stockholder vote at the annual meeting of stockholders;

·

evaluates, proposes, and approves any nominations of director candidates validly made by stockholders in accordance with policies and procedures adopted by the Board and applicable laws, rules, and regulations;

 

The nominating and corporate governance committee considers all qualified director candidates regardless of age, race, gender, national origin or religion. The nominating and corporate governance committee does not specifically consider diversity in fulfilling its responsibilities to select qualified and appropriate director candidates. Instead, the nominating and corporate governance committee will seek to balance the existing skill sets of current Board members with the need for other diverse skills and qualities that will complement our strategic vision. All director candidates are evaluated based on general characteristics and specific talents and skills needed to increase the Board’s effectiveness, including such factors as business experience, skills and knowledge with respect to the gaming industry, finance, marketing, and financial reporting. Additionally, all candidates must possess a commitment to high ethical standards and have a demonstrated reputation for integrity. The nominating and corporate governance committee will consider stockholder recommendations for director candidates and will do so in the same manner that it considers all director candidates. Other than as provided by applicable law, there are no specific, minimum qualifications that must be met by a director nominee recommended by a stockholder except that a director must be of full age.

 

Under our By-Laws, if a stockholder wishes to submit a nominee for consideration by the nominating and corporate governance committee, the stockholder must deliver or mail notice of the request to the Secretary, in writing, so that it is received not less than 90 days nor more than 120 days prior to the anniversary date of the prior year’s annual meeting of stockholders. However, if the annual meeting is not within 30 days in advance of the anniversary date of the prior year’s annual meeting or not within 70 days after the anniversary date of the prior year’s annual meeting, such notice must be received by the Secretary no later than 10 days following the date of public disclosure of the annual meeting date. The notice must be accompanied by the information concerning the nominee and proposing stockholder described in Article I, Section 12 of our By-Laws including disclosure of: (i) the number of shares of our capital stock owned of record and beneficially by the nominee, (ii) a description of any agreement, arrangement or understanding between a proposing stockholder and any other persons acting in concert, (iii) information we deem appropriate to ascertain the nominee’s suitability to serve on the Board or eligibility to serve as an independent director, and (iv) any other information concerning the nominee required to comply with the proxy rules and regulations. A nomination not made in accordance with the procedures set forth in our By-Laws is void.

 

Although the nominating and corporate governance committee’s charter permits the committee to engage a search firm to identify director candidates, we did not pay any third parties a fee to assist in the process of identifying or evaluating director candidates in 2019.

 

Compliance Committee

 

The compliance committee is comprised of four members: Mr. Adams, Dr. Braunlich, Mr. Lee and Ms. Marshall. Mr. Adams serves as chair of the regulatory compliance committee. The compliance committee’s functions include reviewing and making recommendations to the Board regarding compliance with gaming laws and regulations. The compliance committee held five meetings in 2019.

 

The compliance committee meets quarterly to review the items determined by the Colorado, Nevada, Indiana and Mississippi gaming control boards to be of sufficient material interest to warrant review by a committee of the Board. During 2019, the committee reviewed reports from our Compliance Officer.

 

Board’s Role in Risk Oversight

 

The audit committee is responsible for reviewing and assessing our financial risks, including those that may relate to cybersecurity. The compensation committee is primarily responsible for overseeing the management of risks associated with compensation policies and practice. In addition, the compliance committee is responsible for the oversight and review of all matters of gaming regulatory importance. We believe that these committees provide us with proper risk oversight.

 

Prohibition on Short Sales, Derivatives Trading and Pledging and Hedging of Company Securities

 

Our insider trading policy prohibits directors, officers, employees, and our consultants and independent contractors (“Insiders”) from engaging in short-term or speculative transactions involving our securities.  Specifically, Insiders may not engage in any of the following activities with respect to our securities:

 

 

Code of Conduct and Ethics

 

Our Board has adopted a Code of Conduct and Ethics applicable to each of our directors, officers and employees. The full text of the Code of Conduct and Ethics is available through the “Investors - Governance Documents” link on our website, www.fullhouseresorts.com. We intend to provide disclosure of any amendments or waivers of our Code of Conduct and Ethics on our website within four business days following the date of the amendment or waiver.

 

Certain Relationships and Related Party Transactions

 

On March 26, 2018, we closed on a registered direct offering of 3.9 million shares of common stock. Of such amount, Mr. Landau, our director, purchased 100,000 shares of common stock. While other participants in the offering paid a discounted price of $3.00 per share, Mr. Landau paid $3.19 per share, the closing price of our common stock on March 23, 2018, for an aggregate purchase price of $319,000.

 

Our Code of Conduct and Ethics broadly covers related-party transactions that may involve a conflict of interest. Under our audit committee charter, all related party transactions must be approved by our audit committee. Current SEC rules define transactions with related persons to include any transaction, arrangement or relationship (i) in which the company is a participant, (ii) in which the amount involved exceeds the lesser of $120,000 or one percent of the average of a smaller reporting company’s total assets at year-end for the last two completed fiscal years, and (iii) in which any executive officer, director, director nominee, beneficial owner of more than 5% of our common stock, or any immediate family member of such persons has or will have a direct or indirect material interest. All directors must recuse themselves from any discussion or decision affecting their personal, business or professional interests. In accordance with its charter, the audit committee reviewed the related party transaction described above.