PART I

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements about management’s current expectations. Examples of such forward-looking statements include discussions of the expected results of various strategies. Although we believe that our expectations are based upon reasonable assumptions, there can be no assurance that our financial goals will be realized. Our forward-looking statements concern matters that involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from the future results, performance or achievements described or implied by such forward-looking statements. Numerous factors may affect our actual results and may cause results to differ materially from those expressed in the forward-looking statements made by us or on our behalf. Any statements that are not statements of historical fact may be forward-looking statements. Among others, we have used the words, “believes,” “anticipates,” “plans,” “estimates,” and “expects” to identify forward-looking statements. Such statements may be considered forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). Factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the risk factors set forth in Item 1A of this Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this filing. We assume no obligation to update the forward-looking statements to reflect actual results or changes in the factors affecting such forward-looking statements.

Overview

Empire Resorts, Inc. (“Empire,” and, together with its subsidiaries, the “Company,” “us,” “our” or “we”) was organized as a Delaware corporation on March 19, 1993, and since that time has served as a holding company for various subsidiaries engaged in the hospitality and gaming industries.

On December 21, 2015, our indirect wholly-owned subsidiary, Montreign Operating Company, LLC ("Montreign Operating"), was awarded a gaming license (a "Gaming Facility License") by the New York State Gaming Commission ("NYSGC") to operate a resort casino (the "Casino Project") to be located at the site of a four-season destination resort being developed in the Town of Thompson in Sullivan County, approximately 90 miles from New York City (the "Destination Resort"), which is described below. Montreign Operating is the sole holder of a Gaming Facility License in the Hudson Valley-Catskill Area, which consists of Columbia, Delaware, Dutchess, Greene, Orange, Sullivan and Ulster counties in New York State. The Gaming Facility License became effective on March 1, 2016.

The Destination Resort is located on approximately 1,700 acres (the “EPT Property”) owned by EPT Concord II, LLC (“EPT”) and EPR Concord II, L.P. (“EPR LP”), two wholly-owned subsidiaries of EPR Properties, an entity unrelated to the Company. The Casino Project is part of the initial phase of the Destination Resort, which will also include an Indoor Waterpark Lodge (the "Waterpark"), a Rees Jones-redesigned "Monster" Golf Course (the "Golf Course Project") and an Entertainment Village, which will include hotel, retail, restaurants and other amenities (the "Entertainment Village Project" and, together with the Casino Project and the Golf Course Project, the "Development Projects"). In addition to the Casino Project, subsidiaries of Montreign Operating are responsible for developing the Entertainment Village Project and the Golf Course Project. Subsidiaries of EPR Properties are responsible for developing the Waterpark.

Through our 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, approximately 90 miles northwest of New York City. Monticello Casino and Raceway operates 1,110 VGMs, which includes 1,070 video lottery terminals ("VLTs") and 40 electronic table game positions ("ETGs"). VGMs are similar to slot machines, but they are connected to a central system and report financial information to the central system. ETGs include the games of roulette, blackjack and 3-card poker. 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 23, 2016, the NYSGC approved MRMI's racetrack and simulcast license renewal applications for calendar year 2017. Generally, the annual license renewal process requires the NYSGC to review the financial responsibility, experience, character and general fitness of MRMI and its management.

Recent Events     

Corporate Restructuring

In January 2017, the Company undertook certain corporate restructuring. In particular, Empire created Montreign Holding Company, LLC ("Montreign Holding"), a wholly-owned subsidiary, to which it contributed all of its membership interests in Montreign Operating, which was formerly a wholly-owned subsidiary of Empire. Concurrently, Empire contributed to Montreign Operating all of its membership interests in each of Empire Resorts Real Estate I, LLC ("ERREI"), which is developing the Golf Course Project, and Empire Resorts Real Estate II, LLC ("ERREII" and together with ERREI, the "Montreign Subsidiaries" and, together with ERREI and Montreign Operating, the "Project Parties"), which is developing the Entertainment Village Project, each of which were formerly wholly-owned subsidiaries of Empire. The diagram below illustrates the Company's organization as to these entities before and after the restructuring:

    

.

Debt Financing for the Development Projects

                 

On January 24, 2017, Montreign Operating closed a senior secured first lien term loan facility, which provides an aggregate principal amount of $485 million of senior secured first lien term loans, consisting of $70 million of Term A loans and $415 million of Term B loans. In addition, on the same date, Montreign Operating entered into a senior secured revolving credit facility in the amount of $15 million. The net proceeds of the senior secured term facility will be used to fund costs relating to the construction of the Development Projects and the proceeds of the senior secured revolving credit facility will be used for working capital, capital expenditures and other general corporate expenses of Montreign Operating following the opening of the Casino Project to the public. The obligations of Montreign Operating under the aforementioned loan facilities are guaranteed by the Montreign Subsidiaries and are secured by security interests in substantially all of the assets of the Project Parties, as well as by a pledge of the membership interests in Montreign Operating by Montreign Holding. In connection with the senior secured term facility, Empire provided a guaranty capped at $30 million on the completion of construction of the Casino Project and the Entertainment Village Project. Please see " Business - The Destination Resort and the Development Projects - Term Loan Agreement and Revolving Credit Agreement " below for more information.

      

     Kien Huat Montreign Loan Agreement

On January 24, 2017, Kien Huat Realty III Limited ("Kien Huat"), Empire's largest stockholder, and Montreign Holding entered into a loan agreement (the "Kien Huat Montreign Loan Agreement"), pursuant to which Montreign Holding obtained from Kien Huat a loan in the principal amount of $32.3 million (the "Kien Huat Montreign Loan"). The net proceeds of the Kien Huat Montreign Loan will be used as a capital contribution to Montreign Operating for use towards the development and operating expenses of the Development Projects. The obligations of Montreign Holding under the Kien Huat Montreign Loan Agreement are secured by a pledge of all the membership interests of Montreign Holding by Empire. Please see " Business - The Destination Resort and the Development Projects - Kien Huat Montreign Loan Agreement " below for more information.

The Destination Resort and the Development Projects

The Destination Resort is located on the EPT Property in the Town of Thompson in Sullivan County, New York. The Casino Project is part of the initial phase of the Destination Resort, which will also include the Waterpark, the Golf Course Project and the Entertainment Village Project (the Casino Project, the Waterpark, the Golf Course Project and the Entertainment Village Project, collectively the “Initial Projects”). The Company currently expects the construction of the Development Projects will cost approximately $909 million, which includes $744 million of currently expected costs for the Development Projects, $72 million for contingency and interest reserves, $51 million for the Gaming Facility License fee and $42 million of original issue discount and financing and legal fees.

The Casino Project

The Casino Project is designed to meet five-star and five-diamond standards and is expected to include:

    

As of February 28, 2017, approximately 85% of the Guaranteed Maximum Price (defined below)(see " Business - The Destination Resort and the Development Projects - LP Ciminelli " below for more information) under the construction manager agreement with LP Ciminelli for the Casino Project has been contracted. Additionally, approximately 45% of the construction of the Casino Project is complete.

Gaming Facility License

The Gaming Facility License became effective on March 1, 2016. The Gaming Facility License will have an initial duration of 10 years from March 1, 2016. It will be renewable thereafter for a period of at least an additional ten years, as determined by the NYSGC. The Gaming Facility License is also subject to certain conditions established by the NYSGC, including the following:

•     the payment of an aggregate license fee of $51 million, which was paid on March 30, 2016;

The Golf Course Project and the Entertainment Village Project

ERREI and ERREII are responsible for the development and construction of the Golf Course Project and the Entertainment Village Project, respectively. The development of the Entertainment Village Project is expected to be built-out in phases. The Company is currently preparing the design plans for the Entertainment Village Project, which will consist of a non-gaming hotel with 100-200 guest rooms as well as dining, entertainment and retail offerings. The targeted rating for this hotel and its related amenities is in the range of 3-Star and 3-Diamond standards to serve mid-market customers. On December 8, 2016, the Company submitted to the Town of Thompson Planning Board (the "Planning Board") an application for the approval for the site plan for the hotel to be located within the Entertainment Village Project. The Planning Board held a special public hearing to consider the application on March 1, 2017.

ERREI has obtained final site approval from the Planning Board for, and has begun site preparation of, the redesign of the Golf Course Project. On December 28, 2016, the Planning Board extended this site plan approval for a period of six months to allow the Company to coordinate the commencement of construction and to obtain final approval of updates to the wetlands permits from the United States Army Corps of Engineers and the New York State Department of Environmental Conservation, if required.

Master Development Agreement and Completion Guaranties

On December 28, 2015 (the “MDA Effective Date”), the Project Parties, on the one hand, and EPT, EPR LP and Adelaar Developer, LLC (the “Destination Resort Developer,” together with EPT and EPR LP collectively, “EPR”), on the other hand, entered into an Amended and Restated Master Development Agreement (as amended, the “MDA”), which amends and restates that certain master development agreement by and between EPT and MRMI originally executed on December 14, 2012. The MDA defines and governs the overall relationship between EPR and the Project Parties with respect to the development, construction, operation, management and disposition of the Initial Projects.

In accordance with the terms of the MDA, the Project Parties shall each be responsible for the development and construction of their portion of the Development Projects. On December 28, 2015, Empire entered into a Completion Guaranty, guaranteeing completion of the development and construction obligations of the Project Parties described in this paragraph.

In accordance with the terms of the MDA, EPR is responsible for the development and construction of the Waterpark and the common infrastructure-related improvements (such as streets, sidewalks, sanitary and storm sewer lines, water, gas, electric, telephone and other utility lines, systems, conduits and other similar facilities) for the Destination Resort. EPR has agreed to be responsible for the development and construction of the Waterpark with a minimum capital investment of $120 million, and the infrastructure for the Destination Resort. EPR financed the costs of the infrastructure by the issuance of tax-exempt bonds by a local development corporation. The debt service for these infrastructure bonds will be funded through special district tax assessments, a portion of which will be allocated to each of the parcels on which the Initial Projects are being built. EPR and the Project Parties have agreed to a capped dollar amount on the special district tax assessment for each of the parcels on which the Development Projects are being built, above which the Project Parties will not be responsible. On December 28, 2015, EPR Properties, a real estate investment trust and the parent company of EPR, entered into a Completion Guaranty, guaranteeing completion of the development and construction obligations of EPR described in this paragraph.

Neither party has the right to terminate the MDA unless Montreign Operating fails to exercise the Purchase Option (as defined below) prior to its expiration in accordance with the terms and conditions of the Purchase Option Agreement (as defined below).

On January 24, 2017, the MDA was amended to (a) reflect that EPR has secured bond financing in connection with its infrastructure development obligations and (b) account for increases in the common infrastructure budget (and corresponding increases in Empire’s common infrastructure cap amount) in connection with the development of additional roads and increase in the budgeted amounts for New York State Electric and Gas costs. The changes to Empire’s common infrastructure cap amount were also reflected in each of the amendments to the Casino Lease, Golf Course Lease and Entertainment Village Lease.

Development Project Parcel Leases and Purchase Option Agreement

On December 28, 2015, the Project Parties entered into the Casino Lease, the Golf Course Lease, the Entertainment Village Lease and the Purchase Option Agreement (each as defined and described in " Properties - EPT Property " below). Option payments made by the Company pursuant to that certain option agreement, originally executed on December 21, 2011 and last amended on June 20, 2014 (the "Original Option Agreement"), which total $8.5 million, were applied against rent amounts due to EPT as rent under the Casino Lease, as more fully described below. The Original Option Agreement, which granted the Company the right to lease the Casino Parcel, was superseded by the Casino Lease, Golf Course Lease and the Entertainment Village Lease, which are described below in " Properties - EPT Property" .

Term Loan Agreement and Revolving Credit Agreement

    

Term Loan Agreement

On January 24, 2017 (the "Loan Closing Date"), Montreign Operating entered into a Building Term Loan Agreement (the "Term Loan Agreement"), among Montreign Operating, the lenders from time to time party thereto, and Credit Suisse AG, Cayman Islands Branch ("Credit Suisse"), as administrative agent. The Term Loan Agreement provides for loans to be made to Montreign Operating in an aggregate principal amount of $485 million (the "Term Loan Facility").

The Term Loan Facility consists of $70 million of Term A loans (the "Term A Loan") and $415 million of Term B loans (the "Term B Loan"). The Term B Loan was borrowed in full on the Loan Closing Date and the proceeds were used to pay fees and expenses related to the financing and fund various lender-controlled accounts. The proceeds of the Term Loan Facility (including proceeds of the Term A Loan, which will be deposited into the lender-controlled accounts upon borrowing) will be made available to Montreign Operating, subject to Montreign Operating satisfying the disbursement conditions set forth in the Term Loan Agreement and related loan documents, to pay debt service and costs relating to the development and construction of the Development Projects.

The Term A Loan may be borrowed during the period from the Loan Closing Date to July 24, 2018, subject to meeting the conditions set forth in the Term Loan Agreement at the time of the borrowing. The Term A Loan will mature on January 24, 2022 and the Term B Loan will mature on January 24, 2023. Interest will accrue on outstanding borrowings under the Term A Loan at a rate equal to LIBOR plus 5.0% per annum, or an alternate base rate plus 4.0% per annum. Interest will accrue on

outstanding borrowings under the Term B Loan at a rate equal to LIBOR (with a LIBOR floor of 1%) plus 8.25% per annum, or an alternate base rate plus 7.25% per annum. In addition, Montreign Operating will pay a commitment fee to each Term A Loan lender (“Term A Lender”) equal to the undrawn amount of such Term A Lender’s Term A Loan commitment multiplied by a rate equal to 2.5% per annum for the period commencing on the Loan Closing Date through March 24, 2018 and 5.0% per annum thereafter.

In the event that the Term B Loan is prepaid or repaid in whole or in part for any reason other than as a result of scheduled amortization and certain other exceptions, Montreign Operating is required to pay pre-payment premiums based on a make-whole if the prepayment occurs from the Loan Closing Date to (but excluding) the 30th-month anniversary following the Loan Closing Date (the “30th Month”), and a 2% and 1% premium if the prepayment occurs from the 30th Month to (but excluding) the 42nd-month anniversary of the Loan Closing Date (the “42nd Month”) and from the 42nd Month to (but excluding) the 54th-month anniversary of the Loan Closing Date, respectively.

Revolving Credit Agreement

On the Loan Closing Date, Montreign Operating also entered into a Revolving Credit Agreement (the “Revolving Credit Agreement”) among Montreign Operating, the lenders from time to time party thereto, and Fifth Third Bank, as administrative agent. The Revolving Credit Agreement provides for loans or other extensions of credit to be made to Montreign Operating in an aggregate principal amount of up to $15 million (including a letter of credit sub-facility of $10 million) (the “Revolving Credit Facility”), the proceeds of which may be used for working capital needs, capital expenditures and other general corporate purposes following the opening of the Casino Project to the public. The Revolving Credit Facility will mature on January 24, 2022. Interest will accrue on outstanding borrowings at a rate equal to LIBOR plus 5.0% per annum, or an alternate base rate plus 4.0% per annum.

Collateral and Other Provisions

The Term Loan Facility and the Revolving Credit Facility are each guaranteed by the Montreign Subsidiaries and are secured by security interests in substantially all the real and personal property of Montreign Operating and the Montreign Subsidiaries and by a pledge of all the membership interests of Montreign Operating held by Montreign Holding. In addition, Empire delivered a completion guaranty in connection with the Term Loan Facility guaranteeing the completion of the construction of the Casino Project and the Entertainment Village Project. Empire’s liability under the completion guaranty (excluding lender’s enforcement costs) is capped at $30 million.

The Term Loan Agreement and the Revolving Credit Agreement contain representations, warranties, affirmative covenants, negative covenants and financial covenants that are usual and customary, including representations, warranties and covenants that, among other things, restrict the ability of Montreign Operating and the Montreign Subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, or make dividends or other distributions. Additionally, Montreign Operating is required to deposit $35 million into the lender-controlled account holding the net proceeds of the Term Loan Facility and the Kien Huat Montreign Loan, which amount will be used towards the Entertainment Village Project. Of this payment, $15 million is required to be deposited by June 30, 2017 and the remaining $20 million is required to be deposited by December 31, 2017. The $35 million must be funded in the form of a further equity contribution to Montreign Operating. The Company expects to raise additional equity capital to cover these amounts by the dates on which the deposits must be made. Obligations under the Term Loan Agreement and the Revolving Credit Agreement may be accelerated upon certain customary events of default (subject to grace periods, as appropriate), including, among others: nonpayment of principal, interest or fees; breach of the affirmative or negative covenants; revocation of a gaming license for seven consecutive business days; and a change of control (as such term is defined in the Term Loan Agreement) of Montreign Operating.

    

To further fund the Development Projects, on January 24, 2017, Montreign Operating entered into the Term Loan Agreement and Montreign Holding entered into the Kien Huat Montreign Loan Agreement. In connection with the consummation of the Term Loan Agreement, on the Loan Closing Date, that certain construction loan agreement (the "Kien Huat Construction Loan Agreement") dated October 13, 2016, by and between Kien Huat and Montreign Operating expired on its terms without being utilized by Montreign Operating. Montreign Operating and Kien Huat had entered into the Kien Huat Construction Loan Agreement to provide Montreign Operating with short-term access to up to $50 million of loans to pay the expenses of the Casino Project while the debt financing for the Development Projects was being finalized.

Kien Huat Montreign Loan Agreement

On the Loan Closing Date, Kien Huat and Montreign Holding entered into the Kien Huat Montreign Loan Agreement, pursuant to which Montreign Holding obtained from Kien Huat a loan in the principal amount of $32.3 million, the net proceeds of which will be used as a capital contribution to Montreign Operating for use towards the expenses of the Development Projects. The Kien Huat Montreign Loan shall mature on February 24, 2024 (the “Kien Huat Loan Maturity Date”), which Kien Huat Loan Maturity Date may be extended by Kien Huat in its sole discretion by up to an additional year.

The Kien Huat Montreign Loan bears interest at a rate of 12% per annum. Prior to the Kien Huat Loan Maturity Date,

interest on the Kien Huat Montreign Loan shall accrue and be added to the outstanding principal of the Kien Huat Montreign

Loan (the “Principal Indebtedness”) on the first business day of each calendar month beginning on February 1, 2017 (each an

“Interest Payment Date”) and shall thereafter be deemed to be part of the Principal Indebtedness. The Principal Indebtedness,

including all interest due through the applicable Interest Payment Date and other amounts due under the Kien Huat Montreign

Loan, shall be payable in cash on the Kien Huat Loan Maturity Date. Notwithstanding the foregoing, Montreign Holding shall

be required to pay in cash to Kien Huat, at the end of any “accrual period” (as defined in Section 1275(a)(5) of the Internal

Revenue Code of 1986, as amended (the “Code”)) ending after the fifth anniversary of the Loan Closing Date the aggregate

amount by which (x) the sum of (i) the amount of accrued interest on the Kien Huat Montreign Loan that has been added to the

Principal Indebtedness plus (ii) any other accrued but unpaid original issue discount (as determined under Section 163(i) of the

Code) on the Kien Huat Montreign Loan from the closing date through the end of such accrual period, in each case that has not

been paid in cash, exceeds (y) the product of (i) the “issue price” (as defined for purposes of the Code) and (ii) the “yield to

maturity” (as defined for purposes of the Code). In addition to the interest payable on the Kien Huat Montreign Loan, Kien

Huat was entitled to a commitment fee of 1%, which fee was added to the Principal Indebtedness of the Kien Huat Montreign Loan on the Loan Closing Date.

Until the Kien Huat Montreign Loan is repaid in full, Montreign Holding shall make no dividend or other distributions to Empire except (i) for purposes of paying bona fide corporate overhead expenses in an amount not to exceed $9 million (which amount is subject to further reduction pursuant to the Kien Huat Montreign Loan Agreement) and (ii) for purposes of the payment of taxes by Empire, to the extent also permitted by the Term Loan Agreement with respect to distributions from

Montreign Operating. The Kien Huat Montreign Loan may be prepaid in full or in part at any time without premium or penalty.

The obligations of Montreign Holding under the Kien Huat Montreign Loan Agreement are secured by a pledge of all the membership interests of Montreign Holding by Empire. The Kien Huat Montreign Loan Agreement contains representations and warranties and affirmative covenants that are usual and customary, including representations, warranties and covenants that, among other things, restrict Montreign Holding’s use of the proceeds of the Kien Huat Montreign Loan to expenses relating to the Development Projects. Obligations under the Kien Huat Montreign Loan Agreement may be accelerated upon certain customary events of default (subject to grace periods, as appropriate), including, among others: nonpayment of principal, interest or fees; breach of the affirmative covenants and a default with respect to the payment of principal or interest under the Term Loan Facility by Montreign Operating or acceleration of the Term Loan Facility for any reason.

County of Sullivan Industrial Development Agency Benefits Relating to the Development Projects

Casino Project IDA Benefits

In March 2013, the Company received approval from the County of Sullivan Industrial Development Agency ("IDA") for the provision of certain forms of financial assistance in connection with the development of the Casino Project. These

prospective benefits included, among others, (i) an exemption from New York 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 “Casino Project

Tax Benefit”), which Casino Project Tax Benefit is subject to a cap, (ii) an exemption from all mortgage recording taxes

imposed in New York State, and (iii) a partial (or full) real property tax abatement over 16 years ((i), (ii) and (iii), collectively, the “Casino Project IDA Benefits”). The Casino Project IDA Documents, as further amended as discussed below, became effective upon the grant of the Gaming Facility License to Montreign Operating in December 2015.

   

In September 2014, the IDA and the Company entered into an Agent Agreement, Lease Agreement, Leaseback Agreement, payment in lieu of tax ("PILOT") Agreement, and related documents (together and as amended, the "Casino Project IDA Documents") providing for the Casino Project IDA Benefits following formal approval of such agreements by the IDA. Among other things, pursuant to the Casino Project IDA Documents, the Company is required to pay to the IDA (i) annual rent and (ii) a fee in connection with the use of these forms of financial assistance.

    

In support of site preparation activities for the Casino Project, on May 26, 2015, the IDA took action to allow the Company to obtain the Casino Project Tax Benefit with respect to its eligible Casino Project expenses immediately, even though the Casino Project IDA Documents would not be effective until the Gaming Facility License was issued. 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 cap on the Casino Project Tax Benefit and the value subject to the PILOT agreement as a result of changes to the design of the Casino Project, which substantially increased the cost of development. On September 18, 2015, the IDA approved amendments to the Casino Project IDA Documents (i) increasing the Casino Project Tax Benefit cap from approximately $15 million to $35 million and (ii) increasing the total value subject to the PILOT agreement from $53.5 million to $65 million. In connection with these amendments to the Casino Project IDA Documents, the annual rent due to the IDA from the Company on the Casino Project Parcel increased to $166,000 and the fee due to the IDA was increased by $82,500.

In connection with Montreign Operating's entry into the Term Loan Agreement and the Revolving Credit Agreement, on the Loan Closing Date, Montreign Operating, ERREI, the IDA and the Credit Suisse AG, Cayman Islands Branch, as Collateral Agent, entered into a Building Loan Mortgage, Leasehold Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing. In connection with the execution of these agreements, the Company was exempt from the mortgage recording taxes imposed by New York State pursuant to the terms of the Casino Project IDA Documents.

Golf Course Project IDA Benefits

On June 20, 2016, ERREI obtained approval from the IDA for the provision of certain forms of financial assistance in

connection with the Golf Course Project, which prospective benefits include (i) an exemption from New York State and local sales and use taxes with respect to certain items used in, or for, the acquisition, construction and equipping of the Golf Course Project, (ii) an exemption from all mortgage recording taxes imposed in New York State, and (iii) a partial (or full) real property tax abatement over 16 years ((i), (ii) and (iii), collectively, the "Golf Course Project IDA Benefits").

On December 22, 2016, the IDA and ERREI entered into an Agent Agreement, Lease Agreement, Leaseback Agreement, PILOT Agreement and related documents (the "Golf Course Project IDA Documents") providing for the Golf Course Project IDA Benefits. ERREI is required to pay annual rent to the IDA in the amount of $10,000 per year for the first two years of the Lease Agreement term and $25,000 per year thereafter. In addition, ERREI is required to make annual PILOT payments to the IDA based on a total value of $4.8 million, which payment is discounted for the first two years of the property tax abatement period to accommodate for construction of the Golf Course Project.

Casino Project Branding

Montreign Operating is in discussions with an entity affiliated with Tan Sri Lim Kok Thay, a beneficiary of Kien Huat, to use certain trademarks related to the “Resorts World” and "Genting" names in relation to the Casino Project and the other Development Projects (the "RW License Agreement"). In addition, the parties are negotiating an agreement pursuant to which the Casino Project will become a member of the "Genting Rewards" customer loyalty program. On March 7, 2017, the Board of Directors of Empire and the Board of Managers of Montreign Operating approved the form of the RW License Agreement, which will be submitted to the NYSGC for review and approval. Upon the receipt of such approval from the NYSGC, the parties will execute the RW License Agreement.

JCJ Architectur e

Montreign Operating has entered into a professional services agreement with JCJ Architecture PC, which is a standard architectural agreement, with normal and customary terms, and addresses, among other things, architectural services, dates of completion of the Casino Project and MWBE participation in the Casino Project.

LP Ciminelli

Montreign Operating has entered into a construction manager agreement with LP Ciminelli, Inc., which is a standard construction manager agreement, with normal and customary terms, and addresses, among other things, the Guaranteed Maximum Price of approximately $511 million for the Casino Project (the "Guaranteed Maximum Price"), completion commitments and MWBE participation in the Casino Project. 

Monticello Casino and Raceway

Monticello Casino and Raceway began racing operations in 1958 and currently features the following:

• 1,070 VLTs and 40 ETGs (collectively 1,110 VGMs);

• year-round live harness horse racing;

• year-round simulcast pari-mutuel wagering on thoroughbred and harness horse racing from around the world;

• a 3,000-seat grandstand with retractable windows and a 100-seat clubhouse;

• parking spaces for 2,000 cars and 10 buses;

• an a la carte restaurant and a two-outlet food court with seating capacity for up to 100 patrons;

• a 1,386-square foot multi-functional space used for events;

• a 1,525-square foot simulcast room located directly adjacent to the gaming floor;

• a casino bar and an additional clubhouse bar; and

• an entertainment lounge with seating for 75 patrons.

    

VGM Operations

We operate a 45,000-square foot VGM facility known as Monticello Casino and Raceway. The VGMs are owned by New York State and VGM activities in New York State are overseen by the NYSGC. Revenues derived from our VGM operations consist of VGM revenues and food and beverage revenues.

Gross VGM revenues consist of the total amount wagered at our VGMs, less prizes awarded. The statute provides a

marketing allowance for racetracks operating video lottery programs of 10% on the first $100 million of net revenues generated

and 8% thereafter. Video lottery gaming is permitted for no more than 20 consecutive hours per day and on no day can such operation be conducted past 6:00 a.m.

Raceway Operations

Raceway operations, simulcasting and pari-mutuel wagering activities in New York State are overseen by the NYSGC. We derive our racing revenue principally from the following:

• wagering at Monticello Casino and Raceway on live races run at Monticello Casino and Raceway;

• fees from wagering at out-of-state locations and internationally on races run at Monticello Casino and Raceway

using export simulcasting;

• revenue allocations, as prescribed by law, from betting activity at off-track betting facilities in New York State;

• wagering at Monticello Casino and Raceway on races broadcast from out-of-state racetracks using import

simulcasting; and

• program and certain other ancillary activities.

Simulcasting

Import and, particularly, export simulcasting, are important parts of our business. Simulcasting is the process by which a live horse race held at one facility (the “host track”) is transmitted to another location that allows patrons of such other location to wager on that race. Amounts wagered at each off-track betting location are combined into the appropriate pools at the host

track’s tote facility where the final odds and payouts are determined. With the exception of a few holidays, we offer year-round simulcast wagering from racetracks across the country. In addition, races of national interest, such as the Kentucky Derby, Preakness Stakes and Breeders’ Cup supplement our regular simulcast programming. We also export live broadcasts of our own races to race tracks, casinos and off-track betting facilities in the United States and internationally.

On November 3, 2014, MRMI and the Monticello Harness Horsemen’s Association (the “MHHA”) entered into an

agreement that governs the conduct of MRMI and MHHA relating to horseracing purse payments, the simulcasting of horse

races and certain other payments (the “2014 MHHA Agreement”). The term of the 2014 MHHA Agreement expires seven years

from the date the NYSGC approves the Casino Project to engage in legalized gaming. On that same date, MHHA will also

receive, subject to adjustment for corporate events, 200,000 shares of common stock and a warrant to purchase 60,000 shares of common stock, the proceeds of any sales of which will provide additional monies for the harness horsemen’s purse account.

Pari-mutuel Wagering

Our racing revenue is derived from pari-mutuel wagering at our track and government mandated revenue allocations from certain New York State off-track betting locations. In pari-mutuel wagering, patrons bet against each other rather than against the operator of the facility or with pre-set odds. The amounts wagered form a pool of funds from which winnings are paid based on odds determined by the wagering activity. The racetrack acts as a stakeholder for the wagering patrons and deducts from the amounts wagered a “take-out” or gross commission from which the racetrack pays state and county taxes and racing purses. Our pari-mutuel commission rates are fixed as a percentage of the total handle or amounts wagered.

Regulation

The gaming industry is highly regulated and we must maintain our licenses and pay gaming taxes to continue our operations. The Casino Project and Monticello Casino and Raceway are subject to extensive regulation under the laws, rules, and regulations of New York State. These laws, rules, and regulations generally concern the conduct of operations as well as the responsibility, financial stability, and character of the facilities, owners, managers, and persons with financial interests in the gaming operations. Individuals and entities, including investors and vendors conducting business with us, must file license/registration applications with the NYSGC, and in some instances must submit to background investigations by the New York State Police in order to prove suitability for licensure/registration. Application, fingerprinting and investigative fees must be paid by us or by the individual or entity seeking licensure or registration. Failure to obtain and maintain a license or registration, as applicable, could require us to sever our relationship with such individuals and/or entities, which could have a material adverse effect on our operations or the Development Projects.

Our businesses are also subject to various foreign, federal, state, and local laws and regulations, in addition to gaming regulations. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, smoking, environmental matters, employees, currency transactions, taxation, zoning and building codes, construction, land use, and marketing and advertising. We also deal with significant amounts of cash in our operations and are subject to various reporting and federal anti-money laundering ("AML") laws, as further discussed below. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material differences in interpretations by courts or governmental authorities could adversely affect our operations or the Development Projects. 

Casino Gaming Regulations

The Upstate New York Gaming and Economic Development Act ("Gaming Act"), provides among other things, the statutory framework for the regulation of full-scale casino gaming. The Gaming Act authorized the NYSGC to award up to four Gaming Facility Licenses. The NYSGC awarded Montreign Operating the sole Gaming Facility License in the Hudson Valley-Catskills region. It also awarded one Gaming Facility License in the Albany region and two Gaming Facility Licenses in the eastern Southern Tier/Finger Lakes region. The Gaming Act provides that no casinos shall be authorized in Bronx, Kings, New York, Queens or Richmond counties. New York State may, however, legislatively authorize additional Gaming Facility Licenses.

The Gaming Act provides for a seven-year exclusivity period for holders of Gaming Facility Licenses, commencing March 1, 2016, during which no further Gaming Facilities can be licensed by the NYSGC without legislative action. If the New York State legislature authorizes additional Gaming Facility Licenses within this exclusivity period, holders of the original four Gaming Facility Licenses shall have the right to recover a pro-rata portion of the license fee paid.

On March 1, 2016, the Minimum Capital Investment Deposit was made in the aggregate amount of $85.4 million. The Project Parties' portion of the Minimum Capital Investment Deposit was made in the form of a deposit bond representing approximately $65 million, which is 10% of the Company's share of the Minimum Capital Investment in the Development Projects and EPR's portion was made in the form of a deposit bond representing approximately $20 million, which is 10% of their Minimum Capital Investment in the infrastructure for the Destination Resort and the Waterpark. In addition, on March 30, 2016, we paid the license fee of $51 million, which is reflected on the accompanying consolidated balance sheet as an intangible asset as of December 31, 2016.

The operations of the Casino Project are subject to regulation by the NYSGC, Division of Gaming. The tax rate on slot machines at the Casino Project 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 rate 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 Operating. Existing payments to the racing industry for purses and breeding will be maintained. However, 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.

The Gaming Act imposes a $500 annual fee on each slot machine and table game. In addition, the Gaming Act requires that the minimum gambling age for the Casino Project will be 21, and no smoking will be authorized.

Moreover, the Gaming Act deems the Casino Project to be a New York State agency for its capital projects for the purpose of MWBE participation and the NYSGC regulations require all contracts with Montreign Operating that are in excess of $25,000 to be reviewed by the NYSGC for the purpose of MWBE participation. Montreign Operating is expected to use good faith efforts to achieve a 30% MWBE participation rate with respect to the Casino Project.

Regulatory Permits and Approvals Relating to the Development Projects

Casino Project

    

The Casino Project received all approvals and permits required to begin construction in February 2015 and began construction soon thereafter. In June 2015, Montreign Operating submitted certain changes in the design of the Casino Project, which received approval in July 2015.

Entertainment Village Project and Golf Course Project

On July 22, 2015, the Planning Board granted preliminary site plan approval for the Golf Course Project. On April 13, 2016, the Planning Board approved the lot improvement/consolidation plan for the Golf Course Project, which enables the Company to submit an application for final site plan approval. The Company submitted such application for final site plan approval (the "Golf Course Final Site Plan Approval") for the Golf Course Project on May 25, 2016. On June 8, 2016, the Planning Board approved the Golf Course Final Site Plan Approval. On December 28, 2016, the Planning Board extended its approval of the Golf Course Final Site Plan Approval for a period of six months to allow the Company time to coordinate the start of construction.

On December 8, 2016, the Company submitted to the Planning Board an application for site plan approval for the Entertainment Village Hotel. On February 8, 2017, the Planning Board declared itself the lead agency under the New York State Environmental Quality Review Act and referred the site plan the the Sullivan County Department of Planning and set a public hearing date of March 1, 2017. The Planning Board held a special public hearing to consider the site plan on March 1, 2017. Continued review and final approval of the site plan application for the Entertainment Village hotel is anticipated in the coming weeks.

        

VGM and Racing Operations

Our VGM, harness horseracing and simulcast activities in New York State are overseen by the NYSGC, Division of Lottery and Division of Horse Racing and Pari-Mutuel Wagering, respectively. The NYSGC has the authority and

responsibility to promulgate rules and regulations that affect the operations of our business. By statute, from April 1, 2008 until March 31, 2017, 41% of gross VGM revenue is distributed to us. Unless the 2017-2018 New York State Budget, which we anticipate will be adopted before March 31, 2017, contains a provision to extend this share percentage of gross VGM revenue to March 31, 2018, effective as of April 1, 2017, only 39% of gross VGM revenue will be distributed to us. We anticipate that

the New York State Budget will be adopted by March 31, 2017. In addition, the law provides for subsidized free play allowance of 15%.

Anti-Money Laundering Laws

        The operations of the Casino Project and Monticello Casino and Raceway are subject to federal AML laws. The AML laws relate to the reporting of large cash transactions and suspicious activity and include screening transactions against lists maintained by the Office of Foreign Assets Control in order to prevent the processing of transactions to or from certain countries, individuals, nationals and entities. Our AML policy was developed by applying a risk-based approach and is tailored to our business activities and customer risk profiles. The risk assessment will be updated and revised to reflect changes in our business to ensure sufficiency and effectiveness of our AML policy. Failure to comply with the AML laws could subject us to significant fines and penalties.

Market and Competition from Other Gaming and VGM Operations

The Development Projects are located in the Catskills region in New York State, which has historically been a resort area, although its popularity declined with the growth of other resort destinations. We are located approximately 90 miles northwest of New York City. Specifically, Monticello Casino and Raceway is directly adjacent to New York State Route 17 (the future Interstate 86), has highly visible signage and convenient access from Exit 104 of New York State Route 17. The Development Projects are located at the Destination Resort approximately three miles away from Monticello Casino and Raceway in the Town of Thompson. The Exit 106 interchange off of New York State Route 17 is being redesigned and reconstructed to connect directly to a newly constructed Destination Resort entry road that will deliver guests arriving from New York State Route 17 directly into the Destination Resort.

The casino entertainment business is highly competitive. The industry is comprised of a diverse group of competitors that vary considerably in size and geographic diversity, quality of facilities and amenities available, marketing and growth strategies, and financial condition. Generally, we will compete directly with certain VGM and casino facilities operating in the immediate and surrounding areas. Ultimately, the Casino Project and Monticello Casino and Raceway will also compete, in part, with each other. Upon the completion of the Casino Project and the remaining Initial Projects for the Destination Resort, we will also compete with other non-gaming resorts and vacation areas, various other entertainment businesses, and other forms of gaming. Our non-gaming offerings will also compete with other retail facilities, amusement attractions, food and beverage offerings, and entertainment venues.

Gaming Operations

    

We expect the Casino Project to receive patronage from guests residing within 75 miles, which represents our primary market. With the completion of the Casino Project and the further opening of the Initial Projects, we expect to also receive patronage from guests residing within a 75- to 120-mile radius, which represents our secondary market. In addition, we are developing a marketing plan to attract Asian clientele both in the bus market from New York City and the mid to high-end gaming market. From game selection to food and beverage offerings, we have allocated appropriate space, game offerings and amenities to support these efforts.

We will face competition for the Casino Project from certain VGM facilities in New York State and from casinos in northeastern Pennsylvania and New Jersey and, to a lesser extent, casinos and gaming facilities located on Native American lands in the Northeast. We will face competition for guests from our primary market from a VGM facility at Yonkers Raceway, located within the New York City metropolitan area. Yonkers Raceway has a harness horse racing facility, approximately 5,300 VGMs, food and beverage outlets and other amenities. In addition, we face competition in and from the northeastern Pennsylvania, New Jersey and Connecticut gaming markets in marketing to and attracting patrons from our secondary market, including the New York City metropolitan area. Pennsylvania casinos operate table games and slot machines, grant casino credit and have access to unlimited non-taxable free play. Pennsylvania legalized the operation of up to 61,000 slot machines at 14 locations throughout the state. As of March 3, 2017, there were 12 casinos in operation within Pennsylvania, with six located at racetracks. One such racetrack facility is Mohegan Sun at Pocono Downs, in Wilkes-Barre, Pennsylvania, located approximately 70 miles southwest of Monticello, which has approximately 2,332 slot machines and 91 table games, including 18 poker tables, and a hotel and spa. In addition, Mount Airy Casino Resort in Mount Pocono, Pennsylvania, approximately 60 miles southwest of Monticello, has approximately 1,868 slot machines and 81 table games, including nine poker tables, a hotel, spa and a golf course and Sands Casino Resort in Bethlehem, Pennsylvania, located approximately 95 miles from Monticello, has approximately 3,000 slot machines and 230 table games, including 30 poker tables, a hotel and spa.

In addition to facing potential competition from the casinos in Atlantic City, legislators in New Jersey have reviewed options to place slot machines in various locations, including the Meadowlands Racetrack located in Bergen County, New Jersey. A referendum was placed on the ballot in November 2016 to enable voters to decide whether or not to amend the New Jersey State Constitution to permit two casinos in northern New Jersey, at least 72 miles from Atlantic City. The referendum was defeated by the voters.

We also face potential competition from the current or future expansion of state-licensed gaming in New England and the northeastern United States and prospective gaming projects under consideration by Native American tribes, including federally-recognized tribes in Massachusetts and New York. With the addition of traditional table gaming in Rhode Island, Maine, Pennsylvania and Delaware in recent years, and new gaming facilities authorized or under development in Massachusetts and Pennsylvania, commercial casino gaming has expanded in the northeastern United States and is poised to expand further. In the Commonwealth of Massachusetts, the single slot-only facility in Plainville has been open since 2015, while the two commercial casinos authorized for the cities of Springfield and Everett reportedly will open in 2018 and 2019, respectively. These jurisdictional expansions, many of which are convenience gaming facilities as opposed to destination gaming facilities, may not result in a corresponding increase in gaming revenues.

Native American gaming projects being pursued by the Mashpee Wampanoag Tribe, which has entered into a tribal-state gaming compact, and the Aquinnah Wampanoag Tribe, both located in the Commonwealth of Massachusetts, and the Shinnecock Indian Nation of New York, also increase the possibility of new tribal gaming in the northeastern United States in the future. In addition, other federally-recognized Native American tribes continue to pursue new gaming projects elsewhere in the northeastern United States. Additionally, tribes seeking federal recognition, as well as presently federally-recognized Native American tribes, continue efforts to establish or expand reservation lands with an interest in commercial casino gaming on such lands.

We are unable to predict the impact additional commercial casino and tribal gaming operations in the northeastern United States will have on our operations. We are also unable to predict whether changes in federal recognition rules or efforts by federally-recognized Native American tribes or tribes seeking federal recognition will lead to the establishment of additional Native American casino gaming operations in the northeastern United States, which could cause further competition with the Casino Project and the other Development Projects.

VGM Facilities

    

In New York State, we face competition for guests from Orange, Dutchess and Ulster counties for our VGM operation from a VGM facility at Yonkers Raceway. To a lesser extent, Monticello Casino and Raceway faces competition from two of the Pennsylvania casinos, Mohegan Sun at Pocono Downs and Mount Airy Casino Resort. These facilities are discussed above.

Generally, Monticello Casino and Raceway does not compete directly with other harness racing tracks in New York State for live racing patrons. However, Monticello Casino and Raceway does face intense competition for off-track and other

legalized wagering at numerous gaming sites within New York State and the surrounding region. The inability to compete with larger purses for the races at Monticello Casino and Raceway and the limitation on other forms of legalized wagering that Monticello Casino and Raceway may offer has been a significant limitations on our ability to compete for off-track and other legalized wagering revenues.

Other Gaming

Currently electronic gaming machines are operated in 39 states, with 15 of the 39 states with commercial casinos that also offer table games. Legislation permitting other forms of casino gaming is proposed, from time to time, in various states,

including those bordering New York State. Our business could be adversely affected by such competition.

New York legislators have introduced bills related to Internet gaming and Internet poker. We are unable to determine whether and which, if any, legislation will be enacted and what effect it would have on our current operations. On August 3, 2016, New York Governor Cuomo signed legislation to legalize interactive fantasy sports. We do not believe that interactive fantasy sports will materially impact our results of operations.

Pennsylvania legislators have introduced bills related to Internet gaming and the conduct of lottery on the Internet. Such bills have been referred to committees. We are unable to determine whether and which, if any, legislation will be enacted and what impact it would have on our current operations.

New Jersey law permits Atlantic City casinos to conduct Internet gaming by accepting wagers from individuals who are physically present in New Jersey. Additionally, mobile gaming is permitted in any area located within the property boundaries of a casino hotel facility, including any recreation or swimming pool and excluding parking garages and parking areas. Further, New Jersey law permits racetrack customers to place bets on live or simulcast racing while they are on racetrack property, including the restaurants and outdoor areas, such as the paddock. New Jersey gaming regulations also authorized skill-based gaming options such as Candy Crush and Words with Friends-type games that appeal to a new generation of players.

In December 2011, the United States Department of Justice (“Department”) confirmed the reversal of a long-standing precedent that applied a 1961 federal gambling law to Internet gambling. The Wire Act, 18 U.S.C § 1084, et. seq., prevents wagers from taking place over phone lines. Deputy Attorney General James Cole wrote in a letter to William J. Murray, then Deputy Director and General Counsel for New York Lottery, “The Department’s Office of Legal Counsel (‘OLC’) has analyzed the scope of the Wire Act, 18 U.S.C § 1084, and concluded that it is limited only to sports betting.” We are uncertain if the Department’s position would have any effect on our operations.

In November 2011, the voters in New Jersey approved a constitutional amendment permitting the legislature to authorize wagering at casinos in Atlantic City and at current or former racetracks, on the results of professional, certain college, and amateur sport and athletic events. There is legislation that would allow the state Casino Control Commission to issue licenses to casinos and racetracks to accept bets on some professional and collegiate events. However, in August 2016, the U.S. Third Circuit Court of Appeals upheld the prohibition of sports gambling in New Jersey, ruling that under federal law New Jersey may not permit racetracks and casinos to accept such sports wagers. We are uncertain if legalized sports wagering in New Jersey, if permitted in the future, would have an impact on our current or future operations.

Website Access

Our website address is www.empireresorts.com. Our filings with the Securities and Exchange Commission are available at no cost on our website as soon as practicable after the filing of such reports with the Securities and Exchange Commission.

In addition to the other information contained in this report on Form 10-K, the following Risk Factors should be considered carefully in evaluating our business. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected.

Risks Relating to our Overall Business

Although a substantial portion of the funds needed for the development of the Casino Project are in place, the completion of the Development Projects will require additional equity capital and debt financing.  If the Company is unable to raise the additional financing needed to complete these projects, the Company’s business will be materially adversely affected.

Although the proceeds of the January 2016 Rights Offering, the Term Loan Agreement and the Kien Huat Montreign Loan Facility provide a substantial portion of the funds needed for the development of the Casino Project, the completion of the Development Projects will require additional capital, including furniture, fixture and equipment financing of up to $40 million and a deposit of $35 million into the lender-controlled account holding the net proceeds of the Term Loan Facility and the Kien Huat Montreign Loan, which amount will be used towards the Entertainment Village Project. Of this payment, $15 million is required to be deposited by June 30, 2017 and the remaining $20 million is required to be deposited by December 31, 2017. The $35 million must be funded in the form of a further equity contribution to Montreign Operating. The Company expects to raise additional equity capital by the dates on which the deposits must be made. The designs of the Golf Course Project and the Entertainment Village Project are not yet finalized and our cost estimates for those projects may change. In addition, cost overruns, delays in the construction schedule or changes in design are among the factors that may increase the projected costs of the Development Projects, which may also require us to raise additional capital. If we are unable to obtain the necessary financing on terms and conditions acceptable to the Company, we may need to curtail or cease the construction of the Development Projects and our business, financial condition and prospects will be materially adversely affected.

As a holding company, we are dependent on the operations of our subsidiary, MRMI, to pay dividends or make distributions in order to generate internal cash flow. Moreover, until the Casino Project is open to the public, none of our subsidiaries involved in the Development Projects will be generating revenue, which will adversely impact our cash flow.

We are a holding company with no revenue generating operations. Montreign Operating and its subsidiaries are responsible to develop the Development Projects, which will generate no revenues or cash flow until those projects are open to the public. The Casino Project, which we expect will be the first Development Project open to the public, is scheduled to open the gaming floor and a portion of the hotel rooms in March 2018. MRMI, which operates the Monticello Casino and Raceway, is our sole subsidiary that generates revenues. Consequently, our ability to meet our working capital requirements for fiscal 2017 depends on the earnings and the distribution of funds from our sole operating subsidiary, MRMI. In fiscal 2016, MRMI had operating income of approximately $3.0 million in the current year. While the cash flow generated from our current operations, along with the proceeds of the Term Loan Facility, the Kien Huat Montreign Loan Agreement and the remaining proceeds of the January 2016 Rights Offering, are sufficient to fund our current obligations and the currently expected costs of the Development Projects and service our debt obligations, it is unlikely that MRMI will generate sufficient revenue to make cash distributions in an amount necessary for us to satisfy our working capital requirements or our obligations under any current or future indebtedness. In addition, MRMI or any other subsidiary may enter into contracts that limit or prohibit its ability to make distributions. The Kien Huat Montreign Loan Agreement limits Montreign Holding’s ability to declare dividends or make distributions to Empire in an amount greater than $9 million, which amount can be used for working capital requirements and for purposes of paying taxes. Such limitations may adversely impact our ability to meet our ongoing obligations. Specifically, these limitations on making of distributions may adversely impact the Company’s ability to pay our employees, accounting professionals or legal professionals, all of whom we rely on to manage our operations, ensure regulatory compliance and sustain our public company status.

If revenues and operating income from our operations at Monticello Casino and Raceway do not increase, it could adversely affect our financial performance.

There can be no assurance that our current operations will draw sufficient patrons to Monticello Casino and Raceway to increase our revenues to the point that we will recognize net income. The operations and placement of our VGMs, including the layout and distribution, are under the jurisdiction of the NYSGC and the program contemplates that a significant share of the responsibility for marketing the program will be borne by the NYSGC. The NYSGC is not required to make decisions that we feel are in our best interest and, as a consequence, the profitability of our VGM operations may not reach the levels that we believe to be feasible or may be slower than expected in reaching those levels. By statute, from April 1, 2008 until March 31, 2017, 41% of gross VGM revenue is distributed to us. Unless the 2017-2018 New York State Budget, which we anticipate will be adopted before March 31, 2017, contains a provision to extend this share percentage of gross VGM revenue to March 31, 2018, effective as of April 1, 2017, only 39% of gross VGM revenue will be distributed to us. No assurance can be given that such revenue will be sufficient to generate a profit or continue to do so. Our operations are subject to many regulatory, competitive, economic and business risks beyond our control, and a change in this regard could have a material adverse impact on our operations and our business prospects.

Gaming is a highly regulated industry and adverse changes or developments in gaming laws or regulations could be

difficult to comply with or significantly increase our costs, which could cause our Development Projects to be unsuccessful.

Gaming is a highly regulated industry. Current laws, such as licensing requirements, tax rates and other regulatory

obligations, including for anti-money laundering, could change or become more stringent resulting in additional regulations

being imposed upon the development and operation of the Casino Project or a further liberalization of competition being introduced in the gaming industry. Any such adverse developments in the regulation of the gaming industry in New York State could be difficult to comply with and significantly increase our costs, which could cause the Development Projects to be unsuccessful.

Changes in the laws, regulations, and ordinances (including local laws) to which the gaming industry is subject, and the application or interpretation of existing laws and regulations, or our inability or the inability of our subsidiaries, key personnel, significant stockholders, or joint venture partners to obtain or maintain required gaming regulatory licenses, permits or approvals could prevent us from pursuing future development projects or otherwise adversely impact our results of operation.

The ownership, management and operation of our current and any future gaming facilities are and will be subject to extensive federal, state, provincial, and/or local laws, regulations and ordinances that are administered by the relevant regulatory agency or agencies in each jurisdiction. These laws, regulations and ordinances vary from jurisdiction to jurisdiction, but generally concern the responsibilities, financial stability and character of the owners and managers of gaming operations as well as persons financially interested or involved in gaming operations, and often require such parties to obtain certain licenses, permits and approvals. In addition, some of the licenses that we and our subsidiaries, officers, directors and principal stockholders hold expire after a relatively short period and thus require frequent renewals and reevaluations. Obtaining these

licenses in the first place and the renewal process involves a subjective determination by the regulatory agencies. If we or our subsidiaries do not obtain and maintain the required licenses, permits and approvals, we may be required to divest our interest in our current or future gaming facilities or our current gaming facility risks losing its licenses. These laws, regulations and ordinances may also affect the operations of our gaming facilities or our plans in pursuing future projects.

Commercial casino gaming was legalized in New York State in 2013 and regulations implementing the Gaming Act are not fully adopted, which makes it difficult for the Company to assess the impact of these regulations on the Casino Project and other Development Projects.

The regulations implementing the Gaming Act are still in development stage and, accordingly, the Company cannot fully assess the rules that will govern the operation and maintenance of the Casino Project and the other Development Projects. Our inability to consider all relevant regulations in the pre-opening stage of our development may lead to unexpected results and adversely affect our results of operations.

The gaming industry in the northeastern United States is highly competitive, with many of our competitors better known and better financed than us.

We primarily compete directly with other casino and VGM facilities operating in the immediate and surrounding market areas. With the completion of the Casino Project and the further opening of the Initial Projects, we expect to also receive patronage from guests residing within a 75- to 120-mile radius, including the New York City metropolitan area, which represents our secondary market. The gaming industry in the northeastern United States is highly competitive and increasingly dominated by multinational corporations or Native American tribes that enjoy widespread name recognition, established brand loyalty, decades of casino operation experience, an array of amenities, high-quality management talent and a diverse portfolio of gaming assets and with substantially greater financial resources.

Monticello Casino and Raceway faces competition from Yonkers Raceway which is located within the New York City metropolitan area. The Yonkers facility, which is much closer to New York City, has a harness horseracing facility, approximately 5,300 VGMs, food and beverage outlets and other amenities. In contrast, we have more limited financial resources and currently operate our harness horse racing facility and VGMs in Monticello, New York, which is approximately a 90-minute drive from New York City.

Pennsylvania casinos may operate table games and slot machines, have the ability to grant credit to guests of the casino and have the ability to award an unlimited amount of non-taxable free play to their guests, which poses a competitive threat to both the Casino Project and the Monticello Casino and Raceway. Pennsylvania legalized the operation of up to 61,000 slot machines at 14 locations throughout the state. As of March 10, 2017, there were 12 casinos in operation within Pennsylvania, with six located at race tracks. One such racetrack facility is the Mohegan Sun at Pocono Downs, which has approximately 2,330 slot machines and 75 table games, including 18 poker tables, and a hotel and spa. The Mohegan Sun at Pocono Downs in Wilkes-Barre, Pennsylvania, is approximately 70 miles southwest of Monticello and the Town of Thompson. In addition, the Mount Airy Casino Resort has approximately 1,868 slot machines and 81 table games, including nine poker tables, a hotel, spa, and a golf course. The Mount Airy Casino Resort is located in Mount Pocono, Pennsylvania, approximately 60 miles southwest of Monticello. The Pennsylvania Gaming Control Commission selected Stadium Casino, LLC to be awarded the 13th license for a casino to be located in Philadelphia, Pennsylvania. Any expansion of these casinos in Pennsylvania will likely increase the degree of competition within our market and may have an adverse effect on our business and future operating performance.

No assurance can be given that we will be able to compete successfully for gaming customers with established casinos or the competing VGM facility at Yonkers Raceway.

If our competitors operate more successfully than we do, if they attract customers away from us as a result of aggressive pricing and promotion, if they are more successful than us in attracting and retaining employees, if their properties are enhanced or expanded, if they operate in jurisdictions that give them operating advantages due to differences or changes in gaming regulations or taxes, or if additional hotels and casinos are established in and around the locations in which we conduct

business, we may lose market share or the ability to attract or retain employees. In particular, the expansion of casino gaming in

or near any geographic area from which we attract or expect to attract a significant number of our customers could have a

significant adverse effect on our business, financial condition and results of operations.

We depend on our skilled employees and key personnel and the loss of their services would adversely affect our operations and business strategy.

The operation of our business requires qualified executives, managers and skilled employees with hospitality, gaming and horse racing industry experience and qualifications to enable such individuals to obtain and maintain the requisite licenses and approvals from the NYSGC. In addition, with respect to our involvement in the Development Projects, we place substantial reliance on the gaming, project development and hospitality industry experience and knowledge of the northeastern United States gaming market possessed by members of our senior management team. If we are unable to maintain our key personnel and attract new skilled employees with high levels of expertise in the gaming areas in which we engage and propose to engage, or are unable to do so without unreasonably increasing our labor costs, the execution of our business strategy may be hindered and our growth limited. We believe that our success is largely dependent on the continued employment of our executive management and the hiring of strategic personnel at reasonable costs. Competition for skilled employees and qualified executives is intense and we can give no assurance that we would be able to hire a qualified replacement with the required level of experience and expertise for any current members of our senior management, if required to do so. Accordingly, if any of our current key executives were unable or unwilling to continue in his or her present position, or we were unable to attract a sufficient number of qualified employees at reasonable rates, our business, results of operations and financial condition would be materially adversely impacted. Additionally, recruiting and hiring a replacement for any skilled employees or executive management position could divert the attention of other senior management and increase our operating expenses.

Casinos are subject to Anti-Money Laundering Laws.

    

We deal with significant amounts of cash in the operations and will be subject to various reporting and anti-money laundering regulations. Any violation of AML laws or regulations, on which in recent years, governmental authorities have been increasingly focused, with a particular focus on the gaming industry, by any of our properties could have a material adverse effect on our financial condition and results of operation.

A downgrade in our credit ratings could materially adversely affect our business and financial condition.

In connection with the Term Loan Facility and the Revolving Credit Facility, Montreign Operating was required to obtain credit ratings for its debt offering. Although the maintenance of a certain credit rating is not a condition to the availability of the Term Loan Facility or the Revolving Credit Facility, an adverse change in this credit rating and the credit ratings assigned to our debt securities could adversely affect our business. Such ratings are subject to ongoing evaluation by credit rating agencies, and any rating could be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant such action. For example, such ratings could change based upon, among other things, our results of operations and financial condition.

If any of the credit rating agencies that have rated our securities downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a "watch list" for a possible downgrade or lowering, or otherwise indicates that its outlook for that rating is negative, such action could have a material adverse effect on our costs and availability of funding in the future, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows, the trading price of our securities and our ability to satisfy our debt service obligations, among other obligations.

Risks Relating to the Development Projects

The Development Projects are capital intensive and, in order to obtain the necessary financing, we have entered into the Term Loan Agreement and the Kien Huat Montreign Loan Agreement, which contain restrictions that limit our flexibility in operating our business.

The Development Projects require substantial capital. On January 24, 2017, Montreign Operating entered into the Term Loan Agreement and Montreign Holding entered into the Kien Huat Montreign Loan Agreement, both of which agreements contain restrictions that limit our flexibility in operating our business. The Term Loan Agreement and the Kien Huat Montreign Loan Agreement contain a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our subsidiaries’ ability to, among other things:

· incur additional debt or issue certain shares;

· pay dividends on or make distributions in respect of our common stock or make other restricted payments;

· make certain investments or acquisitions;

· incur or permit liens on certain assets; and

· consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.

Moreover, to make use of the proceeds of the Term Loan Agreement, Montreign Operating must satisfy the disbursement conditions set forth thereunder, including confirmations that the proceeds will be applied towards the expenses itemized in the Development Projects construction budget submitted to the lenders. If we cannot satisfy the disbursement conditions, Montreign Operating will be unable to utilize the Term Loan Facility, which may require us to curtail or end construction of the Development Projects altogether. As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs, which may adversely impact our operations.

Defaults under the Term Loan Agreement, the Revolving Credit Agreement or the Kien Huat Montreign Loan Agreement could result in a substantial loss of our assets.

We have pledged a significant portion of our assets as collateral under the Term Loan Agreement, Revolving Credit

Agreement and the Kien Huat Montreign Loan Agreement. A failure to comply with the covenants contained in any of these

agreements could result in an event of default thereunder, which, if not cured or waived, could enable the lenders thereunder to

declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable and terminate all

commitments to extend further credit. The lenders could also elect to foreclose on our assets securing such debt. Such actions

by the lenders could cause cross defaults under our other indebtedness. In such an event, the Company may not be able to

refinance or repay all of its indebtedness, pay dividends or have sufficient liquidity to meet operating and capital expenditure

requirements. Any such acceleration could cause us to lose a substantial portion of our assets and will substantially adversely

affect our ability to continue our operations.

Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our

ability to react to changes in the economy or our industry and prevent us from meeting our obligations.

As of the Loan Closing Date, the amount of our total long-term debt was approximately $447 million (with the ability to draw down on the $70 million Term A Loan subject to the conditions of the Term Loan Agreement, which must be met at the time a request to draw on the Term A Loan is made). Our outstanding debt and related debt service obligations could have important adverse consequences to us, including:

The ability to make payments of principal and interest on indebtedness will depend on the future performance of the Development Projects, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. If sufficient cash flow is not generated from operations to service such debt, we may be required, among other things, to:

Such measures might be insufficient to service the indebtedness. In addition, any such financing, refinancing or sale of assets may not be available on commercially reasonable terms, or at all. If funds are not available when needed, or available on acceptable terms, we may be required to delay, scale back or eliminate some of our obligations with respect to the Development Projects. In addition, we may not be able to grow market share, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, which could negatively impact our business, operating results and financial condition.

Construction at the Development Projects is subject to hazards that may cause personal injury or loss of life, thereby subjecting us to liabilities and possible losses, which may not be covered by insurance.

The construction of large-scale properties such as the Development Projects can be dangerous. Construction workers at our projects are subject to hazards that may cause personal injury or loss of life, thereby subjecting the contractor and us to liabilities, possible losses, delays in completion of the projects and negative publicity. In the event of such accidents, we may stop construction for several days to allow for safety inspections and investigations. We and our contractors will take safety precautions that are consistent with industry practice, but these safety precautions may not be adequate to prevent serious personal injuries or further loss of life, damage to property or delays. If accidents occur during the construction of Development Projects, we may be subject to delays, including delays imposed by regulators, liabilities and possible losses, which may not be covered by insurance, and our business, prospects and reputation may be materially and adversely affected.

The costs associated with the Development Projects may increase due to significant risks inherent in construction projects.

The construction of the Development Projects subjects us to significant risks inherent in the construction of a new facility, including unanticipated design, construction, regulatory and environmental problems. The Development Projects could also experience:

The occurrence of any of these development and construction risks could increase the total costs of the Development Projects or delay or prevent the construction or opening or otherwise affect the design and features of the Development Projects, all of which could materially adversely affect our financial condition and cause us to require additional external financing.

In combination with existing and proposed casinos in New York State and nearby states, the Casino Project will face intense competition that may adversely impact our ability to meet our development goals.

A number of Native American tribes and gaming entrepreneurs are seeking to develop casinos in New York State and Connecticut in areas that are approximately 90 miles from New York City, such as Bridgeport, Connecticut and Southampton, New York. We are unable to predict when or if laws would be amended to permit such tribes and entrepreneurs to develop casinos in New York State and nearby states. Depending on the size, location and scope and gaming tax rate, if casinos are built in northern New Jersey, they may adversely impact our current operations and the prospects for the Casino Project. Based on proximity, a gaming facility in any of the nearby states, which could include a casino, hotel, restaurants and retail shops, may significantly increase the competition we face and have a material adverse effect on our business operations and future performance.

None of the Development Projects have operating history and our projections on the operations of such properties may not serve as an adequate basis to judge our future operating results and prospects.

There is no historical information available about the Casino Project, the Entertainment Village Project or the Golf Course Project upon which you can base your evaluation of their respective business plans and prospects. The Development Projects will generate no revenue until the Casino Project is open to the public (which will be the first of the Development Projects open to the public), which is expected to occur in March 2018. As a result, you should consider our business and prospects in light of the risks, expenses and challenges that we will face as a company seeking to develop and operate a major new development project and gaming businesses in a rapidly growing and intensely competitive market.

We have encountered and will continue to encounter risks and difficulties frequently experienced by companies developing a major new project, and those risks and difficulties may be heightened in a rapidly developing market such as the gaming market in the northeastern United States. Some of the risks relate to our ability to:

If we are unable to complete any of these tasks, we may be unable to complete and operate the Development Projects in the manner we contemplate and generate revenues in the amounts and by the times we anticipate. We may also be unable to meet the conditions to draw on the Term A Loan in order to fund our development and construction activities. If any of these events were to occur, it would have a material adverse effect on our business and prospects, financial condition, results of operations and cash flows.

Even if the Casino Project, the Entertainment Village Project and the Golf Course Project are completed as planned and opened, they may not be financially successful, which would limit our cash flow and would materially adversely affect our operations and our ability to repay our debt.

Even if the Casino Project, the Entertainment Village Project and the Golf Course Project are completed as planned and opened, one or more still may not be a financially successful venture or generate the cash flows that we anticipate. We may not attract the level of patronage that we are seeking. If the Casino Project, the Entertainment Village Project or the Golf Course

Project do not attract sufficient business, this will limit our cash flow and would materially adversely affect our operations and our ability to service payments under our debt agreements.

New York State could grant additional Gaming Facility Licenses in our area or in New York City or the surrounding counties earlier than the expected seven-year blackout period, which could significantly increase the already intense competition in the northeastern United States and cause us to lose or be unable to gain market share.

The Gaming Act provides for the award of up to four Gaming Facility Licenses in three regions of upstate New York, including our area, and prohibits the issuance of Gaming Facility Licenses in the “downstate” region, which includes New York City and its surrounding counties. The award of such a Gaming Facility License is intended to be exclusive for a period of seven years commencing on the date of the award. We can provide no assurance that the New York State government will not change this law and issue additional Gaming Facility Licenses before the expiration of this seven-year exclusivity period. If the New York State government were to allow additional competitors to operate in our area or in other regions of New York through the grant of additional Gaming Facility Licenses, we would face additional competition, which could significantly increase the already intense competition in the northeastern United States and cause us to lose or be unable to gain market share.

Our business depends on a strong brand and if we are not able to build, maintain and enhance our brand, our ability to expand our market will be impaired and our business and operating results will be harmed.

We believe that the brand identity that we intend to develop will significantly contribute to the success of our business. We also believe that maintaining and enhancing a brand is critical to expanding our market share. The Board of Directors of Empire and the Board of Managers of Montreign Operating have approved the form of the RW License Agreement, which has been submitted to the NYSGC for review and approval. Building, maintaining and enhancing our brand may require us to make substantial investments and these investments may not be successful. If we fail to promote and maintain our brand, or if we incur excessive expenses in this effort, our business, operating results and financial condition will be materially adversely affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive.

Risks Relating to our Ownership Structure

Stockholders’ ability to influence corporate decisions may be limited because our major stockholder owns a large percentage of our common stock.

Kien Huat is the beneficial holder of 27,533,067 shares of our common stock, representing approximately 88.3% of our voting power as of March 10, 2017. This reflects Kien Huat's participation and backstop of the January 2016 Rights Offering (as defined below) pursuant to the January 2016 Standby Purchase Agreement (as defined below) and the conversion of the convertible promissory note held by Kien Huat pursuant to the terms of a loan agreement dated November 10, 2010, by and between the Company and Kien Huat (the "2010 Kien Huat Loan Agreement"). Under the terms of an investment agreement dated November 12, 2009 (the “Investment Agreement”), between the Company and Kien Huat, if any option or warrant outstanding as of the final closing under the Investment Agreement, or the first 200,000 shares granted to directors or officers who served in such capacity as of the final closing date under the Investment Agreement, are exercised, Kien Huat has the right (following notice of such exercise) to purchase an equal number of additional shares of our common stock as are issued upon such exercise at the exercise price for the applicable option or warrant (such rights the "Option Matching Rights"). As of December 31, 2016, Kien Huat had approximately 21,000 Option Matching Rights.

Under the terms of the Investment Agreement, Kien Huat is also entitled to recommend three directors candidates whom we are required to cause to be elected or appointed to our Board of Directors (“Board”), subject to the satisfaction of all legal and governance requirements regarding service as a director and to the reasonable approval of the Corporate Governance and Nominations Committee of our Board. Kien Huat will continue to be entitled to recommend three directors candidates for so long as it owns at least 24% of our voting power outstanding at such time, after which the number of directors whom Kien Huat will be entitled to designate for election to our Board will be reduced proportionally to Kien Huat’s percentage of ownership. Under the Investment Agreement, for so long as Kien Huat is entitled to recommend nominees to serve as Board members, among other things, Kien Huat will have the right to nominate one of its director designees to serve as the Chairman of the Board. Emanuel Pearlman has been appointed to serve as Chairman of the Board pursuant to Kien Huat’s recommendation. Until such time as Kien Huat ceases to own capital stock with at least 30% of our voting power outstanding at such time, our Board will be prohibited under the terms of the Investment Agreement from taking certain actions relating to fundamental transactions involving us and our subsidiaries and certain other matters without the affirmative vote of the directors recommended by Kien Huat and elected by shareholders. Consequently, Kien Huat has the ability to exert significant influence

over our policies and affairs, including the election of our Board and the approval of any action requiring a stockholder vote, such as approving amendments to our certificate of incorporation and mergers or sales of substantially all of our assets, as well as other matters. Although Kien Huat has expressed no interest in doing so, Kien Huat is not restricted from acquiring additional shares of our common stock, including through open market purchases. However, on February 17, 2016, we entered into a letter agreement with Kien Huat (the "Kien Huat Letter Agreement"), wherein Kien Huat agreed, for a period of three years from the date of the Kien Huat Letter Agreement, to seek certain approvals of the Board of Directors and minority shareholders in connection with any "going-private" transaction. Notwithstanding the Kien Huat Letter Agreement, this concentration of voting power could delay or prevent an acquisition of our Company on terms that other stockholders may desire or force the sale of our company on terms undesirable to other stockholders.

Risks Relating to the Market Value of Our Common Stock

The Racing, Pari-Mutuel Wagering and Breeding Law of New York State requires our stockholders to possess certain qualifications. If the NYSGC believes a stockholder does not meet their subjective determination, a stockholder may be forced to sell any stock they hold and such sale may result in a material loss of investment value for the stockholder.

The Racing, Pari-Mutuel Wagering and Breeding Law of New York State requires our stockholders to possess certain qualifications. A failure to possess such qualifications could lead to a material loss of investment by either us or our stockholders, as it would require divestiture of the stockholder’s direct or indirect interest in us. Consequently, should any stockholder ever fail to meet the qualifications necessary to own a direct or indirect interest in us as determined by NYSGC, such stockholder could be forced to liquidate all interests in us. Should such stockholder be forced to liquidate these interests within a relatively short period of time, such stockholder would likely be forced to sell at a discount, causing a material loss of investment value.

The market price of our common stock is volatile, leading to the possibility of its value being depressed at a time when our stockholders want to sell their holdings.

The market price of our common stock has in the past been, and may in the future continue to be, volatile. For instance, between January 1, 2016 and March 10, 2017, the closing price of our common stock has ranged between $11.38 and $25.19 per share. A variety of events may cause the market price of our common stock to fluctuate significantly, including, but not necessarily limited to the following:

In addition, the stock market in recent years has experienced significant price and volume fluctuations. This volatility has had a substantial effect on the market prices of companies, at times for reasons unrelated to their operating performance. These market fluctuations may adversely affect the price of our common stock and other interests in the Company at a time when our stockholders want to sell their interest in us.

If we fail to meet the applicable continued listing requirements of NASDAQ Global Market, NASDAQ may delist our common stock, in which case the liquidity and market price of our common stock could decline.

Our common stock is currently listed on the NASDAQ Global Market. In order to maintain that listing, we must satisfy certain continued listing requirements. If we are deficient in maintaining the necessary listing requirements, our common stock may be delisted. If our common stock is delisted, an active trading market for our common stock may not be sustained and the market price of our common stock could decline.

We do not anticipate declaring any dividends in the foreseeable future.

During the past three fiscal years, we did not declare or pay any cash dividends with respect to our common stock and we do not anticipate declaring any cash dividends on our common stock in the foreseeable future. We intend to retain all future earnings for use in the development of our business. There can be no assurance that we will have, at any time, sufficient surplus under Delaware law to be able to pay any dividends.

Future sales of our common stock by our insiders may cause our stock price to decline.

A portion of our outstanding shares are held by directors and executive officers and a significant portion of our outstanding shares are held by Kien Huat, our largest stockholder. Resales of a substantial number of shares of our stock by these stockholders, announcements of the proposed resale of substantial amounts of our stock, or the perception that substantial resales may be made by such stockholders could adversely impact the market price of our stock. Some of our directors and executive officers have entered into Rule 10b5-1 trading plans pursuant to which they have arranged to sell shares of our common stock from time to time in the future. Actual or potential sales by these insiders, including those under a pre-arranged Rule 10b5-1 trading plan may adversely impact the market price of our stock.

Future sales of shares of our common stock in the public market could adversely affect the trading price of shares of our common stock and our ability to raise funds in new stock offerings.

Future sales of substantial amounts of shares of our common stock in the public market, including pursuant to the Second Amendment to the Commitment Letter or the effective shelf registration statement, or the perception that such sales are likely to occur could affect the market price of our common stock. Kien Huat’s stock ownership may also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

Risks Relating to our Racing Operations

The continuing decline in the popularity of horse racing, decline of the horse population and increasing competition in simulcasting could adversely impact the business of Monticello Casino and Raceway.

Since the mid-1980s, there has been a general decline in the number of people attending and wagering at live horse races at North American racetracks due to a number of factors, including increased competition from other forms of gaming, unwillingness of guests to travel a significant distance to racetracks and the increasing availability of off-track wagering. The declining attendance at live horse racing events has prompted racetracks to rely increasingly on revenues from inter-track, off-track and account wagering markets. The industry-wide focus on inter-track, off-track and account wagering markets has increased competition among racetracks for outlets to simulcast their live races. In 2016, 2015 and 2014, we generated approximately $2.9 million, $3.3 million and $1.8 million, respectively, of revenues from the import and export simulcasting of out-of-state racing, of which approximately $1.4 million, $1.7 million and $900,000, respectively, were due to the horsemen. A continued decrease in attendance at live events and in on-track wagering, continued decline in the horse population and available drivers, as well as increased competition in the inter-track, off-track and account wagering markets, could lead to a decrease in the amount wagered at Monticello Casino and Raceway. Our business plan anticipates the possibility of Monticello Casino and Raceway attracting new guests to our racetrack wagering operations through VGMs in order to offset the general decline in raceway attendance. However, even if our VGM operations attract new guests to our racetrack, we may not be able to generate profit from operations. Public tastes are unpredictable and subject to change. Any further decline in interest in horse racing or any change in public tastes may adversely affect our revenues and, therefore, limit our ability to make a positive contribution to our results of operation.

                        

General Business Risks

Instability and volatility in the financial markets could have a negative impact on our business, financial condition, results of operations and cash flows.

The demand for entertainment and leisure activities tends to be highly sensitive to consumers’ disposable income. Discretionary consumer spending habits have been adversely affected by the recent economic conditions and the actual or perceived economic conditions could lead to further decrease in spending by our guests. We cannot predict at what level these negative trends will continue, worsen or improve and the ultimate impact it will have on our future results of operations. The continued weakness in our market and the deterioration of the broader global economy would have a material adverse effect on our industry and our business, including our revenues, profitability, operating results and cash flow.

Moreover, we may need to raise additional capital or incur additional indebtedness to finance our plans for growth. We may be unable to incur additional indebtedness in the public or private markets to fund our business strategy on terms we believe to be reasonable, if at all. In addition, the Term Loan Agreement and Revolving Credit Agreement may limit our ability to incur debt at all. Moreover, we may be unable to raise capital on terms acceptable to the Company. An inability to obtain the capital we need to finance our growth plans may adverse affect our operations and business prospects.

We are subject to greater risks than a geographically diverse company.

Our operations are limited to the Catskills region of New York State, which has been affected by decades-long decline in economic conditions. As a result, in addition to our susceptibility to adverse global and domestic economic, political and business conditions, any economic downturn in the region could have a material adverse effect on our operations. An economic downturn would likely cause a decline in the disposable income of consumers in the region, which could result in a decrease in the number of patrons at our facility, the frequency of their visits and the average amount that they would be willing to spend at our facility. We are subject to greater risks than more geographically diversified gaming or resort operations, including:

The occurrence of any one of the events described above could cause a material disruption in our business and make us unable to generate sufficient cash flow to make payments on our obligations.

Our business is particularly sensitive to energy prices and a rise in energy prices could harm our operating results.

We are a large consumer of electricity and other energy and, therefore, higher energy prices may have an adverse effect on our results of operations. Accordingly, increases in energy costs may have a negative impact on our operating results. Additionally, higher electricity and gasoline prices which affect our customers may result in reduced visitation to Monticello Casino and Raceway and a reduction in our revenues.

Our business operations have historically been subject to seasonal variations and quarterly fluctuations in operating results, and we can expect to experience such variations and fluctuations in the future.

Our results of operations may be adversely affected by weather-related and seasonal factors. Severe winter weather conditions may deter or prevent patrons from reaching our gaming facilities or undertaking day trips. Although our budget assumes these seasonal fluctuations in our gaming revenues to ensure adequate cash flow during expected periods of lower revenues, we cannot ensure that weather-related and seasonal factors will not have a material adverse effect on our operations.

Our operations are located at a facility in Monticello, New York and the Development Projects are being developed in the Town of Thompson, New York. Although this area is not prone to earthquakes, floods, tornadoes, fires or other natural disasters, the occurrence of any of these events or any other cause of material disruption in our operation could have a material adverse effect on our business, financial condition and operating results. Moreover, although we do maintain insurance customary for our industry, including a policy with $10 million limit of coverage for the perils of flood and earthquake, we cannot ensure that this coverage will be sufficient in the event of one of the disasters mentioned above.

We may be subject to material environmental liability as a result of unknown environmental hazards.

We are subject to various federal, New York State and local environmental laws and regulations that govern our operations and the construction of the Development Projects, including emissions and discharges into the environment, and the storage, handling and disposal of hazardous and non-hazardous substances and wastes. Failure to comply with such laws and regulations could result in regulatory fines, legal fees and costs for remediation. Such fines and costs could be related to our storage, handling and disposal of waste from our racing operations, the existence of asbestos at Monticello Casino and Raceway and the existence of environmental conditions at the site of the Development Projects, which could have a material adverse effect on our business, financial condition or results of operations.

Our information technology and other systems are subject to cyber security risk including misappropriation of customer information or other breaches of information security.

We rely on information technology and other systems to maintain and transmit customers' personal and/or financial information, credit card information, mailing lists and other information. We have taken steps designed to safeguard our customers' personal and financial information and have implemented systems designed to meet all requirements of the Payment Card Industry standards for data protection. However, our information and processes are subject to the ever-changing threat of

compromised security, in the form of a risk of potential breach, system failure, computer virus or unauthorized or fraudulent access or use by unauthorized individuals. The steps we take to deter and mitigate these risks may not be successful, and any resulting compromise or loss of data or systems could adversely impact operations or regulatory compliance and could result in remedial expenses, fines, litigation and loss of reputation, potentially impacting our financial results. Although we have invested in and deployed security systems and developed processes that are designed to protect all sensitive data, prevent data loss and reduce the impact of any security breach, such measures cannot provide absolute security.

None.