DOVER DOWNS GAMING & ENTERTAINMENT INC (Form: 10-K, Received: 03/01/2017 16:27:44)

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended December 31, 2016

Commission file number 1-16791

Dover Downs Gaming & Entertainment, Inc.

(Exact name of registrant as specified in its charter)

Delaware		51-0414140
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

1131 North DuPont Highway, Dover, Delaware 19901

(Address of principal executive offices)

(302) 674-4600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class		Name of Exchange on Which Registered
Common Stock, $.10 Par Value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None .

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

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

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

The aggregate market value of common stock held by non-affiliates of the registrant was $18,209,081 as of June 30, 2016 (the last day of our most recently completed second quarter).

As of February 21, 2017, the number of shares of each class of the registrant’s common stock outstanding is as follows:

Common Stock -		18,283,009 shares
Class A Common Stock -		14,869,623 shares

Documents Incorporated by Reference

Portions of the registrant’s Proxy Statement in connection with the Annual Meeting of Stockholders to be held April 26, 2017 are incorporated by reference into Part III, Items 10 through 14 of this report.

Part I

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

Item 1. Business

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

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

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

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

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

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

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

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

Our license from the Delaware Harness Racing Commission (the “Commission”) to hold harness race meetings on our premises and to offer pari-mutuel wagering on live and simulcast horse races must be renewed on an annual basis. In order to maintain our gaming license, we are required to maintain our harness horse racing license. We have received an annual license from the Commission for the past 48 consecutive years and management believes that our relationship with the Commission remains good.

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

In recent years, the mid-Atlantic region has experienced an unprecedented expansion in gaming venues and gaming offerings. This has had a significant adverse effect on our visitation numbers, our revenues and our profitability. Management has estimated that approximately 29% of our gaming win comes from Maryland patrons and approximately 60% of our Capital Club® member gaming win comes from out of state patrons.

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

In July 2013, the State enacted a bond and capital improvements bill which appropriated $8,000,000 to the Department of Finance to be used to offset increases in vendor costs that the three Delaware video lottery agents would otherwise pay for the period July 1, 2013 to June 30, 2014. The State used $875,000 of the amount appropriated to offset increases in our vendor costs. Additionally, the bill created a Lottery & Gaming Study Commission responsible for examining the competitive marketplace confronting the Delaware gaming industry, including the business performance and business plans of existing lottery agents, the marketing efforts and investments made by Delaware video lottery agents, and the division of revenue from the video lottery, sports lottery, table games and internet gaming. The Commission’s findings and recommendations were released in March 2014 and included: the State sharing certain vendor costs that the three Delaware video lottery agents currently pay associated with slot machines; reducing the State’s share of table game win; and eliminating the annual table game license fee. On July 1, 2014, the Delaware legislature approved the vendor cost sharing recommendation on a permanent basis which had the State provide for approximately $3,910,000, $3,909,000 and $1,950,000 during 2016, 2015 and 2014, respectively, of our video lottery vendor costs. The recommendations to reduce the State’s share of gross table game revenues and eliminate the table game license fee were not part of the legislation that was passed.

The Commission reconvened in September 2014 to consider previous and make further recommendations relative to the gaming industry. The Commission’s findings and recommendations were released in January 2015 and included: increasing the State’s share of vendor costs associated with slot machines; eliminating the annual table game license fee; reducing the State’s share of table game win; and providing each video lottery agent a credit of up to 5% of video lottery proceeds to be used for marketing expenditures and a credit of up to 5% of video lottery proceeds to be used for capital expenditures. Delaware State Senate Bill 30 was introduced in January 2015 in order to implement the Commission’s recommendations, but it was not released from the Senate Finance Committee for action. In January 2016, Senate Bill 183 was introduced to phase in some of the Commission’s recommendations over the next four years and to authorize internet sports betting in Delaware, but it was not acted upon prior to the end of the 2016 legislative session.

Without legislative relief, we may be unable to refinance or extend the maturity of our credit facility on favorable terms or may default on our obligations, we may be unable to allocate sufficient resources to marketing and promotions in order to compete effectively in the regional marketplace, we may be unable to allocate sufficient resources to maintaining our facility, and we may be required to take other actions in order to manage expenses - especially with respect to operations that have operated at a loss, such as table games. Such actions could adversely affect our business, financial condition, operating results and cash flow.

Dover Downs Casino

Our casino opened in December 1995 with approximately 500 slot machines. Due to its popularity, the casino has expanded six times since its opening. The casino complex features 165,000 square-feet of space and houses approximately 2,300 slot machines, 40 table games including blackjack, craps and roulette, and 12 poker tables at December 31, 2016. We are open for business 24 hours per day, seven days per week. Our facilities are open every day of the year, except Christmas and Easter, and we estimate that the facility was visited by approximately 1.9 million patrons in 2016.

Our slot machines range from our popular penny machines to $100 machines in the Premium Slots area and include some of the most popular games found in the country’s major gaming jurisdictions.

Our Race & Sports Book operation features parlay sports wagering on National Football League (“NFL”) games, and pari-mutuel wagering on live and simulcast horse races.

We use sophisticated database marketing to enable us to develop long-term relationships with our patrons and to target promotions to specific customer segments. Our Capital Club ® , a slots players club and tracking system, allows us to identify customers and to reward their level of play through various marketing programs. Membership in this club currently stands at approximately 141,000 active patrons in one of three tiers — Capital Gold ® , Capital Platinum ® or Platinum Elite ® .

We have implemented extensive procedures for financial and accounting controls, safekeeping and accounting of monies, and security provisions. Security over the gaming operations involves the integration of surveillance cameras, observation and oversight by employees, security and gaming staff, and various security features built into our equipment. The above, when combined with proper internal control procedures and daily monitoring by the Delaware State Lottery Office and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement, are intended to maintain the security, integrity and accountability of our gaming operations.

Dover Downs Hotel

Our luxury hotel facility, the Dover Downs Hotel and Conference Center, is the largest hotel in the State of Delaware and connects to our casino. The facility includes 500 rooms, including eleven luxury spa suites, a multi-purpose ballroom/concert hall, a fine dining restaurant, swimming pool and a luxurious 6,000 square-foot full-service spa. Our facility offers 41,500 square feet of multi-use event space, the most of any hotel in Delaware. By offering a wide range of entertainment options to our patrons, including concerts featuring prominent entertainers, live boxing, gourmet dining, spa facilities, trade shows and conferences, we believe we are able to attract new patrons and lengthen the stay of current patrons and encourage visits from patrons who may have a more convenient gaming option. In 2016, hotel occupancy averaged 84% and the hotel was awarded the AAA Four Diamond Award for the fourteenth consecutive year.

Dover Downs Raceway

Dover Downs Raceway has presented pari-mutuel harness racing events for 48 consecutive years. Live harness races are conducted at Dover Downs Raceway from November until April and are simulcast to more than 300 tracks and other off-track betting locations across North America on each of our 106 scheduled live race dates. During our harness racing season, we have historically used the 5/8-mile harness racing track that is located on DVD’s property and is on the inside of its one-mile motorsports superspeedway. In order to continue this historic use, DVD granted a perpetual easement to the harness track to us at the time of the spin-off. This perpetual easement allows us to have exclusive use of the harness track during the period beginning November 1 of each year and ending April 30 of the following year, together with set up and tear down rights for the two weeks before and after such period. The

easement requires that we maintain the harness track but does not require the payment of any rent. Additional amenities include the Winners Circle ® Restaurant overlooking the horse racing track.

Within our Race & Sports Book operation is the simulcast parlor where our patrons can wager on harness and thoroughbred races received by satellite into our facility year round from numerous tracks across North America. Large flat screen monitors throughout the area provide views of all races simultaneously and the betting windows are connected to a central computer allowing bets to be received on all races from all tracks.

Harness racing in the State of Delaware is governed by the Delaware Harness Racing Commission. We hold a license from the Harness Racing Commission authorizing us to hold harness race meetings on our premises and to offer pari-mutuel wagering on live and simulcast horse races.

In harness racing, competing horses are harnessed to a two-wheeled sulky, which carries the driver. Pari-mutuel wagering is pooled betting by which the wagering public, not the track, determines the odds and the payoff. The track retains a commission, which is a percentage of the total amount wagered, or the “handle.” Simulcasting is the transmission of live horse racing by television, cable or satellite signal from a race track to another facility with pari-mutuel wagering being conducted at the sending track and the receiving facility and a portion of the handle being shared by the sending track and receiving facility.

The legislation authorizing our gaming operations under the Delaware Lottery was initially adopted in June 1994, and is referred to as the “Horse Racing Redevelopment Act.” The Delaware General Assembly’s stated purpose in approving the legislation was to (i) provide non-state supported assistance in the form of increased economic activity and vitality for Delaware’s harness and thoroughbred horse racing industries, which activity and vitality will enable the industry to improve its facilities and breeding stock, and cause increased employment; and (ii) restrict the location of gaming operations to locations where wagering is already permitted and controls exist. A portion of the proceeds from our gaming operations is allocated to increase the purses for harness horse races held at Dover Downs Raceway and is intended to provide increased vitality for Delaware’s horse racing industry.

We have an agreement with the Delaware Standardbred Owner’s Association, Inc. (“DSOA”) effective August 1, 2016 and continuing through August 31, 2018. DSOA’s membership consists of owners, trainers and drivers of harness horses participating in harness race meetings at our facilities and elsewhere in the United States and Canada. The DSOA has been organized and exists for the purpose of promoting the sport of harness racing; improving the lot of owners, drivers and trainers of harness racing horses participating in race meetings; establishing health, welfare and insurance programs for owners, drivers and trainers of harness racing horses; negotiating with harness racing tracks on behalf of owners, trainers, drivers and grooms of harness racing horses; and generally rendering assistance to them whenever and wherever possible. Under the DSOA agreement, we are required to distribute as purses for races conducted at our facilities a percentage of our retained share of pari-mutuel revenues.

We enjoy a good relationship with representatives of DSOA and anticipate that this relationship will continue. We believe that the DSOA agreement is typical of similar agreements in the industry.

Licensing and Regulation by Gaming and Other Authorities

General

We are subject to extensive federal, state and local regulations related to our operations, particularly our video lottery, sports wagering, table game and internet gaming operations, live harness racing and pari-mutuel wagering. These operations are contingent upon continued government approval of such operations as forms of legalized gaming and could be subjected at any time to additional or more restrictive regulations. The following is a brief outline of some of the more significant regulations affecting our gaming operations and not intended as a recitation of all regulations applicable to our business.

Delaware law regulates the percentage of commission we are entitled to receive from our gaming activities, which comprises a significant portion of our overall revenues. Our licenses to conduct video lottery, sports wagering and table game operations, harness horse races and pari-mutuel wagering could be modified or repealed at any time and we could be required to terminate our gaming operations.

Video Lottery, Sports Wagering, Table Game and Internet Gaming Operations

General. Video lottery, sports wagering, table game and internet gaming operations are by statute operated and administered by the Director of the Delaware State Lottery Office (the “Lottery Director”) and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement. We are a Licensed Agent authorized to conduct these activities under the Delaware State Lottery Code.

The Lottery Director has discretion to adopt such rules and regulations as the Lottery Director deems necessary or desirable for the efficient and economical operation and administration of the lottery, including (i) type and number of games permitted, (ii) pricing of games, (iii) numbers and sizes of prizes, (iv) manner of payment, (v) value of bills, coins or tokens needed to play, (vi) requirements for licensing agents and service providers, (vii) standards for advertising, marketing and promotional materials used by Licensed Agents, (viii) procedures for accounting and reporting, (ix) registration, kind, type, number and location of machines or equipment on a Licensed Agent’s premises, (x) security arrangements for the gaming systems, and (xi) reporting and auditing of financial information of Licensed Agents.

Licensing Requirements . We were granted a gaming license on December 13, 1995. Initially, the license was for video lottery operations but it now extends to our sports wagering, table game and internet gaming operations. Delaware gaming licenses do not have an expiration date.

There are continuing licensure requirements for all officers, directors, key employees and persons who own directly or indirectly 10% or more of a Licensed Agent, which licensure requirements shall include the satisfaction of such security, fitness and background standards as the Lottery Director may deem necessary relating to competence, honesty and integrity, such that a person’s reputation, habits and associations do not pose a threat to the public interest of the State or to the reputation of or effective regulation and control of the lottery; it being specifically understood that any person convicted of any felony, a crime involving gambling, or a crime of moral turpitude within 10 years prior to applying for a license or at any time thereafter shall be deemed unfit.

There are similar licensure requirements for providers of equipment and certain companies that seek to provide services to a Licensed Agent.

Revocation, Suspension or Modification of License . The Lottery Director may revoke or suspend the license of a Licensed Agent, such as ours, for “cause.” “Cause” is broadly defined and could potentially include falsifying any application for license or report required by the rules and regulations, the failure to report any information required by the rules and regulations, the material violation of any rules and regulations promulgated by the Lottery Director or any conduct by the licensee which undermines the public confidence in the lottery or serves the interest of organized gambling or crime and criminals in any manner. A license may be revoked for an unintentional violation of any federal, state or local law, rule or regulation provided that the violation is not cured within a reasonable time as determined by the Lottery Director. A hearing officer’s decision revoking or suspending the license shall be appealable to the Delaware Superior Court under the provisions of the Administrative Procedures Act. All existing or new officers, directors, key employees and owners of a Licensed Agent are subject to background investigation. Failure to satisfy the background investigation may constitute cause for suspension or revocation of the License.

Ownership Changes . Under Delaware law, a change of ownership of a Licensed Agent will automatically terminate its license 90 days after the change of ownership occurs, unless the Lottery Director determines after application to issue a new license to the new owners. Change of ownership may occur if any new individual or entity acquires, directly or indirectly, 10% or more of the Licensed Agent or if more than 20% of the legal or beneficial interest in the Licensed Agent is transferred, whether by direct or indirect means. The Lottery Director may require extensive background investigations of any new owner acquiring a 10% or greater interest in a Licensed Agent, including criminal background checks. Accordingly, we have a restrictive legend on our shares of common stock which require that (a) any holders of common stock found to be disqualified or unsuitable or not possessing the qualifications required by any appropriate gaming authority could be required to dispose of such stock and (b) any holder of common stock intending to acquire 10% or more of our outstanding common stock must first obtain prior written approval from the Delaware State Lottery Office.

Harness Racing Events . In order to maintain our gaming license with the Delaware Lottery, we are required to maintain our license for harness horse racing with the Harness Racing Commission and must conduct a minimum of 80 live race days each racing season, subject to the availability of racing stock.

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

Harness Racing and Pari-Mutuel Wagering

Licensing Requirements. Harness racing in the State of Delaware is governed by the Delaware Harness Racing Commission. We hold a license from the Commission by which we are authorized to hold harness race meetings on our premises and to make, conduct and sell pools by the use of pari-mutuel machines or totalizators. The license must be renewed on an annual basis. The Commission may reject an application for a license for any cause which it deems sufficient and the action of the Commission is final. The Commission may also suspend or revoke a license which it has issued and its action in that respect is final, subject to review, upon questions of law only, by the Superior Court of the County within which the license was granted. The action of the Commission stands unless and until reversed by the Court. We have received an annual license from the Commission for the past 48 consecutive years and management believes that our relationship with the Commission remains good. However, there can be no assurances that we will continue to be licensed by the Commission in the future.

Under the law, the Commission has broad powers of supervision and regulation. The Commission may prescribe rules, regulations and conditions under which all harness racing and betting pools shall be conducted; may regulate the performance of any service or the sale of any article on the premises of a licensee; may compel the production of books and documents of a licensee and require that books and records be kept in such manner as the Commission may prescribe; may visit, investigate and place accountants or other persons as it deems necessary, at the expense of a licensee, in the office, track or place of business of a licensee; may summon witnesses and administer oaths; and may require the removal of any employee or official employed by a licensee. All proposed extensions, additions or improvements to the property of a licensee are subject to the approval of the Commission.

The Commission is required to inspect a licensee’s racing plant not less than five days prior to a race meeting and may withdraw the license for the meeting if the racing plant is found to be unsafe for animals or persons or is not rendered safe prior to the opening of the meeting. A licensee must deposit with the Commission, ten days before a race meeting, a policy of insurance against personal injury liability in an amount to be approved by the Commission.

USTA. Any license granted by the Commission may also be subject to such reasonable rules and regulations as may be prescribed from time to time by the United States Trotting Association (“USTA”). The USTA sets various rules relating to the conduct of harness racing. According to its Articles of Incorporation, the purposes of the USTA shall include the improvement of the breed of trotting and pacing horses, the establishment of rules regulating standards and the registration of such horses thereunder, the advancement and promotion of the interest of harness racing in the United States, the investigation, ascertainment and registration of the pedigrees of such horses, the regulation and government of the conduct of the sport of harness racing, the establishment of rules for the conduct thereof, not inconsistent with the laws of the various states, and the sanctioning of the holding of exhibitions of such horses and meetings for the racing thereof, the issuance of licenses to qualified persons to officiate at harness race meetings and exhibitions, the issuance of licenses to the owners of horses permitting the exhibition and racing of such horses and the qualification thereof, the issuance of licenses to drivers of horses participating in such races or exhibitions, and providing for the enforcement of the rules promulgated by the USTA, and providing for the fixing of penalties, fines, and the suspension or expulsion from membership, or privileges or for any other misconduct detrimental to the sport.

Gaming Taxes and Fees

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

Compliance with Other Laws

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

The Internal Revenue Service (“IRS”) requires operators of casinos located in the United States to file information returns for United States citizens, including names and addresses of winners, for all winnings in excess of stipulated amounts. The IRS also requires operators to withhold taxes on certain winnings.

Regulations adopted by the Financial Crimes Enforcement Network of the Treasury Department (“FinCEN”) require us to report currency transactions in excess of stipulated amounts occurring within a gaming day, including identification of the patron by name and social security number. FinCEN has also established regulations that require us to file suspicious activity reports on all transactions that we know, suspect, or have reason to suspect fall into specific categories that are deemed to be suspicious. We believe our programs meet the requirements of the applicable regulations.

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

Competition

The gaming industry in the United States is intensely competitive and features many participants, including riverboat casinos, dockside casinos, land-based casinos and racinos, slot and poker machines, whether or not located in casinos, native American gaming, pari-mutuel wagering on live and simulcast horse racing, off-track betting, state run lotteries, internet gambling and other forms of gambling. Gaming competition is particularly intense in each of these sectors.

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

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

In recent years, the mid-Atlantic region has experienced an unprecedented expansion in gaming venues and gaming offerings and many analysts believe that the market is showing signs of saturation, in part due to the fact that new gaming venues often result in a substantial loss of business to existing locations. This has had a significant adverse effect on our visitation numbers, our revenues and our profitability. Management has estimated that approximately 29% of our gaming win comes from Maryland patrons and approximately 60% of our Capital Club® member gaming win comes from out of state patrons.

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

Several states have passed legislation authorizing internet gaming and other states are pursuing or exploring the legalization of internet gaming in various forms — from fantasy sports to state run lotteries to privately run casino games, including online poker. States are aggressively seeking new revenue streams through gaming.

Competition in horse racing is varied since racetracks in the surrounding area differ in many respects. Some tracks only offer thoroughbred or harness horse racing; others have both. Tracks have live racing seasons that may or may not overlap with neighboring tracks. Depending on the purse structure, tracks that are farther apart may compete with each other more for quality horses than for patrons.

Live harness racing also competes with simulcasts of thoroughbred and harness racing. All racetracks in the region are involved with simulcasting. In addition, a number of off-track betting parlors compete with track simulcasting activities. With respect to the simulcasting of our live harness races to tracks and other locations, our simulcast signals are in direct competition with live races at the receiving track and other races being simulcast to the receiving location.

Within the State of Delaware, we face little direct live competition from the State’s other two tracks. Harrington Raceway, a south central Delaware fairgrounds track, conducts harness horse racing periodically between April and October. Delaware Park, a northern Delaware track, conducts thoroughbred horse racing from May through mid-October. There is no overlap presently with our live race season from Harrington or Delaware Park.

We compete with harness and thoroughbred racing and simulcasting facilities in the neighboring states of Pennsylvania, Maryland and New Jersey. We also receive simulcast harness and thoroughbred races from approximately 80 race tracks.

Competition for our hotel varies and consists of local and regional competition. With respect to hotel accommodations only, we compete with a variety of nearby hotels in the Dover area; however, none of these offer the luxury accommodations and amenities that we offer. Our hotel is the only hotel in the Dover area, and one of only three hotels in the State, to receive the AAA Four Diamond Award. With respect to trade shows, conferences, concerts and hotel room packages tied to these events or tied to our casino and other gaming offerings, we compete at a regional level with the other gaming operations referred to above and with convention centers and larger hotels in major cities such as Philadelphia, Washington, D.C., Baltimore and Wilmington.

In addition, our activities compete with other leisure, entertainment and recreational activities.

Mission and Strategy

We offer a unique gaming and entertainment experience and make available to our patrons a number of different options: slot machine gaming, table game wagering, sports wagering, live harness horse racing, luxury hotel accommodations, fine dining, full service spa, national recording and entertainment acts, night club, retail shopping, trade shows and conferences, and simulcasting of thoroughbred and harness horse races from across North America. Our mission is simple: to provide all of our customers a premier gaming and entertainment experience with a focus on unparalleled customer service. We foster customer loyalty by following this mission, focus on our most valuable customers, improve the quality of our gaming positions, enhance our gaming products with additional

entertainment offerings and create an exciting gaming environment while focusing on areas that we believe will increase our revenue and profitability.

We use a sophisticated database marketing program to enable us to develop long-term relationships with our patrons and to target promotions to specific customer segments. Our Capital Club, a players club and tracking system, allows us to identify customers and to reward their level of play through various marketing programs. Membership in this club currently stands at approximately 141,000 active patrons. We attempt to increase attendance at both our casino and hotel through effective promotional use of our database and by making improvements to our facilities and gaming offerings based on what we learn from our Capital Club members. For example, we continually add the most popular machines, have added live table games, as well as multi-player electronic table games and other amenities requested by our customers. We began offering internet gaming in 2013.

Our luxury hotel facility, the Dover Downs Hotel, connects to our casino. It is one of only three hotels in Delaware to receive the AAA Four Diamond Award and the only casino hotel in the State. By offering a wide range of entertainment options to our patrons, including concerts featuring prominent entertainers, live boxing, gourmet dining, spa amenities, trade shows and conferences, we believe we are able to attract new patrons and lengthen the stay of current patrons.

Seasonality

Our quarterly operating results are affected by weather and the general economic conditions in the United States. Additionally, given our high level of fixed operating costs, fluctuations in our business volume can lead to variations in quarterly operating results. The results for any quarter are not necessarily indicative of results to be expected in any future period.

Employees

As of December 31, 2016, we had 1,401 employees, of which 889 were full-time. We engage temporary personnel to assist during our live harness racing season. None of our employees are party to a collective bargaining agreement and we believe that our relationship with our employees is good.

Available Information

We file annual, quarterly and current reports, information statements and other information with the United States Securities and Exchange Commission (the “SEC”). The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.

Internet Address

We maintain a website where additional information concerning our business and various upcoming events can be found. The address of our Internet website is www.doverdowns.com. We provide a link on our website, under Investor Relations, to our filings with the SEC, including our annual report on Form 10-K, proxy statement, Section 16 reports, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports.

Item 1A. Risk Factors

In addition to historical information, this report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to our financial condition, profitability, liquidity, resources, business outlook, possible acquisitions, market forces, corporate strategies, consumer preferences, contractual commitments, legal matters, capital requirements and other matters. Documents incorporated by reference into this report may also contain forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. To comply with the terms of the safe harbor, we note that a variety of factors could cause our actual results and experience to differ substantially

from the anticipated results or other expectations expressed in our forward-looking statements. When words and expressions such as: “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely” or similar words or expressions are used, as well as phrases such as “in our view,” “there can be no assurance” or “there is no way to anticipate with certainty,” forward-looking statements may be involved.

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

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

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

We Have a Significant Amount of Indebtedness

As of December 31, 2016, we had total outstanding debt of $25,250,000 under our credit facility. The facility is classified as a current liability as of December 31, 2016 in our consolidated balance sheets as the facility expires on September 30, 2017. We will seek to refinance or extend the maturity of this obligation prior to its expiration date; however, there is no assurance that we will be able to execute this refinancing or extension or, if we are able to refinance or extend this obligation, that the terms of such refinancing or extension would be as favorable as the terms of our existing credit facility. These factors raise substantial doubt about our ability to continue as a going concern. This indebtedness and any future increases in our outstanding borrowings or decreases in our results of operations could:

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

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

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

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

· limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

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

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

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

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

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

All Of Our Facilities Are In One Location

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

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

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

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

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

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

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

In July 2013, the Delaware legislature created a Lottery & Gaming Study Commission responsible for examining the competitive marketplace confronting the Delaware gaming industry, including the business performance and business plans of existing lottery agents, the marketing efforts and investments made by Delaware video lottery agents, and the division of revenue from the video lottery, sports lottery, table games and internet gaming. The Commission’s findings and recommendations were released in March 2014 and included: the State sharing certain vendor costs that the three Delaware video lottery agents currently pay associated with slot machines; reducing the State’s share of table game win; and eliminating the annual table game license fee. On July 1, 2014, the legislature only enacted a vendor cost sharing recommendation and asked the Commission to reconvene to consider previous and make further recommendations relative to the gaming industry. The Commission’s findings and recommendations were released in January 2015 and included: increasing the State’s share of vendor costs associated with slot machines; eliminating the annual table game license fee; reducing the State’s share of table game win; and providing each video lottery agent a credit of up to 5% of video lottery proceeds to be used for marketing expenditures and a credit of up to 5% of video lottery proceeds to be used for capital expenditures. Delaware State Senate Bill 30 was introduced in January 2015 in order to implement the Commission’s recommendations, but it was not released from the Senate Finance Committee for action. In January 2016, Senate Bill 183 was introduced to phase in some of the Commission’s recommendations over the next four years and to authorize internet sports betting in Delaware, but it was not acted upon prior to the end of the 2016 legislative session.

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

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

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

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

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

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

Our Success Depends on the Availability and Performance of Key Personnel

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

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

any forward-looking statements. Given these risks and uncertainties, stockholders should not overly rely or attach undue weight to our forward-looking statements as an indication of our actual future results.

Item 1B. Unresolved Staff Comments

We have not received any written comments that were issued within 180 days before December 31, 2016, the end of the fiscal year covered by this report, from the SEC staff regarding our periodic or current reports under the Securities Exchange Act of 1934 that remain unresolved.

Item 2. Properties

We own our principal executive office located in Dover, Delaware and the Dover Downs Hotel & Casino. The casino is a 165,000-square foot complex featuring popular table games, including craps, roulette and card games such as blackjack, Spanish 21, baccarat, 3-card and pai gow poker, the latest in slot machine offerings, multi-player electronic table games, a poker room, and our Race & Sports Book operation. The hotel is a 500 room AAA Four Diamond hotel with conference, banquet, ballroom and concert hall facilities. We have a perpetual easement to Dover Downs Raceway — our harness racing track. Our casino offers pari-mutuel wagering on live racing from this raceway and simulcast horse races. The casino facility includes the Dover Downs’ Fire & Ice Lounge, the Festival Buffet, Doc Magrogan’s Oyster House, Frankie’s Italian restaurant, as well as several bars, restaurants and six retail outlets, all of which are located at our entertainment complex situated on approximately 69 acres of owned land.

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

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

Intellectual Property

We have various registered and common law trademark rights, including, but not limited to, “Dover Downs Gaming & Entertainment,” “Dover Downs,” “Dover Downs Hotel & Casino,” “Capital Club,” “Capital Gold,” “Capital Platinum,” “Capital Elite,” “Delaware Poker Championship,” “Come Play!,” “UnREEL,” “Wonder Spin,” “Sweet Perks,” “Gazebo Bar,” “Winners Circle,” “Michele’s” and “Rollins Center.” We also have limited rights to use the names and logos of other businesses in connection with promoting our facilities and special events at those facilities. Due to the value of our intellectual property rights for promotional purposes, it is our intention to vigorously protect these rights, through litigation, if necessary.

Item 3. Legal Proceedings

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

Item 4. Mine Safety Disclosures

Not applicable.

Executive Officers Of The Registrant

See Part III, Item 10 of this Annual Report on Form 10-K for information about our executive officers.

Part II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities

Our common stock is listed on the New York Stock Exchange under the ticker symbol “DDE.” Our Class A common stock is not publicly traded but is freely convertible on a one-for-one basis into common stock at any time at the option of the holder thereof. As of February 21, 2017, there were 18,283,009 shares of common stock and 14,869,623 shares of Class A common stock outstanding. There were 554 holders of record for common stock and 16 holders of record for Class A common stock.

The high and low sales prices for our common stock on the New York Stock Exchange and the dividends declared per share for the years ended December 31, 2016 and 2015 are detailed in the following table.

					Dividends
Quarter Ended:	High		Low		Declared
December 31, 2016	$	1.21	$	1.03	$	—
September 30, 2016	$	1.15	$	0.92	$	—
June 30, 2016	$	1.13	$	0.96	$	—
March 31, 2016	$	1.19	$	0.82	$	—

December 31, 2015	$	1.17	$	0.92	$	—
September 30, 2015	$	1.08	$	0.88	$	—
June 30, 2015	$	1.20	$	0.87	$	—
March 31, 2015	$	1.24	$	0.80	$	—

On January 23, 2013, our Board of Directors suspended the quarterly dividend. In addition, our credit facility prohibits the payment of dividends.

On October 23, 2002, our Board of Directors authorized the repurchase of up to 3,000,000 shares of our outstanding common stock. The purchases may be made in the open market or in privately negotiated transactions as conditions warrant. The repurchase authorization has no expiration date, does not obligate us to acquire any specific number of shares and may be suspended at any time. No purchases of our equity securities were made pursuant to this authorization during 2016. At December 31, 2016, we had remaining repurchase authority of 1,653,333 shares. At present we are not permitted to make such purchases under our credit facility.

Item 6. Selected Financial Data

Not applicable.

Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

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

Dover Downs Gaming & Entertainment, Inc. is a premier gaming and entertainment resort destination whose operations consist of:

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

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

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

Approximately 86% of our revenue is gaming revenue. Several factors contribute to the win for any gaming company, including, but not limited to:

· Proximity to major population bases,

· Competition in the market,

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

· The quality of the physical property,

· Other amenities offered on site,

· Customer service levels,

· Marketing programs, and

· General economic conditions.

Our entertainment complex is located in Dover, the capital of the State of Delaware. We draw patrons from several major metropolitan areas. Philadelphia, Baltimore and Washington, D.C. are all within a two hour drive. According to the 2010 United States Census, approximately 36.8 million people live within 150 miles of our complex. There are significant barriers to entry related to the gaming business in Delaware. By law, currently only the three existing horse racing facilities in the State are allowed to have a video lottery gaming license. In recent years, additional gaming venues have opened in Maryland and Pennsylvania and more are expected to open. These venues are having a significant adverse effect on our visitation numbers, our revenues and our profitability. Our property is similar to properties found in the country’s largest gaming markets. Our luxury hotel is the only casino-hotel in Delaware, providing a strong marketing tool, especially to higher-end players. We also utilize our recently enhanced slot marketing system to allow for more efficient marketing programs and the highest levels of customer service. Our facility offers approximately 41,500 square feet of multi-use event space — the most space of any hotel in Delaware.

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

Results of Operations

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

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

Year Ended December 31, 2016 vs. Year Ended December 31, 2015

Gaming revenues decreased by $696,000, or 0.4%, to $157,226,000 in 2016 primarily as a result of lower slot machine play and a lower sports wagering hold percentage. This decrease was partially offset by an increase in internet gaming revenues and a higher table game hold percentage.

Other operating revenues were $25,066,000 in 2016 as compared to $25,024,000 in 2015. Food and beverage revenues increased $271,000 to $14,506,000 in 2016 from $14,235,000 in 2015 due primarily to the opening of a new food and beverage outlet in the fourth quarter of 2015 and higher sales in our Festival Buffet and higher banquet sales. These increases were partially offset by lower revenues in other food and beverage outlets. Rooms revenue decreased $437,000 to $5,843,000 in 2016 from $6,280,000 in 2015 due primarily to lower convention sales, partially offset by higher tour & travel and transient sales. During the second quarter of 2015, we recognized revenue of $269,000 in connection with the termination and settlement of a lease related to retail space at our facility. As a result of terminating the lease, we subsequently began operating the five existing retail outlets. Revenues from these outlets increased $251,000 in 2016 as compared to 2015. Other operating revenues do not include the retail amount of promotional allowances which are provided to customers on a complimentary basis of $18,784,000 and $18,003,000 in 2016 and 2015, respectively.

Gaming expenses increased by $982,000, or 0.7%, primarily as a result of increased marketing and promotional costs, the higher internet gaming revenues, and higher employee benefit costs. These increases were partially offset by a slight decrease in gaming expenses as a result of the lower slot machine and sports wagering revenues.

Other operating expenses increased to $17,316,000 in 2016 from $16,602,000 in 2015 due primarily to higher employee benefit costs in our food and beverage operations and expenses related to the retail operations we began to operate in the second quarter of 2015.

General and administrative expenses decreased to $5,375,000 in 2016 from $5,499,000 in 2015 due primarily to lower legal fees incurred in 2016, partially offset by higher employee wage and benefit costs.

Depreciation expense decreased to $7,743,000 in 2016 from $8,375,000 in 2015 as a result of certain assets becoming fully depreciated.

Interest expense decreased by $297,000 primarily due to lower outstanding borrowings and a lower average interest rate in 2016.

Our effective income tax rate was 44.6% in 2016 as compared to 31.0% in 2015. The effective tax rate in 2015 was impacted by a discrete item relating to a federal income tax credit for payroll taxes incurred on customer tips paid to our employees. Additionally, the rates in both years were impacted by the non-deductible portion of the restricted stock awards that vested during 2016 and 2015.

Year Ended December 31, 2015 vs. Year Ended December 31, 2014

Gaming revenues decreased by $2,469,000, or 1.5%, to $157,922,000 in 2015 primarily as a result of lower win from slot machine play, a lower table game hold percentage and lower commissions from wagering on harness races. We believe that our revenues continue to be negatively impacted from the overall increased competition in regional gaming markets.

Other operating revenues were $25,024,000 in 2015 as compared to $24,991,000 in 2014. Rooms revenue increased $136,000 to $6,280,000 in 2015 as compared to $6,144,000 in 2014. Food and beverage revenues decreased $1,259,000 to $14,235,000 in 2015 from $15,494,000 in 2014 due primarily to the closing of an offsite food and beverage outlet in January 2015, lower banquet sales and lower revenues in other food and beverage outlets, partially offset by higher sales in our Festival Buffet. During 2015, we terminated and settled a lease related to retail space at our facility and subsequently began operating the five existing retail outlets. As a result, we recognized increased revenues of $788,000 in 2015. Additionally, we held more live concerts and other events in 2015 as compared to 2014. Other operating revenues do not include the retail amount of promotional allowances which are provided to customers on a complimentary basis of $18,003,000 and $18,241,000 in 2015 and 2014, respectively.

Gaming expenses decreased by $2,839,000, or 1.9%, primarily from the reduction in our portion of video lottery vendor costs from legislation that became effective on July 1, 2014, lower gaming taxes as a result of the lower gaming revenues and decreases in other operating departments.

Other operating expenses decreased to $16,602,000 in 2015 from $17,808,000 in 2014 due primarily to the closing of an offsite food and beverage outlet in January 2015 and lower costs in our food and beverage operations. Partially offsetting these decreases were expenses related to the retail operations we began to operate in the second quarter of 2015.

General and administrative expenses decreased $212,000 to $5,499,000 in 2015 as compared to $5,711,000 in 2014.

Depreciation expense decreased to $8,375,000 in 2015 from $9,128,000 in 2014 as a result of certain assets becoming fully depreciated.

Interest expense decreased by $527,000 primarily due to lower outstanding borrowings and a lower average interest rate in 2015.

Our effective income tax rate in 2015 was impacted by a federal tax credit related to payroll taxes paid as a result of an IRS audit of employee tip income and by the non-deductible portion of the restricted stock awards that vested during 2015. Our effective income tax rate in 2014 was impacted by our net loss and by the non-deductible portion of the restricted stock awards that vested during 2014.

Liquidity and Capital Resources

Net cash provided by operating activities was $10,355,000 in 2016 compared to $9,719,000 in 2015. The increase in net cash from operating activities was primarily due to the timing of payments to the Delaware State Lottery Office for its portion of the slot win and lower income tax payments in 2016. These increases were partially offset by lower earnings before depreciation in 2016.

Net cash used in investing activities was $2,818,000 in 2016 compared to $1,634,000 in 2015 and was primarily related to capital improvements in both periods. Capital expenditures in 2016 and 2015 related primarily to information systems and facility and equipment upgrades.

Net cash used in financing activities was $6,356,000 in 2016 compared to $7,668,000 in 2015. During 2016, we had net repayments of $6,250,000 on our credit facility compared to $7,510,000 during 2015. We repurchased and retired $66,000 and $65,000 of our outstanding common stock during 2016 and 2015, respectively. These purchases were made from employees in connection with the vesting of restricted stock awards under our stock incentive plan. As a result of amending our credit agreement in 2016 and 2015, we paid $40,000 and $93,000 in bank fees, respectively.

On October 23, 2002, our Board of Directors authorized the repurchase of up to 3,000,000 shares of our outstanding common stock. The purchases may be made in the open market or in privately negotiated transactions as conditions warrant. The repurchase authorization has no expiration date, does not obligate us to acquire any specific number of shares and may be suspended at any time. No purchases of our equity securities were made pursuant to this authorization during 2016 or 2015. At December 31, 2016, we had remaining repurchase authority of 1,653,333 shares. At present we are not permitted to make such purchases under our credit facility.

Based on current business conditions, we expect to make capital expenditures of approximately $2,500,000 - $2,750,000 during 2017. Additionally, we expect to contribute $290,000 to our defined benefit pension plans in 2017.

On September 1, 2016, we modified our credit agreement with our bank group. The credit facility was modified to: extend the maturity date to September 30, 2017; adjust the maximum borrowing limit from $40,000,000 to $35,000,000 as of March 31, 2017 and through the date of maturity; modify the maximum ratio of funded debt to earnings before interest, taxes, depreciation and amortization (the “leverage ratio”); and delete the minimum consolidated tangible net worth requirement and the minimum consolidated earnings before interest, taxes, depreciation and amortization requirement. The credit facility also contains a minimum fixed charge coverage ratio. Material adverse changes in our results of operations could impact our ability to satisfy these requirements. Interest is based upon LIBOR plus a margin that varies between 150 and 350 basis points (200 basis points at December 31, 2016) depending on the leverage ratio. The credit facility is secured by a mortgage on and security interest in all real and personal property owned by Dover Downs, Inc. In addition, the credit agreement includes a material adverse change clause and prohibits the payment of dividends. The credit facility provides for seasonal funding needs, capital improvements and other general corporate purposes. At December 31, 2016, there was $25,250,000 outstanding at an interest rate of 2.77% and $14,750,000 was available pursuant to the facility. Additionally, we were in compliance with all terms of the facility at December 31, 2016 and we expect to be in compliance with the financial covenants, and all other covenants, for all measurement periods through September 30, 2017, the expiration date of the facility.

The credit facility is classified as a current liability as of December 31, 2016 in our consolidated balance sheets as the facility expires on September 30, 2017. We will seek to refinance or extend the maturity of this obligation prior to its expiration date; however, there is no assurance that we will be able to execute this refinancing or extension or, if we are able to refinance or extend this obligation, that the terms of such refinancing or extension would be as favorable as the terms of our existing credit facility. These factors raise substantial doubt about our ability to continue as a going concern. The financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

While we believe that our net cash flows from operating activities and funds available from our credit facility will be sufficient to provide for our working capital needs and capital spending requirements for the foreseeable future, we will need to refinance or extend the maturity of our outstanding credit facility prior to its expiration on September 30, 2017.

In recent years, the mid-Atlantic region has experienced an unprecedented expansion in gaming venues and gaming offerings. These new venues — particularly a large casino at Arundel Mills Mall in Maryland which opened in June 2012 with slot machines and subsequently added table games in April 2013 — have had a significant adverse effect on our visitation numbers, our revenues and our profitability. Management has estimated that approximately 29% of our gaming win comes from Maryland patrons and approximately 60% of our Capital Club® member gaming win comes from out-of-state patrons.

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

In 2013, the State enacted a bond and capital improvements bill which, among other things, created a Lottery & Gaming Study Commission responsible for examining the competitive marketplace confronting the Delaware gaming industry, including the business performance and business plans of existing lottery agents, the marketing efforts and investments made by Delaware video lottery agents, and the division of revenue from the video lottery, sports lottery, table games and internet gaming. In 2014, the Delaware legislature approved, on a permanent basis, the Commission’s recommendation for the State to share certain vendor costs that the three Delaware video lottery agents pay associated with slot machines.

Contractual Obligations

At December 31, 2016, we had the following contractual obligations:

			Payments Due by Period
	Total		2017		2018 – 2019		2020 – 2021		Thereafter
Revolving line of credit(a)	$	25,250,000	$	25,250,000	$	—	$	—	$	—
Estimated interest payments on revolving line of credit(b)	525,000		525,000		—		—		—
Defined benefit pension plan contributions	290,000		290,000		—		—		—
	$	26,065,000	$	26,065,000	$	—	$	—	$	—

(a) Our current credit facility expires on September 30, 2017.

(b) The future interest payments on our revolving credit agreement were estimated using the current outstanding principal as of December 31, 2016 and current interest rates through the expiration date.

Related Party Transactions

See NOTE 11 — Related Party Transactions to our consolidated financial statements included elsewhere in this document for a full description of related party transactions.

Critical Accounting Policies

The accounting policies described below are those considered critical by us in preparing our consolidated financial statements and/or include significant estimates made by management using information available at the time the estimates are made. As described below, these estimates could change materially if different information or assumptions were used.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided for financial reporting purposes using the straight-line method over estimated useful lives ranging from 3 to 10 years for furniture, fixtures and equipment and up to 40 years for facilities. These estimates require assumptions that are believed to be reasonable. We perform reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its fair value. Generally, fair value will be determined using valuation techniques such as the present value of future cash flows.

Accrued Pension Cost

On June 15, 2011, we decided to freeze participation and benefit accruals under our defined benefit pension plans. The freeze was effective July 31, 2011. The benefits provided by our defined benefit pension plans are based on years of service and employee’s remuneration through July 31, 2011. Accrued pension costs are developed using actuarial principles and assumptions which consider a number of factors, including estimates for the discount rate, expected long-term rate of return on assets and mortality. Changes in these estimates would impact the amounts that we record in our consolidated financial statements and our funding contributions to the plans.

Recent Accounting Pronouncements

See NOTE 3 — Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this document for a full description of recent accounting pronouncements that affect us.

Factors That May Affect Operating Results; Forward-Looking Statements

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

Item 7A. Quantitative And Qualitative Disclosure About Market Risk

Not applicable.

Item 8. Financial Statements And Supplementary Data

Our consolidated financial statements and the Report of Independent Registered Public Accounting Firm included in this report are shown on the Index to Consolidated Financial Statements on page 30.

Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

None.

Item 9A. Controls and Procedures

Our management is responsible for the preparation, integrity and objectivity of the consolidated financial statements and other financial information included in this Form 10-K. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles and reflect the effects of certain estimates and judgments made by management.

Our management also is responsible for establishing and maintaining a system of internal controls designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded and executed in accordance with management’s authorization. The system is regularly monitored by direct management review and by internal auditors who conduct an extensive program of audits throughout our organization. The Director of Internal Audit reports directly to the Audit Committee of our Board of Directors. We have confidence in our financial reporting, the underlying system of internal controls, and our people, who are objective in their responsibilities and operate under our Code of Business Conduct and with the highest level of ethical standards. These standards are a key element of our control system.

The Audit Committee of our Board of Directors, which is comprised entirely of independent directors, has direct and private access to and meets regularly with management, our internal auditors and our independent registered public accounting firm to review accounting, reporting, auditing and internal control matters.

Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedure may deteriorate.

(a) Evaluation of Disclosure Controls and Procedures

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

Based on their evaluation as of December 31, 2016, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

(b) Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2016.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this annual report.

(c) Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Part III

Item 10. Directors, Executive Officers And Corporate Governance

Except as presented below, biographical information relating to our directors and executive officers, information regarding our audit committee financial experts and information on Section 16(a) Beneficial Ownership Reporting Compliance called for by this Item 10 are incorporated by reference to our Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Stockholders to be held on April 26, 2017.

We have a Code of Business Conduct applicable to all of our employees, including our Chief Executive Officer and Chief Financial Officer. We also have a Code of Business Conduct and Ethics for Directors and Executive Officers and Related Party Transactions Policy applicable to all directors and executive officers. Copies of these Codes and other corporate governance documents are available on our website at www.doverdowns.com under the heading Investor Relations. We will post on our website any amendments to, or waivers from, these Codes as required by law.

Executive Officers of the Registrant. As of December 31, 2016, our executive officers were:

Name	Position	Age	Term of Office

Denis McGlynn	President and Chief Executive Officer	70	11/79 to date

Edward J. Sutor	Executive Vice President and Chief Operating Officer	66	3/99 to date

Timothy R. Horne	Sr. Vice President-Finance, Treasurer and Chief Financial Officer	50	11/96 to date

Klaus M. Belohoubek	Sr. Vice President-General Counsel and Secretary	57	7/99 to date

Our Chairman of the Board, Henry B. Tippie, is a non-employee director and, therefore, not an executive officer. Mr. Tippie has served as Chairman of the Board since our spin-off from DVD in 2002. Mr. Tippie also serves as Chairman of the Board to DVD as a non-employee director.

Denis McGlynn has served as our President and Chief Executive Officer for 37 years. Mr. McGlynn also serves as President and Chief Executive Officer to DVD.

Edward J. Sutor has been Executive Vice President and Chief Operating Officer since 1999. Previously, Mr. Sutor served as Senior Vice President of Finance at Caesars Atlantic City from 1983 until 1999.

Timothy R. Horne has been Sr. Vice President-Finance, Treasurer and Chief Financial Officer since November 1996. Mr. Horne also serves as Sr. Vice President-Finance and Chief Financial Officer to DVD.

Klaus M. Belohoubek has been Sr. Vice President-General Counsel and Secretary since 1999 and has provided us legal representation in various capacities since 1990. Mr. Belohoubek also serves as Sr. Vice President-General Counsel and Secretary to DVD.

Item 11. Executive Compensation

The information called for by this Item 11 is incorporated by reference to our Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Stockholders to be held on April 26, 2017.

Item 12. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters

The information called for by this Item 12 is incorporated by reference to our Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Stockholders to be held on April 26, 2017.

Equity Compensation Plan Information

We have a stock incentive plan which provides for the grant of up to 2,000,000 shares of common stock to our officers and key employees through stock options and/or awards valued in whole or in part by reference to our common stock, such as nonvested restricted stock awards. Refer to NOTE 9 — Stockholders’ Equity to our consolidated financial statements included elsewhere in this document for further discussion. Securities authorized for issuance under equity compensation plans at December 31, 2016 are as follows:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders	—	$	—	1,258,465

Equity compensation plans not approved by security holders	—	—		—
Total	—	$	—	1,258,465

Item 13. Certain Relationships And Related Transactions, And Director Independence

The information called for by this Item 13 is incorporated by reference to our Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Stockholders to be held on April 26, 2017.

Item 14. Principal Accounting Fees And Services

The information called for by this Item 14 is incorporated by reference to our Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Stockholders to be held on April 26, 2017.

Part IV

Item 15. Exhibits, Financial Statement Schedules

(a)(1) Financial Statements — See accompanying Index to Consolidated Financial Statements on page 30.

(2) Financial Statement Schedules — None.

(3) Exhibits:

2.1 Amended and Restated Agreement Regarding Distribution and Plan of Reorganization, dated as of February 15, 2002, by and between Dover Motorsports, Inc. (formerly known as Dover Downs Entertainment, Inc.) and Dover Downs Gaming & Entertainment, Inc. (incorporated herein by reference to Exhibit 2.1 to the Form 10 filed on February 26, 2002, which was declared effective on March 7, 2002).

3.1 Certificate of Incorporation of Dover Downs Gaming & Entertainment, Inc. (incorporated herein by reference to Exhibit 3.1 to the Form 10 filed on November 21, 2001, which was declared effective on March 7, 2002).

3.2 Amended and Restated By-laws of Dover Downs Gaming & Entertainment, Inc. dated March 1, 2017.

4.1 Form of Common Stock Certificate of Dover Downs Gaming & Entertainment, Inc. (incorporated herein by reference to Exhibit 4.1 to the Form 10 filed on November 21, 2001, which was declared effective on March 7, 2002).

4.2 Rights Agreement dated as of January 1, 2012 between Dover Downs Gaming & Entertainment, Inc. and Mellon Investor Services, as Rights Agent (incorporated herein by reference to Exhibit 4.1 to the Form 8-A filed on December 30, 2011).

10.1 Transition Support Services Agreement, dated as of January 15, 2002, by and between Dover Motorsports, Inc. (formerly known as Dover Downs Entertainment, Inc.) and Dover Downs Gaming & Entertainment, Inc. (incorporated herein by reference to Exhibit 10.3 to the Form 10 filed on January 16, 2002, which was declared effective on March 7, 2002).

10.2 Real Property Agreement dated as of January 15, 2002, by and between Dover Motorsports, Inc. (formerly known as Dover Downs Entertainment, Inc.) and Dover Downs Gaming & Entertainment, Inc. (incorporated herein by reference to Exhibit 10.5 to the Form 10 filed on January 16, 2002, which was declared effective on March 7, 2002).

10.3 Agreement between Dover Downs, Inc. and Delaware Standardbred Owners Association, Inc. effective August 1, 2016.

10.4 Credit Agreement between Dover Downs Gaming and Entertainment, Inc. and RBS Citizens, N.A., as agent, dated as of June 17, 2011 (incorporated herein by reference to Exhibit 10.1 to the Form 8-K filed on June 23, 2011).

10.5 Amendment to Credit Agreement between Dover Downs Gaming and Entertainment, Inc. and RBS Citizens, N.A., as agent, dated as of March 12, 2013 (incorporated herein by reference to Exhibit 10.7 to the Form 10-K filed on March 15, 2013).

10.6 Modification and Reaffirmation Agreement between Dover Downs Gaming and Entertainment, Inc. and Citizens Bank, National Association, as agent, dated as of June 12, 2014 (incorporated herein by reference to Exhibit 10.1 to the Form 8-K filed on June 13, 2014).

10.7 Modification and Reaffirmation Agreement between Dover Downs Gaming and Entertainment, Inc., Dover Downs, Inc. and Dover Downs Gaming and Management Corp. and Citizens Bank, National Association, as agent, dated as of August 14, 2014 (incorporated herein by reference to Exhibit 10.1 to the Form 8-K filed on August 14, 2014).

10.8 Modification and Reaffirmation Agreement between Dover Downs Gaming and Entertainment, Inc., Dover Downs, Inc. and Dover Downs Gaming and Management Corp. and Citizens Bank, National Association, as agent, dated as of September 14, 2015 (incorporated herein by reference to Exhibit 10.1 to the Form 8-K filed on September 17, 2015).

10.9 Modification and Reaffirmation Agreement between Dover Downs Gaming and Entertainment, Inc., Dover Downs, Inc. and Dover Downs Gaming and Management Corp. and Citizens Bank, National Association, as agent, dated as of September 1, 2016 (incorporated herein by reference to Exhibit 10.1 to the Form 8-K filed on September 1, 2016).

10.10 Amended and Restated Employment and Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Denis McGlynn dated February 13, 2006 (incorporated herein by reference to Exhibit 10.1 to the Form 8-K filed on February 17, 2006).

10.11 Amended and Restated Employment and Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Edward J. Sutor dated February 13, 2006 (incorporated herein by reference to Exhibit 10.2 to the Form 8-K filed on February 17, 2006).

10.12 Amended and Restated Employment and Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Timothy R. Horne dated February 13, 2006 (incorporated herein by reference to Exhibit 10.3 to the Form 8-K filed on February 17, 2006).

10.13 Amended and Restated Employment and Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Klaus M. Belohoubek dated February 13, 2006 (incorporated herein by reference to Exhibit 10.4 to the Form 8-K filed on February 17, 2006).

10.14 Amendment to certain agreements between Dover Downs Gaming & Entertainment, Inc. and selected executives and directors (incorporated herein by reference to Exhibit 10.1 to the Form 10-Q filed on November 3, 2008).

10.15 Amendment to certain agreements between Dover Downs Gaming & Entertainment, Inc. and certain executives dated June 15, 2011 (incorporated herein by reference to Exhibit 2.1 to the Form 8-K dated June 15, 2011).

10.16 Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Henry B. Tippie dated June 16, 2004 (incorporated herein by reference to Exhibit 10.7 to the Form 10-Q filed on August 6, 2004).

10.17 Dover Downs Gaming & Entertainment, Inc. 2012 Stock Incentive Plan (incorporated herein by reference to Exhibit A to our Proxy Statement filed on March 30, 2012).

10.18 Dover Downs Gaming & Entertainment, Inc. Supplemental Executive Retirement Savings Plan Dated November 9, 2012 (incorporated herein by reference to Exhibit 10.1 to the Form 10-Q filed on November 9, 2012).

21.1 List of Subsidiaries of Dover Downs Gaming & Entertainment, Inc.

24.1 Powers of Attorney for Directors

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

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

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

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

99.1 Information Statement dated as of March 7, 2002 (incorporated herein by reference to Exhibit 99.1 to the Form 10 filed on March 7, 2002).

99.2 Audit Committee Charter of Dover Downs Gaming & Entertainment, Inc. (incorporated herein by reference to Exhibit B to our Proxy Statement filed on March 30, 2010).

101 The following materials from the Dover Downs Gaming & Entertainment, Inc. annual report on Form 10-K for the year ended December 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss) for the years ended December 31, 2016, 2015 and 2014; (ii) Consolidated Balance Sheets as of December 31, 2016 and 2015; (iii) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014; and (iv) Notes to the Consolidated Financial Statements.

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DATED:	March 1, 2017	Dover Downs Gaming & Entertainment, Inc.
		Registrant


		BY:	/s/ Denis McGlynn
			Denis McGlynn
			President and Chief Executive Officer
			and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

/s/ Denis McGlynn	President and Chief Executive Officer	March 1, 2017
Denis McGlynn	and Director
	(Principal Executive Officer)

/s/ Timothy R. Horne	Sr. Vice President — Finance, Treasurer,	March 1, 2017
Timothy R. Horne	Chief Financial Officer and Director
	(Principal Financial and Accounting Officer)

The Directors of the registrant (listed below) executed a power of attorney appointing Denis McGlynn and Timothy R. Horne their attorneys-in-fact, empowering either of them to sign this report, or any amendments, on their behalf.

/s/ Henry B. Tippie	Chairman of the Board	March 1, 2017
Henry B. Tippie

/s/ Patrick J. Bagley	Director and Chairman	March 1, 2017
Patrick J. Bagley	of the Audit Committee

/s/ Jeffrey W. Rollins	Director	March 1, 2017
Jeffrey W. Rollins

/s/ R. Randall Rollins	Director	March 1, 2017
R. Randall Rollins

/s/ Richard K. Struthers	Director	March 1, 2017
Richard K. Struthers

/s/ Denis McGlynn	As Attorney-in-Fact	March 1, 2017
Denis McGlynn	and Director

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page

Report of Independent Registered Public Accounting Firm	31

Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss) for the years ended December 31, 2016, 2015 and 2014	32

Consolidated Balance Sheets at December 31, 2016 and 2015	33

Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014	34

Notes to the Consolidated Financial Statements	35

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Dover Downs Gaming & Entertainment, Inc.:

We have audited the accompanying consolidated balance sheets of Dover Downs Gaming & Entertainment, Inc. and subsidiaries (the Company) as of December 31, 2016 and 2015, and the related consolidated statements of earnings (loss) and comprehensive income (loss) and cash flows for each of the years in the three-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dover Downs Gaming & Entertainment, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the consolidated financial statements, the Company’s credit facility expires on September 30, 2017 and at present no agreement has been reached to refinance the debt, which raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to this matter is also described in note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

	KPMG LLP

Philadelphia, Pennsylvania

March 1, 2017

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

	Years ended December 31,
	2016			2015			2014
Revenues:
Gaming	$	157,226		$	157,922		$	160,391
Other operating	25,066			25,024			24,991
	182,292			182,946			185,382
Expenses:
Gaming	149,577			148,595			151,434
Other operating	17,316			16,602			17,808
Impairment charge	—			—			358
General and administrative	5,375			5,499			5,711
Depreciation	7,743			8,375			9,128
	180,011			179,071			184,439

Operating earnings	2,281			3,875			943

Interest expense	(863		)	(1,160		)	(1,687		)

Earnings (loss) before income taxes	1,418			2,715			(744		)

Income tax (expense) benefit	(632		)	(842		)	38

Net earnings (loss)	786			1,873			(706		)

Unrealized gain (loss) on available-for-sale securities, net of income taxes	3			(6		)	2

Change in pension net actuarial loss and prior service cost, net of income taxes	(395		)	482			(3,588		)

Comprehensive income (loss)	$	394		$	2,349		$	(4,292	)

Net earnings (loss) per common share (Note 3):
Basic	$	0.02		$	0.06		$	(0.02	)
Diluted	$	0.02		$	0.06		$	(0.02	)

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

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31,
	2016			2015
ASSETS
Current assets:
Cash	$	11,677		$	10,496
Accounts receivable	3,507			2,926
Due from State of Delaware	7,285			7,952
Inventories	1,910			1,912
Prepaid expenses and other	2,365			2,530
Receivable from Dover Motorsports, Inc.	7			—
Income taxes receivable	221			254
Deferred income taxes	—			1,308
Total current assets	26,972			27,378

Property and equipment, net	140,714			145,425
Other assets	594			672
Deferred income taxes	2,020			482
Total assets	$	170,300		$	173,957

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,749		$	3,380
Purses due horsemen	7,649			7,473
Accrued liabilities	9,732			8,538
Payable to Dover Motorsports, Inc.	—			44
Deferred revenue	361			408
Revolving line of credit	25,250			31,500
Total current liabilities	46,741			51,343

Liability for pension benefits	7,897			7,606
Total liabilities	54,638			58,949

Commitments and contingencies (see Notes to the Consolidated Financial Statements)

Stockholders’ equity:
Preferred stock, $.10 par value; 1,000,000 shares authorized; shares issued and outstanding: none	—			—
Common stock, $.10 par value; 74,000,000 shares authorized; shares issued and outstanding: 18,144,992 and 17,990,997, respectively	1,814			1,799
Class A common stock, $.10 par value; 50,000,000 shares authorized; shares issued and outstanding: 14,869,623 and 14,870,673, respectively	1,487			1,487
Additional paid-in capital	5,669			5,424
Retained earnings	111,288			110,502
Accumulated other comprehensive loss	(4,596		)	(4,204		)
Total stockholders’ equity	115,662			115,008
Total liabilities and stockholders’ equity	$	170,300		$	173,957

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

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years ended December 31,
	2016			2015			2014
Operating activities:
Net earnings (loss)	$	786		$	1,873		$	(706	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation	7,743			8,375			9,128
Amortization of credit facility origination fees	89			111			133
Stock-based compensation	326			375			580
Deferred income taxes	(36		)	(508		)	(723		)
Impairment charge	—			—			358
Changes in assets and liabilities:
Accounts receivable	(581		)	912			410
Due from State of Delaware	667			(694		)	967
Inventories	2			(129		)	174
Prepaid expenses and other	204			(146		)	154
Receivable from/payable to Dover Motorsports, Inc.	(51		)	66			(26		)
Income taxes receivable	99			(197		)	114
Accounts payable	149			(662		)	(505		)
Purses due horsemen	176			556			(1,061		)
Accrued liabilities	1,149			211			(2,369		)
Deferred revenue	(47		)	19			(74		)
Liability for pension benefits	(320		)	(443		)	(274		)
Net cash provided by operating activities	10,355			9,719			6,280

Investing activities:
Capital expenditures	(2,812		)	(1,651		)	(900		)
Purchase of available-for-sale securities	(55		)	(16		)	(35		)
Proceeds from the sale of available-for-sale securities	49			8			26
Proceeds from sale of property and equipment	—			25			—
Net cash used in investing activities	(2,818		)	(1,634		)	(909		)

Financing activities:
Borrowings from revolving line of credit	46,850			52,060			94,530
Repayments of revolving line of credit	(53,100		)	(59,570		)	(102,560		)
Repurchase of common stock	(66		)	(65		)	(104		)
Credit facility fees	(40		)	(93		)	(108		)
Net cash used in financing activities	(6,356		)	(7,668		)	(8,242		)

Net increase (decrease) in cash	1,181			417			(2,871		)
Cash, beginning of year	10,496			10,079			12,950
Cash, end of year	$	11,677		$	10,496		$	10,079

Supplemental information:
Interest paid	$	778		$	1,108		$	1,589
Income tax payments, net of refunds received	$	569		$	1,547		$	569
Change in accounts payable for capital expenditures	$	220		$	67		$	—

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

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—Business Operations

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

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

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

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

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

For the past several years, we have been engaged with the Delaware legislature, seeking to change the cost sharing structure that exists between video lottery agents, video lottery vendors, horsemen and the State, all in an effort to make the Delaware gaming industry more competitive in the regional marketplace. Several bills have been introduced to implement one or more of the recommendations of the gaming industry and the legislatively created Lottery & Gaming Study Commission, but not enacted. Without legislative relief, we may be unable to refinance or extend the maturity of our credit facility on favorable terms or may default on our obligations, we may be unable to allocate sufficient resources to marketing and promotions in order to compete effectively in the regional marketplace, we may be unable to allocate sufficient resources to maintaining our facility, and we may be required to take other actions in order to manage expenses - especially with respect to operations that have operated at a loss, such as table games. Such actions could adversely affect our business, financial condition, operating results and cash flow.

NOTE 2—Going Concern

At December 31, 2016, we had a credit agreement with a bank group (see NOTE 6 — Credit Facility). The maximum borrowing limit under the facility was $40,000,000 as of December 31, 2016 and the facility expires September 30, 2017. At December 31, 2016, there was $25,250,000 outstanding under the facility. The credit facility is classified as a current liability as of December 31, 2016 in our consolidated balance sheets as the facility expires on September 30, 2017. We will seek to refinance or extend the maturity of this obligation prior to its expiration date; however, there is no assurance that we will be able to execute this refinancing or extension or, if we are able to refinance or extend this obligation, that the terms of such refinancing or extension would be as favorable as the terms of our existing credit facility. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. The report from our independent registered public accountants, KPMG LLP, dated March 1, 2017, includes an explanatory paragraph related to our ability to continue as a going concern.

NOTE 3—Summary of Significant Accounting Policies

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

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

Investments— Investments, which consist of mutual funds, are classified as available-for-sale and reported at fair-value in other assets in our consolidated balance sheets. Changes in fair value are reported in other comprehensive income (loss). See NOTE 9 — Stockholders’ Equity and NOTE 10 — Fair Value Measurements for further discussion.

Inventories— Inventories consisting primarily of food, beverage and operating supplies are stated at the lower of cost or market with cost being determined on the first-in, first-out basis.

Property and equipment— Property and equipment is stated at cost. Depreciation is provided using the straight-line method over the following estimated useful lives:

Facilities		10-40 years
Furniture, fixtures and equipment		3-10 years

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

Income taxes— Deferred income taxes are provided on all differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements based upon enacted statutory tax rates in effect at the balance sheet date. Tax years after 2012 remain open to examination for federal and state income tax purposes.

We recognize interest expense and penalties on uncertain income tax positions as a component of interest expense. No interest expense or penalties were recorded for uncertain income tax matters in 2016, 2015 or 2014. As of December 31, 2016 and 2015, we had no liabilities for uncertain income tax matters.

Point loyalty program— We currently have a point loyalty program for our customers which allows them to earn points based on the volume of their gaming activity. All reward points earned by customers are expensed in the period they are earned. The estimated amount of points redeemable for cash is recorded as a reduction of gaming revenue and the estimated amount of points redeemable for services and merchandise is recorded as gaming expense. In determining the amount of the liability, which was $1,652,000 and $1,660,000, respectively, at December 31, 2016 and 2015, we estimate a redemption rate, a cost of rewards to be offered and the mix of cash, goods and services for which reward points will be redeemed. We use historical data to estimate those amounts.

Revenue and expense recognition— Gaming revenues represent (i) the net win from slot machine, table games, internet gaming and sports wagering and (ii) commissions from pari-mutuel wagering. Other operating revenues consist of hotel rooms revenue, food and beverage sales and other miscellaneous income. Revenues do not include the retail amount of hotel rooms, food and beverage and other miscellaneous goods and services provided without charge to customers as promotional items of $18,784,000, $18,003,000 and $18,241,000 for the years ended December 31, 2016, 2015 and 2014, respectively. The estimated direct cost of providing these items has been charged to the casino through interdepartmental allocations and is included in gaming expenses in the consolidated statements of operations.

Advertising costs— Advertising costs are charged to operations as incurred. Advertising expenses were $2,161,000, $2,135,000 and $2,171,000 in 2016, 2015 and 2014, respectively.

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

	2016		2015		2014
Net earnings (loss) per common share — basic and diluted:
Net earnings (loss)	$	786	$	1,873	$	(706	)
Allocation to nonvested restricted stock awards	20		44		—
Net earnings (loss) available to common stockholders	$	766	$	1,829	$	(706	)

Weighted-average shares outstanding	32,201		32,085		31,961

Net earnings (loss) per common share — basic and diluted	$	0.02	$	0.06	$	(0.02	)

There were no options outstanding and we paid no dividends during 2016, 2015 or 2014.

Accounting for stock-based compensation— We recorded total stock-based compensation expense for our restricted stock awards of $326,000, $375,000 and $580,000 as general and administrative expenses for the years ended December 31, 2016, 2015 and 2014, respectively. We recorded income tax benefit (expense) of $14,000, ($20,000) and $51,000 for the years ended December 31, 2016, 2015 and 2014, respectively, related to vesting of our restricted stock awards.

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

Segment information —We account for operating segments based on those used for internal reporting to management. We report information under a single gaming and entertainment segment.

Recent accounting pronouncements —In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments , which provides guidance on how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The adoption of this ASU is not expected to have an impact on our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , which is intended to simplify various aspects of the accounting for share-based payments, including treatment of excess tax benefits, forfeitures, consideration of minimum statutory tax withholding requirements and classification on the statement of cash flows. The update is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. The adoption of this ASU is not expected to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires that lessees recognize assets and liabilities for leases with lease terms greater than twelve months in the statement of financial position and also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. The update is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years. Early adoption is permitted. We are currently analyzing the impact of this ASU and, at this time, we are unable to determine the impact on the new standard, if any, on our consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes , which requires companies to present deferred income tax assets and deferred income tax liabilities as noncurrent in a classified balance sheet instead of the current requirement to separate deferred income tax liabilities and assets into current and noncurrent amounts. The update is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. We adopted this ASU in the second quarter of 2016 on a prospective basis.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory , which requires companies to measure inventory at lower of cost and net realizable value, versus lower of cost or market. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The update is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this ASU is not expected to have an impact on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , which requires an entity to present debt issuance costs as a direct reduction from the carrying amount of the related debt liability on the balance sheet. In August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs from line-of-credit arrangements after adoption of ASU 2015-03. The SEC Staff announced they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The update was effective January 1, 2016, required retrospective application and represented a change in accounting principle. The adoption of this ASU did not have an impact on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern , which provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management is required to evaluate whether there are conditions or events that raise substantial doubt about our ability to continue as a going concern within one year from the date the financial statements are issued. The update was effective for the annual period ending after December 15, 2016. The adoption of this ASU did not have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , which supersedes nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States of America. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for reporting periods beginning after December 15, 2016. We are currently analyzing the impact of this ASU on our results of operations and, at this time, we are unable to determine the impact on the new standard, if any, on our consolidated financial statements.

NOTE 4—Property and Equipment

Property and equipment consists of the following as of December 31:

	2016			2015
Land	$	785,000		$	785,000
Casino facility	77,032,000			77,032,000
Hotel facility	113,685,000			113,599,000
Harness racing facilities	10,982,000			10,982,000
General facilities	16,798,000			16,781,000
Furniture, fixtures and equipment	58,642,000			56,871,000
Construction in progress	581,000			244,000
	278,505,000			276,294,000
Less accumulated depreciation	(137,791,000		)	(130,869,000		)
	$	140,714,000		$	145,425,000

NOTE 5—Accrued Liabilities

Accrued liabilities consist of the following as of December 31:

	2016		2015
Point loyalty program	$	1,652,000	$	1,660,000
Payroll and related items	2,351,000		2,179,000
Win due to Delaware State Lottery Office	3,583,000		2,564,000
Other	2,146,000		2,135,000
	$	9,732,000	$	8,538,000

NOTE 6—Credit Facility

The credit facility is classified as a current liability as of December 31, 2016 in our consolidated balance sheets as the facility expires on September 30, 2017. We will seek to refinance or extend the maturity of this obligation prior to its expiration date; however, there is no assurance that we will be able to execute this refinancing or extension or, if we are able to refinance or extend this obligation, that the terms of such refinancing or extension would be as favorable as the terms of our existing credit facility. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

The report from our independent registered public accountants, KPMG LLP, dated March 1, 2017, includes an explanatory paragraph related to our ability to continue as a going concern.

NOTE 7—Income Taxes

The current and deferred income tax (expense) benefit is as follows:

	Years ended December 31,
	2016			2015			2014
Current:
Federal	$	(513,000	)	$	(972,000	)	$	(503,000	)
State	(155,000		)	(378,000		)	(182,000		)
	(668,000		)	(1,350,000		)	(685,000		)
Deferred:
Federal	34,000			423,000			623,000
State	2,000			85,000			100,000
	36,000			508,000			723,000
Total income tax (expense) benefit	$	(632,000	)	$	(842,000	)	$	38,000

A reconciliation of the effective income tax rate with the applicable statutory federal income tax rate is as follows:

	Years ended December 31,
	2016		2015		2014
Federal tax at statutory rate	34.0	%	34.0	%	(34.0	)%
State taxes, net of federal benefit	6.0	%	6.0	%	3.7	%
Non-deductible stock based compensation	8.4	%	6.3	%	24.8	%
Federal tax credit for payroll tax on employee tips	(4.7	)%	(14.6	)%	—
Other	0.9	%	(0.7	)%	0.4	%
Effective income tax rate	44.6	%	31.0	%	(5.1	)%

The components of deferred income tax assets and liabilities are as follows as of December 31:

	2016			2015
Deferred income tax assets:
Point loyalty program	$	656,000		$	660,000
Accrued expenses	4,077,000			3,901,000
Net operating loss carry-forwards	—			91,000
Federal tax credit for payroll tax on employee tips	96,000			132,000
Other	236,000			297,000
Total deferred income tax assets	5,065,000			5,081,000
Valuation allowance	—			(91,000		)
Net deferred income tax assets	5,065,000			4,990,000

Deferred income tax liabilities:
Depreciation — property and equipment	(3,045,000		)	(3,200,000		)
Total deferred income tax liabilities	(3,045,000		)	(3,200,000		)
Net deferred income tax assets	$	2,020,000		$	1,790,000

Amounts recognized in the consolidated balance sheet:
Current deferred income tax assets	$	—		$	1,308,000
Noncurrent deferred income tax assets	2,020,000			482,000
	$	2,020,000		$	1,790,000

NOTE 8—Pension Plans

We maintain a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011. All of our full time employees were eligible to participate in this qualified pension plan. Benefits provided by our qualified pension plan were based on years of service and employees’ remuneration over their term of employment. Compensation earned by employees up to July 31, 2011 is used for purposes of calculating benefits under our pension plan with no future benefit accruals after this date. We also maintain a non-qualified, non-

contributory defined benefit pension plan, the excess plan, for certain employees that has been frozen since July 2011. This excess plan provided benefits that would otherwise be provided under the qualified pension plan but for maximum benefit and compensation limits applicable under federal tax law. The cost associated with the excess plan is determined using the same actuarial methods and assumptions as those used for our qualified pension plan. The assets for the excess plan aggregate $304,000 and $287,000 as of December 31, 2016 and 2015, respectively, and are recorded in other assets in our consolidated balance sheets (see NOTE 10 — Fair Value Measurements).

The following table sets forth the plans’ funded status and amounts recognized in our consolidated balance sheets as of December 31:

	2016			2015
Change in benefit obligation:
Benefit obligation at beginning of year	$	22,358,000		$	23,787,000
Interest cost	867,000			948,000
Actuarial loss (gain)	502,000			(1,870,000		)
Benefits paid	(540,000		)	(507,000		)
Benefit obligation at end of year	23,187,000			22,358,000

Change in plan assets:
Fair value of plan assets at beginning of year	14,442,000			14,655,000
Actual gain (loss) on plan assets	848,000			(59,000		)
Employer contribution	210,000			353,000
Benefits paid	(540,000		)	(507,000		)
Fair value of plan assets at end of year	14,960,000			14,442,000

Unfunded status	$	(8,227,000	)	$	(7,916,000	)

The following table presents the amounts recognized in our consolidated balance sheets as of December 31:

	2016			2015
Accrued liabilities	$	(452,000	)	$	(407,000	)
Liability for pension benefits	(7,775,000		)	(7,509,000		)
	$	(8,227,000	)	$	(7,916,000	)

Amounts recognized in accumulated other comprehensive loss that have not yet been recognized as components of net periodic pension benefit (expense) at December 31 are as follows:

	2016		2015
Net actuarial loss, pre-tax	$	7,704,000	$	7,048,000

The components of net periodic pension benefit for the years ended December 31, 2016, 2015 and 2014 are as follows:

	2016			2015			2014
Interest cost	$	867,000		$	948,000		$	915,000
Expected return on plan assets	(1,137,000		)	(1,158,000		)	(1,092,000		)
Recognized net actuarial loss	136,000			146,000			32,000
	$	(134,000	)	$	(64,000	)	$	(145,000	)

For the year ending December 31, 2017, we expect to recognize the following amounts as components of net periodic benefit (expense) which are included in accumulated comprehensive loss as of December 31, 2016:

Actuarial loss

157,000

The principal assumptions used to determine the net periodic pension benefit for the years ended December 31, 2016, 2015 and 2014, and the actuarial value of the benefit obligation at December 31, 2016 and 2015 (the measurement dates) for our pension plans are as follows:

	Net Periodic Pension Cost						Benefit Obligation
	2016		2015		2014		2016		2015
Weighted-average discount rate	4.4	%	4.1	%	5.1	%	4.3	%	4.4	%
Weighted-average rate of compensation increase	n/a		n/a		n/a		n/a		n/a
Expected long-term rate of return on plan assets	8.0	%	8.0	%	8.0	%	n/a		n/a

Historically, we used a single weighted-average discount rate approach to determine the pension benefit obligation and the subsequent years’ interest cost component of the net periodic pension benefit. The weighted-average discount rate was determined by matching estimated benefit payment cash flows to a yield curve derived from long-term, high-quality corporate bond curves. This method represented the constant annual rate that would be required to discount all future benefit payments related to past service from the date of expected future payment to the measurement date. As of December 31, 2015, we elected to use a refined method, known as the spot rate approach, to determine the benefit obligation and the subsequent years’ interest cost component of the net periodic pension benefit. This method uses individual spot rates along the yield curve that correspond with the timing of each benefit payment and will provide a more precise measurement of the interest cost by improving the correlation between projected benefit cash flows and the corresponding spot yield curve rates. The change in method did not impact the December 31, 2015 benefit obligation, but resulted in a slight decrease in the interest component of the net periodic pension benefit in 2016. We accounted for this as a change in estimate on a prospective basis.

For 2016, we assumed a long-term rate of return on plan assets of 8.0%. In developing the 8.0% expected long-term rate of return assumption, we reviewed asset class return expectations and long-term inflation assumptions and considered our historical compounded return, which was consistent with our long-term rate of return assumption.

In 2014, we adopted the Society of Actuaries’ (“SOA”) RP-2014 mortality tables and MP-2014 mortality improvement tables to determine our December 31, 2014 pension liability. These updated mortality tables, along with a lower discount rate, resulted in the increase in the unfunded status of our pension plans and the increase in accumulated other comprehensive loss at December 31, 2014. During 2015, we reviewed the SOA tables and adopted the MP-2015 mortality improvement tables which resulted in a decrease in our pension benefit obligation. In determining the 2016 pension liability, we adopted the new updated MP-2016 mortality improvement tables. These new mortality tables, along with the lower discount rate, resulted in an increase in our pension liability and accumulated other comprehensive loss at December 31, 2016.

Our investment goals are to achieve a combination of moderate growth of capital and income with moderate risk. Acceptable investment vehicles will include mutual funds, exchange-traded funds (ETFs), limited partnerships, and individual securities. Our target allocations for plan assets are 60% equities and 40% fixed income. Of the equity portion, 50% will be invested in passively managed securities using ETFs and the other 50% will be invested in actively managed investment vehicles. We address diversification by investing in mutual funds and ETFs which hold large, mid and small capitalization U.S. stocks, international (non-U.S.) equity, REITS, and real assets (consisting of inflation-linked bonds, real estate and natural resources). A sufficient percentage of investments will be readily marketable in order to be sold to fund benefit payment obligations as they become payable.

The fair values of our pension assets as of December 31, 2016 by asset category are as follows (refer to NOTE 10 — Fair Value Measurements for a description of Level 1, Level 2 and Level 3 categories):

Asset Category	Total		Level 1		Level 2		Level 3
Corporate common stock	$	1,210,000	$	1,210,000	$	—	$	—
Mutual funds/ETFs:
Equity-large cap	3,521,000		3,521,000		—		—
Equity-mid cap	1,419,000		1,419,000		—		—
Equity-small cap	287,000		287,000		—		—
Equity-international	1,666,000		1,666,000		—		—
Fixed income	5,649,000		5,649,000		—		—
Real estate	822,000		822,000		—		—
Money market	386,000		386,000		—		—
Total mutual funds/ETFs	13,750,000		13,750,000		—		—
Grand total	$	14,960,000	$	14,960,000	$	—	$	—

The fair values of our pension assets as of December 31, 2015 by asset category are as follows (refer to NOTE 10 — Fair Value Measurements for a description of Level 1, Level 2 and Level 3 categories):

Asset Category	Total		Level 1		Level 2		Level 3
Corporate common stock	$	1,548,000	$	1,548,000	$	—	$	—
Mutual funds/ETFs:
Equity-large cap	2,962,000		2,962,000		—		—
Equity-mid cap	1,306,000		1,306,000		—		—
Equity-small cap	285,000		285,000		—		—
Equity-international	1,772,000		1,772,000		—		—
Fixed income	5,369,000		5,369,000		—		—
Real estate	799,000		799,000		—		—
Money market	401,000		401,000		—		—
Total mutual funds/ETFs	12,894,000		12,894,000		—		—
Grand total	$	14,442,000	$	14,442,000	$	—	$	—

We expect to contribute $290,000 to our defined benefit pension plans in 2017.

Estimated future benefit payments are as follows:

2017	$	1,168,000
2018	$	772,000
2019	$	795,000
2020	$	861,000
2021	$	886,000
2022-2026	$	5,328,000

We also maintain a non-elective, non-qualified supplemental executive retirement plan (“SERP”) which provides deferred compensation to certain highly compensated employees that approximates the value of benefits lost by the freezing of the pension plan which are not offset by our enhanced matching contribution in our 401(k) plan. The SERP is a discretionary defined contribution plan and contributions made to the SERP in any given year are not guaranteed and will be at the sole discretion of our Compensation and Stock Incentive Committee. During 2016, 2015 and 2014, we recorded expenses of $124,000, $99,000 and $126,000, respectively, related to the SERP. During 2016, 2015 and 2014, we contributed $99,000, $126,000 and $115,000 to the plan, respectively. The liability for SERP pension benefits was $122,000 and $97,000 as of December 31, 2016 and 2015, respectively.

We maintain a defined contribution 401(k) plan which permits participation by substantially all employees. Our matching contributions to the 401(k) plan were $833,000, $874,000 and $829,000 for the years ended December 31, 2016, 2015 and 2014, respectively.

NOTE 9—Stockholders’ Equity

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

	Common Stock			Class A Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss
Balance at December 31, 2013	$	1,774		$	1,487	$	4,663		$	109,335		$	(1,095	)
Net loss	—			—		—			(706		)	—
Issuance of nonvested stock awards, net of forfeitures	21			—		(21		)	—			—
Stock-based compensation	—			—		580			—			—
Change in net actuarial loss and prior service cost, net of income tax benefit of $2,365	—			—		—			—			(3,588		)
Unrealized gain on available-for-sale securities, net of income tax expense of $2	—			—		—			—			3
Repurchase and retirement of common stock	(7		)	—		(97		)	—			—
Balance at December 31, 2014	1,788			1,487		5,125			108,629			(4,680		)
Net earnings	—			—		—			1,873			—
Issuance of nonvested stock awards, net of forfeitures	18			—		(18		)	—			—
Stock-based compensation	—			—		375			—			—
Change in net actuarial loss and prior service cost, net of income tax expense of $318	—			—		—			—			482
Unrealized loss on available-for-sale securities, net of income tax benefit of $4	—			—		—			—			(6		)
Repurchase and retirement of common stock	(7		)	—		(58		)	—			—
Balance at December 31, 2015	1,799			1,487		5,424			110,502			(4,204		)
Net earnings	—			—		—			786			—
Issuance of nonvested stock awards, net of forfeitures	22			—		(22		)	—			—
Stock-based compensation	—			—		326			—			—
Change in net actuarial loss and prior service cost, net of income tax benefit of $261	—			—		—			—			(395		)
Unrealized loss on available-for-sale securities, net of income tax expense of $1	—			—		—			—			3
Repurchase and retirement of common stock	(7		)	—		(59		)	—			—
Balance at December 31, 2016	$	1,814		$	1,487	$	5,669		$	111,288		$	(4,596	)

As of December 31, 2016 and 2015, accumulated other comprehensive loss consists of the following:

	2016			2015
Net actuarial loss and prior service cost not yet recognized in net periodic benefit cost, net of income tax benefit of $3,080,000 and $2,819,000, respectively	$	(4,624,000	)	$	(4,229,000	)
Accumulated unrealized gain on available-for-sale securities, net of income tax expense of $19,000 and $18,000, respectively	28,000			25,000
Accumulated other comprehensive loss	$	(4,596,000	)	$	(4,204,000	)

We have 125,000,000 shares of authorized capital stock which consists of 74,000,000 shares of common stock, par value $.10 per share; 50,000,000 shares of Class A common stock, par value $.10 per share; and 1,000,000 shares of preferred stock, par value $.10 per share.

The holders of common stock are entitled to one vote per share and the holders of our Class A common stock are entitled to 10 votes per share. There is no cumulative voting. Shares of Class A common stock are convertible at any time into our shares of common stock on a one-for-one basis at the option of the stockholder. Subject to rights of any preferred stockholder, holders of our common stock and Class A common stock are entitled to receive on a pro rata basis such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available for that purpose. At the discretion of our Board of Directors, we may pay to the holders of common stock a cash dividend greater than the dividend, if any, paid to the holders of Class A common stock.

Under Delaware law, a change of ownership of a Licensed Agent will automatically terminate its license 90 days after the change of ownership occurs, unless the Director of the Delaware State Lottery Office determines after application to issue a new license to the new owners. Change of ownership may occur if any new individual or entity acquires, directly or indirectly, 10% or more of the Licensed Agent or if more than 20% of the legal or beneficial interest in the Licensed Agent is transferred, whether by direct or indirect means. The Commission may require extensive background investigations of any new owner acquiring a 10% or greater interest in a Licensed Agent, including criminal background checks. Accordingly, we have a restrictive legend on our shares of common stock which require that (a) any holders of common stock found to be disqualified or unsuitable or not possessing the qualifications required by any appropriate gaming authority could be required to dispose of such stock and (b) any holder of common stock intending to acquire 10% or more of our outstanding common stock must first obtain prior written approval from the Delaware State Lottery Office.

We adopted a stockholder rights plan in 2012. The rights are attached to and trade in tandem with our common stock and Class A common stock. Each right entitles the registered holder to purchase from us one share of common stock. The rights, unless earlier redeemed by our Board of Directors, will detach and trade separately from our common stock upon the occurrence of certain events such as the unsolicited acquisition by a third party of beneficial ownership of 10% or more of our outstanding combined common stock and Class A common stock or the announcement by a third party of the intent to commence a tender or exchange offer for 10% or more of our outstanding combined common stock and Class A common stock. After the rights have detached, the holders of such rights would generally have the ability to purchase such number of either shares of our common stock or stock of an acquirer of ours having a market value equal to twice the exercise price of the right being exercised, thereby causing substantial dilution to a person or group of persons attempting to acquire control of us. The rights may serve as a significant deterrent to unsolicited attempts to acquire control of us, including transactions involving a premium to the market price of our stock. This rights agreement expires on January 1, 2022, unless earlier redeemed.

On January 23, 2013, our Board of Directors suspended the quarterly dividend. In addition, our credit facility prohibits the payment of dividends. See NOTE 6 — Credit Facility.

On October 23, 2002, our Board of Directors authorized the repurchase of up to 3,000,000 shares of our outstanding common stock. The purchases may be made in the open market or in privately negotiated transactions as conditions warrant. The repurchase authorization has no expiration date, does not obligate us to acquire any specific number of shares and may be suspended at any time. No purchases of our equity securities were made pursuant to this authorization during 2016 or 2015. At December 31, 2016, we had remaining repurchase authority of 1,653,333 shares. At present we are not permitted to make such purchases under our credit facility.

During the years ended December 31, 2016, 2015 and 2014, we purchased and retired 67,555, 73,453 and 66,829 shares of our outstanding common stock for $66,000, $65,000 and $104,000, respectively. These purchases were made from employees in connection with the vesting of restricted stock awards under our stock incentive plan and were not pursuant to the aforementioned repurchase authorization. Since the vesting of a restricted stock award is a taxable event to our employees for which income tax withholding is required, the plan allows employees to surrender to us some of the shares that would otherwise have vested in satisfaction of their tax liability. The surrender of these shares is treated by us as a purchase of the shares.

We have a stock incentive plan which provides for the grant of up to 2,000,000 shares of common stock to our officers and key employees through stock options and/or awards valued in whole or in part by reference to our common stock, such as nonvested restricted stock awards. Under the plan, nonvested restricted stock vests an aggregate of twenty percent each year beginning on the second anniversary date of the grant. The aggregate market value of the

nonvested restricted stock at the date of issuance is being amortized on a straight-line basis over the six-year period. As of December 31, 2016, there were 1,258,465 shares available for granting options or stock awards.

Nonvested restricted stock activity for the year ended December 31, 2016 was as follows:

	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2015	775,900		$	1.86
Granted	220,500		$	0.97
Vested	(183,400	)	$	2.60
Nonvested at December 31, 2016	813,000		$	1.45

The aggregate market value of the nonvested restricted stock at the date of issuance is being amortized on a straight-line basis over the six-year service period or the service period remaining until normal retirement age, if shorter. The total fair value of shares vested during the years ended December 31, 2016, 2015 and 2014 based on the weighted average grant date fair value was $477,000, $608,000 and $745,000, respectively. The grant-date fair value of restricted stock awards granted during the years ended December 31, 2016, 2015 and 2014 was $0.97, $0.89 and $1.52, respectively. We recorded, within general and administrative expenses, compensation expense of $326,000, $375,000 and $580,000 related to restricted stock awards for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016, there was $565,000 of total deferred compensation cost related to nonvested restricted stock awards granted to employees under our stock incentive plan. That cost is expected to be recognized over a weighted-average period of 3.3 years.

NOTE 10—Fair Value Measurements

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

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

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

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

The following table summarizes the valuation of our financial instrument pricing levels as of December 31, 2016 and 2015:

	Total		Level 1		Level 2		Level 3
2016
Available-for-sale securities	$	304,000	$	304,000	$	—	$	—

2015
Available-for-sale securities	$	287,000	$	287,000	$	—	$	—

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

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

At December 31, 2016 and 2015, there was $25,250,000 and $31,500,000, respectively, outstanding under our revolving credit agreement. The borrowings under our revolving credit agreement bear interest at the variable rate described in NOTE 6 — Credit Facility and therefore we believe approximate fair value.

NOTE 11—Related Party Transactions

During the years ended December 31, 2016, 2015 and 2014, we allocated costs of $1,952,000, $1,851,000 and $1,910,000, respectively to DVD, a company related through common ownership, for certain administrative and operating services, including leased space. DVD allocated certain administrative and operating service costs of $158,000, $252,000 and $240,000, respectively, to us for the years ended December 31, 2016, 2015 and 2014. The allocations were based on an analysis of each company’s share of the costs. In connection with DVD’s 2016, 2015 and 2014 NASCAR event weekends at Dover International Speedway, we provided certain services, primarily catering, for which DVD was invoiced $876,000, $836,000 and $689,000, respectively. Additionally, DVD invoiced us $200,000, $230,000 and $184,000, respectively, for tickets, their commission for suite catering and other services at DVD’s 2016, 2015 and 2014 NASCAR event weekends at Dover International Speedway. As of December 31, 2016 and 2015, respectively, our consolidated balance sheet included a $7,000 receivable from and a $44,000 payable to DVD for the aforementioned items. We settled these items in January of 2017 and 2016. The net costs incurred by each company for these services are not necessarily indicative of the costs that would have been incurred if the companies had been unrelated entities and/or had otherwise independently managed these functions; however, management believes that these costs are reasonable.

In conjunction with the spin-off from DVD, we and DVD entered into various agreements that addressed the allocation of assets and liabilities between the two companies and that define the companies’ relationship after the separation. Among these are the Real Property Agreement and the Transition Support Services Agreement.

The Real Property Agreement governs certain real property transfers, leases and easements affecting our Dover, Delaware facility.

The Transition Support Services Agreement provides for each of us and DVD to provide each other with certain administrative and operational services. The party receiving the services is required to pay for them within 30 business days after receipt of an invoice at rates agreed upon by us and DVD. The agreement may be terminated in whole or in part 90 days after the request of the party receiving the services or 180 days after the request of the party providing the services.

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

Patrick J. Bagley, Timothy R. Horne, Denis McGlynn, Jeffrey W. Rollins, R. Randall Rollins, Richard K. Struthers and Henry B. Tippie are all Directors of ours and DVD. Denis McGlynn is the President and Chief Executive Officer of both companies, Klaus M. Belohoubek is the Senior Vice President — General Counsel and

Secretary of both companies and Timothy R. Horne is the Senior Vice President — Finance and Chief Financial Officer of both companies. Mr. Tippie controls in excess of fifty percent of the voting power of DVD.

NOTE 12—Commitments and Contingencies

We have employment, severance and noncompete agreements with certain of our officers and directors under which certain change of control, severance and noncompete payments and benefits might become payable in the event of a change in our control, defined to include a tender offer or the closing of a merger or similar corporate transactions. In the event of such a change in our control and the subsequent termination of employment of all employees covered under these agreements, we estimate that the maximum contingent liability would range from $8,800,000 to $10,800,000 depending on the tax treatment of the payments.

To the extent that any of the potential payments or benefits due under the agreements constitute an excess “parachute payment” under the Internal Revenue Code and result in the imposition of an excise tax, each agreement requires that we pay the amount of such excise tax plus any additional amounts necessary to place the officer or director in the same after-tax position as he would have been had no excise tax been imposed. We estimate that the tax gross ups that could be paid under the agreements in the event the agreements were triggered due to a change of control could be between $1,300,000 and $3,300,000 and these amounts have been included in the maximum contingent liability disclosed above. This maximum tax gross up assumes that none of the payments made after the hypothetical change in control would be characterized as reasonable compensation for services rendered. Each agreement with an executive officer provides that fifty percent of the monthly amount paid during the term is paid in consideration of the executive officer’s non-compete covenants. The exclusion of these amounts would reduce the calculated amount of excess parachute payments subject to tax. We are unable to conclude whether the Internal Revenue Service would characterize all or some of these non-compete payments as reasonable compensation for services rendered.

NOTE 13—Quarterly Results (unaudited)

	March 31			June 30		September 30		December 31
Year Ended December 31, 2016
Revenues	$	44,717,000		$	46,224,000	$	47,110,000	$	44,241,000
Operating earnings (loss)	$	34,000		$	1,509,000	$	1,013,000	$	(275,000	)
Net (loss) earnings	$	(239,000	)	$	796,000	$	520,000	$	(291,000	)
Net (loss) earnings per share-basic and diluted	$	(0.01	)	$	0.02	$	0.02	$	(0.01	)

Year Ended December 31, 2015
Revenues	$	44,338,000		$	45,301,000	$	47,196,000	$	46,111,000
Operating earnings	$	41,000		$	1,399,000	$	1,216,000	$	1,219,000
Net (loss) earnings	$	(352,000	)	$	631,000	$	826,000	$	768,000
Net (loss) earnings per share-basic and diluted	$	(0.01	)	$	0.02	$	0.03	$	0.02

Exhibit 3.2

Amended and

Restated as of

March 1, 2017

BY-LAWS

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

ARTICLE I

The Corporation

Section 1.1 Name . The title of this Corporation is Dover Downs Gaming & Entertainment, Inc.

Section 1.2 Office . The registered office of this Corporation shall be located at 3411 Silverside Road, Tatnall Bldg., Suite 201, Wilmington, Delaware 19810, or at such other place as the Board of Directors may designate in accordance with Section 133 of the Delaware Corporation Law.

Section 1.3 Seal . The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation and the year of its creation (2001) and the words “Incorporated Delaware”.

ARTICLE II

Stockholders

Section 2.1 Annual Meeting . The annual meeting of stockholders shall be held at such place within or without the State of Delaware as the Board of Directors from time to time determine.

Section 2.2 Special Meetings . Special meetings of stockholders for any purpose or purposes may be called at any time by the Chairman of the Board of Directors, the Chairman of the Executive Committee or the President and not by any other person.

Section 2.3 Notice of Meetings . Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.

Section 2.4 Adjournments . Any meeting of the stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 2.5 Quorum . At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority of the voting

power represented by shares of stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided in Section 2.4 of these by-laws until a quorum shall attend.

Section 2.6 Organization . Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his absence by the President, or in his absence by the Chairman of the Executive Committee, if any, or in his absence by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

Section 2.7 Voting; Proxies . Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock of Common Stock and ten votes for each share of Class A Common Stock held by such shareholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A stockholder entitled to vote may authorize a proxy by means of a writing, by telephone, by the Internet, by other forms of electronic transmission or by any other manner permitted by law. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of

the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall so determine. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. All other elections and questions shall, unless otherwise provided by law or by the certificate of incorporation or these by-laws, be decided by the vote of the holders of a majority of the voting power entitled to vote thereon present in person or by proxy at the meeting, provided that (except as otherwise required by law or by the certificate of incorporation or these by-laws) the Board of Directors may require a larger vote upon any election or question.

Section 2.8 Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion of exchange or stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 2.9 List of Stockholders Entitled To Vote . The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to

vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

Section 2.10 Action by Consent Of Stockholders . Unless prohibited by law or the rules and regulations of any national securities exchange on which securities of the Corporation are listed, action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and stockholders shall have the power to consent in writing, without a meeting, to the taking of any action.

Section 2.11 Notice of Stockholder Business at Stockholder Meeting . At the annual meeting or any special meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before meeting, business must be a proper subject for stockholder action under the Delaware General Corporation Law and must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section and who shall be entitled to vote at the meeting. For business to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing

to the Secretary of the Corporation. To be timely, a stockholder’s notice must be in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation and received in the form required by this Section and (a) with respect to an annual meeting, not less than ninety days prior to the anniversary of the prior year’s annual meeting of stockholders, or (b) with respect to a special meeting, not less than seven days following the day on which notice of the special meeting has been mailed to stockholders or public disclosure of such meeting was first made. A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting, (b) as to the stockholder giving such notice (i) the name and address, as they appear on the Corporation’s stock ledger, of such stockholder, (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder, and (iii) if the stockholder intends to solicit proxies in support of such stockholder’s proposal, a representation to that effect; and (c) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at a meeting, except in compliance with the procedures set forth in this Section. Stockholders shall also be required to comply with all applicable requirements of the Securities Exchange Act of 1934 and any national securities exchange on which the Corporation’s shares shall be listed. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in compliance with the provisions of this Section, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

ARTICLE III

Board of Directors

Section 3.1 Number; Qualifications . The Board of Directors shall consist of up to the number of directors provided for in the Corporation’s Certificate of Incorporation. At the time of nomination, a Director must own not less than 500 shares of common stock in the Corporation.

Section 3.2 Election; Resignation; Removal; Vacancies . At each annual meeting of stockholders, the stockholders shall elect Directors to replace those Directors whose terms then expire. Any Director may resign at any time upon written notice to the Corporation. Stockholders may remove Directors only for cause. Any vacancy occurring in the Board of Directors for any cause may be filled only by the Board of Directors, acting by vote of a majority of the Directors then in office, although less than quorum. Each Director so elected shall hold office until the expiration of the term of office of the Director whom he has replaced.

Section 3.3 Notice Of Nomination Of Directors . Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. Nominations by a shareholder shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation and received in the form required by these By-laws not less than ninety days prior to the anniversary of the prior year’s annual meeting of stockholders or not less than seven days following the day on which notice of any special meeting has been mailed to stockholders calling for the election of directors. Each such notice shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee for the past five years and (iii) evidence of such nominee’s qualification under Section 3.1 to these By-laws. The Chairman of the meeting may, if the facts

warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.

Section 3.4 Non-Discrimination Statement . Consistent with the Corporation’s equal employment opportunity policy, nominations for the election of directors shall be made by the Board of Directors and accepted from stockholders in a manner consistent with these By-Laws and without regard to the nominee’s race, color, ethnicity, religion, sex, age, national origin, veteran status, handicap or disability.

Section 3.5 Regular Meetings . Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of Directors may from time to time determine, and if so determined notices thereof need not be given.

Section 3.6 Special Meetings . Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board of Directors, the Chairman of the Executive Committee, or by the President. Reasonable notice thereof shall be given by the person calling the meeting, not later than the second day before the date of the special meeting.

Section 3.7 Telephonic Meetings Permitted . Members of the Board of Directors, or any committee designated by the Board, may participate in any meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. No electronic recording or stenographic transcription of any meeting of the Board or any committee shall be permitted without the consent of a majority of the Board or committee members present at the meeting and no recording or transcription made in violation of these By-laws shall be disclosed to any third person, admissible in any proceeding or used in any fashion.

Section 3.8 Quorum; Vote Required For Action; Informal Action . At all meetings of the Board of Directors a majority of the whole Board shall constitute a quorum for the transaction of business. Except in cases in which the certificate of incorporation or these by-laws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or committee.

Section 3.9 Organization . Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his absence by the President, or in his absence by the Chairman of the Executive Committee, if any, or in his absence by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as a secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

Section 3.10 Compensation Of Directors . The Directors and members of standing committees shall receive such fees or salaries as fixed by resolution of the Executive Committee and in addition will receive expenses in connection with attendance or participation in each regular or special meeting.

ARTICLE IV

Committees

Section 4.1 Committees . The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have power or authority in reference to amending the certificate of incorporation of the Corporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange or all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, or amending these by-laws. The Board of Directors shall, at the annual organization meeting thereof, elect an Executive Committee which shall consist of not more than three members, all of whom shall be members of the Board of Directors. The Executive Committee shall have and may exercise all of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation to the fullest extent permitted by law (as presently allowed under Section 141 (c) to the Delaware General Corporation Law and as may be allowed in the future pursuant to amendments or revisions to applicable law). Any Director may be removed from any

committee of the Board with or without cause by the affirmative vote of a majority of the entire Board of Directors.

Section 4.2 Committee Rules . Unless the Board of Directors otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article III of these by-laws.

ARTICLE V

Officers

Section 5.1 Executive Officers; Election; Qualifications; Term of Office; Resignation; Removal; Vacancies . The officers of the Corporation shall consist of a President, Vice Presidents, Secretary, Assistant Secretaries, Treasurer, Assistant Treasurers, General Counsel, and such other officers as may from time to time be elected or appointed by the Board of Directors. Any officer may resign at any time upon written notice to the Corporation. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. Any number of offices may be held by the same person. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting. In the absence of any officer, the Board of Directors may delegate his power and duties to any other officer or to any director for the time being.

Section 5.2 Duties Of The Chairman Of The Board . The Chairman of the Board shall preside at all meetings of the shareholders and the Board, shall have general and active management of the business of the Corporation and shall perform such duties as the Board of Directors may prescribe. The Chairman of the Board shall not be deemed an executive officer of the Corporation if he is a non-employee director and shall otherwise be an executive officer of the Corporation only if specifically designated as such by the Board of Directors at the time of his election or appointment.

Section 5.3 President . The President shall be the Chief Executive Officer of the Corporation, may execute in the name of the Corporation all contracts and agreements authorized by the Board or the Executive Committee. He may sign certificates of stock; he shall have general supervision and direction of all the other officers of the Corporation; he shall submit a complete report of the operations and condition of the Corporation for the year to the Chairman and to the

directors at their regular meetings, and from time to time shall report to the directors all matters which the interest of the Corporation may require to be brought to their notice. He shall have the general powers and duties usually vested in the office of a president of a corporation.

Section 5.4 Vice President - Finance . The Vice President - Finance shall be the Chief Accounting and Chief Financial Officer of the Corporation and shall be responsible to the Board of Directors, the Executive Committee and the President for all financial control and internal audit of the Corporation and its subsidiaries. He shall perform such other duties as may be assigned to him by the Board of Directors, the Executive Committee or the President.

Section 5.5 Vice Presidents . The Vice Presidents elected or appointed by the Board of Directors shall perform such duties and exercise such powers as may be assigned to them from time to time by the Board of Directors, the Executive Committee or the President. In the absence or disability of the President, the Vice President designated by the Board of Directors, the Executive Committee, or the President shall perform the duties and exercise the powers of the President. A Vice President may sign and execute contracts and other obligations pertaining to the regular course of his duties.

Section 5.6 Secretary . The Secretary shall be ex-officio Secretary of the Board of Directors and of the standing committees. He shall attend all sessions of the Board, act as clerk thereof, record all votes and keep the minutes of all proceedings in a book to be kept for that purpose. He shall perform like duties for the standing committees when required. He shall see that the proper notices are given of all meetings of stockholders and directors, and perform such other duties as may be prescribed from time to time by the Board of Directors, the Executive Committee, the Chairman or the President.

Section 5.7 Treasurer . The Treasurer shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be

designated by the Board of Directors or Executive Committee. He shall disburse the funds of the Corporation as may be ordered by the Board, the Executive Committee or the President, taking proper vouchers therefor, and shall render to the President and the Executive Committee and Directors, whenever they may require it, an account of all his transactions as Treasurer, and of the financial condition of the Corporation, and at the annual organization meeting of the Board a like report for the preceding year.

Section 5.8 General Counsel . The General Counsel shall be the legal adviser of the Corporation and shall perform such services as the Chairman, President, Board of Directors or Executive Committee may require.

ARTICLE VI

Stock

Section 6.1 Certificates . Every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board of Directors, if any, or the President of the Corporation, certifying the number of shares owned by him in the Corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate, shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.

Section 6.2 Lost, Stolen Or Destroyed Stock Certificates; Issuance Of New Certificates . The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

ARTICLE VII

Indemnification

Section 7.1 . General . The Company shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (as hereinafter defined) to the fullest extent permitted by applicable law in effect on the adoption of these By-Laws, and to such greater extent as applicable law may thereafter from time to time permit. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Article.

Section 7.2 . Proceedings Other Than Proceedings By Or In The Right Of The Company . Indemnitee shall be entitled to the indemnification rights provided in this Section 7.2 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to any threatened, pending, or completed Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the Company. Pursuant to this Section 7.2, Indemnitee shall be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful.

Section 7.3 . Proceedings By Or In The Right Of The Company . Indemnitee shall be entitled to the indemnification rights provided in this Section 7.3 to the fullest extent permitted by law if, by reason of his Corporate Status, he is, or is threatened to be made, a party to any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 7.3, Indemnitee shall be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him

or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Company.

Section 7.4 . Indemnification For Expenses Of A Party Who Is Wholly Or Partly Successful . Notwithstanding any other provision of this Article, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 7.5 . Indemnification For Expenses Of A Witness . Notwithstanding any other provision of this Article, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

Section 7.6 . Advancement Of Expenses . The Company shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within twenty days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses.

Section 7.7 . Procedure For Determination Of Entitlement To Indemnification .

(a) To obtain indemnification under this Article, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The determination of Indemnitee’s entitlement to indemnification shall be made not later than 60 days after receipt by the Company of the written request for indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.

(b) Indemnitee’s entitlement to indemnification under any of Sections 7.2, 7.3 or 7.4 of this Article shall be determined in the specific case: (i) by the Board of Directors by a majority vote of a quorum of the Board consisting of Disinterested Directors (as hereinafter defined); or (ii) by Independent Counsel (as hereinafter defined), in a written opinion, if (A) a Change of Control (as hereinafter defined) shall have occurred and Indemnitee so requests, or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs; or (iii) by the stockholders of the Company; or (iv) as provided in Section 7.8 of this Article.

(c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7.7(b) of this Article, the Independent Counsel shall be selected as provided in this Section 7.7(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, and if so requested by Indemnitee in his written request for indemnification, the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In

either event, Indemnitee or the Company, as the case may be, may, within 7 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 7.13 of this Article, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected shall be disqualified from acting as such. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 7.7(a) hereof, no Independent Counsel shall have been selected, or if selected shall have been objected to, in accordance with this Section 7.7(c), either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person so appointed shall act as Independent Counsel under Section 7.7(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in acting pursuant to Section 7.7(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 7.7(c), regardless of the manner in which such Independent Counsel was selected or appointed.

Section 7.8 . Presumptions And Effect Of Certain Proceedings . If a Change of Control shall have occurred, Indemnitee shall be presumed (except as otherwise expressly provided in this Article) to be entitled to indemnification under this Article upon submission of a request for indemnification in accordance with Section 7.7(a) of this Article, and thereafter the Company shall have the burden of proof to overcome that presumption in reaching a determination contrary to that presumption. Whether or not a Change of Control shall have occurred, if the person or persons empowered under Section 7.7 of this Article to determine entitlement to indemnification shall not have made a determination within 60 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and

Indemnitee shall be entitled to such indemnification unless (i) Indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification, or (ii) such indemnification is prohibited by law. The termination of any Proceeding described in any of Sections 7.2, 7.3, or 7.4 of this Article, or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Article) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

Section 7.9 . Remedies Of Indemnitee .

(a) In the event that (i) a determination is made pursuant to Section 7.7 of this Article that Indemnitee is not entitled to indemnification under this Article, (ii) advancement of Expenses is not timely made pursuant to Section 7.6 of this Article, or (iii) payment of indemnification is not made within five (5) days after a determination of entitlement to indemnification has been made or deemed to have been made pursuant to Sections 7.7 or 7.8 of this Article, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) In the event that a determination shall have been made pursuant to Section 7.7 of this Article that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 7.9 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse

determination. If a Change of Control shall have occurred, in any judicial proceeding or arbitration commenced pursuant to this Section 7.9 the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made or deemed to have been made pursuant to Sections 7.7 or 7.8 of this Article that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 7.9, unless (i) Indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification, or (ii) such indemnification is prohibited by law.

(d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 7.9 that the procedures and presumptions of this Article are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Article.

(e) In the event that Indemnitee, pursuant to this Section 7.9, seeks a judicial adjudication of, or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Article, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 7.13 of this Article) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

Section 7.10 . Non-Exclusivity And Survival Of Rights . The rights of indemnification and to receive advancement of Expenses as provided by this Article shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of stockholders or a resolution of directors, or

otherwise. Notwithstanding any amendment, alteration or repeal of any provision of this Article, Indemnitee shall, unless otherwise prohibited by law, have the rights of indemnification and to receive advancement of Expenses as provided by this Article in respect of any action taken or omitted by Indemnitee in his Corporate Status and in respect of any claim asserted in respect thereof at any time when such provision of this Article was in effect. The provisions of this Article shall continue as to an Indemnitee whose Corporate Status has ceased and shall inure to the benefit of his heirs, executors and administrators.

Section 7.11 . Severability . If any provision or provisions of this Article shall be held to be invalid, illegal or unenforceable for any reason whatsoever:

(a) the validity, legality and enforceability of the remaining provisions of this Article (including without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and

(b) to the fullest extent possible, the provisions of this Article (including, without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

Section 7.12 . Certain Persons Not Entitled To Indemnification Or Advancement Of Expenses . Notwithstanding any other provision of this Article, no person shall be entitled to indemnification or advancement of Expenses under this Article with respect to any Proceeding, or any claim therein, brought or made by him against the Company.

Section 7.13 . Definitions . For purposes of this Article:

(a) “Change in Control” means a change in control of the Company of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A (or

in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the “Act”), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the “beneficial owner”) (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the Company is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors.

(b) “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company.

(c) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(d) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the

types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

(e) “Indemnitee” includes any person who is, or is threatened to be made, a witness in or a party to any Proceeding as described in Sections 7.2, 7.3 or 7.4 of this Article by reason of his Corporate Status.

(f) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Article.

(g) “Proceeding” includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee pursuant to Section 7.9 of this Article to enforce his rights under this Article.

Section 7.14 . Miscellaneous . Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.

ARTICLE VIII

Miscellaneous

Section 8.1 Fiscal Year . The fiscal year of the Corporation shall be determined by resolution of the Board of Directors.

Section 8.2 Waiver Of Notice Of Meetings Of Stockholders, Directors, And Committees . Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice.

Section 8.3 Interested Directors; Quorum . No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or the committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon,

and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

Section 8.4 [Intentionally Omitted]

Section 8.5 Form Of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, tape, disc, photographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same.

Section 8.6 Amendment Of By-Laws . The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the by-laws of the Corporation by a vote of a majority of the entire Board. The stockholders may make, alter or repeal any by-law whether or not adopted by them, provided however, that any such additional by-laws, alterations or repeal may be adopted only by the affirmative vote of the holders of 75% or more of the voting power of the Corporation entitled to vote generally in the election of directors, unless such additional by-laws, alterations or repeal shall have been recommended to the stockholders for adoption by a majority of the Board of Directors, in which event such additional by-laws, alterations or repeal may be adopted by the affirmative vote of the holders of a majority voting power of the Corporation entitled to vote generally in the election of directors.

Section 8.7 Restrictive Gaming Legend . All certificates issued for Shares of the $.10 par value Common Stock of the Corporation shall bear the following legend:

“Any and all shares of Common Stock of the Corporation are held subject to the

condition that if (a) any regulatory authority should request, determine or otherwise advise that the holder or owner is disqualified, or unsuitable, must qualify for or obtain a license, or must submit an application and satisfy a review process, including background checks, in order for the Corporation or any subsidiary to obtain or retain a license or a relicense, or otherwise avoid significant penalties or business disadvantage, and (b) such holder or owner shall fail to submit to qualification within fifteen (15) days following such request, determination or advice, or fail to be found qualified or suitable, then (c) such holder or owner, at the request of the Corporation or the appropriate regulatory authority, shall promptly dispose of such holder’s or owner’s interest in the Corporation’s Common Stock and shall be subject to any order of such regulatory body limiting such holder’s or owner’s rights pending such disposition. Without limiting the foregoing, any holder or owner that intends to acquire, directly or indirectly, ten percent (10%) or more of the outstanding common stock of the Corporation (regardless of class or series) shall first notify the Corporation and obtain prior written approval from the Delaware State Lottery Office. Since money damages are inadequate to protect the Corporation, it shall be entitled to injunctive relief to enforce the foregoing provision.”

Section 8.8 Restrictions on Transfer of Class A Common Stock .

(a) Restriction . Shares of the Company’s Class A Common Stock (the “Shares”) may be sold, transferred or disposed of only in accordance with the following:

(i) Shares may be sold or transferred to any other holder of Shares, provided that such holder has not acquired Shares in contravention of these Bylaws; or

(ii) Shares may be sold, transferred or pass by intestacy, will or inheritance to:

(A) one or more members of the immediate family of a holder of Shares, provided that such holder has not acquired Shares in contravention of these Bylaws;

(B) a corporation all of the shares of which are owned by holders of Shares (or one or more members of the immediate family of a holder of Shares), provided that no such holder has acquired Shares in contravention of these Bylaws;

(C) a trust all of the beneficial interests of which are owned by holders of Shares (or one or more members of the immediate family of a holder of Shares), provided that no such holder has acquired Shares in contravention of these Bylaws; or

(D) a general or limited partnership all of the partnership interests in which are owned by holders of Shares (or one or more members of the immediate family of a holder of Shares), provided that no such holder has acquired Shares in contravention of these Bylaws.

(b) Family Member Defined . For purposes of clause (a)(ii) above, “members of the immediate family” shall be limited to any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.

(c) Evidence of Compliance . Prior to any sale, transfer or disposition of Shares,

the holder may be required, at the option of the Company, to furnish appropriate evidence of compliance with these Bylaws, including but not limited to an opinion of counsel.

(d) Conversion . Shares may be converted to shares of the Company’s Common Stock and sold, transferred or disposed of without regard to the limitations set forth in clause (a) above.

(e) Pledge . The bona fide pledge of Shares as collateral security for indebtedness to the pledgee shall not be deemed to violate clause (a) above, provided that the pledgee provides to the Company a written undertaking not to sell, transfer or dispose of the Shares in violation of these Bylaws.

(f) Legend . All certificates evidencing the Shares (and replacement certificates issued in their stead) shall be inscribed with the following legend (in addition to any other legends required hereunder or under federal or state securities laws):

“The Shares of Class A Common Stock represented by this certificate may be sold, transferred or otherwise disposed of only in accordance with the terms and conditions set forth in the Company’s Bylaws, which terms and conditions restrict, and in some instances prohibit, the transfer or other disposition of such Shares and which terms and conditions may only be amended by shareholders owning 75% or more of the outstanding shares of Class A Common Stock. The terms and conditions set forth in the Company’s Bylaws are incorporated herein by reference and copies thereof are available for inspection or will be mailed by the Company to any holder without charge within five days after the Company’s receipt of a written request therefor.”

(g) Vote Required to Amend . This Section 8.8 may only be amended by

shareholders owning 75% or more of the outstanding Shares.

(h) Injunctive Relief . Since money damages would be inadequate, the Company or any holder of Shares shall be entitled to injunctive relief to enforce this Section 8.7.

Section 8.9 Selection of Delaware Courts as Exclusive Forum for Certain Actions .

Unless the Corporation consents in writing to the selection of an alternative forum, a state or federal court in the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this provision.

Exhibit 10.3

AGREEMENT

This Agreement is made and entered into August 16, 2016 (“Agreement”), superseding the agreement entered into on July 1, 2014 by and between Dover Downs, Inc., a Delaware corporation (“Dover Downs”), and Delaware Standardbred Owners Association, Inc., a Delaware corporation (“DSOA”), and is executed in duplicate original copies.

WHEREAS, Dover Downs is licensed to conduct and is engaged in the business of conducting harness racing meetings at a harness racing track known as Dover Downs, located in Dover, Delaware; and

WHEREAS, DSOA’s membership consists of owners, trainers, and drivers of harness horses participating in harness race meetings at Dover Downs and elsewhere in the United States and Canada, and DSOA has been organized and exists for the purpose of promoting the sport of harness racing; improving the lot of owners, drivers, and trainers of harness racing horses participating in race meetings; establishing health, welfare and insurance programs for owners, drivers, and trainers of harness racing horses; negotiating with harness racing tracks on behalf of owners, trainers, drivers, and grooms of harness racing horses; and generally rendering assistance to them whenever and wherever possible; and

WHEREAS, the parties hereto desire to cooperate in promoting the popularity of the sport of harness racing, and in insuring the continuity of harness racing at Dover Downs for the best interests of the parties hereto and the public; and

IN CONSIDERATION OF the promises, the covenants set forth herein, and other considerations, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. TERM OF AGREEMENT

The provisions of this Agreement shall apply to and govern every harness racing meeting conducted by or at Dover Downs effective August 1, 2016, and continuing through August 31, 2018. The parties agree that this Agreement shall automatically renew for successive one year periods after August 31, 2018 unless either party notifies the other party by June 1 of its intention to not renew this Agreement in which event the Agreement shall terminate at the end of the then current term.

During the first year of this Agreement Dover Downs will schedule ninety-five days of racing. However, any days of racing lost to weather, acts of God, technical problems, or human error that exceed three in number shall be rescheduled, if necessary, as additional races added to previously scheduled days. The scheduled days are subject to the availability of horses and may be reduced if the races are not adequately filled by available horses. If such a reduction is necessary, Dover Downs will consult with the DSOA to determine the best manner in which to conduct the reduced number of races.

The above racing schedule shall remain in effect beyond year one unless notification is given by either party to the other party prior to June 1 of each year during the term of this Agreement. If such notice is given and the parties are unable to agree on a future race schedule, then Dover Downs will race not less than the scheduled days of the previous live racing meet subject to the availability of horses.

The terms of this Agreement shall terminate regardless of the August 31, 2018 date above if one of the following events occurs after the date of this Agreement and either party notifies the other party of their intent to terminate the Agreement:

(a) Delaware legalizes additional video lottery terminals and/or table venues and a venue opens and is operational;

(b) Delaware statutorily changes the video lottery distribution of Dover Downs or the purse funds to be distributed at Dover Downs; or

(c) Standardbred race days are legislatively changed or a track other than Harrington Raceway is awarded and conducts standardbred races.

2. BASIC PURSE DISTRIBUTION

A. Dover Downs will distribute as racing purses at all meetings conducted at Dover Downs during the term of this Agreement ten (10%) percent of the live handle wagered at Dover Downs. Except, however, when Dover Downs races more than 13 races per day, Dover Downs will retain all monies received from the live handle wagered on the last race each day.

In the event of any legislation which changes Dover Downs’ share of the pari-mutuel commission, the amount calculated above shall be adjusted so that fifty (50%) percent of any increase shall be added to the purses and fifty (50%) percent of any decrease shall be subtracted from the purses.

B. Dover Downs agrees to distribute to DSOA via the purse pool and subject to the provisions of Paragraph 5, twenty-five percent (25%) of any monies received from Dover Downs’ export signal of the live race meets conducted during the term of this agreement. Except, however, when Dover Downs races more than 13 races per day, Dover Downs will retain all monies received from Dover Downs’ export signal on the last live race each day.

C. Over and above the purses payable under Paragraphs 2.A. and 2.B., Dover Downs shall pay additional purses in an amount calculated pursuant to 29 Del.C.4815 (b)(3)b et seq.

D. In consideration of Dover Downs agreeing to many provisions relating to race conditions, qualifying standards, qualifying races, physical improvements, and other accommodations for the horsemen, the share of pari-mutuel commissions for purses has been negotiated to the amounts specified in Paragraphs 2.A. and 2.B. above.

E. Delaware owned or bred horses, approved and qualified as Delaware owned or bred by the Delaware Harness Racing Commission (“DHRC”) and accepted to race by Dover Downs, will receive a bonus agreed upon by Dover Downs and the DSOA. The bonus is not to exceed twenty (20%) percent of the advertised purse money earned by the DHRC-qualified horse in each race the horse earns purse money. All bonus money earned will be added to the earnings of the horse in the same manner that the normal purse won is added.

F. During the term of this Agreement, Dover Downs, on a weekly basis during any race meeting conducted by Dover Downs, shall pay directly to the drivers and trainers of the horses whose owners are entitled to receive a portion of the purse money, an amount equal to five (5%) percent of the owners’ purse money, which amount shall be credited against the purses required to be paid to the owners of such horses. In no event shall the aggregate payment made by Dover Downs on account of purses and other items specified in Paragraph 5 be increased beyond the applicable amount for purses.

3. PROJECTION OF PURSES AND CARRY-OVER OF PURSE MONEY

A. The specifications of the applicable purses for the race meet, in accordance with Paragraph 2, shall be projected on the basis of the total estimated purse funds to be accrued during the live race meeting, with consideration given to seasonal fluctuation of purse accruals, so as to maintain a reasonably uniform purse distribution schedule throughout the Dover Downs meetings each year.

B. (i) If any purse money due under Paragraph 2 has not been fully distributed at any meeting covered by this Agreement, the amount due shall be carried over and distributed in purses at the next meeting covered by this Agreement. Any underpayment of purse money under the preceding agreements between Dover Downs and DSOA shall likewise be added to the purse money payable under Paragraph 2.

(ii) If the purses actually paid at any meeting covered by this Agreement exceed the amount due under Paragraph 2, the amount of the excess payment shall be deducted from the purses otherwise payable at the next meeting covered by this Agreement. Any overpayment of purses during the last meeting conducted under the previous agreement between Dover Downs and DSOA shall likewise be deducted from the purse money payable under Paragraph 2 of this Agreement.

4. MINIMUM AND MAXIMUM PURSES

At all meetings conducted at Dover Downs, the minimum and maximum purse payable by Dover Downs for any pari-mutuel betting race shall be agreed upon by DSOA representatives and Dover Downs prior to the beginning of each race meet. In the event the parties are unable

to reach an agreement, the minimum and maximum purse payable will be the same as the start of the previous race meet conducted at Dover Downs.

5. ARRANGEMENTS WITH DSOA

A. Dover Downs will pay to DSOA, in diminution of and as a credit against the percentages specified in Paragraph 2, requested funds to compensate DSOA for its expenses provided that DSOA’s representation of the horsemen racing at meetings conducted by Dover Downs has been demonstrated by the horsemen’s adherence to and recognition of this Agreement. Such sum shall not exceed one hundred ten (110%) percent of the amount requested the prior year and shall be paid in monthly installments no later than seven (7) days after the conclusion of each month of each racing meeting covered by this Agreement unless mutually agreed by the parties.

B. When this Agreement and any succeeding agreement between DSOA and Dover Downs has expired and there is no agreement in effect between them providing otherwise, any underpayment of purses due under this Agreement shall be payable to horsemen who participated in the last Dover Downs’ meet covered by this Agreement and both parties shall take whatever action is required to accomplish such payment.

In order to minimize any underpayment or overpayment of purses at the conclusion of the live race meet under this Agreement, DSOA and Dover Downs will meet regularly to make adjustments to the purse account if necessary. These adjustments to the purses will be in a fair and reasonable manner and will include lowering the minimum purse if such action is warranted. The base purse for any claiming race will not exceed eighty (80%) percent of the claiming price.

C. Dover Downs shall provide an office for the use of a DSOA representative on its racing grounds.

D. Representatives of Dover Downs will be available at reasonable times to consult with DSOA representatives upon request of either party concerning any matters pertaining to the provisions of this Agreement and/or the conduct of races, maintenance of the receiving stable area, the race track, paddock and training areas.

E. Dover Downs shall pay to DSOA as part of its expenses in Paragraph 5.A. the incurred premiums of insurance administered by DSOA for grooms, second trainers, trainers, and drivers. Insurance premiums shall be paid monthly upon presentation of a bill from DSOA. The premiums shall be in diminution of and as a credit against purse money payable under this Agreement as specified in Paragraph 2.

F. Dover Downs agrees to cooperate with DSOA in its effort to provide education, promotional material and public relations regarding harness racing, pari-mutuel betting, and horse ownership.

G. DSOA acknowledges that from time to time certain legislative effort will be required in Delaware pertaining to pari-mutuel wagering, horse racing, the video lottery as well as other matters that will affect Dover Downs. DSOA will fully support and help lobby for all reasonable legislation and oppose all harmful legislation insofar as it does not adversely impact horsemen’s issues.

H. The minimum “claiming priced race” and the minimum “nonwinners (“NW”) last 6 condition race” will be for Delaware owned or bred horses only unless changed by mutual agreement.

I. Unless changed by mutual agreement, the qualifying times during the term of this Agreement shall be 2:00 for pacers and 2:02 for trotters, plus applicable allowances for weather, and track conditions. Two year olds will receive a two second allowance. Three year olds will receive a one second allowance.

J. During this Agreement, horses permitted at Dover Downs will have the opportunity to qualify two times per calendar month. Horses that are two year olds and three year olds, and are nominated to the Delaware Breeders program, will have unlimited opportunity to qualify during each of the three (3) months leading up to the first event of the program to which it is nominated.

K. There shall not be any general age restrictions in condition races that are written as NW of $6,000 or higher in last (x) starts. This does not apply to NW of (x) races lifetime, NW of ($x) lifetime, or any other type of condition race written according to the available horse population in an effort to enhance the quality and competitiveness of the racing at Dover Downs. All races written for NW of (x) races lifetime shall exclude as a win only, any win in which the first place money was less than or equal to $750.

L. During the term of this Agreement, if Dover Downs has races with nine horse fields, a bonus will be added to the base purse as follows:

Base purse is:	Bonus is:
Less than $20,000	$	500
$20,000 or more	$	1,000

M. Dover Downs, upon request, shall furnish to DSOA a summary of the handle.

6. SIMULCAST WAGERING

A. As consideration for the distribution to the purse pool in accordance with Paragraph 2.B., DSOA agrees, as is standard in the industry, to share the daily cost incurred by Dover Downs for the daily export of the live signal throughout each season. These incremental costs incurred by Dover Downs for the exporting of live races will be calculated and shared twenty-five (25%) percent by DSOA and seventy-five (75%)

percent by Dover Downs. These daily costs will be detailed on the purse reconciliation report submitted to DSOA at the end of each month.

B. As consideration for the covenants set forth herein, and other considerations, DSOA agrees that it will not share in any of the revenues or expenses from intrastate and interstate simulcasting of standardbred and thoroughbred races from such tracks as approved per Paragraph 6.C.

C. All simulcasting agreements need the approval of DSOA prior to Dover Downs accepting wagering on those races. DSOA agrees not to unreasonably withhold their approval.

Should either DSOA or Dover Downs deny an approval or elect to terminate an agreement, they must provide the other party written notice at least 15 days prior to termination or disapproval with reasonable explanation for their action.

7. STAKE AND EARLY CLOSING EVENTS

Not more than eight (8%) percent of the total purse money payable to the horsemen during each race meet shall be paid for stake and early closing events. Purse money payable to the Delaware Standardbred Breeders Program, or any other Delaware owned or bred stakes or early closing events, shall not be part of the eight (8%) percent limitation.

8. ON-TRACK DRIVER INSURANCE

Dover Downs shall provide on-track driver accident and disability insurance with minimums of $100,000 death benefit, $100,000 medical expenses and $350 a week disability income for 104 weeks subject to no more than a seven-day waiting period. Up to an additional $150 per week disability income will be provided for the first 26 weeks of disability based on the prior six months earnings of the injured person as a driver/trainer on a dollar for dollar disability to earnings per week over $350 up to $500 per week. This coverage shall have no deductible to the horsemen and will be provided on race days, non-race days during the race meet when the track is available for training and for three (3) days prior to each race meeting covered under this Agreement.

9. STALL ASSIGNMENTS AND RACING PRIVILEGES

Nothing in this Agreement shall be deemed to limit or restrict in any manner the absolute discretion of Dover Downs to assign stalls and/or grant racing privileges to owners and trainers whether or not members of DSOA, except that stall space and/or racing privileges shall not be denied by reason of membership in, or activity on behalf of, DSOA or a duly constituted horsemen’s committee. Notwithstanding this paragraph, it is understood that Dover Downs does not contemplate opening its barn area and providing stabling facilities during the term of this Agreement. Dover Downs does, however, agree to make reasonable

attempts to restrict the horse population to a manageable level with preference being given to Delaware owned horses.

10. INDEMNITY AND COOPERATION

DSOA shall indemnify and hold Dover Downs harmless against any claims, losses, expenses, judgments, penalties or extra distributions imposed upon or suffered by Dover Downs arising out of, or in connection with, the payment provided in Paragraph 5 above. In the event any other organization shall claim to represent the horsemen participating in any Dover Downs meeting during the term of this Agreement, Dover Downs shall promptly notify DSOA.

Dover Downs agrees and acknowledges that the DSOA during the term of this Agreement is and shall be the sole and exclusive representatives and bargaining agent for harness horse people in respect to all matters related to harness racing and ancillary and appurtenant activities carried on by Dover Downs, as long as DSOA represents a majority of the horsemen racing at Dover Downs.

11. CONTROLLING LAW AND REGULATION

The interpretation of the provisions of this Agreement shall be governed by the law of Delaware. If and to the extent that any provision(s) of this Agreement is and/or becomes inconsistent with any Delaware statute, law or any regulation of the DHRC not in effect or hereinafter enacted, such provision or provisions shall be deemed to be superseded by such law or regulation as the case may be. The validity of the remaining provisions of this Agreement shall be construed and enforced as if the Agreement did not contain the particular provision held to be invalid.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed on their behalf by their respective Officers as of the date first above written.

DOVER DOWNS, INC.


By:	/s/ Charles B. Lockhart
	Charles B. Lockhart
	Vice-President, Horse Racing


DELAWARE STANDARDBRED OWNERS ASSOCIATION, INC.


By:	/s/ Andrew D. Markano
	Andrew D. Markano
	President

Exhibit 21.1

Dover Downs Gaming & Entertainment, Inc.

Subsidiaries of Registrant at December 31, 2016

Dover Downs, Inc.

Dover Downs Gaming Management Corp.

Exhibit 24.1

POWER OF ATTORNEY

Know All Men by These Presents, that the undersigned constitutes and appoints Denis McGlynn and Timothy R. Horne, each and individually, as his true and lawful attorney-in-fact and agent. with full power of substitution, in any and all capacities to sign filings by Dover Downs Gaming & Entertainment, Inc. of Form 10-K and any and all amendments thereto, and to file the same, with all exhibits, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney may be signed in counterparts.

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney, in the capacities indicated, as of this 1 st day of March, 2017.

/s/ Patrick J. Bagley
Patrick J. Bagley
Director


/s/ Jeffrey W. Rollins
Jeffrey W. Rollins
Director


/s/ R. Randall Rollins
R. Randall Rollins
Director


/s/ Richard K. Struthers
Richard K. Struthers
Director


/s/ Henry B. Tippie
Henry B. Tippie
Director

Exhibit 31.1

Certification

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

1. I have reviewed this annual report on Form 10-K of the registrant;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: March 1, 2017

/s/ Denis McGlynn
Denis McGlynn
President and Chief Executive Officer and Director

Exhibit 31.2

Certification

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

1. I have reviewed this annual report on Form 10-K of the registrant;

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

Date: March 1, 2017

/s/ Timothy R. Horne
Timothy R. Horne
Senior Vice President-Finance, Treasurer, Chief Financial Officer and Director

Exhibit 32.1

Dover Downs Gaming & Entertainment, Inc.

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

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Dover Downs Gaming & Entertainment, Inc., a Delaware corporation (the “Company”), on Form 10-K for the period ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Denis McGlynn, President and Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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

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

Dated: March 1, 2017

/s/ Denis McGlynn
Denis McGlynn
President and Chief Executive
Officer and Director

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

Exhibit 32.2

Dover Downs Gaming & Entertainment, Inc.

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

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Dover Downs Gaming & Entertainment, Inc., a Delaware corporation (the “Company”), on Form 10-K for the period ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy R. Horne, Senior Vice President-Finance, Treasurer, Chief Financial Officer and Director of the Company, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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

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

Dated: March 1, 2017

/s/ Timothy R. Horne
Timothy R. Horne
Senior Vice President-Finance,
Treasurer,
Chief Financial Officer
and Director