EDGAR 10-K Filing

Company CIK: 1005276
Filing Year: 2022
Filename: 1005276_10-K_2022_0001005276-22-000072.json

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ITEM 1. BUSINESS
Item 1.Business.
Our Company
The Mohegan Tribal Gaming Authority (the “Company,” “we,” “us” or “our”) was established in July 1995 by the Mohegan Tribe (the “Mohegan Tribe”), a federally-recognized Indian tribe with an approximately 595-acre reservation situated in southeastern Connecticut, adjacent to Uncasville, Connecticut. We have the exclusive authority to conduct and regulate gaming activities for the Mohegan Tribe on tribal lands and the non-exclusive authority to conduct such activities elsewhere. The Indian Gaming Regulatory Act of 1988 (“IGRA”) permits federally-recognized Indian tribes to conduct full-scale casino gaming operations on tribal lands, subject to certain conditions, and the Mohegan Compact, as amended, permits the Mohegan Tribe to conduct casino and sportsbook operations on its tribal lands in Uncasville, Connecticut, along with online casino gaming and sports wagering (“iGaming”) in the state of Connecticut and on its tribal lands. We are governed and overseen by a nine-member Management Board, whose members also comprise the Mohegan Tribal Council, the governing body of the Mohegan Tribe.
We have three major business functions. First, we are primarily engaged in the ownership, operation and development of integrated entertainment facilities. In conjunction with the Mohegan Tribe, we also evaluate and pursue various business opportunities in an effort to diversify our revenue base and cash flow streams. These opportunities primarily consist of development, consulting and/or management of, investment in or ownership of, additional gaming and entertainment operations through direct investments, acquisitions, joint venture arrangements and loan or financial/credit support transactions. We currently own two facilities in the United States and operate or manage five other facilities in the United States and Canada. We are also currently developing a facility in South Korea, the Inspire Entertainment Resort located adjacent to the Incheon International Airport (“Inspire Korea”). Second, we have the exclusive authority to direct the operation, management and promotion of gaming enterprises and all related activities for the Mohegan Tribe on tribal lands. Third, we regulate gaming activities for the Mohegan Tribe on tribal lands. Our Management Board has appointed an independent Director of Regulation who is responsible for the regulation of gaming activities at Mohegan Sun and on its tribal lands.
Refer to “Mohegan Tribe of Indians of Connecticut” below and Part III. Item 10. Directors, Executive Officers and Corporate Governance to this Annual Report on Form 10-K for additional information.
Our principal executive office and mailing address is One Mohegan Sun Boulevard, Uncasville, CT 06382. Our telephone number is (860) 862-8000. Our corporate website address is www.mohegangaming.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as well as any other information filed or furnished pursuant to Section 13(a) or 15(d) under the Exchange Act, are made available free of charge on our corporate website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. We intend to use our corporate website as a regular means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD promulgated by the Securities and Exchange Commission. Such disclosures will be included on our corporate website under the headings “News” or “Financial Information.” Any updates to the list of social media channels we use to announce material information will be posted on the “News” or “Financial Information” pages of our corporate website. Accordingly, investors should monitor such portions of our corporate website and social media channels, in addition to following our press releases, Securities and Exchange Commission filings, public conference calls and webcasts.
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and the United States federal government declared it a national emergency. The spread of COVID-19 has affected most segments of the global economy, including our operations. In March 2020, we temporarily suspended operations at our properties in the United States and Canada to ensure the health and safety of our employees, customers and the surrounding communities in which we operate, consistent with directives from various governmental bodies. All of our properties in the United States were reopened by July 2020. Our properties in Canada reopened in July 2021, but were temporarily closed again from January 5, 2022 through January 30, 2022, due to a resurgence of COVID-19 at that time.
While we are operating at full capacity as of the filing of this Annual Report on Form 10-K, COVID-19 has had a significant impact on our operations, the full extent of which depends on future developments which are highly uncertain and cannot be predicted with confidence. Such developments include the following:
•the duration of COVID-19 or the extent of any resurgence or variants of COVID-19 in areas where we operate or where our customers are located;
•the manner in which our customers, suppliers and other third parties respond to COVID-19, including the perception of safety and health measures we implemented;
•new information that may emerge concerning the severity of COVID-19 and the actions to contain or treat it;
•general, local or national economic conditions; and
•consumer confidence.
Strategy
Our overall strategy is to: (i) drive incremental profit through gaming and non-gaming initiatives, most notably the enhancement of entertainment amenities at our existing integrated resorts and in our core markets; (ii) diversify our business interests within the integrated resort and entertainment industry, both domestically and internationally; and (iii) enhance our credit profile by reducing leverage through improved operational efficiency, increased financial discipline and high return investments, as well as revenue diversification efforts.
Domestically, we developed Mohegan Sun into a full-scale entertainment and destination resort, and we further strengthened our presence in the Northeastern United States gaming market with the acquisition of Mohegan Pennsylvania. Our domestic gaming portfolio also includes the development and management of ilani Casino Resort, the management of Resorts Casino Hotel and the operation of Mohegan Casino Las Vegas. In addition, we have taken significant steps in our diversification efforts internationally with the acquisition of the Niagara Resorts and the current development of Inspire Korea. We also recently launched our new Mohegan Digital division (“Mohegan Digital”) to provide iGaming solutions to our customers and to capitalize on the growth and expansion of the iGaming industry, both domestically and internationally.
Our Properties
Property Location Opening Year Casino Square Footage Slot Machines Table Games Hotel Rooms Food & Beverage and Retail Outlets Primary Entertainment Venue (Seats)
Owned
Mohegan Sun Uncasville, CT 1996 310,000 3,650 250 1,562 83 10,000
Mohegan Pennsylvania Wilkes-Barre, PA 2006 95,000 1,700 65 237 18 1,500
Inspire Korea (1)
Incheon, South Korea 2023 260,000 700 150 1,275 70 15,000
Operated/Managed
Fallsview Casino Resort Niagara Falls, ON 2004 160,000 3,500 120 372 41 5,000
Casino Niagara Niagara Falls, ON 1996 70,000 1,400 30 N.A. 2 N.A.
Mohegan Casino Las Vegas Las Vegas, NV 2021 60,000 600 45 1,504 22 4,500
ilani Casino Resort La Center, WA 2017 110,000 2,750 75 N.A. 15 2,550
Resorts Casino Hotel (2)
Atlantic City, NJ 1978 80,000 1,350 75 942 22 1,250
1,145,000 15,650 810 5,892 273 39,800
_________
(1) Estimated.
(2)10% ownership.
N.A. Not Applicable.
Mohegan Sun
Mohegan Sun is located on an approximately 196-acre site on the Mohegan Tribe's reservation overlooking the Thames River with direct access from Interstate 395 and Connecticut Route 2A. Mohegan Sun is approximately 125 miles from New York City, New York, and approximately 100 miles from Boston, Massachusetts. The facility is one of two authorized gaming and entertainment facilities in the state of Connecticut and competes primarily with gaming operations in Massachusetts, Rhode Island and New York.
Mohegan Pennsylvania
Mohegan Pennsylvania is located on an approximately 400-acre site in Wilkes-Barre, Pennsylvania, and features live harness racing. The facility is located off of Interstate 81 and is approximately eight miles from the Wilkes-Barre/Scranton International Airport. Mohegan Pennsylvania is one of 16 gaming and entertainment facilities in the state of Pennsylvania and competes primarily with facilities in Bethlehem and Mount Pocono.
Inspire Korea
In February 2016, we were awarded pre-approval for a gaming license to be issued upon completion of the construction of Inspire Korea in South Korea. This license would permit gaming only by holders of non-Korean passports. In August 2016, we
entered into an agreement with the Incheon International Airport Authority for the long-term lease and development of approximately 4.4 million square meters of land located directly adjacent to Terminal 2 of the Incheon International Airport. The integrated entertainment resort phase of Inspire Korea is planned to open in late 2023, with the casino anticipated to open in January 2024. Inspire Korea will compete primarily with another casino resort located in Incheon and several other smaller casino-only operations located in downtown Seoul.
Niagara Resorts
We operate the Niagara Resorts under a Casino Operating and Services Agreement. The Niagara Resorts include Fallsview Casino Resort, Casino Niagara and the OLG Stage at Fallsview Casino, all in Niagara Falls, Canada. Fallsview Casino Resort, which overlooks the iconic Horseshoe Falls, and Casino Niagara are the only two gaming and entertainment facilities in Niagara Falls, Canada. The Niagara Resorts compete primarily with facilities in Toronto, Ontario and Niagara Falls, New York.
Mohegan Casino Las Vegas
We operate Mohegan Casino Las Vegas, a more than 60,000-square-foot gaming facility at Virgin Hotels Las Vegas, in Las Vegas, Nevada. The integrated resort, including Mohegan Casino Las Vegas, competes primarily with resorts and casinos in Las Vegas.
ilani Casino Resort
We developed and currently operate ilani Casino Resort in Clark County, Washington, a gaming and entertainment facility owned by the federally-recognized Cowlitz Indian Tribe and the Cowlitz Tribal Gaming Authority. ilani Casino Resort is located approximately 16 miles north of Portland with direct access to Interstate 5.
Resorts Casino Hotel
We manage Resorts Casino Hotel and own 10% of the casino's holding company and its subsidiaries, including those conducting or licensing iGaming and retail sports wagering in the state of New Jersey. Resorts Casino Hotel, the first casino hotel in Atlantic City, New Jersey, opened in 1978, becoming the first legal casino outside of the state of Nevada. Resorts Casino Hotel is one of nine casinos operating in Atlantic City and competes primarily with resorts and casinos in Atlantic City, New Jersey, Pennsylvania and New York.
Seasonality
The gaming markets in the Northeastern United States and Niagara Falls, Canada, are seasonal in nature, with peak gaming activities often occurring during the months of May through August.
Mohegan Tribe of Indians of Connecticut
General
The Mohegan Tribe has lived in a cohesive community for hundreds of years in what is today southeastern Connecticut. The Mohegan Tribe became a federally-recognized Indian tribe in 1994 and currently has approximately 2,300 members, of which approximately 1,500 are of voting age.
Governance of the Mohegan Tribe
The Mohegan Tribe's Constitution provides for the governance of the Mohegan Tribe by the Mohegan Tribal Council, consisting of nine members, and a Council of Elders, consisting of seven members. Legislative and executive powers of the Mohegan Tribe are vested in the Mohegan Tribal Council, with the exception of enrollment of tribal members and cultural duties, which are vested in the Council of Elders. The members of the Mohegan Tribal Council also serve as members and officers on our Management Board. The registered voters of the Mohegan Tribe elect all members of the Mohegan Tribal Council. Pursuant to the Mohegan Tribe's Constitution, the members of the Mohegan Tribal Council are elected on a four-year staggered term basis. The terms for four members of the Mohegan Tribal Council expire in October 2023, while the terms for the remaining five members expire in October 2025. Members of the Mohegan Tribal Council must be at least 21 years of age when elected.
The Mohegan Tribe may amend provisions of its Constitution that established us and the Gaming Disputes Court, which is described below. Such an amendment requires the approval of two-thirds of the members of the Mohegan Tribal Council and must be ratified by registered voters of the Mohegan Tribe by a two-thirds majority of all votes cast, with at least a 40% participation of registered voters of the Mohegan Tribe. In addition, the Mohegan Tribe's Constitution currently prohibits the Mohegan Tribe from enacting any law that would impair the obligations of contracts entered into in furtherance of the development, construction, operation and promotion of gaming on tribal lands. An amendment to this provision requires the affirmative vote of 75% of registered voters of the Mohegan Tribe. Prior to the enactment of any such amendment by the Mohegan Tribal Council, any non-tribal party would have the opportunity to seek a ruling from the Appellate Branch of the Gaming Disputes Court that the proposed amendment would constitute an impermissible impairment of contract.
Gaming Disputes Court
Under the Constitution and laws of the Mohegan Tribe, the Mohegan Tribe has established a Gaming Disputes Court, which is vested with exclusive jurisdiction over all disputes related to gaming and associated facilities on tribal lands, including appeals from certain final administrative agency decisions.
The Gaming Disputes Court has jurisdiction over all disputes or controversies related to gaming between any person or entity and us or the Mohegan Tribe. The Gaming Disputes Court also has jurisdiction over certain appeals arising out of tribal agency regulatory powers, including licensing actions. The Mohegan Tribe has adopted the substantive law of the State of Connecticut as the applicable law of the Gaming Disputes Court to the extent that such law is not in conflict with Mohegan Tribal Law. Also, the Mohegan Tribe has adopted all of Connecticut's rules of civil and appellate procedure and professional and judicial conduct to govern the Gaming Disputes Court.
Judges of the Gaming Disputes Court are chosen by the Mohegan Tribal Council from a publicly available list of eligible retired federal judges and Connecticut Attorney Trial Referees, who are appointed by the Chief Justice of the Connecticut Supreme Court, each of whom must remain licensed to practice law in Connecticut.
Government Regulation
General
Operations at our properties and iGaming opportunities are subject to varying federal, state, provincial, local and tribal laws and regulations. The following description of the regulatory environment in which gaming takes place at our properties is only a summary and not a complete recitation of all applicable regulations and does not encompass gaming jurisdictions where we manage facilities for third parties. Moreover, since these regulatory environments are susceptible to changes in public policy considerations, it is impossible to predict how particular provisions will be interpreted, from time to time, or whether they will remain intact. Changes in such regulations could have a material adverse impact on our operations. Refer to Part I. Item 1A. Risk Factors to this Annual Report on Form 10-K.
Tribal Law and Legal Systems
Applicability of State and Federal Law
Federally-recognized Indian tribes are independent governments, subordinate to the United States, with sovereign powers, except as those powers may have been limited by treaty or by Congress. The power of Indian tribes to enact their own laws to regulate gaming derives from the exercise of this tribal sovereignty. Indian tribes maintain their own governmental systems and often their own judicial systems. Indian tribes have the right to tax persons and enterprises conducting business on tribal lands. Indian tribes also have the right to require licenses and to impose other forms of regulations and regulatory fees on persons and businesses operating on their lands.
Absent the consent of the Mohegan Tribe or action of Congress, the laws of the State of Connecticut do not apply to us or the Mohegan Tribe. Pursuant to the federal law that settled the Mohegan Tribe's land claims in 1994, the United States and the Mohegan Tribe consented to, among other things, the extension of Connecticut criminal law and Connecticut state traffic controls over Mohegan Sun.
Waiver of Sovereign Immunity; Jurisdiction; Exhaustion of Tribal Remedies
Indian tribes enjoy sovereign immunity from unconsented suit similar to that of the states and the United States. In order to sue an Indian tribe (or an agency or instrumentality of an Indian tribe, such as us), the Mohegan Tribe must have effectively waived its sovereign immunity with respect to the matter in dispute. Further, in most commercial disputes with Indian tribes, the jurisdiction of the federal courts, which are courts of limited jurisdiction, may be difficult or impossible to obtain. A commercial dispute is unlikely to present a federal question, and some courts have ruled that an Indian tribe as a party is not a citizen of any state for purposes of establishing diversity jurisdiction in the federal courts. State courts may also lack jurisdiction over suits brought by non-Indians against Indian tribes in Connecticut. The remedies available against an Indian tribe also depend, at least in part, upon the rules of comity requiring initial exhaustion of remedies in tribal tribunals and, as to some judicial remedies, the tribe's consent to jurisdictional provisions contained in the disputed agreements. The United States Supreme Court has held that, where a tribal court exists, jurisdiction in that forum first must be exhausted before any dispute can be heard properly by federal courts which otherwise would have jurisdiction. Where a dispute as to the jurisdiction of the tribal forum exists, the tribal court first must rule as to the limits of its own jurisdiction.
In connection with certain of our contractual arrangements, including substantially all of our outstanding debt, we, the Mohegan Tribe and our restricted subsidiaries have agreed to waive our and their respective sovereign immunity from unconsented suit, to the extent applicable, to permit any court of competent jurisdiction to: (i) enforce and interpret the terms of our applicable outstanding debt, and award and enforce the award of damages owing as a consequence of a breach thereof, whether such award is the product of litigation, administrative proceedings, or arbitration, (ii) determine whether any consent or approval of
the Mohegan Tribe or us has been granted improperly or withheld unreasonably, (iii) enforce any judgment prohibiting the Mohegan Tribe or us from taking any action, or mandating or obligating the Mohegan Tribe or us to take any action, including a judgment compelling the Mohegan Tribe or us to submit to binding arbitration and (iv) adjudicate any claim under the Indian Civil Rights Act of 1968, 25 U.S.C. § 1302 (or any successor statute).
The Indian Gaming Regulatory Act of 1988
Regulatory Authority
The operation of casinos and gaming on Indian lands is subject to IGRA, which is administered by the National Indian Gaming Commission (“NIGC”), an independent agency within the United States Department of the Interior, which exercises primary federal regulatory responsibility over Indian gaming. The NIGC has exclusive federal authority to issue regulations governing tribal gaming activities, approve tribal ordinances for regulating Class II and Class III Gaming (as described below), approve management agreements for gaming facilities, conduct investigations and generally monitor tribal gaming. Certain responsibilities under IGRA (such as the approval of gaming compacts, gaming revenue allocation plans for tribal members and the review of applications to take land into trust for gaming) are retained by the Bureau of Indian Affairs (“BIA”). The BIA also has responsibility to review and approve certain agreements and land leases relating to Indian lands. The United States Department of Justice also retains responsibility for federal criminal law enforcement on the Mohegan Tribe's reservation.
The NIGC is empowered to inspect and audit all Indian gaming facilities, to conduct background checks on all persons associated with Class II Gaming and management contractors involved in Class III Gaming, to hold hearings, issue subpoenas, take depositions, adopt regulations and assess fees and impose civil penalties for violations of IGRA. IGRA also prohibits illegal gaming on Indian lands and theft from Indian gaming facilities. The NIGC has adopted rules implementing specific provisions of IGRA, which govern, among other things, the submission and approval of tribal gaming ordinances or resolutions and require an Indian tribe to have the sole proprietary interest in and responsibility for the conduct of any gaming. Tribes are required to issue gaming licenses only under articulated standards, to conduct or commission financial audits of their gaming enterprises, to perform or commission background investigations for primary management officials and key employees and to maintain their facilities in a manner that adequately protects the environment and the public health and safety. These rules also set out review and reporting procedures for tribal licensing of gaming operation employees and tribal gaming facilities.
Tribal Ordinances
Under IGRA, except to the extent otherwise provided in a tribal-state compact, Indian tribal governments have primary regulatory authority over Class III Gaming on land within a tribe's jurisdiction. Therefore, our gaming operations, and persons engaged in gaming activities, are guided by and subject to the provisions of the Mohegan Tribe's ordinances and regulations regarding gaming, in addition to the provisions of the Mohegan Compact.
IGRA requires that the NIGC review tribal gaming ordinances and authorizes the NIGC to approve such ordinances only if they meet specific requirements relating to: (i) the ownership, security, personnel background, record keeping and auditing of a tribe's gaming enterprises, (ii) the use of the revenues from such gaming and (iii) the protection of the environment and the public health and safety. The Mohegan Tribe adopted its gaming ordinance in July 1994, and the NIGC approved the gaming ordinance in November 1994.
Classes of Gaming
IGRA classifies games that may be conducted on Indian lands into three categories. Class I Gaming includes social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as part of, or in connection with, tribal ceremonies or celebrations. Class II Gaming includes bingo, pull-tabs, lotto, punch boards, tip jars, certain non-banked card games (if such games are played legally elsewhere in the state), instant bingo and other games similar to bingo, if those games are played at the same location where bingo is played. Class III Gaming includes all other forms of gaming, such as slot machines, video casino games (e.g., video blackjack and video poker), so-called banked table games (e.g., blackjack, craps and roulette) and other commercial gaming (e.g., sports wagering and pari-mutuel wagering).
Class I Gaming on Indian lands is within the exclusive jurisdiction of the Indian tribe and is not subject to IGRA. Class II Gaming is permitted on Indian lands if: (i) the state in which the Indian lands lie permits such gaming for any purpose by any person, organization or entity, (ii) the gaming is not otherwise specifically prohibited on Indian lands by federal law, (iii) the gaming is conducted in accordance with a tribal ordinance or resolution which has been approved by the NIGC, (iv) an Indian tribe has sole proprietary interest and responsibility for the conduct of gaming, (v) the primary management officials and key employees are tribally licensed and (vi) several other requirements are met. Class III Gaming is permitted on Indian lands if the conditions applicable to Class II Gaming are met, and in addition, the gaming is conducted in conformance with the terms of a tribal-state compact (a written agreement between the tribal government and the government of the state within whose boundaries the tribe's lands lie).
With the growth of the Internet and other modern advances, computers, mobile devices and other technology aids are increasingly used to conduct iGaming, where authorized by law. Several states and provinces where we operate (Connecticut, Nevada, New Jersey, Pennsylvania and Ontario) have passed legislation to license and tax iGaming conducted on an intra-state or intra-provincial basis or with other territories by compact, while federal iGaming legislation has been introduced in Congress from time to time. To date, Congress has not passed amendments to the Unlawful Internet Gambling Enforcement Act of 2006 or new legislation to establish a licensing, taxing and enforcement framework for Internet gaming. Nor has Congress responded to the United States Supreme Court’s decision in May 2018 which overturned the federal law on sports wagering and has led to a proliferation of state laws authorizing sports wagering online and at retail locations.
Tribal-State Compacts
IGRA requires states to negotiate in good faith with Indian tribes that seek to enter into tribal-state compacts for the conduct of Class III Gaming. Such tribal-state compacts may include provisions for the allocation of criminal and civil jurisdiction between the state and the Indian tribe necessary for the enforcement of laws and regulations, taxation by the Indian tribe of gaming activities in amounts comparable to those amounts assessed by the state for comparable activities, remedies for breach of compacts, standards for the operation of gaming and maintenance of gaming facilities, including licensing and any other subjects that are directly related to the operation of gaming activities. While the terms of tribal-state compacts vary from state to state, compacts within a state tend to be substantially similar. Tribal-state compacts usually specify the types of permitted games, establish technical standards for gaming, set maximum and minimum machine payout percentages, entitle the state to inspect casinos, require background investigations and licensing of casino employees and may require the tribe to pay a portion of the state's expenses for establishing and maintaining regulatory agencies. Some tribal-state compacts are for set terms, while others are for an indefinite duration.
IGRA provides that if an Indian tribe and state fail to successfully negotiate a tribal-state compact, the United States Department of the Interior may approve gaming procedures pursuant to which Class III Gaming may be conducted on Indian lands. Gaming compacts or approved gaming procedures take effect upon notice of approval by the United States Secretary of the Interior published in the Federal Register. The Mohegan Compact, first approved by the United States Secretary of the Interior in 1994, does not have a specific term and, according to its terms, will remain in effect until terminated by written agreement between both parties. Our gaming operations are subject to the requirements and restrictions contained in the Mohegan Compact, which authorizes the Mohegan Tribe to conduct most forms of Class III Gaming. In July 2017, the Mohegan Tribe and the State of Connecticut entered into an agreement to amend the Mohegan Compact and the Memorandum of Understanding (the “MOU”) to allow the Mohegan Tribe and the Mashantucket Pequot Tribal Nation (“MPT”) to jointly and exclusively own a proposed off-reservation casino in East Windsor, Connecticut. In September 2021, a second agreement signed in July 2021 to amend the Mohegan Compact and a memorandum of agreement amending the MOU became effective allowing the Mohegan Tribe or its designated instrumentality or subsidiary to conduct sports wagering as approved Class III Gaming under the Mohegan Compact and iGaming. This agreement has an initial term of ten years, with an additional five-year renewal option. In October 2021, state enabling legislation and implementing regulations became effective, thereby enabling Mohegan Digital to commence iGaming throughout the state of Connecticut, with the exception of the Mohegan Tribe's and the MPT's reservations, and delaying the proposed off-reservation casino for a period of ten years. In February 2022, iGaming was expanded to Mohegan Sun and the Mohegan Tribe's tribal lands.
Tribal-state compacts have been the subject of litigation in a number of states. Tribes frequently sought to enforce the provision of IGRA which entitles tribes to bring suit in federal court against a state that fails to negotiate a tribal-state compact in good faith. The United States Supreme Court held that the Indian Commerce Clause does not grant Congress authority to abrogate sovereign immunity granted to the states under the Eleventh Amendment. Accordingly, IGRA does not grant jurisdiction over a state that did not consent to be sued.
There has been litigation in a number of states challenging the authority of state governors, under state law, to enter into tribal-state compacts without legislative approval. Federal courts have upheld such authority in the states of Louisiana and Mississippi. The highest state courts of Arizona, Kansas, Michigan, New Mexico, New York and Rhode Island have held that governors in those states did not have authority to enter into such compacts without the consent or authorization of the legislatures of those states. In the New Mexico and Kansas cases, the courts held that the authority to enter into such compacts is a legislative function under their respective state constitutions. The court in the New Mexico case also held that state law does not permit casino-style gaming.
In Connecticut, there has been no litigation challenging the Governor's authority to enter into tribal-state compacts. If such a suit was filed, however, the Mohegan Tribe does not believe that the precedent in the New Mexico or Kansas cases would apply. At the time of original execution of the Mohegan Compact, the Connecticut Attorney General issued a formal opinion, which states that, “existing state statutes provide the Governor with the authority to negotiate and execute the Mohegan Compact.” Thus, the Attorney General declined to follow the Kansas case. In addition, in a case brought by the MPT, the United States Court of Appeals for the Second Circuit has held that Connecticut law authorizes casino gaming. After original execution of the Mohegan Compact, the Connecticut General Assembly passed a law requiring that future gaming compacts be
approved by the legislature, but that law does not apply to previously executed compacts such as the Mohegan Compact, only to amendments. As mentioned above, in July 2017 and July 2021, the Mohegan Tribe and the State of Connecticut entered into agreements to amend the Mohegan Compact, each of which was approved by the Connecticut General Assembly prior to approval by the United States Secretary of the Interior.
Possible Changes in Federal Law
Bills have been introduced in Congress from time to time seeking to amend IGRA. While there have been a number of technical amendments to the law, to date, there have been no material changes to IGRA. Any amendment to IGRA could change the regulatory environment and requirements within which the Mohegan Tribe could conduct gaming.
Pennsylvania Racing Regulations
Our harness racing operation at Mohegan Pennsylvania is subject to extensive regulation under the Pennsylvania Racing Act. Under that law, as amended in 2016, the previously separate thoroughbred and standardbred commissions were combined under the jurisdiction of the Pennsylvania State Horse Racing Commission (the “PSHRC”), which is responsible for, among other things:
•granting permission annually to maintain racing licenses and schedule races;
•approving, after a public hearing, the opening of additional off-track wagering facilities and racetracks;
•approving simulcasting activities;
•licensing all officers, directors, racing officials and certain other employees of a company; and
•approving all contracts entered into by a company affecting racing, pari-mutuel wagering, phone/internet wagering and off-track wagering operations, including iGaming and retail sports wagering.
As in most states, the regulations and oversight applicable to our operations in Pennsylvania are intended primarily to safeguard the legitimacy of the sport and its freedom from inappropriate or criminal influences. The PSHRC has broad authority to regulate in the best interests of racing and may disapprove the involvement of certain personnel in our operations, deny approval of certain acquisitions following their consummation or withhold permission for a proposed off-track wagering site for a variety of reasons, including community opposition. The Pennsylvania legislature has also reserved the right to revoke the power of the PSHRC to approve additional off-track wagering facilities and could, at any time, terminate pari-mutuel wagering as a form of legalized gaming in Pennsylvania or subject such wagering to additional restrictive regulation or taxation.
Pennsylvania Gaming Regulations
Our slot machine and table game operations at Mohegan Pennsylvania and iGaming operations in Pennsylvania are subject to extensive regulation under the Pennsylvania Gaming Act. Under that law, as amended, the Pennsylvania Gaming Control Board (the “PGCB”), is responsible for, among other things:
•issuing and renewing slot machine licenses and table game certificates;
•approving, after a public hearing, the granting of additional slot machine licenses or table game certificates (to the extent allowed under the Pennsylvania Gaming Act);
•licensing all officers, directors, principals and certain other employees and vendors of a company with gaming operations;
•approving certain contracts entered into by a company affecting gaming operations; and
•implementing iGaming and retail sports wagering legislation in Pennsylvania.
As in most states, the regulations and oversight applicable to our operations in Pennsylvania are intended primarily to safeguard the legitimacy of gaming and its freedom from inappropriate or criminal influences. The PGCB has broad authority to regulate in the best interests of gaming and may disapprove the involvement of certain personnel in our operations, reject certain transactions following their consummation, require divestiture by unsuitable persons or withhold permission on applicable gaming matters for a variety of reasons.
Canadian Gaming Regulations
The Niagara Resorts and iGaming in the Province of Ontario are subject to both federal and provincial legal and regulatory considerations. Federally, the Canadian Criminal Code stipulates that operations like the Niagara Resorts and certain other forms of gaming must be conducted and managed by the government of a province. As a service provider licensed by the Alcohol and Gaming Commission of Ontario (“AGCO”), we must provide gaming-related services in the Province of Ontario within this provincial conduct and management structure. This structure is comprised of the Ontario Lottery and Gaming Corporation (the “OLG”), as the provincial entity that conducts and manages lottery schemes on behalf of the Province of Ontario, and the AGCO, as the provincial regulator responsible for the administration of the Ontario Gaming Control Act and other regulations.
The OLG is the crown agency of the government of the Province of Ontario responsible for overseeing the business of the province's gaming industry. Established pursuant to the Ontario Lottery and Gaming Corporation Act, 1999 (the “OLGCA”), the OLG's purpose is to enhance the province’s economic development, generate revenues, promote responsible gaming with respect to lottery schemes and ensure that anything done regarding any or all of the foregoing is also done for the public good and in the province’s best interests.
Included in the OLG’s objectives are:
•to develop, undertake, organize, conduct and manage gaming on behalf of the Province of Ontario;
•to provide for the operation of gaming sites;
•to ensure gaming and gaming sites are conducted, managed and operated in accordance with the Criminal Code (Canada), the OLGCA and the Gaming Control Act, 1992 (the “GCA”); and
•to provide for the operation of any business that the OLG considers to be reasonably related to gaming operations, including any business that offers goods and services to persons who participate in gaming.
The AGCO is responsible for regulating various forms of gaming in the Province of Ontario pursuant to the powers granted to it under the GCA.
With respect to gaming operations such as the Niagara Resorts, the AGCO’s overarching regulatory objective is to ensure that such operations are operated within the law and with honesty and integrity and in the broader public interest. The AGCO undertakes a number of key activities to fulfill its regulatory mandate including:
•conducting eligibility assessments and registering operators, suppliers and gaming assistants who work in or supply the casino sector;
•testing, approving and monitoring slot machines and gaming management systems;
•establishing standards and requirements for the conduct, management and operation of lottery schemes, gaming sites and related businesses;
•inspecting, auditing and monitoring casinos for compliance with the GCA and its regulation, licence/registration requirements and the standards and requirements established by the Registrar of Alcohol, Gaming and Racing;
•approving rules of play or changes to the rules of play for games conducted and managed by the OLG;
•excluding persons from accessing gaming sites pursuant to the GCA; and
•maintaining Ontario Provincial Police Casino Enforcement operations and presence to support a safe and secure environment at all gaming sites.
Nevada Gaming Regulations
The ownership and operation of casino gaming facilities in the state of Nevada are subject to the Nevada Gaming Control Act and the regulations made thereunder (collectively, the “Nevada Act”), as well as to various local ordinances. Any changes in applicable laws, regulations and procedures could have an adverse effect on our Mohegan Casino Las Vegas operations and our financial condition and results of operations.
Mohegan Casino Las Vegas is subject to the licensing and regulatory control of the Nevada Gaming Commission (“NGC”), the Nevada Gaming Control Board (“NGCB”) and the Clark County Liquor and Gaming Licensing Board (“CCLGLB”). The NGC and NGCB are referred to herein collectively as the “Nevada Gaming Authorities.” Our subsidiary, MGNV, LLC, the operator of the Mohegan Casino Las Vegas, is licensed by the Nevada Gaming Authorities to conduct casino gaming operations, including the operation of a gaming salon. It is also licensed as a manufacturer and distributor. These gaming licenses are not transferable.
We are required by virtue of our public debt to be registered as a publicly traded corporation (a “registered public company”) and to be found suitable by the NGC to own the equity interests of MGNV Holding, LLC (“Holding”). Holding is required to be registered as an intermediary company and to be found suitable to own the equity interests of MGNV, LLC.
No person may become a member of or receive profits from MGNV, LLC or Holding without first registering (for equity ownership of 5% or less) or obtaining licenses and approvals from the Nevada Gaming Authorities. The Nevada Gaming Authorities may investigate any individual who has a material relationship to or material involvement with us to determine whether the individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors (or managers, in the case of limited liability companies) and certain key employees of MGNV, LLC and Holding and our officers and Management Board members who are actively and directly involved in the gaming activities of Mohegan Casino Las Vegas may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may require additional applications and may also deny an application for licensing for any reason which they deem appropriate.
If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or to continue having a relationship with MGNV, LLC, Holding or us, we would have to sever all relationships with that person. In addition, the Nevada Gaming Authorities may require MGNV, LLC, Holding or us to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability are not subject to judicial review.
If the NGC determines that we, Holding or MGNV, LLC have violated the Nevada Act, it could limit, condition, suspend or revoke our and our intermediary subsidiary registrations and MGNV, LLC's gaming license. In addition, we and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the NGC. Further, the NGC could appoint a supervisor to operate Mohegan Casino Las Vegas and, under specified circumstances, earnings generated during the supervisor's appointment (except for the reasonable rental value of the premises) could be forfeited to the state. The limitation, conditioning or suspension of any of our gaming licenses and the appointment of a supervisor could, and revocation of any gaming license would, have a significant negative effect on our gaming operations.
Periodically, we are required to submit detailed financial and operating reports to the NGC and provide any other information that the NGC may require. Substantially all of our material loans, leases, sales of securities and similar financing transactions must be reported to, and/or approved by, the NGC. All pledges of equity in MGNV, LLC or Holdings, and any action by a lender to foreclose upon such pledges, must be approved in advance by the NGC.
The NGC may, in its discretion, require the owner of any debt or similar securities of a registered public company, to file applications, be investigated and be found suitable to own the debt or other securities of the registered company if the NGC has reason to believe that such ownership would otherwise be inconsistent with state's declared public policies. If the NGC decides that a person is unsuitable to own the securities, then under the Nevada Act, the registered public company can be sanctioned, including the loss of its approvals if, without the prior approval of the NGC, it continues to have any financial or economic arrangements with that person or recognizes any voting right of that person in connection with the securities.
We may not make a public offering of debt without the prior approval of the NGC if the proceeds from the offering are intended to be used to construct, acquire or finance gaming facilities in the state or to retire or extend obligations incurred for those purposes or for similar transactions.
License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the licensed subsidiaries' respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable monthly, quarterly or annually and are based upon a percentage of the gross revenues received, the number of gaming devices operated or the number of table games operated. A live entertainment tax also is imposed on admission charges where live entertainment is furnished.
As a condition of our status as a registered public company we are required to maintain a gaming compliance committee for the purpose of, at a minimum, performing due diligence, determining the suitability of relationships with other entities and individuals and reviewing and ensuring our compliance, and the compliance of our subsidiaries and any affiliated entities, with the gaming laws of the State of Nevada and the other jurisdictions in which they operate. Because we are involved in gaming ventures outside of the state, we are required to deposit with the NGCB, and thereafter maintain, a revolving fund in the amount of $50,000 to pay the expenses of investigation of the NGCB of our participation in such foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the NGC. Thereafter, we are also required to comply with certain reporting requirements imposed by the Nevada Act. A licensee or registrant is also subject to disciplinary action by the NGC in the event of misconduct in its gaming ventures outside of the state.
The conduct of gaming activities and the service and sale of alcoholic beverages at Mohegan Casino Las Vegas are subject to licensing, control and regulation by the CCLGLB, which has granted MGNV, LLC, its landlord and certain of its co-tenants licenses for such purposes. In addition to approving MGNV, LLC, the CCLGLB has the authority to approve all persons owning or controlling the equity of any entity controlling a gaming license. Certain of our officers, Management Board members and key employees have been or may be required to file applications with the CCLGLB. Clark County gaming and liquor licenses are not transferable. Clark County has full power to limit, condition, suspend or revoke any license. Any disciplinary action could, and revocation would, have a substantial negative impact on our operations.
Human Capital
It is our vision that, while honoring the past and building for the future, we create the most authentic, rewarding and inviting hospitality and entertainment experience for our customers. To serve this vision, our mission is to deliver excellence that maximizes value for all of our stakeholders and communities. The competitive advantage that differentiates and enables us to fulfill our mission is rooted in Spirit of Aquai, a long-standing tradition of the Mohegan Tribe. This centuries-old guiding philosophy infuses our everyday lives with four key principles that truly define who we are and how we treat each other - welcoming, mutual respect, cooperation and building relationships. Living by these principles and always striving to adhere to our core values, we have created a unique culture built on traditional principles in sync with modern values.
Spirit of Aquai lays the foundation for special relationships among our employees and customers, and it is the bedrock of our human capital strategy. Our passionate, diverse and dedicated employees are the central reason for our success. We are also committed to the theory of the Service Profit Chain, which suggests that taking care of employees leads to employees taking care of customers, and, accordingly, results in a more profitable business.
We aim to attract, retain and develop diverse and high-quality talent who can emulate Spirit of Aquai. To support these objectives, we have designed programs that:
•Enhance the company culture through employee experiences, policies and practices aimed at making the workplace healthy, diverse and inclusive;
•Align leader and team member behaviors to our purpose, deliver exceptional guest experiences and drive business success;
•Facilitate talent acquisition and mobility to create a high-performing and diverse workforce;
•Reward employees through fair, equitable and competitive pay and benefits;
•Develop employees at all levels through effective learning strategies focused on new skills required to support operational excellence and the ever-evolving marketplace; and
•Evolve and invest in technology and other resources that enable employees to work more effectively.
Overall Statistics
As of September 30, 2022, we had approximately 9,660 employees comprised of approximately 70% full-time employees and 30% seasonal, part-time, and on-call employees. The approximate number of employees by location was as follows: (i) Mohegan Sun: 5,180, (ii) Mohegan Pennsylvania: 840, (iii) the Niagara Resorts: 3,150, (iv) Mohegan Casino Las Vegas: 300 and (v) corporate and other: 190.
Certain employees at Mohegan Pennsylvania are represented under collective bargaining agreements between Downs Racing, L.P. and either the International Union of Operating Engineers Local Union 542C or Teamsters Local No. 401. The agreement with the International Union of Operating Engineers Local Union 542C expires on March 31, 2023 and relates to equipment and heavy equipment operators. The agreement with Teamsters Local No. 401 expires on January 31, 2027 and relates to truck drivers and maintenance employees.
Certain employees at the Niagara Resorts are represented under a collective bargaining agreement between Unifor Canada and Complex Services Inc. (d/b/a Fallsview Casino Resort and Casino Niagara). This agreement expires on March 31, 2023 and relates to employees classified as security officers.
Certain employees at Mohegan Casino Las Vegas are represented under collective bargaining agreements between MGNV, LLC (d/b/a Mohegan Sun Casino Las Vegas) and the International Union of Operating Engineers Local No. 501 or the Local Joint Executive Board of Las Vegas (composed of Culinary Workers Union Local 226 and Bartenders Union Local 165). The agreement with the International Union of Operating Engineers Local No. 501 is in full force and effect from year to year, subject to the agreement’s conditions of renewal. The agreement with the Local Joint Executive Board of Las Vegas (composed of Culinary Workers Union Local 226 and Bartenders Union Local 165) expires on May 31, 2023.
We have experienced no material business interruptions due to disputes with our employees.
Diversity and Inclusion
We believe that a diverse and inclusive workforce produces better overall decision-making for employees and customers, which benefits our overall organization. In hiring decisions, we seek appropriate skills, as well as diversity of the team and candidate, to ensure that we are including an appropriate mix of race, gender and other factors in hiring, promoting and succession planning decisions. Ongoing diversity and inclusion initiatives from committees to training and communication campaigns build awareness of the rich diversity of our employees and customers. We also sponsor the Mohegan Vocational Inclusion Program for individuals with disabilities or other disadvantages. Since 2012, over 690 individuals have participated in this program and approximately 85% of graduates have successfully been hired by Mohegan Sun.
We have received multiple forms of recognition for our employment practices. Awards include:
•2022 Top Workplaces - Hartford Courant;
•2022 America's Most Loved Workplaces - Newsweek;
•2022 America's Best-In-State Employers Connecticut - Forbes/Statista;
•2022 HR Innovation Award - HRD Canada;
•2021 Enduring Equity and Inclusion Employer - Viability;
•2020 Healthy Workplace Honoree - The Business Council of Hartford County;
•Top Employer Hamilton/Niagara 2020 (10th consecutive year); and
•2019 Business that Gives Back Award GNCC - Women in Business Award.
A diverse and inclusive vendor base is also important in meeting our diversity and inclusion goals. Therefore, we have implemented initiatives to track the diversity of vendors and support inclusion of vendors with minority or female ownership through preferred vendor lists.
Talent Acquisition, Development and Retention
Hiring, developing and retaining employees is critical to the success of our business. We focus on creating experiences and programs that attract new hires and foster growth, performance and retention. Pursuant to the Tribal Employment Rights Ordinance, when recruiting and hiring personnel, except key personnel, our Connecticut operations are obligated to give first preference to qualified members of the Mohegan Tribe then to enrolled members of other Indian tribes.
Creating opportunities to help employees grow and build their careers is also a priority to us. We sponsor numerous trainings, apprenticeships and development programs to enhance leadership and managerial capability, expand skill sets, drive guest satisfaction and support the Spirit of Aquai. Our corporate office also offers development courses on various topics, such as reading financial statements and the basics of contracts, to expand our employees’ knowledge base. In addition, succession planning at all our locations has been completed to identify talent risk, gaps and high potential employees for development.
Compensation, Benefits, Safety and Wellness
We offer fair, equitable and competitive salaries and wages, as well as comprehensive health and retirement benefits to eligible full-time and part-time employees. Our core health benefits are supplemented with discount programs for health-related goods and services, a variety of voluntary benefits and paid time-off programs. We have also partnered with Yale New Haven Health to provide medical treatment for our employees at our Connecticut location at low out-of-pocket costs, provide both an on-site pharmacy and a fitness center and offer employees access to health and nutritional counselors free of charge. In addition, we provide low-cost telehealth services, as well as free mental and behavioral health resources, including on-demand access to an employee assistance program for employees and their dependents. We also offer mental, physical and financial wellness workshops to help employees better manage stress and anxiety.
In collaboration with the Mohegan Tribe Safety Department, we use a proactive approach to manage workplace safety and health based on incident management, inspections, job safety analysis and safety meetings. This approach has led to a significant decline in incidents at our Connecticut location. We also provide training in emergency evacuation, active shooter, blood borne pathogens, hazard communications and back safety.
Technology and Other Resources
We offer and maintain various applications and systems to communicate with and engage our employees. There are also email notifications to keep employees abreast of our daily operations, as well as various other resources to enable employees to stay connected and enhance customer experience.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, set forth below are cautionary statements identifying important factors that could cause actual events or results to differ materially from any forward-looking statements made by or on behalf of us, whether oral or written. We wish to ensure that any forward-looking statements are accompanied by meaningful cautionary statements in order to maximize to the fullest extent possible the protections of the safe harbor established in the Private Securities Litigation Reform Act of 1995. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause actual events or results to differ materially from our forward-looking statements. Refer also to Cautionary Note Regarding Forward-Looking Statements on page 1 to this Annual Report on Form 10-K.
Risks Related to Our Debt
We have a substantial amount of outstanding debt which could adversely affect our financial condition
We currently have and will continue to have a substantial amount of outstanding debt. As of September 30, 2022, our debt totaled $2.5 billion.
This indebtedness could have significant adverse effects on our business. Such adverse effects could include, without limitation, the following:
•making it more difficult for us to satisfy our debt service obligations;
•increasing our vulnerability to adverse economic, industry and competitive conditions;
•requiring us to dedicate a substantial portion of our cash flows from operations towards debt repayment, thereby reducing the availability of our cash flows to fund working capital requirements, capital expenditures and other general operating requirements;
•limiting our flexibility in planning for, or reacting to, changes in our business and the gaming industry, which may place us at a disadvantage compared to our competitors with stronger liquidity positions, thereby negatively affecting our results of operations and ability to meet our financial obligations;
•restricting us from exploring or taking advantage of new business opportunities;
•placing us at a competitive disadvantage compared to our competitors with less debt; and
•limiting, along with the financial and other restrictive covenants related to our debt, our ability to borrow additional funds for working capital requirements, capital expenditures, acquisitions, investments, debt service obligations, execution of our business strategy or other general operating requirements on satisfactory terms or at all.
In addition, our senior secured credit facility and the indentures governing our existing notes contain, and the agreements evidencing or governing other future indebtedness may contain, restrictive covenants that limit our ability to engage in activities that may be in our best interests. Our failure to comply with such covenants could result in an event of default which, if not cured or waived, could result in the acceleration of the required repayment of some or all of our outstanding debt.
Economic volatility affects our operations and our debt
Economic downturns or contractions may adversely affect visitation and spending at our properties which would negatively impact our results of operations and cash flows. The credit environment could also impact our ability to borrow in the future. Additional financing or refinancing of our existing debt may not be available and, if available, may not be available on economically favorable terms. Furthermore, increases in our leverage could lead to deterioration in our credit ratings. A reduction in our credit ratings, regardless of the cause, could also limit our ability to obtain additional financing and/or increase our cost of obtaining such financing. We can provide no assurance that we will be able to access the capital markets at financially economical interest rates, which could negatively affect our business. While we believe that we will continue to have adequate credit available to meet our business needs, we can provide no assurance in this regard.
A substantial portion of our debt accrues interest at variable rates
We are exposed to risks from tightening credit markets and increasing interest rates through interest payable on our variable rate debt, such as our credit facilities. As of September 30, 2022, approximately 7% of our total debt was variable rate debt. While we may choose to mitigate the effect of fluctuations in interest rates through interest rate hedging transactions, we can provide no assurance that we will enter any such transactions or that any such transactions would adequately mitigate the risks of fluctuations in interest rates.
A substantial portion of our debt is denominated in currencies other than U.S. dollars
We are exposed to risks from fluctuations in foreign currency exchange rates since a substantial portion of our debt is denominated in currencies other than U.S. dollars, including borrowings under our credit facilities in Canada and South Korea. Fluctuations in foreign currency exchange rates would affect the U.S. dollar value of principal, interest and other amounts related to such debt. As of September 30, 2022, we had $90.1 million and $362.5 million in debt that were denominated in Canadian dollars and Korean won, respectively. While we may choose to mitigate the effect of fluctuations in foreign currency exchange rates through foreign currency hedging transactions, we can provide no assurance that we will enter any such transactions or that any such transactions would adequately mitigate the risks of fluctuations in foreign currency exchange rates.
We, the Mohegan Tribe and certain of our subsidiaries may not be subject to federal bankruptcy laws, which could impair the ability of creditors to participate in the realization of our assets or the restructuring of related liabilities if we are unwilling or unable to meet our debt service obligations
We, the Mohegan Tribe and our wholly-owned subsidiaries that are tribal entities may or may not be subject to, or permitted to seek protection under, federal bankruptcy laws since an Indian tribe and we, as an instrumentality of the Mohegan Tribe, may or may not be eligible to be a debtor under the United States Bankruptcy Code. Therefore, our creditors may not be able to seek liquidation of our or any of the other tribal entities' assets or other action under federal bankruptcy laws. Also, the Mohegan Tribe’s Constitution and laws have established a special court which is vested with exclusive jurisdiction, in the absence of a contractual agreement otherwise, over all disputes related to gaming and associated facilities on tribal lands, including appeals from certain final administrative agency decisions, known as the Gaming Disputes Court. The Gaming Disputes Court may lack powers typically associated with a federal bankruptcy court, such as the power to non-consensually alter liabilities, direct the priority of creditors' claims and liquidate certain assets. The Gaming Disputes Court is a court of limited jurisdiction and may not have jurisdiction over all creditors of ours or our subsidiaries or over all of the territories in which we and our subsidiaries carry on business.
Risks Related to Our Business
The COVID-19 pandemic has had a material adverse impact on our businesses, results of operations, liquidity and financial condition
In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and the United States federal government declared it a national emergency. The spread of COVID-19 has affected most segments of the global economy, including our operations. In March 2020, we temporarily suspended operations at our properties in the United States and Canada to ensure the health and safety of our employees, customers and the surrounding communities in which we operate, consistent with directives from various governmental bodies. All of our properties in the United States were reopened by July 2020. Our properties in Canada reopened in July 2021, but were temporarily closed again from January 5, 2022 through January 30, 2022, due to a resurgence of COVID-19 at that time.
While we are operating at full capacity as of the filing of this Annual Report on Form 10-K, COVID-19 has had a significant impact on our operations and on our projects under development, including Inspire Korea, the full extent of which depends on future developments which are highly uncertain and cannot be predicted with confidence. Such developments include the following:
•the duration of COVID-19 or the extent of any resurgence or variants of COVID-19 or any other infectious diseases in areas where we operate or where our customers are located;
•the manner in which our customers, suppliers and other third parties respond to COVID-19, including the perception of safety and health measures we implemented;
•new information that may emerge concerning the severity of COVID-19 and the actions to contain or treat it;
•general, local or national economic conditions;
•local, state or national rules, regulations or policies which may restrict travel and operating hours or impose other operating restrictions;
•limitations or restrictions on domestic or international travel or reluctance to travel to our properties; and
•consumer confidence.
Accordingly, we cannot reasonably estimate the extent to which COVID-19 will further impact our business and financial condition, results of operations and cash flows.
Our business is subject to extensive governmental gaming regulation by multiple governmental and tribal authorities and changes to the regulatory regime governing our business, our inability to renew or obtain new contracts governing our existing gaming operations or our inability to obtain new casino licenses could adversely affect us
Our gaming operations are highly regulated. Changes in applicable laws and regulations could limit or materially affect the types of gaming that may be conducted, or services provided, by us and the revenues realized therefrom.
With respect to our operations on the Mohegan Tribe's reservation, we are subject to extensive regulations by federal, state and tribal regulatory agencies, including the NIGC and agencies of the State of Connecticut, such as the Department of Consumer Protection's Gaming Division and Division of Liquor Control and the State Police. Currently, gaming on Indian tribal lands is subject to IGRA. Legislation has been introduced in Congress from time to time with the intent of modifying a variety of perceived deficiencies with IGRA or the Indian Reorganization Act of 1934 under which land can be acquired for tribes for various purposes, including gaming. Certain proposals that have been considered would be prospective in effect and contain clauses that would grandfather existing Indian tribal gaming operations such as Mohegan Sun. However, legislation has also been proposed from time to time which would have the effect of repealing many of the key provisions of IGRA and prohibiting the continued operation of particular classes of gaming on Indian tribal reservations in states where such gaming is not otherwise allowed on a commercial basis. While none of the substantive proposed amendments to IGRA have been enacted, we cannot predict the effects of future legislative acts. In the event that Congress passes prohibitory legislation that does not include any grandfathering exemption for existing Indian tribal gaming operations, and if such legislation is sustained in the courts against tribal challenge, our ability to meet our financial obligations would be materially and adversely affected.
In addition, under federal law, gaming on Indian tribal lands is dependent on the permissibility under state law of specific forms of gaming or similar activities and gaming at Mohegan Sun is dependent on the tribal-state compact between the Mohegan Tribe and the State of Connecticut, as amended. iGaming by Mohegan Digital outside of tribal lands in the state of Connecticut is dependent on recent state gaming legislation and other regulations in the state. Adverse decisions or legal actions with respect to gaming legislation, regulations or the Mohegan Compact may have an adverse effect on our ability to conduct our gaming operations.
Our operations at Mohegan Pennsylvania are subject to extensive state regulation by the PGCB, the PSHRC and other state regulatory agencies, such as the Pennsylvania Liquor Control Board. Applicable rules and regulations may require that we obtain and periodically renew a variety of licenses, registrations, permits and approvals to conduct our operations. Regulatory agencies may, for any reason set forth in the applicable legislation, rules and regulations, limit, condition, suspend, deny or revoke our license to conduct our operations in Pennsylvania as intended. The sale of alcoholic beverages at our properties is subject to licensing, control and regulation by state and local agencies in Pennsylvania, including the Pennsylvania Liquor Control Board. The liquor agencies have broad powers to limit, condition, suspend or revoke any liquor license. We can provide no assurance that we will be able to continually renew all registrations, permits, approvals or licenses necessary to conduct our operations in Pennsylvania as intended. Any of these events, including any disciplinary action with respect to our liquor license or any changes in applicable laws or regulations or the enforcement thereof could, and any failure to renew or revocation of our liquor license would, have a material adverse effect on our business, financial condition and results of operations.
Changes in applicable laws or regulations, including statutory changes, tax rates and the implementation or enforcement of applicable laws and regulations could limit or materially affect the types of gaming we may conduct, the services we may provide or the profitability of our operations at Mohegan Pennsylvania. Our ability to continue to operate and our ability to meet our financial obligations could be adversely affected by such legal or regulatory changes and their implementation.
With respect to our operations at the Niagara Resorts, we are regulated by both federal and provincial authorities. The Criminal Code of Canada mandates that dice games and games operated on or through a computer, video device or slot machine may only be conducted through and managed by provincial governments and as a licensed service provider we must provide gaming-related services in accordance with applicable provincial laws and regulations. Gaming in the Province of Ontario, where the Niagara Resorts are located, is highly regulated. The OLG is empowered to conduct and manage gaming in the Province of Ontario and has the power and authority to oversee and/or regulate the gaming industry directly or through AGCO.
In other jurisdictions where we operate, own or manage gaming facilities, or have facilities under development, we are similarly subject to applicable laws and regulations whose implementation or enforcement could limit or materially affect the types of gaming we may conduct, the services we may provide or the profitability of our operations.
If we are not able to compete successfully with existing and future competitors, we may not be able to generate sufficient cash flows from our operations to fulfill our financial obligations
The gaming industry is highly competitive for both customers and employees, including management level employees. We compete directly with numerous gaming operations and hotels in the immediate and surrounding market areas where our properties are located. We also compete with non-gaming resorts and vacation destinations, as well as other forms of
entertainment, including iGaming operations. The gaming industry is characterized by competitors that vary considerably in their size, quality of facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities, level of amenities, management talent and geographic diversity. In the future, our business may be adversely impacted by new forms of legalized gaming, as well as additional gaming and hotel room capacity in the market areas where we operate or intend to operate.
With the general lack of new gaming markets, competition in existing markets has intensified in recent years. We and our competitors have invested in expanding existing facilities, developing new facilities and acquiring established facilities in existing markets. Competition may continue to intensify if our competitors commit additional resources to aggressive pricing and promotional activities in order to attract customers.
We also compete to some extent with other forms of gaming both locally and nationally, including state-sponsored lotteries, charitable gaming, video gaming terminals at bars, restaurants, taverns and truck stops, on-track and off-track wagering and other forms of entertainment, including motion pictures, sporting events and other recreational activities. It is possible that these secondary competitors could adversely impact visitation or amounts wagered at our facilities, which could have a material adverse effect on our ability to generate revenues or maintain our profitability and cash flows.
If our competitors operate more successfully than we do, if they attract customers away from us, if they are more successful than us in attracting and retaining employees, if their properties are enhanced or expanded, if they operate in jurisdictions that provide them with operating advantages due to differences or changes in gaming regulations or taxes or if additional gaming operations and hotels are established or expanded in size or scope in and around market areas in which we conduct business, we may lose market share or the ability to attract and retain employees. In particular, the expansion of gaming in or near any geographical area from which we attract or expect to attract a significant number of our customers could have a significant adverse effect on our business, financial condition and results of operations.
In addition, increased competition may require us to make substantial capital expenditures to maintain and enhance the competitive position of our properties, including updating slot machines to reflect changing technology, refurbishing public service areas, replacing obsolete equipment on an ongoing basis and making other expenditures to enhance the attractiveness and appeal of our facilities. Since we are highly leveraged, after satisfying obligations under our outstanding debt, there can be no assurance that we will have sufficient funds or that we will be able to obtain sufficient financing to fund such expenditures. If we are unable to make such expenditures, our competitive position could be materially adversely affected.
The gaming markets in the Northeastern United States and Niagara Falls, Canada, have experienced seasonal fluctuations in the past and, as such, we may also experience seasonal variations in our revenues and operating results that could adversely affect our cash flows
The gaming markets in the Northeastern United States and Niagara Falls, Canada, are seasonal in nature, with peak gaming activities at Mohegan Sun, Mohegan Pennsylvania and the Niagara Resorts often occurring during the months of May through August. As a result of these seasonal fluctuations, we will likely continue to experience seasonal variations in our revenues and operating results that could result in lower cash flows during periods in which gaming activities are not at peak levels. These variations in revenues and operating results could adversely affect our financial condition.
Negative conditions affecting the lodging industry may have an adverse effect on our revenues and cash flows
We depend on revenues generated from our hotels and other portions of our properties to meet our financial obligations and fund our operations. Revenues generated from our hotels are primarily subject to conditions affecting our gaming operations, but are also subject to the lodging industry in general and, as a result, our financial performance and cash flows may be affected not only by the conditions in the gaming industry, but also by those in the lodging industry. Some of these conditions are as follows:
•changes in the local, regional or national economic climate, including economic recessions;
•changes in local conditions such as an oversupply of hotel properties;
•decreases in the level of demand for hotel rooms and related services;
•the attractiveness of our hotels to customers and competition from comparable hotels;
•cyclical over-building in the hotel industry;
•changes in travel patterns;
•public health, environmental or climate concerns affecting public accommodations or travel;
•changes in room rates and increases in operating costs due to inflation and other factors;
•the inability to fully staff our properties due to difficulties in hiring sufficient employees at all positions;
•increases in fuel or travel costs resulting in reduced visitation to our properties; and
•the periodic need to repair and renovate our hotels.
There are significant risks associated with our construction projects, which could have a material adverse effect on our financial condition, results of operations and cash flows
Inspire Korea, which is under construction adjacent to the Incheon International Airport in South Korea, the hotel under construction at ilani and any of our other construction projects, including renovations to existing facilities, entail significant risks. While currently on schedule, Inspire Korea has been adversely affected by inflationary pressures, COVID-19 related construction delays and product sourcing restrictions and uncertainties. We have been attempting to mitigate the effects of these matters, however, we can provide no assurance that we will be successful in this regard.
Construction activity requires us to obtain qualified contractors and subcontractors, the availability of which may be uncertain. Construction projects are subject to cost overruns and delays caused by events outside of our control or, in certain cases, our contractors’ control, such as shortages of materials or skilled labor, unforeseen engineering, environmental and/or geological problems, work stoppages, weather interference, unanticipated cost increases and unavailability of construction materials or equipment, fire, flood and other natural disasters. Construction, equipment or staffing problems or difficulties in obtaining any of the requisite materials, licenses, permits, allocations and authorizations from governmental or regulatory authorities could increase the total cost, delay, jeopardize, prevent the construction or opening of our projects or otherwise affect the design and features.
Construction contractors or counterparties for our projects may be required to bear certain cost overruns for which they are contractually liable and, if such counterparties are unable to meet their obligations, or if the liability of such persons for such overruns is limited or not covered by their contracts, we may incur increased costs for such projects. In addition, the location of Inspire Korea and other projects which we may pursue throughout the world present unique challenges and risks to manage and execute. If our management is unable to successfully manage such international construction projects, it could have a material adverse effect on our financial condition, results of operations and cash flows.
The anticipated costs and completion dates for our current construction projects are based on budgets, designs, development and construction documents and schedule estimates that are prepared with the assistance of architects and other construction consultants and are subject to change as the design, development and construction documents are finalized and as actual construction work is performed. A failure to complete our projects on budget or on schedule may have a material adverse effect on our financial condition, results of operations and cash flows.
Furthermore, while construction activities may be planned to minimize disruptions, construction noise, debris and temporary closures may disrupt our current operations. Unexpected construction delays could exacerbate or magnify these disruptions. We can provide no assurance that our construction projects will not have a material adverse effect on our results of operations.
We may suspend or elect not to proceed with construction projects once they have been undertaken, resulting in charges that could adversely affect our financial condition. We may also make additional capital expenditures and/or increase the allocation of our capital resources to construction projects.
We may suspend, elect not to proceed with or fail to complete construction projects once they have been undertaken. In such cases, we may be required to carry assets on our balance sheet related to suspended projects or incur significant costs relating to design and construction work performed and materials purchased that may no longer be useful. In addition, our agreements or arrangements with third parties relating to the suspension or termination of such construction projects could cause us to incur additional fees and costs. The suspension of, election not to proceed with, or failure to complete any of our construction projects may result in adverse effects to our financial condition.
We may also elect to make additional capital expenditures to cover increased costs or to expand the scope of construction projects following initial planning. In such cases, we may be required to raise additional capital resources or commit more of our existing capital resources, which could have an adverse effect on our liquidity. In connection with Inspire Korea, we have proposed to the lenders and construction contractor that we make additional investments of at least 155 billion Korean won ($108 million as of September 30, 2022) over the next 12 to 15 months to fund expansions in the scope of the project relating to convention, meeting room and restaurant capacity, to increase funding for pre-opening expenses, to pay for certain increased costs and to provide for working capital and additional project contingency. These investments are currently under review with the lenders and construction contractor. These matters are not expected to impact the timing of construction or opening of Inspire Korea.
The risks associated with operating expanded facilities and managing growth could have a material adverse effect on our future performance
We may expand our facilities from time to time. We can provide no assurance that we will be successful in integrating the new amenities from such expansions into our current operations or in managing our expanded facilities. Failure to successfully
integrate and manage new services and amenities could have a material adverse effect on our results of operations and our ability to meet our financial obligations.
A person's or entity's ability to enforce its rights against us is limited by our sovereign immunity and that of our wholly-owned subsidiaries that are tribal entities
While we, the Mohegan Tribe and certain of our wholly-owned subsidiaries that are tribal entities each have sovereign immunity and generally may not be sued without our and their respective consents, a limited waiver of sovereign immunity and consent to suit has been granted by our restricted subsidiaries in connection with substantially all of our outstanding debt. Each such waiver permits lawsuits against us to enforce our obligation to repay certain outstanding debt. Generally, duly authorized express waivers of sovereign immunity have been held to be enforceable against Indian tribes. In the event that any waiver of sovereign immunity is held to be ineffective, a claimant could be precluded from judicially enforcing its rights and remedies. With limited exceptions, our restricted subsidiaries have not waived sovereign immunity for claims under federal or state securities laws and therefore a claimant may not have any remedy based on such claims.
Where an entity that enjoys tribal sovereign immunity has waived its immunity and consented to suit in federal and/or state court, disputes may be brought in a federal or state court that has jurisdiction over the matter. However, federal courts may not exercise jurisdiction over disputes not arising under federal law or between litigants that are not citizens of different states, and some courts have ruled that an Indian tribe is not a citizen of any state. The extent to which state courts will assume jurisdiction over disputes involving Indian tribes varies from state to state. In addition, the Mohegan Tribe's Constitution has established a special court, the Gaming Disputes Court, to rule on disputes with respect to Mohegan Sun. The federal and state courts, under the doctrines of comity and exhaustion of tribal remedies, may: (i) defer to the jurisdiction of the Gaming Disputes Court or (ii) require that any plaintiff exhaust its remedies in the Gaming Disputes Court before bringing any action in federal or state court. Thus, there may be no available federal or state court forum for adjudication of a dispute with an entity that enjoys tribal sovereign immunity.
The limited waiver of sovereign immunity that has been granted in connection with our outstanding debt additionally provides that in the event that none of the specified federal or state courts accept or exercise jurisdiction over a dispute, claims may be brought in arbitration proceedings with enforcement of arbitration awards in courts of competent jurisdiction. Such a dispute would not be decided by a judge, but by an arbitrator appointed in accordance with the commercial arbitration rules of the American Arbitration Association. The scope of a party’s ability to conduct discovery with respect to such a dispute and the time in which the party is permitted to do so are more limited than in a judicial proceeding. If any party does not prevail in a dispute before an arbitrator, that party’s ability to appeal the arbitrator’s decision will be limited. Federal and state courts typically are required to enforce a proper arbitration award without a re-examination of the merits of the decision. Enforcement of arbitration awards in the Gaming Disputes Court may not be subject to the same limitations on such re-examination.
If an event of default occurs in connection with our debt, no assurance can be given that a forum will be available to creditors other than arbitration with enforcement of arbitration awards in the Gaming Disputes Court. In such court, there are presently limited precedents for the interpretation of tribal law with respect to insolvency. Any execution of a judgment of the Gaming Disputes Court or any other court on tribal lands will require the cooperation of the Mohegan Tribe's officials in the exercise of their police powers. Thus, to the extent that a judgment of the Gaming Disputes Court must be executed on tribal lands, the practical realization of any benefit of such a judgment will be dependent upon the willingness and ability of tribal officials to carry out such judgment. In addition, the land on which Mohegan Sun is located is owned by the United States in trust for the Mohegan Tribe and our creditors and the creditors of the Mohegan Tribe may not foreclose upon or obtain title to the land. Additionally, while we do not presently hold any material fee interest in real property, if we do in the future, federal law may not allow for real property interest to be mortgaged or, if mortgaged, transferred as a result of foreclosure.
Any rights as a creditor are limited to our assets and those of our guarantor subsidiaries
Any rights as a creditor in a bankruptcy, if applicable, liquidation, reorganization or similar proceeding would be limited to our assets and the assets of our guarantor subsidiaries and would not encompass the assets of any other subsidiary that is not a guarantor or the Mohegan Tribe or its other affiliates.
Our failure to generate sufficient cash flows and current and future economic and credit market conditions could adversely affect our ability to fulfill our debt service obligations or refinance our outstanding debt
Our ability to generate cash flows is subject to financial, economic, political, competitive, regulatory and other factors beyond our control. If we are unable to generate sufficient cash flows from operations or borrow additional funds, we may be unable to fulfill our debt service obligations. In addition, we can provide no assurance that we will be able to obtain additional debt for refinancing or to fund our growth, or that financing options available, if any, will be on favorable or acceptable terms.
Restrictions contained in our senior secured credit facility and the indentures to which we are a party may impose limits on our ability to pursue our business interests
Our senior secured credit facility and the indentures to which we are a party contain customary operating and financial restrictions that limit our discretion on various business matters. These restrictions include, among other things, covenants limiting our ability to:
•incur additional debt;
•pay dividends or make other distributions;
•make certain investments;
•use assets as security in other transactions;
•sell certain assets or merge with or into another person;
•grant liens;
•make capital expenditures; and
•enter into transactions with affiliates.
These restrictions may, among other things, reduce our flexibility in planning for, or reacting to, changes in our business and the gaming industry in general and thereby may negatively impact our financial condition, results of operations and ability to meet our financial obligations.
Our senior secured credit facility requires us to maintain a fixed charge coverage ratio and not to exceed certain ratios of total leverage and secured leverage. If these ratios are not maintained or are exceeded, as applicable, it may not be possible for us to borrow additional funds to meet our financial obligations. Additionally, our failure to comply with covenants in our senior secured credit facility, including the fixed charge coverage and leverage ratios, could result in an event of default under the senior secured credit facility, which, if not cured or waived, could have a material adverse effect on us and could result in the acceleration of required repayments of some or all of then-outstanding debt thereunder and an inability to make debt service payments. However, we can provide no assurance that we would be able to obtain such waivers.
In addition, our indentures place certain limitations on our ability to incur debt. Under our indentures, we are generally able to incur debt that otherwise may be restricted, provided that we meet a minimum fixed charge coverage ratio, as defined. If we were to fall below the minimum fixed charge coverage ratio, our ability to incur additional debt could be limited and subject to other applicable exceptions contained in the indentures and the options available to us to refinance our existing debt could be restricted.
Additionally, our failure to comply with covenants in our debt instruments could result in an event of default, which, if not cured or waived, could have a material adverse effect on us and could result in the acceleration of required repayments of some or all of then-outstanding debt and an inability to make debt service payments.
A change in our current tax-exempt status, or that of certain of our subsidiaries, could reduce our cash flows and have a material adverse effect on our operations and our ability to meet our financial obligations
Based on current interpretation of the Internal Revenue Code of 1986, as amended, we, the Mohegan Tribe and certain of our subsidiaries are not subject to United States federal income taxes. However, we can provide no assurance that Congress or the Internal Revenue Service will not reverse or modify the exemption for Indian tribes from United States federal income taxation. A change in the tax law could have a material adverse effect on our financial performance.
Weakness or downturn in the United States, Canadian or South Korean economies and fluctuations in exchange rates could negatively impact our financial performance
During periods of economic contraction, our revenues may decline while some of our costs remain fixed, resulting in lower earnings since gaming and other leisure activities that we offer are discretionary in nature and participation in such activities may decline during economic downturns since consumers have less disposable income. Even an uncertain economic outlook may adversely affect spending at our properties since consumers may spend less in anticipation of a potential economic downturn.
Economic recessions negatively impact consumer confidence and the amount of consumer spending. Economic conditions such as a prolonged regional, national or global economic downturn or slow growth, including periods of increased inflation, rising unemployment, tax rates, interest rates, energy and gasoline prices or declining consumer confidence could also reduce consumer spending. Reduced consumer spending has resulted and may continue to result in an adverse impact on our business, financial condition and operating results. Furthermore, uncertainty and adverse changes in the economy could also increase the cost and reduce the availability of sources of financing, which could have a material adverse impact on our financial condition
and operating results. If adverse economic conditions continue or worsen, our business, assets, financial condition and results of operations could continue to be affected adversely.
In addition, our operations in Canada and South Korea are conducted in the respective local currency. Accordingly, fluctuations in exchange rates may adversely affect our financial results.
Our diversification efforts may not be successful
We receive and evaluate various opportunities to diversify our business interests. These opportunities primarily include the development and/or management of, investment in or ownership of other gaming and entertainment enterprises through direct investments, acquisitions, joint venture arrangements and loan transactions. In addition to the opportunities we are currently pursuing, we are evaluating other opportunities in various jurisdictions. These efforts may require various levels of regulatory or legislative approval and may require the commitment of financial and capital resources. Failure to receive such approvals or to obtain or generate sufficient funds to meet such financial or capital requirements may result in the termination of the respective project. In addition, our diversification initiatives may not generate the expected (or any) returns on our investments. Furthermore, there can be no assurance that we will continue to pursue any of the diversification initiatives we are pursuing or evaluating or that any of them will be consummated.
The non-impairment provision of the Mohegan Tribe's Constitution is subject to change
Unlike states, the Mohegan Tribe is not subject to the United States Constitution's provision restricting governmental impairment of contracts. The Mohegan Tribe's Constitution currently has a provision that prohibits the Mohegan Tribe from enacting any law that would impair the obligations of contracts entered into in furtherance of the development, construction, operation and promotion of gaming on tribal lands. However, this provision could be amended by a vote of 75% of the Mohegan Tribe's registered voters to rescind the restriction on impairment of the obligation of such contracts.
We and our guarantor subsidiaries are controlled by a tribal government and may not necessarily be operated in the same way as if we and they were privately owned for-profit businesses
We and our guarantor subsidiaries are subject to control by the Mohegan Tribe. Our Management Board is comprised of the same nine members as the Mohegan Tribal Council, the governing body of the Mohegan Tribe with legislative and executive authority. As a sovereign government, the Mohegan Tribe is governed by officials elected by tribal members who have a responsibility for the general welfare of all members of the Mohegan Tribe. In making decisions relative to us and our guarantors, these officials may consider the interests of their electorate, instead of pure economic or other business factors.
Control deficiencies could prevent us from accurately and timely reporting our financial results
We may identify deficiencies in our internal control over financial reporting in the future, including significant deficiencies and material weaknesses. A “significant deficiency” is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of a company’s financial reporting. A "material weakness" is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. Our failure to identify deficiencies in our internal control over financial reporting in a timely manner or remediate any deficiencies, or identify material weaknesses or significant deficiencies in the future, could prevent us from accurately and timely reporting our financial results.
We may be subject to material environmental liability resulting from possible incomplete remediation of known environmental hazards or the existence of unknown environmental hazards
Our properties and operations are subject to a wide range of federal, state, local and tribal environmental laws and regulations governing, among other things, air emissions, wastewater discharges, the use, management and disposal of, or exposure to, hazardous and non-hazardous materials and wastes and the clean-up of contamination. Noncompliance with such laws and regulations, as well as past or future activities resulting in environmental releases, could affect our operations or could cause us to incur substantial costs, including clean-up costs, fines and penalties or investments to retrofit or upgrade our properties.
In addition, should unknown contamination be discovered on our properties or should a release of hazardous material occur on our properties, we could be required to investigate and clean up such contamination and could also be held responsible to a governmental entity or third parties for personal injury, property damage or investigation and cleanup costs, which may be substantial. Moreover, such contamination may also impair the use or value of the affected property. Liability for contamination can be joint and several in nature and in many instances can be imposed on the owner or operator of property regardless of whether such owner or operator is responsible for creating the contamination or is otherwise at fault.
At both Mohegan Sun and Mohegan Pennsylvania, investigations and remedial actions have been successfully undertaken to address significant site contamination resulting from historical operations. The site on which Mohegan Sun is located was formerly occupied by United Nuclear Corporation, a naval products manufacturer of, among other things, nuclear reactor fuel components. Prior to the decommissioning of the United Nuclear Corporation facilities on the site, extensive investigations were completed and contaminated soils were remediated to applicable standards. Prior to us taking possession of the site, it was determined to be safe for general public use. In addition, prior to acquiring Mohegan Pennsylvania, we conducted an extensive environmental investigation. During the course of the investigation, we identified several environmental conditions that required corrective actions to bring the property into compliance with applicable laws and regulations. These remedial actions, including an ongoing monitoring program for the portion of the property that was formerly used as a solid waste landfill, were addressed as part of a comprehensive plan that was fully implemented by July 2008.
Notwithstanding the foregoing, we can provide no assurance that:
•any environmental reports or studies prepared with respect to these sites or, any other properties owned or operated by us, revealed all environmental liabilities;
•prior owners or tenants did not create any material environmental condition not presently known to us that may be discovered in the future;
•future laws, ordinances or regulations will not impose any material environmental liability with regard to existing conditions or operations; or
•a material environmental condition does not otherwise exist on any site.
Any of the above could have a material adverse effect on our operating results and ability to meet our financial obligations.
Our business could be affected by a variety of uncontrollable events that could impact our operations
Our operations could be adversely affected by a variety of factors beyond our control, including health concerns (as has been the case with COVID-19 and could occur in the event of future health outbreaks and pandemics), adverse weather conditions arising from short-term weather patterns or long-term climate change, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, typhoons, floods, droughts, tsunamis and earthquakes), international, political or military developments (including social unrest) and terrorist attacks. These events and others may also inhibit our ability to provide our amenities and services or to obtain insurance coverage with respect to certain of these events. In addition, the costs of protecting against such incidents could reduce the profitability of our operations.
Our table games business is subject to volatility
Table gaming, especially high-end table gaming, is more volatile than other forms of gaming and variances in table games hold percentage may have a positive or negative impact on our quarterly revenues and operating results. Negative variations in quarterly revenues and operating results could adversely affect our financial condition.
Energy and fuel price increases may adversely affect our business and results of operations
Our properties use significant amounts of electricity, natural gas and other forms of energy. Increases in the cost of any of our sources of energy may negatively affect our results of operations. In addition, energy and fuel price increases could negatively impact our business and results of operations by making it difficult for potential customers to travel to our properties or by causing customers who do visit our properties to reduce their spending due to a reduction in disposable income.
Our information technology and other systems are subject to cyber security risks, including misappropriation of customer information or other breaches of information security
We rely upon sophisticated information technology networks, systems and infrastructure, some of which are managed by third parties, to process, transmit and store electronic information and to manage or support a variety of business processes and activities. Additionally, we collect and store sensitive data, including proprietary business information. Despite security measures, our information technology networks, systems and infrastructure may be vulnerable to damage, disruptions or shutdowns due to attack by hackers or breaches, employee error or malfeasance, power outages, computer viruses, telecommunication or utility failures, systems failures, natural disasters or other catastrophic events. Likewise, data privacy or security breaches by employees and others with permitted access to our systems, including in some cases third parties to which we may outsource certain business functions, may pose a risk that sensitive data, including intellectual property or personal information, may be exposed to unauthorized persons or to the public. Security breaches and other disruptions to our information technology infrastructure could interfere with our operations, compromise information belonging to us and our customers and suppliers and expose us to liability which could adversely impact our business and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm.
Impairment of our intangible assets could adversely affect our financial condition
In accordance with authoritative guidance issued by the Financial Accounting Standards Board pertaining to intangible assets, we assess our intangible assets at least annually for impairment by comparing their fair value to their carrying value. Fair value is estimated utilizing a discounted cash flow method. As of September 30, 2022, we assessed our intangible assets for impairment and determined that no impairment existed. The evaluation of intangible assets for impairment requires the use of estimates about future cash flows to determine the estimated fair value of the reporting unit. Such estimates are, by their nature, subjective. Actual results may differ materially from our estimates and could result in impairment charges in the future. In the event that the carrying value of our intangible assets exceeds their fair value in a future period, the intangible assets would be impaired and subject to a non-cash write-down, which could have a material adverse impact on our financial condition.
We are subject to risks associated with doing business outside of the United States
With the Niagara Resorts, Inspire Korea and other potential projects outside of the United States, we have operations outside of the United States that are subject to risks that are inherent in conducting business under non-United States laws, regulations and customs. In particular, the risks associated with the Niagara Resorts, Inspire Korea or other operations that we may engage in other foreign jurisdictions, include:
•changes in laws and policies that govern operations of companies in Canada, South Korea or other foreign jurisdictions;
•changes in non-United States government programs;
•possible failure by our employees or agents to comply with anti-bribery laws such as the United States Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions;
•general economic conditions and policies in such jurisdictions, including restrictions on travel and currency movements;
•difficulty in establishing, staffing and managing non-United States operations;
•different labor regulations;
•changes in environmental, health and safety laws;
•outbreaks of diseases or epidemics;
•potentially negative consequences from changes in or interpretations of tax laws;
•political instability and actual or anticipated military and political conflicts;
•economic instability and inflation, recession or interest rate or exchange rate fluctuations; and
•uncertainties regarding judicial systems and procedures.
Any of the above risks could have an adverse effect on our results of operations and financial condition. We are also exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates. If the United States dollar strengthens in relation to the currencies of other countries, our United States dollar reported income from sources where revenues are denominated in the currencies of other such countries will decrease.
Any violation of the United States Foreign Corrupt Practices Act or any other similar anti-corruption laws could have a negative impact on us
A portion of our revenues are derived from operations outside of the United States, which exposes us to complex United States and foreign regulations inherent in doing cross-border business and in each of the countries in which we transact business. We are subject to compliance with the United States Foreign Corrupt Practices Act and other similar anti-corruption laws, which generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. While our employees and agents are required to comply with these laws, we can provide no assurance that our internal policies and procedures will always protect us from violations of these laws, despite our commitment to legal compliance and corporate ethics. Violations of these laws by us or any of our ventures may result in severe criminal and civil sanctions and other penalties against us, as the Securities and Exchange Commission and United States Department of Justice continue to vigorously pursue enforcement of the United States Foreign Corrupt Practices Act. The occurrence or allegation of any such violation may adversely affect our business, performance, prospects, value, financial condition and results of operations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties.
Property Location Opening Year Casino Square Footage Slot Machines Table Games Hotel Rooms Food & Beverage and Retail Outlets Primary Entertainment Venue (Seats)
Owned
Mohegan Sun Uncasville, CT 1996 310,000 3,650 250 1,562 83 10,000
Mohegan Pennsylvania Wilkes-Barre, PA 2006 95,000 1,700 65 237 18 1,500
Inspire Korea (1)
Incheon, South Korea 2023 260,000 700 150 1,275 70 15,000
Operated/Managed
Fallsview Casino Resort Niagara Falls, ON 2004 160,000 3,500 120 372 41 5,000
Casino Niagara Niagara Falls, ON 1996 70,000 1,400 30 N.A. 2 N.A.
Mohegan Casino Las Vegas Las Vegas, NV 2021 60,000 600 45 1,504 22 4,500
ilani Casino Resort La Center, WA 2017 110,000 2,750 75 N.A. 15 2,550
Resorts Casino Hotel (2)
Atlantic City, NJ 1978 80,000 1,350 75 942 22 1,250
1,145,000 15,650 810 5,892 273 39,800
_________
(1) Estimated.
(2)10% ownership.
N.A. Not Applicable.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
We are a defendant in various claims and legal actions resulting from our normal course of business. We believe the aggregate liability, if any, arising from such legal actions will not have a material impact on our financial position, results of operations or cash flows.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
We have not issued or sold any equity securities.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial position and operating results for the fiscal year ended September 30, 2022 should be read in conjunction with our Financial Statements and the notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K.
The statements in this discussion regarding our expectations related to our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results may differ materially from those contained in or implied by any forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” within this Annual Report on Form 10-K.
For a discussion of the comparison of our financial position and operating results for the fiscal years ended September 30, 2021 and 2020, refer to our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, filed with the Securities and Exchange Commission on December 16, 2021.
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and the United States federal government declared it a national emergency. The spread of COVID-19 has affected most segments of the global economy, including our operations. In March 2020, we temporarily suspended operations at our properties in the United States and Canada to ensure the health and safety of our employees, customers and the surrounding communities in which we operate, consistent with directives from various governmental bodies. All of our properties in the United States were reopened by July 2020. Our properties in Canada reopened in July 2021, but were temporarily closed again from January 5, 2022 through January 30, 2022, due to a resurgence of COVID-19 at that time.
While we are operating at full capacity as of the filing of this Annual Report on Form 10-K, COVID-19 has had a significant impact on our operations, the full extent of which depends on future developments which are highly uncertain and cannot be predicted with confidence. Such developments include the following:
•the duration of COVID-19 or the extent of any resurgence or variants of COVID-19 in areas where we operate or where our customers are located;
•the manner in which our customers, suppliers and other third parties respond to COVID-19, including the perception of safety and health measures we implemented;
•new information that may emerge concerning the severity of COVID-19 and the actions to contain or treat it;
•general, local or national economic conditions; and
•consumer confidence.
Accordingly, we cannot reasonably estimate the extent to which COVID-19 will further impact our future financial condition, results of operations and cash flows.
We could experience other potential adverse impacts as a result of COVID-19, including, but not limited to, charges from further adjustments to the carrying value of our intangible assets, as well as other long-lived asset impairment charges. Actual results may differ materially from our current estimates as the scope of COVID-19 evolves, depending largely, but not exclusively, on the duration and extent of any business disruptions.
Discussion of Consolidated Operating Results
The most significant factors and trends that impacted our operating and financial performance during fiscal 2022 were as follows:
•relatively full periods of operations at our properties;
•a return to relatively normal operating conditions at our properties; and
•impairment charges related to Inspire Korea.
Consolidated Operating Results
For the Fiscal Years Ended September 30, Variance
2022 vs. 2021
(in thousands) 2022 2021 2020 $ %
Net revenues:
Gaming $ 1,122,864 $ 910,378 $ 799,647 $ 212,486 23.3 %
Food and beverage 134,724 73,631 103,678 61,093 83.0 %
Hotel 115,828 84,307 69,113 31,521 37.4 %
Retail, entertainment and other 217,095 160,517 142,524 56,578 35.2 %
Net revenues $ 1,590,511 $ 1,228,833 $ 1,114,962 361,678 29.4 %
Operating costs and expenses:
Gaming $ 573,561 $ 470,723 $ 444,875 $ 102,838 21.8 %
Food and beverage 111,379 63,414 91,662 47,965 75.6 %
Hotel 47,689 36,097 35,578 11,592 32.1 %
Retail, entertainment and other revenue 79,289 38,390 54,020 40,899 106.5 %
Advertising, general and administrative 309,160 231,084 226,588 78,076 33.8 %
Corporate 65,034 61,301 44,177 3,733 6.1 %
Depreciation and amortization 102,625 105,335 109,067 (2,710) (2.6) %
Impairment of tangible assets 23,565 - - 23,565 N.M.
Impairment of intangible assets 12,869 - 126,596 12,869 N.M.
Other, net 19,106 38,032 15,616 (18,926) (49.8) %
Total operating costs and expenses $ 1,344,277 $ 1,044,376 $ 1,148,179 299,901 28.7 %
_________
(N.M.) Not Meaningful.
Segment Operating Results
For the Fiscal Years Ended September 30, Variance
2022 vs. 2021
(in thousands) 2022 2021 2020 $ %
Net revenues:
Mohegan Sun $ 940,282 $ 816,376 $ 715,674 $ 123,906 15.2 %
Mohegan Pennsylvania 257,840 221,479 181,160 36,361 16.4 %
Niagara Resorts 279,263 99,202 180,025 180,061 181.5 %
Management, development and other 62,221 70,009 37,189 (7,788) (11.1) %
All other 54,619 18,780 - 35,839 190.8 %
Corporate 575 3,247 741 (2,672) (82.3) %
Inter-segment (4,289) (260) 173 (4,029) N.M.
Net revenues $ 1,590,511 $ 1,228,833 $ 1,114,962 361,678 29.4 %
Operating costs and expenses:
Mohegan Sun $ 726,628 $ 614,065 $ 587,225 $ 112,563 18.3 %
Mohegan Pennsylvania 213,884 188,945 296,233 24,939 13.2 %
Niagara Resorts 240,371 121,840 204,701 118,531 97.3 %
Management, development and other 78,169 52,847 35,604 25,322 47.9 %
All other 47,461 20,314 - 27,147 133.6 %
Corporate 42,113 46,605 24,180 (4,492) (9.6) %
Inter-segment (4,349) (240) 236 (4,109) N.M.
Total operating costs and expenses $ 1,344,277 $ 1,044,376 $ 1,148,179 299,901 28.7 %
_________
(N.M.) Not Meaningful.
Mohegan Sun
Revenues
Net revenues increased $123.9 million, or 15.2%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This increase was primarily driven by higher non-gaming revenues which benefited from strong overall business volumes reflecting a return to relatively normal operating conditions compared with the prior fiscal year, which was negatively impacted by various COVID-19 restrictions. Overall non-gaming revenues also benefited from a full entertainment calendar compared with the prior fiscal year in which the Mohegan Sun Arena was partially closed due to COVID-19. In addition, the growth in net revenues reflected higher gaming revenues. Slot revenues increased principally due to higher slot handle, while the growth in table game revenues reflected higher hold percentage.
Operating Costs and Expenses
Operating costs and expenses increased $112.6 million, or 18.3%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This increase primarily reflected higher overall operating costs and expenses commensurate with the increase in net revenues and return to relatively normal operating conditions, including increased payroll costs, cost of goods sold and direct entertainment expenses, as well as higher costs related to advertising, utilities and certain other administrative services. The increase in operating costs and expenses was also driven by higher slot win contribution.
Mohegan Pennsylvania
Revenues
Net revenues increased $36.4 million, or 16.4%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This increase was primarily due to higher slot revenues driven by increased slot handle, as well as higher non-gaming revenues. In general, these results were driven by strong overall business volumes reflecting a return to relatively normal operating conditions compared with the prior fiscal year, which was negatively impacted by various COVID-19 restrictions and the temporary closure of Mohegan Pennsylvania from December 12, 2020, through January 3, 2021.
Operating Costs and Expenses
Operating costs and expenses increased $24.9 million, or 13.2%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This increase primarily reflected higher Pennsylvania slot machine tax expenses driven by the increase in slot revenues, combined with higher overall operating costs and expenses commensurate with the return to relatively normal operating conditions.
Niagara Resorts
Revenues
Net revenues increased $180.1 million, or 181.5%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This increase reflected a relatively full year of operations and a return to fairly normal operating conditions compared with the prior fiscal year. The Niagara Resorts were temporarily closed effective March 18, 2020, following the outbreak of COVID-19, and reopened on July 23, 2021 under various COVID-19 related restrictions. The Niagara Resorts were temporarily closed again from January 5, 2022, through January 30, 2022, due to a resurgence of COVID-19 at that time.
Operating Costs and Expenses
Operating costs and expenses increased $118.5 million, or 97.3%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This increase primarily reflected higher operating costs and expenses commensurate with the growth in net revenues, combined with higher overall costs and expenses associated with a relatively full year of operations.
Management, Development and Other
Revenues
Net revenues decreased $7.8 million, or 11.1%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This decline was primarily driven by lower management fees from ilani Casino Resort, combined with the impact of non-recurring management fees associated with our prior management agreement with Paragon Casino Resort.
Operating Costs and Expenses
Operating costs and expenses increased $25.3 million, or 47.9%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. As described in Note 4 and Note 5, this increase was primarily driven by $36.4 million in impairment charges related to Inspire Korea, partially offset by lower pre-opening costs and expenses related to Inspire Korea.
All Other
Revenues
Net revenues increased $35.8 million, or 190.8%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This increase was driven by incremental revenues generated by our online casino gaming and sports wagering operations in Connecticut, which commenced in October 2021, and Mohegan Casino Las Vegas, which opened in March 2021.
Operating Costs and Expenses
Operating costs and expenses increased $27.1 million, or 133.6%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This increase reflected incremental operating costs and expenses associated with our online casino gaming and sports wagering operations in Connecticut and Mohegan Casino Las Vegas.
Corporate
Revenues
Net revenues decreased $2.7 million, or 82.3%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This decline principally reflected the impact of non-recurring revenues generated by our construction group in the prior fiscal year.
Operating Costs and Expenses
Operating costs and expenses decreased $4.5 million, or 9.6%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This decline primarily reflected the impact of a non-recurring contract termination charge in the prior fiscal year, as well as non-recurring construction related expenses, partially offset by increased payroll costs and higher costs related to certain other professional and administrative services.
Other Income (Expense)
For the Fiscal Years Ended September 30, Variance
2022 vs. 2021
(in thousands) 2022 2021 2020 $ %
Interest income $ 168 $ 123 $ 1,754 $ 45 36.6 %
Interest expense, net (206,314) (171,844) (134,925) (34,470) (20.1) %
Gain (loss) on modification and early extinguishment of debt 630 (21,793) (2,888) 22,423 N.M.
Gain on fair value adjustment
43,020 - - 43,020 N.M.
Other, net 268 10,057 566 (9,789) (97.3) %
Income tax benefit (provision)
(8,810) 6,353 6,694 (15,163) N.M.
_________
(N.M.) Not Meaningful.
Interest Expense
Interest expense increased $34.5 million, or 20.1%, for the fiscal year ended September 30, 2022 compared with the prior fiscal year. This increase was partially offset by $22.3 million in capitalized interest related to Inspire Korea. The increase in interest expense was due to higher weighted average interest rate and weighted average outstanding debt. Refer to Note 6 for additional information.
Modification and Early Extinguishment of Debt
Loss on modification and early extinguishment of debt in fiscal 2021 primarily represented transaction costs expensed in connection with our January 2021 refinancing transactions.
Fair Value Adjustment
Gain on fair value adjustment was driven by changes in the estimated fair value of the warrants and put option related to Inspire Korea. Refer to Note 6 for additional information.
Other
The reduction in other, net primarily reflected lower COVID-19 related governmental subsidies associated with the Niagara Resorts.
Income Tax
Income tax benefit or provision was primarily driven by taxable losses incurred or taxable income generated by the Niagara Resorts.
Liquidity and Capital Resources
Liquidity
As of September 30, 2022 and 2021, we held cash and cash equivalents of $164.7 million and $149.8 million, respectively, of which the Niagara Resorts held $37.5 million and $25.1 million, respectively. As a result of the cash-based nature of our business, operating cash flow levels tend to follow trends in our operating income, excluding the effects of non-cash charges, such as depreciation and amortization and impairment charges. Inclusive of letters of credit, which reduce borrowing availability, we had $243.0 million of borrowing capacity under our senior secured credit facility and line of credit as of September 30, 2022. In addition, inclusive of letters of credit, which reduce borrowing availability, the Niagara Resorts had $120.1 million of borrowing capacity under the Niagara revolving facility and Niagara swingline facility as of September 30, 2022.
Material contractual obligations arising in the normal course of business consist primarily of long-term debt and related interest payments, finance and operating lease obligations, distributions to the Mohegan Tribe, slot machine operation fee that must be paid to the Pennsylvania Department of Revenue and purchase and other contractual obligations. In connection with Inspire Korea, we have proposed to the lenders and construction contractor that we make additional investments of at least 155 billion Korean won ($108 million as of September 30, 2022) over the next 12 to 15 months to fund expansions in the scope of the project relating to convention, meeting room and restaurant capacity, to increase funding for pre-opening expenses, to pay for certain increased costs and to provide for working capital and additional project contingency. These investments are currently under review with the lenders and construction contractor. Refer to our Financial Statements and notes for additional information.
Cash provided by operating activities increased $60.5 million, or 26.6%, to $288.3 million for the fiscal year ended September 30, 2022 compared with $227.8 million in the prior fiscal year. The increase in cash provided by operating activities was driven by higher net income, after factoring in non-cash items, partially offset by higher working capital requirements, reflecting a return to relatively normal operating conditions at our properties. Refer to “Discussion of Consolidated Operating Results” for additional information.
Cash used in investing activities increased $245.6 million, or 497.7%, to $294.9 million for the fiscal year ended September 30, 2022 compared with $49.3 million in the prior fiscal year. The increase in cash used in investing activities was primarily driven by higher capital expenditures related to Inspire Korea.
Cash provided by financing activities totaled $438.2 million for the fiscal year ended September 30, 2022 compared with cash used in financing activities of $156.4 million in the prior fiscal year. The increase in cash provided by financing activities was primarily driven by additional borrowings to fund the development of Inspire Korea.
Sufficiency of Resources
We believe that existing cash balances, financing arrangements and operating cash flows will provide us with sufficient resources to meet our existing debt obligations, finance and operating lease obligations, distributions to the Mohegan Tribe, capital expenditures and working capital requirements for the next twelve months; however, we can provide no assurance in this regard. Refer to Part I. Item 1A. Risk Factors to this Annual Report on Form 10-K for further details regarding risks relating to our sufficiency of resources.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. Actual amounts could differ from those estimates.
We believe the following accounting policies impact significant judgments and estimates utilized in the preparation of our financial statements.
Property and Equipment
Property and equipment are stated at cost. Depreciation is recognized over the estimated useful lives of the assets, other than land, on a straight-line basis. Leasehold improvements are amortized over the shorter of the lease terms or the estimated useful lives of the improvements. Estimated useful lives by asset categories are as follows:
Buildings and land improvements 40 years
Furniture and equipment 3 - 7 years
The costs of significant improvements are capitalized. Costs of normal repairs and maintenance are expensed as incurred.
Property and equipment are assessed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If it is determined that the carrying amounts may not be recoverable based on current and future levels of income and cash flows, as well as other factors, an impairment charge will be recognized at such time.
Intangible Assets
Intangible assets consist primarily of Mohegan Sun's trademark and Mohegan Pennsylvania's various gaming licenses. These intangible assets all have indefinite lives. Intangible assets with indefinite lives are assessed at least annually for impairment by comparing their fair value to their carrying value. However, these intangible assets may be assessed more frequently for impairment if events or changes in circumstances, such as declines in revenues, earnings and cash flows or material adverse changes in business climate, indicate that their carrying value may be impaired.
As of September 30, 2022, a 1% reduction in the estimated revenue growth rate would decrease the fair value of Mohegan Pennsylvania’s intangible assets by approximately $11 million and a 1% increase in the discount rate would decrease the fair value of Mohegan Pennsylvania’s intangible assets by approximately $42 million.
Intangible assets with finite lives are assessed for impairment whenever events or circumstances indicate that their carrying value may not be recoverable. If necessary, an impairment charge is recognized when the carrying value of the asset (asset group) exceeds the estimated undiscounted cash flows expected from the use and eventual disposition of the asset (asset group). The amount of the impairment charge, if any, is calculated as the excess of the asset’s (asset group’s) carrying value over its fair value.
The evaluation of intangible assets for impairment requires the use of estimates about future cash flows. Such estimates are, by their nature, subjective. Actual results may differ materially from our estimates and could result in impairment charges in the future.
Warrants and Put Option
We account for our warrants and put option liabilities in accordance with guidance provided by Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging” (“ASC 815”). Under ASC 815, the warrants and put option do not meet the criteria for equity treatment. Accordingly, these instruments are classified as long-term liabilities and are re-measured at their estimated fair values at each reporting date. The estimated fair value of the warrants and put option was determined by utilizing the income approach (discounted cash flow method) and a binomial lattice model.
Revenues from Casino Operating and Services Agreement
We operate the Niagara Resorts under the terms of a 21-year Casino Operating and Services Agreement with the Ontario Lottery and Gaming Corporation. Pursuant to the laws of Canada and the Province of Ontario, the Ontario Lottery and Gaming Corporation retains legal authority to conduct and manage lottery schemes on behalf of the Province of Ontario. We are acting as a service provider to the Ontario Lottery and Gaming Corporation under the Casino Operating and Services Agreement and, therefore, recognize gaming revenues net of amounts due to the Ontario Lottery and Gaming Corporation. We retain all non-gaming revenues and recognize these amounts on a gross basis. The Casino Operating and Services Agreement represents a series of distinct goods and services and, therefore, is deemed to be a single performance obligation. The transaction price under the Casino Operating and Services Agreement includes both fixed and variable consideration. The fixed consideration is comprised of an annual service provider fee and additional consideration for permitted capital expenditures up to an annual cap. The fixed consideration is recognized as revenue on a straight-line basis over the term of the Casino Operating and Services Agreement. The variable consideration consists of 70% of Gaming Revenues (as defined under the Casino Operating and Services Agreement), in excess of a guaranteed annual minimum amount payable to the Ontario Lottery and Gaming Corporation (the “Threshold”). Annual Threshold amounts are contractually established and vary from year to year. If gaming revenues are less than the Threshold for any given year, we are obligated to make a payment to cover the related shortfall. The variable consideration is recognized as revenue as services are rendered under the terms of the Casino Operating and Services Agreement. We measure our progress in satisfying this performance obligation based on the output method, which aligns with the benefits provided to the Ontario Lottery and Gaming Corporation. Projected revenues are estimated based on the most likely amount within a range of possible outcomes to the extent that a significant reversal in the amount of cumulative revenues recognized is not probable of occurring. The difference between revenues recognized and cash received is recorded as an asset or a liability and classified as short-term or long-term based upon the anticipated timing of reversal. In the event an asset is recorded, such asset is assessed at least annually for impairment. In June 2021, the Casino Operating and Services Agreement was amended to provide for, among other things, a three-year replacement of the annual Threshold, subject to certain
conditions, with a fixed revenue share percentage. The annual Threshold may be reinstated at any time during this three-year period under certain conditions specified in the amended Casino Operating and Services Agreement.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. As of September 30, 2022, our primary exposure to market risk was interest rate risk associated with our credit facilities which accrued interest on the basis of base rate, secured overnight financing rate and bankers’ acceptance rate formulas, plus applicable rates, as defined under the credit facilities.
We attempt to manage our interest rate risk through a controlled combination of long-term fixed rate borrowings and variable rate borrowings in accordance with established policies and procedures. We do not hold or issue financial instruments for speculative or trading purposes.
The following table presents information about our debt obligations as of September 30, 2022 that were sensitive to changes in interest rates. The table presents principal payments and related weighted average interest rates by expected maturity dates. Weighted average variable interest rates were based on implied forward rates in respective yield curves, which should not be considered to be precise indicators of actual future interest rates. Fair values for our debt obligations were primarily based on quoted market prices or prices of similar instruments as of September 30, 2022.
Expected Maturity Date by Fiscal Year
(in thousands) 2023 2024 2025 2026 2027 Thereafter Total Fair Value
Long-term debt obligations, including current portions (1):
Fixed rate $23,139 $15,970 $500,025 $1,485,203 $312,022 $358 $2,336,717 $1,993,613
Average interest rate - - 7.9% 7.6% 17.0% - 8.8%
Variable rate $24,263 $79,837 $- $52,277 $- $29,109 $185,486 $185,239
Average interest rate (2) 8.3% 7.9% - 7.0% - 8.0% 7.7%
_________
(1)Excludes unamortized debt issuance costs and discounts.
(2)A 100-basis point change in average interest rate would impact annual interest expense by approximately $1.9 million.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 34)
Consolidated Balance Sheets of the Mohegan Tribal Gaming Authority as of
September 30, 2022 and 2021
Consolidated Statements of Operations and Comprehensive Income (Loss) of the Mohegan Tribal Gaming Authority for the
Fiscal Years Ended September 30, 2022, 2021 and 2020
Consolidated Statements of Changes in Capital of the Mohegan Tribal Gaming Authority for the
Fiscal Years Ended September 30, 2022, 2021 and 2020
Consolidated Statements of Cash Flows of the Mohegan Tribal Gaming Authority for the
Fiscal Years Ended September 30, 2022, 2021 and 2020
Notes to Consolidated Financial Statements of the Mohegan Tribal Gaming Authority
Schedule II-Valuation and Qualifying Accounts and Reserves
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Management Board of Mohegan Tribal Gaming Authority:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Mohegan Tribal Gaming Authority and subsidiaries (the "Company") as of September 30, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), changes in capital, and cash flows for each of the three years in the period ended September 30, 2022, and the related notes and the schedule as listed in the Index at Item 15(a)(2) (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021 and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Warrants and Put Option Liabilities - Refer to Note 6 to the financial statements
Critical Audit Matter Description
As described in Note 6 to the consolidated financial statements, on November 4, 2021, the Company entered into a warrant agreement to issue detachable warrants (the “Warrants”) that can be converted into up to a total of 4,400 shares of capital in MGE Korea Holding III Limited. Holders of unexercised Warrants have the right to require the parent of MGE Korea Holding III Limited to purchase all of the unexercised Warrants that they hold at certain relevant times (the “Put Option”). The Warrants and the Put Option are classified as long-term liabilities and are re-measured at their estimated fair values at each reporting date. The estimated fair value of the Warrants and the Put Option was determined by utilizing the income approach (discounted cash flow method) and a binomial lattice model. This valuation approach utilized Level 3 inputs. Management applied significant judgment in determining the appropriate accounting treatment and inputs utilized in its quarterly fair value model.
Auditing the fair value of the Company’s Warrants and Put Option liabilities involved a high degree of subjectivity in evaluating whether management’s estimates and assumptions of projected cash flows and the selection of the discount rates and volatility inputs used to derive the fair value were reasonable, including the need to involve our fair value specialists.
How the Critical Audit Matter was Addressed in the Audit
We evaluated management’s projected cash flows by benchmarking projected cash flows against comparable companies, evaluating inputs used in the fair value model and gathering audit evidence to support those inputs.
• We evaluated the reasonableness of management’s cash flow estimates by:
◦ Comparing to historical results from other similar properties.
◦ Comparing to internal communications to management, external parties and the Management Board.
◦ Evaluating inputs used in the fair value model such as projected capital expenditures and pre-opening costs and expenses, and verifying that those projections are reasonable and supportable based on audit evidence.
• With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rates and volatility inputs by:
◦ Testing the source information underlying the determination of the discount rates, volatility inputs and the mathematical accuracy of the calculations.
◦ Developing a range of independent estimates and comparing those estimates to the discount rates and volatility inputs selected by management.
/s/ Deloitte & Touche LLP
Hartford, Connecticut
December 20, 2022
We have served as the Company’s auditor since 2018.
MOHEGAN TRIBAL GAMING AUTHORITY
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 2022 September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents $ 164,671 $ 149,822
Restricted cash and cash equivalents 8,838 5,259
Accounts receivable, net 45,995 40,772
Inventories 19,662 18,455
Due from Ontario Lottery and Gaming Corporation 8,906 16,711
Contract asset 35,478 32,665
Other current assets 35,551 56,466
Total current assets 319,101 320,150
Restricted cash and cash equivalents
347,005 9,616
Property and equipment, net
1,643,790 1,531,619
Right-of-use assets 305,480 362,008
Intangible assets, net 311,526 327,255
Contract asset, net of current portion 51,979 87,262
Notes receivable
2,514 2,514
Other assets, net
67,522 89,453
Total assets $ 3,048,917 $ 2,729,877
LIABILITIES AND CAPITAL
Current liabilities:
Current portion of long-term debt $ 47,402 $ 80,276
Current portion of finance lease obligations 4,491 5,836
Current portion of operating lease obligations 5,473 9,616
Trade payables 16,465 23,675
Accrued payroll 64,332 53,352
Construction payables 61,166 53,120
Accrued interest payable 38,947 37,546
Due to Ontario Lottery and Gaming Corporation 3,582 22,253
Other current liabilities 165,048 159,802
Total current liabilities 406,906 445,476
Long-term debt, net of current portion
2,304,551 1,858,478
Finance lease obligations, net of current portion
107,977 109,189
Operating lease obligations, net of current portion 357,139 410,090
Warrants and put option liabilities 47,300 -
Accrued payroll
- 3,529
Other long-term liabilities
38,943 36,357
Total liabilities 3,262,816 2,863,119
Commitments and Contingencies
Capital:
Retained deficit (130,551) (133,087)
Accumulated other comprehensive loss (88,146) (2,065)
Total capital attributable to Mohegan Tribal Gaming Authority (218,697) (135,152)
Non-controlling interests 4,798 1,910
Total capital (213,899) (133,242)
Total liabilities and capital $ 3,048,917 $ 2,729,877
The accompanying notes are an integral part of these consolidated financial statements.
MOHEGAN TRIBAL GAMING AUTHORITY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands)
For the For the For the
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
September 30, 2022 September 30, 2021 September 30, 2020
Revenues:
Gaming $ 1,122,864 $ 910,378 $ 799,647
Food and beverage 134,724 73,631 103,678
Hotel 115,828 84,307 69,113
Retail, entertainment and other 217,095 160,517 142,524
Net revenues 1,590,511 1,228,833 1,114,962
Operating costs and expenses:
Gaming, including related party transactions of
$3,235, $1,513 and $2,265, respectively
573,561 470,723 444,875
Food and beverage 111,379 63,414 91,662
Hotel, including related party transactions of
$8,644, $8,644 and $8,644, respectively
47,689 36,097 35,578
Retail, entertainment and other 79,289 38,390 54,020
Advertising, general and administrative, including related party
transactions of
$48,723, $35,155 and $28,873, respectively
309,160 231,084 226,588
Corporate, including related party transactions of
$7,551, $6,761 and $7,221, respectively
65,034 61,301 44,177
Depreciation and amortization 102,625 105,335 109,067
Impairment of tangible assets 23,565 - -
Impairment of intangible assets 12,869 - 126,596
Other, net 19,106 38,032 15,616
Total operating costs and expenses 1,344,277 1,044,376 1,148,179
Income (loss) from operations 246,234 184,457 (33,217)
Other income (expense):
Interest income 168 123 1,754
Interest expense, net (206,314) (171,844) (134,925)
Gain (loss) on modification and early extinguishment of debt 630 (21,793) (2,888)
Gain on fair value adjustment 43,020 - -
Other, net 268 10,057 566
Total other expense (162,228) (183,457) (135,493)
Income (loss) before income tax 84,006 1,000 (168,710)
Income tax benefit (provision) (8,810) 6,353 6,694
Net income (loss) 75,196 7,353 (162,016)
Income attributable to non-controlling interests (545) (622) (139)
Net income (loss) attributable to Mohegan Tribal Gaming Authority 74,651 6,731 (162,155)
Comprehensive income (loss):
Foreign currency translation adjustment (86,081) (929) 7,303
Other - 17 (48)
Other comprehensive income (loss) (86,081) (912) 7,255
Other comprehensive income attributable to non-controlling interests - (1,376) (399)
Other comprehensive income (loss) attributable to
Mohegan Tribal Gaming Authority (86,081) (2,288) 6,856
Comprehensive income (loss) attributable to Mohegan Tribal Gaming Authority
$ (11,430) $ 4,443 $ (155,299)
The accompanying notes are an integral part of these consolidated financial statements.
MOHEGAN TRIBAL GAMING AUTHORITY
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(in thousands)
Retained Earnings (Deficit) Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Total Capital Attributable to Mohegan Tribal Gaming Authority Non-controlling Interests Total
Capital
Balance, September 30, 2019 $ 137,124 $ - $ (6,633) $ 130,491 $ 6,942 $ 137,433
Net income (loss) (162,155) - - (162,155) 139 (162,016)
Foreign currency translation adjustment - - 6,904 6,904 399 7,303
Contribution from Mohegan Tribe 10,000 - - 10,000 - 10,000
Distributions to Mohegan Tribe (60,000) - - (60,000) - (60,000)
Distributions to Salishan Company, LLC (661) - - (661) - (661)
Other - - (48) (48) - (48)
Balance, September 30, 2020 (75,692) - 223 (75,469) 7,480 (67,989)
Net income 6,731 - - 6,731 622 7,353
Foreign currency translation adjustment - - (2,305) (2,305) 1,376 (929)
Contribution from Mohegan Tribe - 2,814 - 2,814 - 2,814
Distributions to Mohegan Tribe (63,186) (2,814) - (66,000) - (66,000)
Distributions to Salishan Company, LLC (940) - - (940) - (940)
Other - - 17 17 (7,568) (7,551)
Balance, September 30, 2021 (133,087) - (2,065) (135,152) 1,910 (133,242)
Net income 74,651 - - 74,651 545 75,196
Foreign currency translation adjustment - - (86,081) (86,081) - (86,081)
Contribution from Mohegan Tribe - 325 - 325 - 325
Distributions to Mohegan Tribe (71,075) (325) - (71,400) - (71,400)
Distributions to Salishan Company, LLC (1,040) - - (1,040) - (1,040)
Other - - - - 2,343 2,343
Balance, September 30, 2022 $ (130,551) $ - $ (88,146) $ (218,697) $ 4,798 $ (213,899)
The accompanying notes are an integral part of these consolidated financial statements.
MOHEGAN TRIBAL GAMING AUTHORITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the For the For the
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
September 30, 2022 September 30, 2021 September 30, 2020
Cash flows provided by operating activities:
Net income (loss) $ 75,196 $ 7,353 $ (162,016)
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation and amortization
102,625 105,335 109,067
Non-cash operating lease expense 8,335 10,911 12,465
Accretion of discounts
1,984 1,670 1,109
Amortization of discounts and debt issuance costs
15,739 19,415 19,205
Paid-in-kind interest 35,059 - -
Gain on fair value adjustment (43,020) - -
(Gain) loss on modification and early extinguishment of debt (704) 21,418 -
Provision for losses on receivables
6,095 4,709 4,592
Deferred income taxes 9,102 (6,716) (7,049)
Impairment charges 36,434 - 126,596
Other, net
4,746 (6,676) 1,585
Changes in operating assets and liabilities, net of effect of the Niagara Resorts acquisition:
Accounts receivable, net (12,618) (1,617) 4,423
Inventories (1,419) (1,518) 1,435
Due from Ontario Lottery and Gaming Corporation 7,463 (13,768) 7,571
Contract asset 24,817 16,244 (77,026)
Other assets 21,789 (772) 7,797
Trade payables (7,115) 126 5,125
Accrued interest payable 1,899 11,176 6,550
Due to Ontario Lottery and Gaming Corporation (18,397) 5,835 (1,983)
Operating lease obligations (4,345) 13,800 3,105
Other liabilities 24,650 40,842 (14,339)
Net cash flows provided by operating activities 288,315 227,767 48,212
Cash flows used in investing activities:
Purchases of property and equipment
(287,211) (48,263) (149,031)
Investments related to the Inspire Korea project (5,611) - (7,980)
Investment in Mohegan Hotel Holding, LLC - - (10,750)
Acquisition of the Niagara Resorts, net of cash acquired - - (1,666)
Other, net (2,077) (1,078) (3,929)
Net cash flows used in investing activities (294,899) (49,341) (173,356)
Cash flows provided by (used in) financing activities:
Proceeds from revolving credit facilities 1,064,176 1,056,296 730,772
Repayments on revolving credit facilities (1,125,253) (1,201,511) (609,345)
Proceeds from issuance of long-term debt 698,358 1,223,802 7,845
Repayments of long-term debt (55,884) (1,143,507) (76,458)
Payments on finance lease obligations (5,553) (1,145) (1,298)
Contributions from affiliates 325 2,814 10,000
Distributions to affiliates (72,440) (66,940) (60,661)
Payments of financing fees (66,301) (24,586) (13,752)
Other, net 736 (1,607) (1,527)
Net cash flows provided by (used in) financing activities 438,164 (156,384) (14,424)
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 431,580 22,042 (139,568)
Effect of exchange rate on cash, cash equivalents, restricted cash and restricted cash equivalents (75,763) 586 908
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year 164,697 142,069 280,729
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of year $ 520,514 $ 164,697 $ 142,069
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents to the consolidated balance sheets:
Cash and cash equivalents $ 164,671 $ 149,822 $ 112,665
Restricted cash and cash equivalents, current 8,838 5,259 934
Restricted cash and cash equivalents, non-current 347,005 9,616 28,470
Cash, cash equivalents, restricted cash and restricted cash equivalents
$ 520,514 $ 164,697 $ 142,069
Supplemental disclosures:
Cash paid for interest $ 165,192 $ 139,267 $ 114,873
Non-cash transactions:
Right-of-use assets additions (reductions) $ (26,009) $ (53,392) $ 426,403
Operating lease obligations additions (reductions) $ (26,009) $ (43,146) $ 426,548
Paid-in-kind interest capitalized $ 7,390 $ - $ -
Paid-in-kind interest converted to debt $ 36,998 $ - $ -
Increase in construction payables $ 8,046 $ 22,052 $ 38,172
Finance lease assets and obligations
$ - $ 79,187 $ 2,879
Prior senior secured credit facility reduction $ - $ - $ 10,514
Derecognition of build-to-suit asset and liability $ - $ - $ 90,675
The accompanying notes are an integral part of these consolidated financial statements.
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization
Organization
We were established by the Mohegan Tribe of Indians of Connecticut (the “Mohegan Tribe”) in July 1995. We have the exclusive authority to conduct and regulate gaming activities for the Mohegan Tribe on tribal lands and the non-exclusive authority to conduct such activities elsewhere.
We are primarily engaged in the ownership, operation and development of integrated entertainment facilities. We currently own two facilities in the United States and operate or manage five other facilities in the United States and Canada. We are also currently developing a facility in South Korea, the Inspire Entertainment Resort located adjacent to the Incheon International Airport (“Inspire Korea”).
Our Properties
Mohegan Sun
We own Mohegan Sun which is located on an approximately 196-acre site on the Mohegan Tribe's reservation overlooking the Thames River. The facility is one of two authorized gaming and entertainment facilities in the state of Connecticut and competes primarily with gaming operations in Massachusetts, Rhode Island and New York.
Mohegan Pennsylvania
We own Mohegan Pennsylvania which is located on an approximately 400-acre site in Wilkes-Barre, Pennsylvania, and features live harness racing. The facility is one of 16 gaming and entertainment facilities in the state of Pennsylvania and competes primarily with facilities in Bethlehem and Mount Pocono.
Inspire Korea
In February 2016, Inspire Integrated Resort Co., Ltd. (“Inspire Integrated Resort”), a wholly-owned subsidiary, was awarded pre-approval for a gaming license to be issued upon completion of the construction of Inspire Korea in South Korea. This license would permit gaming only by holders of non-Korean passports. In August 2016, we entered into an agreement with the Incheon International Airport Authority for the long-term lease and development of approximately 4.4 million square meters of land located directly adjacent to Terminal 2 of the Incheon International Airport. The integrated entertainment resort phase of Inspire Korea is planned to open in late 2023, with the casino anticipated to open in January 2024. Inspire Korea will compete primarily with another casino resort located in Incheon and several other smaller casino-only operations located in downtown Seoul.
Niagara Resorts
We operate the Niagara Resorts under a Casino Operating and Services Agreement. The Niagara Resorts include Fallsview Casino Resort, Casino Niagara and the OLG Stage at Fallsview Casino, all in Niagara Falls, Canada. Fallsview Casino Resort, which overlooks the iconic Horseshoe Falls, and Casino Niagara are the only two gaming and entertainment facilities in Niagara Falls, Canada. The Niagara Resorts compete primarily with facilities in Toronto, Ontario and Niagara Falls, New York.
Mohegan Casino Las Vegas
We operate Mohegan Casino Las Vegas, a more than 60,000-square-foot gaming facility at Virgin Hotels Las Vegas, in Las Vegas, Nevada. The integrated resort, including Mohegan Casino Las Vegas, competes primarily with resorts and casinos in Las Vegas.
ilani Casino Resort
We developed and currently operate ilani Casino Resort in Clark County, Washington, a gaming and entertainment facility owned by the federally-recognized Cowlitz Indian Tribe and the Cowlitz Tribal Gaming Authority. ilani Casino Resort is located approximately 16 miles north of Portland with direct access to Interstate 5.
Resorts Casino Hotel
We manage Resorts Casino Hotel and own 10% of the casino's holding company and its subsidiaries, including those conducting or licensing iGaming and retail sports wagering in the state of New Jersey. Resorts Casino Hotel, the first casino hotel in Atlantic City, New Jersey, opened in 1978, becoming the first legal casino outside of the state of Nevada. Resorts
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Casino Hotel is one of nine casinos operating in Atlantic City and competes primarily with resorts and casinos in Atlantic City, New Jersey, Pennsylvania and New York.
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and the United States federal government declared it a national emergency. The spread of COVID-19 has affected most segments of the global economy, including our operations. In March 2020, we temporarily suspended operations at our properties in the United States and Canada to ensure the health and safety of our employees, customers and the surrounding communities in which we operate, consistent with directives from various governmental bodies. All of our properties in the United States were reopened by July 2020. Our properties in Canada reopened in July 2021, but were temporarily closed again from January 5, 2022 through January 30, 2022, due to a resurgence of COVID-19 at that time.
While we are operating at full capacity as of the filing of this Annual Report on Form 10-K, COVID-19 has had a significant impact on our operations, the full extent of which depends on future developments which are highly uncertain and cannot be predicted with confidence. Such developments include the following:
•the duration of COVID-19 or the extent of any resurgence or variants of COVID-19 in areas where we operate or where our customers are located;
•the manner in which our customers, suppliers and other third parties respond to COVID-19, including the perception of safety and health measures we implemented;
•new information that may emerge concerning the severity of COVID-19 and the actions to contain or treat it;
•general, local or national economic conditions; and
•consumer confidence.
Accordingly, we cannot reasonably estimate the extent to which COVID-19 will further impact our future financial condition, results of operations and cash flows.
We could experience other potential adverse impacts as a result of COVID-19, including, but not limited to, charges from further adjustments to the carrying value of our intangible assets, as well as other long-lived asset impairment charges. Actual results may differ materially from our current estimates as the scope of COVID-19 evolves, depending largely, but not exclusively, on the duration and extent of any business disruptions.
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying Financial Statements include the accounts of the Company and its majority and wholly-owned subsidiaries and entities. The accounts of MGE Niagara Entertainment Inc. (“MGE Niagara”) are consolidated into the accounts of the Company as MGE Niagara is a variable interest entity and the Company is deemed to be the primary beneficiary of MGE Niagara. In consolidation, all intercompany balances and transactions are eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. Actual amounts could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of deposits that can be redeemed on demand and highly liquid investments with original maturities of three months or less from the date of purchase. Cash and cash equivalents include all operating cash and in-house funds.
Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents consist of deposits that are restricted as to their withdrawal or use. Restricted cash and cash equivalents primarily include cash intended to be used for Inspire Korea.
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Accounts Receivable
Accounts receivable consists of casino receivables, which represent credit extended to approved casino customers, and hotel and other non-gaming receivables. We maintain a reserve for doubtful collection of these receivables, which primarily relates to casino receivables.
Inventories
Inventories are stated at the lower of cost or net realizable value and consist primarily of food and beverage, retail, hotel and operating supplies. Cost is determined using the average cost method.
Due from/to Ontario Lottery and Gaming Corporation
On a bi-weekly basis, the Ontario Lottery and Gaming Corporation remits estimated amounts due to us pursuant to the terms of the Casino Operating and Services Agreement. Any such remittance that is due, but not yet received, is recorded within due from Ontario Lottery and Gaming Corporation. Differences between actual and estimated amounts due are separately settled with the Ontario Lottery and Gaming Corporation on an annual basis, however, a quarterly interim reconciliation process is available. Any settlement amount owed to the Ontario Lottery and Gaming Corporation is recorded within due to Ontario Lottery and Gaming Corporation.
Property and Equipment
Property and equipment are stated at cost. Depreciation is recognized over the estimated useful lives of the assets, other than land, on a straight-line basis. Leasehold improvements are amortized over the shorter of the lease terms or the estimated useful lives of the improvements. Estimated useful lives by asset categories are as follows:
Buildings and land improvements 40 years
Furniture and equipment 3 - 7 years
The costs of significant improvements are capitalized. Costs of normal repairs and maintenance are expensed as incurred.
Property and equipment are assessed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If it is determined that the carrying amounts may not be recoverable based on current and future levels of income and cash flows, as well as other factors, an impairment charge will be recognized at such time.
Intangible Assets
Intangible assets consist primarily of Mohegan Sun's trademark and Mohegan Pennsylvania's various gaming licenses. These intangible assets all have indefinite lives. Intangible assets with indefinite lives are assessed at least annually for impairment by comparing their fair value to their carrying value. However, these intangible assets may be assessed more frequently for impairment if events or changes in circumstances, such as declines in revenues, earnings and cash flows or material adverse changes in business climate, indicate that their carrying value may be impaired.
Intangible assets with finite lives are assessed for impairment whenever events or circumstances indicate that their carrying value may not be recoverable. If necessary, an impairment charge is recognized when the carrying value of the asset (asset group) exceeds the estimated undiscounted cash flows expected from the use and eventual disposition of the asset (asset group). The amount of the impairment charge, if any, is calculated as the excess of the asset’s (asset group’s) carrying value over its fair value.
The evaluation of intangible assets for impairment requires the use of estimates about future cash flows. Such estimates are, by their nature, subjective. Actual results may differ materially from our estimates and could result in impairment charges in the future.
Debt Issuance Costs
Debt issuance costs are amortized to interest expense based on the effective interest method.
Self-insurance Reserves
We are self-insured up to certain limits for costs associated with workers’ compensation, general liability and employee medical coverage. Insurance claims and reserves include estimated settlements of known claims, as well as estimates of incurred but not reported claims. These reserves are recorded within other current liabilities. In estimating self-insurance reserves, we consider historical loss experiences and expected levels of costs per claim. Claims are accounted for based on estimates of undiscounted claims, including claims incurred but not reported.
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Leases
We account for leases in accordance with guidance provided by Accounting Standards Updates (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which requires, among other things, lessees to recognize a right-of-use asset and liability for leases with terms in excess of 12 months.
We determine if a contract is, or contains, a lease at its inception or at the time of any modification. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control over the use of the identified asset requires that the lessee has both: (i) the right to obtain substantially all of the economic benefits from the use of the asset and (ii) the right to direct the use of the asset.
Right-of-use operating and finance lease assets and liabilities are recognized on the respective lease commencement date based on the present value of future lease payments over the expected lease term. An expected lease term includes any option to extend or terminate the lease if it is reasonably certain that we will exercise such option. We utilize the incremental borrowing rate (“IBR”) applicable to the lease as determined at the lease commencement date to calculate the present value of future lease payments. The applicable IBR is determined based on the treasury group to which the leasing entity belongs and that group’s estimated interest rate for collateralized borrowings over a similar term as the future lease payments. Operating lease expense for fixed lease payments is recognized on a straight-line basis over the expected lease term. Finance lease assets are recorded within property and equipment, net and are amortized on a straight-line basis over the related lease term.
Warrants and Put Option
We account for our warrants and put option liabilities in accordance with guidance provided by Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging” (“ASC 815”). Under ASC 815 the warrants and put option do not meet the criteria for equity treatment. Accordingly, these instruments are classified as long-term liabilities and are re-measured at their estimated fair values at each reporting date. The estimated fair value of the warrants and put option was determined by utilizing the income approach (discounted cash flow method) and a binomial lattice model.
Revenue Recognition
Our revenues from contracts with customers consist of gaming, including racing and online casino gaming and sports wagering, food and beverage, hotel, retail, entertainment and convention related transactions, as well as management and development services related to management and development contracts with third-party facilities.
The transaction price in a gaming contract is the difference between gaming wins and losses, not the total amount wagered. The transaction price in a racing contract, inclusive of live racing at our facilities, as well as import and export arrangements, is the commission received from the pari-mutuel pool less contractual fees and obligations, which primarily consist of purse funding requirements, simulcasting fees, tote fees and certain pari-mutuel taxes that are directly related to racing operations. The transaction price in online casino gaming and sports wagering is the share of the revenues that we expect to collect as the agent. The transaction prices in food and beverage, hotel, retail, entertainment and convention contracts are the net amounts collected for such goods and services. Sales and other taxes collected on behalf of governmental authorities are accounted for on a net basis and are not recorded within revenues or expenses. The transaction prices in management and development service contracts are the amounts collected for services rendered in accordance with contractual terms, inclusive of reimbursable costs and expenses.
We recognize gaming revenues as amounts wagered less prizes paid out. Gaming transactions involve two performance obligations for customers participating in our loyalty reward programs and a single performance obligation for customers that do not participate. We apply a practical expedient by accounting for gaming contracts on a portfolio basis, as such contracts share similar characteristics. The effects on our Financial Statements under this approach do not differ materially versus under an individual contract basis. We utilize a deferred revenue model to reduce gaming revenues by the estimated fair value of loyalty points earned by customers. Revenues allocated to gaming performance obligations are recognized when gaming occurs as such activities are settled immediately. Revenues allocated to the loyalty points deferred revenue liability are recognized when loyalty points are redeemed. The deferred revenue liability is based on the estimated stand-alone selling price of loyalty points earned after factoring in the likelihood of redemption.
Food and beverage, hotel, retail, entertainment and convention transactions have been determined to be separate, stand-alone performance obligations and revenues for such contracts are recognized when the related goods and services are transferred to customers. Revenues from contracts which include a combination of these transactions are allocated on a pro rata basis based on the stand-alone selling price of the goods and services. Revenues from food and beverage, hotel, retail, entertainment and other services, including revenues associated with loyalty point redemptions, are recognized at the time such service is performed. Minimum rental revenues are recognized on a straight-line basis over the terms of the related leases. Percentage rental revenues are recognized in the periods in which the tenants exceed their respective percentage rent thresholds.
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Management and development services have been determined to be separate, stand-alone performance obligations, and revenues for such contracts are recognized when the related services are performed. We recognize management fees pursuant to the respective management agreement, usually as a percentage of the managed entity’s earnings during the period. Development fees are recognized pursuant to the respective development agreement, typically as a percentage of construction costs incurred during the period. Management and development fees are recorded within retail, entertainment and other revenues.
We operate the Niagara Resorts under the terms of a 21-year Casino Operating and Services Agreement with the Ontario Lottery and Gaming Corporation. Pursuant to the laws of Canada and the Province of Ontario, the Ontario Lottery and Gaming Corporation retains legal authority to conduct and manage lottery schemes on behalf of the Province of Ontario. We are acting as a service provider to the Ontario Lottery and Gaming Corporation under the Casino Operating and Services Agreement and, therefore, recognize gaming revenues net of amounts due to the Ontario Lottery and Gaming Corporation. We retain all non-gaming revenues and recognize these amounts on a gross basis. The Casino Operating and Services Agreement represents a series of distinct goods and services and, therefore, is deemed to be a single performance obligation. The transaction price under the Casino Operating and Services Agreement includes both fixed and variable consideration. The fixed consideration is comprised of an annual service provider fee and additional consideration for permitted capital expenditures up to an annual cap. The fixed consideration is recognized as revenue on a straight-line basis over the term of the Casino Operating and Services Agreement. The variable consideration consists of 70% of Gaming Revenues (as defined under the Casino Operating and Services Agreement), in excess of a guaranteed annual minimum amount payable to the Ontario Lottery and Gaming Corporation (the “Threshold”). Annual Threshold amounts are contractually established and vary from year to year. If gaming revenues are less than the Threshold for any given year, we are obligated to make a payment to cover the related shortfall. The variable consideration is recognized as revenue as services are rendered under the terms of the Casino Operating and Services Agreement. We measure our progress in satisfying this performance obligation based on the output method, which aligns with the benefits provided to the Ontario Lottery and Gaming Corporation. Projected revenues are estimated based on the most likely amount within a range of possible outcomes to the extent that a significant reversal in the amount of cumulative revenues recognized is not probable of occurring. The difference between revenues recognized and cash received is recorded as an asset or a liability and classified as short-term or long-term based upon the anticipated timing of reversal. In the event an asset is recorded, such asset is assessed at least annually for impairment.
In June 2021, the Casino Operating and Services Agreement was amended to provide for, among other things, a three-year replacement of the annual Threshold, subject to certain conditions, with a fixed revenue share percentage. The annual Threshold may be reinstated at any time during this three-year period under certain conditions specified in the amended Casino Operating and Services Agreement.
Gaming Costs and Expenses
Gaming costs and expenses primarily represent portions of gaming revenues that must be paid to the State of Connecticut and the Pennsylvania Gaming Control Board (the “PGCB”). Gaming costs and expenses also include, among other things, payroll costs, expenses associated with the operation of slot machines, table games, poker, online casino gaming, live harness racing, racebook and sportsbook, certain marketing expenditures and promotional expenses related to loyalty point and coupon redemptions.
Advertising Costs and Expenses
Production costs are expensed the first time the advertisement takes place. Prepaid rental fees associated with billboard advertisements are capitalized and amortized over the terms of the related agreements. Advertising costs and expenses totaled $36.1 million, $19.3 million and $22.5 million for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
Pre-opening Costs and Expenses
Costs of start-up activities are expensed as incurred. Pre-opening costs and expenses totaled $15.8 million, $37.1 million and $15.6 million for the fiscal years ended September 30, 2022, 2021 and 2020, respectively, and were recorded within other, net.
Income Taxes
Similar to other sovereign governments, the Mohegan Tribe and its entities, including the Company, are not subject to United States federal income taxes. However, certain of our non-tribal entities are subject to income taxes in various domestic and foreign jurisdictions.
We account for income taxes in accordance with guidance provided by ASC Topic 740, “Income Taxes” (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities, and are measured at the prevailing enacted tax rates that will be in
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
effect when these differences are settled or realized. ASC 740 requires that deferred tax assets be reduced by a valuation allowance if it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.
ASC 740 also creates a single model to address uncertainty in tax positions and clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the entity's financial statements. In addition, ASC 740 provides guidance with respect to de-recognition, measurement, classification, interest and penalties, accounting in interim periods and disclosure requirements. Our uncertain tax positions are insignificant.
Foreign Currency
The financial position and operating results of foreign operations are consolidated using the local currency as the functional currency. Local currency assets and liabilities are translated at the end-of-period rates, while local currency revenues and expenses are translated at the average rates in effect during the period. Local currency equity is translated at historical rates and the resulting cumulative translation adjustments are recorded as a component of accumulated other comprehensive income or loss.
Fair Value of Financial Instruments
We apply the following fair value hierarchy, which prioritizes the inputs utilized to measure fair value into three levels:
•Level 1 - Quoted prices for identical assets or liabilities in active markets;
•Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets or valuations based on models where the significant inputs are observable or can be corroborated by observable market data; and
•Level 3 - Valuations based on models where the significant inputs are unobservable. The unobservable inputs reflect our estimates or assumptions that market participants would utilize in pricing such assets or liabilities.
Our assessment of the significance of a particular input requires judgment and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy.
The carrying amount of cash and cash equivalents, restricted cash and cash equivalents, receivables and trade payables approximates fair value. The estimated fair value of our long-term debt is primarily based on Level 2 inputs (refer to Note 6).
Recently Issued Accounting Pronouncements
ASU 2019-12
In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which simplifies various aspects related to the accounting for income taxes. This new standard removes certain exceptions to the general principles in ASU 2019-12 and clarifies and amends existing guidance to improve consistent application. ASU 2019-12 was effective for annual reporting periods beginning after December 15, 2020. There was no effect on our financial statements from adopting this new standard.
ASU 2021-10
In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (“ASU 2021-10”), which requires business entities to provide certain disclosures about government transactions that are accounted for by applying a grant or contribution accounting model by analogy to other accounting guidance. ASU 2021-10 is effective for annual reporting periods beginning after December 15, 2021. We are currently evaluating the effect ASU 2021-10 will have on our disclosures, but do not expect its adoption to have a material impact.
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3 - Revenue Recognition
Revenue Disaggregation
We are primarily engaged in the ownership, operation, management and development of integrated entertainment facilities both domestically and internationally. Our current wholly-owned operations are primarily focused within Connecticut and Pennsylvania. We also currently operate and manage other gaming facilities elsewhere within the United States and Canada. We generate revenues by providing the following types of goods and services: gaming, food and beverage, hotel and retail, entertainment and other, which includes management and development fees earned.
Revenue Disaggregation by Geographic Location
For the Fiscal Year Ended September 30, 2022
(in thousands) Connecticut Pennsylvania Canada Other
Gaming $ 631,456 $ 229,163 $ 213,165 $ 49,080
Food and beverage 90,722 16,005 23,782 4,215
Hotel 94,240 6,258 15,339 (9)
Retail, entertainment and other 123,864 6,414 26,977 59,840
Net revenues $ 940,282 $ 257,840 $ 279,263 $ 113,126
For the Fiscal Year Ended September 30, 2021
(in thousands) Connecticut Pennsylvania Canada Other
Gaming $ 604,482 $ 202,932 $ 87,406 $ 15,558
Food and beverage 59,611 8,718 2,837 2,465
Hotel 77,282 4,946 2,091 (12)
Retail, entertainment and other 75,001 4,883 6,868 74,025
Net revenues $ 816,376 $ 221,479 $ 99,202 $ 92,036
For the Fiscal Year Ended September 30, 2020
(in thousands) Connecticut Pennsylvania Canada Other
Gaming $ 518,599 $ 159,661 $ 121,387 $ -
Food and beverage 64,012 12,208 27,544 (86)
Hotel 58,219 4,578 6,319 (3)
Retail, entertainment and other 74,844 4,713 24,775 38,019
Net revenues $ 715,674 $ 181,160 $ 180,025 $ 37,930
Contract and Contract-related Assets
Accounts Receivable
(in thousands) September 30, 2022 September 30, 2021
Gaming $ 40,385 $ 37,921
Food and beverage 18 13
Hotel 5,601 3,106
Retail, entertainment and other 24,009 19,099
Accounts receivable 70,013 60,139
Allowance for doubtful accounts (24,018) (19,367)
Accounts receivable, net $ 45,995 $ 40,772
As of September 30, 2022 and 2021, contract assets related to the Niagara Resorts Casino Operating and Services Agreement with the Ontario Lottery and Gaming Corporation totaled $87.5 million and $119.9 million, respectively.
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Contract and Contract-related Liabilities
A difference may exist between the timing of cash receipts from customers and the recognition of revenues, resulting in a contract or contract-related liability. In general, we have three types of such liabilities: (1) outstanding gaming chips and slot tickets liability, which represents amounts owed in exchange for outstanding gaming chips and slot tickets held by customers, (2) loyalty points deferred revenue liability and (3) customer advances and other liability, which primarily represents funds deposited in advance by customers for gaming and advance payments by customers for goods and services such as advance ticket sales, deposits on rooms and convention space and gift card purchases. These liabilities are generally expected to be recognized as revenues within one year and are recorded within other current liabilities.
(in thousands) September 30, 2022 September 30, 2021
Outstanding gaming chips and slot tickets liability $ 9,743 $ 9,632
Loyalty points deferred revenue liability 40,873 42,663
Customer advances and other liability 30,528 30,166
Total
$ 81,144 $ 82,461
As of September 30, 2022 and 2021, customer contract liabilities related to Mohegan Pennsylvania's revenue sharing agreement with Unibet Interactive Inc. totaled $14.4 million and $15.8 million, respectively, and were primarily recorded within other long-term liabilities.
Note 4 - Property and Equipment
Property and equipment
(in thousands) September 30, 2022 September 30, 2021
Land $ 44,848 $ 44,848
Land improvements 103,134 102,820
Buildings and improvements 1,869,455 1,860,005
Furniture and equipment 764,356 752,087
Construction in process (1)
424,867 255,909
Property and equipment 3,206,660 3,015,669
Accumulated depreciation (1,562,870) (1,484,050)
Property and equipment, net $ 1,643,790 $ 1,531,619
_________
(1)As of September 30, 2022 and 2021, Inspire Korea related construction in process totaled $385.7 million and $233.5 million, respectively.
As of September 30, 2022 and 2021, finance lease assets totaled $97.8 million and $105.2 million, respectively.
Depreciation expense totaled $101.1 million, $103.8 million and $107.6 million for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
Capitalized interest related to Inspire Korea totaled $22.3 million and $7.6 million for the fiscal years ended September 30, 2022 and 2020, respectively. We did not record any capitalized interest during the fiscal year ended September 30, 2021.
Design and construction work related to Inspire Korea was temporarily paused in September 2020 while we were in the process of securing the necessary financing for the project, which was completed in November 2021 (refer to Note 6). During this temporary pause in construction, we obtained approval to modify our development plan and adjust the timing of a future sub-phase of the initial phase of the project and, in December 2021, we elected to terminate a licensing arrangement for a previously-planned sub-phase and discontinue related design work. As a result, during fiscal 2022, we recognized a tangible asset impairment of $23.6 million on the related construction in progress.
As of September 30, 2022, we assessed our property and equipment for any further impairment and determined that no impairment existed.
Note 5 - Intangible Assets
Intangible assets
(in thousands) September 30, 2022 September 30, 2021
Mohegan Sun trademark (1)
$ 119,692 $ 119,692
Mohegan Pennsylvania gaming licenses (1)
171,904 171,904
Niagara Resorts Casino Operating and Services Agreement rights (2)
16,291 17,612
Other 10,748 25,717
Intangible assets 318,635 334,925
Accumulated amortization (7,109) (7,670)
Intangible assets, net $ 311,526 $ 327,255
_________
(1)Indefinite lives.
(2)21-year useful life.
Amortization expense totaled $1.4 million, $1.5 million and $1.4 million for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
In connection with the termination of the licensing arrangement related to Inspire Korea (refer to Note 4), during fiscal 2022, we recognized an intangible asset impairment of $12.9 million.
As of September 30, 2022, we assessed our intangible assets for any further impairment and determined that no impairment existed.
Note 6 - Long-Term Debt
Long-term debt
September 30, 2022 September 30, 2021
(in thousands) Final Maturity Face Value Book Value Book Value
Senior Secured Credit Facility 2024 $ - $ - $ 27,000
Line of Credit 2024 18,000 18,000 20,227
2021 8% Senior Secured Notes
2026 1,175,000 1,161,164 1,157,731
2016 7 7/8% Senior Unsecured Notes 2024 500,000 495,531 493,599
Niagara Credit Facility
Revolving
2024 - - 27,534
Swingline 2024 - - 4,333
Term Loan 2024 60,945 60,453 68,965
Niagara Convertible Debenture 2040 29,108 29,108 31,468
Korea Credit Facility 2025 362,455 315,475 -
Korea Term Loan 2027 311,998 211,425 -
Expo Credit Facility (1)
2022 - - 25,697
Guaranteed Credit Facility 2023 25,156 24,875 27,208
Redemption Note Payable 2024 38,880 35,261 53,130
Other Varies 661 661 1,862
Long-term debt 2,522,203 2,351,953 1,938,754
Current portion of long-term debt (47,402) (47,402) (80,276)
Long-term debt, net of current portion $ 2,474,801 $ 2,304,551 $ 1,858,478
Fair value $ 2,178,852
Unamortized discounts and debt issuance costs $ 170,250 $ 34,022
_________
(1) Repaid at maturity on April 1, 2022.
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Maturities of long-term debt, excluding unamortized debt issuance costs and discounts, are as follows:
(in thousands)
Fiscal years:
2023 $ 47,402
2024 95,807
2025 500,025
2026 1,537,480
2027 312,022
Thereafter 29,467
Total $ 2,522,203
Senior Secured Credit Facility
In January 2021, we entered into a credit agreement (the “Credit Agreement”) providing for a $262.875 million senior secured revolving credit facility (the “Senior Secured Credit Facility”).
On May 31, 2022, we entered into an amendment to the Senior Secured Credit Facility. Among other things, the amendment extended the maturity date of the Senior Secured Credit Facility from April 14, 2023 to April 12, 2024 and replaced the interest rate based on the London Interbank Offered Rate with an interest rate based on a secured overnight financing rate (“SOFR”).
Borrowings under the Senior Secured Credit Facility accrue interest as follows: (i) for base rate loans, a base rate equal to the highest of (x) the prime rate, (y) the federal funds rate, plus 50 basis points, and (z) the daily SOFR rate, plus a 0.10% credit spread adjustment (subject to a 0.75% floor), plus 100 basis points and a leverage-based margin of 100 to 275 basis points and (ii) for SOFR loans, the applicable SOFR rate, plus a 0.10% credit spread adjustment (subject to a 0.75% floor), plus a leverage-based margin of 200 to 375 basis points. We are also required to pay a leverage-based undrawn commitment fee under the Senior Secured Credit Facility of between 37.5 and 50 basis points.
The leverage-based undrawn commitment fee was 50 basis points as of September 30, 2022.
As of September 30, 2022, letters of credit issued under the Senior Secured Credit Facility totaled $1.9 million. We had $243.0 million of borrowing capacity under the Senior Secured Credit Facility as of September 30, 2022, after factoring in outstanding letters of credit.
The Senior Secured Credit Facility is fully and unconditionally guaranteed, jointly and severally, by certain of our restricted subsidiaries. The Senior Secured Credit Facility is secured on a first priority senior secured basis by collateral constituting substantially all of our and our restricted subsidiaries' assets. In the future, certain other subsidiaries may be required to become guarantors under the terms of the Credit Agreement.
The Credit Agreement contains certain customary covenants applicable to us and our restricted subsidiaries, including covenants governing: incurrence of indebtedness, incurrence of liens, payment of dividends and other distributions, investments, asset sales, affiliate transactions and mergers or consolidations. Additionally, the Credit Agreement includes financial maintenance covenants pertaining to total leverage, secured leverage and fixed charge coverage, as well as a minimum liquidity covenant under certain conditions. The Credit Agreement also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations.
Line of Credit
In January 2021, in connection with the Senior Secured Credit Facility, we entered into a $25.0 million revolving credit facility (the “Line of Credit”).
On May 31, 2022, in connection with the amendment to the Senior Secured Credit Facility, we entered into an amendment to the Line of Credit. This amendment extended the maturity date of the Line of Credit from April 14, 2023 to April 12, 2024 and replaced the interest rate based on the London Interbank Offered Rate with a rate based on SOFR.
Under the terms of the Senior Secured Credit Facility, the Line of Credit may be converted into loans under the Senior Secured Credit Facility. Borrowings under the Line of Credit accrue interest at a base rate plus a spread. As of September 30, 2022, outstanding borrowings under the Line of Credit accrue interest at 6.27%. The Line of Credit contains negative covenants and financial maintenance covenants that are substantially the same as those contained in the Senior Secured Credit Facility.
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2021 8% Senior Secured Notes
In January 2021, we issued $1.175 billion second priority senior secured notes with interest at 8% per annum (the “2021 Senior Secured Notes”). The 2021 Senior Secured Notes mature on the earlier of February 1, 2026 and the Springing Maturity Date (as defined in the 2021 Senior Secured Notes indenture). Interest on the 2021 Senior Secured Notes is payable semi-annually in arrears on February 1 and August 1.
Prior to February 1, 2023, we may redeem the 2021 Senior Secured Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2021 Senior Secured Notes redeemed and a Make-whole Premium (as defined in the 2021 Senior Secured Notes indenture), plus accrued interest. In addition, we may, during the twelve-month period commencing on the issue date of the 2021 Senior Secured Notes and during the twelve-month period subsequent to such initial twelve-month period and prior to February 1, 2023, redeem in each such twelve-month period up to 10% of the initial aggregate principal amount of the 2021 Senior Secured Notes at a price equal to 103% of the principal amount of the 2021 Senior Secured Notes redeemed, plus accrued interest, provided that if we do not redeem 10% of the initial aggregate principal amount of the 2021 Senior Secured Notes during the initial twelve-month period commencing on the issue date of the 2021 Senior Secured Notes, we may, in the subsequent twelve-month period prior to February 1, 2023, redeem the 2021 Senior Secured Notes in an amount that does not exceed 10% of the initial aggregate principal amount of the 2021 Senior Secured Notes plus the difference between: (i) 10% of the initial aggregate principal amount of the 2021 Senior Secured Notes and (ii) the aggregate principal amount of any 2021 Senior Secured Notes redeemed during such initial twelve-month period. On or after February 1, 2023, we may redeem some or all of the 2021 Senior Secured Notes at prices set forth in the 2021 Senior Secured Notes indenture, plus accrued interest.
The 2021 Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, by each of our restricted subsidiaries and will be guaranteed by any restricted subsidiary that becomes a guarantor under the terms of the 2021 Senior Secured Notes indenture. The 2021 Senior Secured Notes are secured on a second priority senior secured basis by collateral constituting substantially all of our and our restricted subsidiaries’ assets.
The 2021 Senior Secured Notes indenture contains certain customary covenants, including our and our restricted subsidiaries’ ability to incur additional debt, pay dividends or distributions, make certain investments, create liens on assets, enter into transactions with affiliates, merge or consolidate with another company or sell assets. The 2021 Senior Secured Notes indenture includes customary events of default, including, but not limited to, failure to make required payments and failure to comply with certain covenants.
2016 7 7/8% Senior Unsecured Notes
In 2016, we issued $500.0 million senior unsecured notes with interest at 7.875% per annum (the “2016 Senior Unsecured Notes”). The 2016 Senior Unsecured Notes mature on October 15, 2024. Interest on the 2016 Senior Unsecured Notes is payable semi-annually in arrears on April 15 and October 15.
The 2016 Senior Unsecured Notes are redeemable at our option, in whole or in part, at specified redemption prices, plus accrued interest. If we experience specific kinds of change-of-control triggering events, we are required to make an offer to repurchase the 2016 Senior Unsecured Notes at a price equal to 101% of the principal amount, plus accrued interest. Additionally, if we undertake specific kinds of asset sales and do not use the related sale proceeds for specified purposes, we may be required to offer to repurchase the 2016 Senior Unsecured Notes at a price equal to 100% of the principal amount, plus accrued interest. In certain circumstances, if any gaming regulatory authority requires a holder or beneficial owner of the 2016 Senior Unsecured Notes to be licensed, qualified or found suitable under applicable gaming laws, and such holder or beneficial owner does not obtain such license, qualification or finding of suitability within a specified time, we can require such holder or beneficial owner to dispose our 2016 Senior Unsecured Notes or call for redemption of the 2016 Senior Unsecured Notes held by such holder or beneficial owner at a price equal to the lesser of 100% of the principal amount or the price paid by such holder or beneficial owner, plus accrued interest.
The 2016 Senior Unsecured Notes are unsecured, unsubordinated obligations and are guaranteed by certain of our restricted subsidiaries.
The 2016 Senior Unsecured Notes indenture contains certain covenants that, subject to certain significant exceptions, limit, among other things, us and certain of our restricted subsidiaries’ ability to incur additional debt, pay dividends or distributions, make certain investments, create liens on assets, enter into transactions with affiliates, merge or consolidate with another company or transfer and sell assets. The 2016 Senior Unsecured Notes indenture also includes events of default, including, but not limited to, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay certain other indebtedness the occurrence of which is caused by a failure to pay principal, premium or interest or results in the acceleration of such indebtedness, certain events of bankruptcy and insolvency and certain judgment defaults.
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Refer to Note 13 for further details regarding an exchange agreement we entered into in connection with the 2016 Senior Unsecured Notes.
Niagara Credit Facilities
In July 2021, MGE Niagara entered into an amended and restated credit agreement (the “Niagara Credit Agreement”) providing for certain credit facilities (the “Niagara Credit Facilities”). The Niagara Credit Agreement, as amended from time to time, provides for a revolving credit facility in the amount of up to 180.0 million Canadian dollars (the “Niagara Revolving Facility”), a swingline facility in the amount of up to 25.0 million Canadian dollars (the “Niagara Swingline Facility”) and a term loan facility in the amount of 90.0 million Canadian dollars (the “Niagara Term Loan Facility”). Availability under the Niagara Revolving Facility and the Niagara Swingline Facility is determined based on Province of Ontario-approved gaming capacity levels.
The Niagara Credit Facilities mature on June 10, 2024. The Niagara Term Loan Facility is repayable, in quarterly installments, at a rate of 5.0 million Canadian dollars per annum, commencing September 30, 2019.
Borrowings under the Niagara Credit Facilities accrue interest at a base rate plus a spread. We are also required to pay a leverage-based undrawn fee under the Niagara Revolving Facility of between 75 and 125 basis points.
As of September 30, 2022, outstanding borrowings under the Niagara Term Loan Facility accrue interest at 8.69%. As of September 30, 2022, the undrawn fee under the Niagara Revolving Facility was 125 basis points.
As of September 30, 2022, letters of credit issued under the Niagara Revolving Facility totaled $25.5 million. We had $120.1 million of borrowing capacity under the Niagara Revolving Facility and Niagara Swingline Facility as of September 30, 2022, after factoring in outstanding letters of credit.
MGE Niagara is an unrestricted subsidiary under our existing credit facilities and indentures and the Niagara Credit Facilities are non-recourse to us and our restricted subsidiaries.
The Niagara Credit Facilities are secured by, among other things, substantially all of the properties and assets of MGE Niagara, subject to certain customary exceptions, as well as by a pledge of: (i) all of the issued and outstanding shares of MGE Niagara and (ii) a convertible debenture held by a third-party investor.
The Niagara Credit Agreement contains customary covenants applicable to MGE Niagara, including covenants governing: incurrence of indebtedness, incurrence of liens, payment of dividends and other distributions, asset sales, acquisitions and investments, affiliate transactions and fundamental changes. The Niagara Credit Agreement also includes financial maintenance covenants pertaining to total leverage and fixed charge coverage. In addition, the Niagara Credit Agreement contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations.
Niagara Convertible Debenture
In 2019, MGE Niagara issued a convertible debenture (the “Niagara Convertible Debenture”) to a third-party investor (the "Convertible Debenture Holder") in an aggregate principal amount of 40.0 million Canadian dollars. The Niagara Convertible Debenture is convertible, at the option of the Convertible Debenture Holder, between the fourth and sixth anniversaries of the acquisition of the Niagara Resorts (the “Closing Date”), into Class B Special shares representing 40% of the capital of MGE Niagara. The Class B Special shares will be similar in nature to the existing Common shares. The Niagara Convertible Debenture accrues interest at an annual rate of 3.50% prior to the sixth anniversary of the Closing Date and 8.00% thereafter, compounded annually. The first interest payment was payable on June 11, 2022, with annual payments due thereafter. Repayment of the outstanding principal, plus accrued interest, is due thirty days following the expiration or the termination of the Casino Operating and Services Agreement. If the Niagara Convertible Debenture is not converted as of the sixth anniversary of the Closing Date, either MGE Niagara or the Convertible Debenture Holder may elect early repayment of half of the principal outstanding as of such date.
Korea Credit Facility
In September 2021, Inspire Integrated Resort entered into a loan agreement providing for a loan commitment of up to 1.04 trillion Korean won (“KRW”) in two tranches (the “Korea Credit Facility”), comprised of a 740.0 billion KRW credit facility (the “Tranche A Facility”) and a 300.0 billion KRW credit facility (the “Tranche B Facility”). The Korea Credit Facility is being used to pay for the construction, operation, financial and other project costs in connection with Inspire Korea (refer to Note 1). The Korea Credit Facility matures 48 months after the date of the first draw, which was November 29, 2021.
Mandatory prepayments are required under the Korea Credit Facility in connection with certain specified asset dispositions or receipt of insurance proceeds, without a prepayment fee. The Korea Credit Facility may not be voluntarily prepaid in whole or
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
in part until one year after the date of the first draw. After such date, any voluntary prepayment requires a Prepayment Fee (as defined in the Korea Credit Facility agreement).
Borrowings outstanding under the Tranche A Facility accrue interest at a fixed rate of 5.4% per annum or a floating rate equal to the sum of a base rate and an applicable margin (as defined in the Korea Credit Facility agreement). Loans outstanding under the Tranche B Facility accrue interest at a fixed rate of 7.0% per annum or a floating rate equal to the sum of a base rate and an applicable margin (as defined in the Korea Credit Facility agreement). The Korea Credit Facility includes an interest reserve whereby a portion of loan proceeds is reserved for payment of interest. Interest on Tranche A Facility loans is fully reserved and interest on Tranche B Facility loans is reserved for 36 months. If any portion of the Korea Credit Facility is undrawn, Inspire Integrated Resort is required to pay a 0.3% commitment fee on the undrawn amount.
As of September 30, 2022, outstanding borrowings under the Korea Credit Facility accrue interest at between 5.40% and 8.10%.
Inspire Integrated Resort is an unrestricted subsidiary under our existing credit facilities and indentures and the Korea Credit Facility is non-recourse to us and our restricted subsidiaries.
The Korea Credit Facility is secured by liens on substantially all assets of, and equity interests in, Inspire Integrated Resort (subject to certain exceptions and limitations).
The Korea Credit Facility contains certain customary covenants applicable to Inspire Integrated Resort, including covenants governing: incurrence of indebtedness, incurrence of liens, investments, mergers or consolidations, asset sales, acquisitions of assets, the payment of dividends and other distributions and affiliate transactions. In addition, the Korea Credit Facility includes other covenants, representations and warranties and events of default that are customary for financing transactions of this type.
In connection with the Korea Credit Facility, we entered into a credit enhancement support agreement to provide up to $100.0 million credit enhancement support for Inspire Integrated Resort's payment of principal, interest and other sums due under the Korea Credit Facility.
We incurred $59.1 million in costs in connection with this transaction during fiscal 2022. These debt issuance costs were reflected as a debt discount and are being amortized over the term of the Korea Credit Facility using the effective interest method.
Korea Term Loan
On November 4, 2021, MGE Korea Limited (“Korea Limited”), a wholly-owned subsidiary and parent company of Inspire Integrated Resort, entered into a $275.0 million secured term loan facility agreement (the “Korea Term Loan”). Korea Limited received funding from the Korea Term Loan on November 24, 2021 (the “Utilisation Date”). The Korea Term Loan was primarily used to make a capital contribution to Inspire Integrated Resort to partially fund construction-related costs for Inspire Korea. The Korea Term Loan matures 66 months after the Utilisation Date.
If the Korea Term Loan is voluntarily prepaid, if certain mandatory prepayment events are triggered or if it is repaid following a notice of acceleration, we are required to pay a Prepayment Fee (as defined in the Korea Term Loan agreement).
The Korea Term Loan accrues payment-in-kind interest at a rate of 17.0% per annum, to be compounded and capitalized at the end of each quarter, or paid in cash if so elected by Korea Limited.
Korea Limited is an unrestricted subsidiary under our existing credit facilities and indentures and the Korea Term Loan is non-recourse to us and our restricted subsidiaries.
The Korea Term Loan is secured by a fixed charge over 100% of Korea Limited’s share capital and a debenture over the assets of Korea Limited (subject to certain exceptions and limitations).
The Korea Term Loan contains certain customary covenants, including covenants governing: incurrence of indebtedness, incurrence of liens, payment of dividends and other distributions, disposals, acquisitions and investments, arm’s length transactions, mergers and the development and management of Inspire Korea. In addition, the Korea Term Loan includes financial maintenance covenants pertaining to net leverage and debt service coverage of Korea Limited and Inspire Integrated Resort, and contains a requirement that Inspire Integrated Resort maintain a minimum cash balance in the amounts set forth in the Korea Term Loan agreement. The Korea Term Loan also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations.
We incurred $9.3 million in costs in connection with the Korea Term Loan during fiscal 2022. These debt issuance costs were reflected as a debt discount and are being amortized over the term of the Korea Term Loan using the effective interest method. In addition, the allocation of proceeds to the issuance of warrants and associated put option (see below) resulted in an original
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
issue discount on the Korea Term Loan of $90.3 million, which will also be amortized over the term of the Korea Term Loan using the effective interest method.
Korea Warrant Agreement
In connection with the Korea Term Loan, on November 4, 2021, MGE Korea Holding III Limited (“Korea Holding III”), the parent company of Korea Limited, entered into a warrant agreement (the “Warrant Agreement”) to issue detachable warrants (the “Warrants”). The Warrants can be converted into up to a total of 4,400 shares of capital in Korea Holding III at an initial exercise price of $0.01 per share. At the time of issuance, the Warrants represented 22.0% of the fully-diluted share capital of Korea Holding III.
The Warrants are generally exercisable at any time after the third anniversary of the Utilisation Date (November 2024) until the tenth anniversary of the Utilisation Date (November 2031), but may be exercised earlier upon certain triggering events defined in the Warrant Agreement. Upon the earlier of: (i) the tenth anniversary of the Utilisation Date (November 2031) and (ii) the consummation of an Exit Event (as defined in the Warrant Agreement), all unexercised Warrants will expire.
Warrant holders do not have any rights held by holders of shares in the capital of Korea Holding III to vote or to receive dividends and other distributions (other than as set forth in the Warrant Agreement). Warrant holders and shareholders of Korea Holding III have certain preemptive rights in relation to any proposed issuance of equity securities by Korea Holding III or certain affiliates (as defined in the Warrant Agreement), subject to customary exceptions.
Holders of unexercised Warrants have the right to require the parent of Korea Holding III (the “Parent”) to purchase all of the unexercised Warrants that they hold at certain relevant times (the “Put Option”). In turn, the Parent has the right to require the holders of unexercised Warrants to sell all of the unexercised Warrants they hold at certain relevant times (the “Call Option”). Both the Put Option and the Call Option are exercisable at any time in the period from (and including) the date six years and six months after the Utilisation Date (May 2028) until the tenth anniversary of the Utilisation Date (November 2031). The aggregate cash purchase price for both the Put Option and the Call Option equals the higher of: (i) the fair market value of the relevant unexercised Warrants and (ii) $110.0 million, multiplied by a fraction, the numerator of which is the number of the relevant unexercised Warrants and the denominator of which is the total number of Warrants.
The Warrants and the Put Option are classified as long-term liabilities and are re-measured at their estimated fair values at each reporting date. The estimated fair value of the Warrants and the Put Option was determined by utilizing the income approach (discounted cash flow method) and a binomial lattice model. This valuation approach utilized Level 3 inputs. The primary unobservable inputs utilized were the discount rate, which was 12.0%, and the expected volatility of the underlying stock price, which was 55.0%. In addition, projected cash flows are utilized in this valuation approach.
Debt issuance costs incurred during fiscal 2022 and allocated to the Warrants and the Put Option totaling $4.2 million were expensed on the Utilisation Date and recorded within Corporate costs and expenses.
Warrants and Put Option
(in thousands)
Balance, September 30, 2021 $ -
Additions 90,320
Unrealized gain (43,020)
Balance, September 30, 2022 $ 47,300
Guaranteed Credit Facility
In 2018, we entered into loan agreements providing for $35.0 million in term loans under the Indian Loan Guaranty, Insurance and Interest Subsidy Program (the “Guaranteed Credit Facility”). The Guaranteed Credit Facility matures on October 1, 2023 and is repayable, in quarterly installments, at a rate of $2.6 million per annum, commencing January 1, 2019. As of September 30, 2022, outstanding borrowings under the Guaranteed Credit Facility accrue interest at 5.31%. The Guaranteed Credit Facility subjects us to certain covenant requirements.
Redemption Note Payable
In 2017, Salishan-Mohegan redeemed the membership interest in Salishan-Mohegan that was previously held by Salishan Company, LLC for a redemption price of $114.8 million, payable through a promissory note (the “Redemption Note Payable”). The Redemption Note Payable is payable in monthly installments of $1.9 million over a five-year period, commencing in May 2019. We recognize interest expense relating to the amortization of discount to the Redemption Price, utilizing the effective yield method.
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 7 - Leases
Lessee
We lease real estate and equipment under various operating and finance lease agreements. The leases have remaining terms ranging from approximately one month to 49 years and do not contain any material residual value guarantees or restrictive covenants. Rental payments under these lease agreements are fixed and/or variable based on periodic adjustments for inflation, performance, usage or appraised land values. Variable components of lease payments are not included in the calculation of right-of-use assets and liabilities.
Our lease arrangements contain both lease and non-lease components. For instances in which we are a lessee, we account for both lease and non-lease components as a single lease component for substantially all classes of underlying assets (primarily real estate and equipment). Leases with an expected or initial term of 12 months or less are not recorded on our Balance Sheets.
Information related to weighted average lease terms and discount rates is as follows:
September 30, 2022
Weighted average remaining lease terms (years):
Operating leases
Finance leases
Weighted average discount rates:
Operating leases 7.84 %
Finance leases
6.88 %
The components of lease expense are as follows:
For the Fiscal Years Ended
(in thousands) September 30, 2022 September 30, 2021 September 30, 2020
Operating lease expense $ 44,065 $ 45,458 $ 38,414
Short-term lease expense 43,642 33,438 27,121
Variable lease expense 18,133 17,427 12,922
Finance lease expense:
Amortization of right-of-use assets 6,494 4,459 2,401
Interest on lease liabilities 8,740 5,059 1,547
Sublease income (1)
(38,298) (23,147) (20,791)
Total $ 82,776 $ 82,694 $ 61,614
_________
(1)Represents income earned from the rental of hotel, convention or retail space at the Niagara Resorts and the Earth Hotel Tower at Mohegan Sun, both of which are leased properties.
Supplemental cash flow information related to lease liabilities is as follows:
For the Fiscal Years Ended
(in thousands) September 30, 2022 September 30, 2021 September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Payments on operating lease obligations
$ 38,842 $ 20,747 $ 22,844
Payments for interest on finance lease obligations
4,714 345 889
Payments on finance lease obligations
5,553 1,145 1,298
Total
$ 49,109 $ 22,237 $ 25,031
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Maturities of lease obligations are as follows:
(in thousands) Operating Leases
Finance Leases
Fiscal years:
2023 $ 36,788 $ 12,790
2024 38,133 12,354
2025 37,555 11,849
2026 37,827 11,658
2027 38,087 11,240
Thereafter 707,304 148,971
Total future lease payments 895,694 208,862
Amounts representing interest (533,082) (96,744)
Residual values - 350
Present value of future lease payments 362,612 112,468
Current portion of lease obligations (5,473) (4,491)
Lease obligations, net of current portion $ 357,139 $ 107,977
Lessor
We lease space at our facilities to third parties. Remaining lease terms for these non-cancelable operating leases range from approximately one month to 10 years. Rental income under these lease agreements is fixed and/or variable based on percentage of tenant sales or periodic adjustments for inflation. Rental income is recorded within hotel and retail, entertainment and other revenues. For instances in which we are the lessor, and the class of underlying asset represents retail space, we account for both the lease and non-lease components, such as common area maintenance and tenant services, as a single lease component. In all other instances, non-lease components are accounted for separately in accordance with applicable guidance, most commonly ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”.
Rental income consists of the following:
For the Fiscal Years Ended
September 30, 2022 September 30, 2021 September 30, 2020
(in thousands) Hotel Retail,
Entertainment and Other Hotel Retail,
Entertainment and Other Hotel Retail,
Entertainment and Other
Fixed rent $ 66,375 $ 6,799 $ 53,904 $ 5,226 $ 42,473 $ 7,160
Variable rent - 10,885 - 5,314 - 4,176
Total $ 66,375 $ 17,684 $ 53,904 $ 10,540 $ 42,473 $ 11,336
Fixed rental income that we expect to earn under non-cancelable operating leases, exclusive of amounts under contingent rent escalation clauses, is as follows:
(in thousands) Fixed Rental Income
Fiscal years:
2023 $ 6,781
2024 5,978
2025 4,990
2026 4,612
2027 3,220
Thereafter 8,984
Total $ 34,565
The portions of Mohegan Sun, including the Sky Hotel Tower and the Earth Expo & Convention Center, and Mohegan Pennsylvania that are leased to third parties under operating leases are recorded within property and equipment, net as follows:
(in thousands) September 30, 2022 September 30, 2021
Property and equipment, at cost $ 487,180 $ 491,673
Accumulated depreciation (233,344) (218,873)
Property and equipment, net $ 253,836 $ 272,800
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 8 - Related Party Transactions
Services
The Mohegan Tribe provides us certain governmental and administrative services. We incurred expenses for such services totaling $37.5 million, $26.5 million and $22.9 million for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
We purchase most of our utilities, including electricity, gas, water and waste water services, from an instrumentality of the Mohegan Tribe. We incurred costs for such utilities totaling $22.0 million, $16.9 million and $15.5 million for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
Leases
We lease the land on which Mohegan Sun is located from the Mohegan Tribe under a long-term lease agreement. The current term of 25 years, which commenced in October 2016, is renewable by us for an additional 25 years upon expiration. The lease agreement requires us to make a nominal annual rental payment.
We also lease the Earth Hotel Tower at Mohegan Sun from a subsidiary of the Mohegan Tribe. We incurred rental expense relating to this lease totaling $8.6 million for each of the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
Note 9 - Employee Benefit Plans
We offer a retirement savings plan for our employees under Section 401(k) and Section 401(a) of the Internal Revenue Code (the “Mohegan Retirement and 401(k) Plan”). We currently make discretionary matching contributions of 50%, up to the first 6% of participants’ eligible compensation contributed to the 401(k) portion of the plan. We contributed $4.3 million, $2.1 million and $1.5 million, net of forfeitures, to the Mohegan Retirement and 401(k) Plan for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
We, together with the Mohegan Tribe, offer a non-qualified deferred compensation plan for certain key employees (the “Mohegan Deferred Compensation Plan”). As of September 30, 2022 and 2021, balances under the Mohegan Deferred Compensation Plan totaled $9.1 million and $11.4 million, respectively. The related asset and liability are recorded within other current assets and accrued payroll, respectively.
We, together with the Mohegan Tribe, offer a benefit plan for certain eligible employees (the “Mohegan Benefit Plan”). The Mohegan Benefit Plan is sponsored by the Mohegan Tribe for the benefit of participants who authorize the purchase of life insurance policies as a means of providing certain life insurance benefits to the participants and their spouses as joint insured. As of September 30, 2022 and 2021, balances under the Mohegan Benefit Plan totaled $8.1 million and $7.0 million, respectively, and are recorded within other assets, net.
Note 10 - Income Taxes
Similar to other sovereign governments, the Mohegan Tribe and its entities, including the Company, are not subject to United States federal income taxes. However, certain of our non-tribal entities are subject to income taxes in various domestic and foreign jurisdictions.
The components of income (loss) before income tax are as follows:
For the Fiscal Years Ended
(in thousands) September 30, 2022 September 30, 2021 September 30, 2020
Domestic $ 104,432 $ 57,138 $ (124,227)
Foreign (20,426) (56,138) (44,483)
Income (loss) before income tax $ 84,006 $ 1,000 $ (168,710)
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The components of income tax are as follows:
For the Fiscal Years Ended
(in thousands) September 30, 2022 September 30, 2021 September 30, 2020
Current:
Federal $ - $ - $ -
State 292 (325) (355)
Foreign - - -
Total 292 (325) (355)
Non-current:
Federal - - -
State - - -
Foreign (9,102) 6,678 7,049
Total (9,102) 6,678 7,049
Income tax benefit (provision) $ (8,810) $ 6,353 $ 6,694
The components of deferred income tax benefit or provision result from various temporary differences and relate to items included within the Statements of Operations. The tax effect of these temporary differences are recorded within deferred income tax assets or liabilities as follows:
September 30, 2022 September 30, 2021
Deferred income tax assets:
Foreign net operating loss carryforward $ 18,058 $ 26,188
Lease obligations 91,447 92,243
Limitation on interest expense deduction 9,749 -
Accumulated book depreciation in excess of tax depreciation 6,909 8,336
Other 1,493 29
Valuation allowance (19,919) -
Total 107,737 126,796
Deferred income tax liabilities:
Casino Operating and Services Agreement contract asset (23,137) (31,685)
Right-of-use lease assets (80,728) (81,656)
Other (46) (127)
Total (103,911) (113,468)
Deferred income tax asset, net (1)
$ 3,826 $ 13,328
_________
(1)Recorded within other assets, net.
MGE Niagara generated taxable income of $66.7 million for Canadian tax purposes for the fiscal year ended September 30, 2022. This taxable income will be offset by past net operating losses.
As of September 30, 2022, we have gross income tax net operating loss carryforwards related to our foreign operations of $117.8 million. Such deferred tax assets expire as follows:
(in thousands)
Fiscal years:
2025 through 2029 $ 10,707
2030 through 2034 3,522
2035 through 2039 66,636
2040 through 2042 33,386
Indefinite 3,546
Total $ 117,797
We assess the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets. A significant objective negative evidence assessed was the cumulative loss
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
incurred in connection with Inspire Korea. Such objective evidence limits the ability to consider other subjective evidence, such as our projections of future taxable income.
Based on this assessment, we recorded a valuation allowance of $19.9 million to recognize the portion of deferred tax assets that is more likely than not to be realized. However, the amount of deferred tax assets currently considered to be realizable may be adjusted in future periods if objective evidence in the form of taxable income is realized and additional weight is given to subjective evidence, such as our projections of taxable income.
Note 11 - Segment Reporting
We, either directly or through subsidiaries, operate Mohegan Sun, along with our other Connecticut operations (the “Connecticut Facilities”), Mohegan Pennsylvania, along with our other Pennsylvania operations (the “Pennsylvania Facilities”) and the Niagara Resorts. Certain other properties that are managed or under development are identified as the management, development and other reportable segment.
Our chief operating decision makers currently review and assess the performance and operating results and determine the proper allocation of resources to the Connecticut Facilities, the Pennsylvania Facilities, the Niagara Resorts and the properties managed or under development on a separate basis. Accordingly, we have four separate reportable segments: (i) Mohegan Sun, which includes the operations of the Connecticut Facilities, (ii) Mohegan Pennsylvania, which includes the operations of the Pennsylvania Facilities, (iii) the Niagara Resorts and (iv) management, development and other. Certain other gaming and entertainment operations (“all other”), which are not individually reportable segments, our corporate functions and inter-segment activities are each disclosed separately in the following segment disclosures to reconcile to consolidated results.
Net Revenues
For the Fiscal Years Ended
(in thousands) September 30, 2022 September 30, 2021 September 30, 2020
Mohegan Sun $ 940,282 $ 816,376 $ 715,674
Mohegan Pennsylvania 257,840 221,479 181,160
Niagara Resorts 279,263 99,202 180,025
Management, development and other 62,221 70,009 37,189
All other 54,619 18,780 -
Corporate 575 3,247 741
Inter-segment (4,289) (260) 173
Net revenues $ 1,590,511 $ 1,228,833 $ 1,114,962
Income (Loss) from Operations
For the Fiscal Years Ended
(in thousands) September 30, 2022 September 30, 2021 September 30, 2020
Mohegan Sun $ 213,654 $ 202,311 $ 128,449
Mohegan Pennsylvania 43,956 32,534 (115,073)
Niagara Resorts 38,892 (22,638) (24,676)
Management, development and other (15,948) 17,162 1,585
All other 7,158 (1,534) -
Corporate (41,538) (43,358) (23,439)
Inter-segment 60 (20) (63)
Income (loss) from operations $ 246,234 $ 184,457 $ (33,217)
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Capital Expenditures Incurred
For the Fiscal Years Ended
(in thousands) September 30, 2022 September 30, 2021 September 30, 2020
Mohegan Sun $ 29,353 $ 23,250 $ 17,600
Mohegan Pennsylvania 11,316 6,063 3,559
Niagara Resorts 17,232 14,079 17,799
Management, development and other 249,569 7,773 137,171
All other 49 88,725 -
Corporate 1,415 307 545
Capital expenditures incurred $ 308,934 $ 140,197 $ 176,674
Total Assets
(in thousands) September 30, 2022 September 30, 2021
Mohegan Sun $ 1,226,689 $ 1,267,538
Mohegan Pennsylvania 405,455 408,187
Niagara Resorts 474,281 561,812
Management, development and other 869,117 407,831
All other 98,947 98,945
Corporate 1,010,984 996,040
Inter-segment (1,036,556) (1,010,476)
Total assets $ 3,048,917 $ 2,729,877
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 12 - Commitments and Contingencies
Slot Win Contribution
The Mohegan Tribe and the State of Connecticut entered into a Memorandum of Understanding (“MOU”), which sets forth certain matters regarding implementation of the Mohegan Compact. The MOU stipulates that a portion of revenues from slot machines must be paid to the State of Connecticut (“Slot Win Contribution”). Slot Win Contribution payments are not required if the State of Connecticut legalizes any other gaming operation with slot machines, video facsimiles of games of chance or other commercial casino games within the state of Connecticut, except those consented to by the Mohegan Tribe and the Mashantucket Pequot Tribe. Annual Slot Win Contribution payments are the lesser of: (i) 30% of gross revenues from slot machines and (ii) the greater of 25% of gross revenues from slot machines or $80.0 million.
Pennsylvania Slot Machine Tax
The Pennsylvania Race Horse Development and Gaming Act stipulates that holders of Category One slot machine licenses, including Mohegan Pennsylvania, must pay a portion of revenues from slot machines and other assessments to the PGCB (collectively, the “Pennsylvania Slot Machine Tax”). The Pennsylvania Slot Machine Tax approximates 52% of gross revenues from slot machines, plus an annual $10.0 million slot machine operation fee.
Niagara Resorts Casino Operating and Services Agreement Thresholds
We operate the Niagara Resorts under the terms of a 21-year Casino Operating and Services Agreement with the Ontario Lottery and Gaming Corporation. Annual Threshold amounts under the Casino Operating and Services Agreement are contractually established and vary from year to year. If gaming revenues are less than the Threshold for any given year, we are obligated to make a payment to cover the related shortfall (refer to Note 2).
Mohegan Casino Las Vegas Lease
In July 2019, MGNV, LLC entered into a casino lease agreement with JC Hospitality, LLC, which developed the former Hard Rock Hotel and Casino in Las Vegas, Nevada, into an integrated resort under the Virgin Hotels brand. We operate Mohegan Casino Las Vegas, the gaming portion of the integrated resort. During the initial term of the 20-year lease agreement, we are required to make annual minimum rent payments of $9.0 million, subject to escalators which could result in annual minimum rent payments of up to $15.0 million, plus consumer price index inflators and additional common area maintenance fees. Annual minimum rent payments commenced upon the first anniversary of the Lease Commencement Date, as defined under the lease agreement, and continue until the end of the lease term, which concludes in 2041, subject to additional extensions at our option.
Priority Distribution
We and the Mohegan Tribe are parties to a perpetual agreement, which requires us to make payments to the Mohegan Tribe to the extent of our Net Cash Flow, as defined, subject to a minimum payment of $40.0 million per calendar year.
Purchase and Other Contractual Obligations
As of September 30, 2022, we were contractually committed to purchase goods and services totaling $10.2 million, of which $3.0 million is expected to be incurred in fiscal 2023.
Litigation
We are a defendant in various claims and legal actions resulting from our normal course of business, primarily relating to personal injuries to customers and damages to customers' personal assets. We estimate litigation claims expense and accrue for such liabilities based upon historical experience. In management's opinion, the aggregate liability, if any, arising from such legal actions will not have a material impact on our financial position, results of operations or cash flows.
Note 13 - Subsequent Events
2016 7 7/8% Senior Unsecured Notes Exchange
Notes Exchange Agreement
We entered into an exchange agreement and a related amendment on November 29, 2022 and December 9, 2022, respectively, (the “Exchange Agreement”) with holders of approximately $475 million of our 2016 Senior Unsecured Notes (refer to Note 6). The Exchange Agreement provided for the exchange (the “Notes Exchange”) of the holders’ approximately $475 million 2016 Senior Unsecured Notes for newly issued senior unsecured notes with interest at 13.25% per annum (the “2022 Senior Unsecured Notes”). The 2022 Senior Unsecured Notes were issued at a ratio of $1,052.63 in principal amount for each $1,000
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
aggregate principal amount of 2016 Senior Unsecured Notes, plus accrued interest, under an indenture dated as of December 9, 2022.
The 2022 Senior Unsecured Notes are redeemable by us at a price equal to 100% of the principal amount through June 15, 2024, and at specified, fixed premiums thereafter, in each case plus accrued interest. The 2022 Senior Unsecured Notes are unsecured, unsubordinated obligations and are guaranteed by certain of our restricted subsidiaries, as well as certain future restricted subsidiaries or subsidiaries that incur more than $25.0 million in debt.
The 2022 Senior Unsecured Notes mature on December 15, 2027. Interest on the 2022 Senior Unsecured Notes is payable semi-annually in arrears on June 15 and December 15, commencing on June 15, 2023.
Exchange Settlements
We completed the initial settlement (the “Initial Settlement”), a second settlement and a final settlement under the Exchange Agreement on December 9, 2022, December 14, 2022 and December 19, 2022, respectively, whereby we issued $502.5 million in aggregate principal amount of 2022 Senior Unsecured Notes, and consequently cancelled $477.3 million in aggregate principal amount of 2016 Senior Unsecured Notes. Following the final settlement, $22.7 million in aggregate principal amount of 2016 Senior Unsecured Notes remain outstanding.
Supplemental Indenture
Concurrently with the Initial Settlement, we entered into a supplemental indenture to the existing indenture governing the 2016 Senior Unsecured Notes. As of the Initial Settlement, the supplemental indenture provided for, among other things, certain amendments to the existing indenture governing the 2016 Senior Unsecured Notes, including modifying our and our restricted subsidiaries ability to incur certain additional debt, pay certain dividends or distributions and make certain investments.
As of the final settlement on December 19, 2022, the supplemental indenture provided for certain additional amendments to the existing indenture governing the 2016 Senior Unsecured Notes. These amendments removed substantially all of the restrictive covenants contained in the existing indenture governing the 2016 Senior Unsecured Notes, including, but not limited to, covenants limiting our and our restricted subsidiaries ability to incur additional debt, pay dividends or distributions, make certain investments, create liens on assets, enter into transactions with affiliates or sell assets.
MOHEGAN TRIBAL GAMING AUTHORITY
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2022, 2021 and 2020
Column A Column B Column C Column D
(in thousands) Balances at
Beginning
of Year Charges to
Costs and
Expenses (Additions) Deductions
from
Reserves Balances
at End
of Year
Fiscal Year ended September 30, 2022
Reserves and allowances deducted from asset accounts:
Reserves for uncollectible accounts: $ 19,367 $ 6,095 $ 1,444 $ 24,018
Fiscal Year ended September 30, 2021
Reserves and allowances deducted from asset accounts:
Reserves for uncollectible accounts: $ 16,313 $ 4,709 $ 1,655 $ 19,367
Fiscal Year ended September 30, 2020
Reserves and allowances deducted from asset accounts:
Reserves for uncollectible accounts: $ 11,715 $ 4,592 $ (6) $ 16,313

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Management recognizes that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on an evaluation of our disclosure controls and procedures as of September 30, 2022, and in light of a material weakness identified in our internal control over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective. Notwithstanding this material weakness, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed 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. Our internal control over financial reporting includes those policies and procedures that:
•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of our management; and
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2022. In connection with this assessment, we identified a material weakness in our internal control over financial reporting relating to our warrants and put option valuation control, which was not designed or operating effectively. We did not have a precise enough control to review the accuracy and completeness of the cash flow projections utilized in the valuation of the warrants and put option liabilities. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. In making this assessment, our management used the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “2013 Internal Control-Integrated Framework.”
Because of this material weakness, our management concluded that, as of September 30, 2022, our internal control over financial reporting was not effective.
This Annual Report on Form 10-K does not include an attestation report from our registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to such attestation as we are a non-accelerated filer.
Changes in Internal Control Over Financial Reporting
Other than the material weakness noted above, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Remediation Efforts with Respect to Material Weakness
Our management, under the oversight of our Audit Committee, is in the process of developing a plan to remediate the material weakness, which is expected to include the following measures:
•Strengthening of our finance and accounting functions and, if deemed necessary, engaging additional resources with the appropriate depth of experience;
•Enhancing our senior management and accounting review process to specifically address all disclosures and related financial information;
•Strengthening existing internal controls related to review of key reports and assumptions utilized in estimating the fair value of the warrants and put option liabilities;
•Implementing specific review procedures designed to enhance our valuation monitoring control; and
•Strengthening our current valuation control activities with improved documentation standards, technical oversight and training.
The material weakness will not be considered remediated until management completes the remediation plan above, the enhanced controls operate for a sufficient period of time and management concludes, through testing, that the related controls are effective. We will monitor the effectiveness of our remediation plan and will refine the remediation plan as appropriate.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
We are governed by a nine-member Management Board, whose members also comprise the Mohegan Tribal Council, the governing body of the Mohegan Tribe. Any change in the composition of the Mohegan Tribal Council results in a corresponding change in our Management Board. The members of the Management Board and their terms are as follows: Patricia A. LaPierre, Joseph M. Soper, Thayne D. Hutchins, Jr. and John G. Harris are each serving terms expiring in October 2023, while Ralph James Gessner, Jr., Sarah E. Harris, William Quidgeon, Jr., Kenneth Davison and Mark F. Brown are each serving terms expiring in October 2025. Members of the Mohegan Tribal Council are elected by the registered voters of the Mohegan Tribe through competitive general elections. Vacancies on the Mohegan Tribal Council, to the extent they arise, are likewise filled by similar special elections. Upon expiration of Mohegan Tribal Council members' terms, registered voters of the Mohegan Tribe may re-elect current Mohegan Tribal Council members who choose to run for re-election or elect new Mohegan Tribal Council members. Incumbent members of the Mohegan Tribal Council do not nominate or otherwise identify candidates for election. Accordingly, the Mohegan Tribal Council and Management Board do not screen candidates for election nor do they maintain a nominating committee. The terms of office of our named executive officers, and the periods during which they have served as such, are described in Part III. Item 11. Executive Compensation to this Annual Report on Form 10-K.
Management Board and Named Executive Officers
The following table presents data related to the members of the Management Board and our named executive officers:
Name Age Position
Ralph James Gessner, Jr. 53 Chairman and Member, Management Board
Sarah E. Harris 44 Vice Chairwoman and Member, Management Board
Patricia A. LaPierre 71 Recording Secretary and Member, Management Board (1)
Joseph M. Soper 43 Corresponding Secretary and Member, Management Board (1)
Thayne D. Hutchins, Jr. 51 Treasurer and Member, Management Board (1)
William Quidgeon, Jr. 60 Member, Management Board
John G. Harris 68 Member, Management Board
Kenneth Davison 59 Member, Management Board
Mark F. Brown 65 Member, Management Board
Raymond Pineault 56 Chief Executive Officer
Carol K. Anderson 47 Chief Financial Officer
Jody Madigan 51 Chief Operating Officer
_________
(1)Audit Committee member.
Ralph James Gessner, Jr.-Mr. Gessner was first seated on the Mohegan Tribal Council and Management Board in October 2005. He was elected Chairman in October 2019, after serving as Vice Chairman since October 2010. Mr. Gessner previously held multiple positions at Mohegan Sun, including Director of Executive Hosts and Vice President of Casino Marketing. Mr. Gessner holds a Bachelor of Science in Hotel and Restaurant Management from the University of Southwestern Louisiana.
Sarah E. Harris-Ms. Harris was first seated on the Mohegan Tribal Council and Management Board in October 2017. Ms. Harris was elected Vice Chairwoman in October 2019. She previously worked as an attorney at various law firms in the Washington, D.C. area, representing Native American tribes and tribal entities and organizations. Ms. Harris received a presidential appointment to serve as Chief of Staff to the Assistant Secretary-Indian Affairs and, prior to that, served as Special Assistant to the Solicitor in the Office of the Secretary of the Interior. Ms. Harris holds a Juris Doctor from American University Washington College of Law and a Bachelor of Arts in Native American Studies from Dartmouth College.
Patricia A. LaPierre-Ms. LaPierre is currently serving her first term on the Mohegan Tribal Council and Management Board, having been seated in October 2019. She previously spent over 17 years in various roles within the Human Resources Department at Mohegan Sun. Her most recent position was Vice President of Human Resources. Ms. LaPierre also has a wide range of civic involvement with both her community and the Mohegan Tribe. Over the past 12 years she has served on the Board of Directors for the Norwich Arts Center, the Board of Safe Futures, the Public Health and Safety Committee for the Town of Griswold and as a Board of Education Member of the Mohegan Tribe. Ms. LaPierre holds a Bachelor of Arts in Liberal Studies from Providence College and a Master of Arts in Organizational Management from the University of Phoenix.
Joseph M. Soper-Mr. Soper is currently serving his first term on the Mohegan Tribal Council and Management Board, having been seated in October 2019. Mr. Soper previously spent over 15 years working at the Company, first as a Senior Financial Analyst and later as the Director of Sports and Entertainment, where he managed the day-to-day financial operations for the Sports and Entertainment Department. Mr. Soper holds a Bachelor of Science in Business Administration with a major in Finance from Western New England University.
Thayne D. Hutchins, Jr.-Mr. Hutchins was first seated on the Mohegan Tribal Council and Management Board in October 2007 after serving as a staff accountant for the Mohegan Tribe for six years. Mr. Hutchins graduated Magna Cum Laude from Eastern Connecticut State University and holds a Bachelor of Science in Economics with a concentration in Accounting.
William Quidgeon, Jr.-Mr. Quidgeon was first seated on the Mohegan Tribal Council and Management Board in October 2005. He previously held multiple positions at the Mohegan Tribe and Mohegan Sun, including Senior Project Manager of the Mohegan Tribal Development Department. Prior to his employment with the Mohegan Tribe, Mr. Quidgeon served as Chairman of the Mohegan Information Technology Group, a limited liability company that is majority-owned by the Mohegan Tribe.
John G. Harris-Mr. Harris is currently serving his first term on the Mohegan Tribal Council and Management Board, having been seated in October 2019. Mr. Harris previously worked as the Engineering Grounds Supervisor at Mohegan Sun for approximately 6 years. Prior to his employment with Mohegan Sun, Mr. Harris served in a wide variety of managerial operational roles in his 30-year career with Pfizer Inc. Mr. Harris has also served as the Chairman of the Mohegan Tribal Housing Authority for nearly 25 years, as Site Operations Director for the Preston Redevelopment Agency for the past 10 years and the Chairman of the Preston Housing Authority from 2007 to 2017.
Kenneth Davison-Mr. Davison was first seated on the Mohegan Tribal Council and Management Board in March 2020. Mr. Davison was previously a lawyer focusing on consumer law. He also has a background in finance having served as the Finance and Logistics Manager at The HALO Trust and as an independent Finance Consultant. Mr. Davison is also a retired officer of the United States Army Reserve and the Connecticut National Guard. Mr. Davison holds a Law Degree from Arizona Summit Law School and a Bachelor of Science in Finance from the University of Connecticut.
Mark F. Brown-Mr. Brown was most recently seated on the Mohegan Tribal Council and Management Board in October 2021. Mr. Brown previously served on the Mohegan Tribal Council and Management Board from December 2019 to March 2020 and from October 1995 to October 2019. He served as Chairman of the Mohegan Tribal Council and Management Board from October 2000 until October 2005. Mr. Brown also served as the Mohegan Tribe's historian and was instrumental in the Mohegan Tribe's pursuit of federal recognition.
Raymond Pineault-Mr. Pineault was appointed Chief Executive Officer of the Company in May 2021, after stepping in as its interim Chief Executive Officer in March 2021. Mr. Pineault previously served as the Company's Chief Operating Officer since July 2020 and as its Regional President since January 2020. Prior to that, he served as President and General Manager of Mohegan Sun, since April 2015. He joined the Company in 2005 as Senior Vice President of Administration at Mohegan Sun. Mr. Pineault holds a Bachelor of Science in Psychology from the University of Connecticut.
Carol K. Anderson-Ms. Anderson was appointed Chief Financial Officer of the Company in March 2021 after serving as a consultant to the Company since December 2020. Previously, Ms. Anderson held positions of increasing responsibility at Light & Wonder, Inc. (previously Scientific Games Corporation), including Vice President - Associate General Counsel, Corporate Securities from July 2015 to April 2017, Vice President - Corporate Treasury and Associate General Counsel from April 2017 to March 2019 and Senior Vice President - Treasury, Capital Markets and Associate General Counsel from March 2019 to May 2020. Ms. Anderson holds a Bachelor of Arts in Political Science from Syracuse University and a Juris Doctor from Boston College Law School.
Jody Madigan-Mr. Madigan was appointed Chief Operating Officer of the Company in September 2021. Prior to his employment with the Company, Mr. Madigan served as the General Manager of Paragon Casino Resort from April 2018 to June 2021. Prior to that, Mr. Madigan served as Vice President of Strategic Execution and Business Development for Seneca Gaming Corporation from September 2016 to January 2018. He previously served as Assistant General Manager for Mountaineer Casino, Racetrack & Resort from July 2014 to August 2016 and as President and General Manager for Casino Miami from June 2013 to June 2014.
Audit Committee
We have established a separately-designated standing Audit Committee in accordance with applicable provisions of the Securities Exchange Act of 1934, as amended. The Audit Committee is comprised of certain members of the Management Board and two independent ex-officio (non-voting) members appointed by the Management Board, Daniel A. Cassella and Daniel H. Scott. Members of our Audit Committee are capable of reading and understanding financial statements, including balance sheets and statements of operations, changes in capital and cash flows. In addition, each of the two ex-officio members satisfies the criteria to qualify as an Audit Committee Financial Expert in accordance with Item 407(d)(5) under Regulation S-K. The Audit Committee may additionally be advised on financial matters through a Financial Advisory Committee comprised of one or more financial experts independent from us.
Code of Ethics
We have adopted a code of ethics that applies to all of our executive officers, including our principal executive and financial officers. Our code of ethics is available on our website at “www.mohegangaming.com” under “Corporate Governance.”
Should we make any significant amendment to the code of ethics or grant any waiver, including any implicit waiver, from a provision of the code of ethics to our principal executive, financial and accounting officers, we will disclose the nature of such amendment or waiver on our website.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
Compensation Discussion and Analysis
Executive Compensation Objectives
We operate in an extremely competitive environment and believe that our current and future success is closely correlated with our ability to attract and retain highly talented employees and a strong management team. Accordingly, our executive compensation program is intended to meet three principal objectives: (1) attract, reward and retain senior management employees, (2) motivate these individuals to achieve our short-term and long-term business goals and (3) promote internal compensation equity and external competitiveness.
Our philosophy relating to executive compensation is to attract and retain highly qualified individuals by offering competitive base salaries, cash-based incentive opportunities and other employee benefits. We face unique challenges in designing our executive compensation program because, as an instrumentality of the Mohegan Tribe, we cannot offer equity-based compensation to our executives, unlike many of our industry peers. As a result, we strive to offer a cash-based compensation program that rewards our executives with competitive compensation while providing proper incentives to achieve our financial and operational goals at both the operating unit and company-wide levels. We also strive to ensure that our executive compensation program is straightforward, transparent and understandable.
Role of the Compensation Committee and Senior Management
Our nine-member Management Board, whose members also comprise the Mohegan Tribal Council, serves as our Compensation Committee and has final authority over the design, negotiation and implementation of our executive compensation program. As discussed below, our principal executive officer, along with other senior and executive level employees, have taken the leading roles in the design of our executive compensation program. In addition, acting within the boundaries of our annual budget, as approved by the Management Board, our principal executive officer and other senior and executive level employees determine the base salaries and cash-based incentive opportunities offered to our executives.
Elements of Compensation
Compensation offered to our named executive officers, or NEOs, primarily consists of annual compensation in the form of base salaries and employee benefits/perquisites. We also offer our NEOs cash-based incentive opportunities. In addition, we offer our NEOs the opportunity to defer all or a portion of their annual compensation under a deferred compensation plan, or DCP, and to participate in the Mohegan Retirement and 401(k) Plan, both of which are sponsored by the Mohegan Tribe. The following presents additional information relating to the elements of compensation offered to our NEOs:
Annual Compensation
Annual compensation consists of base salaries and employee benefits. These elements are intended to provide some degree of compensation certainty to our NEOs by providing compensation that, unlike incentive compensation, is not “at-risk” based upon company performance.
Base Salary
We believe that a competitive base salary is an important component of compensation as it provides a degree of financial stability and is a critical factor in recruiting and retaining our NEOs. Base salary is also designed to recognize the scope of responsibilities placed under each NEO and to reward each NEO for their unique leadership skills, management experience and contributions to the Company.
In determining base salary levels, we take into consideration economic and industry conditions and company performance. We do not assign relative weights to individual and company performance, but instead make a subjective determination after considering such measures collectively. Base salary is also evaluated relative to other components of our executive compensation program to ensure that each NEO's total compensation and mix of components are consistent with our overall compensation objectives and philosophies.
With these factors in mind, we have entered into employment agreements with our NEOs that, among other things, provide for minimum base salary levels and employee benefits that, when combined, provide total compensation reflecting our need to
compete for and retain management talent in a competitive environment. Our NEOs base salaries are also subject to annual increases.
Employee Benefits
Our NEOs receive certain employee benefits, including health insurance, dental and vision coverage, prescription drug plans, long-term disability insurance, life and accidental death and dismemberment insurance and flexible spending accounts. Our NEOs are also provided the opportunity to receive discretionary employer-matching 401(k) contributions of 50%, up to the first 6% of their eligible compensation contributed under the Mohegan Retirement and 401(k) Plan.
Incentive Compensation
We also have a discretionary incentive compensation plan covering certain of our employees. As it pertains to our NEOs, the plan generally sets aside approximately 25% of our Adjusted EBITDA in excess of a target established prior to the beginning of the fiscal year as part of our budgeting process. Adjusted EBITDA eliminates certain items from net income, such as interest, taxes, depreciation, amortization and certain non-cash and other items. Adjusted EBITDA is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States of America, or US GAAP. However, we have historically evaluated our operating performance with the non-US GAAP measure Adjusted EBITDA. Under the plan, the base incentive compensation target for our NEOs is generally set at 35% of base salary, with a maximum payout of 52.5% of base salary. For the fiscal years ended September 30, 2022 and 2021, the payout rates to our eligible NEOs were approximately 35% and 33%, respectively. For the fiscal year ended September 30, 2020, Adjusted EBITDA did not exceed our established targets and, as such, no incentive compensation was paid to our NEOs.
Compensation Committee Report
Our nine-member Management Board serves as our Compensation Committee. The Management Board met with us to review and discuss the preceding Compensation Discussion and Analysis. Based on such review and discussion, the Management Board approved this Compensation Discussion and Analysis and authorized its inclusion in this Annual Report on Form 10-K.
Management Board
The members of the Management Board are as follows: Ralph James Gessner, Jr., Sarah E. Harris, Patricia A. LaPierre, Joseph M. Soper, Thayne D. Hutchins, Jr., William Quidgeon, Jr., John G. Harris, Kenneth Davison and Mark F. Brown.
Summary Compensation Table
Name and Principal Position Fiscal Year Base Salary Cash Bonus Non-Equity
Incentive
Compensation All
Other
Compensation (5)
Total
Raymond Pineault (1)
2022 $ 1,027,693 360,500 - 9,834 $ 1,398,027
Chief Executive Officer 2021 $ 883,667 325,493 - 4,959 $ 1,214,119
2020 $ 679,650 - - 4,965 $ 684,615
Carol K. Anderson (2)
2022 $ 617,308 396,300 - 9,834 $ 1,023,442
Chief Financial Officer
2021 $ 311,767 270,296 - 158 $ 582,221
Jody Madigan (3)
2022 $ 600,000 310,000 - 9,702 $ 919,702
Chief Operating Officer 2021 $ 34,615 50,000 - - $ 84,615
Mario C. Kontomerkos (4)
2022 $ - - - 579,986 $ 579,986
Former Chief Executive Officer 2021 $ 691,764 - - 528,083 $ 1,219,847
2020 $ 948,598 - - 690 $ 949,288
_________
(1)Appointed Chief Executive Officer on May 27, 2021. Served as interim Chief Executive Officer from March 31, 2021 to May 26, 2021. Served as Chief Operating Officer from July 17, 2020 to March 30, 2021.
(2)Commenced employment on March 15, 2021.
(3)Commenced employment on August 30, 2021.
(4)Ceased employment on March 31, 2021.
(5)Amounts reported in this column are comprised of the following:
All Other Compensation Details
Name Fiscal
Year 401(k) (1)
Long-Term
Disability (2)
Post-Employment
Payout (3)
Total
Raymond Pineault 2022 $ 9,150 684 - $ 9,834
2021 $ 4,275 684 - $ 4,959
2020 $ 4,275 690 - $ 4,965
Carol K. Anderson 2022 $ 9,150 684 - $ 9,834
2021 $ - 158 - $ 158
Jody Madigan 2022 $ 9,150 552 - $ 9,702
2021 $ - - - $ -
Mario C. Kontomerkos 2022 $ - - 579,986 $ 579,986
2021 $ - 342 527,741 $ 528,083
2020 $ - 690 - $ 690
_________
(1)Employer-matching 401(k) contributions.
(2)Premium payments on long-term disability policies.
(3)Payments pertaining to post-employment benefits.
Non-Qualified Deferred Compensation
We offer our NEOs the opportunity to participate in the DCP. The DCP is a non-qualified plan that allows our executives the opportunity to defer all or a portion of their annual compensation. We do not make contributions to the DCP on behalf of our NEOs. None of our NEOs participate in the DCP.
Mohegan Benefit Plan
We offer our NEOs the opportunity to participate in the Mohegan Benefit Plan. The Mohegan Benefit Plan is sponsored by the Mohegan Tribe for the benefit of participants who authorize the purchase of life insurance policies as a means of providing certain life insurance benefits to the participants and their spouses as joint insured. For the fiscal years ended September 30, 2022, 2021 and 2020, contributions to the Mohegan Benefit Plan on behalf of Mr. Pineault totaled $231,485, $200,507 and $67,831, respectively. Ms. Anderson and Mr. Madigan do not participate in the Mohegan Benefit Plan.
Potential Payments and Benefits upon Termination or Change in Control
The following table presents potential payments to our NEOs in the event of a termination of employment, based on the terms of their employment agreements, as described below. Due to our sovereignty, potential payments upon change in control are not included within the table below, as these are not applicable. The amounts presented represent our estimate of potential payments to our NEOs upon their termination, assuming, in each case, that termination occurred on September 30, 2022, the last day of fiscal 2022. Actual payments can only be determined at the time of each NEO's separation from the Company.
Base Salary Medical
Benefits Other
Payment Total
Raymond Pineault
Termination without cause (1)
$ 1,060,900 27,755 25,000 $ 1,113,655
Termination due to medical disability (3)
$ 530,450 13,878 - $ 544,328
Change of Control
$ - - - $ -
Carol K. Anderson
Termination without cause (2)
$ 636,540 19,105 - $ 655,645
Termination due to medical disability (3)
$ 318,270 9,552 - $ 327,822
Change of Control
$ - - - $ -
Jody Madigan
Termination without cause (2)
$ 618,000 27,755 - $ 645,755
Termination due to medical disability (3)
$ 309,000 13,878 - $ 322,878
Change of Control
$ - - - $ -
_________
(1)Under Mr. Pineault's employment agreement, upon termination without cause, we are required to continue to pay his base salary for 12 months and a $25,000 relocation benefit and provide medical benefits for a period of one year following such termination.
(2)Under each of Ms. Anderson’s and Mr. Madigan’s employment agreements, upon termination without cause, we are required to pay their base salary for 12 months and provide medical benefits for a period of one year following such termination.
(3)Under each NEO's employment agreement, upon termination due to medical disability, we are required to continue to pay their base salary and provide medical benefits for a period of 180 days; thereafter, if we choose to suspend their employment or they are deemed permanently disabled, we are required to provide disability insurance coverage per our disability insurance program.
Executive Employment Agreements
Mr. Pineault. Mr. Pineault’s employment agreement commenced effective May 27, 2021. The agreement provides for a base annual salary of $1,000,000, subject to annual increases. Mr. Pineault is also entitled to participate in our discretionary incentive compensation plan. In accordance with Mr. Pineault’s prior employment agreement, his new employment agreement has no specified term. The agreement provides that if Mr. Pineault is terminated for cause, as defined under his agreement, or if Mr. Pineault voluntarily terminates his employment, he will not be entitled to any further compensation from and after the termination date. If Mr. Pineault is terminated other than for cause, he will be entitled, among other things, to receive his base annual salary from the termination date through 12 months from the termination date.
Ms. Anderson. Ms. Anderson’s employment agreement commenced as of March 15, 2021. The agreement provides for a base annual salary of $600,000, subject to annual increases, and a sign-on payment in the amount of $175,000 allocated over the first two years of employment. Ms. Anderson is also entitled to participate in our discretionary incentive compensation plan. The agreement is subject to automatic renewals for additional one-year terms unless either party provides notice, at least six months prior to the end of the initial three-year term or any renewal terms, of an intention not to renew or otherwise terminate the agreement. The agreement provides that if Ms. Anderson is terminated for cause, as defined under her agreement, or if Ms. Anderson voluntarily terminates her employment, she will not be entitled to any further compensation from and after the termination date. If Ms. Anderson is terminated other than for cause, she will be entitled, among other things, to receive her base annual salary from the termination date through 12 months from the termination date.
Mr. Madigan. Mr. Madigan’s employment agreement commenced as of August 30, 2021. The agreement provides for a base annual salary of $600,000, subject to annual increases, and a sign-on payment in the amount of $50,000. Mr. Madigan is also entitled to participate in our discretionary incentive compensation plan. In addition, Mr. Madigan was eligible for an additional bonus for fiscal 2022 in an amount of between $50,000 and $100,000 based on a sliding-scale EBITDA achievement target. The agreement is subject to automatic renewals for additional one-year terms unless either party provides notice, at least six months prior to the end of the initial term of March 31, 2025 or any renewal terms, of an intention not to renew or otherwise terminate the agreement. The agreement provides that if Mr. Madigan is terminated for cause, as defined under his agreement, or if Mr. Madigan voluntarily terminates his employment, he will not be entitled to any further compensation from and after the termination date. If Mr. Madigan is terminated other than for cause, he will be entitled, among other things, to receive his base annual salary from the termination date through 12 months from the termination date.
CEO Pay Ratio
We calculated our CEO Pay Ratio, or the ratio of the pay of our Chief Executive Officer to that of our median employee, as permitted under Securities and Exchange Commission rules. To determine the compensation for our median employee, we included the base salary of employees employed by us during the fiscal year ended September 30, 2022, excluding our Chief Executive Officer. For full-time and part-time employees, we annualized their hourly pay rates, and, for seasonal and on-call employees, we utilized payroll compensation consistent with what would have been reported on each employee's W-2, Box 1 as of September 30, 2022. Based on the above, for fiscal 2022, our Chief Executive Officer's base salary was $1,027,693 and our median employee's compensation was $29,120, resulting in a CEO Pay Ratio of approximately 35:1.
Compensation of Management Board
The following table presents data related to compensation of members of the Management Board for the fiscal year ended September 30, 2022.
Name Compensation Other (1)
Total
Ralph James Gessner, Jr. $ 219,531 300 $ 219,831
Sarah E. Harris $ 197,178 237 $ 197,415
Patricia A. LaPierre $ 162,050 111 $ 162,161
Joseph M. Soper $ 162,050 222 $ 162,272
Thayne D. Hutchins, Jr. $ 161,427 222 $ 161,649
William Quidgeon, Jr. $ 162,050 222 $ 162,272
John G. Harris $ 162,002 145 $ 162,147
Kenneth Davison $ 157,478 216 $ 157,694
Mark F. Brown (2)
$ 158,973 145 $ 159,118
_________
(1)Premium payments on life insurance policies owned by each member.
(2)Term commenced on October 4, 2021.
Members of the Management Board are paid annual salaries by the Mohegan Tribe for their services as members of the Mohegan Tribal Council. Due to the dual roles of these individuals in our governance and the Mohegan Tribe's, we are obligated to fund a portion of their compensation pursuant to an arrangement established at the time of Mohegan Sun's inception. For the fiscal year ended September 30, 2022, we were obligated to fund 60% of each member's annual compensation. This allocation was determined based on the amount of time members acted in their capacity as the Management Board as opposed to their capacity as the Mohegan Tribal Council. We believe that members' activities in fiscal 2023 will be consistent with their fiscal 2022 activities and, as such, we expect to fund 60% of their fiscal 2023 compensation.
Compensation Committee Interlocks and Insider Participation
As noted above, the Management Board serves as our Compensation Committee.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
We have no outstanding equity securities.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Procedure for Review of Related Party Transactions
Potential conflicts of interest, including related party transactions reportable under Securities and Exchange Commission rules, must be approved in advance. We have a code of ethics which applies to our principal executive officer, principal financial officer and all other executive officers, whom we collectively refer to as our principal officers. Our code of ethics addresses, among other things, conflicts of interest and is available on our website at “www.mohegangaming.com”. Under our code of ethics, actual, potential or perceived conflicts of interest must be disclosed to our Management Board, and only the Management Board may waive provisions of our code of ethics.
Our Management Board reviews all transactions between us and principal officers. In addition, our corporate governance practices include procedures for discussing and assessing relationships among us and principal officers, including business, financial and family member, as applicable. Our Management Board also reviews transactions with principal officers, on a case-by-case basis, to determine whether any conflict of interest exists. Additionally, our Management Board ensures that directors voting on such matters have no interest in the matter and discusses transactions with counsel as deemed necessary.
Transactions between the Company and the Company’s Subsidiaries and the Mohegan Tribe
Refer to Part II. Item 8. Financial Statements and Supplementary Data. Note 8-Related Party Transactions to this Annual Report on Form 10-K.
Corporate Governance and Management Board Independence
We are governed by a nine-member Management Board, whose members also comprise the Mohegan Tribal Council, the governing body of the Mohegan Tribe. Any change in the composition of the Mohegan Tribal Council results in a corresponding change in our Management Board. Upon election, each Mohegan Tribal Council and Management Board member serves a four-year term on a staggered basis. Incumbent members of the Mohegan Tribal Council do not nominate or otherwise identify candidates for election. Accordingly, the Mohegan Tribal Council and Management Board do not screen candidates for election nor do they maintain a nominating committee. Instead, the registered voters of the Mohegan Tribe elect all members of the Mohegan Tribal Council. In order to qualify for, and seek election to a position on the Mohegan Tribal Council, an individual: (1) must be at least 21 years of age prior to the date of the election, (2) must be a registered voting member of the Mohegan Tribe in good standing and (3) must not have been convicted of either a felony or a misdemeanor involving moral integrity, such as forgery or bribery. In addition, an individual must comply with the tribal election ordinance, including requirements for declaring the intention to run and submission to a comprehensive background check, to qualify for and seek election.
As described above, members of the Management Board are also members of the Mohegan Tribe and the Mohegan Tribal Council. Due to the relationships between us and the Mohegan Tribe, as described above, none of the Management Board members would qualify as “independent directors” within the rules of the New York Stock Exchange or the NASDAQ Stock Market.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
The following table presents the aggregate fees paid or accrued for professional services rendered by Deloitte & Touche LLP:
Fiscal 2022 Fiscal 2021
Audit fees (1)
$ 1,759,800 $ 1,495,950
Tax fees 245,953 217,250
Total $ 2,005,753 $ 1,713,200
_________
(1)Audit fees include fees for our annual audit, quarterly reviews and services rendered in connection with regulatory filings with the Securities and Exchange Commission.
The Audit Committee’s independent registered public accounting firm independence policy provides for pre-approval of all services performed by our independent registered public accounting firm. All above services were pre-approved by the Audit Committee. The Audit Committee considered whether the provision of these services was compatible with maintaining independent registered public accounting firm independence.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibit and Financial Statement Schedules.
(a) Documents filed as part of this Annual Report on Form 10-K.
(1) List of Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income (Loss)
Consolidated Statements of Changes in Capital
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) List of Financial Statement Schedule
Schedule II-Valuation and Qualifying Accounts and Reserves
(3) List of Exhibits
Exhibit No. Description
2.1* Amended and Restated Transition and Asset Purchase Agreement, dated May 1, 2019, among MGE Niagara Entertainment Inc., Ontario Lottery and Gaming Corporation and Ontario Gaming Assets Corporation (filed as Exhibit 2.1 to the Mohegan Tribal Gaming Authority’s Form 8-K, filed with the SEC on June 14, 2019 (the “June 2019 Form 8-K”) and incorporated by reference herein).**
2.2* First Amendment to Amended and Restated Transition and Asset Purchase Agreement, dated June 6, 2019, among MGE Niagara Entertainment Inc., Ontario Lottery and Gaming Corporation and Ontario Gaming Assets Corporation (filed as Exhibit 2.2 to the June 2019 Form 8-K and incorporated by reference herein).
2.3* Second Amendment to Amended and Restated Transition and Asset Purchase Agreement, dated June 7, 2019, among MGE Niagara Entertainment Inc., Ontario Lottery and Gaming Corporation and Ontario Gaming Assets Corporation (filed as Exhibit 2.3 to the June 2019 Form 8-K and incorporated by reference herein).**
3.1* Constitution of the Mohegan Tribe of Indians of Connecticut, as amended (filed as Exhibit 3.1 to the Mohegan Tribal Gaming Authority’s Registration Statement on Form S-4, filed with the SEC on January 27, 2014 (the “2014 Form S-4”) and incorporated by reference herein).
3.2 Ordinance No. 95-2 of the Tribe for Gaming on Tribal Lands, enacted on July 15, 1995 (filed as Exhibit 3.2 to the Mohegan Tribal Gaming Authority’s Amendment No. 1 to its Registration Statement on Form S-1, filed with the SEC on February 29, 1996 (the "1996 Form S-1") and incorporated by reference herein).
4.1* Indenture, dated as of October 14, 2016, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, the Guarantors party thereto and U.S. Bank National Association, as Trustee, relating to the 7.875% Senior Notes due 2024 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.1 to the Mohegan Tribal Gaming Authority’s Form 8-K, filed with the SEC on October 20, 2016 (the “October 2016 Form 8-K”) and incorporated by reference herein).
4.2* Promissory Note, dated as of December 15, 2017, by and between Salishan-Mohegan, LLC and Salishan Company, LLC (filed as Exhibit 4.2 to the Mohegan Tribal Gaming Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017, filed with the SEC on December 22, 2017 (the “2017 Form 10-K”) and incorporated by reference herein).
4.3* Waiver, dated as of June 11, 2020, by and among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and U.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the Mohegan Tribal Gaming Authority’s Form 8-K, filed with the SEC on June 18, 2020 and incorporated by reference herein).
4.4* Indenture, dated as of January 26, 2021, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, the guarantors party thereto and U.S. Bank National Association, as trustee, relating to the 8.000% Second Priority Senior Secured Notes due 2026 (filed as Exhibit 4.1 to the Mohegan Tribal Gaming Authority's Form 8-K, filed with the SEC on January 27, 2021 (the “January 2021 Form 8-K”) and incorporated by reference herein).
4.5* First Supplemental Indenture, dated as of July 23, 2021, among Mohegan Digital, LLC and Mohegan Digital Services, LLC, the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and U.S. Bank National Association, as trustee, relating to the 8.000% Second Priority Senior Secured Notes due 2026 (filed as Exhibit 4.1 to the Mohegan Tribal Gaming Authority’s Quarterly Report on Form 10-Q for the period ended June 30, 2021, filed with the SEC on August 12, 2021 (the “June 30, 2021 Form 10-Q”) and incorporated by reference herein).
4.6* First Supplemental Indenture, dated as of July 23, 2021, among Mohegan Digital, LLC and Mohegan Digital Services, LLC, the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and U.S. Bank National Association, as trustee, relating to the 7.875% Senior Notes due 2024 (filed as Exhibit 4.2 to the June 30, 2021 Form 10-Q and incorporated by reference herein).
4.7* Second Supplemental Indenture, dated as of November 1, 2021, among MGNV Holding, LLC and MGNV, LLC, the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and U.S. Bank National Association, as trustee, relating to the 8.000% Second Priority Senior Secured Notes due 2026 (filed as Exhibit 4.7 to the Mohegan Tribal Gaming Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021, filed with the SEC on December 16, 2021 (the “2021 Form 10-K”) and incorporated by reference herein).
4.8* Second Supplemental Indenture, dated as of November 1, 2021, among MGNV Holding, LLC and MGNV, LLC, the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and U.S. Bank National Association, as trustee, relating to the 7.875% Senior Notes due 2024 (filed as Exhibit 4.8 to the 2021 Form 10-K and incorporated by reference herein).
4.9* Third Supplemental Indenture, dated as of April 1, 2022, among Mohegan Expo Center, LLC, the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and U.S. Bank Trust Company, National Association, as trustee, relating to the 8.000% Second Priority Senior Secured Notes due 2026 (filed as Exhibit 4.1 to the Mohegan Tribal Gaming Authority’s Quarterly Report on Form 10-Q for the period ended March 31, 2022, filed with the SEC on May 12, 2022 (the “March 31, 2022 Form 10-Q”) and incorporated by reference herein).
4.10* Third Supplemental Indenture, dated as of April 1, 2022, among Mohegan Expo Center, LLC, the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and U.S. Bank National Association, as trustee, relating to the 7.875% Senior Notes due 2024 (filed as Exhibit 4.2 to the March 31, 2022 Form 10-Q and incorporated by reference herein).
10.1 The Mohegan Tribe-State of Connecticut Gaming Compact between the Mohegan Tribe of Indians of Connecticut and the State of Connecticut (filed as Exhibit 10.1 to the 1996 Form S-1 and incorporated by reference herein).
10.2 Agreement, dated as of April 25, 1994, between the Mohegan Tribe of Indians of Connecticut and the State of Connecticut resolving certain land claims (filed as Exhibit 10.2 to the 1996 Form S-1 and incorporated by reference herein).
10.3 Memorandum of Understanding, dated as of April 25, 1994, between the Mohegan Tribe of Indians of Connecticut and the State of Connecticut regarding implementation of the Compact and the Resolution Agreement (filed as Exhibit 10.3 to the 1996 Form S-1 and incorporated by reference herein).
10.4 Agreement, dated as of June 16, 1994, between the Mohegan Tribe of Indians of Connecticut and the Town of Montville, Connecticut (filed as Exhibit 10.4 to the 1996 Form S-1 and incorporated by reference herein).
10.5* Amended and Restated Land Lease, dated as of October 14, 2016, between the Mohegan Tribe of Indians of Connecticut and the Mohegan Tribal Gaming Authority (filed as Exhibit 10.2 to the October 2016 Form 8-K and incorporated by reference herein).
10.6* The Merrill Lynch Non-Qualified Deferred Compensation Plan Trust Agreement, dated as of September 1, 1998, between the Mohegan Tribal Gaming Authority and Merrill Lynch Trust (filed as Exhibit 10.16 to the Mohegan Tribal Gaming Authority’s Form 10-K405 for the fiscal year ended September 30, 1998, filed with the SEC on December 29, 1998 and incorporated by reference herein).***
10.7* Priority Distribution Agreement, dated as of August 1, 2001, between the Mohegan Tribal Gaming Authority and the Mohegan Tribe of Indians of Connecticut (filed as Exhibit 10.1 to the Mohegan Tribal Gaming Authority’s Quarterly Report on Form 10-Q for the period ended June 30, 2001, filed with the SEC on August 10, 2001 and incorporated by reference herein).
10.8* First Amendment to the Priority Distribution Agreement, dated as of December 31, 2014, by and between the Mohegan Tribal Gaming Authority and the Mohegan Tribe of Indians of Connecticut (filed as Exhibit 10.1 to the Mohegan Tribal Gaming Authority’s Quarterly Report on Form 10-Q for the period ended December 31, 2014, filed with the SEC on February 17, 2015 and incorporated by reference herein).
10.9* Management Agreement, dated as of September 21, 2004, between The Cowlitz Indian Tribe and Salishan-Mohegan, LLC (filed as Exhibit 10.30 to the Mohegan Tribal Gaming Authority’s Registration Statement on Form S-4, filed with the SEC on November 1, 2004 (the "2004 Form S-4") and incorporated by reference herein).
10.10* Development Agreement, dated as of September 21, 2004, between The Cowlitz Indian Tribe and Salishan-Mohegan, LLC (filed as Exhibit 10.31 to the 2004 Form S-4 and incorporated by reference herein).
10.11* Membership Interest Redemption and Withdrawal Agreement, dated as of April 14, 2017, by and between Salishan-Mohegan, LLC and Salishan Company, LLC (filed as Exhibit 10.23 to the 2017 Form 10-K and incorporated by reference herein).
10.12* Agreement between The Mohegan Tribe of Indians of Connecticut and the State of Connecticut dated July 26, 2021 (filed as Exhibit 10.1 to the Mohegan Tribal Gaming Authority's Form 8-K, filed with the SEC on September 28, 2021 (the “September 2021 Form 8-K”) and incorporated by reference herein).
10.13* Memorandum of Understanding between The Mohegan Tribe of Indians of Connecticut and the State of Connecticut dated July 26, 2021 (filed as Exhibit 10.2 to the September 2021 Form 8-K and incorporated by reference herein).
10.14* Credit Agreement, dated as of January 26, 2021, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, Citizens Bank, N.A. as administrative agent, and the other lenders and financial institutions party thereto (filed as Exhibit 10.1 to the January 2021 Form 8-K and incorporated by reference herein).**
10.15* First Amendment to Credit Agreement, dated as of May 31, 2022, by and among the Mohegan Tribe of Indians of Connecticut, the Mohegan Tribal Gaming Authority, the other loan parties party thereto, each of the lenders party thereto and Citizens Bank, N.A., as administrative agent (filed as Exhibit 10.1 to the Mohegan Tribal Gaming Authority's Form 8-K, filed with the SEC on June 3, 2022 and incorporated by reference herein).
10.16* Amended and Restated Credit Agreement, dated as of July 14, 2021, among MGE Niagara Entertainment Inc., the lenders named therein, Bank of Montreal, as administrative agent, and the other parties thereto (filed as Exhibit 10.1 to the Mohegan Tribal Gaming Authority's Form 8-K, filed with the SEC on July 20, 2021 and incorporated by reference herein).**
10.17* Amending Agreement, dated as of September 29, 2022, by and among MGE Niagara Entertainment Inc., among others, Bank of Montreal, as administrative agent, and the lenders party thereto (filed as Exhibit 10.1 to the Mohegan Tribal Gaming Authority's Form 8-K, filed with the SEC on October 3, 2022 and incorporated by reference herein).
10.18* Loan Agreement, dated September 24, 2021, among Inspire Integrated Resort Co., Ltd., the lenders named therein, Kookmin Bank Co., Ltd. as Facility Agent, and the other parties thereto (filed as Exhibit 10.19 to the 2021 Form 10-K and incorporated by reference herein).**
10.19* Secured Term Loan Facility, dated November 4, 2021, among MGE Korea Limited, the financial institutions named therein, Serica Agency Limited as Facility Agent and Security Agent, and the other parties thereto (filed as Exhibit 10.20 to the 2021 Form 10-K and incorporated by reference herein).**
10.20* Warrant Agreement, dated November 4, 2021, by and among MGE Korea Holding III Limited, BCC Inspire Aggregator, L.P., Royale SS II Ltd., and the other parties thereto (filed as Exhibit 10.21 to the 2021 Form 10-K and incorporated by reference herein).**
10.21* Employment agreement, effective March 15, 2021, by and between the Mohegan Tribal Gaming Authority and Carol K. Anderson (filed as Exhibit 10.1 to the Mohegan Tribal Gaming Authority's Form 8-K, filed with the SEC on March 18, 2021 and incorporated by reference herein).***
10.22* Employment agreement, effective August 30, 2021, by and between the Mohegan Tribal Gaming Authority and Jody Madigan (filed as Exhibit 10.1 to the Mohegan Tribal Gaming Authority’s Form 8-K, filed with the SEC on September 9, 2021 and incorporated by reference herein).***
10.23* Employment Agreement, dated as of October 20, 2021, and effective as of May 27, 2021, by and between the Mohegan Tribal Gaming Authority and Raymond Pineault (filed as Exhibit 10.1 to the Mohegan Tribal Gaming Authority's Form 8-K/A, filed with the SEC on October 26, 2021 and incorporated by reference herein).***
21.1* Subsidiaries of the Registrant (filed as Exhibit 21.1 to the Mohegan Tribal Gaming Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020, filed with the SEC on December 29, 2020 and incorporated by reference herein).
31.1* Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).
31.2* Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith).
32.1* Section 1350 Certification of Chief Executive Officer (filed herewith).
32.2* Section 1350 Certification of Chief Financial Officer (filed herewith).
101.INS* XBRL Instance Document (filed herewith).
101.SCH* XBRL Taxonomy Extension Schema (filed herewith).
101.CAL* XBRL Taxonomy Calculation Linkbase (filed herewith).
101.DEF* XBRL Taxonomy Extension Definition Linkbase (filed herewith).
101.LAB* XBRL Taxonomy Extension Label Linkbase (filed herewith).
101.PRE* XBRL Taxonomy Extension Presentation Linkbase (filed herewith).
104 Cover Page Interactive Data File (formatted as Inline XBRL).
_________
* Exhibits transmitted via EDGAR.
** Certain portions of this exhibit have been omitted pursuant to Item 601 of Regulation S-K. Upon request by the Securities and Exchange Commission, we hereby undertake to furnish supplementary to the Securities and Exchange Commission a copy of any omitted information.
*** Management contract or compensatory plan or arrangement.