The Management's Discussion and Analysis of the Financial Condition and Results of Operations should be read together with the Management's Discussion and Analysis of Financial Condition and Results of Operations and the Condensed Consolidated Financial Statements and related notes thereto in Empire Resorts, Inc. ("Empire") and subsidiaries' (the "Company", "us", "our", or "we") Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally relate to our strategies, plans and objectives for future operations and are based upon management's current plans and beliefs or estimates of future results or trends. Forward-looking statements also involve risks and uncertainties, including, but not restricted to, the risks and uncertainties described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict.

You should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we will not update these forward-looking statements, even if our situation changes in the future. We caution the reader that a number of important factors discussed herein, and in other reports filed with the Securities and Exchange Commission, could affect our actual results and cause actual results to differ materially from those discussed in forward-looking statements.

Overview

We were organized as a Delaware corporation on March 19, 1993, and since that time have served as a holding company for various subsidiaries engaged in the hospitality and gaming industries.

Through our wholly-owned subsidiary, Monticello Raceway Management, Inc. ("MRMI"), we currently own and operate Monticello Casino and Raceway, a 45,000 square foot video gaming machine ("VGM") and harness horseracing facility located in Monticello, New York, 90 miles northwest of New York City. Monticello Casino and Raceway operates 1,110 VGMs which includes 20 electronic table game positions ("ETGs") as an agent for the New York Lottery ("NYL"). VGM activities in the State of New York are overseen by the NYL. VGMs are similar to slot machines, but they are connected to a central system and report financial information to the central system. We also generate racing revenues through pari-mutuel wagering on the running of live harness horse races, the import simulcasting of harness and thoroughbred horse races from racetracks across the country and internationally, and the export simulcasting of our races to offsite pari-mutuel wagering facilities.

On November 4, 2011, each holder of a New York racetrack license with a VGM facility, with the exception of Aqueduct who has a management agreement, received a joint letter (the "Letter") from the NYL and the New York State Racing and Wagering Board ("RWB"), which notified the license holders that RWB has commenced its review of the holder's racetrack license renewal application for calendar year 2012. The Letter said that, for the first time since the commencement of VGM operations, the NYL and RWB will be conducting a joint review of applicant license materials. While there has been no change to the laws governing racing or VGM operations, the Letter also indicated that the RWB is considering an open competition process for the re-award of licenses forfeited for failure to meet licensing and operating standards and is also considering whether all track licenses should be subject to an open competition for determining licensure for the 2013 calendar year. Generally, the annual license renewal process requires the RWB to review the financial responsibility, experience, character and general fitness of MRMI and our management. We cooperated fully with RWB and NYL during this annual review in pursuit of the renewal of MRMI's racetrack and simulcast licenses. We submitted our 2012 license renewal applications and supplemental information to RWB and NYL. RWB has informed us that MRMI continued to operate under the 2011 licenses prior to RWB's formal action on MRMI's 2012 license renewal applications. On May 30, 2012, the RWB granted MRMI's license renewals through December 31, 2012, conditioned upon our continued cooperation with RWB staff regarding certain stockholders and the requirement that we immediately notify the RWB in the event of any change in percentages of our ownership and whether certain Empire stockholders vote their shares.

The enacted New York State budget includes legislation to replace the RWB and NYL with a Gaming Commission that will establish and supervise four divisions to carry out responsibilities relating to the regulation and enforcement of lottery, charitable gaming, gaming, and horse racing and pari-mutuel wagering. Each division will be supervised by a division director. The gaming division will be responsible for the appropriate operation and administration of our VGM operations and the horse racing and pari-mutuel wagering division will be responsible for the supervision, regulation and administration of our horse racing and pari-mutuel wagering activities. The Gaming Commission was expected to begin on or about October 1, 2012; however, as part of the New York Governor's Program Bill #45 dated June 16, 2012, the Gaming Commission is expected to begin on or about February 1, 2013.

We have joined with other VGM facility operators in New York State to form the New York Gaming Association, whose principal effort is to seek approval for passage of a constitutional amendment authorizing table games at the VGM facilities in New York, which would permit us to develop and operate a full-scale casino which would include slot machines and table game wagering and the extension of credit. Generally, a constitutional amendment must be approved by both houses of the New York State Legislature ("Legislature"), approved again by a newly elected Legislature, and approved by the voters at a general election, in which instance it becomes effective on the following January 1. On March 15, 2012, Governor Andrew Cuomo, Assembly Speaker Sheldon Silver and Senate Majority Leader Dean Skelos announced that a constitutional amendment authorizing up to seven non-tribal casinos at locations to be determined by the Legislature, was approved by the Legislature. A newly elected Legislature would have to pass the amendment again next year before it goes to a general referendum in November 2013. However, there can be no assurance given that an amendment to the New York State Constitution to permit full-scale casino gaming will be passed in a timely manner, or at all, or that, if such amendment were passed, we would be able to effectively develop and operate a full-scale casino.

Development

On April 12, 2011, we announced the execution of an exclusivity agreement with Entertainment Properties Trust ("EPR") and MSEG LLC to explore exclusively the joint development of the companies' respective properties located in Sullivan County, New York. EPR's subsidiary EPT Concord II, LLC ("EPT"), is the sole owner of 1,500 acres located at the site of the former Concord Resort (the "EPT Property"). The exclusivity agreement also committed the parties to work towards the execution of a master development agreement (the "Master Development Agreement") to develop the EPT Property.

On December 21, 2011, we entered into an option agreement with EPT, which agreement was amended on March 30, 2012, April 30, 2012, May 30, 2012 and June 30, 2012 (as amended (the "Option Agreement"). Pursuant to the Option Agreement, EPT granted us a sole and exclusive option to lease certain EPT property located in Sullivan County, New York pursuant to the terms of a lease negotiated between the parties. The initial term of the Option Agreement expires on December 21, 2012 (the "Option Exercise Period"). In addition, subject to the conditions of the Option Agreement, the Option Exercise Period may be extended for one or more six month periods; provided, however, in no event shall the Option Exercise Period extend beyond June 30, 2013.

In connection with the execution of the Option Agreement, we paid EPT an option payment in the amount of $750,000 (the "Option Payment"). Any extension of the Option Exercise Period shall be accompanied by an additional option payment of $750,000. The Option may be exercised only to the extent we (or our affiliate) simultaneously exercise other options in connection with the master development agreement. Pursuant to the Option Agreement, the parties agreed to work towards entering into a master development agreement by October 1, 2012. In addition, our rights and EPT's obligations pursuant to the Option Agreement are subject to certain existing EPT agreements. Subject to the terms and conditions of the Option Agreement, EPT shall not grant to any third party the right to lease the EPT Property during the Option Exercise Period.

On March 8, 2012, EPT and Empire presented an overview of the master plan for redevelopment of the EPT Property in Sullivan County, New York to the Town of Thompson Town Board. In addition, on March 8, 2012, EPT and Empire formally submitted the proposed redevelopment plan to the Town of Thompson for an assessment of its environmental impact as prescribed by the State Environmental Quality Review ("SEQR") provisions of the New York Environmental Conservation Law. Thereafter, EPT submitted the Draft Generic

Environmental Impact Statement (DGEIS) and Draft Environmental Impact Statement (DEIS) to the Town of Thompson for the redevelopment plan. On July 25, 2012, the Town of Thompson provided EPT with the Notice of Completion of Draft DGEIS/DEIS and Notice of SEQR Hearing. The SEQR hearing is scheduled for August 28, 2012.

At June 30, 2012, project development costs totaled approximately $5.9 million.

Competition

Our gaming operations are located in the Catskills region in the State of New York, which has historically been a resort area, although its popularity declined with the growth of destinations such as Atlantic City and Las Vegas. We are located approximately 90 miles northwest of New York City. There are approximately 17.5 million adults who live within 100 miles of the Catskills area, an area where average per capita income is approximately $35,000. Specifically, Monticello Casino and Raceway is directly adjacent to Highway 17, has highly visible signage and convenient access, and is less than 1,000 feet from the highway's exit.

Generally, Monticello Casino and Raceway does not compete directly with other harness racing tracks in New York State for live racing patrons. However, Monticello Casino and Raceway does face intense competition for off-track and other legalized wagering at numerous gaming sites within the State of New York and the surrounding region. The inability to compete with larger purses for the races at Monticello Casino and Raceway and the limitation on other forms of legalized wagering that Monticello Casino and Raceway may offer has been a significant limitation on our ability to compete for off-track and other legalized wagering revenues.

In New York, we face competition for guests from Orange, Duchess and Ulster Counties in New York for our VGM operation from a VGM facility at Yonkers Raceway, located within the New York City metropolitan area. Yonkers Raceway has a harness horseracing facility, approximately 4,950 VGMs, food and beverage outlets and other amenities.

From time to time, New Jersey has reviewed options to place slot machines in various locations including the Meadowlands Racetrack located in Bergen County, NJ. There are currently bills pending in the New Jersey Assembly and the New Jersey Senate to allow establishment and operation of casinos in Bergen County no later than January 1, 2014, which would require, among other things, an amendment to the State Constitution. If passed, the bills would take effect upon approval by voters at a referendum held at a general election. We are uncertain of whether the referendum will be placed on the ballot in November 2012 and do not know if the constitutional amendment would be approved by the voters. Currently no slot machines or legalized full-scale casino gambling is permitted at the privately operated Meadowlands Racetrack and New Jersey Governor Chris Christie and Senate President Stephen Sweeney have stated publicly that they do not currently support permitting gambling at the Meadowlands Racetrack.

On November 8, 2011, the voters in New Jersey approved a constitutional amendment permitting the Legislature to authorize by law wagering at casinos in Atlantic City and at current or former running and harness horse racetracks on the results of professional, certain college, and amateur sport and athletic events. On January 9, 2012 the New Jersey State Legislature approved a bill that would allow the state Casino Control Commission to issue licenses to casinos and racetracks to accept bets on some professional and collegiate events. Governor Christie signed the legislation. The approved legislation, however, remains pending due to the existing federal ban on such wagering. To a lesser extent, Monticello Casino and Raceway faces competition from two casinos in Pennsylvania. In January 2010, the Pennsylvania legislature authorized and its Governor approved table games in its existing slot machine facilities. The legislation authorized all table games, including blackjack, craps, roulette, baccarat, and poker at thoroughbred and harness racetracks with slot machine facilities and stand-alone slot machine facilities. In addition, the legislation authorized the granting of credit to guests of the Pennsylvania casinos. Table games became operational in Pennsylvania's casinos in July 2010. Both Pennsylvania casinos that we compete against have installed and offer table games. This legislation augmented the legislation passed in July 2004, whereby Pennsylvania legalized the operation of up to 61,000 slot machines at 14 locations throughout the state, to permit table games at the slot machine facilities. As of July 31, 2012, there were eleven casinos in operation within Pennsylvania, with six located at racetracks. One such race track facility is the Mohegan Sun at Pocono Downs, which has approximately 2,300 slot machines and 84 table games, including 18 poker tables. The Mohegan Sun at Pocono Downs in Wilkes-Barre, Pennsylvania is approximately 70 miles southwest of Monticello. In addition, the Mount Airy Casino Resort has approximately 2,075 slot machines and 72 table games, including 11 poker tables, a hotel, spa and a golf course. The Mount Airy Casino Resort is located in Mount Pocono, Pennsylvania, approximately 60 miles southwest of Monticello.

In August 2009, the NYL approved a pilot test period for us and one other New York State VGM facility which provided us the opportunity to reward our guests based on their level of VGM play and to offer promotions

that can compete with the offerings of our competitors located in Pennsylvania, although at a restricted level. On March 22, 2011, the NYL extended the subsidized free play pilot program until legislation authorizing a statewide subsidized free play program is enacted. The budget that was passed in March 2011 included a statewide subsidized free play program, which became effective for the gaming day of April 4, 2011. Subsidized free play credits issued pursuant to the program will be excluded from the calculation of net win at the issuing facility. Each facility will be permitted to issue subsidized free play credits in an amount not to exceed 10% of adjusted net win.

In 2001, the New York State Legislature and the New York State Governor authorized the building of three Native American casinos in the Catskills region of the State of New York. On November 22, 2010, former Governor Paterson of New York signed a land settlement agreement with the Stockbridge-Munsee Community Band of Mohican Indians, a Wisconsin based Tribe ("Stockbridge-Munsee Band") with alleged roots in New York. As part of this land settlement, former Governor Paterson and the Stockbridge-Munsee Band executed a compact permitting the construction and operation of a Class III tribal casino on property located in Bridgeville, New York, approximately five miles from Monticello Casino and Raceway. On January 5, 2011, the United States Department of the Interior ("USDOI") received the compact. Approval of the compact is a condition precedent to the land settlement agreement becoming effective. In addition to approving the compact, the USDOI must also authorize the taking of the land into trust for the benefit of the Stockbridge-Munsee Band. On February 18, 2011, the USDOI notified New York State Governor Cuomo and the Stockbridge-Munsee Band that the compact is disapproved because the limitations on the use of the land violate the Indian Gaming Regulatory Act. The USDOI indicated that it did not have enough information to conduct analysis on the compact's revenue sharing or exclusivity provisions and it also had outstanding questions regarding the relationship between the compact and the proposed settlement agreement. Newspaper reports indicate that the Stockbridge-Munsee Band recently filed an updated application to have the USDOI take 330 acres in the Catskills region into trust. The USDOI began consulting with state and local officials and other nearby Indian Tribes, as required by the Indian Gaming Regulatory Act, regarding the Stockbridge-Munsee Band's request. The USDOI sent a letter to interested parties asking the addressees for input on whether or not the gaming establishment on the 330 acres to be held in trust for the Stockbridge-Munsee Band would be detrimental to the surrounding community. The responses will be used by the USDOI to develop proposed findings of fact related to the Stockbridge-Munsee Band's application. We are unable to predict when or if the compact will be resubmitted to the USDOI or whether taking the land into trust will require an Act of Congress. Throughout 2011 several tribal and other entities, have reportedly expressed an interest in gaming in the Catskill region of New York, and in particular, Sullivan County. However, to date, no governmental action has been taken by the State of New York to enable such entities to engage in legalized gaming activities. We are unable to determine when or if any tribal or other entities would request or obtain the ability to engage in legalized gaming activities in the Catskill region.

On June 14, 2011, the United States Department of the Interior ("USDOI") Assistant Secretary-Indian Affairs, the head of the Bureau of Indian Affairs ("BIA"), announced that he has rescinded a January 3, 2008, memo which said, among other things, that tribes could develop casinos on land off their reservations only if it was within "commutable distance" of the reservation which was considered by the USDOI to be approximately 40 miles. The requirements of the Indian Gaming Regulatory Act ("IGRA") will continue to be applied by the BIA even though the "commutability" standard has been rescinded.

As of October 2010, the Shinnecock Indian Nation, a state-recognized Native American tribe, is an Indian entity recognized by the BIA. The Shinnecock Indian Nation has expressed its interest in building a casino in Southampton, New York or at another location in downstate New York. Since becoming federally recognized, the Shinnecock Indian Nation has the right to build a Class II casino (as defined in IGRA) on their 800-acre reservation in Southampton, New York, but the Shinnecock have expressed a desire to develop a Class III casino (as defined in IGRA) closer to New York City including the possibility of a casino at Belmont, New York.

On May 5, 2011, Concord Associates, LP ("Concord") announced that it has agreed to terms with the Mohegan Tribal Gaming Authority ("MTGA") to develop a 116 acre site adjacent to the EPT Property. Concord and MTGA are planning to develop a gaming and racing resort facility. On May 6, 2011, we issued a press release announcing that neither Concord nor MTGA have valid New York State licenses to operate a harness racetrack or VGMs in Sullivan County, prerequisites to the operation of VGMs at the proposed development. As such, we cannot predict the outcome of our efforts to implement our plan to develop jointly with EPR the EPT Property.

Currently electronic gaming machines are operated in 39 states and there are 11 states with commercial casinos that also offer table games. Legislation permitting other forms of casino gaming is proposed, from time to time, in various states, including those bordering the State of New York. Our business could be adversely affected by such competition.

In December 2011, the United States Department of Justice ("Department") confirmed the reversal of a long-standing precedent that applied a 1961 federal gambling law to Internet gambling. The Wire Act, 18 U.S.C §

1084, et. seq., prevents wagers from taking place over phone lines. Deputy Attorney General James Cole wrote in a letter to William J. Murray, Deputy Director and General Counsel for NYL, "The Department's Office of Legal Counsel ('OLC') has analyzed the scope of the Wire Act, 18 U.S.C § 1084, and concluded that it is limited only to sports betting." We are uncertain if the Department's position would have any effect on our operations.

Results of Operations

The results of operations for three months ended June 30, 2012 and 2011
(unaudited) are summarized below:



                                                                                             Percentage
                                            2012            2011           Variance           variance
                                                    (dollars in thousands)
Revenues:
Gaming                                    $ 16,427        $ 16,146        $      281                   2 %
Food, beverage, racing and other             3,296           2,877               419                  15 %

Gross revenues                              19,723          19,023               700                   4 %
Less: Promotional allowances                  (864 )          (457 )            (407 )                89 %

Net revenues                                18,859          18,566               293                   2 %

Costs and expenses:
Gaming                                      11,776          11,498               278                   2 %
Food, beverage, racing and other             2,746           2,624               122                   5 %
Selling, general and administrative          3,372           2,808               564                  20 %
Stock-based compensation                       166             319              (153 )               (48 )%
Depreciation                                   344             327                17                   5 %

Total costs and expenses                    18,404          17,576               828                   5 %

Income from operations                         455             990              (535 )               (54 )%
Interest expense                              (218 )          (342 )             124                 (36 )%
Interest income                                  3               2                 1                  50 %

Income before income taxes                     240             650              (410 )               (63 )%

Income tax provision                             0               0                                     0 %

Net income                                $    240        $    650        $     (410 )               (63 )%

Gaming revenue

Gaming revenue increased by $281,000, or 2%, for the three months ended June 30, 2012, as compared to the three months ended June 30, 2011. Our daily patron visits increased 3% and the average daily win per unit increased 2% from $159.85 for the three months ended June 30, 2011 to $162.62 for the three months ended June 30, 2012, as we continue to concentrate our marketing efforts on more profitable guests and programs to increase loyalty. Our VGM hold percentage was 6.9% and 7.1% for the three months ended June 30, 2012 and 2011, respectively.

Food, beverage, racing and other revenue

Food, beverage, racing and other revenue increased by $419,000, or 15%, for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011, due to increased food, beverage and other revenues of $100,000 and racing revenue of $314,000.

Food, beverage and other revenues increased primarily due to higher food and beverage promotional offers compared to a reduced food and beverage promotional program offered in 2011. Racing revenue increased primarily due to the receipt of most of the Off-Track Betting Corporations ("OTB's") statutory payments of $314,000; that due to the uncertainty of collection, are accounted for as revenue when received.

Promotional allowances

Promotional allowances increased by $407,000, or 89%, for the three months ended June 30, 2012, as compared to the three months ended June 30, 2011, primarily due to increased food and beverage comps of $259,000 and non-subsidized free play of $119,000. The increase in food and beverage comps is primarily due to a reduction of food and beverage comp expense of $167,000 in 2011 due to a change in marketing strategy. The food and beverage point program was modified to permit certain players to redeem their accumulated food points for non-subsidized free play. This program spanned multiple months and most players did not redeem their food points for non-subsidized free play until the third quarter of 2011. In 2012, we have increased our food and beverage comp program, as well as our non-subsidized free play offerings accounting for the remaining increases in food and beverage comps and non-subsidized free play.

Gaming costs

Gaming costs increased by $278,000, or 2%, for the three months ended June 30, 2012, as compared to the three months ended June 30, 2011, primarily due to an increase in NYL and other commissions of $193,000 resulting from higher gaming revenue as compared to the same period in the prior year. Other gaming costs related to equipment and HVAC repairs of $47,000 and higher gaming payroll costs of $45,000 also contributed to this variance.

Food, beverage, racing and other costs

Food, beverage, racing and other costs increased approximately $122,000, or 5%, for the three months ended June 30, 2012, as compared to the three months ended June 30, 2011, primarily due to an increase in food, beverage, racing and other payroll and benefit cost of $58,000, Racing costs increased due to purses of $50,000 resulting from the higher gaming revenue and the horsemen's share of the statutory payments received from the OTB's as compared to the same period in the prior year.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $564,000, or 20%, for the three months ended June 30, 2012, as compared to the three months ended June 30, . . .