UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



(Mark One)
X	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015



or
_	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-54532

BREF HR, LLC

(Exact name of registrant as specified in its charter)



Delaware		27-4938906
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

Three World Financial Center
250 Vesey Street, 15^th Floor New York, NY		10281
(Address of principal executive office)		(Zip Code)

(212) 417-7265

(Registrant’s telephone number, including area code)

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

None

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

Class A Units

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. Yes __ No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes __ No X

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No __

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.



Large accelerated filer __	Accelerated filer __	Non-accelerated filer X	Smaller reporting company __

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

There is no aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2015. There currently is no established public trading market for our Class A Units.

INDEX



	Page
PART I

ITEM 1 BUSINESS	2

ITEM 1A RISK FACTORS	16

ITEM 1B UNRESOLVED STAFF COMMENTS	24

ITEM 2 PROPERTIES	24

ITEM 3 LEGAL PROCEEDINGS	24

ITEM 4 MINE SAFETY DISCLOSURES	24

PART II

ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	26

ITEM 6 SELECTED FINANCIAL DATA	27

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	38

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	38

ITEM 9A CONTROLS AND PROCEDURES	38

ITEM 9B OTHER INFORMATION	39

PART III

ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	40

ITEM 11 EXECUTIVE COMPENSATION	41

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	42

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	43

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES	44

PART IV

ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	45

PART I
Explanatory Note

Unless otherwise specified, references to the “Company”, “we”, “us” or “our” refer to BREF HR, LLC and its consolidated subsidiaries, or any one or more of them, as the context may require.

See Note 1, Company Structure and Nature of Business, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K and Item 1A, Risk Factors--Risks Related to our Business--There is substantial doubt about our ability to continue as a going concern, for a discussion of factors that could affect our ability to continue as a going concern.

Cautionary Statement Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains certain “forward-looking statements”, which represent our expectations or beliefs concerning future events. Statements containing expressions such as “believes”, “anticipates”, “expects” or other similar words or expressions are intended to identify forward-looking statements. We caution that these and similar statements included in this Annual Report on Form 10-K are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. Although we believe our expectations are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, we cannot guarantee future results, levels of activity, performance or achievements. The factors that could cause actual results to differ materially from expected results include changes in economic, business, competitive market and regulatory conditions. Important risks and factors that could cause our actual results to differ materially from any forward-looking statements include, but are not limited to:


•	our ability to continue as a going concern;


•	adverse changes in the U.S. and global economies, particularly as it relates to the levels of spending in the Las Vegas hotel, resort and casino industry;


•	reliance on a single property to attract local residents in the Las Vegas market;


•	reliance on Northern and Southern California markets;


•	changes in the competitive environment in our industry, particularly in the Las Vegas market;


•	volatility of and access to capital markets and increases in interest rates;


•	pre-tax net losses and risks related to our substantial amount of debt;


•	risks related to high fixed costs, including property taxes and insurance costs;


•	damage to our name, image or brand, including through the use of the “Hard Rock” brand name by entities other than us;


•	disputes with third parties for infringement or misappropriation of their proprietary rights;


•	potential liabilities associated with litigation and legal proceedings;


•	hostilities, including future terrorist attacks, or fear of hostilities that affect travel;


•	our dependence on BREF HR Management, LLC ("BREF HR Management") for our management or the departure of key personnel;


•	the seasonal nature of the hotel, resort and casino industry;


•	costs associated with compliance with extensive regulatory requirements;


•	increases in uninsured and under-insured losses, and


•	the other risks discussed in this Annual Report on Form 10-K in Item 1A, Risk Factors.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof. We undertake no obligation, and are under no duty, to update any of the forward-looking statements to conform these statements to reflect events or circumstances after the date hereof.

Item 1 Business

BREF HR, LLC is a Delaware limited liability company that was formed on February 11, 2011. The Company does not maintain a corporate website. The affairs of the Company are governed by a Limited Liability Company Agreement dated as of March 1, 2011 (the “LLC Agreement”).

The Company was formed by certain affiliates of Brookfield Financial, LLC (“Brookfield Financial”) to acquire the limited liability company interests of HRHH JV Junior Mezz, LLC (“HRHH JV Junior Mezz”) and HRHH Gaming Junior Mezz, LLC (“HRHH Gaming Junior Mezz”), which indirectly own the Hard Rock Hotel & Casino Las Vegas and certain related assets. These assets were acquired pursuant to the assignment (the "Assignment") from Hard Rock Hotel Holdings, LLC (“HRH Holdings”) in connection with the default by HRH Holdings and its subsidiaries on a real estate financing facility (the "Facility"), and the resulting Settlement Agreement. Brookfield Financial is managed by Brookfield Real Estate Financial Partners LLC (together with its affiliates, “Brookfield”).

As part of the Assignment, the Company assumed the obligations under the Facility and entered into an amendment thereof (as amended, the “Amended Facility”) between Vegas HR Private Limited (the "Mortgage Lender") and the Company. Pursuant to the Amended Facility, the land, building and improvements, equipment, fixtures and all personal property relating to the Hard Rock Hotel & Casino Las Vegas were pledged as security and collateral. Also as part of the Assignment, the Company entered into a second mortgage loan agreement with Brookfield Financial, as lender, (the “Second Mortgage”) in the amount of $30.0 million pursuant to which certain land, building and improvements, equipment, fixtures and personal properties were pledged as security and collateral. The Second Mortgage is subordinate in right of payment to the Amended Facility.

The Amended Facility required that the Company repay in full all “paid-in-kind” interest ("PIK interest") outstanding on March 1, 2014, in the event the Company had not made sufficient payments to the lender to provide a specified debt yield. The Company did not meet the specified debt yield threshold for the twelve-month period ending March 1, 2014. However, the lender entered into a Forbearance Agreement effective as of March 1, 2014, pursuant to which it agreed not to exercise any rights or remedies with respect to the PIK interest. The lender entered into a series of amendments to the Forbearance Agreement which, each time, extended the effective date to which the lender agreed it would not exercise any rights or remedies with respect to the PIK interest. The most recent amendment to the Forbearance Agreement, the Twenty-Third Amendment, is effective as of March 7, 2016, pursuant to which the lender agreed not to exercise any rights or remedies with respect to the PIK interest until April 4, 2016. Currently, the Company does not have sufficient funds to satisfy a demand for the PIK interest payment on April 4, 2016. The Amended Facility has a maturity date of March 1, 2018 and provides for interest only at The London InterBank Offered Rate (“LIBOR”) plus 2.5% with a 1.5% LIBOR floor (total of 4%) at December 31, 2015. In addition, under the Amended Facility, supplemental interest is accrued at a rate sufficient to provide for the greater of 6.5% or LIBOR plus 4% effective interest rate at maturity after consideration of all prior payments of principal and interest ("supplemental interest"). The rates of accrual are dependent on fluctuations in the applicable LIBOR rate. The Amended Facility has a provision whereby if the cash available for debt service is less than the current interest due, the interest shortfall (“PIK interest”) will be automatically added to the outstanding principal balance of the Amended Facility and shall thereafter accrue interest. In addition, excess cash in the cash management account will be applied to the outstanding PIK interest, supplemental interest and principal according to the terms of the Amended Facility.

The outstanding PIK interest as of December 31, 2015 was $83.7 million. The Company is currently assessing its options to satisfy the PIK interest payment obligation including, but not limited to, negotiating a waiver of this requirement from the lender, restructuring the Amended Facility with the lender, selling off a portion of existing collateral or attempting to obtain borrowings or additional equity funding from our current ownership or other sources. If we are unable to negotiate a waiver, restructure our indebtedness, obtain alternative financing on acceptable terms, obtain approval from the lender to use our available cash reserves to satisfy a portion of this potential obligation, or otherwise are unsuccessful in satisfying our PIK interest payment obligation, we risk losing some or all of our property to foreclosure. If prevailing interest rates or other factors at the time of any restructuring of our indebtedness or at the time we obtain borrowings from other sources results in higher interest rates, our interest expense would increase, which would harm our business and results of operations.

See Note 1, Company Structure and Nature of Business and Note 9, Debt, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K. See also Item 1A, Risk Factors--Risks Related to our Business--There is substantial doubt about our ability to continue as a going concern.

Corporate Structure

Until June 15, 2012, gaming operations at the Hard Rock Hotel & Casino Las Vegas were operated by LVHR Casino, Inc. (“LVHR”), a third party operator, pursuant to the Casino Lease dated as of March 1, 2011 between LVHR, as Tenant, and HRHH Hotel/Casino, LLC ("HRHH Hotel/Casino") as Landlord (the “Casino Lease”). LVHR became one of our indirect subsidiaries and we assumed operation of the gaming facilities at the Hard Rock Hotel & Casino Las Vegas on June 15, 2012.

On or about June 15, 2012, we also restructured and converted LVHR from a Nevada corporation to a Nevada limited liability company known as LVHR Casino, LLC ("LVHR Casino"). Upon consummation of the conversion of LVHR into LVHR Casino: (i) LVHR Casino became a mortgage borrower under the Amended Facility and the Second Mortgage; (ii) LVHR Casino continued to own all of the assets that are used at the Hard Rock Hotel & Casino Las Vegas gaming operations (which assets LVHR acquired on March 2, 2011); and (iii) the revolving line of credit HRHH Gaming, LLC was obligated to make available to LVHR was terminated. See Item 1, Business – Nevada Gaming Regulation and Licensing and Item 1, Business--Agreements Governing the Operation of the Hard Rock Hotel & Casino Las Vegas for additional information.

OVERVIEW OF HARD ROCK HOTEL & CASINO LAS VEGAS

We operate the Hard Rock Hotel & Casino Las Vegas, which we believe is a premier destination entertainment resort with a rock music theme. Commencing operations in 1995, the Hard Rock Hotel & Casino Las Vegas is modeled after the highly successful Hard Rock Cafe restaurant chain and is decorated with an extensive collection of rare rock and roll memorabilia. The original Hard Rock Cafe was co-founded in 1971 by Peter Morton, and the “Hard Rock” name has grown to become widely recognized throughout the world.

The property continues to retain a strong following among its target customer base, now ranging generally between the ages of 25 and 54, who seek a vibrant, energetic entertainment and gaming experience with the services and amenities associated with a boutique luxury resort hotel.

The Hard Rock Hotel & Casino Las Vegas currently consists of:


•	three hotel towers with 1,504 stylishly furnished hotel rooms averaging approximately 500 square feet in size (including 448 suites, 11 penthouses, 10 pool villas and eight multi-level spa villas);


•	an approximately 60,000 square-foot uniquely styled casino with 695 slot machines, 58 table games and five poker tables where rock music is played continuously to provide the casino with an energetic and entertaining club-like atmosphere;


•	an approximately 1,250 square-foot “Hard Rock” retail store, a jewelry store, two clothing stores, a lingerie store and a tattoo parlor;


•	a 12,621 square-foot special events facility offered in the Vanity night club space with a capacity of approximately 1,400 persons;


•	a 14,578 square-foot nightclub called “Body English” with a capacity of approximately 800 persons;


•	approximately 80,000 square feet of flexible banquet and meeting facilities;


•	a live music concert hall called “The Joint” with a capacity of approximately 4,255 persons, and a live entertainment venue called “Vinyl” with a capacity of approximately 650 persons;


•	a nearly five-acre pool area comprised of various diverse pool areas including Paradise Beach, Nirvana Pool and Breathe Pool and Lounge (collectively the “Pools”);


•	seven full service restaurants at multiple price points - 35 Steaks + Martinis, Pink Taco, Mr. Lucky’s, Nobu Las Vegas, Culinary Dropout, Pizza Forte and Fú, and three coffee/juice bars--Fuel Cafe, Fuel Express and Juice Bar;


•	seven cocktail lounges including two circular lounges called “Luxe Bar” and “Center Bar” that are surrounded by the gaming floor, a sports bar called “The Ainsworth”, Lounge Bar and the Midway Bar; and


•	an approximately 21,000 square-foot spa, salon and fitness center called “Reliquary”.

See Item 1, Business--The Hard Rock Hotel & Casino Las Vegas for additional information.

BUSINESS STRATEGY

We aim to position uniquely the Hard Rock Hotel & Casino Las Vegas within the Las Vegas hotel, resort and casino industry. Our primary business and marketing strategies center on creating a vibrant and energetic entertainment and gaming environment that appeals to a youthful and hip customer base. We leverage certain of our strengths, including a theme consistent with the “Hard Rock” brand and our vibrant atmosphere and personalized service, to differentiate the Hard Rock Hotel & Casino Las Vegas from the substantially larger “mega resorts” located approximately one mile west on the Las Vegas Strip. Key elements of our business strategy include the following:

Target Clientele

We believe that we have successfully differentiated the Hard Rock Hotel & Casino Las Vegas in the Las Vegas market by targeting a youthful and hip customer base that consists primarily of rock music fans as well as actors, musicians and other members of the entertainment industry. To attract this target audience, we promote the Hard Rock Hotel & Casino Las Vegas as “the place-to-be” in Las Vegas. The “Hard Rock Hotel” and “Hard Rock Casino” trademarks, along with an extensive network of contacts in the music and entertainment industry, continue to help attract a number of famous actors, musicians and celebrities to the Hard Rock Hotel & Casino Las Vegas. We believe this customer base is comprised of demographic groups that remain under-served by competing facilities despite recent competition from other properties in Las Vegas.

Entertainment

We believe that The Joint’s concerts and the Hard Rock Hotel & Casino Las Vegas’ special events generate significant worldwide publicity and reinforce the Hard Rock Hotel & Casino Las Vegas’ marquee image and unique position in the Las Vegas marketplace and provide an added source of visitors for the hotel, casino, retail, and food and beverage operations.

Gaming Mix Targeted To Customer Base

Our target gaming customer has a higher propensity to play table games and we strive to create a fun and enthusiastic gaming environment through the use of music themed gaming chips and playing surfaces and by promoting interaction between table game dealers and customers. The casino also features the latest slot machines, some of which reflect the Hard Rock Hotel & Casino Las Vegas’ rock music theme as well as more traditional machines.

Significant Revenues from Non-Gaming Operations

We derive significant revenues from non-gaming operations. Our hotel, Pools, retail, food and beverage and other operations allow us to market the Hard Rock Hotel & Casino Las Vegas as a full-service destination. We believe our diversified revenue base allows us to be less dependent on the casino as a source of revenues and profits and may result in less volatility in our earnings.

Emphasis on Customer Service

We believe that one of the cornerstones of our business strategy is providing our customers with a high level of personal service. Our employees are trained to interact with guests and continually strive to instill in our employees a dedication to superior service designed to exceed guests’ expectations. We regularly gather and respond to feedback regarding customer satisfaction.

LOCATION

The Hard Rock Hotel & Casino Las Vegas occupies what we believe is one of the most highly visible and easily accessible sites in Las Vegas. The Hard Rock Hotel & Casino Las Vegas is located on approximately 30 acres of land near the intersection of Paradise Road and Harmon Avenue, approximately two miles from McCarran International Airport and approximately one mile east of the Las Vegas Strip, the main tourist area in Las Vegas. We believe the Hard Rock Hotel & Casino Las Vegas represents an attractive alternative for tourists, business travelers and locals who wish to maintain close and easy access to the Las Vegas

Strip while avoiding its crowds and congestion. We believe the Hard Rock Hotel & Casino Las Vegas’ location is particularly attractive due to its proximity to:


•	a high concentration of popular Las Vegas restaurants and nightclubs;


•	the Las Vegas Convention Center;


•	the Thomas & Mack Center at the University of Nevada Las Vegas, Las Vegas’ primary sporting and special events arena; and


•	a number of non-gaming hotels which have an aggregate of more than 1,000 guest rooms.

THE HARD ROCK HOTEL & CASINO LAS VEGAS

The Hard Rock Hotel & Casino Las Vegas currently consists of the hotel, casino, retail stores, nightclubs, a special events facility, banquet and meeting facilities, The Joint, a live entertainment venue, Pools and beach area, seven full service restaurants, three coffee/juice bars, seven cocktail lounges, spa, salon, and a fitness center which was closed since 2014.

The Hotel

The Hard Rock Hotel & Casino Las Vegas’ three hotel towers consist of 1,504 hotel rooms, 448 or approximately 30% of which are suites, including 11 penthouses, 10 pool villas and eight multi-level spa villas. The hotel rooms average approximately 500 square feet, which is larger than the average Las Vegas hotel room. Consistent with the Hard Rock Hotel & Casino Las Vegas’ distinctive decor, the hotel rooms are stylishly furnished, with over-sized bathrooms, pedestal beds with leather headboards and photos of famous rock musicians. The rooms also include special amenities such as large 40-plus inch flat screen televisions with high speed internet access and, in certain cases, French doors that open to the outdoors, and personal iPod compatible sound systems. A full-service concierge and 24-hour room service are available to all guests of the hotel.

The following table illustrates certain historical information relating to our hotel:



	For the year ended December 31,
	2015			2014			2013
Average number of hotel rooms	1,504			1,504			1,505
Average occupancy rate (1)	92		%	94		%	89		%
Average daily rate (1)	$	132		$	125		$	125
Revenues per available room (2)	$	123		$	119		$	113

(1)

The Company calculates (a) average occupancy rate by dividing total rooms occupied by average number of hotel rooms(b) average daily rate by dividing total daily lodging revenue by total daily rooms rented. The Company accounts for lodging revenue on a daily basis. As is customary for companies in the gaming industry, average occupancy rate and average daily rate include rooms provided on a complimentary basis. Rooms provided on a complimentary basis include rooms provided free of charge or at a discount to the rate normally charged to customers as an incentive to use the casino. Complimentary rooms reduce average daily rate for a given period to the extent the provision of such rooms reduces the amount of revenue the Company would otherwise receive.


(2)	The Company calculates revenues per available room by dividing total lodging revenue by the average number of hotel rooms.

The Casino

The casino is designed with an innovative layout around two lounges, Luxe Bar and Center Bar, which allows the casino’s patrons to see and be seen from nearly every area of the casino. Rock music is played continuously to provide an energetic and entertaining club-like atmosphere. In addition, the casino promotes a friendly, intimate atmosphere by encouraging its employees to smile at and interact with casino players.

The casino houses 58 table games including Blackjack tables, Craps tables, Roulette tables, Baccarat tables, Three-Card Poker tables, Let-it-Ride table, Big 6 table, Ultimate Texas Holdem table, Switch Blackjack tables, Pai Gow Poker tables as well as five poker tables, 695 slot machines, and a state-of-the-art, 5,836 square-foot race and sports book. The race and sports book is operated by CG Technology (formerly Cantor G&W (Nevada), L.P.) under a lease arrangement. Some of the casino’s gaming tables are themed to coincide with current concerts and the casino also offers patrons other attractions, such as cutting edge slot technology, proprietary slot graphics and distinctive slot signage.

Retail

The Hard Rock Hotel & Casino Las Vegas’ retail operations consist of an approximately 1,250 square-foot “Hard Rock” retail store; an approximately 700 square-foot sundries shop; and an approximately 600 square-foot “Love Jones” lingerie store. Visitors may purchase clothing and other accessories, including merchandise displaying the popular “Hard Rock Hotel”, from the retail and sundries shops. Our retail operations offer a convenient and inexpensive outlet to market and advertise the “Hard Rock Hotel” trademark and attract visitors to the Hard Rock Hotel & Casino Las Vegas. Our in-house design team is responsible for maintaining the consistency of the Hard Rock Hotel & Casino Las Vegas’ image while creating new merchandise to expand and diversify the retail selection. Additionally, the following independently operated stores are located at the property: “Rocks the Jewelers” jewelry store, “Hart & Huntington Tattoo” tattoo parlor, and “John Varvatos” and “Affliction” clothing stores.

Vanity

Vanity is a 12,621 square-foot venue featuring two marble bars, a sunken dance floor, 50 intimate VIP booths and an outdoor terrace, including five cabanas. Since January 1, 2013, Vanity has limited its operations exclusively to special events.

Body English

On December 28, 2012, the Company re-opened the 14,578 square-foot nightclub Body English (which had been closed since January 1, 2010). The venue, which is located underground, features intimate lighting, elegant leather booths, multiple bars and dance floors, and sound equipment featuring popular and innovative DJs from all around the country. Body English has limited its operations exclusively to special events.

Banquet and Meeting Facilities

Our approximately 80,000 square feet of flexible banquet and meeting space, and entertainment areas have capacity to accommodate groups of up to 8,000 persons. Depending upon the size of the event, customers can choose to host their functions, conventions and banquets indoors at The Joint or Ballrooms, or outdoors around the Pools (as defined below).

The Joint

The Joint is a live music concert hall with a capacity for up to 4,255 persons that draws audiences from both visitors to Las Vegas as well as local residents.

Vinyl

Vinyl, which opened in August 2012, is a live music entertainment venue with a capacity for up to approximately 650 persons, featuring up-and-coming and local rock, jazz, blues and comedy acts.

The Pools

The nearly five-acre pool area is comprised of various diverse pool areas including Paradise Beach, Nirvana Pool and Breathe Pool and Lounge (collectively the “Pools”). The Pools feature beaches with white sand imported from Monterey, California, rock outcroppings and whirlpools.

Paradise Beach features swim-up blackjack, a bar and grill, Tahitian-style private cabanas, daybeds, and a removable dance floor that extends from one of the beach areas. Each of the private cabanas include water misters, a refrigerator, a safe, a television and (for an additional fee) an on-site massage service.

Rehab is the original party pool in Las Vegas. Each Saturday and Sunday during pool season (April through October), the Pools and the Hard Rock Hotel & Casino host a massive outdoor party, with 1,500 to 4,500 attendees that party from morning until night. The resident DJ plays a wide variety of music and Rehab has become a noted destination for headline dance music DJs, and a frequent destination for celebrities.

The Nirvana Pool features an expansive pool area, sandy beach, daybeds and luxury cabanas, a unique island pool, swim-up blackjack and a lounge area. Breathe Pool and Lounge serves as a poolside escape for guests seeking more privacy.

Food and Beverage

The Hard Rock Hotel & Casino Las Vegas offers its patrons a selection of high-quality food and beverages at multiple price points. Food and beverage operations include seven full service restaurants (35 Steaks + Martinis, Pink Taco, Mr. Lucky’s, Nobu Las Vegas, Culinary Dropout, Pizza Forte and Fú), three coffee/juice bars (Fuel Café, Fuel Express and Juice Bar), seven cocktail lounges (Luxe Bar, Lounge Bar, Midway Bar, The Ainsworth, Race and Sports Bar, High Limit Bar and Center Bar), four bars in The Joint, two bars at the Paradise Beach, a bar at the Nirvana Pool, two bars at Breathe Pool and Lounge and catering service for corporate events, conventions, banquets and parties. 35 Steaks + Martinis, with a seating capacity of approximately 227 persons, is a unique marriage of traditional steakhouse cuisine and libations, complemented with clean, classic yet cutting edge design. Pink Taco, with a seating capacity of approximately 400 persons, is a stylish, authentic Mexican eatery with seasonal outside dining. Mr. Lucky’s, a 24-hour restaurant with a seating capacity for approximately 214 persons, specializes in high-quality, moderately priced American cuisine. Nobu Las Vegas, with a seating capacity of approximately 267 persons, is an upscale Japanese restaurant created by renowned chef Nobu Matsuhisa and serves traditional Japanese cuisine infused with South American and Western flavors. Nobu Las Vegas is owned and operated independently of the Hard Rock Hotel & Casino Las Vegas. Culinary Dropout, with a seating capacity of approximately 392 persons, is a gastropub serving unique and simple pub fare. Pizza Forte, opened on our property in August 2015, is a traditional family-owned restaurant that serves New York & Roman style pizzas by the slice, and other fast Italian food and treats. Fú, which means “luck” in Chinese, is an Asian restaurant, with a seating capacity of approximately 200 persons, offering a modern twist on Chinese cuisine. Fú features a unique fusion of Asian fare such as noodle dishes and the popular dim sum, and offers authentic Chinese cuisine with additional regional inspirations including Korean, Vietnamese and Thai. Fuel Cafe and Fuel Express offer a diverse array of coffees, teas, pastries and freshly-blended smoothies and juices. Juice Bar offers an array of coffees, teas, freshly-blended smoothies, and fresh squeezed juices.

Reliquary

Our spa and salon features a 1,500 square-foot Roman bath, 21 treatment rooms, including couples facilities, and hydro therapy rooms.

MARKETING

Our marketing efforts are targeted at both the visitor market (tourists and business travelers) as well as local patrons. Our marketing department uses both traditional and innovative marketing strategies to promote the “Hard Rock Hotel” and “Hard Rock Casino” trademarks. The Hard Rock Hotel & Casino Las Vegas is marketed aggressively through domestic and international public relations activities, direct mail, online, print, outdoor and broadcast advertising, and through special arrangements with various members of the entertainment industry.

Casino marketing also includes the Backstage Pass loyalty program for casino guests. The program, which is available to all casino visitors, tracks each patron’s record, and based upon the level of gaming and non-gaming activity, members may become eligible for discounted or complimentary services, invitations to special events and merchandise at the Hard Rock Hotel & Casino Las Vegas.

TRADEMARKS

“Hard Rock Hotel” and “Hard Rock Casino” are registered trademarks owned by Hard Rock Cafe International (USA), Inc. (“HRCI”), which we understand is controlled by the Seminole Tribe of Florida. We are successors in interest to a license agreement obtained from HRCI’s predecessors (the “Hard Rock License”) that, in substance, grants us the exclusive, royalty-free and perpetual right to use and exploit these trademarks in connection with hotel/casino operations or casino operations in certain geographic areas defined in the Hard Rock License as the “Morton Territories”. The Morton Territories include the State of Illinois and all states and possessions of the United States that are located west of the Mississippi River, including the entire state of Louisiana,

but excluding Texas, except for the Greater Houston Area. The Morton Territories also include the nations of Australia, Brazil, Israel and Venezuela, and the Greater Vancouver Area, British Columbia, Canada. In addition, under the Hard Rock License we have the right to sell licensed merchandise bearing the geographic location where it is sold in stores located in or contiguous to a Hard Rock Hotel/Casino or a Hard Rock Casino. The Hard Rock License further provides that we may sublicense and franchise our rights under the Hard Rock License.

On November 11, 2008, HRH Holdings executed a license agreement (the "CNE license agreement") with Cherokee Nation Enterprises, LLC (“CNE”), an entity indirectly 100%-owned by the Cherokee Nation. Pursuant to the CNE license agreement, we have agreed to sublicense certain intellectual property, including the “Hard Rock Hotel” and “Hard Rock Casino” trademarks, to CNE in connection with a hotel and a casino that CNE opened in Catoosa, Oklahoma. Under the terms of the CNE license agreement, CNE has agreed to pay us a certain percentage of its annual gross revenues based on the performance of its Hard Rock Hotel/Casino as well as certain other license fees. On February 17, 2009, HRH Holdings received notice from the National Indian Gaming Commission (the “NIGC”) that the CNE license agreement (i) is not a management agreement requiring the NIGC Chairman’s approval under the Indian Gaming Regulatory Act, and (ii) does not provide us or any other party with an impermissible proprietary interest in Indian gaming. The CNE license agreement became effective upon receipt of this NIGC notice.

On October 13, 2009, HRH Holdings executed a license agreement (the "Isleta license agreement") with the Pueblo of Isleta (“Isleta”). On December 24, 2012, Isleta and the Company mutually agreed to terminate the Isleta license agreement effective on June 30, 2013 resulting in an impairment of the intangible asset included in other licenses of $6.2 million which was recorded in December 2012 and was included in the carrying value of the in-place-contracts as of December 31, 2015. See further discussion at Note 6, Intangible Assets to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K.

On June 28, 2013, the Company executed a license agreement with Great Canadian Casinos, Inc., an affiliate of Great Canadian Gaming Corporation, for the Hard Rock Casino Vancouver, to rebrand and renovate the Boulevard Casino, situated in the city of Coquitlam, British Columbia in Metro Vancouver. The Hard Rock Casino Vancouver, opened on December 20, 2013, houses table games, including blackjack, roulette, pai gow, poker, baccarat, craps, VIP high-limit salons and more than 950 state-of-the-art interactive slot machines spread across an approximately 80,000 square-foot casino floor. The British Columbia Lottery Corporation and the British Columbia Gaming Policy Enforcement Branch (“GPEB”) determined that HRHH IP, LLC ("HRHH IP"), our subsidiary, was an “associate” of Great Canadian Gaming Casinos, Inc. within the meaning of the Gaming Control Act of British Columbia and, as such, was required to submit to background investigations as a condition of effectiveness to the license agreement. Accordingly, HRHH IP submitted the required information to GPEB and was approved as an associate company on November 26, 2013.

On November 11, 2013, the Company executed a license agreement with SCE Partners, LLC (“SCE”), pursuant to which certain intellectual property, including the “Hard Rock Hotel” and “Hard Rock Casino” trademarks, was licensed to SCE in connection with a land-based casino and adjacent hotel in downtown Sioux City, Iowa ("Hard Rock Hotel & Casino Sioux City"). SCE, together with the Missouri River Historical Development, Inc. ("MRHD"), was awarded the land-based casino license on April 18, 2013 through the request for proposal process conducted by the Iowa Racing and Gaming Commission. Hard Rock Hotel & Casino Sioux City opened on August 1, 2014 and has an approximately 30,000 square-foot casino with 700 slot machines and 18 table games along with an approximately 50-room hotel.

On July 14, 2014, the Company executed a license agreement with Neva One, LLC, pursuant to which certain intellectual property, including the “Hard Rock Hotel” and “Hard Rock Casino” was licensed to Neva One, LLC in connection with an approximately 25,000 square-foot casino and hotel with 500 slot machines and 539 rooms (the "Hard Rock Hotel and Casino Lake Tahoe"). The Hard Rock Hotel and Casino Lake Tahoe opened on January 28, 2015.

We also own a number of trademarks we consider important to our business. We intend to take all steps necessary to protect our trademark rights against unauthorized use throughout the world. See also Item 1A, Risk Factors--Risks Related to our Business-- We may have disputes with third parties for infringement or misappropriation of their proprietary rights, which could have a negative impact on our business.

LAS VEGAS MARKET

During 2015, according to the Las Vegas Convention and Visitors Authority (the “LVCVA”), gaming revenues in Clark County increased 0.7% to approximately $9.6 billion and the number of visitors traveling to Las Vegas increased 2.9% to approximately $42.3 million in 2015.

The following table sets forth certain statistical information for the Las Vegas market for the years ended December 31, 2011 through 2015, as reported by the LVCVA.



	For the year ended December 31,
	2015		2014		2013		2012		2011
Visitor Volume (in thousands)	42,312		41,127		39,668		39,727		38,929
Clark County Gaming Revenues (in millions)	$	9,616	$	9,554	$	9,676	$	9,400	$	9,223
Hotel/Motel Rooms	149,213		150,544		150,593		150,481		150,161
Airport Passenger Traffic (in thousands)	45,389		42,870		41,857		41,668		41,480
Convention Attendance (in thousands)	5,891		5,169		5,107		4,944		4,865

COMPETITION

The hotel and casino industry in general, and the markets in which we compete in particular, are highly competitive. The Hard Rock Hotel & Casino Las Vegas, located less than one mile east of the Las Vegas Strip, competes with other high-quality Las Vegas resorts and other Las Vegas hotel casinos including those located on the Las Vegas Strip, on the basis of overall atmosphere, range of amenities, price, location, entertainment offered, theme and size. Many of these Las Vegas resorts seek to attract customers to their properties by not only offering casino gaming, but also by providing hotel accommodations, food and beverage outlets, retail stores and other related amenities. To the extent that the Hard Rock Hotel & Casino Las Vegas seeks to enhance its revenue base by offering its own various resort amenities, it competes with the service offerings provided by these Las Vegas resorts. Some of these hotel casinos are operated by companies that have more than one operating facility and may have greater name recognition and financial and marketing resources than we do and market to the same target demographic group. See also Item 1A, Risk Factors--Risks Related to our Business--We face intense local and increasingly national competition which could impact our operations and adversely affect our business and results of operations.

We face additional competition from HRCI which, pursuant to the Hard Rock License, may open competing “Hard Rock” hotels in jurisdictions other than Nevada and the Morton Territories. For example, HRCI uses or licenses the use of the “Hard Rock” name in connection with its Seminole Hard Rock Hotels in Hollywood and Tampa, Florida and a number of other Hard Rock Hotels or hotel/casinos. There can be no assurance that our business and results of operations will not be adversely affected by the management or the enforcement of the “Hard Rock” brand name by parties outside of our control. See also Item 1A, Risk Factors--Risks Related to our Business--Use of the “Hard Rock” brand name by entities other than us could damage the brand and our operations and adversely affect our business and results of operations.

The Hard Rock Hotel & Casino Las Vegas also competes with hotel casinos in the Mesquite, Laughlin, Reno and Lake Tahoe areas of Nevada, and in a growing number of other jurisdictions in which gaming is now permitted. The Hard Rock Hotel & Casino Las Vegas also competes with state-sponsored lotteries, on- and off- track wagering, card parlors, riverboat and Native American gaming ventures, and other forms of legalized gaming in the United States, as well as with gaming on cruise ships, Internet gaming ventures and international gaming operations.

SEASONALITY

The Las Vegas hotel, resort and casino industry is seasonal in nature. This seasonality can tend to cause quarterly fluctuations in revenues at our hotel casino. For instance, our revenues generally peak in the second quarter. Our quarterly earnings may also be adversely affected by other related factors outside our control including weather conditions and poor economic conditions. As a result, we may have to enter into short-term borrowings in certain quarters in order to offset these quarterly fluctuations in our revenues.

EMPLOYEES

As of December 31, 2015, we had 1,160 full-time employees and 747 on-call and seasonal employees who are employed on an as-needed basis. None of our employees are represented by unions except for our valet employees who are represented by the Teamsters Union Local 995 (the "Teamsters"). The Company commenced bargaining with the Teamsters in May 2012 and such bargaining has continued through the date of this filing. We have been approached by other unions on various occasions and cannot be certain that one or more unions will not approach our employees. We consider our relations with our employees to be good and have never experienced an organized work stoppage, strike or labor dispute.

NEVADA GAMING REGULATION AND LICENSING

Introduction

The gaming industry is highly regulated. Gaming registrations, licenses and approvals, once obtained, can be suspended or revoked for a variety of reasons. We cannot be certain that our registrations, findings of suitability, licenses and approvals will not be suspended, conditioned, limited or revoked. 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 under such Act, as well as to various local ordinances (collectively, the “Nevada Gaming Control Act”). The Company is subject to the licensing and regulatory control of the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming Control Board and the Clark County Liquor and Gaming Licensing Board (the “Clark County Board”), which we collectively refer to in this document as the “Nevada Gaming Authorities”. The Nevada Gaming Authorities have broad authority with respect to licensing and registration of our business entities and individuals investing in or otherwise involved with us. The Nevada Gaming Authorities may, among other things, revoke the gaming license of any corporate entity or the registration of a registered corporation or any entity registered as a holding company of a corporate licensee for violations of gaming regulations. In addition, the Nevada Gaming Authorities may, under certain conditions, revoke the license or finding of suitability of any officer, director, controlling person, stockholder, note-holder or key employee of a licensed or registered entity.

Policy Concerns of Gaming Laws

The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy. Such public policy concerns include, among other things:


•	preventing unsavory or unsuitable persons from being directly or indirectly involved with gaming at any time or in any capacity;


•	establishing and maintaining responsible accounting practices and procedures;


•	maintaining effective controls over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and safeguarding assets and revenue, providing reliable recordkeeping and requiring the filing of periodic reports with the Nevada Gaming Authorities;


•	preventing cheating and fraudulent practices; and


•	providing a source of state and local revenue through taxation and licensing fees.

Changes in applicable laws, regulations and procedures could have significant negative effects on our gaming operations and our financial condition and results of operations.

Owner and Operator Licensing Requirements

The Company, as the indirect owner of the Hard Rock Hotel & Casino Las Vegas, has been approved by the Nevada Gaming Authorities as a publicly-traded company (referred to as a registered company for purposes of the Nevada Gaming Control Act). Nevada Gaming Authorities’ approval also grants LVHR Casino a license to conduct non-restricted gaming operations at the Hard Rock Hotel & Casino Las Vegas, and grants LVHR Casino an approval to share in gaming revenue with the third party operator of the race and sports book operation at the Hard Rock Hotel & Casino Las Vegas. The gaming license requires the periodic payment of fees and taxes and is not transferable.

Company Registration Requirements

In connection with our obtaining approvals and licenses to acquire and own the equity securities of LVHR Casino, our Class A members were found suitable by the Nevada Commission as the beneficial owners and controlling beneficial owners of the Company. A finding of suitability by the Nevada Commission is required for certain licensing and other approvals, as explained in detail below.

As a consequence of its registration with the Nevada Commission, the Company is required to submit detailed financial and operating reports to the Nevada Commission and provide any other information that the Nevada Commission may require. Substantially all of our material loans, leases, sales of securities and similar financing transactions must be reported to, or approved by, the Nevada Commission.

Individual Licensing Requirements

No person may become a stockholder or member of, or receive any percentage of the profits of, a registered intermediary company or company licensee without first 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. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. An applicant for licensing or an applicant for a finding of suitability must pay or must cause to be paid all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensing, the Nevada Gaming Authorities have the jurisdiction to disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director, a member or manager of BREF HR Management, LLC (“BREF HR Management”), as applicable, or a key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person. See Item 1A, Risk Factors--Risks Related to our Business--We depend on BREF HR Management for the future success of our business and the loss of one or more of their key personnel could have an adverse effect on our ability to manage our business and operate successfully and competitively, or could be negatively perceived in the capital markets. In addition, the Nevada Commission may require us to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or questions pertaining to licensing are not subject to judicial review in Nevada.

Requirements for Security Holders

Regardless of the number of shares or other interests held, any beneficial holder of the voting or non-voting securities of a registered company may be required to file an application, be investigated and have that person’s suitability as a beneficial holder of voting or non-voting securities evaluated if the Nevada Commission has reason to believe that the ownership would otherwise be inconsistent with the declared policies of the State of Nevada. If the beneficial holder of such securities who must be found suitable is a corporation, partnership, limited partnership, limited liability company or trust, it must submit detailed business and financial information including a list of its beneficial owners. The applicant must pay all costs of the investigation incurred by the Nevada Gaming Authorities in conducting any investigation.

The Nevada Gaming Control Act requires any person who acquires more than 5% of the voting securities of a registered company to report the acquisition to the Nevada Commission. The Nevada Gaming Control Act requires beneficial owners of more than 10% of a registered company’s voting securities to apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Board mails the written notice requiring such filing. However, an “institutional investor,” as defined in the Nevada Gaming Control Act, which beneficially owns more than 10% but not more than 11% of a registered company’s voting securities as a result of a stock repurchase by the registered company may not be required to file such an application. Further, an institutional investor which acquires more than 10%, but not more than 25%, of the registered company’s voting securities may apply to the Nevada Commission for a waiver of a finding of suitability if the institutional investor holds the voting securities for investment purposes only. An institutional investor that has obtained a waiver may own more than 25% but not more than 29% of the voting securities of a registered company and maintain the waiver where the additional ownership results from a stock repurchase by the registered company. An institutional investor will not be deemed to hold voting securities

for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the registered company, a change in the corporate charter, bylaws, management, policies or operations of the registered company, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the registered company’s voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include:


•	voting on all matters voted on by stockholders or interest holders;


•	making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and


•	other activities that the Nevada Commission may determine to be consistent with such investment intent.

Consequences of Being Found Unsuitable

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or by the Chairman of the Nevada Board, or who refuses or fails to pay the investigative costs incurred by the Nevada Gaming Authorities in connection with the investigation of its application, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of any security of a registered company beyond the period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. We will be subject to disciplinary action if, after we receive notice that a person is unsuitable to hold an equity interest or to have any other relationship with, we:


•	pay that person any dividend or interest upon any voting securities;


•	allow that person to exercise, directly or indirectly, any voting right held by that person relating to the Company;


•	pay remuneration in any form to that person for services rendered or otherwise; or


•	fail to pursue all lawful efforts to require the unsuitable person to relinquish such person’s voting securities including, if necessary, the immediate purchase of the voting securities for cash at fair market value.

Approval of Public Offerings

A registered company may not make a public offering of its securities without the prior approval of the Nevada Commission if it intends to use the proceeds from the offering to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for those purposes or for similar transactions. Any approval that we might receive in the future relating to future offerings will not constitute a finding, recommendation or approval by any of the Nevada Board or the Nevada Commission as to the accuracy or adequacy of the offering memorandum or the investment merits of the securities. Any representation to the contrary is unlawful.

The regulations of the Nevada Commission also provide that any entity which is not an “affiliated company”, as that term is defined in the Nevada Gaming Control Act, or which is not otherwise subject to the provisions of the Nevada Gaming Control Act, such as the Company, that plans to make a public offering of securities intending to use such securities, or the proceeds from the sale thereof, for the construction or operation of gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes, may apply to the Nevada Commission for prior approval of such offering. The Nevada Commission may find an applicant unsuitable based solely on the fact that it did not submit such an application, unless upon a written request for a ruling, referred to as a Ruling Request, the Chairman of the Nevada Board has ruled that it is not necessary to submit an application.

Approval of Changes in Control

We must obtain prior approval of the Nevada Commission with respect to a change in control through merger, consolidation, stock or asset acquisitions, management or consulting agreements or any act or conduct by a person by which the person obtains control of us. Entities seeking to acquire control of a registered company must satisfy the Nevada Board and Nevada Commission with respect to a variety of stringent standards before assuming control of the registered company. The Nevada Commission may also

require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process relating to the transaction.

Approval of Defensive Tactics

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licenses or affecting registered companies that are affiliated with the operations permitted by Nevada gaming licenses may be harmful to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to reduce the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to:


•	assure the financial stability of corporate gaming operators and their affiliates;


•	preserve the beneficial aspects of conducting business in the corporate form; and


•	promote a neutral environment for the orderly governance of corporate affairs.

Approvals may be required from the Nevada Commission before we can make exceptional repurchases of voting securities above their current market price and before a corporate acquisition opposed by management can be consummated. The Nevada Gaming Control Act also requires prior approval of a plan of recapitalization proposed by a registered company’s board of directors in response to a tender offer made directly to its stockholders for the purpose of acquiring control.

Fees and Taxes

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 revenue received;


•	the number of gaming devices operated; or


•	the number of table games operated.

A live entertainment tax is also paid by gaming operations where live entertainment is furnished in connection with admission fees, the selling or serving of food or refreshments or the selling of merchandise.

Foreign Gaming Investigations

From time to time, the Company and its affiliates may become involved in gaming activities outside of Nevada through sublicensing and franchising our rights under the Hard Rock License, as described more fully in Item 1, Business--Trademarks. Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with those persons (collectively, “licensees”), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada Board of the licensee’s or registrant’s participation in such foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the Nevada Commission. Licensees and registrants are required to comply with the reporting requirements imposed by the Nevada Gaming Control Act. A licensee or registrant is also subject to disciplinary action by the Nevada Commission if it:


•	knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation;


•	fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations;


•	engages in any activity or enters into any association that is unsuitable because it poses an unreasonable threat to the control of gaming in Nevada, reflects or tends to reflect, discredit or disrepute upon the State of Nevada or gaming in Nevada, or is contrary to the gaming policies of Nevada;


•	engages in activities or enters into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees; or


•	employs, contracts with or associates with a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of unsuitability.

License for Conduct of Gaming and Sale of Alcoholic Beverages

The conduct of gaming activities and the service and sale of alcoholic beverages at the Hard Rock Hotel & Casino Las Vegas are subject to licensing, control and regulation by the Clark County Board. In addition to approving the licensee, the Clark County Board has the authority to approve all persons owning or controlling the stock of any business entity controlling a gaming or liquor license. All licenses are revocable and are not transferable. The Clark County Board has full power to limit, condition, suspend or revoke any license. Any disciplinary action could, and revocation of a license would, have a substantial negative impact upon the operations of the Hard Rock Hotel & Casino Las Vegas.

Consequences of Violating Gaming Laws

If the Nevada Commission decides that we have violated the Nevada Gaming Control Act or any of its regulations, it could limit, condition, suspend or revoke our applications, or registrations and gaming license. In addition, we and the persons involved could be subject to substantial fines for each separate violation of the Nevada Gaming Control Act at the discretion of the Nevada Commission. Further, the Nevada Commission could appoint a supervisor to operate the gaming-related activities at the Hard Rock Hotel & 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 of Nevada. Limitation, conditioning or suspension of any gaming licenses obtained and the appointment of a supervisor could, and revocation of any such gaming license would, have a significant negative effect on our gaming operations. See Item 1A, Risk Factors--Risks Related to our Business-- The gaming industry is heavily regulated and failure to comply with extensive regulatory requirements may result in an adverse effect on our business.

AGREEMENTS GOVERNING THE OPERATION OF THE HARD ROCK HOTEL & CASINO LAS VEGAS

In April 2011, the Company applied to the Nevada Gaming Authorities for all required approvals and licenses to assume the gaming operations at the Hard Rock Hotel & Casino Las Vegas. On December 22, 2011, we received all approvals, licenses and findings of suitability from the Nevada Commission necessary to serve as the operator of the gaming facilities at the Hard Rock Hotel & Casino Las Vegas and we were approved to acquire and own the equity securities of LVHR. Prior to obtaining the necessary gaming approvals, we were prohibited from receiving any revenues of the casino at the Hard Rock Hotel & Casino Las Vegas. As such, we entered into a definitive lease agreement with a third party casino operator, LVHR, for all gaming and related activities at the casino and management agreements related to the Hard Rock Hotel & Casino Las Vegas with WG-Harmon, an affiliate of LVHR. On June 15, 2012, LVHR became a 100%-owned consolidated subsidiary of the Company. The Company has included revenues earned by LVHR during periods prior to that date in its consolidated financial statements in accordance with applicable guidance relating to variable interest entities.

Casino Lease

Lease of Casino Premises. On March 1, 2011, the Company entered into the Casino Lease, pursuant to which the Company leased to LVHR (i) a portion of the Hard Rock Hotel & Casino Las Vegas in which gaming operations presently are being conducted, as well as other gaming areas located in and around the Hard Rock Hotel & Casino Las Vegas’ Pools including, without limitation, areas containing the front of the house casino-related slot machines, table games and sports book, all areas in the Hard Rock Hotel & Casino Las Vegas used for gaming purposes and (ii) the associated offices, back of the house count rooms, casino cages and all surveillance areas within the Hard Rock Hotel & Casino Las Vegas (collectively, the “Casino Premises”).

Term. The term of the Casino Lease began on March 1, 2011 and was amended on June 15, 2012 (as amended, the "Casino Lease")with an initial term of 10 years. On such date, LVHR became one of our subsidiaries and we assumed operation of the gaming facilities at the Hard Rock Hotel & Casino Las Vegas. The Casino Lease contains terms that are reflective of a lease agreement between related parties, including a provision for the payment of nominal rent.

Rent. Prior to June 15, 2012, LVHR agreed to pay rent to the Company in the amount of $1.25 million per month, paid in arrears on the last day of each month under the Amended Resort Management Agreement (described below). On June 15, 2012, when LVHR became one of our subsidiaries, the Casino Lease was amended to provide for the payment of nominal rent.

Sale of Gaming Assets and Working Capital Line. In addition to the Casino Lease, LVHR and the Company entered into the Existing Gaming Assets Acquisition Agreement dated as of March 1, 2011, pursuant to which LVHR acquired all of the then existing assets of the Company used in the Hard Rock Hotel & Casino Las Vegas’ gaming operations. As part of the Casino Lease, the Company was obligated to make available to LVHR a revolving line of credit to be used solely for working capital purposes. On December 22, 2011, we received all approvals, licenses and findings of suitability from the Nevada Commission necessary to serve as the operator of the gaming facilities at the Hard Rock Hotel & Casino Las Vegas and we were approved to acquire and own the equity securities of LVHR. LVHR became one of our subsidiaries and we assumed operation of the gaming facilities at the Hard Rock Hotel & Casino Las Vegas on June 15, 2012. On or about the same date LVHR became one of our subsidiaries, we assumed operation of the gaming facilities at the Hard Rock Hotel & Casino Las Vegas, and we restructured and converted LVHR from a Nevada corporation to a Nevada limited liability company known as LVHR Casino. Upon consummation of the conversion of LVHR: (i) LVHR Casino became a mortgage borrower under the Amended Facility and the Second Mortgage; (ii) LVHR Casino continued to own all of the assets that are used at the Hard Rock Hotel & Casino Las Vegas gaming operations (which assets LVHR acquired on March 2, 2011) and (iii) the revolving line of credit was terminated.

Resort Management Agreement

Management of Premises. On March 1, 2011, the Company and WG-Harmon entered into a Resort Management Agreement, which agreement was subsequently amended on June 15, 2012, November 11, 2013 and March 28, 2016 (as amended, the “Amended Resort Management Agreement”), pursuant to which WG-Harmon manages the Hard Rock Hotel & Casino Las Vegas, including the gaming operations and the liquor operations.

WG-Harmon is required to use commercially reasonable efforts to operate the Hard Rock Hotel & Casino Las Vegas and, subject to certain ownership approval rights and consents, has complete discretion and control in all matters relating to the management and operation of the Hard Rock Hotel & Casino Las Vegas. WG-Harmon is required to act at all times with the standard of skill, care and expertise that would be customary and reasonably expected from a prudent manager of comparable resorts, and WG-Harmon shall cause the Hard Rock Hotel & Casino Las Vegas to be operated, serviced, maintained, furnished, equipped and refurbished in a manner reasonably expected to enhance the financial performance of the Hard Rock Hotel & Casino Las Vegas’ operations.

Term. The term of the Amended Resort Management Agreement, as most recently amended, began on March 28, 2016 and will continue until March 31, 2017. The Amended Resort Management Agreement may be terminated by the Company, at any time, without payment, during its term, by the Company providing WG-Harmon with at least ninety days prior written notice.

Management Fees. During the term of the Amended Resort Management Agreement, the Company is required to pay WG-Harmon a base fee in the amount of $150,000 per month, payable monthly. In addition to such base fee, the Company is required to pay WG-Harmon an incentive management fee based on the performance of the adjusted EBITDA of the Hard Rock Hotel & Casino Las Vegas, as set forth in the Amended Resort Management Agreement. The Company incurred incentive management fees for the years ended December 31, 2015, 2014 and 2013 of $0.3 million, $1.8 million and $0, respectively.

Termination. Upon the occurrence of any Event of Default (as defined below), the non-defaulting party has a right to terminate the Amended Resort Management Agreement upon written notice given to the other parties. Additionally, the Company has the right to terminate the Amended Resort Management Agreement following (i) any failed drug test by the senior officers of Warner Gaming or WG-Harmon and the failure of Warner Gaming or WG-Harmon to promptly take remedial action in connection with such senior officer, (ii) any failed drug test of William W. Warner, (iii) if Warner Gaming or WG-Harmon is no longer controlled by William W. Warner (including in connection with his death or disability) or (iv) if William W. Warner is convicted of or pleads nolo contendere to any felony.

For the purposes of the Amended Resort Management Agreement:

“Event of Default” includes:


•	the failure of any party to make any required monetary payment, which failure is not cured within 10 days after written notice;


•	the failure of a party to perform any of its other material obligations under the Amended Resort Management Agreement, which failure is not cured upon 30 days’ notice from the non-defaulting party;


•	the filing of a voluntary petition in bankruptcy or insolvency or a petition for liquidation or reorganization under any bankruptcy law by a party, or a party consenting to, acquiescing in, or failing to timely controvert, an involuntary petition in bankruptcy, insolvency or an involuntary petition for liquidation or reorganization filed against it; or


•	the filing against a party of a petition seeking adjudication of a party as insolvent or seeking liquidation or reorganization or appointment of a receiver, trustee or liquidator of all or a substantial part of a party’s assets, if such petition is not dismissed within 90 days.

Additionally, an “Event of Default” of WG-Harmon under the Amended Resort Management Agreement includes:


•	a default or material breach by WG-Harmon under the Amended Resort Management Agreement, or the Amended and Restated IP License Agreement between the Company and WG-Harmon dated as of June 15, 2012 (the “IP License”), in each case where a remedy of termination is exercised;


•	WG-Harmon fails to maintain any necessary regulatory approvals;


•	WG-Harmon fails to comply with the IP License or the intellectual property provisions of the Amended Resort Management Agreement; and


•	WG-Harmon misapplies or misappropriates any funds from the Hard Rock Hotel & Casino Las Vegas operations, the Company or any reserve funds, which is not cured within two days’ written notice.

Change of Control Provisions. WG-Harmon may not assign the Amended Resort Management Agreement without the Company’s prior written approval, which may be withheld in the Company’s sole discretion. The Company may not assign the Amended Resort Management Agreement, other than to a mortgagee or to an affiliate succeeding in ownership of the Hard Rock Hotel & Casino Las Vegas, without WG-Harmon’s prior written approval, which may be withheld in WG-Harmon’s sole discretion.

Item 1A Risk Factors

Set forth below are risks and uncertainties that we believe are material to the Company. You should consider carefully the following risks and uncertainties, together with the other information contained in and incorporated by reference in this Annual Report on Form 10-K, and the descriptions included in our consolidated financial statements and accompanying notes.

Risks Related to Our Business

The Company’s consolidated results of operations, financial position and cash flows can be adversely affected by various risks. These risks include, but are not limited to, the principal factors listed below and the other matters set forth in this Annual Report on Form 10-K. All of these risks should be carefully considered.

There is substantial doubt about our ability to continue as a going concern.

The Amended Facility required that the Company repay in full all PIK interest outstanding on March 1, 2014, in the event the Company had not made sufficient payments to the lender to provide a specified debt yield. The Company did not meet the specified debt yield threshold for the twelve month period ending March 1, 2014. However, the lender entered into a Forbearance Agreement effective as of March 1, 2014, pursuant to which it agreed not to exercise any rights or remedies with respect to the PIK interest. The lender entered into a series of amendments to the Forbearance Agreement which each time extended the effective date to which the lender agreed it would not exercise any rights or remedies with respect to the PIK interest. The most recent amendment

to the Forbearance Agreement, the Twenty-Third Amendment, is effective as of March 7, 2016, pursuant to which the lender agreed not to exercise any rights or remedies with respect to the PIK interest until April 4, 2016. Currently, the Company does not have sufficient funds to satisfy a demand for the PIK interest payment on April 4, 2016. The Amended Facility has a maturity date of March 1, 2018 and provides for interest only at The London InterBank Offered Rate (“LIBOR”) plus 2.5% with a 1.5% LIBOR floor (total of 4%) at December 31, 2015. In addition, under the Amended Facility supplemental interest is accrued at a rate sufficient to provide for the greater of 6.5% or LIBOR plus 4% effective interest rate at maturity after consideration of all prior payments of principal and interest. The rates of accrual are dependent on fluctuations in the applicable LIBOR rate. The Amended Facility has a provision whereby if the cash available for debt service is less than the current interest due, the interest shortfall (“PIK interest”) will be automatically added to the outstanding principal balance of the Amended Facility and shall thereafter accrue interest. In addition, excess cash in the cash management account will be applied to the outstanding PIK interest, supplemental interest, and principal according to the terms of the Amended Facility.

The outstanding PIK interest as of December 31, 2015 was $83.7 million. The Company is currently assessing its options to satisfy the PIK interest payment obligation, including, but not limited to, negotiating a waiver of this requirement from the lender, restructuring the Amended Facility with the lender, selling off a portion of existing collateral or attempting to obtain borrowings or additional equity funding from our current ownership or other sources. If we are unable to negotiate a waiver, restructure our indebtedness, obtain alternative financing on acceptable terms, obtain approval from the lender to use our available cash reserves to satisfy a portion of this potential obligation, or otherwise are unsuccessful in satisfying our PIK interest payment obligation, we risk losing some or all of our property to foreclosure. If prevailing interest rates or other factors at the time of any restructuring of our indebtedness or at the time we obtain borrowings from other sources results in higher interest rates, our interest expense would increase, which would harm our business and results of operations.

We incurred net losses for each of the years ended December 31, 2015, 2014 and 2013.

As a result of these factors, there is substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements, included in Item 15, have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. The financial statements do not include any adjustments that might result from these uncertainties, including the possibility that we may lose some or all of our property to foreclosure.

See Note 1, Company Structure and Nature of Business and Note 9, Debt, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K. See also Item 1, Business.

Adverse changes in the U.S. and global economies could negatively impact our financial performance.

The gaming revenues in Clark County increased 0.7% to approximately $9.6 billion in 2015 from $9.6 billion in 2014 (gaming statistics as released by the LVCVA), visitor volume increased 2.9% to approximately $42.3 million in 2015 from $41.1 million in 2014, and hotel/motel room occupancy increased 0.8% to 47.9 million room nights in 2015 from 47.5 million room nights in 2014. See Item 1, Business--Las Vegas Market. Due to a number of factors affecting consumers, entertainment industries remain uncertain. These factors have resulted at times in the past and could continue to result in the future in fewer customers visiting, or customers spending less, in Las Vegas, as compared to prior periods. Gaming and other leisure activities represent discretionary expenditures and participation in such activities tends to decline during economic downturns, during which consumers generally have less disposable income. As a result, in those times customer demand for the luxury amenities and leisure activities that we offer may decline. Furthermore, during periods of economic contraction, revenues may decrease while some of our costs remain fixed or even increase, resulting in decreased earnings.

We operate a single property located in Las Vegas and rely on the Las Vegas and Southern California and Northern California markets. Changes adversely impacting these markets could have a material effect on our business, financial condition and results of operations.

Our business has a limited base of operations and substantially all of our revenues are currently generated by the Hard Rock Hotel & Casino Las Vegas. Accordingly, we are subject to greater risks than a more diversified hotel and casino resort operator and the profitability of our operations is linked to local economic conditions in Las Vegas and, indirectly, Southern and Northern California markets, where many of our hotel casino’s targeted customers reside. The combination of a decline in the local economies of Las Vegas, Southern California or Northern California, reliance on a single location and the significant investment associated with it may cause our operating results to fluctuate significantly and may adversely affect us and materially affect our total profitability.

We face intense local and increasingly national competition which could impact our operations and adversely affect our business and results of operations.

We operate in the highly-competitive Las Vegas hotel, resort and casino industry. Our hotel casino, located less than one mile east of the Las Vegas Strip, competes with other high-quality Las Vegas resorts and other Las Vegas hotel casinos, including those located on the Las Vegas Strip. Many of these Las Vegas resorts seek to attract customers to their properties by not only offering casino gaming, but also by providing hotel accommodations, food and beverage outlets, retail stores and other related amenities. To the extent that we seek to enhance our revenue base by offering our own various resort amenities, we compete with the service offerings provided by these Las Vegas resorts.

Many of the competing properties have themes and attractions which draw a significant number of visitors and directly compete with our operations. Some of these properties are operated by subsidiaries or divisions of large public companies that may have greater name recognition and financial and marketing resources than we do and market to the same target demographic group as we do. Various competitors are expanding and renovating their existing facilities. We believe that competition in the Las Vegas hotel, resort and casino industry is based on certain property-specific factors, including overall atmosphere, range of amenities, price, location, entertainment attractions, theme and size. Any market perception that we do not excel with respect to such property-specific factors could adversely affect our ability to compete effectively. If we are unable to compete effectively, we could lose market share, which could adversely affect our business and results of operations.

We also compete with hotel casinos in the Mesquite, Laughlin, Reno and Lake Tahoe areas of Nevada, Atlantic City, New Jersey and gambling destinations elsewhere in the United States as well as with state-sponsored lotteries, on- and off- track wagering, card parlors, riverboat gaming ventures, and other forms of legalized gaming in the United States, gaming on cruise ships, Internet gaming ventures and international gaming operations. Continued proliferation of gaming activities could significantly and adversely affect our business and results of operations.

Another area of competition is legalized gaming from casinos located on Native American tribal lands. Native American tribes in California are permitted to operate casinos with video slot machines, black jack and house-banked card games. The State of California has entered into compacts with numerous tribes in California, and the federal government has approved numerous compacts in California and casino-style gaming is now legal on those tribal lands. While the competitive impact on our operations in Las Vegas from the continued growth of Native American gaming establishments in California remains uncertain, the proliferation of gaming in California and other areas located near the Hard Rock Hotel & Casino Las Vegas could have an adverse effect on our results of operations.

In addition, many states have legalized, and others may legalize, casino gaming in specific areas, including metropolitan areas from which we traditionally attract customers, such as New York, Philadelphia, Los Angeles, San Francisco and Boston. The current global trend toward liberalization of gaming restrictions and resulting proliferation of gaming venues could result in a decrease in the number of visitors to the Hard Rock Hotel & Casino Las Vegas by attracting customers close to home and away from Las Vegas, which could adversely affect our business and results of operations.

Further, there can be no assurance the Las Vegas market will show future growth or that hotel casinos will continue to be popular. In the event that there is a decline or sustained leveling off of the growth or popularity of gaming facilities generally, our financial condition and results of operations would be adversely affected.

The Las Vegas hotel, resort and casino industry is capital intensive; financing our renovations and future capital improvements could reduce our cash flow and adversely affect our financial performance.

Our hotel casino has an ongoing need for renovations and other capital improvements to remain competitive, including replacement, from time to time, of furniture, fixtures and equipment. We will also need to make capital expenditures to comply with applicable laws and regulations.

Renovations and other capital improvements of hotel casinos require significant capital expenditures. In addition, renovations and capital improvements of hotel casinos usually generate little or no cash flow until the project’s completion. We may not be able to fund such projects solely from cash provided from our operating activities. Consequently, we will rely upon the availability of debt or equity capital and reserve funds to fund renovations and capital improvements and our ability to carry them out will be limited if we cannot obtain satisfactory debt or equity financing, which will depend on, among other things, market conditions. No assurances can be made that we will be able to obtain additional equity or debt financing or that we will be able to obtain such financing on favorable terms.

Renovations and other capital improvements may give rise to the following additional risks, among others:


•	construction cost overruns and delays;


•	temporary closures of all or a portion of the hotel casino to customers;


•	disruption in service and room availability causing reduced demand, occupancy and rates;


•	disruption in gaming operations; and


•	possible environmental issues.

As a result, renovations and any other future capital improvement projects may increase our expenses and reduce our cash flows and our revenues. If capital expenditures exceed our expectations, this excess would have an adverse effect on our available cash.

The Hard Rock Hotel & Casino Las Vegas has incurred substantial losses and may continue to incur losses in the future.

We reported net losses of $119.5 million, $102.8 million and $105.5 million for the years ended December 31, 2015, 2014 and 2013, respectively. There can be no assurance that we will attain profitability in the near term or at all.

We have substantial debt, and we may incur additional indebtedness, which may negatively affect our business and financial results.

We have substantial debt service obligations, and as of December 31, 2015, the book value of our total debt was approximately $832.7 million, with a face amount of $976.4 million. In addition, as of December 31, 2015, the Company had outstanding $114.3 million in supplemental interest under the Amended Facility. Under the Amended Facility, supplemental interest is accrued at a rate sufficient to provide for the greater of 6.5% or LIBOR plus 4% effective interest rate at maturity after consideration of all prior payments of principal and interest.

Our substantial debt may negatively affect our business and operations in several ways, including:


•	requiring us to use a substantial portion of our funds from operations to make required payments on principal and interest, which will reduce funds available for operations and capital expenditures, future business opportunities and other purposes;


•	making us more vulnerable to economic and industry downturns and reducing our flexibility in responding to changing business and economic conditions;


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


•	placing us at a competitive disadvantage compared to our competitors that have less debt;


•	limiting our ability to borrow more money for operations, capital or to finance acquisitions in the future; and


•	requiring us to dispose of portions of the hotel casino property, if needed, in order to make required payments of interest and principal.

A majority of our debt is secured by first deeds of trust on our property. If we were to default on our secured debt, the loss of property securing the debt would adversely impact our ability to satisfy other obligations. Using our property as collateral increases our risk of property losses because defaults on indebtedness secured by property may result in foreclosure and ultimately our loss of the property that secures any loans for which we are in default. For tax purposes, a foreclosure on our property would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. Our working capital and liquidity reserves may not be adequate to cover all of our cash needs and we may have to obtain additional debt financing. Sufficient financing may not be available or, if available, may not be available on terms acceptable to us. Additional borrowings for working capital purposes will increase our interest expense and, therefore, may harm our business and results of operations.

The Company is currently assessing its options to satisfy the PIK interest payment obligation under its Amended Facility, including, but not limited to, negotiating a waiver of this requirement from the lender, restructuring the Amended Facility with the lender, selling off a portion of existing collateral or attempting to obtain borrowings or additional equity funding from our current ownership or other sources. The lender entered into a series of amendments to the Forbearance Agreement which each time extended the effective date to which the lender agreed it would not exercise any rights or remedies with respect to the PIK interest. The most recent amendment to the Forbearance Agreement, the Twenty-Third Amendment, is effective as of March 7, 2016, pursuant to which the lender agreed not to exercise any rights or remedies with respect to the PIK interest until April 4, 2016. The Company's ability to continue as a going concern is dependent upon its ability to negotiate a waiver, restructure its indebtedness, obtain alternative financing on acceptable terms, obtain approval from the lender to use available cash reserves to satisfy a portion of this potential obligation, or otherwise satisfy our PIK interest payment obligation. However, there is no assurance that the Company will be able to achieve any of these possibilities. We have placed mortgages on our hotel casino property to secure our indebtedness. In the event the PIK interest is not paid on April 4, 2016, among other lesser remedies, the lender may declare all unpaid principal and accrued interest, totaling $1.1 billion under the Amended Facility due and payable immediately, in which case, under present circumstances, the Company would not have sufficient funds or other sources of liquidity to pay all such amounts. In addition, if the PIK payment is not made, we risk losing some or all of our property to foreclosure. If this occurs, our business and results of operations would be materially adversely affected. The Company is currently in discussions with the lender but as of the date of the filing the outcome remains uncertain. See also above, Item 1A, Risk Factors – Risks Related to our Business – There is substantial doubt about our ability to continue as a going concern and Item 1, Business, as well as Note 1, Company Structure and Nature of Business and Note 9, Debt, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K.

We anticipate that we will refinance our indebtedness from time to time to repay our debt, and our inability to refinance on favorable terms, or at all, could harm our business and operations.

Since we anticipate that our internally generated cash will be inadequate to repay our indebtedness prior to maturity, we expect that we will be required to repay debt from time to time through refinancing of our indebtedness and/or offerings of equity or debt. The amount of our existing indebtedness may harm our ability to repay our debt through refinancing. If we are unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to sell portions of our property on disadvantageous terms, which might result in losses to us. We have placed mortgages on our hotel casino property to secure our indebtedness. To the extent we cannot meet our debt service obligations, we risk losing some or all of our property to foreclosures. If prevailing interest rates or other factors at the time of any refinancing result in higher interest rates on any refinancing, our interest expense would increase, which would harm our business and results of operations.

Our business model involves high fixed costs, including property taxes and insurance costs, which we may be unable to adjust in a timely manner in response to a reduction in our revenues.

The costs associated with owning and operating hotel casinos are significant. Some of these costs (such as property taxes and insurance costs) are fixed, meaning that such costs may not be altered in a timely manner in response to changes in demand for services. Failure to adjust our expenses may adversely affect our business and results of operations. Our real property taxes may increase as property tax rates change and as the values of properties are assessed and reassessed by tax authorities. Our real estate taxes do not depend on our revenues, and generally we could not reduce them other than by disposing of our real estate assets.

Insurance premiums for the Las Vegas hotel, resort and casino industry have increased significantly in recent years, and continued escalation may result in our inability to obtain adequate insurance at acceptable premium rates. A continuation of this trend would appreciably increase the operating expenses of our hotel casino. If we do not obtain adequate insurance, to the extent that any of the events not covered by an insurance policy materialize, our financial condition may be materially adversely affected.

In the future, our property may be subject to increases in real estate and other tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses, which could reduce our cash flow and adversely affect our financial performance. If our revenues decline and we are unable to reduce our expenses in a timely manner, our business and results of operations could be adversely affected.

Our success depends on the value of our name, image and brand. If demand for, or the value of, our name, image or brand diminishes, our business and results of operations would be adversely affected.

Our success depends, to a large extent, on our ability to shape and stimulate consumer tastes and demands by maintaining our name, image and brand. We may not be successful in this regard and we may not be able to anticipate and react to changing consumer tastes and demands in a timely manner.

Furthermore, a high media profile is an integral part of our ability to shape and stimulate demand for our hotel casino with our target customers. A key aspect of our marketing strategy is to focus on attracting media coverage. If we fail to attract that media coverage, we may need to substantially increase our advertising and marketing costs, which would adversely affect our business and results of operations. In addition, other types of marketing tools, such as traditional advertising and marketing, may not be successful in attracting our target customers.

Our business would be adversely affected if our public image or reputation were to be diminished. Our brand names and trademarks are integral to our marketing efforts. If the value of our name, image or brands were diminished, our business and operations would be adversely affected.

Use of the “Hard Rock” brand name by entities other than us could damage the brand and our operations and adversely affect our business and results of operations.

Our operations benefit from the global name recognition and reputation generated by the Hard Rock Cafés, Hotels and Hotel-Casinos that are operated, licensed or franchised directly or indirectly by the Seminole Tribe of Florida. However, the Seminole Tribe of Florida is under no obligation to continue to own, operate or franchise such businesses, and it may decide to sell, change the focus of, or manage such businesses in a manner that would adversely affect our business and results of operations.

Our business and results of operations may be adversely affected by the management or the enforcement of the “Hard Rock” brand name by parties outside of our control. HRCI owns the “Hard Rock Cafe”, “Hard Rock Hotel” and “Hard Rock Casino” trademarks. HRCI, or its licensee, can use and exploit these and related marks in various ways that we cannot control, including by the establishment and operation of Hard Rock Hotels and Hard Rock Cafes within or without the Morton Territories (except that HRCI may not establish or operate Hard Rock Hotels within Nevada), and by the establishment and operation of Hard Rock hotel-casinos outside of the Morton Territories. HRCI also may exploit the Hard Rock marks in other ways that we cannot control, including by establishing Hard Rock Cafes or marketing “Hard Rock” merchandise anywhere in the world. For example, HRCI has licensed the use of the “Hard Rock” name in connection with its Seminole Hard Rock Hotels in Hollywood and Tampa, Florida. Further, negative publicity of the "Hard Rock" brand name caused by parties outside of our control, could have an adverse effect on our business, financial condition and results of operations.

We may have disputes with third parties for infringement or misappropriation of their proprietary rights, which could have a negative impact on our business.

Other parties may assert trademark, copyright or other intellectual property rights that have a negative impact on our business. We cannot be certain that others will not seek to block our use of certain marks or seek monetary damages or other remedies for the prior use of our brand names or other intellectual property or the sale of our products or services as a violation of their trademark, copyright or other proprietary rights. Defending any claims, even claims without merit, could divert our employees' attention, be time-consuming, result in costly settlements, litigation or restrictions on our business and damage our reputation.

Securing registrations does not fully insulate us against intellectual property claims, as another party may have rights superior to our registration or our registration may be vulnerable to attack on various grounds. In addition, there may be prior registrations or use of trademarks in the United States or foreign countries for similar or competing marks or other proprietary rights of which we are not aware. In all such countries it may be possible for any third-party owner of a national trademark registration or other proprietary right to enjoin or limit our expansion into those countries or to seek damages for our use of such intellectual property in such countries. In the event a claim against us is successful and we could not obtain a license to the relevant intellectual property or redesign or rename our products or operations to avoid infringement, our business, financial condition or results of operations could be harmed.

Litigation and legal proceedings could expose us to significant liabilities and thus negatively affect our financial results.

We are a party, from time to time, to various litigation claims and legal proceedings, government and regulatory inquiries and/or proceedings, including, but not limited to, intellectual property, premises liability and breach of contract claims. Material legal proceedings are described more fully in Note 10, Commitments and Contingencies, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K.

Litigation is inherently unpredictable, and defending these proceedings can result in significant ongoing expenditures and the diversion of our management’s time and attention from the operation of our business, which could have a negative effect on our business operations. Our failure to successfully defend or settle any litigation or legal proceedings could result in liabilities that, to the extent not covered by our insurance, could have a material adverse effect on our financial condition, revenue and profitability.

The threat of terrorism could adversely affect the number of customer visits to our hotel casino.

The threat of terrorism has caused, and may in the future cause, a significant decrease in customer visits to Las Vegas due to disruptions in commercial and leisure travel patterns and concerns about travel safety. We cannot predict the extent to which disruptions in air or other forms of travel as a result of any further terrorist act, outbreak of hostilities or escalation of war would adversely affect our financial condition, results of operations or cash flows. The possibility of future attacks may hamper business and leisure travel patterns and, accordingly, the performance of our business and our operations.

We depend on BREF HR Management for the future success of our business and the loss of one or more of their key personnel could have an adverse effect on our ability to manage our business and operate successfully and competitively, or could be negatively perceived in the capital markets.

The Company is managed by BREF HR Management in compliance with the gaming laws of the State of Nevada. BREF HR Management’s ability to manage the Company’s business and operate successfully and competitively is dependent, in part, upon the efforts and continued service of BREF HR Management’s managers. The departure of key personnel of BREF HR Management could have an adverse effect on our business and our ability to operate successfully and competitively, and it could be difficult for BREF HR Management to find replacements for these key personnel, as competition for such personnel is intense.

The members and managers of BREF HR Management are required to file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny any application for any cause that they deem reasonable. In the event the Nevada Gaming Authorities were to find any person unsuitable for licensing or unsuitable to continue having a relationship with us, we would be required to sever all relationships with such person. We cannot be certain that any such person will be able to obtain or maintain any requisite license or finding of suitability by the Nevada Gaming Authorities.

Seasonality and other related factors such as weather can be expected to cause quarterly fluctuations in revenue at our hotel casino.

The Las Vegas hotel, resort and casino industry is seasonal in nature. This seasonality can tend to cause quarterly fluctuations in revenues at our hotel casino. For instance, our revenues generally peak in the second quarter. Our quarterly earnings may also be adversely affected by other related factors outside our control, including weather conditions and poor economic conditions. As a result, we may have to enter into short-term borrowings in certain quarters in order to offset these quarterly fluctuations in our revenues.

The gaming industry is heavily regulated and failure to comply with extensive regulatory requirements may result in an adverse effect on our business.

The gaming operations and the ownership of our securities are subject to extensive regulation by the Nevada Gaming Authorities and the Hard Rock Hotel & Casino Las Vegas must maintain its licenses and pay gaming taxes to continue operations. The Nevada Gaming Authorities have broad authority with respect to licensing and registration of entities and individuals involved with the Company. These laws, rules and regulations generally concern the responsibility, financial stability and character of the owners, managers, and persons with financial interests in the gaming operations. Violations of laws could result in, among other things, disciplinary action. If we fail to comply with regulatory requirements, this may result in an adverse effect on our business.

Our property is subject to numerous laws, including those relating to the preparation and sale of food and beverages, including alcohol. We are also subject to laws governing our relationship with our employees in such areas as minimum wage and maximum working hours, overtime, working conditions, hiring and firing employees and work permits. Also, our ability to remodel, refurbish or add to our property may be dependent upon our obtaining necessary building permits from local authorities. The failure to obtain any of these permits could adversely affect our ability to increase revenues and net income through capital improvements of our property. In addition, we are subject to the numerous rules and regulations relating to state and federal taxation. Compliance with these rules and regulations requires significant management attention. Furthermore, compliance costs associated with gaming laws, regulations and licenses are significant. Any change in the laws, regulations or licenses applicable to our business or a violation of any current or future laws or regulations applicable to our business or gaming license could require us to make substantial expenditures or could otherwise negatively affect our gaming operations. Any failure to comply with all such rules and regulations could subject us to fines or audits by the applicable taxation authority.

The Nevada Gaming Authorities may, upon any future violation of a gaming law or regulation and after disciplinary complaint and public hearing, among other things, revoke, suspend, limit or condition the gaming license of any corporate entity, which we will refer to as a corporate licensee, or the registration of a registered company or any entity registered as a holding company of a corporate licensee or fine each person or entity or both up to $250,000 for each violation. In addition, the Nevada Gaming Authorities may revoke the license or finding of suitability of any officer, director, controlling person, shareholder, noteholder or key employee of a licensed or registered entity. If our gaming licenses and/or registrations were ever revoked for any reason, the Nevada Gaming Authorities could require the closing of our gaming operations, which would result in a material effect on our business. See Item 1, Business – Nevada Gaming Regulation and Licensing for more information.

Uninsured and underinsured losses could adversely affect our financial condition and results of operations.

We are responsible for insuring our hotel casino and for obtaining the appropriate insurance coverage to reasonably protect our interests in the ordinary course of business. Additionally, the instruments governing our current indebtedness typically specify that comprehensive insurance be maintained on our hotel casino, including liability, fire and extended coverage. There are certain types of losses, generally of a catastrophic nature, such as earthquakes and floods or terrorist acts, which may be uninsurable or not economically insurable, or may be subject to insurance coverage limitations, such as large deductibles or co-payments. We will use our discretion in determining amounts, coverage limits, deductibility provisions of insurance and the appropriateness of self-insuring, with a view to maintaining appropriate insurance coverage on our investments at a reasonable cost and on suitable terms. Uninsured and underinsured losses could harm our financial condition and results of operations. We could incur liabilities resulting from loss or injury to our hotel casino or to persons at our hotel casino. Claims, whether or not they have merit, could harm the reputation of our hotel or cause us to incur expenses to the extent of insurance deductibles or losses in excess of policy limitations, which could harm our results of operations.

In the event of a catastrophic loss, our insurance coverage may not be sufficient to cover the full current market value or replacement cost of our lost investment. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in our hotel casino, as well as the anticipated future revenue from the property. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the hotel casino. In the event of a significant loss, our deductible may be high and we may be required to pay for all such repairs and, as a consequence, it could materially adversely affect our financial condition. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate our hotel after it has been damaged or destroyed. Under those circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or destroyed property.

It has generally become more difficult and expensive to obtain property and casualty insurance, including coverage for terrorism. When our current insurance policies expire, we may encounter difficulty in obtaining or renewing property or casualty insurance on our property at the same levels of coverage and under similar terms. Such insurance may be more limited and for some catastrophic risks (for example, earthquake, flood and terrorism) may not be generally available at current levels. Even if we are able to renew our policies or to obtain new policies at levels and with limitations consistent with our current policies, we cannot be sure that we will be able to obtain such insurance at premium rates that are commercially reasonable. If we were unable to obtain adequate insurance on our hotel casino for certain risks, it could cause us to be in default under specific covenants on certain of our indebtedness or other contractual commitments that require us to maintain adequate insurance on our hotel casino to protect against the risk of loss. If this were to occur, or if we were unable to obtain adequate insurance and our hotel casino experienced damage which would otherwise have been covered by insurance, it could materially adversely affect our financial condition and the operations of our hotel casino.

In addition, insurance coverage for our hotel casino and for casualty losses does not customarily cover damages that are characterized as punitive or similar damages. As a result, any claims or legal proceedings, or settlement of any such claims or legal proceedings that result in damages that are characterized as punitive or similar damages may not be covered by our insurance. If these types of damages are substantial, our financial resources may be adversely affected.

Risks Related to Our Organization and Corporate Structure

We are a holding company and conduct all of our operations through our subsidiaries.

We do not generally have, apart from our ownership of HRHH JV Junior Mezz and HRHH Gaming Junior Mezz, any independent operations. As a result, we would rely on dividends and other payments or distributions from our subsidiaries to pay distributions. The ability of our subsidiaries to pay dividends or make other payments or distributions to us will depend on their respective operating results, and the terms of our current and future financing agreements, which may preclude dividends, distributions or other payments.

In addition, because we are a holding company, claims of our security holders will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of our subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our subsidiaries will be able to satisfy the claims of our members only after all of our and our subsidiaries’ liabilities and obligations have been paid in full.

We may experience conflicts of interest with entities which control the Company.

All of our membership interests are controlled by investment funds affiliated with Brookfield. Brookfield and its other affiliates may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Some of the members and managers of BREF HR Management may also serve as officers or directors of Brookfield and may have conflicts of interest because they may own equity interests in Brookfield or its affiliates or they may receive cash or equity-based awards based on the performance of Brookfield. Andrea Balkan, Barry Blattman, Theresa Hoyt and William Powell are managers, directors and/or officers of other affiliates of Brookfield. See Item 10, Directors, Executive Officers and Corporate Governance and Item 13, Certain Relationships and Related Transactions, and Director Independence.

Item 1B Unresolved Staff Comments

None.

Item 2 Properties

We own approximately 30 acres of land where the Hard Rock Hotel & Casino Las Vegas is located.

Item 3 Legal Proceedings

For discussions of legal proceedings, refer to Note 10, Commitments and Contingencies, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K.

Item 4 Mine Safety Disclosures

Not applicable.

PART II

Item 5 Market for Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities

HOLDERS

The sole holder of our Class A Units is BREF HR Management and the sole holder of our Class B Units is Brookfield Financial.

MARKET INFORMATION

There currently is no established public trading market for our membership interests. None of our membership interests are subject to any outstanding options or warrants, and we have not issued any securities convertible into our membership interests. None of our membership interests may currently be sold under Rule 144 of the Securities Act of 1933, as amended. There were no Class A Units or Class B Units sold during the past fiscal year.

DIVIDENDS

We have not in the past paid cash distributions on our membership interests. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash distributions in the foreseeable future. The terms of our current financing agreements currently preclude us, and any future financing agreements may preclude us, from paying any distributions. To the extent not prohibited by the terms of any financing agreement, applicable law or to the extent there is excess cash available, we may distribute cash to our members in accordance with our financing agreements.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

We do not currently maintain any equity compensation plans pursuant to which equity securities of the Company may be issued.

RECENT SALES OF UNREGISTERED SECURITIES

None.

Item 6 Selected Financial Data

The selected financial data of HRH Holdings presented in the table below has been derived from the audited consolidated financial statements of HRH Holdings. The selected historical income statement data of the Company for the years ended December 31, 2015, December 31, 2014, 2013 and 2012 and for the period from March 1, 2011 to December 31, 2011 have been derived from the audited consolidated financial statements of the Company.

In the opinion of management, the audited information set forth below contains all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial data at the relevant periods. Historical results are not necessarily indicative of the results of operations to be expected for future periods. The selected financial data set forth below should be read in conjunction with the Company’s and HRH Holdings' consolidated financial statements and notes thereto and with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.



	Company														HRH Holdings
	As of and for the year ended December 31, 2015			As of and for the year ended December 31, 2014			As of and for the year ended December 31, 2013			As of and for the year ended December 31, 2012			As of and for the period from Mar 1, 2011 to December 31, 2011		As of and for the period from Jan 1, 2011 to Feb 28, 2011
($ in thousands)	As of and for the year ended December 31, 2015			As of and for the year ended December 31, 2014			As of and for the year ended December 31, 2013			As of and for the year ended December 31, 2012					As of and for the period from Jan 1, 2011 to Feb 28, 2011
Statement of Operations Data:
Net revenues	$	193,799		$	200,404		$	194,613		$	198,541		$	164,653	$	29,257
(Loss) income from operations (1)	$	1,590		$	3,657		$	(7,197	)	$	(25,456	)	$	1,527	$	(7,451	)

Balance Sheet Data:
Cash and cash equivalents	$	21,838		$	13,303		$	14,094		$	13,658		$	16,818	$	20,191
Total assets	$	569,525		$	583,203		$	604,227		$	627,841		$	680,452	$	1,191,539
Long term debt and capital lease obligations, less current portion	$	21,283		$	18,638		$	16,596		$	647,885		$	608,699	$	1,238,553
Total debt	$	832,681		$	762,000		$	703,446		$	647,885		$	608,699	$	1,305,910
Shareholders/Members' deficit	$	(422,915	)	$	(303,384	)	$	(200,551	)	$	(95,012	)	$	20,389	$	(182,173	)

(1) The Company recognized a non-cash impairment charge of approximately $6.2 million, relating to the Isleta license agreement and $15.0 million, relating to the Hard Rock trademark during 2012. On December 24, 2012, Isleta and the Company mutually agreed to terminate the Isleta license agreement. The termination of the Isleta license agreement occurred on June 30, 2013. As part of such termination, the Company recorded an impairment of other licenses of $6.2 million. The $6.2 million impairment represented amounts included in the March 1, 2011 fair value related to the Isleta license agreement which were anticipated at that time had the Isleta license agreement continued after June 30, 2013. During the second quarter of 2012, due to weak economic conditions, the Company performed an interim impairment analysis of the Hard Rock trademark. This analysis resulted in an impairment charge of $3.0 million for the second quarter of 2012. During the fourth quarter of 2012, the Company completed its annual impairment analysis of the Hard Rock trademark, which resulted in an impairment charge of $12.0 million. These impairment charges were the result of reductions in the projected revenue due to the weak market environment and are included within Impairment of intangible assets reflected in the Consolidated Statement of Operations and Comprehensive Loss.

Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, AND THE OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K.

Within this management’s discussion and analysis of financial condition and results of operation for the period from January 1, 2013 to December 31, 2015, references to the “Company”, “we”, “us” or “our” refer to BREF HR, LLC.

Substantially all of our current business is comprised of the operation of the Hard Rock Hotel & Casino Las Vegas. For the year ended December 31, 2015, Hard Rock Hotel & Casino Las Vegas’ gross revenues were derived 21.4% from gaming operations, 31.7% from food and beverage, 31.8% from lodging and 15.1% from entertainment, retail and other sales. Our business strategy is to provide our guests with an energetic and exciting gaming and entertainment environment with the services and amenities of a luxury boutique hotel.

As is customary for companies in the gaming industry, we present average occupancy rate and average daily rate for the Hard Rock Hotel & Casino Las Vegas including rooms provided on a complimentary basis. Operators of hotels in the lodging industry generally may not follow this practice, as they may present average occupancy rate and average daily rate net of rooms provided on a complimentary basis. We calculate (a) average daily rate by dividing total daily lodging revenue by total daily rooms rented and (b) average occupancy rate by dividing total rooms occupied by total number of rooms available. We account for lodging revenue on a daily basis. Rooms provided on a complimentary basis include rooms provided free of charge or at a discount to the rate normally charged to customers as an incentive to use the casino. Complimentary rooms reduce average daily rate for a given period to the extent the provision of such rooms reduces the amount of revenue we would otherwise receive.

The following are key gaming industry-specific measurements we use to evaluate casino revenues. “Table game drop” and “slot machine handle” are used to identify the amount wagered by patrons for a casino table game and slot machine, respectively. “Drop” and “Handle” are abbreviations for table game drop and slot machine handle, respectively. “Table game hold percentage” and “slot machine hold percentage” represent the percentage of the total amount wagered by patrons that the casino has won. Such hold percentages are derived by dividing the amount won by the casino by the amount wagered by patrons.

The Amended Facility required that the Company repay in full all PIK interest outstanding on March 1, 2014 in the event the Company had not made sufficient payments to the lender to provide a specified debt yield. The Company did not meet the specified debt yield threshold for the twelve month period ending March 1, 2014. However, the lender entered into a Forbearance Agreement effective as of March 1, 2014, pursuant to which it agreed not to exercise any rights or remedies with respect to the PIK interest. The lender entered into a series of amendments to the Forbearance Agreement which each time extended the effective date to which the lender agreed it would not exercise any rights or remedies with respect to the PIK interest. The most recent amendment to the Forbearance Agreement, the Twenty-Third Amendment, is effective as of March 7, 2016, pursuant to which the lender agreed not to exercise any rights or remedies with respect to the PIK interest until April 4, 2016. Currently, the Company does not have sufficient funds to satisfy a demand for the PIK interest payment on April 4, 2016. The Amended Facility has a maturity date of March 1, 2018 and provides for interest only at LIBOR plus 2.5% with a 1.5% LIBOR floor (total of 4%) at December 31, 2015. In addition, under the Amended Facility supplemental interest is accrued at a rate sufficient to provide for the greater of 6.5% or LIBOR plus 4% effective interest rate at maturity after consideration of all prior payments of principal and interest. The rates of accrual are dependent on fluctuations in the applicable LIBOR rate. The Amended Facility has a provision whereby if the cash available for debt service is less that the current interest due, the interest shortfall (“PIK interest”) will be automatically added to the outstanding principal balance of the Amended Facility and shall thereafter accrue interest. In addition, excess cash in the cash management account will be applied to the outstanding PIK interest, supplemental interest, and principal according to the terms of the Amended Facility.

The outstanding PIK interest as of December 31, 2015 was $83.7 million. The Company is currently assessing its options to satisfy the PIK interest payment obligation, including, but not limited to, negotiating a waiver of this requirement from the lender, restructuring the Amended Facility with the lender, selling off a portion of existing collateral or attempting to obtain borrowings or additional equity funding from our current ownership or other sources. If we are unable to negotiate a waiver, restructure our indebtedness, obtain alternative financing on acceptable terms, or obtain approval from the lender to use our available cash reserves to satisfy a portion of this potential obligation, or otherwise are unsuccessful in satisfying our PIK interest payment obligation, we risk losing some or all of our property to foreclosure. If prevailing interest rates or other factors at the time of any restructuring of our indebtedness or at the time we obtain borrowings from other sources results in higher interest rates, our interest expense would increase, which would harm our business and results of operations.

See Note 1, Company Structure and Nature of Business and Note 9, Debt, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K. See also Item 1, Business.

We incurred a pre-tax net loss for the years ended December 31, 2015, 2014 and 2013.

As a result of these factors, there is substantial doubt about our ability to continue as a going concern. The accompanying financial statements, included in Item 15, have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. The financial statements do not include any adjustments that might result from these uncertainties, including the possibility that we may lose some or all of our property to foreclosure.

Results of Operations

Results of Operations for the Year Ended December 31, 2015 Compared to the Results for the Year Ended December 31, 2014



							2015 vs 2014
($ in thousands)	For the year ended December 31, 2015			For the year ended December 31, 2014			$			%
Statement of Operations Data:
Revenue
Casino	$	45,466		$	49,444		$	(3,978	)	(8.0	)%
Lodging	67,473			65,220			2,253			3.5	%
Food and beverage	67,188			73,599			(6,411		)	(8.7	)%
Entertainment, retail and other	32,066			30,249			1,817			6.0	%
Gross revenues	212,193			218,512			(6,319		)	(2.9	)%
Less: Promotional allowances	(18,394		)	(18,108		)	(286		)	1.6	%
Net revenues	193,799			200,404			(6,605		)	(3.3	)%

Costs and Expenses
Casino	35,669			34,600			1,069			3.1	%
Lodging	21,151			21,214			(63		)	(0.3	)%
Food and beverage	39,912			44,128			(4,216		)	(9.6	)%
Entertainment, retail and other	19,107			19,700			(593		)	(3.0	)%
Marketing	8,116			9,069			(953		)	(10.5	)%
Fee and expense reimbursements	2,092			3,646			(1,554		)	(42.6	)%
General and administrative	35,837			34,372			1,465			4.3	%
Depreciation and amortization	30,211			29,936			275			0.9	%
Loss (gain) on disposal of assets	114			(6		)	120			(2,000.0	)%
Impairment of licenses and trademarks	—			88			(88		)	(100.0	)%
Total costs and expenses	192,209			196,747			(4,538		)	(2.3	)%
Income (loss) from operations	1,590			3,657			(2,067		)	(56.5	)%
Interest income	8			12			(4		)	(33.3	)%
Interest expense	(121,036		)	(106,460		)	(14,576		)	13.7	%
Loss on joint venture investment	(93		)	(42		)	(51		)	121.4	%
Net loss	$	(119,531	)	$	(102,833	)	$	(16,698	)	16.2	%

The discussion below refers to amounts in millions, which are approximations. Refer to the table above and the audited consolidated financial statements, included elsewhere in this Annual Report on Form 10-K, for the exact dollar amounts.

Casino Revenues. Casino revenues decreased $4.0 million to $45.5 million for the year ended December 31, 2015 from $49.4 million for the year ended December 31, 2014.

Slot. Slot machine revenues increased approximately $1.3 million for the year ended December 31, 2015 when compared to the year ended December 31, 2014 as we continued to focus on optimizing the slot floor with the introduction of new product and technology and growing our customer base with strategic marketing initiatives.

Table Games. Table games revenues decreased approximately $5.1 million for the year ended December 31, 2015 when compared to the year ended December 31, 2014 due to a decrease in the hold percentage to 10.1% from 11.9% and a decrease in drop of $9.9 million. The decrease in drop is attributed to a casino floor remodel during the third quarter of 2015 and a change in game mix on the casino floor.

Lodging Revenues. Lodging revenues increased $2.3 million for the year ended December 31, 2015 when compared to the year ended December 31, 2014, which is attributed to an increase in average daily rate, occupancy, and revenue per available room of $132, 91.6%, and $123, respectively, compared to $125, 93.7%, and $119, respectively, for the year ended December 31, 2014.

Food and Beverage Revenues. Food and beverage revenues decreased $6.4 million for the year ended December 31, 2015 when compared to the year ended December 31, 2014 due to decreases in revenue generated by our Pools (as a result of changes made in programming at the pool), Body English's limited operations exclusively for special events, and the closure of Center Bar for remodeling.

Entertainment, Retail and Other Revenues. For the year ended December 31, 2015 when compared to the year ended December 31, 2014, entertainment, retail and other revenues increased $1.8 million to $32.1 million mainly due to an increase of $2.2 million or 53.3% to $6.3 million in intellectual property revenue primarily due to licensing revenues generated pursuant to licensing agreements with respect to properties in Sioux City and Lake Tahoe, which was offset by a decrease in retail revenue of $0.5 million.

Casino Expenses. Casino expenses increased $1.1 million to $35.7 million for the year ended December 31, 2015 when compared to the year ended December 31, 2014 primarily due to an increase in returned markers of $1.5 million caused by an increase in the use of lines of credit by gaming patrons.

Lodging Expenses. Lodging expenses were relatively flat for the year ended December 31, 2015 when compared to the the year ended December 31, 2014.

Food and Beverage Expenses. Food and beverage expenses decreased $4.2 million to $39.9 million for the year ended December 31, 2015 when compared to the year ended December 31, 2014. The decrease is primarily due to decreases in expenses incurred on cost of sales, payroll, advertising and professional services, and a tax refund.

Entertainment, Retail and Other Expenses. The $0.6 million decrease in entertainment, retail and other expenses to $19.1 million for the year ended December 31, 2015 when compared to the year ended December 31, 2014 was due to a decrease in cost associated with concert merchandise sales, and a decrease in payroll and benefit expenses.

Fee and Expense Reimbursements. The $1.6 million decrease to $2.1 million in management fee and expense reimbursements for the year ended December 31, 2015 when compared to the the year ended December 31, 2014 was primarily the result of lower incentive fees incurred under the Amended Resort Management Agreement.

General and Administrative. The increase in general and administrative expenses for the year ended December 31, 2015 of $1.5 million to $35.8 million when compared to the year ended December 31, 2014 was primarily due to an increase in non-recurring expenses.

Depreciation and Amortization. The $0.3 million increase in depreciation and amortization expenses for the year ended December 31, 2015 when compared to the year ended December 31, 2014 was primarily the result of an increase in capital assets.

Interest Expense. The $14.6 million increase in interest expense to $121.0 million for the year ended December 31, 2015 when compared to the year ended December 31, 2014 was the result of an increase in the amount of our debt and therefore interest thereon.

Results of Operations for the Year Ended December 31, 2014 Compared to the Results for the Year Ended December 31, 2013



							2014 vs 2013
($ in thousands)	For the year ended December 31, 2014			For the year ended December 31, 2013			$			%
Statement of Operations Data:
Revenue
Casino	$	49,444		$	43,965		$	5,479		12.5	%
Lodging	65,220			61,910			3,310			5.3	%
Food and beverage	73,599			73,924			(325		)	(0.4	)%
Entertainment, retail and other	30,249			34,516			(4,267		)	(12.4	)%
Gross revenues	218,512			214,315			4,197			2.0	%
Less: Promotional allowances	(18,108		)	(19,702		)	1,594			(8.1	)%
Net revenues	200,404			194,613			5,791			3.0	%

Costs and Expenses
Casino	34,600			35,593			(993		)	(2.8	)%
Lodging	21,214			19,797			1,417			7.2	%
Food and beverage	44,128			43,540			588			1.4	%
Entertainment, retail and other	19,700			22,875			(3,175		)	(13.9	)%
Marketing	9,069			9,324			(255		)	(2.7	)%
Fee and expense reimbursements	3,646			1,836			1,810			98.6	%
General and administrative	34,372			37,916			(3,544		)	(9.3	)%
Depreciation and amortization	29,936			30,916			(980		)	(3.2	)%
Loss (gain) on disposal of assets	(6		)	(26		)	20			(76.9	)%
Pre-opening	—			39			(39		)	(100.0	)%
Impairment of licenses and trademarks	88			—			88			—	%
Total costs and expenses	196,747			201,810			(5,063		)	(2.5	)%
Income (loss) from operations	3,657			(7,197		)	10,854			(150.8	)%
Interest income	12			23			(11		)	(47.8	)%
Interest expense	(106,460		)	(98,316		)	(8,144		)	8.3	%
Loss on joint venture investment	(42		)	(49		)	7			(14.3	)%
Loss before income tax expense	(102,833		)	(105,539		)	2,706			(2.6	)%
Net loss	$	(102,833	)	$	(105,539	)	$	2,706		(2.6	)%

Casino Revenues. Casino revenues increased $5.5 million to $49.4 million for the year ended December 31, 2014 from $44.0 million for the year ended December 31, 2013.

Slot. Slot machine revenues increased $2.0 million for the year ended December 31, 2014 when compared to the year ended December 31, 2013 as we continued to focus on optimizing the slot floor with the introduction of new product and technology and growing our customer base with strategic marketing initiatives.

Table Games. Table games revenues increased $3.4 million for the year ended December 31, 2014 when compared to the year ended December 31, 2013 due to an increase in the hold percentage to 11.9% from 11.0% and an increase in drop of $11.6 million.

Lodging Revenues. Lodging revenues increased $3.3 million for the year ended December 31, 2014 when compared to the year ended December 31, 2013 due to an increase in occupancy which was primarily driven by increases in the groups and wholesale lines of business which was needed to fill a 2014 decline in transient rooms business. In addition, we continued to focus on casino rooms in an effort to drive repeat visits and grow our customer base. For the year ended December 31, 2014 average daily rate,

occupancy, and revenue per available room was $125, 93.7%, and $119, respectively, compared to $125, 88.7%, and $113, respectively, for the year ended December 31, 2013.

Food and Beverage Revenues. Food and beverage revenues decreased $0.3 million for the year ended December 31, 2014 when compared to the year ended December 31, 2013 due to decreases in revenue generated by our Pools, nightclubs and restaurants such as Pink Taco due to increased competition in the Las Vegas market.

Entertainment, Retail and Other Revenues. For the year ended December 31, 2014 when compared to the year ended December 31, 2013 entertainment, retail and other revenues decreased $4.3 million to $30.2 million due to 7 fewer events.

Casino Expenses. Casino expenses decreased $1.0 million to $34.6 million for the year ended December 31, 2014 when compared to the year ended December 31, 2013 primarily due to an decline in cost incurred by the Company for complimentaries to casino customers.

Lodging Expenses. Lodging expenses increased $1.4 million to $21.2 million for the year ended December 31, 2014 when compared to the the year ended December 31, 2013 primarily due to increases in payroll and related expenses, travel agency commissions and laundry expenses.

Food and Beverage Expenses. Food and beverage expenses increased $0.6 million to $44.1 million for the year ended December 31, 2014 when compared to the year ended December 31, 2013. The largest increases were due to costs related to professional services, contract services and equipment rental.

Retail and Other Expenses. The $3.2 million decrease in retail and other expenses to $19.7 million for the year ended December 31, 2014 when compared to the year ended December 31, 2013 was due to a decrease in artist fees and related production costs from fewer Joint concerts in 2014.

Fee and Expense Reimbursements. The $1.8 million increase to $3.6 million in management fee and expense reimbursements for the year ended December 31, 2014 when compared to the the year ended December 31, 2013 was primarily the result of incentive fees incurred under the Amended Resort Management Agreement.

General and Administrative. The decrease in non-recurring expenses associated with the timing of certain legal matters led to an overall decrease in general and administrative expenses for the year ended December 31, 2014 of $3.5 million to $34.4 million when compared to the year ended December 31, 2013.

Depreciation and Amortization. The $1.0 million decrease in depreciation and amortization expenses for the year ended December 31, 2014 when compared to the year ended December 31, 2013 was primarily the result of intangible assets becoming fully amortized.

Interest Expense. The $8.1 million increase in interest expense to $106.5 million for the year ended December 31, 2014 when compared to the year ended December 31, 2013 was the result of an increase in supplemental interest.

LIQUIDITY AND CAPITAL RESOURCES

See Note 1, Company Structure and Nature of Business, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K and Item 1A, Risk Factors – Risks Related to our Business – There is substantial doubt about our ability to continue as a going concern, for a discussion of factors that could affect our ability to continue as a going concern.

Liquidity Requirements

Short-Term Liquidity Requirements. Currently, the Company does not have sufficient funds to satisfy a demand for the PIK interest payment on April 4, 2016 due under its Amended Facility and therefore, the Company would be in default and its debt could be accelerated upon notification by the lender. The Amended Facility, supplemental interest, and PIK interest are classified as current on the Balance Sheet as of December 31, 2015. The Amended Facility requires that the Company repay in full all PIK interest outstanding on April 4, 2016, in the event the Company has not made sufficient payments to the lender to provide a specified debt yield according to the terms specified in the Amended Facility. The Amended Facility has a maturity date of March 1, 2018 and provides for interest only at LIBOR plus 2.5% with a 1.5% LIBOR floor (total of 4%) at December 31, 2015. In addition, under the Amended Facility, supplemental interest is accrued at a rate sufficient to provide for the greater of 6.5% or LIBOR plus 4%

effective interest rate at maturity after consideration of all prior payments of principal and interest. The rates of accrual are dependent on fluctuations in the applicable LIBOR rate. If prevailing interest rates or other factors at the time of any restructuring of our indebtedness or at the time we obtain borrowings from other sources result in higher interest rates, our interest expense could increase, which would harm our business and results of operations. See Item 1, Business and Item 1A, Risk Factors - Risks Related to our Business - There is substantial doubt about our ability to continue as a going concern. See also Note 1, Company Structure and Nature of Business and Note 9, Debt, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K.

Except for the implications described above related to the Amended Facility, we expect our liquidity requirements to consist primarily of funds necessary to pay operating expenses associated with our subsidiaries’ hotel and casino operations, interest, payment of principal, fees and expenses under certain of our subsidiaries’ loan agreements (including required deposits into reserve accounts) and capital expenditures associated with the Hard Rock Hotel & Casino Las Vegas. Anticipated sources of our liquidity needs include our subsidiaries’ existing working capital, cash provided by our subsidiaries’ operations and our subsidiaries’ non-restricted cash reserves. Excluding the potential implications of the item described above, we expect to be able to meet our short-term liquidity needs through existing working capital and cash provided by our operations. For the year ended December 31, 2015, the Company made cash interest payments of $14.5 million.

Long-Term Liquidity Requirements. Our long-term liquidity requirements include funds necessary to pay debt under the Second Mortgage. The maturity date of the Second Mortgage is March 1, 2018 and provides for an effective interest rate of 15% payable at maturity.

Cash Flows

The following table highlights the Company's cash flow activities for each of the years ended December 31, 2015, 2014 and 2013.



	For the year ended December 31,									2015 vs. 2014				2014 vs. 2013
($ in thousands)	2015			2014			2013			$		%		$			%

Net cash provided by operating activities	$	15,792		$	7,049		$	8,135		$	8,743	124.03	%	$	(1,086	)	(13.35	)%
Net cash used in investing activities	$	(7,037	)	$	(7,417	)	$	(7,068	)	$	380	(5.12	)%	$	(349	)	4.94	%
Net cash used in financing activities	$	(220	)	$	(423	)	$	(631	)	$	203	(47.99	)%	$	208		(32.96	)%

Operating Activities. Our operating cash flows primarily consist of our operating income (excluding non-cash charges), interest paid and changes in working capital accounts such as receivables, inventories, prepaid expenses and payables. Net cash provided by operating activities amounted to $15.8 million for the year ended December 31, 2015, compared to $7.0 million for the year ended December 31, 2014; the $8.7 million increase was primarily due to an increase accrued interest payable. For the year ended December 31, 2014 compared to December 31, 2013, net cash provided by operating activities decreased by $1.1 million, primarily due to a decrease in other accrued liabilities.

Investing Activities. Net cash used in investing activities amounted to $7.0 million for the year ended December 31, 2015, compared to $7.4 million for the year ended December 31, 2014. The $0.4 million decrease in net cash used in investing activities was primarily due to an increase in restricted cash withdrawals and property and equipment expenditures which was offset by a decrease in construction costs payable for the year ended December 31, 2015. For the year ended December 31, 2014 compared to December 31, 2013, net cash used in investing activities increased by $0.3 million, primarily due to an increase in restricted cash contribution.

Financing Activities. Net cash used in financing activities amounted to $0.2 million and $0.4 million for the year ended December 31, 2015 and 2014, respectively. The $0.2 million decrease in net cash used in financing activities was primarily

attributable to a decrease in capital lease payments and a decline in repayment of borrowings during 2015. For the year ended December 31, 2014 compared to December 31, 2013, net cash used in financing activities decreased by $0.2 million, primarily due to a decrease in payment on capital leases.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and other commitments as of December 31, 2015, excluding the PIK interest payment, and assumes that the principal balance on the debt is repaid on the maturity date:



	Payments due by
($ in thousands)	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years	Total
Long term debt (1)	$	89,920	$	886,434	$	—	—	$	976,354
Estimated interest payments on long term debt (excluding PIK interest)	24,575		261,935		—		—	286,510
Amended Resort Management Agreement (2)	1,800		1,800		—		—	3,600
Total	$	116,295	$	1,150,169	$	—	—	$	1,266,464

(1) We have included the PIK interest payment due on April 4, 2016 which, as of December 31, 2015, was $83.7 million in the contractual obligations table above. Currently, the Company does not have sufficient funds to satisfy a demand for the PIK interest payment on April 4, 2016, and payment has not yet been made. The Company would be in default upon notification by the lender, if not paid by April 4, 2016, and no such notification has been received. However, the above table has been prepared assuming that the Company will be able to restructure its indebtedness, obtain alternative financing on acceptable terms, obtain approval from the lender to use available cash reserves to satisfy a portion of this potential obligation, or a combination thereof.

(2) Excludes any incentive fees potential earned by WG-Harmon under the Amended Resort Management Agreement as such amounts are based on actual Company performance.

See further discussion at the beginning of this "Management's Discussion and Analysis of Financial Condition and Results of Operations" above under Short-Term Liquidity Requirements and Note 9, Debt, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K

The Company made cash interest payments on its long-term debt of $14.5 million, $16.5 million and $14.9 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Our ability to service our contractual obligations and commitments will be dependent on availability of operating cash and on our future performance, which will be affected by, among other things, prevailing economic conditions and financial, business and other factors, certain of which are beyond our control.

We are a defendant in various lawsuits relating to routine matters in the normal course of our business. Management provides an accrual for estimated losses that may occur to the extent the loss is probable and estimable. We do not believe that the outcome of our litigation, in the aggregate, will have a material effect on our business, or results of operations or financial condition of the Company. See Note 10, Commitments and Contingencies, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K.

Capital Expenditures, Interest Expense and Reserve Funds

We are obligated to maintain cash reserve funds at the Hard Rock Hotel & Casino Las Vegas as determined pursuant to the Amended Facility. These cash reserve funds include tax, insurance, other, and replacement reserves for capital expenditures that relate primarily to the periodic replacement or refurbishment of furniture, fixtures and equipment. The Amended Facility requires subsidiaries of the Company to deposit funds into a replacements and refurbishments fund at amounts equal to three percent of the Hard Rock Hotel & Casino Las Vegas’ gross revenues and requires that the funds be set aside in restricted cash. There is also a working capital reserve where funds are maintained for future events such as settlement of certain claims and approved capital expenditures which may include the build out of white boxes, the repositioning of existing food and beverage outlets or the repositioning of any common area spaces.

Pursuant to Nevada Gaming Control Board Regulation 6.150 and the Amended Facility, certain of our subsidiaries maintain up to $8.0 million in reserve for their gaming operations, which in accordance with the Amended Facility, is not deposited into the cash management account described above.

The following restricted cash can be used as a source of liquidity for its respective restricted purposes:



($ in thousands)	December 31, 2015		December 31, 2014
Current
Tax reserves	$	2,707	$	3,095
Insurance reserves	1,407		893
Other reserves	363		363
Workers' compensation reserves	555		517
Total current restricted cash	5,032		4,868
Long-term
Working capital reserves	15,026		15,048
Replacement reserves	3,816		7,698
Total long-term restricted cash	18,842		22,746
Total restricted cash	$	23,874	$	27,614

Derivative Financial Instruments

We use or may use derivative financial instruments to manage exposure to the interest rate risks related to the variable rate debt under the Amended Facility. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit rating and other factors. The fair value of our derivative financial instruments is determined by our management incorporating standard market conventions and techniques such as discounted cash flow and option pricing models to determine fair value. We believe these methods of estimating fair value result in general approximation of value, and such value may or may not be realized.

All derivative instruments are recorded at fair value. The accounting for changes in the fair value of derivative instruments depends on the intended use of the derivative instruments and the resulting designation. Derivative instruments used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivative instruments used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We assess the effectiveness under the hypothetical derivative method where the cumulative change in fair value of the actual cap is compared to the cumulative change in fair value of a hypothetical cap having terms that exactly match the critical terms of the hedged transaction. For derivatives that do not qualify for hedge accounting or when hedge accounting is discontinued, the changes in fair value of the derivative instrument are recognized directly in earnings.

The objective in using derivative instruments is to add stability to our interest expense and to manage exposure to interest rate movements or other identified risks. Interest rate caps are used as part of a cash flow hedging strategy. We have no derivative financial instruments outstanding as of December 31, 2015.

Off-Balance-Sheet Arrangements

We do not have any off-balance-sheet arrangements or guarantees, such as performance guarantees, keep-well agreements or indemnities in favor of third parties that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Inflation

Although we cannot accurately determine the precise effect of inflation on our operations, we believe inflation has not had a material effect on the Company's results of operations in the last three years.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies and estimates are those that are both important to the presentation of our financial condition and results of operations and requires our most difficult, complex or subjective judgments and that have the most significant impact on our financial condition and results of operations. See Note 2, Significant Account Policies, to our consolidated financial statements for discussion of all significant accounting policies.

The preparation of our consolidated financial statements is made in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") which requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience, information that is currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial statements.

Valuation of Long-lived Assets

Property and Equipment, Net

The carrying value of property and equipment to be held and used are evaluated for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable based on the estimated future undiscounted cash flows of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows are less than the assets carrying value, the impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model. Assets to be disposed of are recorded at the lower of carrying value or fair market value less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model.

Indefinite-lived Intangible Assets

The Company performs an annual impairment test for indefinite-lived intangible assets at December 31 of each year, or more frequently if impairment indicators exist. The impairment test consists of comparing the fair value of the asset with its carrying amount, and, if the carrying amount exceeds its fair value, an impairment loss would be recognized for the carrying amount in excess of its implied fair value.

The Hard Rock licensing intangible asset is tested for impairment using the relief from royalty method based on the estimated present value of future revenues and an assumed royalty rate. Future Trademark licensing intangible asset is tested for impairment using the estimated discounted cash flows of the future royalty income streams.

Finite-lived Intangible Assets

The Company reviews the carrying value of its intangible assets that have a definite life for possible impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The Company then compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is recorded based on the fair value of the asset, typically measured using a discounted cash flow model. All recognized impairment losses, whether for assets held for sale or assets to be held and used, are recorded as operating expenses.

accounting periods. Estimates of cash flows for the Company are based on the current regulatory, social and economic environment where operations are or were conducted as well as recent operating information and budgets for the Company’s business. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events affecting various forms of travel and access to the Hard Rock Hotel & Casino Las Vegas.

Valuation of Debt

The valuation of the fair value of our debt utilizes Level 3 unobservable inputs utilizing a discounted cash flow model. Level 3 inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. Level 3 valuation techniques typically include discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Fair value is a market-based measurement, not an entity-specific measurement. Therefore, fair value measurement is determined based on assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy is used to distinguish between market participant assumptions based on market data obtained from sources independent of the reporting entity as follows:

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Allowance for Uncollectible Receivables

Substantially all of our accounts receivable are unsecured and are due primarily from our subsidiaries’ casino and hotel patrons and convention functions. Financial instruments that potentially subject us to concentrations of credit risk consist principally of casino accounts receivable. We issue credit in the form of “markers” to approved casino customers following investigations of creditworthiness. Non-performance by these parties would result in losses up to the recorded amount of the related receivables. Business or economic conditions or other significant events could also affect the collectibility of such receivables.

Accounts receivable, including casino and hotel receivables, are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems them to be uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful accounts is maintained to reduce our receivables to their carrying amount, which approximates fair value. The allowance is estimated based on specific review of customer accounts as well as our management’s experience with collection trends in the casino industry and current economic and business conditions. Our management’s estimates consider, among other factors, the age of the receivables, the type or source of the receivables, and the results of collection efforts to date, especially with regard to significant accounts. Change in customer liquidity or financial condition could affect the collectibility of that account, resulting in the adjustment upward or downward in the provision for bad debts, with a corresponding impact to our results of operations.

Recently Issued and Adopted Accounting Pronouncements

For discussions of the adoption and potential impacts of recently issued accounting standards, refer to Note 2, Significant Accounting Policies, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K.

Item 7A Quantitative and Qualitative Disclosures about Market Risk

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. The outstanding debt under the Amended Facility has a variable interest rate. We use some derivative financial instruments, primarily interest rate caps, to manage our exposure to interest rate risks related to our floating rate debt. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit rating and other factors.

As of December 31, 2015, our total outstanding variable rate debt had a face value of approximately $946.4 million.

Due to a LIBOR floor of 1.5% currently in place under the Amended Facility, the LIBOR rate would have to exceed the LIBOR floor for our interest expense to be affected and any decrease in interest rates would not decrease interest expense. Subject to the LIBOR floor, as of December 31, 2015, a hypothetical 1% increase in market rates above the LIBOR floor of 1.5% to 2.5% would increase interest expense for the next twelve months by $9.8 million and a hypothetical 2% increase in market rates above the LIBOR floor of 1.5% to 3.5% would increase interest expense for the next twelve months by $19.5 million. Due to the LIBOR floor, a decrease in market interest rates would not decrease our annual interest expense.

Item 8 Financial Statements and Supplementary Data

See the Index to Financial Statements beginning on page F-1.

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of our principal executive and financial officers, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2015. Based on that evaluation, management has concluded that, as of such date, our disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and financial officers and effectuated by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and 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 the assets of the Company;


•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made in accordance with authorization of management and directors of the Company; and


•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s 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.

The Company’s management has conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal Control-Integrated Framework issued by the Committee of the Sponsoring Organizations of the Treadway

Commission (2013). Based on this evaluation, we concluded that the Company’s internal control over financial reporting was effective as of December 31, 2015.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B Other Information

None.

PART III

Item 10 Directors, Executive Officers and Corporate Governance

The Company does not have a board of directors, or maintain a separately designated audit, compensation or nominating committee. The Company is managed by BREF HR Management in compliance with the gaming laws of the State of Nevada. The following table sets forth the name, age and position of each of the members and managers of BREF HR Management and executive officers of the Company:



Name	Age	Position
Andrea Balkan	51	Authorized Representative
Barry S. Blattman	53	Authorized Representative
Theresa Hoyt	53	Authorized Representative
William M. Powell	57	Authorized Representative
William W. Warner	51	Authorized Representative, Principal Executive Officer
Chad Konrad	38	Authorized Representative, Principal Financial Officer

Andrea Balkan. Ms. Balkan is a Managing Partner of Brookfield Real Estate Financial Partners, based in New York. She has held several senior management positions at Brookfield and is responsible for the overall management of the activities of the Fund. Ms. Balkan has over 25 years of experience in real estate finance and capital markets. Prior to joining Brookfield in 2002, Ms. Balkan was a Director at Merrill Lynch in New York in the Investment Banking and Debt Capital Markets groups (1998 to 2002), where she was responsible for conduit and large loan origination business, and before that, a Managing Director at Chase Manhattan Bank where she was a member of the management team that developed Chase Manhattan Bank’s top tier CMBS business. Ms. Balkan holds a B.A. from Wesleyan University and successfully completed Chemical Bank’s credit training program in 1987.

Barry S. Blattman. Mr. Blattman is a Senior Managing Partner of Brookfield Asset Management and is responsible for business development, relationship management and strategic transactions. Prior to joining Brookfield in 2002, Mr. Blattman held the title of Managing Director at Merrill Lynch with responsibility at different points in time for numerous businesses including the commercial real estate debt group, the Latin American debt capital markets group and the structured finance group. Mr. Blattman also served as a senior investment banking relationship manager for the office property client group and for financial institutions, specialty finance companies and opportunity funds focused on real estate at Merrill Lynch. Mr. Blattman holds a B.A. from the University of Michigan and an MBA from New York University.

Theresa Hoyt. Ms. Hoyt is a Senior Vice President of Brookfield Real Estate Financial Partners, based in New York. She has held several senior management positions at Brookfield and is responsible for the structuring, closing and asset management of transactions. Ms. Hoyt has over 23 years of experience in closing real estate transactions, including 11 years of experience in real estate finance and capital markets at Merrill Lynch and JP Morgan. Prior to joining Brookfield in 2003, Ms. Hoyt was at Merrill Lynch and was responsible for the closing and securitization of all large loan transactions. Ms. Hoyt holds a B.A. from Monmouth University.

William M. Powell. Mr. Powell is a Senior Managing Partner of Brookfield Asset Management and currently serves as Brookfield’s Corporate Treasurer and oversees Brookfield’s Australian operations. Prior to joining Brookfield in 2002, Mr. Powell has held various senior management positions within the real estate capital markets groups at several investment management firms. Mr. Powell has a diverse background as a structured real estate investor having considerable experience in subordinate CMBS, investment grade CMBS, and REIT debt transactions, as well as in privately negotiated structured transactions. Mr. Powell holds a B.S. from the University of Richmond and an M.B.A. from the Darden School of the University of Virginia.

William W. Warner. Mr. Warner is the Chief Executive Officer of Warner Gaming, the parent company of WG-Harmon, LLC, which is the management company for gaming and non-gaming operations under the WG-Harmon Management Agreement and is currently acting as the principal executive officer of the Company. Prior to founding Warner Gaming in 2008, Mr. Warner served as Chief Operating Officer of Station Casinos, overseeing all aspects of gaming and non-gaming operations (as well as development) for more than a dozen gaming properties. Mr. Warner also held several senior management positions at Station, including Vice

President of Finance, where he negotiated with banks and underwriters in structuring a variety of bank, bond and equity financings during Station’s fast-growing early years as a public company and Chief Development Officer, where he oversaw design, construction, pre-opening and opening of new properties. Mr. Warner received a bachelor's degree in accounting from Miami University of Ohio in 1986.

Chad Konrad. Mr. Konrad became the Vice President of Finance for a subsidiary of the Company in June 2014. Mr. Konrad has 16 years of experience in the resort and casino industry and prior to his current role, Mr. Konrad held several other financial positions running the day to day finance operations of the Company. Mr. Konrad holds a B.S. in Finance from Winona State University.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics that applies to each of the executive officers and employees.

Item 11 Executive Compensation

The Company is managed by BREF HR Management in compliance with the gaming laws of the State of Nevada. We do not, and do not intend in the future to, compensate the members and managers of BREF HR Management for the management services they provide the Company. All of the members and managers of BREF HR Management are currently directors and/or officers of Brookfield, and their compensation is set and paid by Brookfield.

The Company is managed under the Management Agreement with WG-Harmon as discussed in, Item 1 – Business – Agreements Governing the Operation of the Hard Rock Hotel & Casino Las Vegas. William W. Warner became the Company’s effective Chief Executive Officer on March 1, 2011, and is responsible for the conduct of the Company's day-to-day operations under the supervision of BREF HR Management. WG-Harmon receives base fees in addition to an incentive management fee based on the performance of the adjusted EBITDA of the Hard Rock Hotel & Casino Las Vegas. Compensation of Mr. Warner, who we consider to be the Company’s principal executive officer, is not paid by the Company.

COMPENSATION DISCUSSION AND ANALYSIS

Overview

The executive compensation program of the Company is designed to provide compensation that is competitive in the marketplace and to reward and incentivize executive officers to increase our revenues and maximize value to our members. Specifically, the primary tenets of our executive compensation philosophy, similar to other companies in the Las Vegas hotel and casino industry, are the following:

•

Attract, retain and motivate qualified, high-performing executives. The compensation packages we provide to our executive officers are designed to attract them to the Company. Since our formation in 2011, our executive compensation focus has been on retaining the services of our executive officers to continue to build on our operational success. In addition, we continually evaluate our executive officer compensation packages to ensure that our executive compensation program is competitive and attractive to qualified executives with the level of industry experience that we generally seek.


•	Provide rewards commensurate with performance by emphasizing variable, at-risk compensation that is dependent on both Company and individual achievements and continued service. The main elements of our executive compensation program include a base salary and an annual cash bonus. The annual cash bonus is based on the achievement of pre-determined performance targets by the Company.

Compensation Philosophy and Objectives

As companies in the Las Vegas hotel and casino market are likely to compete with us in the marketplace for recruiting and retaining key executives, we have created what we believe is an attractive executive compensation program. In setting the compensation of our named executive officers, we evaluate the scope of the named executive officer responsibilities and our general knowledge of compensation practices in the Las Vegas hotel and casino market. The amount and form of compensation paid or granted to our named executive officers is also determined by the seniority of his or her position and his or her anticipated roles and responsibilities within the organization. In general, executive officers with higher levels of responsibility and a greater ability to influence results have a greater percentage of their total compensation based on variable compensation.

Summary Compensation Table

The following table sets forth the compensation awarded to, paid to or earned by our principal financial officer for the year ended December 31, 2015 and prior to that, as applicable. We consider Mr. Warner, the Company’s effective Chief Executive Officer, as our principal executive officer. Compensation of Mr. Warner is not paid by the Company, and therefore we have not provided his compensation information.



Name and Principal Position	Year	Salary			Annual Bonus		All Other Compensation		Total
Chad Konrad (1)	2015	$	183,481		$	45,000	$	—	$	228,481
Authorized Representative, Principal Financial Officer	2014	161,583		(2)	—		—		161,583
Marlo Vandemore (3)	2014	108,333		(4)	—		—		108,333
Authorized Representative, Principal Financial Officer	2013	260,000			—		—		260,000

(1) Mr. Konrad became the Vice President of Finance of a subsidiary in June 2014.

(2) Based on an annual base salary of $175,000

(3) Ms. Vandemore served as the Chief Financial Officer of a subsidiary from July 30, 2012 to May 31, 2014.

(4) Based on an annual salary of $260,000.

Compensation Committee Report

The Company does not have a compensation committee. The members and managers of BREF HR Management have reviewed, discussed and approved the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K in this report.

Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information with regard to the beneficial ownership of our membership interests for (i) each person who owned beneficially more than 5% of our Class A Units, (ii) each person who owned beneficially more than 5% of our Class B Units, which comprise our outstanding voting securities, (iii) each of the members and managers of BREF HR Management, (iv) each of the persons determined to be “named executive officers” and (v) all members and managers of BREF HR Management as a group as of the date hereof. Except as otherwise indicated, each such person has sole voting and dispositive power with respect to the membership interests shown as beneficially owned by it.



Name of Beneficial Owner	Percentage Ownership of Class A Units		Percentage Ownership of Class B Units
BREF HR Management, LLC ^{(1) (2)}	100	%	—
Brookfield Financial, LLC as to its Series B ^{(1) (3)}	—		100	%
Andrea Balkan ⁽¹⁾	—		—
Barry S. Blattman⁽¹⁾	—		—
Theresa Hoyt⁽¹⁾	—		—
William M. Powell ⁽¹⁾	—		—
William W. Warner ⁽⁴⁾	—		—
Chad Konrad ⁽⁵⁾	—		—
All members and managers of BREF Management as a group (6 persons)	—		—


(1)	The business address for each of BREF HR Management, Mesdames Balkan and Hoyt and Messrs. Blattman and Powell is Three World Financial Center, 250 Vesey Street, 15th Floor New York, NY 10281.


(2)	Mesdames Balkan and Hoyt and Messrs. Blattman and Powell have dispositive power over the Class A Units held by BREF HR Management.

(3)

The Company does not have a board of directors. The Company is managed by BREF HR Management in compliance with the gaming laws of the State of Nevada. Brookfield Financial will not participate in the management or control of the business of, and will not have any rights or powers with respect to, the Company except that BREF HR Management is permitted to transfer, assign, convey or otherwise dispose of any assets of the Company only with the written consent of Brookfield Financial. In addition, Brookfield Financial may cause BREF HR Management to resign and forfeit its interest in the Company and admit a new Class A member (subject to the approval of the Nevada Commission). Subject to the approval of the Nevada Commission, all distributions of the Company are made to Brookfield Financial.


(4)	The business address for William W. Warner, an authorized representative and our principal executive officer, is 6720 Via Austi Parkway #400, Las Vegas, NV 89119.


(5)	The business address for Chad Konrad, an authorized representative, our principal financial officer and Vice President of Finance of a subsidiary, is 4455 Paradise Road, Las Vegas, NV 89169.

Item 13 Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Transactions

We are an affiliate of Brookfield. While we believe that our ongoing relationship with Brookfield provides us with a strong competitive advantage as well as access to opportunities that would otherwise not be available to us, we operate very differently from an independent, stand-alone entity. In particular, conflicts of interest could arise, among other reasons, because:


•	Brookfield has significant discretion to determine the suitability of opportunities for us and to allocate such opportunities to us or to itself or third parties;

•

there may be circumstances where Brookfield will determine that an acquisition opportunity is not suitable for us because of limits arising due to regulatory or tax considerations or limits on our financial capacity or because of the immaturity of the target assets or the fit with our acquisition strategy and Brookfield is entitled to pursue the acquisition on its own behalf rather than offering us the opportunity to make the acquisition and, as a result, Brookfield may initially or ultimately make the acquisition;


•	where Brookfield has made an acquisition, it may transfer it to us at a later date after the assets have been developed or we have obtained sufficient financing;


•	Brookfield is permitted to pursue other business activities and provide services to third parties that compete directly with our business and activities without providing us with an opportunity to participate, which could result in the allocation of Brookfield’s resources, personnel and acquisition opportunities to others who compete with us; and


•	Brookfield does not owe the Company any fiduciary duties, which may limit our recourse against it.

The Company does not have written policies or procedures for the review, approval or ratification of related party transactions required to be reported pursuant to Item 404 of Regulation S-K. As we do not have a board of directors, the members and managers of the Company approve of related party transactions, as appropriate.

Resort Management Agreement

On March 1, 2011, the Company and WG-Harmon entered into a Resort Management Agreement, which agreement was subsequently amended on June 15, 2012, November 11, 2013 and March 28, 2016 (as amended, the “Amended Resort Management Agreement”), pursuant to which WG-Harmon manages the Hard Rock Hotel & Casino Las Vegas, including the gaming operations and the liquor operations. During the years ended December 31, 2015, 2014 and 2013 the Company incurred $2.1 million, $3.6 million and $1.8 million, respectively, in management and incentive fees payable to WG-Harmon under the Amended Resort Management Agreement, which are included in fee and expense reimbursements-related party on the consolidated statement of operations. As of December 31, 2015, 2014 and 2013, the Company had $0.1 million, $0 and $0.1 million, respectively, payable to WG-Harmon which are included in related party payables on the consolidated balance sheets. See Item 1, Business - Agreements

Governing the Operation of the Hard Rock Hotel & Casino Las Vegas, for a more detailed description of the Amended Resort Management Agreement and our relationship with WG-Harmon.

Second Mortgage Loan Agreement

The Company is a party to the Second Mortgage with Brookfield Financial. See Note 9, Debt, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K.

Investment in Joint Venture

Director Independence

The Company does not have a board of directors. The Company is managed by BREF HR Management. Although the Company and BREF HR Management are not subject to the rules promulgated by the New York Stock Exchange, the Company has used the independence requirements set forth in these rules as a benchmark to determine whether the members and managers of BREF HR Management are independent. None of the members or managers of BREF HR Management meet the independence requirements set forth in the rules promulgated by the New York Stock Exchange because each of its members and managers is also a director and/or officer of another affiliate of Brookfield. However, given that each of our members has direct control over us, we do not believe it is necessary to elect independent directors at this time. The Company does not currently maintain a separately designated audit, compensation or nominating committee.

See also Note 8, Agreements with Related Parties, to our consolidated financial statements, included in Item 15 of this Annual Report on Form 10-K.

Item 14 Principal Accounting Fees and Services

Audit Fees

Audit fees and expenses billed to or accrued by the Company by Deloitte & Touche LLP (“Deloitte”) for the years ended December 31, 2015, 2014 and 2013 for the audit of our consolidated annual financial statements totaled approximately $650,000, $600,000 and $652,000, respectively.

Audit-Related Fees

Audit-related fees billed to the Company by Deloitte were $0, $28,000 and $0 for the years ended December 31, 2015, 2014 and 2013, respectively.

Tax Fees

The Company did not engage Deloitte for tax compliance, tax advice and tax planning services during the years ended December 31, 2015, 2014 and 2013.

All Other Fees

The Company did not engage Deloitte for any other services during the years ended December 31, 2015, 2014 and 2013.

BREF HR Management has adopted a policy requiring pre-approval by our members of all audit services to be provided to the Company by its independent auditors. In accordance with that policy, our management has given its approval for the provision of audit services by Deloitte for fiscal year 2015. All other services must be specifically pre-approved by our management or by a designated named executive officer who has been delegated the authority to pre-approve the provision of services.

PART IV


Item 15	Exhibits and Financial Statement Schedules

(a) Financial Statements.

An index of Financial Statements is included on page F-1 of this Annual Report on Form 10-K

(b) Exhibits

An index of Exhibits is included on page F-24 of this Annual Report on Form 10-K

Signatures

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



	BREF HR, LLC, by its manager, BREF HR Management, LLC

Dated: March 30, 2016	By:	/s/ Andrea Balkan
		Andrea Balkan
		Authorized Representative

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



Signature	Title	Date

/s/ William Warner	Principal Executive Officer	March 30, 2016
William Warner

/s/ Chad Konrad	Principal Financial Officer	March 30, 2016
Chad Konrad

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Audited Consolidated Annual Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations and Comprehensive Loss	F-4
Consolidated Statements of Members' Deficit	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-8

F-1

Report of Independent Registered Public Accounting Firm

BREF HR Management, LLC, on behalf of

BREF HR, LLC and Subsidiaries

New York, New York

We have audited the accompanying consolidated balance sheets of BREF HR, LLC and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive loss, members’ deficit, and cash flows for each of the three years in the period ended December 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of BREF HR, LLC and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, recurring losses from operations and the contractual debt repayments due April 4, 2016 raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada

March 30, 2016

F-2

BREF HR, LLC
Consolidated Balance Sheets



($ in thousands)	As of December 31,
Assets	2015			2014
Current assets
Cash and cash equivalents	$	21,838		$	13,303
Accounts receivable, net	10,954			10,956
Inventories	3,191			3,578
Prepaid expenses and other current assets	4,432			3,070
Related party receivable	116			81
Restricted cash	5,032			4,868
Total current assets	45,563			35,856

Property and equipment, net	441,289			456,929
Intangible assets, net	62,911			66,449
Restricted cash	18,842			22,746
Investment in joint venture	920			1,223
Total assets	$	569,525		$	583,203

Liabilities and members' deficit
Current liabilities
Accounts payable	$	4,142		$	5,220
Construction related payables	197			307
Related party payables	150			30
Accrued expenses	16,516			16,167
Interest payable	114,287			86,327
Current portion of long term debt	811,398			743,362
Total current liabilities	946,690			851,413

Long term accrued expenses	172			—
Long term interest payable	24,295			16,536
Long term debt - due to affiliate	21,283			18,638
Total long term liabilities	45,750			35,174
Total liabilities	992,440			886,587

Commitments and contingencies (Note 10)

Members' deficit
Paid-in capital	86,673			86,673
Accumulated deficit	(509,588		)	(390,057		)
Total members' deficit	(422,915		)	(303,384		)
Total liabilities and members' deficit	$	569,525		$	583,203

The accompanying notes are an integral part of these consolidated financial statements.

F-3

BREF HR, LLC
Consolidated Statements of Operations and Comprehensive Loss




	For the year ended December 31,
($ in thousands)	2015			2014			2013
Revenue
Casino	$	45,466		$	49,444		$	43,965
Lodging	67,473			65,220			61,910
Food and beverage	67,188			73,599			73,924
Entertainment, retail and other	32,066			30,249			34,516
Gross revenues	212,193			218,512			214,315
Less: Promotional allowances	(18,394		)	(18,108		)	(19,702		)
Net revenues	193,799			200,404			194,613

Costs and expenses
Casino	35,669			34,600			35,593
Lodging	21,151			21,214			19,797
Food and beverage	39,912			44,128			43,540
Entertainment, retail and other	19,107			19,700			22,875
Marketing	8,116			9,069			9,324
Fee and expense reimbursements - related party	2,092			3,646			1,836
General and administrative	35,837			34,372			37,916
Depreciation and amortization	30,211			29,936			30,916
Loss/(gain) loss on disposal of assets	114			(6		)	(26		)
Pre-opening	—			—			39
Impairment of intangible assets	—			88			—
Total costs and expenses	192,209			196,747			201,810
Income (loss) from operations	1,590			3,657			(7,197		)
Interest income	8			12			23
Interest expense	(121,036		)	(106,460		)	(98,316		)
Loss on joint venture investment	(93		)	(42		)	(49		)
Net loss	(119,531		)	(102,833		)	(105,539		)

Comprehensive loss	$	(119,531	)	$	(102,833	)	$	(105,539	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

BREF HR, LLC
Consolidated Statements of Members’ Deficit



($ in thousands)	Paid-in Capital		Accumulated Deficit			Total Members' Deficit
Balances at December 31, 2012	$	86,673	$	(181,685	)	$	(95,012	)
Net loss	—		(105,539		)	(105,539		)
Balances at December 31, 2013	86,673		(287,224		)	(200,551		)
Net loss	—		(102,833		)	(102,833		)
Balances at December 31, 2014	86,673		(390,057		)	(303,384		)
Net loss			(119,531		)	(119,531		)
Balances at December 31, 2015	$	86,673	$	(509,588	)	$	(422,915	)

The accompanying notes are an integral part of these consolidated financial statements.

F-5



BREF HR, LLC Consolidated Statements of Cash Flows
	For the year ended December 31,
($ in thousands)	2015			2014			2013
Cash flows from operating activities
Net loss	$	(119,531	)	$	(102,833	)	$	(105,539	)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation	26,673			25,931			25,263
Provision for doubtful accounts	2,245			737			77
Impairment of licenses and trademarks	—			88			—
Amortization of intangible assets	3,538			4,005			5,653
Amortization of debt discount	47,274			38,110			34,173
Accrued non-cash interest applied to principal	23,407			20,444			21,388
Premium amortization included in net loss	—			—			64
Loss on joint venture investment	93			42			49
Loss (gain) on disposal of assets	114			(6		)	(26		)
(Increase) decrease in assets:
Accounts receivable	(2,243		)	(3,342		)	(119		)
Inventories	387			(631		)	(428		)
Prepaid expenses	(1,362		)	(68		)	859
Related party receivable	(35		)	354			335
Increase (decrease) in liabilities:
Accounts payable	(1,078		)	(2,340		)	1,507
Related party payable	120			(190		)	(186		)
Other accrued liabilities	471			(4,403		)	(2,684		)
Accrued interest payable	35,719			31,151			27,749
Net cash provided by operating activities	15,792			7,049			8,135
Cash flows from investing activities
Purchases of property and equipment	(10,899		)	(3,852		)	(5,153		)
Payments on construction related payable	(110		)	(540		)	545
Restricted cash contributions	(10,252		)	(10,916		)	(10,331		)
Restricted cash withdrawals	13,992			7,725			7,684
Loan to joint venture	—			—			(248		)
Return of investment	210			160			—
Repayments on joint venture debt	—			—			363
Proceeds from disposal of operating assets	22			6			72
Net cash used in investing activities	(7,037		)	(7,417		)	(7,068		)

F-6



BREF HR, LLC Consolidated Statements of Cash Flows
	For the year ended December 31,
($ in thousands)	2015			2014			2013
Cash flows from financing activities
Purchase of interest rate caps	—			—			(64		)
Capital lease payments	(220		)	(423		)	(567		)
Net cash used in financing activities	(220		)	(423		)	(631		)
Net increase (decrease) in cash and cash equivalents	8,535			(791		)	436
Cash and cash equivalents, beginning of period	13,303			14,094			13,658
Cash and cash equivalents, end of period	$	21,838		$	13,303		$	14,094

Supplemental disclosure of cash flow information
Cash paid during the period for interest, net
of amounts capitalized	$	14,500		$	16,500		$	14,857

Supplemental disclosure of non-cash investing and financing activities
Construction related payables	197			307			847

The accompanying notes are an integral part of these consolidated financial statements.

F-7

BREF HR, LLC
Notes to Consolidated Financial Statements

1. Company Structure and Nature of Business

BREF HR, LLC (the “Company”) is a Delaware limited liability company that was formed on February 11, 2011. The affairs of the Company are governed by a Limited Liability Company Agreement dated as of March 1, 2011 (the “LLC Agreement”).

Unless otherwise specified, references to the terms the “Company”, “we”, “us” or “our” refer to BREF HR, LLC and its consolidated subsidiaries, or any one or more of them, as the context may require.

The Company was formed by certain affiliates of Brookfield Financial, LLC (“Brookfield Financial”) to acquire the limited liability company interests of HRHH JV Junior Mezz, LLC (“HRHH JV Junior Mezz”) and HRHH Gaming Junior Mezz, LLC (“HRHH Gaming Junior Mezz”), which indirectly own the Hard Rock Hotel & Casino Las Vegas and certain related assets. These assets were acquired pursuant to the assignment (the "Assignment") from Hard Rock Hotel Holdings, LLC (“HRH Holdings”) in connection with the default by HRH Holdings and its subsidiaries on a real estate financing facility (the “Facility”), and the resulting settlement agreement, as described below. Brookfield Financial is managed by Brookfield Real Estate Financial Partners LLC (together with its affiliates, “Brookfield”).

As part of the Assignment, the Company assumed the obligations under the Facility and entered into an amendment thereof (as amended, the “Amended Facility”) between Vegas HR Private Limited (the "Mortgage Lender") and the Company. Pursuant to the Amended Facility, the land, building and improvements, equipment, fixtures and all personal property relating to the Hard Rock Hotel & Casino Las Vegas were pledged as security and collateral. Also, as part of the Assignment, the Company entered into a second mortgage loan agreement with Brookfield Financial, as lender, (the “Second Mortgage”) in the amount of $30.0 million pursuant to which certain land, building and improvements, equipment, fixtures and personal property were pledged as security and collateral. The Second Mortgage is subordinate in right of payment to the Amended Facility. Since March 1, 2011, the Hard Rock Hotel & Casino Las Vegas and related assets have been owned by the Company pursuant to the Assignment.

In connection with agreements entered into in relation to the Assignment, the Company and specified affiliates are contingently liable to distribute certain excess cash flows to specific former lenders and owners of HRH Holdings. These amounts are payable pursuant to the terms of these agreements only in the event that the existing lenders under the Amended Facility and the Second Mortgage agreements are paid specified values in full. After considering the forecasted future performance of the Hard Rock Hotel & Casino Las Vegas and the cash distribution structure specified in the Amended Facility and the Second Mortgage, the Company has determined that the probability that any amounts will be distributed is remote and therfore no value has been attributed to these commitments.

The Assignment was accounted for as a business combination in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805, Business Combinations. All assets and liabilities were recorded at their respective fair values as of the date of foreclosure.

We operate as a single reportable segment.

Going Concern

Over the past three years we have incurred substantial net losses including $119.5 million for the year ended December 31, 2015, and have a net members' deficit of $422.9 million as of December 31, 2015. The Amended Facility (as defined below) allows the Company to accrue "paid-in-kind" interest ("PIK interest"), representing the difference between interest accruing under the Amended Facility and the amounts paid. The outstanding PIK interest as of December 31, 2015 was $83.7 million. The PIK interest outstanding as of March 1, 2014 in the amount of $44.3 million became due and payable on March 3, 2014, as the operating performance of the Company did not meet a specified debt yield threshold for the twelve month period ending March 1, 2014. However, the lender entered into a Forbearance Agreement effective as of March 1, 2014, pursuant to which it agreed not to exercise any rights or remedies with respect to the PIK interest. The lender entered into a series of amendments to the Forbearance Agreement which each time extended the effective date to which the lender agreed it would not exercise any rights or remedies with respect to the PIK interest. The most recent amendment to the Forbearance Agreement, the Twenty-Third Amendment, is effective as of March 7, 2016, pursuant to which the lender agreed not to exercise any rights or remedies with respect to the PIK interest until April 4, 2016. Currently, the Company does not have sufficient funds to satisfy a demand for the PIK interest payment on April 4,

F-8

2016. The Company is currently assessing its options to satisfy the PIK interest payment obligation, including, but not limited to, negotiating a waiver of this requirement from the lender, restructuring the Amended Facility with the lender, selling off a portion of existing collateral or attempting to obtain borrowings or additional equity funding from our current ownership or other sources. The Company's ability to continue as a going concern is dependent upon its ability to negotiate a waiver, restructure its indebtedness, obtain alternative financing on acceptable terms, obtain approval from the lender to use available cash reserves to satisfy a portion of this potential obligation, or otherwise satisfy our PIK interest payment obligation. However, there is no certainty on the outcome. We have placed mortgages on our hotel casino property to secure our indebtedness. In the event the PIK interest is not paid on April 4, 2016, among other lesser remedies, the lender may declare all unpaid principal and accrued interest under the Amended Facility due and payable immediately. If the PIK payment is not made on April 4, 2016, we risk losing some or all of our property to foreclosure. If this occurs, our business and results of operations would be materially adversely affected. These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.

The consolidated financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of uncertainties, including the possibility that the Company loses some or substantially all of its assets to foreclosure as a result of these uncertainties.

2. Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its consolidated subsidiaries.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates, and those differences could be material.

Certain amounts reported in the prior period on the audited consolidated statements of operations and comprehensive loss have been combined to conform to the current presentation. Retail revenues and other revenues have been combined into entertainment, retail and other revenues, and retail expenses and other expenses have been combined into entertainment, retail and other expenses.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and in banks and interest-bearing deposits with maturities at the date of purchase of three months or less. Cash equivalents are carried at cost which approximates fair value.

Restricted Cash

We are obligated to maintain certain cash reserve funds for a variety of purposes as determined pursuant to the Amended Facility, including a requirement to deposit funds into a replacements and refurbishments reserve fund at amounts equal to three percent of the Hard Rock Hotel & Casino Las Vegas' gross revenues. The funds are continuously being used for capital expenditures and contributions are being made on a monthly basis in order to meet the requirements of the Amended Facility.

F-9

Restricted cash consists of the following:



($ in thousands)	December 31, 2015		December 31, 2014
Current
Tax reserves	$	2,707	$	3,095
Insurance reserves	1,407		893
Other reserves	363		363
Workers' compensation reserves	555		517
Total current restricted cash	5,032		4,868
Long-term
Working capital reserves	15,026		15,048
Replacement reserves	3,816		7,698
Total long-term restricted cash	18,842		22,746
Total restricted cash	$	23,874	$	27,614

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of casino accounts receivable. The Company issues credit in the form of “markers” to approved casino customers following investigations of creditworthiness. Business or economic conditions or other significant events could affect the collectability of such receivables.

Substantially all accounts receivable are unsecured and are due primarily from casino and hotel patrons and convention functions. Non-performance by these parties would result in losses up to the recorded amount of the related receivables. Management does not anticipate significant non-performance and believes that they have adequately provided for uncollectible receivables.

Inventories

Inventories are stated at the lower of cost (determined using the first-in, first-out method), or market.

Property and Equipment, Net

Land improvements, buildings and improvements, equipment, furniture and fixtures, and memorabilia were recorded at cost, except for those for which a fair value analysis was prepared as of March 1, 2011. There was no significant amounts of interest capitalized for any periods presented. Depreciation is computed using the straight-line method over the property and equipment's estimated useful lives are as follows:



Building and Building improvements	15-40 years
Equipment, furniture and fixtures	3-10 years

Gains or losses arising from dispositions are included in costs and expenses in the statements of operations. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. Substantially all property and equipment is pledged as collateral for long-term debt at December 31, 2015 and 2014. For assets to be disposed of, the Company recognizes the asset at the lower of carrying value or fair market value less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. We treat memorabilia as an indefinite-lived asset and therefore it is not depreciated.

F-10

Finite-lived Intangible Assets

Intangible assets that have a definite life, such as in-place contracts, trade names, customer relationships, sponsorship agreements, market leases and other amortizing intangible assets are ratably amortized on a straight-line basis over the estimated useful life, which approximates pattern of use, and ranges from one to six years. Player Relationships are amortized on an accelerated basis consistent with the expected timing of the Company’s realization of the economic benefits of such relationships.

Valuation of Long-lived Assets

Property and Equipment, Net

The Company evaluates its property and equipment and other long-lived assets for impairment based on its classification as held for sale or to be held and used. Several criteria must be met before an asset is classified as held for sale, including that management with the appropriate authority commits to a plan to sell the asset at a reasonable price in relation to its fair value and is actively seeking a buyer. For assets to be held and used (including projects under development), fixed assets are reviewed for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the Company first groups its assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the "asset group"). Secondly, the Company estimates the undiscounted future cash flows that are directly associated with and expected to arise from the completion, use and eventual disposition of such asset group. The Company estimates the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs.

Indefinite-lived Intangible Assets

Finite-lived Intangible Assets

Inherent in reviewing the carrying amounts of the above assets is the use of various estimates. First, the Company must determine the usage of the asset. Impairment of an asset is more likely to be recognized where and to the extent management of the Company decides that such asset may be disposed of or sold. Assets must be tested at the lowest level for which identifiable cash flows exist. This testing means that some assets must be grouped and management of the Company exercises some judgment in grouping those assets. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from estimates. If ongoing estimates of future cash flows are not met, the Company may have to record additional impairment charges in future accounting periods. Estimates of cash flows for the Company are based on the current regulatory, social and economic environment where operations are or were conducted as well as recent operating information and budgets for the Company’s business. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events affecting various forms of travel and access to the Hard Rock Hotel & Casino Las Vegas.

F-11

Allowance for Uncollectible Receivables

Accounts receivable, including casino and hotel receivables, are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems them to be uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful accounts is maintained to reduce our receivables to their carrying amount, which approximates fair value. The allowance is estimated based on specific review of customer accounts as well as our management’s experience with collection trends in the casino industry and current economic and business conditions. Our management's estimates consider, among other factors, the age of the receivables, the type or source of the receivables, and the results of collection efforts to date, especially with regard to significant accounts. Change in customer liquidity or financial condition could affect the collectability of that account, resulting in adjustment to the provision for bad debts, with a corresponding impact to our results of operations.

Advertising Expenses

The costs of all advertising campaigns and promotions are expensed as incurred. Total advertising expense (exclusive of amounts related to pre-opening) for the years ended December 31, 2015, 2014 and 2013 was $6.0 million, $6.6 million and $6.5 million, respectively.

Income Taxes

The Company is treated as a limited liability company and its default classification for tax purposes is that of a disregarded entity not subject to federal income taxes. Accordingly, the Company makes no provision for federal income taxes in its financial statements. The Company’s federal taxable income or loss, which is different than financial statement income or loss, is reportable by the member. The Company’s members are responsible for reporting their allocable share of the Company’s income, gains, deductions, losses and credits on their individual income tax returns.

Revenues

Casino revenues are derived from patrons wagering on table games, slot machines and poker. Table games generally include Blackjack or Twenty One, Craps, Baccarat and Roulette. Casino revenue is defined as the win from gaming activities, computed as the difference between gaming wins and losses, not the total amounts wagered. Casino revenue is recognized at the end of each gaming day.

Lodging revenues are derived from rooms and suites rented to guests and include related revenues for incidental services. Room revenue is recognized at the time the room or service is provided to the guest.

Food and beverage revenues are derived from food and beverage sales in the food outlets, including restaurants, room service, banquets and nightclub. Food and beverage revenue is recognized at the time the food and/or beverage is provided to the guest.

Entertainment, retail and other revenues include retail sales, entertainment revenue, spa fees, fees for licensing the “Hard Rock” brand and other miscellaneous income. Revenues are recognized at the point in time the retail sale occurs, when entertainment and spa services are provided to the guest, or when licensing fees become due and payable.

Revenues are recognized net of certain sales incentives, including points redeemed for cash through customer loyalty programs, such as the player's club loyalty program, amounts of reimbursed airfare and marker discounts.

F-12

Complimentaries

Revenues include the retail value of rooms, food and beverage, and other complimentaries provided to casino customers without charge, which are then subtracted to arrive at net revenues.



Estimated Retail Value of Casino Complimentaries
	For the year ended December 31,
($ in thousands)	2015		2014		2013
Food and beverage	$	8,101	$	8,245	$	9,729
Lodging	8,822		8,835		8,414
Other	1,471		1,028		1,559
	$	18,394	$	18,108	$	19,702

The allocated costs of providing such complimentaries have been classified as casino operating expenses as follows:



Estimated Cost of Provided Casino Complimentaries
	For the year ended December 31,
($ in thousands)	2015		2014		2013
Food and beverage	$	5,553	$	5,703	$	5,102
Lodging	3,288		3,410		3,216
Other	968		746		1,045
	$	9,809	$	9,859	$	9,363

Derivative Instruments and Hedging Activities

For derivative instruments designated as cash flow hedges, the effective portion of changes in the fair value of the derivative instrument is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative instrument is recognized directly in earnings. The effectiveness of each hedging relationship is assessed under the hypothetical derivative method, whereby the cumulative change in fair value of the actual derivative instrument is compared to the cumulative change in fair value of a hypothetical derivative instrument having terms that exactly match the critical terms of the hedged transaction. For derivative instruments that do not qualify for hedge accounting or when hedge accounting is discontinued, the changes in fair value of the derivative instrument are recognized directly in earnings.

The objective in using derivative instruments is to add stability to our interest expense and to manage exposure to interest rate movements or other identified risks. Interest rate caps are used as part of a cash flow hedging strategy. There were no outstanding derivatives at December 31, 2015 and 2014.

Fair Value of Financial Instruments

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2: Inputs, other than quoted prices in active markets that are observable either directly or indirectly.

F-13

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Debt. To determine the fair value of our debt the Company utilizes a discounted cash flow model. The discount rate is determined utilizing historical market-based equity returns which are adjusted, as necessary, for entity specific factors. The Company has determined that our debt valuations are classified in Level 3 of the fair value hierarchy. As of December 31, 2015 and 2014, the fair value of the Company’s debt was estimated to be $550.0 million and $610 million, respectively, and the carrying amount was $832.7 million and $762.0 million, respectively.

Recently Issued and Adopted Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, (Topic 606), which supersedes most of the current revenue recognition requirements ("ASU No. 2014-09"). The core principle of this guidance is that an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. Entities must adopt the new guidance using one of two retrospective application methods. For public business entities, certain not-for-profit entities and certain employee benefit plans, the guidance in ASU No. 2014-09 should be applied to annual reporting periods beginning after December 15, 2017, including interim reporting periods within those reporting periods. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company will adopt this standard effective January 1, 2018. We are currently assessing the impact the adoption of this standard will have on our disclosures and results of operations.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern, (Subtopic 205-40), which requires an entity's management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). The entity must also disclose whether or not the substantial doubt is or is not alleviated as a result of consideration of management's plans. The guidance in ASU No. 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim period thereafter. Early application is permitted. The Company will adopt this standard effective January 1, 2016.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest, (Subtopic 835-30), ("ASU No. 2015-03"), which is intended to simplify the presentation of debt issuance costs. The guidance in ASU No. 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the guidance in ASU No. 2015-03. For public business entities, the guidance in ASU No. 2015-03 is effective for financial statements issued for fiscal years beginning after December 31, 2015, and interim periods within those fiscal years. Early adoption of the guidance is permitted for financial statements that have not been previously issued. The adoption of this will result in a reclassification between assets and liabilities but will have no effect on our income statement.

In July 2015, the FASB issued ASU No. 2015-11, Inventory, (Topic 330), ("ASU No. 2015-11"), which provides that inventory measured using any method other than last-in, first-out (LIFO) or the retail inventory method (for example, inventory measured using first-in, first-out (FIFO) or average cost) should be measured at the lower of cost and net realizable value. For public business entities, the guidance in ASU No. 2015-11 is effective for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The guidance in ASU No. 2015-11 should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. Because the Company 's inventories are stated at the lower of cost (determined using the first-in, first-out method) or market, we do not expect the adoption of this standard to have a material effect on our financial statements.

F-14

In February 2016, the FASB issued ASU No. 2016-02, Leases, (Topic 842), ("ASU No. 2016-02), which provides that a lessee should recognize the assets and liabilities that arise from leases. The guidance in ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for public business entities, certain not-for-profit entities and certain employee benefit plans. Early adoption of this guidance is permitted for all entities. The Company will adopt this standard effective January 1, 2019. The Company is beginning to assess its impact on its financial statements.

3. Accounts Receivable

Components of accounts receivable, net consists of the following:



	As of December 31,
($ in thousands)	2015			2014
Casino	$	4,628		$	5,624
Lodging	4,154			3,496
Other	3,746			3,083
	12,528			12,203
Less: allowance for doubtful accounts and discount reserve	(1,574		)	(1,247		)
Total accounts receivable, net	$	10,954		$	10,956

Activity in the allowance for doubtful accounts was as follows:



($ in thousands)
Balance at December 31, 2012	$	959
Bad debt expense (recoveries)	77
Write offs, net of collections	(357		)
Balance at December 31, 2013	679
Bad debt expense (recoveries)	737
Write offs, net of collections	(169		)
Balance at December 31, 2014	1,247
Bad debt expense (recoveries)	2,245
Write offs, net of collections	(1,918		)
Balance at December 31, 2015	$	1,574

4. Inventories

Inventories consist of the following:



	As of December 31,
($ in thousands)	2015		2014
Restaurants and bars	$	2,297	$	2,495
Retail merchandise	761		963
Other inventory and operating supplies	133		120
Total inventories	$	3,191	$	3,578

F-15

5. Property and Equipment

Property and equipment, net consists of the following:



	As of December 31,
($ in thousands)	2015			2014
Land	$	115,600		$	115,600
Buildings and building improvements	347,424			343,375
Furniture, fixtures and equipment	88,698			83,094
Memorabilia	7,100			7,046
	558,822			549,115
Less: accumulated depreciation	(119,008		)	(92,751		)
Construction in progress	1,475			565
Total property and equipment, net	$	441,289		$	456,929

Depreciation relating to property and equipment for the Company was $26.7 million, $25.9 million and $25.3 million for the years ended December 31, 2015, 2014 and 2013, respectively.

On September 15, 2015, the Company entered into an agreement to exchange a parcel of excess undeveloped land with a carrying value of $4.5 million (the land relinquished), for undeveloped land adjacent to the Hard Rock Casino property (the land received) (the "Exchange"). The Exchange closed on November 5, 2015. The fair value of the Company's land relinquished in the Exchange was in excess of the carrying value as of September 30, 2015, and as the Company is not anticipating any identifiable change in the future cash flows resulting from the Exchange and currently does not have any plan for the use of the land received, the Company recorded the land received at the carrying value of the land relinquished, with no gain or loss being recognized. All transaction costs related to the Exchange were paid by the other party.

6. Intangible Assets

Intangible assets, net consists of the following:




	December 31, 2015
($ in thousands)	Gross Carrying Amount		Accumulated Impairment Losses			Accumulated Amortization			Net Carrying Amount		Remaining life (years)

Non-amortizing intangible assets
Hard Rock licensing	$	55,000	$	(15,000	)	$	—		$	40,000	Indefinite
Future Trademark licensing	7,000								7,000		Indefinite
	62,000		(15,000		)	—			47,000

Amortizing intangible assets
In-place contracts	29,000		(6,175		)	(12,492		)	10,333		6
Market leases	1,736		—			(1,278		)	458		0-6
Player Relationships	10,000		—			(5,603		)	4,397		6
Other	2,200		(88		)	(1,389		)	723		6
	42,936		(6,263		)	(20,762		)	15,911
Total intangible assets, net	$	104,936	$	(21,263	)	$	(20,762	)	$	62,911

F-16




	December 31, 2014
($ in thousands)	Gross Carrying Amount		Accumulated Impairment Losses			Accumulated Amortization			Net Carrying Amount

Non-amortizing intangible assets
Hard Rock licensing	$	55,000	$	(15,000	)	$	—		$	40,000
Future Trademark licensing	7,000		—			—			7,000
	62,000		(15,000		)	—			47,000

Amortizing intangible assets
In-place contracts	29,000		(6,175		)	(10,492		)	12,333
Market leases	1,736		—			(1,137		)	599
Player Relationships	10,000		—			(4,752		)	5,248
Other	2,200		(88		)	(843		)	1,269
	42,936		(6,263		)	(17,224		)	19,449
Total intangible assets, net	$	104,936	$	(21,263	)	$	(17,224	)	$	66,449

For the years ended December 31, 2015, 2014, and 2013 the Company recorded amortization expense of $3.5 million, $4.0 million and $5.7 million, respectively.

The estimated amortization expense for the above amortizing intangible assets for each of the five succeeding fiscal years beginning December 31, 2016 is $3.1 million, $3.1 million, $3.1 million, $3.1 million and $3.0 million, respectively.

7. Accrued Expenses

Accrued expenses consist of the following:



	As of December 31,
($ in thousands)	2015		2014
Current
Deferred income	$	48	$	184
Capital leases obligations	55		177
Advance room, convention and customer deposits	5,238		5,947
Accrued salaries, payroll taxes and other employee benefits	1,514		1,873
Accrued miscellaneous taxes	1,654		1,431
Reserve for general liability and accrued legal claims	5,091		3,383
Other accrued liabilities	2,916		3,172
Total current accrued expenses	16,516		16,167
Long term
Capital leases obligations	172		—
Total long term accrued expenses	172		—
Total accrued expenses	$	16,688	$	16,167

8. Agreements with Related Parties

Resort Management Agreement

During the years ended December 31, 2015, 2014 and 2013, the Company incurred $2.1 million, $3.6 million, and $1.8 million, respectively, in management and incentive fees under the Amended Resort Management Agreement. As of December 31, 2015

F-17

and 2014, the Company had $0.1 million and $0, respectively, payable to WG-Harmon which are included in related party payables on the consolidated balance sheets.

Under the terms of the Amended Resort Management Agreement, as most recently amended, began on March 28, 2016 and will continue until March 31, 2017. The Company is required to pay WG-Harmon a base fee in the amount of $150,000 per month, payable monthly. In addition to such base fee, the Company is required to pay WG-Harmon an incentive management fee based on the performance of the adjusted EBITDA of the Hard Rock Hotel & Casino Las Vegas, as set forth in the Amended Resort Management Agreement.

Second Mortgage Loan Agreement

As of December 31, 2015 and 2014 the Company had accrued interest of $7.8 million and $6.0 million, respectively, under the Second Mortgage which is included in long term accrued expenses on the consolidated balance sheets.

Investment in Joint Venture

During 2012, CDO Restaurant Associates LLC (“CDO”), a Delaware limited liability company, was formed between the Company and Fox Restaurant Concepts, LLC (“Fox”) to operate a restaurant, Culinary Dropout, out of leased space at the Hard Rock Hotel and Casino Las Vegas. In 2012, the Company contributed 80% of the initial construction and pre-opening budget, or $2.1 million, and also loaned CDO $100,000 to cover pre-opening costs in excess of initial budgeted amounts. In 2012, the Company loaned CDO an additional $248,000 to cover final construction costs in excess of budgeted amounts. As of December 31, 2014, all loans have been repaid in full. The Company determined that the investment in CDO should be accounted for as an equity method investment. The loans bore interest at the greater of 8% or the reference rate publicly announced by Bank of America N.T. & S.A plus 4%. Loans were required to be repaid before any other distributions of net cash flow. Net cash flow would then be distributed in proportion to the Members’ initial capital contributions, plus an 8% preferred return, and, once paid in full, in accordance with the 50% membership interest. The Company accounts for its investment in CDO under the equity method based on applicable accounting guidance as the Company does not hold a controlling financial interest in CDO.

For the years ended December 31, 2015, 2014 and 2013, the Company recorded losses of $93,000, $42,000 and $49,000, respectively, related to its equity in CDO. The Company’s share of the joint venture’s loss is included in equity in income of joint venture in the accompanying consolidated statements of operations.

At December 31, 2015 and 2014, the Company’s net investment in CDO was $0.9 million and $1.2 million, respectively, which is included in other assets in the accompanying consolidated balance sheets.

The classification of the investment in joint venture was based on the expected timing of the repayment of the initial construction and pre-opening budget contribution. There were no distributions to the members for the years ended December 31, 2015 and 2014.

CDO leases space from the Company under a ten-year operating lease expiring in August 2022. The lease has one five-year renewal option. Rent is paid monthly based upon a percentage of sales, as defined in the agreement. For the years ended December 31, 2015, 2014 and 2013 total rent payments received were $255,000, $251,000 and $296,000, respectively.

F-18

9. Debt

The following table presents debt outstanding as of December 31, 2015 and 2014:



($ in thousands)	Face value			Book value			Face value			Book value
Project name/lender	2015			2015			2014			2014
Amended facility -
Note A/Vegas HR Private Limited	$	619,065		$	574,975		$	595,658		$	536,993

Amended facility -
Note B/Vegas HR Private Limited	327,290			236,423			327,290			206,369

Second Mortgage -
Brookfield Financial	30,000			21,283			30,000			18,638
Total debt	976,355			832,681			952,948			762,000

Current portion of long-term debt	(946,355		)	(811,398		)	(922,948		)	(743,362		)
Total long-term debt	$	30,000		$	21,283		$	30,000		$	18,638

The difference between the face and book value of the debt represents debt discounts that are amortized to interest expense using the effective interest method over the term of the debt.

As of December 31, 2015, the Company has outstanding $114.3 million in supplemental interest under the Amended Facility. In addition, the Company contractually owes $21.2 million under the Second Mortgage, the difference representing application of the effective interest method.

Amended Facility. The Amended Facility has a maturity date of March 1, 2018 and provides for interest only (until maturity) at The London InterBank Offered Rate (LIBOR) plus 2.5% with a 1.5% LIBOR floor (total of 4%) at December 31, 2015. In addition, supplemental interest is accrued at a rate sufficient to provide for the greater of 6.5% or LIBOR plus 4% effective interest rate at maturity after consideration of all prior payments of principal and interest. The rates of accrual are dependent on fluctuations in the applicable LIBOR rate. The Amended Facility has a provision whereby if the cash available for debt service is less that the current interest due, the PIK interest will be automatically added to the outstanding principal balance of the Amended Facility and shall thereafter accrue interest. In addition, excess cash in the cash management account will be applied to the outstanding PIK interest, supplemental interest and principal according to the terms of the Amended Facility.

The Amended Facility requires that the Company repay in full all PIK interest outstanding on March 1, 2014 in the event the Company has not made sufficient payments to the lender to provide a specified debt yield for the twelve month period ending March 1, 2014, on the terms specified in the Amended Facility. The Company did not meet the specified debt yield threshold as of March 1, 2014. However, the lender entered into a Forbearance Agreement effective as of March 1, 2014, pursuant to which it agreed not to exercise any rights or remedies with respect to the PIK interest. The lender entered into a series of amendments to the Forbearance Agreement which each time extended the effective date to which the lender agreed it would not exercise any rights or remedies with respect to the PIK interest. The most recent amendment to the Forbearance Agreement, the Twenty-Third Amendment, is effective as of March 7, 2016, pursuant to which the lender agreed not to exercise any rights or remedies with respect to the PIK interest until April 4, 2016. Currently, the Company does not have sufficient funds to satisfy a demand for the PIK interest payment on April 4, 2016. The Company is currently assessing its options to satisfy the PIK interest payment obligation, including, but not limited to, negotiating a waiver of this requirement from the lender, restructuring the Amended Facility with the lender, selling off a portion of existing collateral or attempting to obtain borrowings or additional equity funding from our current ownership or other sources. However, there is no certainty on the outcome. If the PIK payment is not made on April 4, 2016 we risk losing some or all of our property to foreclosure. If this occurs, our business and results of operations would be materially adversely affected. The outstanding PIK interest as of December 31, 2015 and 2014 was $83.7 million and $60.3 million, respectively. See further discussion in Note 1, Company Structure and Nature of Business.

F-19

The total amount of the Company’s debt, under certain exceptions described in the Amended Facility, is due on March 1, 2018, and no principal payments are due until then. All amounts due under the Amended Facility have been classified as current in the consolidated balance sheets due to the anticipated event of default as a result of the inability to pay the outstanding PIK interest on April 4, 2016.

Second Mortgage. On March 1, 2011, as part of the Assignment, the Company entered into the Second Mortgage with Brookfield Financial in the amount of $30.0 million pursuant to which certain land, building and improvements, equipment, fixtures and personal property were pledged as security and collateral. The Second Mortgage is subordinate in right of payment to the Amended Facility. The maturity date of the Second Mortgage is March 1, 2018 and provides for an effective interest rate of 15% payable at maturity.

The Amended Facility and Second Mortgage include affirmative and negative covenants, including, among others, restrictive covenants regarding incurrence of liens, sales of assets, distributions to affiliates, changes in business, cancellation of indebtedness, dissolutions, mergers and consolidations, as well as limitations on security issuances, transfers of any of the Company's real property and removal of any material article of furniture, fixture or equipment from the Company's real property. As of December 31, 2015, the Company was in compliance with all such covenants.

The estimated annual amortization of the debt discounts under the effective interest method assuming estimated future cash flow payments of the Amended Facility and the Second Mortgage (assuming continued forbearance) for each of the four succeeding years is as follows:



($ in thousands)	Amortization - Amended Facility		Amortization - Second Mortgage
2016	$	57,483	$	3,439
2017	66,272		4,445
2018	11,322		833
2019	—		—
Total	$	135,077	$	8,717

10. Commitments and Contingencies

Contingencies

The Company and affiliates Brookfield Real Estate Financial Partners, LLC, Brookfield Financial, LLC - Series B, and Brookfield Asset Management (US), Inc. are currently amongst a number of defendants (“Defendants”) in an action commenced by Mace Management Group, LLC (“Mace) and Mandown, LLC (“Mandown”) on June 12, 2012 in Nevada’s Eighth Judicial District Court in Clark County, Nevada (the “Mace/Mandown Action”). The Mace/Mandown Action relates to investments made by Mace/Mandown in Wasted Space Lounge, Rare 120 restaurant, the Johnny Smalls restaurant and Vanity nightclub (collectively, the “Venues”) at the Hard Rock Hotel and Casino Las Vegas. In general, all claims assert that actions taken by Defendants allegedly deprived Mace/Mandown of their initial investment and/or their share of profits from the Venues. The Mace/Mandown Action is still in the discovery stages and management has determined that based on the proceedings to date it does not believe the outcome of this matter will have a material effect on the business, results of operations or financial condition of the Company, nor have a material effect on the financial statements of the Company as a whole.

We are also subject to a variety of other claims and lawsuits that arise in the ordinary course of our business. We do not believe the outcome of these and the other matters disclosed above will have a material effect on our business, results of operations or financial condition. As of December 31, 2015, the Company accrued approximately $4.8 million for all loss contingency matters and our best estimate of reasonably possible losses in excess of the amount accrued is not material to the financial statements.

11. Employee Benefit Plans

The Company has a 401(k) profit sharing plan, as amended on June 29, 2015, whereby all employees over the age of 21 who have completed nine months of employment are eligible for the plan. Such employees joining the plan may contribute, through salary deductions, no less than 1% nor greater than 50% of their annual compensation. The Company currently does not match contributions to the plan and recorded no charges for 401(k) contributions years ended December 31, 2015 and 2014.

F-20

12. Membership Interests

Classes of Membership Interests

We have two classes of membership interests: Class A Units and Class B Units, each of which is 100%-owned by its members. Holders of Class A Units are entitled to vote on any matter to be voted upon by our members. Except as provided by law, the holders of Class B Units do not have any right to vote. Holders of Class A Units or Class B Units have no redemption rights or conversion rights and do not benefit from any sinking fund.

Additional Capital Contributions

The members are not required to make any additional capital contributions to the Company. However, the members may make additional capital contributions to the Company at any time. During the years ended December 31, 2015 and 2014, no capital contributions were made to the Company.

Cash Available for Distribution

We have not in the past paid cash distributions on our membership interests. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash distributions in the foreseeable future. The terms of our current financing agreements preclude us, and any future financing agreements may preclude us, from paying any distributions. To the extent not prohibited by the terms of any financing agreement or applicable law, however, we may at some future date distribute available cash to our members.

Restrictions on Transfer

Our members generally are prohibited from transferring or encumbering our membership interests without the prior written consent of BREF HR Management or the holder of Class A Units. No transfer may be made unless certain general conditions are met, including that the transfer complies with applicable gaming regulations.

Distributions Upon Liquidation

We may be dissolved upon certain events, including at the election of the members. In the event of a dissolution, the cash proceeds from the liquidation, after payment of our liabilities, will be distributed to our members in accordance with their respective positive capital account balances as calculated under the LLC Agreement, subject to any necessary approvals from the Nevada Gaming Commission and/or the Nevada State Gaming Control Board.

13. Quarterly Financial Information (unaudited)

Quarterly financial information for the years ended December 31, 2015 and 2014 is summarized below:



	2015
($ in thousands)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Net revenues	$	48,085		$	54,697		$	45,982		$	45,035
Operating (loss) income	1,414			(295		)	(1,230		)	1,701
Loss before income taxes	(27,110		)	(29,268		)	(31,929		)	(31,224		)
Net loss	(27,110		)	(29,268		)	(31,929		)	(31,224		)



	2014
($ in thousands)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Net revenues	$	49,113		$	57,281		$	50,178		$	43,832
Operating income (loss)	1,612			3,951			(32		)	(1,874		)
Loss before income taxes	(23,663		)	(20,756		)	(28,361		)	(30,053		)
Net loss	(23,663		)	(20,756		)	(28,361		)	(30,053		)

F-21



EXHIBIT INDEX
EXHIBIT NUMBER		DESCRIPTION

2.1*		Agreement to Transfer in Lieu of Foreclosure and Settlement Agreement dated as of March 1, 2011 by and among HRHH Hotel/Casino, LLC, HRHH Development, LLC, HRHH Gaming, LLC, HRHH IP, LLC, HRHH Cafe, LLC, HRHH Gaming Senior Mezz, LLC, HRHH JV Senior Mezz, LLC, HRHH Gaming Junior Mezz, LLC, HRHH Junior Mezz Two, LLC, HRHH Gaming Junior Mezz Two, LLC, Hard Rock Hotel, Inc., Hard Rock Hotel Holdings, LLC, Morgans Group LLC, DLJ MB IV HRH, LLC, Morgans Hotel Group Management LLC, BREF HR, LLC, NRFC HRH Holdings, LLC, Vegas HR Private Limited and Brookfield Financial, LLC—Series B; previously filed as Exhibit 2.1 to the Company’s registration statement on Form 10 (File No. 000-54532) filed on October 24, 2011.

3.1*		Certificate of Formation, dated as of February 11, 2011, for BREF HR, LLC; previously filed as Exhibit 3.1 to the Company’s registration statement on Form 10 (File No. 000-54532) filed on October 24, 2011.

3.2*		Limited Liability Company Agreement, dated as of March 1, 2011, for BREF HR, LLC by BREF HR Management, LLC, Brookfield Financial, LLC – Series B, Michele A. Dreyer and Mary S. Stawikey; previously filed as Exhibit 3.2 to the Company’s registration statement on Form 10 (File No. 000-54532) filed on October 24, 2011.

10.1*		Fourth Amended and Restated Loan Agreement, dated as of March 1, 2011 by and among HRHH Hotel/Casino, LLC, HRHH Cafe, LLC, HRHH Development, LLC, HRHH IP, LLC, HRHH Gaming, LLC and Vegas HR Private Limited; previously filed as Exhibit 10.1 to the Company’s registration statement on Form 10 (File No. 000-54532) filed on October 24, 2011.

BREF HR, LLC 10-K