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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
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: 001-31458 
Drive Shack Inc.
(Exact name of registrant as specified in its charter)
Maryland 81-0559116
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
10670 N. Central Expressway, Suite 700, Dallas, TX
 75231
(Address of principal executive offices) (Zip Code)
(646) 585-5591
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbols(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareDS
New York Stock Exchange (NYSE)
9.75% Series B Cumulative Redeemable Preferred Stock, $0.01 par value per shareDS-PB
New York Stock Exchange (NYSE)
8.05% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per shareDS-PC
New York Stock Exchange (NYSE)
8.375% Series D Cumulative Redeemable Preferred Stock, $0.01 par value per shareDS-PD
New York Stock Exchange (NYSE)
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 S No £
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). S Yes   £ No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer £ Accelerated filer S Non-accelerated filer £ Smaller reporting company  Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No S
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date.
Common stock, $0.01 par value per share: 92,085,419 shares outstanding as of July 31, 2021.



CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, (i) the degree to which the pandemic ("COVID-19" or "coronavirus") may cause governmental restrictions on our operations, effect demand for leisure and entertainment services, impact our business relative to other businesses that compete with us and increase the costs of, and time to, open new venues, (ii) the adequacy of our cash flows from operations and available cash to meet our liquidity needs, including in the event of a prolonged re-closure of our venues, (iii) our ability to obtain additional financing and (iv) changes in our labor markets during the recovery period from the pandemic. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “forecast,” “predict,” “continue” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual outcome of future plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from forecasted results. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

our ability to avoid future closures of our venues;
factors impacting attendance, such as local conditions, contagious diseases, including COVID-19, and the availability of an effective vaccine, or the perceived threat of contagious diseases, disturbances, natural disasters, and terrorist activities;
regulations and guidance of federal, state and local governments and health officials regarding the response to the ongoing pandemic, including with respect to business operations, safety protocols and public gatherings;
our financial liquidity and ability to access capital;
the ability to retain and attract members and guests to our properties;
changes in global, national and local economic conditions, including, but not limited to, increases in unemployment levels, changes in consumer spending patterns, a prolonged economic slowdown and a downturn in the real estate market;
effects of unusual weather patterns and extreme weather events, geographical concentrations with respect to our operations and seasonality of our business;
competition within the industries in which we operate or may pursue additional investments, including competition for sites for our Entertainment Golf venues;
material increases in our expenses, including, but not limited to, unanticipated labor issues, rent or costs with respect to our workforce, and costs of goods, utilities and supplies;
our inability to sell or exit certain properties, and unforeseen changes to our ability to develop, redevelop or renovate certain properties;
our ability to further invest in our business and implement our strategies;
difficulty monetizing our real estate debt investments;
liabilities with respect to inadequate insurance coverage, accidents or injuries on our properties, adverse litigation judgments or settlements, or membership deposits;
changes to and failure to comply with relevant regulations and legislation, including in order to maintain certain licenses and permits, and environmental regulations in connection with our operations;
inability to execute on our growth and development strategy by successfully developing, opening and operating new venues;
impacts of any failures of our information technology and cybersecurity systems;
the impact of any current or further legal proceedings and regulatory investigations and inquiries; and
other risks detailed from time to time, particularly under the heading “Risk Factors” in this report, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, and in our subsequent filings with the Securities and Exchange Commission (the "SEC").

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The factors noted above could cause our actual results to differ significantly from those contained in any forward-looking statement.

Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our management’s views only as of the date of this report. We are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.



SPECIAL NOTE REGARDING EXHIBITS
 
In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Drive Shack Inc. (the “Company” or the “Registrant”) or the other parties to the agreements.  The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
 
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.  Additional information about the Company may be found elsewhere in this Quarterly Report on Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
 
The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this report not misleading.
 




DRIVE SHACK INC.  
FORM 10-Q
INDEX
PAGE
 
 
 
 
 
 



PART I.   FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

DRIVE SHACK INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
(unaudited)
June 30, 2021December 31, 2020
Assets
Current assets
Cash and cash equivalents$81,428 $47,786 
Restricted cash2,990 2,252 
Accounts receivable, net4,577 4,446 
Real estate securities, available-for-sale3,341 3,223 
Other current assets22,879 14,410 
Total current assets115,215 72,117 
Restricted cash, noncurrent1,027 795 
Property and equipment, net of accumulated depreciation171,126 169,425 
Operating lease right-of-use assets187,870 192,828 
Intangibles, net of accumulated amortization14,181 15,124 
Other assets6,420 6,765 
Total assets$495,839 $457,054 
Liabilities and Equity
Current liabilities
Obligations under finance leases$5,794 $6,470 
Membership deposit liabilities14,748 14,692 
Accounts payable and accrued expenses32,752 29,596 
Deferred revenue16,529 23,010 
Other current liabilities24,775 28,217 
Total current liabilities94,598 101,985 
Credit facilities and obligations under finance leases - noncurrent10,402 12,751 
Operating lease liabilities - noncurrent172,372 167,837 
Junior subordinated notes payable51,179 51,182 
Membership deposit liabilities, noncurrent103,859 99,862 
Deferred revenue, noncurrent10,224 9,953 
Other liabilities3,695 3,447 
Total liabilities$446,329 $447,017 
Commitments and contingencies
Equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 1,347,321 shares of 9.75% Series B Cumulative Redeemable Preferred Stock, 496,000 shares of 8.05% Series C Cumulative Redeemable Preferred Stock, and 620,000 shares of 8.375% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, issued and outstanding as of June 30, 2021 and December 31, 2020
$61,583 $61,583 
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 92,085,419 and 67,323,592 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively
921 673 
Additional paid-in capital3,233,269 3,178,704 
Accumulated deficit(3,247,589)(3,232,391)
Accumulated other comprehensive income1,326 1,468 
Total equity$49,510 $10,037 
Total liabilities and equity$495,839 $457,054 

See notes to Consolidated Financial Statements.
1


DRIVE SHACK INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(dollars in thousands, except share data)
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Revenues  
Golf operations$61,750 $29,675 $114,912 $78,300 
Sales of food and beverages12,129 2,425 20,059 14,935 
Total revenues73,879 32,100 134,971 93,235 
Operating costs
Operating expenses55,635 33,224 104,504 87,591 
Cost of sales - food and beverages3,151 829 5,255 4,484 
General and administrative expense8,028 6,368 16,012 16,186 
Depreciation and amortization5,784 6,682 12,029 13,476 
Pre-opening costs789 270 1,345 822 
(Gain) Loss on lease terminations and impairment(561)(3,125)2,648 (2,333)
Total operating costs72,826 44,248 141,793 120,226 
Operating income (loss)1,053 (12,148)(6,822)(26,991)
Other income (expenses)
Interest and investment income159 135 312 265 
Interest expense, net(2,713)(2,591)(5,339)(5,336)
Other income (loss), net(18)(24,422)(79)(24,055)
Total other income (expenses)(2,572)(26,878)(5,106)(29,126)
Loss before income tax(1,519)(39,026)(11,928)(56,117)
Income tax expense 450 500 945 771 
Net loss(1,969)(39,526)(12,873)(56,888)
Preferred dividends(1,395)(1,395)(2,790)(2,790)
Loss applicable to common stockholders$(3,364)$(40,921)$(15,663)$(59,678)
Loss applicable to common stock, per share  
Basic$(0.04)$(0.61)$(0.18)$(0.89)
Diluted$(0.04)$(0.61)$(0.18)$(0.89)
Weighted average number of shares of common stock outstanding  
Basic92,065,615 67,111,843 87,338,509 67,090,805 
Diluted92,065,615 67,111,843 87,338,509 67,090,805 

See notes to Consolidated Financial Statements.
2


DRIVE SHACK INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)
(dollars in thousands, except share data)
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net loss$(1,969)$(39,526)$(12,873)$(56,888)
Other comprehensive loss:  
Net unrealized gain (loss) on available-for-sale securities(66)(217)(142)(255)
Other comprehensive gain (loss)(66)(217)(142)(255)
Total comprehensive loss $(2,035)$(39,743)$(13,015)$(57,143)
Comprehensive loss attributable to Drive Shack Inc. stockholders’ equity$(2,035)$(39,743)$(13,015)$(57,143)
  
See notes to Consolidated Financial Statements.
3


DRIVE SHACK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(dollars in thousands, except share data)
Drive Shack Inc. Stockholders
 Preferred StockCommon Stock
 SharesAmountSharesAmountAdditional Paid-
in Capital
Accumulated
Deficit
Accumulated Other Comp.
Income
Total Equity (Deficit)
Equity (deficit) - December 31, 20202,463,321 $61,583 67,323,592 $673 $3,178,704 $(3,232,391)$1,468 $10,037 
Dividends declared— — — — — (930)— (930)
Stock-based compensation— — — — 350 — — 350 
Shares issued from options and restricted stock units— — 745,881 7 (7)— —  
Shares issued from equity raise— — 23,958,333 239 53,666 — — 53,905 
Comprehensive income (loss)
Net loss— — — — — (10,904)— (10,904)
Other comprehensive loss— — — — — — (76)(76)
Total comprehensive loss(10,980)
Equity (deficit) - March 31, 20212,463,321 $61,583 92,027,806 $919 $3,232,713 $(3,244,225)$1,392 $52,382 
Dividends declared— $— — $— $— $(1,395)$— $(1,395)
Stock-based compensation— $— — $2 $556 $— $— $558 
Shares issued from options and restricted stock units— $— 57,613 $— $— $— $— $— 
Comprehensive income (loss)
Net loss— $— — $— $— $(1,969)$— $(1,969)
Other comprehensive income— $— — $— $— $— $(66)$(66)
Total comprehensive loss$(2,035)
Equity (deficit) - June 30, 20212,463,321 $61,583 92,085,419 $921 $3,233,269 $(3,247,589)$1,326 $49,510 
Equity (deficit) - December 31, 20192,463,321 $61,583 67,068,751 $671 $3,177,183 $(3,175,572)$1,710 $65,575 
Dividends declared— — — — — (465)— (465)
Stock-based compensation— — — — 201 — — 201 
Shares issued from restricted stock units— — 1,762 — — — — 
Comprehensive income (loss)
Net loss— — — — — (17,362)— (17,362)
Other comprehensive income— — — — — — (38)(38)
Total comprehensive loss(17,400)
Equity (deficit) - March 31, 20202,463,321 $61,583 $67,070,513 $671 $3,177,384 $(3,193,399)$1,672 $47,911 
Stock-based compensation— — — — 500 — — 500 
Shares issued from restricted stock units— — 141,849 1 (1)— —  
Comprehensive income (loss)
Net loss— — — — — (39,526)— (39,526)
Other comprehensive income— — — — — — (217)(217)
Total comprehensive loss(39,743)
Equity (deficit) - June 30, 20202,463,321 $61,583 67,212,362 $672 $3,177,883 $(3,232,925)$1,455 $8,668 


See notes to Consolidated Financial Statements.
4



DRIVE SHACK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(dollars in thousands, except share data)
 Six Months Ended June 30,
 20212020
Cash Flows From Operating Activities  
Net loss(12,873)(56,888)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization12,029 13,476 
Amortization of discount and premium(262)(193)
Other amortization4,126 3,823 
Amortization of revenue on golf membership deposit liabilities(1,101)(746)
Amortization of prepaid golf membership dues(9,726)(3,451)
Non-cash operating lease expense2,161 6,333 
Stock-based compensation906 700 
(Gain) Loss on lease terminations and impairment2,648 (2,783)
Equity in earnings, net of impairment from equity method investments 24,020 
Other losses, net143 164 
Change in:
Accounts receivable, net, other current assets and other assets - noncurrent(6,522)4,235 
Accounts payable and accrued expenses, deferred revenue, other current liabilities and other liabilities - noncurrent8,939 5,625 
Net cash used in operating activities468 (5,685)
Cash Flows From Investing Activities  
Proceeds from sale of property and equipment 73 
Acquisition and additions of property and equipment and intangibles(16,139)(7,702)
Net cash used in investing activities(16,139)(7,629)
Cash Flows From Financing Activities
Repayments of debt obligations(3,082)(2,068)
Golf membership deposits received1,325 878 
Proceeds from issuance of common stock53,905  
Preferred stock dividends paid(1,395)(1,395)
Other financing activities(470)(186)
Net cash provided by (used in) financing activities50,283 (2,771)
Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Restricted Cash, noncurrent34,612 (16,085)
Cash and Cash Equivalents, Restricted Cash and Restricted Cash, noncurrent, Beginning of Period50,833 31,964 
Cash and Cash Equivalents, Restricted Cash and Restricted Cash, noncurrent, End of Period$85,445 $15,879 
Supplemental Schedule of Non-Cash Investing and Financing Activities
Preferred stock dividends declared but not paid$930 $ 
Additions to finance lease assets and liabilities$495 $1,028 
(Decreases)/increases in accounts payable and accrued expenses related to the purchase of property and equipment$(2,688)$4,192 
Additions for Right of Use Assets and Liabilities$7,002 $659 
Cash paid during the period for interest expense$1,552 $1,711 
Cash paid during the period for income taxes$1,489 $— 

See notes to Consolidated Financial Statements.
5

DRIVE SHACK INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
JUNE 30, 2021
(dollars in tables in thousands, except share data)

1. ORGANIZATION
Drive Shack Inc., a Maryland corporation, was formed in 2002, and its common stock is traded on the NYSE under the symbol “DS.” Drive Shack Inc., together with its subsidiaries, is referenced herein as "Drive Shack Inc.", "the Company", "we", or "our". The Company owns and operates golf-related leisure and entertainment venues and courses focused on bringing people together through competitive socializing, by combining sports and entertainment with elevated food and beverage ("F&B") offerings. The Company conducts its business through the following segments: (i) Entertainment Golf, (ii) Traditional Golf and (iii) corporate. For a further discussion of the reportable segments, see Note 4.
As of June 30, 2021, the Company's Entertainment Golf segment was comprised of four owned or leased entertainment golf venues across three states with locations in Orlando, Florida; West Palm Beach, Florida; Raleigh, North Carolina; and Richmond, Virginia. This segment also includes the Company's newest entertainment golf brand currently under development, Puttery. The first Puttery venue, which is located north of Dallas in The Colony, Texas, is expected to open in late August 2021 and its second venue located in Charlotte, North Carolina is expected to open in Q4 2021. The Company has announced three additional Puttery venues located in Washington DC, Miami, Florida and Houston, Texas; all of which are currently in development. Two additional locations are currently in or nearing lease execution.
The Company’s Traditional Golf segment is one of the largest operators of traditional golf properties in the United States. As of June 30, 2021, the Company owned, leased or managed 56 traditional golf properties across nine states.
In March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (“COVID-19”). In response to the rapid spread of COVID-19, authorities around the world implemented numerous measures to contain the virus, such as travel bans and restrictions, quarantines, "stay-at-home" or "shelter-in-place" orders and business shutdowns. Many jurisdictions in which we operate required mandatory store closures or imposed capacity limitations and other restrictions affecting our operations. As a result, during March 2020, we temporarily closed all of our Entertainment Golf venues and substantially all of our Traditional Golf courses and furloughed a substantial majority of our employees. In response to the uncertainty caused by the pandemic, we took several actions after we suspended operations to preserve our liquidity position and prepare for multiple contingencies.

Following the temporary closure of our venues in March 2020 in response to the COVID-19 pandemic, three of our four Drive Shack Entertainment Golf venues and all of our Traditional Golf properties were reopened by the end of the second quarter, subject to locally mandated capacity limitations and operational restrictions. Our Entertainment Golf venue in Orlando, Florida re-opened in December 2020. Restrictions on large group gatherings were in effect in the majority of the jurisdictions in which we operate, which resulted in the postponement or cancellation of events, banquets, and other large group gatherings. By April of this year the CDC lifted restrictions on group events and our business began to return to normal.

These developments had a material adverse impact on Company revenues, results of operations and cash flows in historical periods, and the Company believes that the risk of further negative effects is not insignificant, as of the date of this Quarterly Report on Form 10-Q, subject to the degree to which the pandemic subsides, intensifies or maintains the current status quo.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation The accompanying Consolidated Financial Statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under U.S. generally accepted accounting principles, or GAAP, have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These financial statements should be read in conjunction with the Company’s Consolidated Financial Statements for the year ended December 31, 2020 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2021. Capitalized terms used herein, and not otherwise defined, are defined in the Company’s Consolidated Financial Statements for the year ended December 31, 2020. There have been no
6

DRIVE SHACK INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 2021
(dollars in tables in thousands, except share data)
significant changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

The Company’s significant accounting policies for these financial statements as of June 30, 2021 are summarized below and should be read in conjunction with the Summary of Significant Accounting Policies detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates – Our estimates are based on information available to management at the time of preparation of the Consolidated Financial Statements, including the result of historical analysis, our understanding and experience of the Company’s operations, our knowledge of the industry and market-participant data available to us. Actual results have historically been in line with management’s estimates and judgments used in applying each of the accounting policies and management periodically re-evaluates accounting estimates and assumptions. Actual results could differ from these estimates and materially impact our Consolidated Financial Statements. However, the Company does not expect our assessments and assumptions to materially change in the future.

Real Estate, Held-for-Sale Long-lived assets to be disposed of by sale, which meet certain criteria, are reclassified to real estate held-for-sale and measured at the lower of their carrying amount or fair value less costs to sell. The Company suspends depreciation and amortization for assets held-for-sale. Subsequent changes to the estimated fair value less costs to sell could impact the measurement of assets held-for-sale. Decreases below carrying value are recognized as an impairment loss and recorded in "(Gain) Loss on lease terminations and impairment" on the Consolidated Statements of Operations. To the extent the fair value increases, any previously reported impairment is reversed to the extent of the impairment taken.

On March 7, 2018, the Company announced it was actively pursuing the sale of 26 owned Traditional Golf properties in order to generate capital for reinvestment in the Entertainment Golf business. On October 16, 2020, the Company completed the sale of that remaining held-for-sale Traditional Golf property for a sale price of $34.5 million and received net cash proceeds of approximately $33.6 million. As of June 30, 2021, the Company does not have any properties classified as held-for-sale.

Leasing Arrangements The Company evaluates at lease inception whether an arrangement is or contains a lease by providing the Company with the right to control an asset. Operating leases are accounted for on balance sheet with the Right of Use (“ROU”) assets and lease liabilities recognized in "Operating lease right-of-use assets," "Other current liabilities" and "Operating lease liabilities - noncurrent" in the Consolidated Balance Sheets. Finance lease ROU assets, current lease liabilities and noncurrent lease liabilities are recognized in "Property and equipment, net of accumulated depreciation," and "Obligations under finance leases" and "Credit facilities and obligations under finance leases - noncurrent" in the Consolidated Balance Sheets, respectively.

All lease liabilities are measured at the present value of the associated payments, discounted using the Company’s incremental borrowing rate determined using a portfolio approach based on the rate of interest that the Company would pay to borrow an amount equal to the lease payments for a similar term and in a similar economic environment on a collateralized basis. ROU assets, for both operating and finance leases, are initially measured based on the lease liability, adjusted for initial direct costs, prepaid rent, and lease incentives received. Operating leases are subsequently amortized into lease cost on a straight-line basis. Depreciation of the finance lease ROU assets is subsequently calculated using the straight-line method over the shorter of the estimated useful lives or the expected lease terms and recorded in "Depreciation and amortization" on the Consolidated Statements of Operations.

In addition to the fixed minimum payments required under the lease arrangements, certain leases require variable lease payments, which are payment of the excess of various percentages of gross revenue or net operating income over the minimum rental payments as well as payment of taxes assessed against the leased property. The leases generally also require the payment for the cost of insurance and maintenance. Variable lease payments are recognized when the associated activity occurs and contingency is resolved.

The Company has elected to combine lease and non-lease components for all lease contracts.

Other Investments The Company owns an approximately 22% economic interest in a limited liability company which owns preferred equity in a commercial real estate project. The Company accounts for this investment as an equity method investment. The Company evaluates its equity method investment for other-than-temporary impairment whenever events or changes in
7

DRIVE SHACK INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 2021
(dollars in tables in thousands, except share data)
circumstances indicate that the carrying amount of the investment might not be recoverable. The evaluation of recoverability is based on management’s assessment of the financial condition and near-term prospects of the commercial real estate project, the length of time and the extent to which the market value of the investment has been less than cost, availability and cost of financing, demand for space, competition for tenants, changes in market rental rates, and operating results. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the values estimated by management in its recoverability analyses may not be realized, and actual losses or impairment may be realized in the future. As the fair value inputs utilized are unobservable, the Company determined that the significant inputs used to value this real estate investment fall within Level 3 for fair value reporting.

The operations and ongoing construction at the commercial real estate project halted due to the COVID-19 pandemic in mid-March 2020 and the Company recorded an other-than-temporary impairment charge of $24.7 million during the three months ended June 30, 2020. The other-than-temporary impairment charge was recorded in "Other income (loss), net" on the Consolidated Statements of Operations. The property reopened to the public with additional entertainment venues and retail shops in October 2020 while following COVID-19 related operational restrictions and capacity limitations, and implementing social distancing measures. However, the ability of the commercial real estate project to obtain additional funding to complete the construction and attain the financial results needed to recover any of our investment remains highly uncertain. The carrying value of the investment was zero as of both June 30, 2021, and December 31, 2020.

Impairment of Long-lived Assets The Company periodically reviews the carrying amounts of its long-lived assets, including real estate held-for-use and held-for-sale, as well as finite-lived intangible assets and right-of-use assets, to determine whether current events or circumstances indicate that such carrying amounts may not be recoverable. The assessment of recoverability is based on management’s estimates by comparing the sum of the estimated undiscounted cash flows generated by the underlying asset, or other appropriate grouping of assets, to its carrying value to determine whether an impairment existed at its lowest level of identifiable cash flows. If the carrying amount is greater than the expected undiscounted cash flows, the asset is considered impaired and an impairment is recognized to the extent the carrying value of such asset exceeds its fair value. The Company generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows using an appropriate discount rate.

Cash and Cash Equivalents and Restricted Cash — The Company considers all highly liquid short-term investments with maturities of 90 days or less when purchased to be cash equivalents. Substantially all amounts on deposit with major financial institutions exceed insured limits. The Company has not experienced any losses in the accounts and believe that the Company is
not exposed to significant credit risk because the accounts are at major financial institutions. Restricted cash is required primarily for construction in progress, letters of credit, and credit card processing.

The following table summarizes the Company's Cash and Cash Equivalents, Restricted Cash and Restricted Cash, noncurrent:

June 30, 2021December 31, 2020June 30, 2020December 31, 2019
Cash and cash equivalents$81,428 47,786 12,638 28,423 
Restricted cash2,990 2,252 2,974 3,103 
Restricted cash, noncurrent1,027 795 267 438 
Total Cash and cash equivalents, Restricted cash and Restricted cash, noncurrent$85,445 $50,833 $15,879 $31,964 

Accounts Receivable, Net — Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts of $0.8 million and $0.9 million as of June 30, 2021 and December 31, 2020, respectively. The allowance for doubtful accounts is based upon several factors including the length of time the receivables are past due, historical payment trends, current economic factors, and our expectations of future events that affect collectability. Collateral is generally not required.

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DRIVE SHACK INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 2021
(dollars in tables in thousands, except share data)
Other Current Assets — The following table summarizes the Company's other current assets:
June 30, 2021December 31, 2020
Managed property receivables$8,420 $3,236 
Prepaid expenses3,442 3,158 
Deposits1,223 767 
Inventory1,953 1,950 
Construction in progress receivables2,158 1,839 
Miscellaneous current assets, net5,683 3,460 
Other current assets$22,879 $14,410 
Other Assets — The following table summarizes the Company's other assets:
June 30, 2021December 31, 2020
Prepaid expenses$1,023 $2,154 
Deposits3,444 2,504 
Miscellaneous assets, net1,953 2,107 
Other assets$6,420 $6,765 

Other Current Liabilities — The following table summarizes the Company's other current liabilities:
June 30, 2021December 31, 2020
Operating lease liabilities$17,624 $19,894 
Accrued rent2,967 4,318 
Dividends payable930  
Miscellaneous current liabilities3,254 4,005 
Other current liabilities$24,775 $28,217 

Membership Deposit Liabilities - Private country club members in our Traditional Golf business generally pay an advance initiation fee deposit upon their acceptance as members to their respective country clubs. Initiation fee deposits are refundable 30 years after the date of acceptance as a member. The difference between the initiation fee deposit paid by the member and the present value of the refund obligation is deferred and recognized into Golf operations revenue in the Consolidated Statements of Operations on a straight-line basis over the expected life of an active membership, which is estimated to be seven years. See Note 3. Revenues. The present value of the refund obligation is recorded as a membership deposit liability in the Consolidated Balance Sheets and accretes over a 30-year nonrefundable term using the effective interest method. This accretion is recorded as interest expense in the Consolidated Statements of Operations.

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DRIVE SHACK INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 2021
(dollars in tables in thousands, except share data)
Other Income (Loss), Net — These items are comprised of the following:
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Collateral management fee income, net$48 $66 $104 $138 
Equity in earnings, net of impairment from equity method investments (24,365) (24,020)
Gain (loss) on sale of long-lived assets and intangibles(49) (64) 
Gain (loss) on sale of traditional golf properties (102) (54)
Other (loss) income(17)(21)(119)(119)
Other income (loss), net$(18)$(24,422)$(79)$(24,055)

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. The effective date of the standard is for annual periods beginning after December 15, 2020, with early adoption permitted. The various amendments in the standard are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment. The Company adopted ASU 2019-12 as of the fiscal year beginning January 1, 2021. The adoption of ASU 2019-12 had no material impact on the Company's financial statements.

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DRIVE SHACK INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 2021
(dollars in tables in thousands, except share data)
3. REVENUES

The majority of the Company’s revenue is recognized at the time of sale to customers at the Company’s Entertainment Golf venues and Traditional Golf properties, including green fees, cart rentals, bay play, events and sales of food, beverages and merchandise. Revenue from membership dues is recognized in the month earned. Membership dues received in advance are included in deferred revenue and recognized as revenue ratably over the appropriate period, which is generally twelve months or less for private club members and the following month for The Players Club members.

Private country club members in our Traditional Golf business generally pay an advance initiation fee deposit upon their acceptance as members to their respective country clubs. Initiation fee deposits are refundable 30 years after the date of acceptance as a member. The difference between the initiation fee deposit paid by the member and the present value of the refund obligation is deferred and recognized into Golf operations revenue in the Consolidated Statements of Operations on a straight-line basis over the expected life of an active membership, which is estimated to be seven years. See Note 2. Summary of Significant Accounting Policies - Membership Deposit Liabilities.

Virtually all of the Company’s revenues are generated within the Entertainment Golf and Traditional Golf segments. The following tables disaggregate revenue by category: entertainment golf venues, public and private golf properties (owned and leased) and managed golf properties.
Three Months Ended June 30, 2021Six Months Ended June 30, 2021
Ent. golf venuesPublic golf propertiesPrivate golf propertiesManaged golf properties (A)TotalEnt. golf venuesPublic golf propertiesPrivate golf propertiesManaged golf properties (A)Total
Golf operations$5,316 $28,693 $12,323 $15,418 $61,750 $8,737 $47,866 $27,042 $31,267 $114,912 
Sales of food and beverages6,273 3,994 1,862  12,129 11,075 5,849 3,135  20,059 
Total revenues$11,589 $32,687 $14,185 $15,418 $73,879 $19,812 $53,715 $30,177 $31,267 $134,971 
Three Months Ended June 30, 2020Six Months Ended June 30, 2020
Ent. golf venuesPublic golf propertiesPrivate golf propertiesManaged golf properties (A)TotalEnt. golf venuesPublic golf propertiesPrivate golf propertiesManaged golf properties (A)Total
Golf operations$762 $13,035 $6,507 $9,371 $29,675 $4,672 $29,058 $20,161 $24,409 $78,300 
Sales of food and beverages1,028 910 487  2,425 7,235 5,195 2,505  14,935 
Total revenues$1,790 $13,945 $6,994 $9,371 $32,100 $11,907 $34,253 $22,666 $24,409 $93,235 
(A)Includes $12.9 million and $26.7 million for the three and six months ended June 30, 2021, as well as $8.5 million and $21.8 million for the three and six months ended June 30, 2020, respectively, related to management contract reimbursements reported under ASC 606 - Revenue Recognition.

4. SEGMENT REPORTING
 
The Company currently has three reportable segments: (i) Entertainment Golf, (ii) Traditional Golf and (iii) corporate. The Company has determined that its chief operating decision maker (“CODM”) is the chief executive officer and president, who reviews discrete financial information, including resource allocation and performance assessment, for each reportable segment to manage the Company.

The Company's Entertainment Golf segment, launched in 2018, is comprised of Drive Shack venues that feature tech-enabled hitting bays with in-bay dining, full-service restaurants, bars, and event spaces. It is also comprised of Puttery, the Company’s newest competitive socializing and entertainment platform. Puttery is a smaller venue format featuring technology-enabled indoor putting golf courses, F&B offerings, multiple bars, lounges, and VIP spaces. As of June 30, 2021, the Company operated four Drive Shack venues across three states which are located in Orlando, Florida; West Palm Beach, Florida; Raleigh, North Carolina; and Richmond, Virginia. The Company expects its first two venues to debut in Dallas and Charlotte in 2021.
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DRIVE SHACK INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 2021
(dollars in tables in thousands, except share data)

The Company's Traditional Golf business is one of the largest operators of golf courses and country clubs in the United States. As of June 30, 2021, the Company owned, leased or managed 56 Traditional Golf properties across nine states. . Following the close of business on March 31, 2021, management agreements expired for the Lomas Santa Fe Country Club, Tustin Ranch Golf Club, and Yorba Linda Country Club, reducing the total number of courses managed in our traditional golf business to 22. On May 5, 2021, the SeaCliff Country Club lease expired, reducing the total number of leased or owned courses to 34. The total annual revenue generated by the four properties during the fiscal year ended December 31, 2020 and the quarter ended March 31, 2021 was $22.4 million and $6.6 million, respectively. The total revenue generated by SeaCliff for the quarter ended June 30, 2021 was not material.

The corporate segment consists primarily of investments in loans and securities, interest income on short-term investments, general and administrative expenses as a public company, interest expense on the junior subordinated notes payable (Note 8) and income tax expense (Note 14).

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DRIVE SHACK INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 2021
(dollars in tables in thousands, except share data)
Summary financial data on the Company’s segments is given below, together with a reconciliation to the same data for the Company as a whole:
Six Months Ended June 30, 2021Entertainment GolfTraditional GolfCorporateTotal
Revenues
Golf operations$8,737 $106,175 $