ds-20210930

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 September 30, 2021


☐			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 class	Trading Symbols(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	DS	New York Stock Exchange (NYSE)
9.75% Series B Cumulative Redeemable Preferred Stock, $0.01 par value per share	DS-PB	New York Stock Exchange (NYSE)
8.05% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share	DS-PC	New York Stock Exchange (NYSE)
8.375% Series D Cumulative Redeemable Preferred Stock, $0.01 par value per share	DS-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: 92,093,425 shares outstanding as of October 31, 2021.

DRIVE SHACK INC.

FORM 10-Q

INDEX


		PAGE
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	1
	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2021 and 2020	2
	Consolidated Statements of Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2021 and 2020	3
	Consolidated Statements of Changes in Equity (unaudited) for the three and nine months ended September 30, 2021 and 2020	4
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2021 and 2020	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	42
SIGNATURES		43

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DRIVE SHACK INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)


	(unaudited)
	September 30, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	63,867	$	47,786
Restricted cash	3,442		2,252
Accounts receivable, net	4,084		4,446

Real estate securities, available-for-sale	3,414		3,223
Other current assets	28,605		14,410
Total current assets	103,412		72,117
Restricted cash, noncurrent	709		795
Property and equipment, net of accumulated depreciation	174,616		169,425
Operating lease right-of-use assets	186,220		192,828
Intangibles, net of accumulated amortization	13,767		15,124

Other assets	5,752		6,765
Total assets	$	484,476	$	457,054

Liabilities and Equity
Current liabilities
Obligations under finance leases	$	5,638	$	6,470
Membership deposit liabilities	17,978		14,692
Accounts payable and accrued expenses	33,812		29,596
Deferred revenue	13,086		23,010

Other current liabilities	20,744		28,217
Total current liabilities	91,258		101,985
Credit facilities and obligations under finance leases - noncurrent	9,997		12,751
Operating lease liabilities - noncurrent	174,776		167,837
Junior subordinated notes payable	51,177		51,182
Membership deposit liabilities, noncurrent	102,521		99,862
Deferred revenue, noncurrent	10,555		9,953
Other liabilities	3,377		3,447
Total liabilities	$	443,661	$	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 September 30, 2021 and December 31, 2020	$	61,583	$	61,583
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 92,086,727 and 67,323,592 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	921		673
Additional paid-in capital	3,233,866		3,178,704
Accumulated deficit	(3,257,835)		(3,232,391)
Accumulated other comprehensive income	1,254		1,468
Total equity of the company	$	39,789	$	10,037
Noncontrolling interest	1,026		—
Total equity	$	40,815	$	10,037
Total liabilities and equity	$	484,476	$	457,054

See notes to Consolidated Financial Statements.

DRIVE SHACK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(Dollars in thousands, except share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues
Golf operations	$	62,257	$	58,766	$	177,170	$	137,066
Sales of food and beverages	14,109		7,699		34,167		22,634
Total revenues	76,366		66,465		211,337		159,700

Operating costs
Operating expenses	60,729		54,993		165,234		142,584
Cost of sales - food and beverages	3,696		2,170		8,951		6,654
General and administrative expense	9,685		7,916		25,697		24,102
Depreciation and amortization	5,823		6,853		17,852		20,329
Pre-opening costs	2,030		227		3,375		1,049
(Gain) Loss on lease terminations and impairment	324		302		2,972		(2,031)

Total operating costs	82,287		72,461		224,081		192,687
Operating income (loss)	(5,921)		(5,996)		(12,744)		(32,987)

Other income (expenses)
Interest and investment income	190		135		502		400
Interest expense, net	(2,626)		(2,896)		(7,964)		(8,232)
Other income (loss), net	107		(157)		29		(24,212)
Total other income (expenses)	(2,329)		(2,918)		(7,433)		(32,044)
Loss before income tax	(8,250)		(8,914)		(20,177)		(65,031)
Income tax expense	616		498		1,562		1,269
Consolidated net loss	(8,866)		(9,412)		(21,739)		(66,300)
Less: net loss attributable to noncontrolling interest	(15)		—		(15)		—
Net loss attributable to the Company	(8,851)		(9,412)		(21,724)		(66,300)
Preferred dividends	(1,395)		(1,395)		(4,185)		(4,185)
Loss applicable to common stockholders	$	(10,246)	$	(10,807)	$	(25,909)	$	(70,485)

Loss applicable to common stock, per share
Basic	$	(0.11)	$	(0.16)	$	(0.29)	$	(1.05)
Diluted	$	(0.11)	$	(0.16)	$	(0.29)	$	(1.05)

Weighted average number of shares of common stock outstanding
Basic	92,085,846		67,212,532		88,938,344		67,131,827
Diluted	92,085,846		67,212,532		88,938,344		67,131,827

See notes to Consolidated Financial Statements.

DRIVE SHACK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)

(Dollars in thousands, except share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net loss	$	(8,866)	$	(9,412)	$	(21,739)	$	(66,300)
Other comprehensive loss:
Net unrealized gain (loss) on available-for-sale securities	(72)		(67)		(214)		(322)
Other comprehensive gain (loss)	(72)		(67)		(214)		(322)
Total comprehensive loss	$	(8,938)	$	(9,479)	$	(21,953)	$	(66,622)
Comprehensive loss attributable to noncontrolling interest	(15)		—		(15)		—
Comprehensive loss attributable to the Company	$	(8,923)	$	(9,479)	$	(21,938)	$	(66,622)

See notes to Consolidated Financial Statements.

DRIVE SHACK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Dollars in thousands, except share data)


	Drive Shack Inc. Stockholders
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid- in Capital		Accumulated Deficit		Accumulated Other Comp. Income (loss)		Noncontrolling Interest		Total Equity (Deficit)
Equity (deficit) - December 31, 2020	2,463,321	$	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, 2021	2,463,321	$	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, 2021	2,463,321	$	61,583	92,085,419	$	921	$	3,233,269	$	(3,247,589)	$	1,326	$	—	$	49,510
Dividends declared	—	—		—	—		—		(1,395)		—		—		(1,395)
Stock-based compensation	—	—		—	—		597		—		—		—		597
Shares issued from restricted stock units	—	—			—		—		—		—		—		—
Contributed Capital													1,041		1,041
Comprehensive income (loss)
Net loss	—	—		—	—		—		(8,851)		—		(15)		(8,866)
Other comprehensive income	—	—		—	—		—		—		(72)		—		(72)
Total comprehensive loss															(8,938)
Equity (deficit) - September 30, 2021	2,463,321	$	61,583	92,085,419	$	921	$	3,233,866	$	(3,257,835)	$	1,254	$	1,026	$	40,815




Equity (deficit) - December 31, 2019	2,463,321	$	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, 2020	2,463,321	$	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, 2020	2,463,321	$	61,583	67,212,362	$	672	$	3,177,883	$	(3,232,925)	$	1,455	$	—	$	8,668
Dividends declared	—	—		—	—		—		—		—		—		—
Stock-based compensation	—	—		—	—		436		—		—		—		436
Shares issued from restricted stock units (directors)	—	—		15,582	—		—		—		—		—		—
Comprehensive income (loss)
Net loss	—	—		—	—		—		(9,412)		—		—		(9,412)
Other comprehensive loss	—	—		—	—		—		—		(67)		—		(67)
Total comprehensive loss													—		(9,479)
Equity (deficit) - September 30, 2020	2,463,321	$	61,583	67,227,944	$	672	$	3,178,319	$	(3,242,337)	$	1,388	$	—	$	(375)

See notes to Consolidated Financial Statements.

DRIVE SHACK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Dollars in thousands, except share data)


	Nine Months Ended September 30,
	2021		2020
Cash Flows From Operating Activities
Net loss	$	(21,739)	$	(66,300)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	17,852		20,329
Amortization of discount and premium	(409)		(304)
Other amortization	6,092		6,135
Amortization of revenue on golf membership deposit liabilities	(1,642)		(1,173)
Amortization of prepaid golf membership dues	(12,646)		(9,556)
Non-cash operating lease expense	3,157		7,636
Stock-based compensation	1,504		1,137
(Gain) Loss on lease terminations and impairment	2,972		(2,681)
Equity in earnings, net of impairment from equity method investments	—		24,020
Other losses, net	119		390


Change in:
Accounts receivable, net, other current assets and other assets - noncurrent	(8,271)		3,614
Accounts payable and accrued expenses, deferred revenue, other current liabilities and other liabilities - noncurrent	5,141		14,452
Net cash used in operating activities	(7,870)		(2,301)
Cash Flows From Investing Activities
Proceeds from sale of property and equipment	—		(74)
Acquisition and additions of property and equipment and intangibles	(22,251)		(9,607)

Net cash used in investing activities	(22,251)		(9,681)
Cash Flows From Financing Activities
Repayments of debt obligations	(4,620)		(3,849)
Golf membership deposits received	1,484		2,241
Proceeds from issuance of common stock	53,905		—
Preferred stock dividends paid	(2,790)		(1,395)
Other financing activities	(673)		(475)
Net cash provided by (used in) financing activities	47,306		(3,478)
Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Restricted Cash, noncurrent	17,185		(15,460)
Cash and Cash Equivalents, Restricted Cash and Restricted Cash, noncurrent, Beginning of Period	50,833		31,964
Cash and Cash Equivalents, Restricted Cash and Restricted Cash, noncurrent, End of Period	$	68,018	$	16,504



Supplemental Schedule of Non-Cash Investing and Financing Activities
Preferred stock dividends declared but not paid	$	930	$	—
Additions to finance lease assets and liabilities	$	1,670	$	4,030
Capital contribution	$	1,041	$	—
(Decreases)/increases in accounts payable and accrued expenses related to the purchase of property and equipment	$	(620)	$	2,555
Additions for operating right of use assets and liabilities	$	9,862	$	—
Cash paid during the period for interest expense	$	2,165	$	—
Cash paid during the period for income taxes	$	1,489	$	—

See notes to Consolidated Financial Statements.

DRIVE SHACK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

SEPTEMBER 30, 2021

(Dollars in tables in thousands, except share data)

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 September 30, 2021, the Company's entertainment golf segment was comprised of five owned or leased entertainment golf venues across four states with locations in Florida, North Carolina, Texas and Virginia.

The Company’s traditional golf segment is one of the largest operators of traditional golf properties in the United States. As of September 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 2020, 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 Centers for Disease Control and Prevention lifted restrictions on group events and our business has begun 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.

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. The portions of equity in consolidated subsidiaries that are not attributable, directly or indirectly, to us are presented as noncontrolling interest. All significant intercompany accounts and transactions have been eliminated. 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 Securities and Exchange Commission (the "SEC") on March 16, 2021.

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.

DRIVE SHACK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

SEPTEMBER 30, 2021

(Dollars in tables in thousands, except share data)

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 the balance sheet with the Right of Use (“ROU”) assets and lease liabilities are 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 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.

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:


	September 30, 2021		December 31, 2020
Cash and cash equivalents	$	63,867	47,786
Restricted cash	3,442		2,252
Restricted cash, noncurrent	709		795
Total Cash and cash equivalents, Restricted cash and Restricted cash, noncurrent	$	68,018	$	50,833

DRIVE SHACK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

SEPTEMBER 30, 2021

(Dollars in tables in thousands, except share data)

Accounts Receivable, Net — Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts of $0.9 million as of September 30, 2021 and December 31, 2020. 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.

Other Current Assets — The following table summarizes the Company's other current assets:


	September 30, 2021		December 31, 2020
Managed property receivables	$	18,739	$	3,236
Prepaid expenses	2,938		3,158
Deposits	1,502		767
Inventory	2,106		1,950
Construction in progress receivables	2,279		1,839
Miscellaneous current assets, net	1,041		3,460
Other current assets	$	28,605	$	14,410

Other Assets — The following table summarizes the Company's other assets:


	September 30, 2021		December 31, 2020
Prepaid expenses	$	1,373	$	2,154
Deposits	3,442		2,504
Miscellaneous assets, net	937		2,107
Other assets	$	5,752	$	6,765

Other Current Liabilities — The following table summarizes the Company's other current liabilities:


	September 30, 2021		December 31, 2020

Operating lease liabilities	$	16,294	$	19,894
Accrued rent	—		4,318
Dividends payable	930		—
Miscellaneous current liabilities	3,520		4,005
Other current liabilities	$	20,744	$	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 2. 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.

DRIVE SHACK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

SEPTEMBER 30, 2021

(Dollars in tables in thousands, except share data)

Other Income (Loss), Net — These items are comprised of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020




Collateral management fee income, net	$	46	$	62	$	148	$	199
Equity in earnings, net of impairment from equity method investments	—		—		—		(24,020)

Gain (loss) on sale of long-lived assets and intangibles	—		—		(64)		—
Gain (loss) on sale of traditional golf properties	—		(9)		—		(63)
Other (loss) income	61		(210)		(55)		(328)
Other income (loss), net	$	107	$	(157)	$	29	$	(24,212)

Noncontrolling Interest - On July 12, 2021, the Company entered into an investment agreement among the Company and Symphony Ventures, which we refer to as Symphony, a company organized under the laws of Ireland, in which the Company agreed to sell to Symphony 10% of the partnership interests in each of the wholly owned subsidiary limited partnerships, which we refer to as “SLPs”, formed by the Company to hold each of the Company’s Puttery venues, in exchange for an amount in cash equal to 10% of the total cost to build the Puttery venue owned by such SLP. Symphony’s purchase price in each such SLP will be fully committed on the date the certificate of occupancy for the Puttery venue is received, up to a total commitment of $10 million. Currently the Company and Symphony are party to one SLP, for the Puttery location in Dallas, Texas. We control through a wholly owned subsidiary all general partnership interests and 90% of the limited partnership interests in the SLP, thus retaining all rights, powers and authority that govern the partnership and, as a result, we consolidate the financial results of this SLP, and report the noncontrolling interest representing the economic interest in the SLP held by Symphony. In exchange for its purchase of limited partnership interests in the SLP, Symphony agreed to pay cash consideration of $1,041,000 on or after November 11, 2021. No fees or other discounts or commissions are payable to underwriters or other entities in connection with the foregoing.

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.

DRIVE SHACK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

SEPTEMBER 30, 2021

(Dollars in tables in thousands, except share data)

Note 2. 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 1. 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 September 30, 2021										Nine Months Ended September 30, 2021
	Ent. golf venues		Public golf properties		Private golf properties		Managed golf properties (A)		Total		Ent. golf venues		Public golf properties		Private golf properties		Managed golf properties (A)		Total
Golf operations	$	5,239	$	30,065	$	10,715	$	16,238	$	62,257	$	13,976	$	77,932	$	37,756	$	47,506	$	177,170
Sales of food and beverages	6,070		6,334		1,705		—		14,109		17,145		12,182		4,840		—		34,167
Total revenues	$	11,309	$	36,399	$	12,420	$	16,238	$	76,366	$	31,121	$	90,114	$	42,596	$	47,506	$	211,337