What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-05 compared with 2021-11-09 · 633 added, 772 removed, 563 unchanged (71% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 30,

2022 December 31,

10 unchanged sentences

Intangible assets, net 2,397,827 2,477,952

Deferred tax asset 15,735 11,922

Other assets 21,423 27,009

4 unchanged sentences

Accounts payable 83,167 87,540

Accrued income taxes 48,701 37,208

Accrued liabilities 352,695 401,428

18 unchanged sentences

Treasury stock, at cost — ( 29,166 )

Retained (deficit) earnings ( 8,328 ) 34,792

Retained deficit ( 144,037 ) ( 138,683 )

Accumulated other comprehensive loss ( 141,249 ) ( 69,707 )

7 unchanged sentences

(In thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Gaming $ 463,702 $ 155,278

Racing 2,022 1,684 6,593 4,817

Hotel 26,935 13,059

Food and beverage 23,988 15,500

Other 22,756 4,589 45,731 13,178

Retail, entertainment and other 33,646 8,429

Total revenue 548,271 192,266

1 unchanged sentence

Gaming 219,212 47,254

Racing 1,996 1,681 5,715 4,877

Hotel 8,582 5,149

Food and beverage 18,956 12,209

Other 7,624 408 11,442 2,461

Retail, entertainment and other 13,099 1,797

Advertising, general and administrative 181,616 80,499

Goodwill and asset impairment — — 4,675 8,554

Expansion and pre-opening — 603

2 unchanged sentences

Rebranding 289 913

Gain on sale-leaseback — — ( 53,425 ) —

Depreciation and amortization 78,881 12,786

Total operating (income) costs and expenses 287,045 93,241 637,038 255,445

Income (loss) from operations 27,734 23,383 137,740 ( 749 )

Total operating costs and expenses 525,751 162,792

Income from operations 22,520 29,474

Other income (expense):

2 unchanged sentences

Change in value of naming rights liabilities 13,379 ( 27,406 )

Gain (adjustment) on bargain purchases ( 1,039 ) — 23,075 —

Loss on extinguishment of debt ( 19,419 ) — ( 19,419 ) —

Adjustment on bargain purchase ( 107 ) —

Other, net 6,207 2,671

Total other expense, net ( 26,206 ) ( 45,009 )

(Loss) income before provision for income taxes ( 20,147 ) 6,475 60,241 ( 44,140 )

(Benefit) provision for income taxes ( 5,400 ) ( 248 ) 16,751 ( 18,430 )

Net (loss) income $ ( 14,747 ) $ 6,723 $ 43,490 $ ( 25,710 )

Loss before provision for income taxes ( 3,686 ) ( 15,535 )

Benefit from income taxes ( 5,575 ) ( 4,830 )

Net income (loss) $ 1,889 $ ( 10,705 )

Basic earnings (loss) per share $ 0.03 $ ( 0.30 )

6 unchanged sentences

(In thousands)

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2021

Net (loss) income $ ( 14,747 ) $ 43,490

Three Months Ended March 31,

Net income (loss) $ 1,889 $ ( 10,705 )

Other comprehensive income (loss):

5 unchanged sentences

(1) Tax effect of reclassification adjustment was de minimis.

Net loss income equals comprehensive loss for the three and nine months ended September 30, 2020.

See accompanying notes to condensed consolidated financial statements.

10 unchanged sentences

Share-based compensation — — 5,095 — — — — 5,095

Retirement of treasury shares — ( 11 ) ( 35,200 ) 42,454 ( 7,243 ) — — —

Share repurchases ( 350,616 ) — — ( 13,288 ) — — — ( 13,288 )

Stock options exercised 20,000 — 86 — — — — 86

Penny warrants exercised 383,934 4 — — — — — 4

Reclassification of Sinclair options — — 59,724 — — — 59,724

Issuance of MKF penny warrants — — 12,010 — — — — 12,010

Shares issued for purchase of SportCaller 221,391 2 11,774 — — — 11,776

Settlement of consideration to SportCaller 107,832 1 3,699 — — — — 3,700

Other comprehensive loss — — — — — ( 71,542 ) — ( 71,542 )

Net loss — — — — ( 10,705 ) — ( 10,705 )

Balance as of March 31, 2021 31,894,089 $ 318 $ 434,457 $ ( 9 ) $ 24,087 $ ( 4,156 ) $ — $ 454,697

Release of restricted stock 9,181 — ( 205 ) ( 116 ) — — ( 321 )

Share-based compensation — — 3,901 — — — 3,901

Retirement of treasury shares — ( 21 ) ( 28,488 ) 114,842 ( 86,333 ) — —

Common stock offering 12,650,000 127 667,746 — — — 667,873

Sinclair shares exchanged for penny warrants ( 2,086,908 ) — 114,717 ( 114,717 ) — — —

Sinclair issuance of penny warrants — — 50,000 — — — 50,000

Bally Interactive equity issuance 2,084,765 21 121,479 — — — 121,500

Stock options exercised 40,000 — 172 — — — 172

Other comprehensive income — — — — — 460 460

Net income — — — — 1,889 — — 1,889

Balance as of June 30, 2021 44,591,127 $ 445 $ 1,363,779 $ — $ 6,696 $ ( 3,696 ) $ — $ 1,367,224

Release of restricted stock 483 — ( 12 ) — — — ( 12 )

Share-based compensation — — 5,449 — — — 5,449

Retirement of treasury shares — — ( 308 ) 585 ( 277 ) — — —

Bally Interactive equity issuance ( 10,042 ) — — ( 585 ) — — ( 585 )

Acquired non-controlling interest — — — — — — 3,760 3,760

Other comprehensive loss — — — — — ( 43,638 ) ( 43,638 )

Net loss — — — — ( 14,747 ) — ( 14,747 )

Balance as of September 30, 2021 44,581,568 $ 445 $ 1,368,908 $ — $ ( 8,328 ) $ ( 47,334 ) $ 3,760 $ 1,317,451

BALLY’S CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

(In thousands, except share data)

Balance as of March 31, 2022 52,538,476 $ 525 $ 1,832,224 $ — $ ( 144,037 ) $ ( 141,249 ) $ 3,760 $ 1,551,223

Common Stock Additional

1 unchanged sentence

Stock Retained

Earnings Accumulated Other Comprehensive Loss Total Stockholders’

Earnings Accumulated Other Comprehensive Loss Non-controlling Interest Total Stockholders’

Shares Outstanding Amount

1 unchanged sentence

Release of restricted stock 23,811 — ( 990 ) — — — — ( 990 )

Dividends and dividend equivalents - $ 0.10 per share

— — — — ( 3,174 ) — ( 3,174 )

Share-based compensation — — 4,483 — — — — 4,483

Retirement of treasury shares — ( 107 ) ( 48,618 ) 254,416 ( 205,691 ) — —

Share repurchases ( 1,649,768 ) — — ( 31,341 ) — — ( 31,341 )

Cumulative effect adjustment upon adoption of ASU 2016-13 — — — — ( 58 ) — ( 58 )

Stock options exercised 30,000 — 129 — — — — 129

Penny warrants exercised 932,949 9 — ( 9 ) — — — —

Reclassification of Sinclair options — — 59,724 — — — — 59,724

Issuance of MKF penny warrants — — 64,694 — — — — 64,694

Shares issued for purchase of SportCaller 221,391 2 11,774 — — — — 11,776

Other comprehensive loss — — — — — ( 1,012 ) — ( 1,012 )

Net loss — — — — ( 10,705 ) — — ( 10,705 )

Balance as of March 31, 2021 31,894,089 $ 318 $ 434,457 $ ( 9 ) $ 24,087 $ ( 4,156 ) $ — $ 454,697

Release of restricted stock 24,427 — ( 81 ) — — — ( 81 )

Share-based compensation — — 2,127 — — — 2,127

Retirement of treasury shares — ( 2 ) ( 733 ) 1,951 ( 1,216 ) — —

Share repurchases ( 162,625 ) — — ( 1,951 ) — — ( 1,951 )

Net loss — — — — ( 23,555 ) — ( 23,555 )

Balance as of June 30, 2020 30,456,493 $ 304 $ 141,297 $ — $ 7,846 $ ( 1,888 ) $ 147,559

Share-based compensation - equity awards — — 1,799 — — — 1,799

Stock options exercised 19,564 — 84 — — — 84

Net income — — — — 6,723 — 6,723

Balance as of September 30, 2020 30,476,057 $ 304 $ 143,180 $ — $ 14,569 $ ( 1,888 ) $ 156,165

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2022 2021

3 unchanged sentences

Depreciation and amortization 78,881 12,786

Amortization of operating lease right of use assets 7,497 875

Goodwill and asset impairment 4,675 8,554

Non-cash lease expense 7,221 159

Share-based compensation 5,095 4,483

1 unchanged sentence

Gain from insurance recoveries — ( 10,513 )

Gain on sale-leaseback ( 53,425 ) —

Loss on assets and liabilities measured at fair value 21,280 —

Loss on extinguishment of debt 19,419 —

Deferred income taxes ( 18,594 ) ( 6,341 )

Loss on assets and liabilities measured at fair value 139 —

Change in value of naming rights liabilities ( 13,379 ) 27,406

Change in contingent consideration payable ( 5,859 ) ( 3,142 )

Gain on bargain purchases, net of adjustments ( 23,075 ) —

Adjustment on bargain purchase 107 —

Other operating activities 1,750 2,111

3 unchanged sentences

Cash paid for acquisitions, net of cash acquired — ( 22,745 )

Proceeds from sale-leaseback 144,000 —

Deposit for pending acquisition of Bally’s Quad Cities Casino & Hotel

Foreign exchange forward contract premiums ( 22,592 ) —

Capital expenditures ( 54,516 ) ( 15,327 )

Insurance proceeds from hurricane damage — 10,513

Cash paid for internally developed software ( 14,956 ) —

Acquisition of gaming licenses ( 860 ) ( 250 )

Other intangible asset acquisitions ( 1,500 ) —

Other investing activities ( 123 ) ( 1,075 )

1 unchanged sentence

Cash flows from financing activities:

Issuance of common stock, net 667,872 —

Revolver borrowings 275,000 250,000

Revolver payments ( 85,000 ) ( 250,000 )

Term loan proceeds, net of fees of $ 0 and $ 13,820 , respectively

Term loan repayments ( 4,313 ) ( 2,938 )

Senior note proceeds, net of fees of $ 12,998

Senior note repayments ( 210,000 ) —

Payment of redemption premium on debt extinguishment ( 14,175 ) —

Issuance of long-term debt 105,000 40,000

Repayments of long-term debt ( 84,863 ) ( 1,438 )

Payment of financing fees — ( 5,840 )

Share repurchases ( 13,288 ) —

Issuance of Sinclair penny warrants 50,000 —

Payment of shareholder dividends — ( 3,199 )

Share redemption for tax withholdings - restricted stock ( 1,323 ) ( 2,564 )

Stock options exercised 301 84

Other financing activities ( 2,444 ) ( 861 )

Net cash provided by financing activities 4,405 31,861

10 unchanged sentences

Acquisitions in exchange for contingent liability — 58,685

Deferred purchase price payable 14,071 —

Deposit applied to acquisition purchase price 4,000 —

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

GENERAL INFORMATION

Bally’s Corporation (the “Company” or “Bally’s”) is a U.S.

full-service sports betting/iGaming company with physical casinos and online gaming solutions united under a single, prominent brand.

The Company, through its wholly owned subsidiary Twin River Management Group, Inc.

(“TRMG”), owns or manages the following properties:

Property by Segment (1)

Location Type Built/Acquired

Description of Business

Bally’s Corporation (the “Company” or “Bally’s”) is a global gaming, hospitality and entertainment company with casinos and resorts and online gaming (“iGaming”) business-to-business-to-consumer (“B2B2C”) businesses.

The Company owns and manages the following casino and resort properties:

Casinos and Resorts Location Type Built/Acquired

Bally’s Twin River Lincoln Casino Resort (“Bally’s Twin River”) Lincoln, Rhode Island Casino and Resort 2004

Bally’s Arapahoe Park Aurora, Colorado Racetrack/OTB Site 2004

Hard Rock Hotel & Casino Biloxi (“Hard Rock Biloxi”) Biloxi, Mississippi Casino and Resort 2014

Bally’s Tiverton Casino & Hotel (“Bally’s Tiverton”) Tiverton, Rhode Island Casino and Hotel 2018

Dover Downs Hotel & Casino (“Dover Downs”)

Dover, Delaware Casino, Hotel and Raceway 2019

Bally’s Atlantic City

Atlantic City, New Jersey Casino and Hotel 2020

Bally’s Evansville Casino & Hotel (“Bally’s Evansville”)

Evansville, Indiana Casino and Hotel 2021

Hard Rock Hotel & Casino (“Hard Rock Biloxi”) Biloxi, Mississippi Casino and Resort 2014

Bally’s Vicksburg Casino (“Bally’s Vicksburg”) Vicksburg, Mississippi Casino and Hotel 2020

Bally’s Kansas City Casino (“Bally’s Kansas City”) Kansas City, Missouri Casino 2020

Bally’s Dover Casino Resort (“Bally’s Dover”) (1)

Dover, Delaware Casino, Resort and Raceway 2019

Bally’s Black Hawk (1)(2)

Black Hawk, Colorado Three Casinos 2020

Bally’s Kansas City Casino (“Bally’s Kansas City”) Kansas City, Missouri Casino 2020

Bally’s Vicksburg Casino (“Bally’s Vicksburg”) Vicksburg, Mississippi Casino and Hotel 2020

Bally’s Atlantic City Casino Resort (“Bally’s Atlantic City”) Atlantic City, New Jersey Casino and Hotel 2020

Bally’s Shreveport Casino & Hotel (“Bally’s Shreveport”) Shreveport, Louisiana Casino and Hotel 2020

Bally’s Lake Tahoe Casino Resort (“Bally’s Lake Tahoe”)

Lake Tahoe, Nevada

Casino and Resort 2021

Bally’s Lake Tahoe Casino Resort (“Bally’s Lake Tahoe”) Lake Tahoe, Nevada Casino and Resort 2021

Bally’s Evansville Casino & Hotel (“Bally’s Evansville”) (1)

Evansville, Indiana Casino and Hotel 2021

Bally’s Quad Cities Casino & Hotel (“Bally’s Quad Cities”) (1)

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__________________________________

(1) During the second quarter of 2021, the Company updated its reportable segments to better align with its strategic growth initiatives in light of recent and pending acquisitions.

Refer to Note 17 “Segment Reporting” for further information.

(2) Includes the recently rebranded Bally’s Black Hawk North Casino, Bally’s Black Hawk West Casino and Bally’s Black Hawk East Casino (previously Golden Gulch Casino).

In addition to the properties noted above, the Company also owns the Bally’s Arapahoe Park racetrack and 13 off-track betting licenses (“Bally’s Arapahoe Park”) in Aurora, Colorado.

Under the Bally Interactive division, the Company owns and manages Bally Interactive, formerly Bet.Works, a U.S.

based sports betting platform provider, Horses Mouth Limited (“SportCaller”), a leading Business-to-Business (“B2B”) free-to-play game provider for sports betting and media companies across North America, the UK, Europe, Asia, Australia, LATAM and Africa, Monkey Knife Fight (“MKF”), a North American gaming platform and daily fantasy sports operator, the Association of Volleyball Professionals (“AVP”), a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the United States, and Telescope Inc.

(1) Properties leased from Gaming and Leisure Properties, Inc.

(“GLPI”) under the Master Lease agreement.

Refer to Note 13 “ Leases ” for further information.

The Company completed its sale-leaseback transaction of Bally’s Quad Cities and Bally’s Black Hawk on April 1, 2022.

(2) Includes Bally’s Black Hawk North Casino, Bally’s Black Hawk West Casino and Bally’s Black Hawk East Casino.

Under the North America Interactive reportable segment, the Company owns and manages the following businesses:

• Bally’s Interactive, a B2B2C sportsbook and iCasino platform provider and operator;

• Horses Mouth Limited (“SportCaller”), a business-to-business (“B2B”) free-to-play game provider for sports betting companies;

• Monkey Knife Fight (“MKF”), a business-to-consumer daily fantasy sports (“DFS”) platform and operator;

• Joker Gaming, known as Live at the Bike, an online subscription streaming service featuring livestream and on-demand poker videos and podcasts;

• the Association of Volleyball Professionals (“AVP”), a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the United States (“US”);

• Telescope Inc.

(“Telescope”), a leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams;

On October 1, 2021, the Company completed the acquisition of Gamesys Group, Plc.

(“Gamesys”), a leading international online gaming operator that provides entertainment to a global consumer base.

• Degree 53, a United Kingdom (“UK”)-based creative agency that specializes in multi-channel website and personalized mobile app and software development for the online gambling and sports industries.

The North America Interactive reportable segment also includes the North American operations of Gamesys.

The Company’s International Interactive reportable segment includes the interactive activities in Europe and Asia of Gamesys Group Ltd.

(“Gamesys”), a B2B2C iCasino and online bingo platform provider and operator, acquired by the Company on October 1, 2021, and Solid Gaming, a games content aggregation business.

Refer to Note 18 “ Segment Reportin g” for further information.

The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “BALY.”

2 unchanged sentences

Basis of Presentation

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

The accompanying condensed consolidated financial statements of the Company include the accounts of the Company, its majority-owned subsidiaries and entities the Company identifies as variable interest entities (“VIEs”), of which the Company is determined to be the primary beneficiary.

All intercompany transactions and balances have been eliminated in the consolidation.

Certain prior year amounts have been reclassified to conform to the current year’s presentation.

The financial statements of our foreign subsidiary is translated into U.S.

The financial statements of our foreign subsidiaries are translated into U.S.

dollars using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations.

8 unchanged sentences

The actual results that we experience may differ materially from our estimates.

Correction of Cash Flow Classification

Subsequent to the issuance of the Company’s Form 10-Q for the quarterly period ended June 30, 2021, the Company concluded that the $144.0 million in proceeds from the sale-leaseback of the Company’s Dover property were incorrectly classified as cash provided by financing activities rather than cash provided by investing activities within the Company’s unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2021.

The accompanying unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2021 correctly reflects such amount as cash provided by investing activities.

The Company will correct the unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2021 when it files its Form 10-Q for the quarterly period ended June 30, 2022 with the SEC.

The correction of this error had no effect on the Company’s net cash provided by operating activities or the accompanying unaudited condensed consolidated balance sheet, unaudited condensed consolidated statement of operations, unaudited condensed consolidated statement of comprehensive income, or unaudited condensed consolidated statement of Stockholders’ equity as of and for the three and nine months ended September 30, 2021.

Acquisition of Gamesys Group, Plc.

On October 1, 2021, the Company completed its acquisition of Gamesys for 9,773,537 shares of Bally’s common stock and approximately £ 1.554 billion in cash (the “Acquisition”).

Based on the October 1, 2021 closing price of $ 53.08 per share of the Company’s common stock, and a foreign exchange rate of 1.354 , the aggregate consideration paid to former Gamesys shareholders in connection with the Acquisition was approximately $ 2.62 billion.

Consideration paid includes $ 518.8 million in shares and $ 2.10 billion in cash.

In connection with the Acquisition, the Company refinanced its and Gamesys’ debt with, among other sources, the proceeds of the senior notes offering completed in August 2021, a new bank credit facility entered into on October 1, 2021 and the Company’s common stock offering completed in April 2021.

See Note 11 “Long-Term Debt” for further information.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Given the short period of time from the completion of the Acquisition, the date of these condensed consolidated financial statements and the size and complexity of the transaction, the initial accounting for the business combination is incomplete at this time.

The Company is not able to provide the valuation of certain components of consideration transferred or provide the allocation of consideration paid to the assets acquired or liabilities assumed.

The Company will reflect the preliminary purchase price allocation in its consolidated financial statements for the year ending December 31, 2021.

Gamesys' Chief Executive Officer, Lee Fenton, became Bally’s Chief Executive Officer and joined Bally’s Board of Directors in the class of directors with a term that expires at Bally’s 2023 annual shareholders meeting.

George Papanier became President, Retail, the head of Bally’s on-land business, and remains a member of Bally’s Board of Directors.

COVID-19 Pandemic

The COVID-19 pandemic significantly impacted the Company’s business.

As of March 16, 2020, all of the Company’s properties at the time were closed as a result of the COVID-19 pandemic.

The Company’s properties began to reopen in mid-2020 in some capacity and remained open for the rest of 2020, with the exception of Bally’s Twin River and Bally’s Tiverton, each of which closed again from November 29, 2020 through December 20, 2020.

As of September 30, 2021, the Company’s properties have returned to full capacity with minimal restrictions.

As of March 31, 2022, the Company’s properties are all operating with minimal restrictions.

Although the Company is experiencing positive trends as a result of the reopening of its properties, the COVID-19 pandemic is ongoing and future developments, which are uncertain and cannot be predicted at this time, could have a material negative impact on operations.

2 unchanged sentences

The Company considers all cash balances and highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.

As of September 30, 2021 and December 31, 2020, restricted cash was $ 1.84 billion and $ 3.1 million, respectively.

The balance at September 30, 2021 includes $ 1.49 billion of proceeds from the senior notes offering, explained in Note 11 “Long-Term Debt,” and $ 667.9 million of cash proceeds from the Company’s April 2021 common stock offering, which were classified as restricted for use in the Acquisition.

These amounts were held in escrow in GBP and were translated to USD using the foreign exchange rate as of September 30, 2021, resulting in a foreign exchange translation loss reflected within other comprehensive loss for the three months ended September 30, 2021.

In addition, restricted cash was comprised of video lottery terminal (“VLT”) and table games cash payable to the State of Rhode Island and certain cash accounts at other properties, which is unavailable for the Company’s use.

As of March 31, 2022 and December 31, 2021, restricted cash of $ 62.9 million and $ 68.6 million, respectively, consisted primarily of player deposits and payment service provider deposits in connection with the Company’s iGaming operations.

Restricted cash also includes Video Lottery Terminal (“VLT”) and table games cash payable to the State of Rhode Island and certain cash accounts at other properties, which are unavailable for the Company’s use.

The following table reconciles cash and restricted cash in the condensed consolidated balance sheets to the total shown on the condensed consolidated statements of cash flows.

September 30, December 31,

March 31, December 31,

(in thousands) 2022 2021

6 unchanged sentences

Accounts receivable, net consists of the following:

September 30, December 31,

March 31, December 31,

(in thousands) 2022 2021

7 unchanged sentences

__________________________________

(1) Represents the Company’s share of VLT and table games revenue for Bally’s Twin River and Bally’s Tiverton due from the State of Rhode Island and from the State of Delaware for Dover Downs.

Property and Equipment

Property and equipment are recorded at cost.

Property and equipment obtained in connection with acquisitions is valued at its estimated fair value as of the date of acquisition.

Additions subsequent to the acquisition date are recorded at cost.

Property and equipment are depreciated over the estimated useful lives of the assets using the straight-line method.

Expenditures for renewals and betterments that extend the life or value of an asset are capitalized and expenditures for repairs and maintenance are charged to expense as incurred.

The costs and related accumulated depreciation applicable to assets sold or disposed are removed from the balance sheet accounts and the resulting gains or losses are reflected in the condensed consolidated statements of operations.

Development costs directly associated with the acquisition, development and construction of a project are capitalized as a cost of the project during the periods in which activities necessary to prepare the property for its intended use are in progress.

Interest costs associated with major construction projects are capitalized as part of the cost of the constructed assets.

When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using the weighted-average cost of borrowing.

Capitalization of interest ceases when the project (or discernible portions of the project) is substantially complete.

If substantially all of the construction activities of a project are suspended, capitalization of interest will cease until such activities are resumed.

During the three and nine months ended September 30, 2021 and 2020, there was no capitalized interest.

As of September 30, 2021 and December 31, 2020, property and equipment was comprised of the following:

(in thousands) Estimated

(in years) September 30, 2021 December 31, 2020

Land $ 75,328 $ 78,506

Land improvements 3 - 20

34,054 29,965

Building and improvements 5 - 40

633,086 635,145

Equipment 1 - 10

169,483 125,667

Furniture and fixtures 3 - 10

41,030 30,277

Construction in process 22,574 8,799

Total property, plant and equipment 975,555 908,359

Accumulated depreciation ( 194,899 ) ( 159,330 )

Property and equipment, net $ 780,656 $ 749,029

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Construction in process relates to costs capitalized in conjunction with major improvements that have not yet been placed in service, and accordingly are not currently being depreciated.

The construction in process balance at September 30, 2021 includes $ 10.5 million of costs associated with the various capital projects at Bally’s Atlantic City, Bally Interactive, Bally’s Kansas City, the Rhode Island properties, and Hard Rock Biloxi, as well as $ 5.3 million of costs associated with software development within our Interactive division.

The construction in process balance at December 31, 2021 included costs associated with various capital projects in process, primarily at Hard Rock Biloxi and Dover Downs.

Depreciation expense relating to property and equipment for the three months ended September 30, 2021 and 2020 was $ 13.5 million and $ 8.9 million, respectively.

Depreciation expense relating to property and equipment for the nine months ended September 30, 2021 and 2020 was $ 37.4 million and $ 23.9 million, respectively.

(1) Represents the Company’s share of VLT and table games revenue for Bally’s Twin River and Bally’s Tiverton due from the State of Rhode Island and from the State of Delaware for Bally’s Dover.

Gain from insurance recoveries, net of losses

Gain from insurance recoveries, net of losses, relate to losses incurred resulting from storms impacting the Company’s properties, net of insurance recovery proceeds.

During the three and nine months ended September 30, 2021, the Company recorded gain from insurance recoveries, net of losses, of $ 7.9 million and $ 19.2 million, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta, which made landfall in Louisiana shutting down the Company’s Hard Rock Biloxi property for three days during the fourth quarter of 2020.

During the three and nine months ended September 30, 2020, we recorded a gain on insurance recoveries of $ 10,000 and $ 1.0 million, respectively, related to proceeds received for a damaged roof at the Bally’s Arapahoe Park racetrack.

Long-lived Assets

The Company reviews its long-lived assets, other than goodwill and intangible assets not subject to amortization, for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If an asset is still under development, the analysis includes the remaining construction costs.

Cash flows expected to be generated by the related assets are estimated over the assets’ useful lives based on updated projections.

If the evaluation indicates that the carrying amount of an asset may not be recoverable, the potential impairment is measured based on a fair value discounted cash flow model.

In connection with its rebranding initiatives, as decisions are made, it is possible that the Company could be required to record impairment charges which could be material.

During the second quarter of 2021, the Company recorded an impairment charge on certain of its intangible assets as a result of the Company’s rebranding.

Refer to Note 6 “Goodwill and Intangible Assets” for further information.

During the three months ended March 31, 2022 and 2021, the Company recorded a gain from insurance recoveries, net of losses, of $ 0.2 million and $ 10.7 million, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta, which made landfall in Louisiana shutting down the Company’s Hard Rock Biloxi property for three days during the fourth quarter of 2020.

Gaming Expenses

Gaming expenses include, among other things, payroll costs and expenses associated with the operation of VLTs, slots and table games, including gaming taxes payable to jurisdictions in which the Company operates outside of Rhode Island and Delaware, and advertising costs directly associated with the sale of the Company’s interactive gaming products and services.

Gaming expenses also includes racing expenses comprised of payroll costs, off track betting (“OTB”) commissions and other expenses associated with the operation of live racing and simulcasting.

Advertising Expense

The Company expenses advertising costs as incurred.

For the three months ended March 31, 2022 and 2021, advertising expense was $ 65.3 million and $ 1.4 million, respectively.

Advertising expense attributable to the Company’s interactive business included within Gaming expenses for the three months ended March 31, 2022 was $ 63.1 million.

There was no advertising expense attributable to the Company’s interactive business included within Gaming expenses for the three months ended March 31, 2021.

Strategic Partnership - Sinclair Broadcast Group

1 unchanged sentence

(“Sinclair”) entered into a Framework Agreement (the “Sinclair Agreement”), which provides for a long-term strategic relationship between the Company and Sinclair combining Bally’s integrated, proprietary sports betting technology with Sinclair’s portfolio of local broadcast stations and live regional sports networks and its Tennis Channel, Stadium sports network and STIRR streaming service, whereby the Company will receive naming rights to the regional sports networks and certain integrations to network programming in exchange for annual fees paid in cash, the issuance of warrants and options, and an agreement to share in certain tax benefits resulting from the Transaction with Sinclair (the “TRA”).

The initial term of the agreement is ten years from the commencement date of the re-branded Sinclair regional sports networks and can be renewed for one additional 5-year term unless either the Company or Sinclair elect not to renew.

The initial term of the agreement is ten years from the commencement date of the re-branded Sinclair regional sports networks and can be renewed for one additional five-year term unless either the Company or Sinclair elect not to renew.

BALLY’S CORPORATION

2 unchanged sentences

The Company accounted for this transaction as an asset acquisition in accordance with the “Acquisition of Assets Rather Than a Business” subsections of Accounting Standards Codification (“ASC”) 805-50 using a cost accumulation model.

The naming rights intangible asset represents the consideration transferred on the acquisition date comprised of the present value of annual naming rights fees, the fair value of the warrants and options and an estimate of the Tax Receivable Agreement payments, each explained below.

The naming rights intangible asset was $ 323.7 million and $ 338.2 million as of September 30, 2021 and December 31, 2020, respectively.

Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $ 8.6 million and $ 17.2 million for the three and nine months ended September 30, 2021, respectively.

The naming rights intangible asset was $ 300.7 million and $ 311.7 million as of March 31, 2022 and December 31, 2021, respectively.

Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $ 8.4 million for the three months ended March 31, 2022.

Refer to Note 8 “ Goodwill and Intangible Assets ” for further information.

Naming Rights Fees - The present value of the annual naming rights fees was recorded as part of the cost of the naming rights intangible asset with a corresponding liability which will be accreted through interest expense over the life of the agreement.

The total value of the liability as of September 30, 2021 and December 31, 2020 was $ 58.3 million and $ 56.6 million, respectively.

The short-term portion of the liability, which was $ 2.0 million as of September 30, 2021 and December 31, 2020, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $ 56.3 million and $ 54.6 million as of September 30, 2021 and December 31 2020, respectively, is recorded within “Naming rights liabilities” in the condensed consolidated balance sheets.

Accretion expense for the three and nine months ended September 30, 2021 was $ 1.1 million and $ 3.2 million respectively, and was reported in “Interest expense, net of amounts capitalized” in the condensed consolidated statements of operations.

Warrants and Options - The Company issued to Sinclair (i) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $ 0.01 per share (“the Penny Warrants”), (ii) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $ 0.01 per share subject to the achievement of various performance metrics (the “Performance Warrants”), and (iii) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $ 30.00 to $ 45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (the “Options”).

The total value of the liability as of March 31, 2022 and December 31, 2021 was $ 59.0 million and $ 58.9 million, respectively.

The short-term portion of the liability, which was $ 2.0 million as of March 31, 2022 and December 31, 2021, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $ 57.0 million and $ 56.9 million as of March 31, 2022 and December 31 2021, respectively, is recorded within “Naming rights liabilities” in the condensed consolidated balance sheets.

Accretion expense for the three months ended March 31, 2022 and 2021 was $ 1.1 million and $ 1.0 million respectively, and was reported in “Interest expense, net of amounts capitalized” in the condensed consolidated statements of operations.

Warrants and Options - The Company issued to Sinclair (1) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $ 0.01 per share (“the Penny Warrants”), (2) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $ 0.01 per share subject to the achievement of various performance metrics (the “Performance Warrants”), and (3) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $ 30.00 to $ 45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (the “Options”).

The exercise and purchase prices and the number of shares issuable upon exercise of the warrants and options are subject to customary anti-dilution adjustments.

The issuance pursuant to the warrants and options of shares in excess of 19.9 % of the Company’s currently outstanding shares was subject to the approval of the Company’s stockholders in accordance with the rules of the New York Stock Exchange (“NYSE”), which was obtained on January 27, 2021.

Penny Warrants .

The Penny Warrants were determined to be an equity classified instrument because they are indexed to the Company’s own stock and met the conditions to be classified as equity under ASC 815, Derivatives and Hedging , including sufficient available shares for the Company to settle the exercise of the warrants in shares.

Penny Warrants & Options .

The Penny Warrants and Options are equity classified instruments under ASC 815, Derivatives and Hedging , (“ASC 815”).

The fair value of the Penny Warrants approximates the fair value of the underlying shares and was $ 150.4 million on November 18, 2020 at issuance, and was recorded to “Additional paid-in-capital” in the condensed consolidated balance sheets, with an offset to the naming rights intangible asset.

The fair value of the Options was $ 59.7 million as of December 31, 2021 and is recorded within “Additional paid-in-capital” in the condensed consolidated balance sheets.

Performance Warrants .

The Performance Warrants are accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company’s own stock and thus equity classification is precluded under ASC 815.

The fair value as of September 30, 2021 and December 31, 2020 was $ 88.0 million and $ 88.1 million, respectively, and is recorded within “Naming Rights liabilities” of the condensed consolidated balance sheets.

Refer to Note 7 “Derivative Instruments” for further information.

As of December 31, 2020, the Options were accounted for as a derivative liability because the Options could have been required to be settled in cash, outside the Company’s control, prior to formal stockholder approval.

The fair value of the Options as of December 31, 2020 was $ 58.2 million.

Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity, at which point, the Options were adjusted to fair value and $ 59.7 million was reclassified from “Naming rights liabilities” to “Additional paid-in-capital” in the condensed consolidated balance sheet.

The increase in fair value of the Options from December 31, 2020 through January 27, 2021 was $ 1.5 million and resulted in a mark to market loss in the first quarter of 2021, reported in “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.

Refer to Note 7 “Derivative Instruments” for further information

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Refer to Note 9 “ Fair Value M easuremen ts ” for further information.

Tax Receivable Agreement - The Company is required to share 60 % of the tax benefit the Company receives from the Penny Warrants, Options, Performance Warrants and payments under the TRA with Sinclair over the term of the agreement as tax benefit amounts are determined through the filing of the Company’s annual tax returns.

Changes in estimate of the tax benefit to be realized and tax rates in effect at the time, among other changes, are treated as an adjustment to the naming rights intangible asset.

As of September 30, 2021, the estimate of the TRA liability was $ 45.7 million, reflecting an increase of $ 2.7 million from the December 31, 2020 value of $ 43.0 million, and is included in “Naming rights liabilities” in the condensed consolidated balance sheets.

The TRA liability was $ 39.6 million and $ 42.2 million as of March 31, 2022 and December 31, 2021, respectively, and is included in “Naming rights liabilities” in the condensed consolidated balance sheets.

The change in value of the TRA liability is included in “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Variable Interest Entities

The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a VIE.

An entity is a VIE if it has any of the following characteristics (1) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support, (2) equity holders, as a group, lack the characteristics of a controlling financial interest or (3) the entity is structured with non-substantive voting rights.

The primary beneficiary of the VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

The Company consolidates its investment in a VIE when it determines that it is its primary beneficiary.

In determining whether it is the primary beneficiary of the VIE, the Company considers qualitative and quantitative factors, including, but not limited to:

which activities most significantly impact the VIE’s economic performance and which party controls such activities;

and significance of the Company’s investment and other means of participation in the VIE’s expected profits/losses.

Significant judgments related to these determinations include estimates about the current and future fair values and performance of assets held by these VIEs and general market conditions.

Management analyzed and concluded that Breckenridge Curacao B.V.

is a VIE because it does not have sufficient equity investment at risk.

The Company has determined that it is the primary beneficiary and consolidates the VIE because (a) although the Company does not control all decisions of the VIE, the Company has the power to direct the activities of the VIE that most significantly impact its economic performance through various contracts with the entity and (b) the nature of these agreements between the VIE and the Company provides the Company with the obligation to absorb losses and the right to receive benefits based on fees that are based upon off-market rates and commensurate to the level of services provided.

The Company receives significant benefits in the form of fees that are not at market and commensurate to the level of services provided.

As a result, the Company consolidates all of the assets, liabilities and results of operations of the VIE and its subsidiaries in the accompanying consolidated financial statements.

As of March 31, 2022 and December 31, 2021 Breckenridge Curacao B.V.

had total assets of $ 86.7 million and $ 85.4 million, respectively, and total liabilities of $ 76.5 million and $ 75.2 million, respectively.

Breckenridge Curacao B.V.

had revenues of $ 86.9 million for the three months ended March 31, 2022.

The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.

The Company performs this analysis on an ongoing basis.

Related Party Transaction

On September 26, 2019, prior to the Company’s acquisition of Gamesys, Gamesys (Holdings) Limited (“GHL”) was acquired by JPJ Group plc (“JPJ”) and subsequently renamed Gamesys.

In connection with the JPJ acquisition, £ 10.0 million of the cash consideration was deferred and payable (plus interest) to GHL’s majority shareholders 30 months after closing.

The Company recorded deferred consideration of $ 14.9 million and $ 15.1 million within current liabilities of the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively.

Of such amount, approximately $ 7.4 million was payable to related parties as former majority shareholders.

The Company paid the deferred consideration in April 2022.

RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements

Standards implemented

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income Taxes .

This amendment serves to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes.

The amendment also improves the consistent application of ASC Topic 740 by clarifying and amending existing guidance.

This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted.

The Company’s adoption of this ASU in the first quarter of 2021, did not have a material impact to its condensed consolidated financial statements.

Standards to be implemented

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

The amendments in this update address diversity in practice and inconsistency related to recognition of an acquired contract liability and the effect of payment terms on subsequent revenue recognition for the acquirer.

This update is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted.

The Company is currently in the process of evaluating the impact of this amendment on its condensed consolidated financial statements.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

REVENUE RECOGNITION

The Company accounts for revenue earned from contracts with customers under ASC 606, Revenue from Contracts with Customers .

The Company generates revenue from five principal sources:

gaming services, hotel, racing, food and beverage and other.

The Company recognizes revenue in accordance with ASC 606 which requires companies to recognize revenue in a way that depicts the transfer of promised goods or serves.

In addition, the standard requires more detailed disclosures to enable readers of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The Company generates revenue from four principal sources:

gaming (which includes retail gaming, online gaming, sports betting and racing), hotel, food and beverage and retail entertainment and other.

The Company determines revenue recognition through the following steps:

• Identify the contract, or contracts, with the customer;

• Identify the performance obligations in the contract;

• Determine the transaction price;

• Allocate the transaction price to performance obligations in the contract;

• Recognize revenue when or as the Company satisfies performance obligations by transferring the promised good or services

The Company is currently engaged in gaming services, which include retail, online and racing.

Additional services include hotel, food and beverage.

The amount of revenue recognized by the Company is measured at the transaction price or the amount of consideration that the Company expects to receive through satisfaction of the identified performance obligations.

Retail gaming, online gaming and sports betting revenue, each as described below, contain a single performance obligation.

Retail gaming transactions have an obligation to honor the outcome of a wager and to payout an amount equal to the stated odds, including the return of the initial wager, if the customer receives a winning hand.

These elements of honoring the outcome of the hand of play and generating a payout are considered one performance obligation.

Online gaming and sports betting represent a single performance obligation for the Company to operate contests or games and award prizes or payouts to users based on results of the arrangement.

Revenue is recognized at the conclusion of each contest, wager or wagering game hand.

Incentives can be used across online gaming products.

The Company allocates a portion of the transaction price to certain customer incentives that create material future customer rights and are a separate performance obligation.

In addition, in the event of a multi-stage contest, the Company will allocate transaction price ratably from contest start to the contest’s final stage.

Racing revenue is earned through advance deposit wagering which consists of patrons wagering through an advance deposit account.

Each wagering contract contains a single performance obligation.

The transaction price for a gaming wagering contract is the difference between gaming wins and losses, not the total amount wagered.

The transaction price for racing operations, inclusive of live racing events conducted at the Company’s racing facilities, is the commission received from the pari-mutuel pool less contractual fees and obligations primarily consisting of purse funding requirements, simulcasting fees, tote fees and certain pari-mutuel taxes that are directly related to the racing operations.

The transaction price for food and beverage and hotel is the net amount collected from the customer for such goods and services.

Hotel, food and beverage services have been determined to be separate, stand-alone performance obligations and revenue is recognized as the good or service is transferred at the point in time of the transaction.

The following contains a description of each of the Company’s revenue streams:

Gaming Revenue

Retail Gaming

The Company recognizes retail gaming revenue as the net win from gaming activities, which is the difference between gaming inflows and outflows, not the total amount wagered.

Progressive jackpots are estimated and recognized as revenue at the time the obligation to pay the jackpot is established.

Gaming revenues are recognized net of certain cash and free play incentives.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Gaming services contracts have two performance obligations for those customers earning incentives under the Company’s player loyalty programs and a single performance obligation for customers who do not participate in the programs.

The Company applies a practical expedient to account for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the impact on the consolidated financial statements of applying the revenue recognition guidance to the portfolio would not differ materially from the application of an individual wagering contract.

For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with incentives earned under loyalty programs, the Company allocates an amount to the loyalty program contract liability based on the stand-alone selling price of the incentive earned for a hotel room stay, food and beverage or other amenity.

The performance obligation related to loyalty program incentives are deferred and recognized as revenue upon redemption by the customer.

The amount associated with gaming wagers is recognized at the point the wager occurs, as it is settled immediately.

Gaming revenue includes the share of VLT revenue for Bally’s Twin River and Bally’s Tiverton, in each case, as determined by each property’s respective master VLT contracts with the State of Rhode Island.

Bally’s Twin River is entitled to a 28.85 % share of VLT revenue on the initial 3,002 units and a 26.00 % share of VLT revenue generated from units in excess of 3,002 units.

Bally’s Twin River is entitled to a 28.85 % share of VLT revenue on the initial 3,002 units and a 26.00 % share on VLT revenue generated from units in excess of 3,002 units.

Beginning July 1, 2021, Bally’s Twin River is entitled to an additional 7.00 % share of revenue on VLTs owned by the Company.

1 unchanged sentence

Gaming revenue also includes Bally’s Twin River’s and Bally’s Tiverton’s share of table games revenue.

Bally’s Twin River and Bally’s Tiverton each were entitled to an 83.5 % share of table games revenue generated as of September 30, 2021 and 2020.

Revenue is recognized when the wager is complete, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment.

Bally’s Twin River and Bally’s Tiverton each were entitled to an 83.5 % share of table games revenue generated as of March 31, 2022 and 2021.

Revenue is recognized when the wager is settled, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment.

The Company records revenue from its Rhode Island operations on a net basis which is the percentage share of VLT and table games revenue received as the Company acts as an agent in operating the gaming services on behalf of the State of Rhode Island.

Gaming revenue also includes Dover Downs’ share of revenue as determined under the Delaware State Lottery Code from the date of its acquisition.

Dover Downs is authorized to conduct video lottery, sports wagering, table game and internet gaming operations as one of three “Licensed Agents” under the Delaware State Lottery Code.

Gaming revenue also includes Bally’s Dover’s share of revenue as determined under the Delaware State Lottery Code from the date of its acquisition.

Bally’s Dover is authorized to conduct video lottery, sports wagering, table game and internet gaming operations as one of three “Licensed Agents” under the Delaware State Lottery Code.

Licensing, administration and control of gaming operations in Delaware is under the Delaware State Lottery Office and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement.

As of September 30, 2021 and 2020, Dover Downs was entitled to an approximately 42 % share of VLT revenue and an 80 % share of table games revenue.

As of March 31, 2022 and 2021, Bally’s Dover was entitled to an approximate 42 % share of VLT revenue and 80 % share of table games revenue.

Revenue is recognized when the wager is complete, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment.

The Company records revenue from its Delaware operations on a net basis, which is the percentage share of VLT and table games revenue received, as the Company acts as an agent in operating the gaming services on behalf of the State of Delaware.

Gaming revenue also includes the casino revenue of Hard Rock Biloxi, Bally’s Black Hawk, beginning January 23, 2020, Bally’s Kansas City and Bally’s Vicksburg, beginning July 1, 2020, Bally’s Atlantic City, beginning November 18, 2020, Bally’s Shreveport, beginning December 23, 2020, Bally’s Lake Tahoe, beginning April 6, 2021, Bally’s Evansville, beginning June 3, 2021, and Bally’s Quad Cities, beginning June 14, 2021, which is the aggregate net difference between gaming wins and losses, with deferred revenue recognized for prepaid deposits by prior to play, for chips outstanding and “ticket-in, ticket-out” coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots.

Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of credits played, are charged to revenue as the amount of the progressive jackpots increase.

Online gaming

Online gaming refers to digital versions of wagering games available in land-based casinos, such as blackjack, roulette and slot machines.

For these offerings, the Company operates similarly to land-based casinos, generating revenue from user wagers net of payouts and incentives awarded to users.

Online gaming revenue includes the online bingo and casino revenue of Gamesys, beginning October 1, 2021.

The revenue is earned from operating online bingo and casino websites, which consists of the difference between total amounts wagered by players less winnings payable to players, bonuses allocated and jackpot contributions.

Online gaming revenue is recognized at the point in time when the player completes a gaming session and payout occurs.

There is no significant degree of uncertainty involved in quantifying the amount of gaming revenue earned, including bonuses, jackpot contributions and loyalty points.

Bonuses, jackpot contributions and loyalty points are measured at fair value at each reporting date.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Gaming revenue also includes the casino revenue of Hard Rock Biloxi, Bally’s Black Hawk, beginning January 23, 2020, Bally’s Kansas City and Bally’s Vicksburg, beginning July 1, 2020, Bally’s Atlantic City, beginning November 18, 2020, Bally’s Shreveport, beginning December 23, 2020, Bally’s Lake Tahoe, beginning April 6, 2021, Bally’s Evansville, beginning June 3, 2021, and Bally’s Quad Cities, beginning June 14, 2021, which is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs, for chips outstanding and “ticket-in, ticket-out” coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots.

The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the effects on the consolidated financial statements of applying the revenue recognition guidance to the portfolio to not differ materially from that which would result if applying the guidance to an individual wagering contract.

The estimated standalone selling price of hotel rooms is determined based on observable prices.

The standalone selling price of food and beverage, and other miscellaneous goods and services is determined based upon the actual retail prices charged to customers for those items.

The performance obligations for the incentives earned under the loyalty programs are deferred and recognized as revenue when the customer redeems the incentive.

The allocated revenue for gaming wagers is recognized when the wagers occur as all such wagers settle immediately.

The estimated retail value related to goods and services provided to guests without charge or upon redemption under the Company’s player loyalty programs included in departmental revenues, and therefore reducing gaming revenues, are as follows for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2021 2020 2021 2020

Hotel $ 18,410 $ 3,962 $ 37,813 $ 9,710

Food and beverage 18,505 4,082 44,334 12,989

Other 2,513 464 4,923 2,270

$ 39,428 $ 8,508 $ 87,070 $ 24,969

Sports betting

Sports betting involves a user wagering money on an outcome or series of outcomes.

If a user wins the wager, the Company pays the user a pre-determined amount known as fixed odds.

Sports betting revenue is generated through built-in theoretical margins in each sports wagering opportunity offered to users.

Revenue is recognized as total wagers net of payouts made and incentives awarded to users.

During 2020, the Company entered into several multi-year agreements with third-party operators for online sports betting and iGaming market access in the states of Colorado and New Jersey from which the Company has received or expects to receive one-time, up front market access fees in cash or equity securities (specific to one operator agreement) and certain other fees in cash generally based on a percentage of the gross gaming revenue generated by the operator, with certain annual minimum guarantees due to the Company.

The one-time market access fees received have been recorded as deferred revenue and will be recognized as gaming revenue ratably over the respective contract terms, beginning with the commencement of operations of each respective agreement.

The Company recognized commissions in certain states from online sports betting and iGaming which are included in gaming revenue for the nine months ended September 30, 2021.

Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $ 8.7 million as of September 30, 2021 and is included in “Accrued liabilities” and “Other long-term liabilities” in the condensed consolidated balance sheets.

Racing revenue includes Bally’s Twin River’s, Bally’s Tiverton’s, Bally’s Arapahoe Park’s and Dover Downs’ share of wagering from live racing and the import of simulcast signals.

Racing revenue is recognized when the wager is complete based on an established take-out percentage.

The Company recognized commissions in certain states from online sports betting and iGaming which are included in gaming revenue for the three months ended March 31, 2022 and 2021.

Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $ 6.8 million as of March 31, 2022 and December 31, 2021, and is included in “Accrued liabilities” and “Other long-term liabilities” in the condensed consolidated balance sheets.

All other revenues, including market access, daily fantasy sports and B2B service revenue generated by the North America Interactive and International Interactive reportable segments, are recognized at the time the goods are sold or the service is provided.

Racing revenue includes Bally’s Twin River’s, Bally’s Tiverton’s, Bally’s Arapahoe Park’s and Bally’s Dover’s share of wagering from live racing and the import of simulcast signals.

Racing revenue is recognized upon completion of the wager based upon an established take-out percentage.

The Company functions as an agent to the pari-mutuel pool.

Therefore, fees and obligations related to the Company’s share of purse funding, simulcasting fees, tote fees, pari-mutuel taxes, and other fees directly related to the Company’s racing operations are reported on a net basis and included as a deduction to racing revenue.

Hotel, Food and Beverage and Retail, Entertainment and Other Revenue

Hotel revenue is recognized at the time of occupancy, which is when the customer obtains control through occupancy of the room.

Advance deposits for hotel rooms are recorded as liabilities until revenue recognition criteria are met.

Food and beverage revenue are recognized at the time the goods are sold from Company-operated outlets.

Food and beverage revenues are recognized at the time the goods are sold from Company-operated outlets.

The estimated standalone selling price of hotel rooms is determined based on observable prices.

The standalone selling price of food and beverage as well as retail, entertainment and other goods and services are determined based upon the actual retail prices charged to customers for those items.

Cancellation fees for hotel and meeting space services are recognized upon cancellation by the customer and are included in hotel, food and beverage revenue within our consolidated statements of operations.

Three Months Ended March 31,

(in thousands) 2022 2021

Hotel $ 15,902 $ 6,909

Food and beverage 16,710 10,449

Retail, entertainment and other 2,207 951

$ 34,819 $ 18,309

Sales tax and other taxes collected on behalf of governmental authorities are accounted for on a net basis and are not included in revenue or operating expenses.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

All other revenues, including market access, daily fantasy sports and B2B service revenue generated by the Bally Interactive operating segment, are recognized at the time the goods are sold or the service is provided.

Sales tax and other taxes collected on behalf of governmental authorities are accounted for on a net basis and are not included in revenue or operating expenses.

In the second quarter of 2021, the Company changed its reportable segments to better align with its strategic growth initiatives in light of recent and pending acquisitions.

In the fourth quarter of 2021, the Company changed its reportable segments to better align with its strategic growth initiatives in light of recent and pending acquisitions.

Refer to Note 18 “ Segment Reporting ” for further information.

The following tables provide a disaggregation of revenue by segment:

(in thousands) East West Other Total

Three Months Ended September 30, 2021

Gaming $ 131,338 $ 95,674 $ 582 $ 227,594

Racing 306 — 1,716 2,022

Hotel 17,883 15,020 — 32,903

Food and beverage 18,324 11,166 14 29,504

Other 9,124 2,743 10,889 22,756

Total revenue $ 176,975 $ 124,603 $ 13,201 $ 314,779

Three Months Ended September 30, 2020

Gaming $ 50,250 $ 46,338 $ — $ 96,588

Racing 68 — 1,616 1,684

Hotel 2,398 4,476 — 6,874

Food and beverage 3,230 3,659 — 6,889

Other 3,119 1,427 43 4,589

Total revenue $ 59,065 $ 55,900 $ 1,659 $ 116,624

Nine Months Ended September 30, 2021

(in thousands) Casinos & Resorts North America Interactive International Interactive Total

Three Months Ended March 31, 2022

Gaming $ 217,805 $ 6,645 $ 239,252 $ 463,702

Racing 1,696 — 4,897 6,593

Hotel 26,935 — — 26,935

Food and beverage 23,988 — — 23,988

Other 21,065 7,846 16,820 45,731

Retail, entertainment and other 11,242 8,582 13,822 33,646

Total revenue $ 279,970 $ 15,227 $ 253,074 $ 548,271

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Gaming $ 154,429 $ 849 — $ 155,278

Racing 1,115 — 3,702 4,817

Hotel 13,059 — — 13,059

Food and beverage 15,500 — — 15,500

Other 9,967 3,104 107 13,178

Retail, entertainment and other 6,445 1,984 — 8,429

Total revenue $ 189,433 $ 2,833 — $ 192,266

Revenue included in operations from SportCaller from the date of its acquisition, February 5, 2021, MKF from the date of its acquisition, March 23, 2021, Bally Interactive from the date of its acquisition, May 28, 2021, AVP from the date of its acquisition, July 12, 2021, and Telescope from the date of its acquisition, August 12, 2021, each through September 30, 2021 are reported in “Other.” Revenue included in operations from Bally’s Lake Tahoe from the date of acquisition, April 6, 2021, and Bally’s Quad Cities from the date of its acquisition, June 14, 2021, through September 30, 2021, are reported in “West.” Revenue included in operations from Bally’s Evansville from the date of its acquisition, June 3, 2021, through September 30, 2021, is reported in “East.” Refer to Note 5.

“Acquisitions” for further information.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company’s receivables related to contracts with customers are primarily comprised of marker balances and other amounts due from gaming activities, amounts due for hotel stays, and amounts due from tracks and off track betting (“OTB”) locations.

The Company’s receivables related to contracts with customers were $ 27.0 million and $ 12.0 million as of September 30, 2021 and December 31, 2020, respectively.

Contract and Contract Related Liabilities

Revenue included in operations from Bally’s Lake Tahoe from the date of acquisition, April 6, 2021, Bally’s Evansville from the date of its acquisition, June 3, 2021, and Bally’s Quad Cities from the date of its acquisition, June 14, 2021 are reported in Casinos & Resorts.

Revenue included in operations from SportCaller from the date of its acquisition, February 5, 2021, MKF from the date of its acquisition, March 23, 2021, Bally’s Interactive from the date of its acquisition, May 28, 2021, AVP from the date of its acquisition, July 12, 2021, Telescope from the date of its acquisition, August 12, 2021, Degree 53 from the date of its acquisition, October 25, 2021, and the North American operations of Gamesys, from the date of its acquisition, October 1, 2021 are reported in North America Interactive.

Revenue included in operations from the European and Asian activities from Gamesys is reported in International Interactive.

Refer to Note 5 “ Acquisition s ” for further information.

Contract Assets and Contract Related Liabilities

The Company’s receivables related to contracts with customers were $ 37.2 million and $ 35.5 million as of March 31, 2022 and December 31, 2021, respectively.

The Company has the following liabilities related to contracts with customers:

liabilities for loyalty programs, advance deposits made for goods and services yet to be provided and unpaid wagers.

All of the contract liabilities are short-term in nature.

All of the contract liabilities are short-term in nature and are included in “Accrued liabilities” in the condensed consolidated balance sheets.

Loyalty program incentives earned by customers are typically redeemed within one year from when they are earned and expire if a customer’s account is inactive for more than 12 months;

therefore, the majority of these incentives outstanding at the end of a period will either be redeemed or expire within the next 12 months.

While properties were operating at limited capacity, many extended the expiration dates for tiered status programs or temporarily suspended periodic purges of unused loyalty points.

While properties were operating at limited capacity, many properties extended the expiration dates for tiered status programs or temporarily suspended periodic purges of unused loyalty points.

As properties have resumed operations at full capacity, many have reinstated their pre-COVID-19 practices or put new loyalty programs into place.

The Company’s contract liabilities related to loyalty programs were $ 17.7 million and $ 15.5 million as of September 30, 2021 and December 31, 2020, respectively, and are included as “Accrued liabilities” in the condensed consolidated balance sheets.

The Company recognized $ 5.8 million and $ 1.4 million of revenue related to loyalty program redemptions for the three months ended September 30, 2021 and 2020, respectively, and $ 18.0 million and $ 3.7 million for the nine months ended September 30, 2021 and 2020.

Advance deposits are typically for future banquet events, hotel room reservations and interactive player deposits.

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The Company holds restricted cash for interactive player deposits and records a corresponding withdrawal liability.

The Company’s contract liabilities related to advance deposits from customers were $ 3.9 million and $ 1.0 million as of September 30, 2021 and December 31, 2020, respectively, and are included as “Accrued liabilities” in the condensed consolidated balance sheets.

Unpaid wagers include unpaid pari-mutuel tickets and unpaid sports bet tickets.

Unpaid pari-mutuel tickets not claimed within 12 months by the customer who earned them are escheated to the state.

The Company’s contract liabilities related to unpaid wagers were $ 1.9 million and $ 0.9 million as of September 30, 2021 and December 31, 2020, respectively, and are included as “Accrued liabilities” in the condensed consolidated balance sheets.

Unpaid wagers include the Company’s outstanding chip liability, unpaid slot and pari-mutuel and sports betting tickets.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Liabilities related to contracts with customers as of March 31, 2022 and December 31, 2021 were as follows:

(in thousands) March 31, 2022 December 31, 2021

Loyalty programs $ 19,759 $ 19,099

Advanced deposits from customers 26,415 29,168

Unpaid wagers 10,483 11,307

Total $ 56,657 $ 59,574

The Company recognized $ 8.3 million and $ 2.8 million of revenue related to loyalty program redemptions for the three months ended March 31, 2022 and 2021, respectively.

Recent Acquisitions

The Company accounted for all of the following recent acquisitions as business combinations using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805.

The Company accounted for all of the following acquisitions as business combinations using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805.

Under this method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed of the acquiree based upon their estimated fair values at the acquisition date.

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Significant assumptions utilized in the income approach are based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance.

The purchase price allocation for the acquisitions of Bally’s Atlantic City, Bally’s Shreveport, Bally’s Lake Tahoe, Bally’s Evansville, Bally’s Quad Cities, SportCaller, Monkey Knife Fight, Bally Interactive, AVP and Telescope, are preliminary and will be finalized when valuations are complete and final assessments of the fair value of other acquired assets and assumed liabilities are completed.

The purchase price allocation for the acquisitions of Bally’s Evansville, Bally’s Quad Cities, Gamesys and certain of the Bally’s Interactive Acquisitions, as defined below, are preliminary and will be finalized when valuations are complete and final assessments of the fair value of other acquired assets and assumed liabilities are completed.

There can be no assurance that such finalizations will not result in material changes from the preliminary purchase price allocations.

The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date), as the Company finalizes the valuations of certain tangible and intangible assets acquired and liabilities assumed.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company recorded transaction costs related to its recent and pending acquisitions of $ 6.8 million and $ 37.5 million during the three and nine months ended September 30, 2021, respectively, and $ 2.7 million and $ 7.0 million during the three and nine months ended September 30, 2020, respectively.

The Company recorded transaction costs related to its recent and pending acquisitions of $ 4.5 million and $ 12.3 million during the three months ended March 31, 2022 and 2021, respectively.

These costs are included in “Acquisition, integration and restructuring” in the condensed consolidated statements of operations.

Refer to Note 11 “ Acquisition, Integration and Restructuring ” for further information.

Bally’s Kansas City and Bally’s Vicksburg

On July 1, 2020, the Company completed its acquisition of the operations and real estate of Bally’s Kansas City and Bally’s Vicksburg from affiliates of Caesars Entertainment, Inc.

The total consideration paid by the Company in connection with the acquisition was approximately $ 229.9 million, or $ 225.5 million net of cash acquired, excluding transaction costs.

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed as of July 1, 2020 in connection with the acquisitions:

As of July 1, 2020

(in thousands) Preliminary as of December 31, 2020 Year to Date Adjustments Final as of September 30, 2021

Cash and cash equivalents $ 4,362 $ — $ 4,362

Accounts receivable, net 582 — 582

Inventory 164 — 164

Prepaid expenses and other current assets 686 ( 256 ) 430

Property and equipment, net 60,865 — 60,865

Right of use asset 10,315 — 10,315

Intangible assets, net 138,160 — 138,160

Other assets 117 — 117

Goodwill 53,896 380 54,276

Accounts payable ( 614 ) — ( 614 )

Accrued liabilities ( 3,912 ) ( 236 ) ( 4,148 )

Lease liability ( 34,452 ) — ( 34,452 )

Other long-term liabilities ( 306 ) 112 ( 194 )

Total purchase price $ 229,863 $ — $ 229,863

Revenue included in operations from Bally’s Kansas City and Bally’s Vicksburg for the three and nine months ended September 30, 2021 was $ 30.9 million and $ 91.4 million, respectively.

Net income included in operations from Bally’s Kansas City and Bally’s Vicksburg for the three and nine months ended September 30, 2021 was $ 4.3 million and $ 16.9 million, respectively.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Bally’s Atlantic City

On November 18, 2020, the Company completed its acquisition of Bally’s Atlantic City from Caesars and paid cash of approximately $ 24.7 million at closing, or $ 16.1 million net of cash acquired, excluding transaction costs.

The Company recorded a liability of $ 2.0 million related to a net working capital adjustment which was reflected in “Accrued liabilities” in the condensed consolidated balance sheets as of December 31, 2020.

The amount was paid in full during the first quarter of 2021.

In connection with the approval of the Company’s interim gaming license in the state of New Jersey, the Company committed to the New Jersey Casino Control Commission to spend $ 90.0 million, increased to $ 100.0 million in the second quarter of 2021, in capital expenditures over a span of five years to refurbish and upgrade the property’s facilities and expand its amenities.

In connection with this commitment, the Company reached an agreement with Caesars, whereby Caesars would reimburse the Company for $ 30.0 million of the capital expenditure commitment by December 31, 2021.

This commitment was accounted for as a contingent consideration asset under ASC 805 and was recognized at its present value as of the acquisition date, which was determined to be $ 27.7 million, as it represents consideration due back from the seller in connection with a business combination, and is included in “Prepaid expenses and other assets” in the condensed consolidated balance sheets.

This contingent consideration asset resulted in an adjusted purchase price of $( 0.9 ) million.

The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Atlantic City on November 18, 2020.

There were no purchase accounting adjustments recorded during the nine months ended September 30, 2021.

(in thousands) Preliminary as of September 30, 2021

Cash and cash equivalents $ 8,651

Accounts receivable, net 1,122

Inventory 721

Prepaid expenses and other current assets 1,402

Property and equipment, net 40,898

Intangible assets, net 1,120

Accounts payable ( 3,131 )

Accrued liabilities ( 7,983 )

Deferred income tax liabilities ( 11,132 )

Net assets acquired 31,668

Bargain purchase gain ( 32,595 )

Total purchase price $ ( 927 )

The identifiable intangible assets recorded in connection with the closing of the Bally’s Atlantic City acquisition based on preliminary valuations include rated player relationships of $ 0.9 million and hotel and conference pre-bookings of $ 0.2 million, which are being amortized on a straight-line basis over estimated useful lives of approximately eight years and three years , respectively.

The Company determined that the value of the intangible asset related to gaming licenses was de minimis, primarily due to the previously mentioned capital expenditure commitment required to obtain the licenses.

The preliminary fair value of the identifiable intangible assets acquired was determined by using a cost approach and an income approach for the rated player relationships and pre-bookings, respectively.

Based on the preliminary purchase price allocation, the fair value of the assets acquired and liabilities assumed exceed the purchase price consideration and therefore, a bargain purchase gain of $ 32.6 million was recorded during the fourth quarter ended December 31, 2020.

The Company believes that it was able to acquire the net assets of Bally’s Atlantic City for less than fair value as a result of a capital expenditure requirement imposed on the Company by the New Jersey Casino Control Commission, which would have been imposed on the seller had they not divested the property.

Revenue included in operations from Bally’s Atlantic City for the three and nine months ended September 30, 2021 was $ 46.8 million and $ 108.4 million, respectively.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Bally’s Shreveport Casino & Hotel

On December 23, 2020, the Company completed its acquisition of Bally’s Shreveport for a total purchase price of approximately $ 137.2 million.

Cash paid by the Company at closing, net of $ 5.0 million of cash acquired and offset by a receivable of $ 0.8 million resulting from a net working capital adjustment, was $ 133.1 million, excluding transaction costs.

The identifiable intangible assets recorded in connection with the closing of the Bally’s Shreveport acquisition based on preliminary valuations include gaming licenses of $ 57.7 million with an indefinite life and rated player relationships of $ 0.4 million, which are being amortized on a straight-line basis over estimated useful lives of approximately eight years .

The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach.

There were no purchase accounting adjustments recorded during the nine months ended September 30, 2021.

(in thousands) Preliminary as of September 30, 2021

Cash and cash equivalents $ 4,980

Accounts receivable, net 1,936

Inventory 495

Prepaid expenses and other current assets 245

Property and equipment, net 125,822

Right of use assets 9,260

Intangible assets, net 58,140

Other assets 403

Accounts payable and Accrued liabilities ( 6,138 )

Lease liability ( 14,540 )

Deferred tax liability ( 11,457 )

Other long-term liabilities ( 680 )

Net assets acquired 168,466

Bargain purchase gain ( 31,276 )

Total purchase price $ 137,190

Based on the preliminary purchase price allocation, the fair value of the assets acquired and liabilities assumed exceed the purchase price consideration and therefore, a bargain purchase gain of $ 31.3 million was recorded during the fourth quarter of 2020.

The Company believes that it was able to acquire the net assets of Bally’s Shreveport for less than fair value as a result of a distressed sale whereby Eldorado was required by the Federal Trade Commission to divest the Bally’s Shreveport property prior to its merger with Caesars coupled with the timing of the agreement to purchase which was in the middle of COVID-19 related shutdowns of casinos in the United States.

Revenue included in operations from Bally’s Shreveport for the three and nine months ended September 30, 2021 was $ 28.7 million and $ 90.6 million, respectively.

Net income included in operations from Bally’s Shreveport for the three and nine months ended September 30, 2021 was $ 4.0 million and $ 16.5 million, respectively.

Bally’s Lake Tahoe Casino Resort

On April 6, 2021, the Company acquired Bally’s Lake Tahoe, formerly MontBleu Resort Casino & Spa, in Lake Tahoe, Nevada from Eldorado and certain of its affiliates for $ 14.2 million, payable one year from the closing date and subject to customary post-closing adjustments.

The deferred purchase price is included within “Accrued liabilities” of the condensed consolidated balance sheet.

On April 6, 2021, the Company acquired Bally’s Lake Tahoe in Lake Tahoe, Nevada from Eldorado Resorts, Inc.

(“Eldorado”) and certain of its affiliates for $ 14.2 million, payable in cash one year from the closing date and subject to customary post-closing adjustments.

The deferred purchase price is included within “Accrued liabilities” of the condensed consolidated balance sheet as of March 31, 2022 and December 31, 2021.

The identifiable intangible assets recorded in connection with the closing of the Bally’s Lake Tahoe acquisition include gaming licenses of $ 5.2 million with an indefinite life and a trade name of $ 0.2 million, which was amortized on a straight-line basis over its estimated useful life of approximately six months .

The fair value of the identifiable intangible assets acquired was determined by using an income approach.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The identifiable intangible assets recorded in connection with the closing of the Bally’s Lake Tahoe acquisition based on preliminary valuations include gaming licenses of $ 5.2 million with an indefinite life and a tradename of $ 0.2 million, which is being amortized on a straight-line basis over its estimated useful life of approximately six months .

The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach.

As of April 6, 2021

(in thousands) Preliminary as of June 30, 2021 Year to Date Adjustments Preliminary as of September 30, 2021

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Lake Tahoe on April 6, 2021:

(in thousands) Preliminary as of December 31, 2021 Year to Date Adjustments Final as of March 31, 2022

Total current assets $ 4,683 $ — $ 4,683

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Accounts payable and accrued liabilities ( 3,402 ) ( 144 ) ( 3,546 )

Lease liability ( 52,927 ) — ( 52,927 )

Lease liabilities ( 52,927 ) — ( 52,927 )

Other long-term liabilities ( 941 ) 37 ( 904 )

2 unchanged sentences

Total purchase price $ 14,172 $ — $ 14,172

Based on the preliminary purchase price allocation, the fair value of the assets acquired and liabilities assumed exceed the purchase price consideration and therefore, a bargain purchase gain of $ 2.6 million was recorded during the second quarter ended June 30, 2021.

An adjustment of $ 0.3 million, reducing the bargain purchase gain to $ 2.3 million, was recorded in the third quarter ended September 30, 2021.

Revenue included in operations from Bally’s Lake Tahoe for the three and nine months ended September 30, 2021 was $ 11.3 million and $ 21.0 million, respectively.

Net income included in operations from Bally’s Lake Tahoe for the three and nine months ended September 30, 2021 was $ 0.5 million and $ 1.0 million, respectively.

During the year ended December 31, 2021, the Company recorded a bargain purchase gain of $ 2.0 million based on the preliminary purchase price allocation as the fair value of the assets acquired and liabilities assumed exceeded the purchase price consideration.

During the three months ended March 31, 2022, based on the final purchase price allocation, an adjustment of $ 0.1 million was recorded reducing the bargain purchase gain to $ 1.9 million.

The original agreement to acquire Bally’s Lake Tahoe from Eldorado was made concurrently with the agreement of Bally’s Shreveport and the Company believes that it was able to acquire Bally’s Lake Tahoe for less than fair value as a result of a distressed sale whereby Eldorado was required by the Federal Trade Commission to divest the properties prior to its merger with Caesars coupled with the timing of the agreement to purchase which was in the middle of COVID-19 related shutdowns of casinos in the United States.

Bally’s Evansville

On June 3, 2021, the Company completed the acquisition of the Bally’s Evansville casino operations from Caesars.

The total purchase price was $ 139.7 million, subject to customary adjustments.

Cash paid by the Company at closing, net of $ 9.4 million cash acquired and offset by a payable of $ 1.7 million resulting from a net working capital adjustment, was $ 128.1 million, excluding transaction costs.

In connection with the acquisition of the Bally’s Evansville casino operations, the Company entered into a sale-leaseback arrangement with an affiliate of Gaming & Leisure Properties, Inc.

(“GLPI”) for the Dover Downs property.

The total purchase price was $ 139.7 million.

Cash paid by the Company at closing, net of $ 9.4 million cash acquired, was $ 130.4 million, excluding transaction costs.

In connection with the acquisition of the Bally’s Evansville casino operations, the Company entered into a sale-leaseback arrangement with an affiliate of GLPI for the Bally’s Dover property.

Refer to Note 13 “ Leases ” for further information.

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As of June 3, 2021

(in thousands) Preliminary as of June 30, 2021 Year to Date Adjustments Preliminary as of September 30, 2021

There were no purchase accounting adjustments recorded during the three months ended March 31, 2022.

(in thousands) Preliminary as of March 31, 2022

Cash and cash equivalents $ 9,355

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Accounts payable and accrued liabilities ( 10,927 )

Lease liability ( 285,772 ) — ( 285,772 )

Lease liabilities ( 285,772 )

Deferred tax liability ( 7,233 )

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Total purchase price $ 139,708

Based on the preliminary purchase price allocation, the fair value of the assets acquired and liabilities assumed exceed the purchase price consideration and therefore, a bargain purchase gain of $ 21.5 million was recorded during the second quarter ended June 30, 2021.

An adjustment of $ 0.6 million, reducing the bargain purchase gain to $ 20.9 million, was recorded in the third quarter ended September 30, 2021.

Based on the preliminary purchase price allocation, the fair value of the assets acquired and liabilities assumed exceeded the purchase price consideration and therefore, a bargain purchase gain of $ 20.9 million was recorded during the year ended December 31, 2021.

The Company believes it was able to acquire Bally’s Evansville for less than fair value as a result of a distressed sale prior to Eldorado’s merger with Caesars, as noted above.

Revenue included in operations from Bally’s Evansville for the three and nine months ended September 30, 2021 was $ 40.1 million and $ 51.8 million, respectively.

Net income included in operations from Bally’s Evansville for the three and nine months ended September 30, 2021 was $ 4.3 million and $ 5.1 million, respectively.

Bally’s Quad Cities Casino & Hotel

On June 14, 2021, the Company completed its acquisition of Bally’s Quad Cities in Rock Island, Illinois.

Pursuant to the terms of the Equity Purchase Agreement, the Company has acquired all of the outstanding equity securities of The Rock Island Boatworks, Inc., for a purchase price of $ 118.9 million in cash, subject to customary post-closing adjustments.

Cash paid by the Company at closing, net of $ 3.2 million cash acquired, the $ 4.0 million deposit paid in the third quarter of 2020 and offset by a receivable of $ 0.3 million resulting from a networking capital adjustment, was $ 112.3 million, excluding transaction costs.

The identifiable intangible assets recorded in connection with the closing of the Bally’s Quad Cities acquisition based on preliminary valuations include gaming licenses of $ 30.3 million with an indefinite life, as well as, rated player relationships and a tradename of $ 0.7 million and $ 0.2 million, respectively, which are being amortized on a straight-line basis over their estimated useful lives of approximately 9 years and 4 months, respectively.

Pursuant to the terms of the Equity Purchase Agreement, the Company acquired all of the outstanding equity securities of The Rock Island Boatworks, Inc., for a purchase price of $ 118.9 million in cash, subject to customary post-closing adjustments.

Cash paid by the Company, net of $ 2.9 million cash acquired and the $ 4.0 million deposit paid in the third quarter of 2020, was $ 112.0 million, excluding transaction costs.

The identifiable intangible assets recorded in connection with the closing of the Bally’s Quad Cities acquisition based on preliminary valuations include gaming licenses of $ 30.3 million with an indefinite life, as well as rated player relationships and a tradename of $ 0.7 million and $ 0.2 million, respectively, which are being amortized on a straight-line basis over their estimated useful lives of approximately nine years and four months , respectively.

The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach.

Goodwill recognized is deductible for local tax purposes and has been assigned as of the acquisition date to the Company’s Casinos & Resorts reportable segment, which includes the reporting unit expected to benefit from the synergies of the acquisition.

Qualitative factors that contribute to the recognition of goodwill include an organized workforce and expected synergies from integrating the property into the Company’s casino portfolio and future development of its omni-channel strategy.

BALLY’S CORPORATION

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The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the Bally’s Quad Cities acquisition on June 14, 2021.

As of June 14, 2021

(in thousands) Preliminary as of June 30, 2021 Year to Date Adjustments Preliminary as of September 30, 2021

There were no purchase accounting adjustments recorded during the three months ended March 31, 2022.

(in thousands) Preliminary as of March 31, 2022

Cash and cash equivalents $ 2,933

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Total purchase price $ 118,928

Revenue included in operations from Bally’s Quad Cities for the three and nine months ended September 30, 2021 was $ 12.3 million and $ 14.6 million, respectively.

Interactive Acquisitions

North America Interactive Acquisitions

SportCaller - On February 5, 2021, the Company acquired SportCaller for total consideration of $ 42.6 million including $ 24.0 million in cash and 221,391 of the Company’s common shares at closing, pending adjustment, and up to $ 12.0 million in value of additional shares if SportCaller meets certain post-closing performance targets (calculated based on a USD to Euro exchange ratio of 0.8334 ).

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Refer to Note 9 “ Fair Value Measurements ” for further information.

Bally Interactive - On May 28, 2021, the Company acquired Bally Interactive, formerly Bet.Works Corp., for approximately $ 71.6 million in cash and 2,084,765 of the Company’s common shares, subject in each case to customary adjustments.

The shareholders of Bally Interactive will not transfer any shares of Company common stock received prior to June 1, 2022 and, for the following 12 months, may transfer only up to 1% of the Company’s common stock per every 90 days.

AVP - On July 12, 2021, the Company acquired AVP, a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the United States, for $ 10.0 million in cash, subject to customary post-closing adjustments.

Telescope - On August 12, 2021, the Company acquired an 84.16 % controlling interest in Telescope, a leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams, for $ 27.7 million, subject to customary post-closing adjustments.

Bally’s Interactive - On May 28, 2021, the Company acquired Bally’s Interactive, formerly Bet.Works Corp., for total consideration of $ 192.1 million, which consisted of $ 70.4 million in cash, net of cash acquired, and 2,084,765 of the Company’s common shares, subject in each case to customary adjustments.

The shareholders of Bally’s Interactive will not transfer any shares of Company common stock received prior to June 1, 2022 and, for the following 12 months, may transfer only up to 1% of the Company’s common stock per every 90 days.

AVP - On July 12, 2021, the Company acquired AVP, a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the US, for $ 10.0 million in cash.

The remaining 15.84 % of Telescope is owned by certain selling shareholders and is reported as a non-controlling interest.

The non-controlling interest is convertible into shares of Bally’s common stock based on a fixed exchange ratio share-settlement feature, valued using the Company’s common stock price, and is classified as permanent equity.

Earnings attributable to the non-controlling interest are not material for the quarter ended September 30, 2021.

Earnings attributable to the non-controlling interest are not material for the quarter ended March 31, 2022 and the year ended December 31, 2021.

Degree 53 - On October 25, 2021, the Company acquired Degree 53, a UK-based creative agency that specializes in multi-channel website and personalized mobile app and software development for the online gambling and sports industries, for $ 7.8 million in cash, net of cash acquired.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The identifiable intangible assets recorded in connection with the closing of SportCaller, MKF, Bally Interactive, AVP, and Telescope (collectively the “Bally Interactive Acquisitions”) are based on preliminary valuations and include customer relationships of $ 41.5 million, which are being amortized over estimated useful lives between three and ten years , developed software of $ 122.4 million, which is being amortized over its estimated useful lives between three and ten years , and tradenames of $ 3.1 million, which are being amortized over their estimated useful lives between ten and 15 years.

Total goodwill recorded in connection with the Bally Interactive Acquisitions was $ 243.1 million.

These Bally Interactive transactions have been accounted for as business combinations using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805.

The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the Bally Interactive Acquisitions:

(in thousands) Preliminary as of September 30, 2021

The identifiable intangible assets recorded in connection with the closing of SportCaller, MKF, Bally’s Interactive, AVP, Telescope and Degree 53 (collectively the “North America Interactive Acquisitions”) include customer relationships of $ 41.5 million, which are being amortized over estimated useful lives between three and ten years , developed software of $ 122.4 million, which is being amortized over estimated useful lives between three and ten years , and tradenames of $ 3.1 million, which are being amortized over estimated useful lives between ten and 15 years.

Total goodwill recorded in connection with the North America Interactive Acquisitions was $ 250.5 million.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill, which consist primarily of benefits from acquiring a talented technology workforce and management team experienced in the online gaming industry, and securing buyer-specific synergies expected to contribute to the Company’s omni-channel strategy which are expected to increase revenue and profits within the Company’s North America Interactive reportable segment.

Goodwill of the Bally’s Interactive Acquisitions has been assigned as of the acquisition date to the Company’s North America Interactive reportable segment.

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the North America Interactive Acquisitions.

There were no purchase accounting adjustments recorded during the three months ended March 31, 2022.

(in thousands) As of March 31, 2022 (1)

Cash and cash equivalents $ 8,689

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Acquired non-controlling interest ( 3,760 )

Net investment in the Bally Interactive Acquisitions $ 391,035

During the nine months ended September 30, 2021, the Company recorded purchase accounting adjustments for MKF, SportCaller and Bally Interactive, increasing intangible assets by $ 0.5 million and reducing goodwill and current liabilities by $ 0.5 million and $ 1.1 million, respectively.

Revenue included in operations from the Bally Interactive Acquisitions from their respective dates of acquisition, each noted above, for the three and nine months ended September 30, 2021 was $ 11.4 million and $ 18.0 million, respectively.

Supplemental Pro Forma Consolidated Information

The following table represents unaudited supplemental pro forma consolidated revenue and net (loss) income based on Bally’s Lake Tahoe and Bally’s Evansville’s historical reporting periods as if the acquisitions had occurred as of January 1, 2020.

The revenue, earnings and proforma effects of other acquisitions completed during the nine months ended September 30, 2021, which include Bally’s Quad Cities and the Bally Interactive Acquisitions, are not material to results of operations, individually or in the aggregate:

Three Months Ended Nine Months Ended

(in thousands, except per share data) September 30, 2020 September 30, 2021 September 30, 2020

Revenue $ 159,708 $ 844,356 $ 349,100

Net income (loss) $ 11,111 $ ( 3,145 ) $ ( 46,140 )

Net income (loss) per share, basic $ 0.36 $ ( 0.07 ) $ ( 1.50 )

Net income (loss) per share, diluted $ 0.36 $ ( 0.07 ) $ ( 1.50 )

Net investment in the North America Interactive Acquisitions $ 400,334

__________________________________

(1) The purchase price allocation of Bally’s Interactive, AVP, Telescope and Degree 53 are preliminary and final for SportCaller and MKF as of March 31, 2022.

Gamesys Acquisition

On October 1, 2021, the Company completed the acquisition of Gamesys.

Total consideration was $ 2.60 billion, which consisted of $ 2.08 billion paid in cash and 9,773,537 shares of Bally’s common stock.

Cash paid by the Company at closing, net of cash received of $ 183.3 million and a $ 10.3 million post-acquisition expense, explained below, was $ 1.90 billion, excluding transaction costs.

The identifiable intangible assets recorded in connection with the closing of Gamesys are based on preliminary valuations and primarily include customer relationships of $ 980.2 million and developed technology of $ 282.0 million, both of which are being amortized over seven years , and trade names of $ 249.8 million, which have indefinite lives.

Total goodwill of $ 1.68 billion represents the excess purchase price over the preliminary fair value of the assets acquired and liabilities assumed.

Goodwill associated with the Gamesys acquisition is assigned as of the acquisition date to the Company’s International Interactive and North America Interactive reportable segments in the amounts of $ 1.64 billion and $ 33.3 million respectively, which include the reporting units expected to benefit from the synergies arising from the acquisition.

The assignment of goodwill to reporting units is based upon preliminary valuations subject to change throughout the measurement period.

Goodwill recognized is not deductible for local tax purposes.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In connection with the acquisition of Gamesys, certain unvested and outstanding equity options held by Gamesys employees were discretionarily accelerated and vested by the Gamesys Board of Directors, requiring allocation of the fair value of post-acquisition service to purchase consideration, with the remainder allocated to non-recurring post-acquisition expense.

The fair value of $ 36.4 million was attributed to pre-acquisition service and included in consideration transferred.

In the fourth quarter of 2021, the fair value of $ 10.3 million, attributable to post acquisition expense was recorded within “Advertising, general, and administrative” expense in the consolidated statements of operations.

The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Gamesys as of October 1, 2021.

(in thousands) Preliminary as of December 31, 2021 Year to Date Adjustments Preliminary as of March 31, 2022

Cash and cash equivalents and restricted cash $ 183,306 $ — $ 183,306

Accounts receivable, net 35,851 — 35,851

Prepaid expenses and other current assets

27,876 542 28,418

Property and equipment, net 15,230 — 15,230

Right of use assets, net 14,185 — 14,185

1,678,476 ( 542 ) 1,677,934

Intangible assets, net 1,513,023 — 1,513,023

Other assets 17,668 — 17,668

Accounts payable ( 47,881 ) — ( 47,881 )

Accrued income taxes ( 40,250 ) — ( 40,250 )

Accrued liabilities ( 177,109 ) — ( 177,109 )

Long-term debt, net ( 456,469 ) — ( 456,469 )

Lease liabilities ( 14,185 ) — ( 14,185 )

Deferred tax liability ( 143,924 ) — ( 143,924 )

Other long-term liabilities ( 6,680 ) — ( 6,680 )

Total purchase price

$ 2,599,117 $ — $ 2,599,117

Pending Acquisitions

3 unchanged sentences

In addition, the Company agreed to lease the land underlying the Tropicana property from GLPI for an initial term of 50 years at an annual rent of $ 10.5 million, subject to increases over time.

The Company and GLPI will also enter into a sale-and-leaseback transaction relating to the Company’s Black Hawk Casinos properties and the Bally’s Quad Cities property for a cash purchase price of $ 150.0 million payable by GLPI.

The lease will have initial annual fixed rent of $ 12.0 million, subject to increase over time.

The Company expects to complete the acquisition of Tropicana Las Vegas during the year ended December 31, 2022.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Supplemental Pro Forma Consolidated Information

The following unaudited pro forma consolidated financial information for the three months ended March 31, 2021 combines the Company’s historical results with pro forma amounts for Bally’s Lake Tahoe, Bally’s Evansville and Gamesys.

The unaudited pro forma consolidated financial information assumes that the acquisitions of Bally’s Lake Tahoe, Bally’s Evansville and Gamesys had occurred as of January 1, 2020.

The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments related to the issuance of new debt and equity offerings as of January 1, 2020 as well as non-recurring adjustments for amortization of acquired intangible assets, compensation expense for share-based compensation arrangements that were cash settled in conjunction with the acquisitions, interest expense, transaction costs, together with the consequential tax effects.

The revenue, earnings and pro forma effects of other acquisitions completed during the year ended December 31, 2021, which include Bally’s Interactive Acquisitions and Bally’s Quad Cities, are not material to results of operations, individually or in the aggregate.

These unaudited pro forma financial results are presented for informational purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the acquisitions actually taken place on January 1, 2020.

In addition, these results are not intended to be a projection of future results and do not reflect events that may occur, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the acquisitions.

Three Months Ended

(in thousands) March 31, 2021

Revenue $ 506,615

Net income $ 14,670

PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of March 31, 2022 and December 31, 2021, prepaid expenses and other current assets was comprised of the following:

March 31, December 31,

(in thousands) 2022 2021

Services and license agreements $ 25,810 $ 21,496

Due from payment service providers 13,832 15,984

Prepaid marketing 12,352 10,066

Sales tax 11,075 18,308

Unbilled revenue 9,929 7,759

Convertible loans 5,774 —

Deposits 4,991 8,748

Prepaid insurance 4,744 9,637

Purse funds 1,482 8,286

Other 3,115 4,179

Total prepaid expenses and other current assets $ 93,104 $ 104,463

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

PROPERTY AND EQUIPMENT

As of March 31, 2022 and December 31, 2021, property and equipment was comprised of the following:

(in thousands) March 31, 2022 December 31, 2021

Land $ 75,328 $ 75,328

Land improvements 34,704 34,704

Building and improvements 669,455 650,837

Equipment 200,280 182,006

Furniture and fixtures 51,689 47,258

Construction in process 64,914 53,715

Total property, plant and equipment 1,096,370 1,043,848

Accumulated depreciation ( 219,095 ) ( 205,197 )

Property and equipment, net $ 877,275 $ 838,651

Depreciation expense relating to property and equipment for the three months ended March 31, 2022 and 2021 was $ 16.7 million and $ 11.1 million, respectively.

During the three months ended March 31, 2022 there was $ 0.3 million of capitalized interest.

There was no capitalized interest during the three months ended March 31, 2021.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

GOODWILL AND INTANGIBLE ASSETS

The change in carrying value of goodwill by reportable segment for the nine months ended September 30, 2021 and 2020 is as follows (in thousands):

East West Other Total

The change in carrying value of goodwill by reportable segment for the three months ended March 31, 2022 is as follows (in thousands):

Casinos & Resorts North America Interactive International Interactive Total

Goodwill as of December 31, 2021 (1)

Goodwill from current year business acquisitions — 14,593 243,138 257,731

$ 201,952 $ 283,358 $ 1,637,343 $ 2,122,653

Effect of foreign exchange — ( 272 ) ( 39,207 ) ( 39,479 )

Purchase accounting adjustments on prior year business acquisitions — — ( 542 ) ( 542 )

Goodwill as of September 30, 2021

Goodwill as of March 31, 2022 (1)

$ 201,952 $ 283,086 $ 1,597,594 $ 2,082,632

East West Total

Goodwill as of December 31, 2019 $ 84,148 $ 48,934 $ 133,082

Goodwill from current year business acquisitions — 58,743 58,743

Impairment charges — ( 5,254 ) ( 5,254 )

Goodwill as of September 30, 2020 $ 84,148 $ 102,423 $ 186,571

The change in intangible assets, net for the nine months ended September 30, 2021 is as follows (in thousands):

__________________________________

(1) Casinos & Resorts amounts are net of accumulated goodwill impairment charges of $ 5.4 million.

The change in intangible assets, net for the three months ended March 31, 2022 is as follows (in thousands):

Intangible assets, net as of December 31, 2021 $ 2,477,952

Intangible assets from current year business combinations 357,895

Additions in current period 18,354

Change in TRA ( 2,564 )

Effect of foreign exchange ( 32,703 )

Impairment charges ( 4,675 )

Accumulated amortization ( 30,123 )

Intangible assets, net as of September 30, 2021

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Other ( 1,074 )

Amortization ( 62,138 )

Intangible assets, net as of March 31, 2022

The Company’s identifiable intangible assets consist of the following:

remaining life

(in years) September 30, 2021

(in years) March 31, 2022

(in thousands, except years) Gross Carrying Amount Accumulated

7 unchanged sentences

Developed technology 6.9 386,434 ( 32,669 ) 353,765

Internally developed software 4.8 35,723 ( 1,713 ) 34,010

Gaming licenses 8.5 32,769 ( 2,526 ) 30,243

Other 4.3 2,413 ( 1,241 ) 1,172

2 unchanged sentences

Gaming licenses Indefinite 478,171 — 478,171

Bally’s trade name Indefinite 18,981 — 18,981

Novelty game licenses Indefinite 1,213 — 1,213

Trade names Indefinite 259,980 — 259,980

Other Indefinite 648 — 648

Total unamortizable intangible assets 738,799 — 738,799

Total intangible assets, net $ 2,571,770 $ ( 173,943 ) $ 2,397,827

__________________________________

(1) Naming rights intangible asset in connection with Sinclair Agreement.

1 unchanged sentence

Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks.

There was no amortization expense for the year ended December 31, 2020.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

remaining life

7 unchanged sentences

Hard Rock license 25.5 8,000 ( 1,818 ) 6,182

Player relationships 5.8 10,515 ( 5,483 ) 5,032

Customer relationships 6.7 1,026,797 ( 46,789 ) 980,008

Developed technology 7.2 392,481 ( 19,690 ) 372,791

Internally developed software 4.8 20,952 ( 727 ) 20,225

Gaming licenses 10.0 30,409 ( 591 ) 29,818

Other 4.4 2,413 ( 1,121 ) 1,292

2 unchanged sentences

Gaming licenses Indefinite 478,171 — 478,171

Bally’s trade name Indefinite 19,052 — 19,052

Novelty game licenses Indefinite 1,213 — 1,213

Trade names Indefinite 265,099 — 265,099

Other Indefinite 1,738 — 1,738

Total unamortizable intangible assets 745,008 — 745,008

Total intangible assets, net $ 2,591,890 $ ( 113,938 ) $ 2,477,952

__________________________________

(2) See note (1) above.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

2021 Tradename Impairment

During the second quarter of 2021, the Company committed to rebrand a majority of its casino portfolio with the Bally’s tradename.

In connection with this rebranding initiative, the Company determined it should complete an interim quantitative impairment test of its tradenames at Dover Downs and Bally’s Black Hawk, formerly the Black Hawk Casinos.

As a result of the analysis, the Company recorded an impairment charge of $ 4.7 million during the second quarter ended June 30, 2021 which is recorded within “ Goodwill and asset impairment” of the condensed consolidated statement of operations.

Dover Downs and Bally’s Black Hawk are reported within the East and West reportable segments, respectively.

2020 Black Hawk Casinos Impairment

Late in the first quarter of 2020, as a result of the economic and market conditions surrounding the COVID-19 pandemic and the decline in stock price and market capitalization the Company experienced at the time, the Company determined that it was more likely than not that the carrying value of all of its reporting units exceeded these units’ respective fair values and performed an interim quantitative impairment test of goodwill.

Based on this analysis, the Company determined that only the carrying value of its Black Hawk Casinos reporting unit exceeded its fair value by an amount that exceeded the assigned goodwill and indefinite lived intangibles as of the acquisition date.

As a result, the Company recorded a total impairment charge of $ 8.6 million for the nine months ended September 30, 2020, which is included in the “West” reportable segment, and was allocated between goodwill and intangible assets with charges of $ 5.3 million and $ 3.3 million, respectively.

Refer to Note 5 “Acquisitions” for further information about the preliminary purchase price allocation and goodwill and intangible balance estimated as of the acquisition date.

DERIVATIVE INSTRUMENTS

Foreign Exchange Forward Contracts

On April 16, 2021, a subsidiary of the Company entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP-denominated purchase price related to the Gamesys acquisition pursuant to which the subsidiary can purchase approximately £ 900 million at a contracted exchange rate.

On April 16, 2021, a subsidiary of the Company entered into two foreign exchange forward contracts to hedge the risk of appreciation of both the GBP-denominated and Euro-denominated debt held by Gamesys which would be paid off at closing of the Gamesys acquisition pursuant to which the subsidiary can purchase £ 200 million and € 336 million, at contracted exchange rates, respectively.

To enter into these foreign exchange forward contracts, the Company paid total premiums to the contract counterparties of $ 22.6 million.

On August 20, 2021, two of the above mentioned foreign exchange forward contracts were modified, decreasing the notional amount of the GBP-denominated forward purchase commitments by £ 746 million to £ 354 million, collectively.

The Company received $ 1.7 million upon settlement of the modification, which decreased the remaining fair value of the contracts.

The Company’s foreign exchange forward contracts are not designated as hedging instruments under ASC 815.

These derivative instruments are reported at fair value as an asset or liability in the condensed consolidated balance sheet.

Gains (losses) recognized in earnings resulting from the change in fair value are reported within “Other, net” on the condensed consolidated statements of operations.

Sinclair Agreement

As noted in Note 2 “Significant Accounting Policies,” on November 18, 2020, Bally’s entered into a long-term strategic relationship with Sinclair.

The Sinclair Agreement provides for Performance Warrants and Options, the accounting for which is explained below.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Performance Warrants - The Performance Warrants are accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company’s own stock and thus equity classification is precluded under ASC 815.

The Performance Warrants are expected to continue to be classified as liability awards with changes in fair value reported within “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.

Options - As of December 31, 2020, the Options were accounted for as a derivative liability because the Options could have been required to be settled in cash, outside the Company’s control, prior to formal stockholder approval.

Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity, at which point, the Options were adjusted to fair value of $ 59.7 million and were reclassified from “Naming rights liabilities” to “Additional paid-in-capital” in the condensed consolidated balance sheet.

The increase in fair value of the Options from $ 58.2 million as of December 31, 2020, through January 27, 2021 was $ 1.5 million and resulted in a mark to market loss in the first quarter of 2021, reported within “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.

The fair values of derivative assets and liabilities not designated as hedging instruments as of September 30, 2021 and December 31, 2020 are as follows:

(in thousands) Balance Sheet Location September 30,

2021 December 31,

Foreign exchange forward contracts Prepaid expenses and other current assets $ 106 $ —

Total Assets $ 106 $ —

Sinclair Performance Warrants Naming rights liabilities $ 87,964 $ 88,119

Sinclair Options Naming rights liabilities — 58,198

Total Liabilities $ 87,964 $ 146,317

The gains (losses) recognized in the condensed consolidated statement of operations for derivatives not designated as hedging instruments during the three and nine months ended September 30, 2021 are as follows:

Condensed Consolidated Statements of Operations Location September 30, 2021

(in thousands) Three months ended Nine months ended

Foreign exchange forward contracts Other, net $ ( 6,003 ) $ ( 20,776 )

Sinclair Performance Warrants Change in value of naming rights liabilities 6,965 155

Sinclair Options Change in value of naming rights liabilities — ( 1,526 )

There was no gain (loss) recognized in the condensed consolidated statement of operations for the three and nine months ended September 30, 2020.

Amortization of intangible assets was approximately $ 62.1 million and $ 1.7 million for the three months ended March 31, 2022 and 2021.

The following table reflects the remaining amortization expense associated with the finite-lived intangible assets as of March 31, 2022:

(in thousands)

Remaining 2022 $ 185,269

Thereafter 518,557

Total $ 1,659,028

FAIR VALUE MEASUREMENTS

7 unchanged sentences

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:

September 30, 2021

(in thousands) Level 1 Level 2 Level 3

Foreign exchange forward contracts $ — $ 106 $ —

Other current assets 336 — —

March 31, 2022

(in thousands) Balance Sheet Location Level 1 Level 2 Level 3

Other current assets Prepaid expenses and other current assets $ 36 $ — $ —

Convertible loans Prepaid expenses and other current assets 5,774 — —

Convertible loans Other assets — — 2,138

Total $ 5,810 $ — $ 2,138

Sinclair Performance Warrants

Contingent consideration — — 43,691

Naming rights liabilities $ — $ — $ 56,185

Contingent consideration Contingent consideration payable — — 13,077

Total $ — $ — $ 69,262

December 31, 2021

(in thousands) Level 1 Level 2 Level 3

Sinclair Performance Warrants $ — $ — $ 88,119

Sinclair Options — 58,198 —

(in thousands) Balance Sheet Location Level 1 Level 2 Level 3

Other current assets Prepaid expenses and other current assets $ 176 $ — $ —

Convertible loans Other assets 5,905 — 2,025

Total $ 6,081 $ — $ 2,025

The Performance Warrants and acquisition related contingent consideration payable are Level 3 liabilities.

A summary of the Level 3 activity is as follows:

( in thousands) Performance Warrants Contingent Consideration Total

Sinclair Performance Warrants Naming rights liabilities $ — $ — $ 69,564

Contingent consideration Contingent consideration payable — — 34,931

Total $ — $ — $ 104,495

The following table summarizes the changes in fair value of the Company’s Level 3 assets and liabilities:

( in thousands) Sinclair Performance Warrants Contingent Consideration Convertible Loans Total

Beginning as of December 31, 2021 $ 69,564 $ 34,931 $ 2,025 $ 106,520

Additions in the period (acquisition fair value) — — 167 167

Reductions in the period — ( 15,862 ) — ( 15,862 )

Change in fair value ( 13,379 ) ( 5,992 ) ( 54 ) ( 19,425 )

Ending as of September 30, 2021 $ 87,964 $ 43,691 $ 131,655

Foreign exchange forward contracts

The fair values of foreign exchange forward contract assets and liabilities are classified within Level 2 of the fair value hierarchy as the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.

Ending as of March 31, 2022 $ 56,185 $ 13,077 $ 2,138 $ 71,400

( in thousands) Sinclair Performance Warrants Contingent Consideration Total

Beginning as of December 31, 2020 $ 88,119 $ — $ 88,119

Additions in the period (acquisition fair value) — 58,623 58,623

Change in fair value 25,880 ( 3,142 ) 22,738

Ending as of March 31, 2021 $ 113,999 $ 55,481 $ 169,480

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The gains (losses) recognized in the condensed consolidated statement of operations for derivatives not designated as hedging instruments during the three months ended March 31, 2022 and 2021 are as follows:

Condensed Consolidated Statements of Operations Location Three months ended March 31,

(in thousands) 2022 2021

Sinclair Performance Warrants Change in value of naming rights liabilities $ 13,379 $ ( 25,880 )

Sinclair Options Change in value of naming rights liabilities $ — $ ( 1,526 )

Sinclair Performance Warrants

2 unchanged sentences

The Performance warrants are valued using an option pricing model, considering the Company’s estimated probabilities of achieving the performance milestones for each tranche.

Inputs to this valuation approach include volatility of the Company’s common stock trading price, risk free interest rates, the Company’s common stock price as of the valuation date, and expected terms.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Inputs to this valuation approach include volatility of 63 %, risk free rates between 1.02 % and 1.24 %, the Company’s common stock price for each period and expected terms between 3.4 and 4.9 years.

Sinclair Options

The fair value was based on a Black-Scholes model using Level 2 inputs, including volatility rates, risk free rates, the Company’s common stock price and expected term.

Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity.

Contingent consideration

3 unchanged sentences

These changes in fair value are recognized within “Other, net” of the condensed consolidated statements of operations.

Refer to Note 5 “Acquisitions” for further information.

Sinclair Options

As noted in Note 7 “Derivative Instruments,” as of December 31, 2020, the Sinclair Options were accounted for as a derivative liability.

The fair value was based on a Black-Scholes model using Level 2 inputs, including volatility rates, risk free rates, the Company’s common stock price and expected term.

Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity.

During the first quarter of 2022, the Company settled contingent consideration of $ 15.9 million comprised of 393,778 immediately exercisable penny warrants to MKF and 107,832 shares of Bally’s Corporation common stock and $ 0.1 million in cash to SportCaller in satisfaction of contingencies related to the respective acquisition agreements (as described in Note 5 “Acquisitions”).

Other current assets

2 unchanged sentences

The Company recorded these securities as a stock receivable at their fair value based on quoted prices in active markets and classified within Level 1 of the hierarchy with changes to fair value included within “Other, net” of the condensed consolidated statements of operations.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Convertible loans

The Company has certain agreements with vendors to provide a portfolio of games to its customers.

Pursuant to these agreements, the Company has issued loans to its vendors and has an option to convert the loans to shares of the vendors’ equity, exercisable within a specified time period.

The Company recorded the short-term portion of the instruments within “Prepaid expenses and other current assets” and the long-term portion of the instruments within “Other assets” at their fair value.

The fair value of the loans to vendors with share prices quoted on active markets are classified within Level 1 of the hierarchy and the fair value of the loans to vendors with share values based on unobservable inputs are classified within Level 3 of the hierarchy.

Long-term debt

The fair values of the Company’s Term Loan Facility and senior notes are estimated based on quoted prices in active markets and are classified as a Level 1 measurements.

The fair value of the Revolving Credit Facility approximates its carrying amount as it is revolving, variable rate debt, and is also classified as a Level 1 measurement.

In the table below, the carrying amount of the Company’s long-term debt is net of debt issuance costs and debt discounts.

Refer to Note 12 “ Long-Term Debt ” for further information.

March 31, 2022 December 31, 2021

(in thousands) Carrying Amount Fair Value Carrying Amount Fair Value

Term Loan Facility $ 1,893,753 $ 1,940,138 $ 1,897,030 $ 1,945,000

5.625 % Senior Notes due 2029

732,988 646,065 732,660 746,250

5.875 % Senior Notes due 2031

731,762 642,953 731,537 754,223

ACCRUED LIABILITIES

As of September 30, 2021 and December 31, 2020, accrued liabilities consisted of the following:

(in thousands) September 30,

As of March 31, 2022 and December 31, 2021, accrued liabilities consisted of the following:

(in thousands) March 31,

2022 December 31,

1 unchanged sentence

Compensation 53,644 49,764

Acquisition related liabilities and transaction services (1)

Property taxes 11,335 3,486

Bally’s trade name accrual, current portion 9,943 9,475

Insurance reserves 10,171 7,188

Purses due to horsemen 9,803 5,726

Legal 4,745 1,761

Interest payable 21,410 46,292

Transaction services and net working capital accrual 18,762 18,516

Other 96,044 116,348

Total accrued liabilities $ 352,695 $ 401,428

__________________________________

(1) Includes the deferred purchase price payable for Bally’s Lake Tahoe of $ 14.2 million and net working capital accruals for certain recent acquisitions.

Refer to Note 5 “Acquisitions” for further information.

BALLY’S CORPORATION

1 unchanged sentence

ACQUISITION, INTEGRATION AND RESTRUCTURING

The following table reflects acquisition, integration and restructuring expenses the Company recorded during the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

The following table reflects acquisition, integration and restructuring expenses the Company recorded during the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(in thousands) 2022 2021

1 unchanged sentence

Gamesys $ 378 $ 6,227

Bally’s Evansville

329 — 6,421 —

Bally Interactive acquisitions (1)

842 — 4,833 —

Bally’s Quad Cities

162 658 1,790 658

Richmond, Virginia (2)

Bally’s Atlantic City 2 683 1,144 2,203

Bally’s Shreveport 37 727 964 1,758

Bally’s Lake Tahoe 82 — 947 —

Bally’s Kansas City and Bally’s Vicksburg — 497 107 1,359

1,581 175 2,041 986

North America Interactive acquisitions (1)

Total 4,482 12,258

1 unchanged sentence

Total acquisition, integration and restructuring $ 5,280 $ 12,258

(1) Costs associated with the acquisition of SportCaller, MKF, AVP and Telescope, which are included within the Bally Interactive division.

(2) Costs associated with a proposal to develop a casino in the City of Richmond, Virginia, which the Company is no longer pursuing.

(3) Includes costs in connection with the development of a casino in Centre County, Pennsylvania in addition to the acquisitions of Tropicana Las Vegas, Bally’s Black Hawk, Dover Downs and other pending and closed acquisitions.

__________________________________

(1) Includes costs associated with the acquisition of SportCaller, MKF, AVP and Telescope, which are included within the North America Interactive segment.

(2) Includes costs in connection with the development of a casino in Centre County, Pennsylvania, the completed acquisitions of Bally’s Shreveport, Bally’s Atlantic City, Bally’s Black Hawk and Bally’s Dover, the pending acquisition of Tropicana Las Vegas and other transactions.

Restructuring Expense

During the three months ended March 31, 2022, the Company incurred restructuring expense of $ 0.8 million attributable to severance costs incurred.

There was no restructuring expense in the three months ended March 31, 2021.

The following table summarizes the restructuring liability accrual activity by segment during the three months ended March 31, 2022:

(in thousands) North America Interactive International Interactive Total

Restructuring liability as of December 31, 2021

Additions 197 601 798

Payments ( 339 ) ( 865 ) ( 1,204 )

Restructuring liability as of March 31, 2022

LONG-TERM DEBT

As of September 30, 2021 and December 31, 2020, long-term debt consisted of the following:

(in thousands) September 30,

As of March 31, 2022 and December 31, 2021, long-term debt consisted of the following:

(in thousands) March 31,

2022 December 31,

Term Loan principal $ 564,813 $ 569,125

Term Loan Facility $ 1,940,138 $ 1,945,000

Revolving Credit Facility 110,000 85,000

2 unchanged sentences

5.875 % Senior Notes due 2031

5.875 % Senior notes due 2031

750,000 750,000

Unamortized original issue discount ( 30,610 ) ( 31,425 )

Unamortized deferred financing fees ( 51,025 ) ( 52,348 )

Long-term debt, including current maturities 2,562,171 1,099,855

Long-term debt, including current portion 3,468,503 3,446,227

Current portion of Term Loan and Revolving Credit Facility ( 19,450 ) ( 19,450 )

Long-term debt, net $ 2,556,421 $ 1,094,105

Long-term debt, net of discount and deferred financing fees;

excluding current portion $ 3,449,053 $ 3,426,777

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

May 2019 Senior Secured Credit Facility

On May 10, 2019, the Company entered into a credit agreement (the “Credit Agreement”) with Citizens Bank, N.A., as administrative agent, and the lenders party thereto, consisting of a $ 300 million Term Loan B facility (the “Term Loan Facility”) and a $ 250 million revolving credit facility (the “Revolving Credit Facility”).

On May 11, 2020, the Company amended the Credit Agreement to increase the Term Loan Facility by $ 275 million to $ 525 million.

On March 9, 2021, the Company amended the Credit Agreement to increase the borrowing limit under the Revolving Credit Facility to $ 325 million.

As of September 30, 2021, there were $ 225.0 million of outstanding borrowings under the Revolving Credit Facility at a weighted average interest rate of 4.73 %.

As of September 30, 2021, the interest rate for the increased portion of the Term Loan Facility was 10.25 %.

The Company’s obligations under the Revolving Credit Facility and the Term Loan Facility were terminated and amounts outstanding were repaid in connection with the Company’s entry into the New Credit Facility on October 1, 2021 as described below under “Subsequent Events.”

6.75 % Senior Notes due 2027

On May 10, 2019, the Company issued $ 400 million aggregate principal amount of 6.75 % unsecured senior notes due June 1, 2027, and, on October 9, 2020, the Company issued an additional $ 125 million aggregate principal amount of 6.75 % unsecured senior notes due June 1, 2027 (together, the “Senior Notes”).

On September 7, 2021, the Company redeemed $ 210 million aggregate principal amount of the Senior Notes at a redemption price of 106.750 % of the principal amount using a portion of the proceeds of the Company’s April 2021 public offering of common stock.

Accordingly, as of September 30, 2021, $ 315 million aggregate principal amount of the Senor Notes remained outstanding.

On October 5, 2021, the Company redeemed the remaining $ 315 million aggregate principal amount of the Senior Notes at a redemption price of 109.074 % of the principal amount using a portion of the proceeds of its New Term Loan Facility described below under “Subsequent Events.” As of October 5, 2021, no amounts pertaining to these Senior Notes remained outstanding.

In connection with the redemption of $ 210 million aggregate principal amount of Senior Notes on September 7, 2021, as noted above, the Company recorded a loss on extinguishment of debt of $ 19.4 million during the three months ended September 30, 2021.

The Company was in compliance with all debt covenants as of September 30, 2021.

New Senior Notes

On August 20, 2021, two unrestricted subsidiaries (together, the “Escrow Issuers”) of the Company issued $ 750.0 million aggregate principal amount of 5.625 % senior notes due 2029 (the “2029 Notes”) and $ 750.0 million aggregate principal amount of 5.875 % Senior Notes due 2031 (the “2031 Notes” and, together with the 2029 Notes, the “New Senior Notes”).

The New Senior Notes were issued pursuant to an indenture, dated as of August 20, 2021, among the Escrow Issuers and U.S.

The Senior Notes were issued pursuant to an indenture, dated as of August 20, 2021, among the Escrow Issuers and U.S.

Bank National Association, as trustee.

Certain of the net proceeds from the New Senior Notes offering were placed in escrow accounts for use in connection with the Gamesys Acquisition.

There are no operations at Bally’s Corporation.

Cash held was de minimis at September 30, 2021 and December 31, 2020.

Subsequent Events

Company Assumption of New Senior Notes Issuer Obligation

On October 1, 2021, upon the closing of the Gamesys Acquisition, the Company assumed the issuer obligation under the New Senior Notes.

The New Senior Notes are guaranteed, jointly and severally, by each of the Company’s restricted subsidiaries that guarantees the Company’s obligations under its New Credit Facility.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Certain of the net proceeds from the Senior Notes offering were placed in escrow accounts for use in connection with the Gamesys acquisition.

On October 1, 2021, upon the closing of the Gamesys acquisition, the Company assumed the issuer obligation under the Senior Notes.

The Senior Notes are guaranteed, jointly and severally, by each of the Company’s restricted subsidiaries that guarantees the Company’s obligations under its Credit Facility.

The 2029 Notes mature on September 1, 2029 and the 2031 Notes mature on September 1, 2031.

Interest is payable on the New Senior Notes in cash semi-annually on March 1 and September 1 of each year, beginning on March 1, 2022.

The Company may redeem some or all of the New Senior Notes at any time prior to September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at prices equal to 100% of the principal amount of the New Senior Notes to be redeemed plus certain “make-whole” premiums, plus accrued and unpaid interest.

In addition, prior to September 1, 2024, the Company may redeem up to 40 % of the original principal amount of each series of the New Senior Notes with proceeds of certain equity offerings at a redemption price equal to 105.625 % of the principal amount, in the case of the 2029 Notes, and 105.875 %, in the case of the 2031 Notes, plus accrued and unpaid interest.

The Company may redeem some or all of the New Senior Notes at any time on or after September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at certain redemption prices set forth in the indenture plus accrued and unpaid interest.

Interest is payable on the Senior Notes in cash semi-annually on March 1 and September 1 of each year, beginning on March 1, 2022.

The Company may redeem some or all of the Senior Notes at any time prior to September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at prices equal to 100% of the principal amount of the Senior Notes to be redeemed plus certain “make-whole” premiums, plus accrued and unpaid interest.

In addition, prior to September 1, 2024, the Company may redeem up to 40 % of the original principal amount of each series of the Senior Notes with proceeds of certain equity offerings at a redemption price equal to 105.625 % of the principal amount, in the case of the 2029 Notes, and 105.875 %, in the case of the 2031 Notes, plus accrued and unpaid interest.

The Company may redeem some or all of the Senior Notes at any time on or after September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at certain redemption prices set forth in the indenture plus accrued and unpaid interest.

The indenture contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, (1) incur additional indebtedness, (2) pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, (3) enter into certain transactions with affiliates, (4) sell or otherwise dispose of assets, (5) create or incur liens and (6) merge, consolidate or sell all or substantially all of the Company’s assets.

These covenants are subject to exceptions and qualifications set forth in the indenture.

New Credit Facility

On October 1, 2021, the Company and certain of its subsidiaries entered into a credit agreement (the “New Credit Agreement”) with Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other lenders party thereto, providing for senior secured financing of up to $ 2.565 billion, consisting of a senior secured term loan facility in an aggregate principal amount of $ 1.945 billion (the “New Term Loan Facility”), which will mature in 2028, and a senior secured revolving credit facility in an aggregate principal amount of $ 620.0 million (the “New Revolving Credit Facility”), which will mature in 2026.

The New Revolving Credit Facility was undrawn at closing.

The credit facilities allow the Company to increase the size of the New Term Loan Facility or request one or more incremental term loan facilities or increase commitments under the New Revolving Credit Facility or add one or more incremental revolving facilities in an aggregate amount not to exceed the greater of $ 650 million and 100 % of the Company’s consolidated EBITDA for the most recent four-quarter period plus or minus certain amounts as specified in the New Credit Agreement, including an unlimited amount subject to compliance with a consolidated total secured net leverage ratio as set out in the New Credit Agreement.

Credit Facility

On October 1, 2021, the Company and certain of its subsidiaries entered into a credit agreement (the “Credit Agreement”) with Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other lenders party thereto, providing for senior secured financing of up to $ 2.565 billion, consisting of a senior secured term loan facility in an aggregate principal amount of $ 1.945 billion (the “Term Loan Facility”), which will mature in 2028, and a senior secured revolving credit facility in an aggregate principal amount of $ 620.0 million (the “Revolving Credit Facility”), which will mature in 2026.

The credit facilities allow the Company to increase the size of the Term Loan Facility or request one or more incremental term loan facilities or increase commitments under the Revolving Credit Facility or add one or more incremental revolving facilities in an aggregate amount not to exceed the greater of $ 650 million and 100 % of the Company’s consolidated EBITDA for the most recent four-quarter period plus or minus certain amounts as specified in the Credit Agreement, including an unlimited amount subject to compliance with a consolidated total secured net leverage ratio as set out in the Credit Agreement.

The credit facilities are guaranteed by the Company’s restricted subsidiaries, subject to certain exceptions, and secured by a first-priority lien on substantially all of the Company’s and each of the guarantors’ assets, subject to certain exceptions.

Borrowings under the credit facilities bear interest at a rate equal to, at the Company’s option, either (1) LIBOR determined by reference to the costs of funds for U.S.

dollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs and subject to a floor of 0.50 % in the case of term loans and 0.00 % in the case of revolving loans or (2) a base rate determined by reference to the greatest of (a) the federal funds rate plus 0.50 %, (b) the prime rate, (c) the one-month LIBOR rate plus 1.00 %, (d) solely in the case of term loans, 1.50 %, and (e) solely in the case of revolving loans, 1.00 %, in each case of clauses (1) and (2), plus an applicable margin.

In addition, on a quarterly basis, the Company is required to pay each lender under the New Revolving Credit Facility a 0.50 % or 0.375 % commitment fee in respect of commitments under the New Revolving Credit Facility, with the applicable commitment fee determined based on the Company’s total net leverage ratio.

Borrowings under the credit facilities bear interest at a rate equal to, at the Company’s option, either (1) LIBOR determined by reference to the costs of funds for USD deposits for the interest period relevant to such borrowing, adjusted for certain additional costs and subject to a floor of 0.50 % in the case of term loans and 0.00 % in the case of revolving loans or (2) a base rate determined by reference to the greatest of (a) the federal funds rate plus 0.50 %, (b) the prime rate, (c) the one-month LIBOR rate plus 1.00 %, (d) solely in the case of term loans, 1.50 %, and (e) solely in the case of revolving loans, 1.00 %, in each case of clauses (1) and (2), plus an applicable margin.

In addition, on a quarterly basis, the Company is required to pay each lender under the Revolving Credit Facility a 0.50 % or 0.375 % commitment fee in respect of commitments under the Revolving Credit Facility, with the applicable commitment fee determined based on the Company’s total net leverage ratio.

The credit facilities contain covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, sell assets, make certain investments and grant liens.

These covenants are subject to exceptions and qualifications set forth in the New Credit Agreement.

The New Revolving Credit Facility contains a financial covenant regarding a maximum first lien net leverage ratio that applies when borrowings under the New Revolving Credit Facility exceed 30% of the total revolving commitment.

These covenants are subject to exceptions and qualifications set forth in the Credit Agreement.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Revolving Credit Facility contains a financial covenant regarding a maximum first lien net leverage ratio that applies when borrowings under the Revolving Credit Facility exceed 30 % of the total revolving commitment.

As of March 31, 2022, the Company’s borrowings under the Revolving Credit Facility did not exceed 30 % and therefore, financial covenants did not apply.

GLPI Master Lease

In connection with the acquisition of Bally’s Evansville, an affiliate of GLPI has agreed to acquire the real estate associated with the Evansville Casino from the Seller for $ 340.0 million and lease it to the Company under a master lease agreement (the “Master Lease”).

GLPI has also agreed to acquire the real estate associated with Dover Downs for $ 144.0 million and lease it back to the Company under the Master Lease.

GLPI also agreed to acquire the real estate associated with Bally’s Dover for $ 144.0 million and lease it back to the Company under the Master Lease.

The Master Lease with GLPI has an initial term of 15 years and includes four , five-year options to renew and requires combined minimum annual payments of $ 40.0 million, subject to escalation.

The acquisition of Evansville and commencement of the Master Lease was June 4, 2021.

During the second quarter of 2021, the Company sold the real estate associated with Dover Downs to GLPI and recorded a gain of $ 53.4 million representing the difference in the transaction price and the derecognition of assets.

This gain is reflected as “Gain on sale-leaseback” in the condensed consolidated statements of operations.

During the second quarter of 2021, the company recognized a lease liability and corresponding right of use asset of $ 117.3 million and $ 276.9 million related to Dover Downs and Bally’s Evansville, respectively.

The acquisition of Bally’s Evansville and commencement of the Master Lease was June 4, 2021.

During the second quarter of 2021, the Company sold the real estate associated with Bally’s Dover to GLPI and recorded a gain of $ 53.4 million representing the difference in the transaction price and the derecognition of assets.

During the second quarter of 2021, the company recognized a lease liability and corresponding right of use asset of $ 117.3 million and $ 276.9 million related to Bally’s Dover and Bally’s Evansville, respectively.

These leases are accounted for as operating leases within the provisions of ASC 842, over the lease term or until a re-assessment event occurs.

On April 1, 2022, the Company completed its sale-leaseback transaction relating to its Bally’s Quad Cities and Bally’s Black Hawk properties which was added to the Master Lease.

Operating Leases

In addition to the operating lease components under the GLPI Master Lease, the Company is committed under various long-term operating lease agreements primarily related to submerged tidelands, property and equipment at Hard Rock Biloxi, Bally’s Kansas City, Bally’s Shreveport, and Bally’s Lake Tahoe.

In addition to the operating lease components under the Master Lease, the Company is committed under various long-term operating lease agreements primarily related to submerged tidelands, property and equipment at Hard Rock Biloxi, Bally’s Kansas City, Bally’s Shreveport and Bally’s Lake Tahoe.

These leases include various renewal options which are included in the lease term when the Company has determined it is reasonably certain of exercising the options.

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Discount rates used to determine the present value of the lease payments are based on a credit-adjusted secured borrowing rate commensurate with the term of the lease.

In the second quarter of 2021, in connection with the acquisition of Bally’s Lake Tahoe, the Company assumed a lease for the real estate and land underlying the operations of the Bally’s Lake Tahoe facility.

In the second quarter of 2021, in connection with the acquisition of Bally’s Lake Tahoe, the Company assumed a lease for the real estate and land underlying the operations of Bally’s Lake Tahoe facility.

The original term of the lease expires on December 31, 2035, at which point the Company will have five options to renew the lease for additional periods of five years each.

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Additionally, the Company is obligated to pay an annual percentage rent based on property net revenues.

Additionally, certain of the Company’s subsidiaries lease office space, parking space, memorabilia and equipment under agreements classified as operating leases that expire on various dates through 2027.

Additionally, certain of the Company’s subsidiaries lease office space, data centers, parking space, memorabilia and equipment under agreements classified as operating leases that expire on various dates through 2030.

Variable expenses generally represent the Company’s share of the landlord’s operating expenses, percentage rent and CPI increases.

The Company does not have any leases classified as financing leases.

The Company had operating lease liabilities of approximately $ 525.5 million and $ 63.5 million as of September 30, 2021 and December 31, 2020, respectively, and right of use assets of approximately $ 499.1 million and $ 36.1 million as of September 30, 2021 and December 31, 2020, respectively, which were included in the condensed consolidated balance sheets.

The Company had operating lease liabilities of approximately $ 526.8 million and $ 531.0 million as of March 31, 2022 and December 31, 2021, respectively, and right of use assets of approximately $ 502.2 million and $ 507.8 million as of March 31, 2022 and December 31, 2021, respectively, which were included in the condensed consolidated balance sheets.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following summarizes quantitative information about the Company’s operating leases:

Three Months Ended September 30, Nine Months Ended September 30,

Total lease cost under ASC 842 for the three months ended March 31, 2022 and 2021 was as follows:

Three Months Ended March 31,

(in thousands) 2022 2021

Operating leases:

Operating lease costs $ 13,214 $ 1,083 $ 20,909 $ 2,183

Variable lease costs 706 13 1,624 37

Operating lease cost $ 15,299 $ 1,332

Variable lease cost 1,817 138

Operating lease expense 17,116 1,470

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Total lease expense $ 20,853 $ 2,524

Supplemental cash flow and other information for the three and nine months ended September 30, 2021 and 2020, related to operating leases was as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Supplemental cash flow and other information for the three months ended March 31, 2022 and 2021, related to operating leases was as follows:

Three Months Ended March 31,

(in thousands) 2022 2021

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Right of use assets obtained in exchange for operating lease liabilities $ 1,363 $ 388

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Weighted average remaining lease term 15.1 years 15.3 years

Weighted average discount rate 6.1 % 6.1 %

As of September 30, 2021, future minimum rental commitments under noncancelable operating leases are as follows:

(in thousands) September 30, 2021

As of March 31, 2022, future minimum rental commitments under noncancelable operating leases are as follows:

(in thousands) March 31, 2022

Remaining 2022 $ 42,725

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The Company also has leasing arrangements with third-party lessees at its properties.

Leasing arrangements for which the Company acts as a lessor are not deemed material as of September 30, 2021 and December 31, 2020.

Leasing arrangements for which the Company acts as a lessor are not deemed material as of March 31, 2022 and December 31, 2021.

BALLY’S CORPORATION

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Effective December 9, 2015, it was determined that no new awards would be granted under the 2010 Option Plan.

During the nine months ended September 30, 2021, there were 70,000 options exercised at a weighted average exercise price of $ 4.31 per share and an aggregate intrinsic value of $ 0.3 million.

As of September 30, 2021, there were 20,000 unexercised options outstanding.

The 2015 Incentive Plan provided for the grant of stock options, restricted stock award (“RSAs”), restricted share units (“RSUs”), performance share units (“PSUs”) and other stock-based awards (collectively, “restricted awards”) (including those with performance-based vesting criteria) to employees, directors or consultants of the Company.

During the three months ended March 31, 2022, there were 20,000 options exercised at a weighted average exercise price of $ 4.31 per share and an aggregate intrinsic value of $ 0.1 million.

As of March 31, 2022, there were no unexercised options outstanding.

The 2015 Incentive Plan provided for the grant of stock options, time-based restricted stock units (“RSUs”), restricted stock awards (“RSAs”), performance-based restricted stock units (“PSUs”) and other awards (collectively, “restricted awards”) (including those with performance-based vesting criteria) to employees, directors or consultants of the Company.

The 2015 Incentive Plan authorized for the issuance of up to 1,700,000 shares of the Company’s common stock pursuant to grants of awards made under the plan.

Effective May 18, 2021, no new awards will be granted under the 2015 Incentive Plan as a result of the new 2021 Incentive Plan being approved at the Company’s 2021 Annual Shareholder Meeting.

Effective May 18, 2021, no new awards were granted under the 2015 Incentive Plan as a result of the new 2021 Incentive Plan being approved at the Company’s 2021 Annual Shareholder Meeting.

The 2021 Incentive Plan provides for the grant of stock options, RSAs, RSUs, PSUs and other awards (including those with performance-based vesting criteria) to employees, directors or consultants of the Company.

The 4,250,000 shares of the Company’s common stock, decreased by the number of shares subject to awards granted under the 2015 Incentive Plan between December 31, 2020 and May 18, 2021, or 221,464 shares, plus any shares subject to awards granted under the 2021 Incentive Plan or the 2015 Incentive Plan that are added back to the share pool under the 2021 Incentive Plan pursuant to the plan’s share counting rules, are authorized for issuance under the 2021 Incentive Plan.

During the nine months ended September 30, 2021, the Company granted 488,009 restricted awards with an aggregate intrinsic value of $ 27.5 million of which 221,667 were granted under the 2015 Incentive Plan and 266,342 were granted under the 2021 Incentive Plan.

As of September 30, 2021, 3,707,178 shares remain available for grant under the 2021 Incentive Plan, which includes shares added back to the share pool based on share counting rules.

There were 875,988 restricted awards outstanding as of September 30, 2021.

During the three months ended March 31, 2022, the Company granted 231,082 restricted awards with an aggregate intrinsic value of $ 8.2 million under the 2021 Incentive Plan.

As of March 31, 2022, 3,311,766 shares remain available for grant under the 2021 Incentive Plan, which includes shares added back to the share pool based on share counting rules.

There were 990,833 restricted awards outstanding as of March 31, 2022.

Share-Based Compensation

The Company recognized total share-based compensation expense of $ 5.4 million and $ 13.8 million for the three and nine months ended September 30, 2021, respectively, and $ 1.8 million and $ 9.5 million for the three and nine months ended September 30, 2020, respectively.

The total income tax benefit for share-based compensation arrangements was $ 1.5 million and $ 0.7 million for the three months ended September 30, 2021 and 2020, respectively, and $ 4.0 million and $ 3.6 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company recognized total share-based compensation expense of $ 5.1 million and $ 4.5 million for the three months ended March 31, 2022 and 2021, respectively.

The total income tax benefit for share-based compensation arrangements was $ 1.2 million and $ 1.4 million for the three months ended March 31, 2022 and 2021, respectively.

BENEFIT PLANS

The Company participates in and contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of its union-represented employees.

The Company acquired a defined benefit pension plan with the acquisition of Dover Downs on March 28, 2019 (“Dover Downs Pension Plan”) which is a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company acquired a defined benefit pension plan with the acquisition of Bally’s Dover on March 28, 2019 (“Dover Downs Pension Plan”) which is a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011.

Dover Downs Defined Benefit Pension Plan

The net periodic benefit (income) cost and other changes in plan assets and benefit obligations, excluding service cost, is set forth in the table below for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended September 30, Nine Months Ended September 30,

The net periodic benefit (income) cost and other changes in plan assets and benefit obligations, excluding service cost, is set forth in the table below for the three months ended March 31, 2022 and 2021.

Three Months Ended March 31,

(in thousands) 2022 2021

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Net periodic benefit income $ ( 241 ) $ ( 133 )

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Contributions

Minimum pension contributions of $ 0.5 million are required to be made to the Dover Downs Pension Plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), in 2021.

The Company expects to contribute approximately $ 0.7 million in 2021.

The Company contributed $ 0.2 million and $ 0.4 million to the Dover Downs Pension Plan during the three and nine months ended September 30, 2021, respectively.

In 2020, under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), minimum required contributions for single-employer pension plans, including quarterly contributions, that were otherwise due during calendar year 2020 were instead due January 1, 2021.

During the three and nine months ended September 30, 2020, the Company contributed $ 0.5 million to the Dover Downs Pension Plan which included the minimum required contributions for first and second quarters of 2020, including all applicable interest after having elected not to make a contribution to the Dover Downs Pension Plan for the first quarter of 2020, as well as the final payment for the 2019 plan year.

The Company has a retirement savings plan under Section 401(k) of the Internal Revenue Code covering non-union employees and certain union employees that reside in the United States.

There is no minimum pension contribution required to be made to the Dover Downs Pension Plan under the Employee Retirement Income Security Act of 1974, as amended in 2021.

The Company does not expect to contribute in 2022.

There were no contributions made to the Dover Downs Pension Plan during the three months ended March 31, 2022 and 2021, respectively.

Defined Contribution Plans

The Company has a retirement savings plan under Section 401(k) of the Internal Revenue Code covering its US non-union employees and certain union employees.

The plan allows employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100 % of their income on a pre-tax basis through contributions to the plan.

Total employer contribution expense was $ 0.9 million and $ 0.1 million for the three months ended September 30, 2021 and 2020, respectively, and $ 2.2 million and $ 0.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Gamesys also operates defined contribution retirement benefit plans for their U.K., US, Toronto, Isle of Man and Gibraltar offices.

Eligible employees are allowed to contribute between 3-5% of their base salary to the various plans and the Company matches all employee contributions.

Total employer contribution expense attributable to defined contribution plans was $ 2.0 million and $ 0.5 million for the three months ended March 31, 2022 and 2021, respectively.

STOCKHOLDERS’ EQUITY

Capital Return Program and Quarterly Cash Dividend

On June 14, 2019, the Company announced that its Board of Directors approved a capital return program under which the Company could expend a total of up to $ 250 million for a share repurchase program and payment of dividends.

On June 14, 2019, the Company announced that its Board of Directors approved a capital return program under which the Company may expend a total of up to $ 250 million for a share repurchase program and payment of dividends.

On February 10, 2020 and October 4, 2021, the Board of Directors approved an increase in the capital return program of $ 100 million and $ 350 million, respectively.

Share repurchases may be effected in various ways, which could include open-market or private repurchase transactions, accelerated stock repurchase programs, tender offers or other transactions.

The amount, timing and terms of any return of capital transaction will be determined based on prevailing market conditions and other factors.

The Company expects to fund any share repurchases and dividends from existing capital resources.

There is no fixed time period to complete share repurchases.

On July 26, 2019, the Company completed a modified Dutch auction tender offer (“Offer”), purchasing 2,504,971 common shares at an aggregate purchase price of $ 73.9 million.

The Offer was funded with cash on hand.

On February 10, 2020 and October 4, 2021, the Board of Directors approved increases in the capital return program of $ 100 million and $ 350 million, respectively.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Total share repurchase activity, including a private repurchase transaction, during the nine months ended September 30, 2020 was as follows:

(in thousands, except share data) Nine Months Ended September 30, 2020

Total share repurchase activity during the three months ended March 31, 2022 was as follows:

(in thousands, except share and per share data) Three Months Ended March 31, 2022

Number of common shares repurchased 350,616

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__________________________________

There was no share repurchase activity during the nine months ended September 30, 2021.

There was no share repurchase activity during the three months ended March 31, 2021.

The Company retired 1,146,194 shares of its common stock held in treasury during the three months ended March 31, 2022 and no shares retired during the three months ended March 31, 2021.

The shares were returned to the status of authorized but unissued shares.

As of March 31, 2022, there were no shares remaining in treasury.

There were no cash dividends paid during the three months ended March 31, 2022 and 2021.

As of March 31, 2022 and December 31, 2021, $ 334.6 million and $ 347.9 million, respectively, remained available for use under the above-mentioned capital return program.

Common Stock Offering

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The net proceeds from the offering were approximately $ 671.4 million, after deducting underwriting discounts, but before expenses.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

On April 20, 2021, the Company issued to affiliates of Sinclair a warrant to purchase 909,090 common shares for an aggregate purchase price of $ 50.0 million, the same price per share as the public offering price in Bally’s common stock public offering ($ 55.00 per share).

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In addition, in accordance with the agreements that Bally’s and Sinclair entered into in November 2020, Sinclair exchanged 2,086,908 common shares for substantially identical warrants.

Treasury Stock

The Company records the repurchase of shares of common stock at cost based on the settlement date of the transaction.

Upon settlement, these shares are classified as treasury stock, which is a reduction to stockholders’ equity.

Treasury stock is included in authorized and issued shares but excluded from outstanding shares.

There was no share repurchase activity during the three and nine months ended September 30, 2021.

As mentioned above, Sinclair exchanged 2,086,908 common shares for substantially identical warrants.

The common stock received by the Company was recorded as treasury stock and subsequently retired during the second quarter of 2021.

The Company retired 10,042 and 2,099,268 shares of its common stock held in treasury during the three and nine months ended September 30, 2021, respectively.

The Company retired 10,892,083 shares of its common stock held in treasury during the nine months ended September 30, 2020.

There were no shares retired during the three months ended September 30, 2020.

The shares were returned to the status of authorized but unissued shares.

As of September 30, 2021, there were no shares remaining in treasury.

During the nine months ended September 30, 2020, the Company paid cash dividends of $ 0.10 per common share, for a total cost of approximately $ 3.2 million.

There were no cash dividends paid during the nine months ended September 30, 2021.

As of September 30, 2021 and December 31, 2020, $ 84.9 million remained available for use under the above-mentioned capital return program.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Changes to Authorized Shares

On May 18, 2021, following receipt of required shareholder approvals, the Company amended its Certificate of Incorporation to increase the number of authorized shares of common stock from 100 million to 200 million, and authorize the issuance of up to 10 million shares of preferred stock.

As of March 31, 2022 and December 31, 2021, no shares of preferred stock have been issued.

Shares Outstanding

As of September 30, 2021, the Company had 44,581,568 common shares issued and outstanding.

As of March 31, 2022, the Company had 52,538,476 common shares issued and outstanding.

The Company issued warrants, options and other contingent consideration in acquisitions and strategic partnerships that are expected to result in the issuance of common shares in future periods resulting from the exercise of warrants and options or the achievement of certain performance targets.

These incremental shares and the shares issued by the consummation of the Gamesys acquisition on October 1, 2021 are summarized below:

These incremental shares as of March 31, 2022 are summarized below:

Sinclair Penny Warrants (Note 2) 7,911,724

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Sinclair Options (1) (Note 2)

Monkey Knife Fight penny warrants (Note 5) 24,611

Monkey Knife Fight contingent shares (Note 5) 787,557

MKF penny warrants (Note 5) 34,455

MKF contingent shares (Note 5) 393,779

Telescope contingent shares (Note 5) 75,678

SportCaller contingent shares (2) (Note 5)

Gamesys acquisition (Note 1) 9,773,537

Outstanding awards under Equity Incentive Plans (Note 14) 990,833

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(1) Consists of four equal tranches to purchase shares with exercise prices ranging from $ 30.00 to $ 45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing of the Sinclair Agreement.

(2) The contingent consideration related to the SportCaller acquisition is 10 M EUR, payable in shares subject to certain post-acquisition earnout targets and based on share price at time of payment.

For purposes of this estimate, the Company used the EUR>USD conversion rate of 1.1574 as of September 30, 2021 and the closing share price of Company common shares of $ 50.14 per share to calculate the shares expected to be issued if all earn-out targets are met.

(2) The contingent consideration related to the SportCaller acquisition is 6.5 M EUR as of March 31, 2022, payable in shares subject to certain post-acquisition earn-out targets and based on share price at time of payment.

For purposes of this estimate, the Company used the EUR>US Dollar conversion rate of 1.1126 as of March 31, 2022 and the closing share price of Company common shares of $ 30.74 per share to calculate the shares expected to be issued if earn-out targets are met.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table reflects the changes in accumulated other comprehensive loss by component, net of tax, for the nine months ended September 30, 2021.

There was no change in accumulated other comprehensive loss for the nine months ended September 30, 2020.

The following tables reflect the changes in accumulated other comprehensive loss by component, net of tax, for the three months ended March 31, 2022 and 2021, respectively:

(in thousands) Foreign Currency Translation Adjustment Benefit Plans Total

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Current period other comprehensive loss ( 71,542 ) — ( 71,542 )

Accumulated other comprehensive loss at March 31, 2022

$ ( 140,273 ) $ ( 976 ) $ ( 141,249 )

(in thousands) Foreign Currency Translation Adjustment Benefit Plans Total

Accumulated other comprehensive loss at December 31, 2020 $ — $ ( 3,144 ) $ ( 3,144 )

Current period other comprehensive loss ( 1,052 ) — ( 1,052 )

Reclassification adjustment to net earnings — 40 40

Accumulated other comprehensive loss at September 30, 2021 $ ( 44,312 ) $ ( 3,022 ) $ ( 47,334 )

Accumulated other comprehensive loss at March 31, 2021

$ ( 1,052 ) $ ( 3,104 ) $ ( 4,156 )

(1) Approximately $ 40 thousand for each quarter ended March 31, June 30, and September 30, 2021.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

SEGMENT REPORTING

During the second quarter of 2021, the Company updated its reporting segments to better align with its strategic growth initiatives in light of recent and pending acquisitions.

The growth and diversification achieved through the Company’s recent and pending acquisitions has resulted in a change in the way the Company’s chief operating decision maker makes operating decisions, assesses the performance of the business and allocates resources.

As a result of this realignment, the Company determined it had four operating segments:

East, West, Bally Interactive and Bally’s Arapahoe Park.

Bally Interactive and Bally’s Arapahoe Park were determined to be immaterial operating segments and are therefore, included in the “Other” category along with interest expense and certain corporate operating expenses that are not allocated to the other segments, including, among other expenses, share-based compensation, merger and acquisition costs and certain non-recurring charges.

The properties included within the East and West reportable segments, along with the components of the Other category, are as follows:

East West Other

Bally’s Twin River Lincoln Casino Resort (1)

Hard Rock Biloxi (3)

Bally Interactive (5)

Bally’s Tiverton Casino & Hotel (1)

Bally’s Vicksburg (3)

Bally’s Arapahoe Park

Dover Downs (2)

Bally’s Kansas City Casino (4)

Twin River Management Group (6)

Bally’s Atlantic City (2)

Bally’s Black Hawk (4)

Bally’s Evansville

Bally’s Shreveport Casino & Hotel (3)

Bally’s Lake Tahoe Casino Resort

Bally’s Quad Cities Casino Hotel

___________________________________________

(1) Previously reported within the “Rhode Island” segment.

(2) Previously reported within the “Mid-Atlantic” segment.

(3) Previously reported within the “Southeast” segment.

(4) Previously reported within the “West” segment.

(5) Immaterial operating segment which includes SportCaller, MKF and Bally Interactive (formerly Bet.Works) as well as online and mobile sports betting operations.

(6) Immaterial operating segment that includes interest expense and certain operating expenses that are not allocated to the other segments, which include, among other expenses, share-based compensation, merger and acquisition costs and certain non-recurring charges.

The Company is currently evaluating the acquisition of Gamesys for segment reporting purposes, but it is expected that it will be reported as International Interactive and the Company’s existing operating segment Bally Interactive, will be reported as North America Interactive.

It is expected that the pending acquisition of Tropicana Las Vegas will be reported in the West and the Pennsylvania development project will be included in the East.

As of September 30, 2021, the Company’s operations are predominately within the United States and has immaterial operations in other jurisdictions.

The Company does not have any revenues from any individual customers that exceed 10% of total reported revenues.

During the fourth quarter of 2021, the Company updated its operating and reportable segments to better align with its strategic growth initiatives in light of recent acquisitions.

The growth and diversification achieved through the Company’s recent acquisitions resulted in a change in the way the Company’s chief operating decision maker makes operating decisions, assesses the performance of the business and allocates resources.

As a result of this realignment, the Company determined it had three operating and reportable segments:

Casinos & Resorts, North America Interactive and International Interactive.

The “Other” category includes interest expense for the Company and certain unallocated corporate operating expenses and other adjustments, including eliminations of transactions among segments to reconcile to the Company’s consolidated results including, among other expenses, share-based compensation, merger and acquisition costs and certain non-recurring charges.

During the first quarter of 2022 as a result of the segment realignment noted above, the Company changed its methodology for allocating certain corporate operating expenses within advertising, general and administrative expense previously reported in “Other” to directly apply such costs to the segment supported.

The prior year results presented below were reclassified to conform to the new segment presentation.

The Company’s three reportable segments as of March 31, 2022 are:

Casinos & Resorts - Bally’s Twin River, Bally’s Tiverton, Bally’s Dover, Bally’s Atlantic City, Bally’s Evansville, Hard Rock Biloxi, Bally’s Vicksburg, Bally’s Kansas City, Bally’s Black Hawk, Bally’s Shreveport, Bally’s Lake Tahoe, Bally’s Quad Cities and Bally’s Arapahoe Park.

North America Interactive - Bally’s Interactive, SportCaller, MKF, AVP, Telescope, Degree 53, Live at the Bike, Gamesys’ North American operations and online and mobile sports betting operations.

International Interactive - Gamesys’ Europe and Asia operations.

The Company is currently evaluating the impact of its pending acquisition of Tropicana Las Vegas and the development of a casino in Centre City, Pennsylvania on its operating and reportable segments;

however, it is expected that they will be included within the Casinos & Resorts segment.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table shows revenues, income (loss), and identifiable assets for each of the Company’s reportable segments.

As of March 31, 2022, the Company’s operations were predominately in the US, Europe and Asia with a less substantive footprint in other countries world-wide.

For geographical reporting purposes, revenue generated outside of the US has been aggregated into the International Interactive reporting segment, and consists primarily of revenue from the UK and Japan.

The Company does not have any revenues from any individual customers that exceed 10% of total reported revenues.

The Company utilizes Adjusted EBITDA (defined below) as a measure of its performance.

Management believes Adjusted EBITDA is representative of its ongoing business operations including its ability to service debt and to fund capital expenditures, acquisitions and operations, in addition to it being a commonly used measure of performance in the gaming industry used by industry analysts to evaluate operations and operating performance.

The following tables set forth certain operating data for the Company’s three reportable segments.

The Other category is included in the following tables in order to reconcile the segment information to the Company’s condensed consolidated financial statements.

The prior year results presented below were reclassified to conform to the new segment presentation.

(in thousands) East West Other Total

Three Months Ended September 30, 2021

Total revenue $ 176,975 $ 124,603 $ 13,201 $ 314,779

Income (loss) from operations 34,469 31,217 ( 37,952 ) 27,734

Net income (loss) 25,386 24,001 ( 64,134 ) ( 14,747 )

Depreciation and amortization 5,763 8,279 14,958 29,000

Interest expense, net of amounts capitalized 15 — 31,838 31,853

Change in value of naming rights liabilities — — 6,965 6,965

Gain (adjustment) on bargain purchases — — ( 1,039 ) ( 1,039 )

Capital expenditures 13,630 11,050 6,693 31,373

Goodwill 84,148 117,804 242,956 444,908

Total assets 1,282,971 1,090,759 2,595,973 4,969,703

Three Months Ended September 30, 2020

Total revenue $ 59,065 $ 55,900 $ 1,659 $ 116,624

Income (loss) from operations 14,578 14,524 ( 5,719 ) 23,383

Net income (loss) 10,702 11,381 ( 15,360 ) 6,723

Depreciation and amortization 5,571 4,279 82 9,932

Interest expense, net of amounts capitalized 30 — 16,920 16,950

Capital expenditures 914 2,104 100 3,118

Goodwill 84,148 102,423 — 186,571

Total assets 627,654 593,038 36,189 1,256,881

Nine Months Ended September 30, 2021

Total revenue $ 408,458 $ 343,190 $ 23,130 $ 774,778

Income (loss) from operations 124,825 100,693 ( 87,778 ) 137,740

Net income (loss) 90,353 77,397 ( 124,260 ) 43,490

Three Months Ended March 31,

(in thousands) 2022 2021

Casinos & Resorts 279,970 189,433

North America Interactive 15,227 2,833

International Interactive 253,074 —

Total 548,271 192,266

Adjusted EBITDA (1)

Casinos & Resorts 73,790 58,223

North America Interactive ( 19,325 ) 1,397

International Interactive 73,327 —

Other ( 12,839 ) ( 7,145 )

Total 114,953 52,475

Operating income (expense)

Depreciation and amortization ( 78,881 ) ( 12,786 )

Interest expense, net of amounts capitalized 49 — 74,431 74,480

Gain on sale-leaseback ( 53,425 ) — — ( 53,425 )

Change in value of naming rights liabilities — — ( 1,371 ) ( 1,371 )

Gain on bargain purchases — — 23,075 23,075

Capital expenditures 25,436 33,773 7,949 67,158

Goodwill 84,148 117,804 242,956 444,908

Total assets 1,282,971 1,090,759 2,595,973 4,969,703

Nine Months Ended September 30, 2020

Total revenue $ 146,848 $ 104,039 $ 3,809 $ 254,696

Income (loss) from operations 9,096 8,295 ( 18,140 ) ( 749 )

Acquisition, integration and restructuring ( 5,280 ) ( 12,258 )

Share-based compensation ( 5,095 ) ( 4,483 )

Other ( 3,177 ) 6,526

Income from operations 22,520 29,474

Other income (expense)

Interest expense, net of interest income ( 45,685 ) ( 20,274 )

Other 19,479 ( 24,735 )

Total other expense, net ( 26,206 ) ( 45,009 )

Loss before provision for income taxes ( 3,686 ) ( 15,535 )

Benefit for income taxes 5,575 4,830

Net income (loss) $ 1,889 $ ( 10,705 )

Depreciation and amortization 18,022 9,804 228 28,054

Interest expense, net of amounts capitalized 107 — 43,581 43,688

Capital expenditures 4,299 3,524 743 8,566

Goodwill 84,148 102,423 — 186,571

Total assets 627,654 593,038 36,189 1,256,881

__________________________________

(1) Adjusted EBITDA is defined as earnings, or loss, for the Company before interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, acquisition, integration and restructuring expense, share-based compensation, and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments.

Adjusted EBITDA should not be construed as an alternative to GAAP net income, its most directly comparable GAAP measure, nor is it directly comparable to similarly titled measures presented by other companies.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Three Months Ended March 31,

(in thousands) 2022 2021

Capital Expenditures

Casinos & Resorts $ 48,573 $ 14,871

North America Interactive 175 68

International Interactive 5,682 —

Total $ 54,516 $ 15,327

(in thousands) March 31, 2022 December 31, 2021

Casinos & Resorts $ 2,487,390 $ 2,437,249

North America Interactive 565,762 528,634

International Interactive 3,360,668 3,429,725

Other ( 5,792 ) 157,609

Total $ 6,408,028 $ 6,553,217

EARNINGS (LOSS) PER SHARE

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Diluted earnings per share includes the determinants of basic earnings per share and, in addition, reflects the dilutive effect of the common stock deliverable for stock options, using the treasury stock method, and for RSUs, RSAs and PSUs for which future service is required as a condition to the delivery of the underlying common stock.

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except per share data) 2022 2021

Net (loss) income $ ( 14,747 ) $ 6,723 $ 43,490 $ ( 25,710 )

Weighted average common shares outstanding - basic 49,506 30,458 45,573 30,825

Net income (loss) $ 1,889 $ ( 10,705 )

Weighted average shares outstanding - basic 60,017 35,827

Weighted average effect of dilutive securities 103 —

Weighted average common shares outstanding - diluted 49,506 30,635 45,876 30,825

Weighted average shares outstanding - diluted 60,120 35,827

Basic earnings (loss) per share $ 0.03 $ ( 0.30 )

Diluted earnings (loss) per share $ 0.03 $ ( 0.30 )

There were 4,953,791 and 4,922,577 share-based awards that were considered anti-dilutive for the three and nine months ended September 30, 2021, respectively.

There were 88,244 share-based awards that were considered anti-dilutive for the nine months ended September 30, 2020.

There were no share-based awards that were considered anti-dilutive for the three months ended September 30, 2020.

There were 4,801,394 and 4,919,006 share-based awards that were considered anti-dilutive for the three months ended March 31, 2022 and 2021, respectively.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

On November 18, 2020, the Company issued penny warrants, performance-based warrants, and options which participate in dividends with the Company’s common stock subject to certain contingencies.

2 unchanged sentences

The penny warrants were considered exercisable for little to no consideration and are therefore, included in basic shares outstanding at their issuance date.

For the three and nine months ended September 30, 2021, the shares underlying the performance warrants were anti-dilutive as certain contingencies were not met.

For the three months ended March 31, 2022 and 2021, the shares underlying the performance warrants were anti-dilutive as certain contingencies were not met.

Refer to Note 2 “ Significant Accounting Policies ” for further information regarding the Sinclair Transaction.

SUBSEQUENT EVENTS

On October 1, 2021, the Company completed its acquisition of Gamesys for approximately £ 1.554 billion in cash and 9,773,537 of the Company’s common shares, subject in each case to customary adjustments.

The Company financed the Acquisition and refinanced its and Gamesys’ debt, utilizing, among other sources, the net proceeds from Bally’s April 2021 common stock offering, the proceeds of borrowings under new bank credit facilities, as well as the issuance of new bonds.

Refer to Note 1 “General Information” for further information.

On October 25, 2021, the Company acquired Degree 53 Limited (“Degree 53”), a UK-based creative agency that specializes in multi-channel website and personalized mobile app and software development for the online gambling and sports industries.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

On October 1, 2021, Bally’s assumed the issuer obligation under two series of notes issued into escrow on August 20, 2021:

$ 750 million aggregate principal amount of 5.625 % senior notes due 2029 and $ 750 million aggregate principal amount of 5.875 % Senior Notes due 2031.

Refer to Note 11 “Long-Term Debt” for further information.

Credit Facility

On October 1, 2021, Bally’s entered into a credit agreement providing for senior secured credit facilities consisting of a $ 1.945 billion senior secured first lien term loan facility and an undrawn $ 620 million senior secured first lien revolving credit facility.

Refer to Note 11 “Long-Term Debt” for further information.

Capital Return Program

On October 4, 2021, the Board of Directors approved an increase in the capital return program of $ 350 million.

Refer to Note 15 “Stockholders’ Equity” for further information.

On April 1, 2022, the Company completed its sale-leaseback transaction relating to the Bally’s Quad Cities and Bally’s Black Hawk properties for a cash purchase price of $ 150 million payable by GLPI.

These properties will be added to the Master Lease with GLPI and will have initial annual fixed rent of $ 12 million, subject to increases over time.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements